EXHIBIT 10.1
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SECURITIES EXCHANGE AGREEMENT
BY AND AMONG
DEEPFIELD TECHNOLOGIES, INC.,
BEIJING SINO-US JINCHE
YINGANG AUTO TECHNOLOGICAL SERVICES LIMITED
AND
THE JOINT VENTURE PARTICIPANTS NAMED HEREIN.
DATED AS OF JANUARY 12, 2006
TABLE OF CONTENTS
Page
SECTION I DEFINITIONS...............................................1
SECTION II EXCHANGE OF INTERESTS AND CONSIDERATION...................7
2.1 Exchange..................................................7
2.2 Withholding...............................................7
2.3 Section 368 Reorganization................................7
2.4 Directors of DFT at Closing...............................8
SECTION III CLOSING...................................................8
3.1 Closing...................................................8
SECTION IV REPRESENTATIONS AND WARRANTIES OF JV PARTICIPANTS.........8
4.1 Generally.................................................8
4.2 Investment Representations................................9
SECTION V REPRESENTATIONS AND WARRANTIES BY THE COMPANY............12
5.1 Organization and Qualification...........................12
5.2 Subsidiaries.............................................12
5.3 Organizational Documents.................................12
5.4 Authorization............................................12
5.5 No Violation.............................................13
5.6 Binding Obligations......................................13
5.7 Capitalization and Related Matters.......................13
5.8 Financial Statements.....................................14
5.9 JV Participant...........................................14
5.10 Compliance with Laws.....................................14
5.11 Certain Proceedings......................................15
5.12 No Brokers or Finders....................................15
5.13 Employees................................................15
5.14 Litigation; Orders.......................................15
5.15 Licenses.................................................15
5.16 Interested Party Transactions............................16
5.17 Title to and Condition of Properties.....................16
5.18 Board Recommendation; JV Participant Approval............16
5.19 Absence of Undisclosed Liabilities.......................16
5.20 Changes..................................................17
5.21 Material Company Contracts.................................
5.22 Tax Matters..............................................18
5.23 Material Assets..........................................19
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5.24 Insurance Coverage.......................................19
5.25 Intellectual Property....................................19
5.26 Employee Benefits........................................20
5.27 Environmental and Safety Matters.........................21
5.28 Product Liability and Recalls............................21
5.29 Receivables and Payables.................................21
5.30 Ethical Business Practices...............................22
5.31 Money Laundering Laws....................................22
5.32 Customers and Suppliers..................................22
5.33 Governmental Inquiry.....................................23
SECTION VI REPRESENTATIONS AND WARRANTIES OF DFT....................23
6.1 Organization and Qualification...........................23
6.2 Subsidiaries.............................................24
6.3 Organizational Documents.................................24
6.4 Authorization............................................24
6.5 No Violation.............................................24
6.6 Securities Laws..........................................25
6.7 Binding Obligations......................................25
6.8 Duly Authorized..........................................25
6.9 Certain Proceedings......................................25
6.10 No Brokers or Finders....................................25
6.11 Material DFT Contracts...................................25
6.12 Material Assets..........................................25
6.13 SEC Documents; Financial Statements......................25
6.14 Board Recommendation.....................................26
6.15 Compliance with Laws.....................................26
6.16 Litigation; Orders.......................................26
6.17 Foreign Corrupt Practices Act............................27
6.18 Money Laundering Laws....................................27
SECTION VII COVENANTS OF THE COMPANY AND THE JV PARTICIPANTS.........28
7.1 Access and Investigation.................................28
7.2 Operation of the Business of the Company.................29
7.3 No Transfers of Interests................................29
7.4 Required Filings and Approvals...........................29
7.5 Notification.............................................30
7.6 Closing Conditions.......................................30
SECTION VIII COVENANTS OF DFT.........................................30
8.1 Access and Investigation.................................30
8.2 Operation of the Business of DFT.........................31
8.3 Required Filings and Approvals...........................31
8.4 Notification.............................................31
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8.5 Closing Conditions.......................................32
8.6 Indemnification and Insurance............................32
8.7 Rule 144 Reporting.......................................33
8.8 Books and Records........................................33
SECTION IX CONDITIONS PRECEDENT TO DFT'S OBLIGATION TO CLOSE........34
9.1 Accuracy of Representations..............................35
9.2 Performance by the Company and JV Participants...........35
9.3 No Force Majeur Event....................................35
9.4 Certificate of Officer...................................35
9.5 Certificate of JV Participants...........................35
9.6 Consents.................................................35
9.7 Documents................................................36
9.8 No Proceedings...........................................37
9.9 No Claim Regarding Ownership or Consideration............37
9.10 Satisfactory Due Diligence...............................37
SECTION X CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
AND THE JV PARTICIPANTS TO THE CLOSING...................37
10.1 Accuracy of Representations..............................37
10.2 Performance by DFT.......................................38
10.3 No Force Majeur Event....................................38
10.4 Certificate of Officer...................................38
10.5 Consents.................................................38
10.6 Documents................................................38
10.7 No Proceedings...........................................39
10.8 Resignation of Officers..................................39
10.9 D&O Insurance............................................39
10.10 Convertible Debenture....................................39
SECTION XI TERMINATION..............................................40
11.1 Termination Events.......................................40
11.2 Effect of Termination....................................40
SECTION XII GENERAL PROVISIONS.......................................41
12.1 Expenses.................................................41
12.2 Public Announcements.....................................41
12.3 Confidentiality..........................................41
12.4 Notices..................................................42
12.5 Arbitration..............................................43
12.6 Further Assurances.......................................43
12.7 Waiver...................................................43
12.8 Entire Agreement and Modification........................44
12.9 Assignments, Successors, and No Third-Party Rights.......44
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12.10 Severability.............................................44
12.11 Section Headings, Construction...........................44
12.12 Governing Law............................................44
12.13 Counterparts.............................................44
12.14 Survival.................................................44
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SECURITIES EXCHANGE AGREEMENT
This Securities Exchange Agreement, dated as of January 10, 2006, is made
by and among DEEP FIELD TECHNOLOGIES, INC., a New Jersey corporation ("DFT"),
each of the Persons listed on Schedule 1 hereto (collectively, the "JV
Participants," and individually a "JV Participant"), and BEIJING SINO-US JINCHE
YINGANG AUTO TECHNOLOGICAL SERVICES LIMITED, a cooperative joint venture under
the laws of The People's Republic of China (the "Company").
RECITAL
The JV Participants have agreed to transfer to DFT, and DFT has agreed to
acquire from the JV Participants, (a) all of the Interests less the Retained
Interest, which Interests (less the Retained Interest) constitute 95% of the
outstanding equity of the Company and (b) all voting and economic rights,
benefits and obligations (other than the right to receive distributions in
connection with a liquidation, sale or other transfer, in whole, of the Company)
associated with the Retained Interest, in exchange for 73,745,909 shares of
DFT's Common Stock and 2,000,000 shares of DFT's Class B Common Stock
(collectively, the "DFT Shares") on the terms and conditions as set forth
herein.
SECTION I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this Section I
have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined.
1.1 "Accredited Investor" has the meaning set forth in Regulation D under
the Securities Act.
1.2 "Affiliate" means any Person that directly or indirectly controls, is
controlled by or is under common control with the indicated Person.
1.3 "Agreement" means this Securities Exchange Agreement, including all
Schedules and Exhibits hereto, as this Securities Exchange Agreement may be from
time to time amended, modified or supplemented.
1.4 "Business Day" means a day, other than Saturday or Sunday, on which
banks in New York, New York, USA, are open for business.
1.5 "Closing" has the meaning set forth in Section 3.1.
1.6 "Closing Date" has the meaning set forth in Section 3.1.
1.7 "Code" means the Internal Revenue Code of 1986, as amended.
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1.8 "Commission" means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
1.9 "Company Balance Sheet" means the audited balance sheet at December 31,
2004 of Jinche.
1.10 "Company Benefit Plans" means employee pension benefit plans, medical,
disability, severance pay, educational, life insurance and other employee
welfare benefit plans, and all other bonus, stock option, stock purchase or
other equity-based compensation arrangements, and incentive, deferred
compensation, supplemental retirement, severance, disability, vacation,
cafeteria and other similar employee benefit plans, policies, programs or
contracts (including those which contain change of control provisions or pending
change of control provisions), and any employment, executive compensation or
severance agreements (including those with change of control provisions or
pending change of control provisions), as amended, modified or supplemented, in
any case that (a) are maintained or contributed to (or to which there was an
obligation to contribute) by the Company, or (b) were formerly maintained or
contributed to (or to which there was an obligation to contribute), by the
Company, as well as each plan with respect to which the Company has or could
have any liability, whether direct or indirect or actual or contingent
(including any liability arising out of an indemnification, guarantee, hold
harmless or similar agreement).
1.11 "Company Audited Financial Statements" has the meaning set forth in
Section 5.8.
1.12 "Company Board" means the Board of Directors of the Company.
1.13 "Consultant Agreements" mean that certain Consultant's Agreement dated
as of the Closing Date between DFT and Mahoney and that certain Consultant
Agreement dated as of the Closing Date between DFT and Meller, in each case,
including among other things, the terms contained in Exhibit A hereto, and which
shall confirm termination of such Persons' employment agreements with DFT and
all of the rights thereunder to benefits and compensation.
1.14 "Consultants" means Mahoney and Meller.
1.15 "D&O Insurance" has the meaning set forth in Section 8.6.3.
1.16 "DFT Balance Sheet" means DFT's balance sheet at September 30, 2005.
1.17 "DFT Board" means the Board of Directors of DFT.
1.18 "DFT's Class B Common Stock, means DFT's Class B Common Stock, $.01
par value.
1.19 "DFT's Common Stock" means DFT's Class A common stock, no par value.
1.20 "DFT Shares" has the meaning set forth in the Recitals.
1.21 "DFT Stockholder Approval" has the meaning set forth in Section 8.11.
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1.22 "DFT Stockholders Meeting" has the meaning set forth in Section 6.22.
1.23 "Distributor" means any underwriter, dealer or other Person who
participates, pursuant to a contractual arrangement, in the distribution of the
securities offered or sold in reliance on Regulation S.
1.24 "Environmental Laws" means any Law or other requirement relating to
the environment, natural resources, or public or employee health and safety.
1.25 "Environmental Permit" means all licenses, permits, authorizations,
approvals, franchises and rights required under any applicable Environmental Law
or Order.
1.26 "Equity Security" means any stock or similar security, including,
without limitation, securities containing equity features and securities
containing profit participation features, or any security convertible into or
exchangeable for, with or without consideration, any stock or similar security,
or any security carrying any warrant, right or option to subscribe to or
purchase any shares of capital stock, or any such warrant or right.
1.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.28 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will then be in effect.
1.29 "Exhibits" means the several exhibits referred to and identified in
this Agreement.
1.30 "GAAP" means, with respect to any Person, generally accepted
accounting principles applied on a consistent basis with such Person's past
practices.
1.31 "Governmental Authority" means any federal or national, state or
provincial, municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, commission, court, tribunal,
official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.
1.32 "Indebtedness" means any monetary obligation, contingent or otherwise.
Any obligation secured by a Lien on, or payable out of the proceeds of, or
production from, property of the relevant party will be deemed to be
Indebtedness.
1.33 "Indemnified Persons" has the meaning set forth in Section 8.6.2.
1.34 "Intellectual Property" means all industrial and intellectual
property, including, without limitation, all U.S. and non-U.S. patents, patent
applications, patent rights, trademarks, trademark applications, common law
trademarks, Internet domain names, trade names, service marks, service mark
applications, common law service marks, and the goodwill associated therewith,
copyrights, in both published and unpublished works, whether registered or
unregistered, copyright applications, franchises, licenses, know-how, trade
secrets, technical
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data, designs, customer lists, confidential and proprietary information,
processes and formulae, all computer software programs or applications, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including manuals, memoranda, and records,
whether such intellectual property has been created, applied for or obtained
anywhere throughout the world.
1.35 "Interests" means the Equity Securities owned by the JV Participants
in the Company and exchanged pursuant to this Agreement.
1.36 "Jinche" means Beijing Jinche Yingang Automobile Service Center, a
corporation duly registered and existing under the laws of the PRC.
1.37 "JV Participant" has the meaning set forth in the Preamble.
1.38 "Key Employee" means those persons who, in the opinion of the
Company's management, are the most integral to the business operations of the
Company.
1.39 "Laws" means, with respect to any Person, any U.S. or non-U.S.
federal, national, state, provincial, local, municipal, international,
multinational or other law (including common law), constitution, statute, code,
ordinance, rule, regulation or treaty applicable to such Person.
1.40 "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction and including any lien or charge arising by
Law.
1.41 "Mahoney" means Jerome Mahoney.
1.42 "Material DFT Contract" means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of DFT required to be filed with
the Commission.
1.43 "Material Adverse Effect" means, when used with respect to DFT or the
Company, as the case may be, any change, effect or circumstance which,
individually or in the aggregate, would reasonably be expected to (a) have a
material adverse effect on the business, assets, financial condition or results
of operations of DFT or the Company, as the case may be, in each case taken as a
whole or (b) materially impair the ability of DFT or the Company, as the case
may be, to perform their obligations under this Agreement, excluding any change,
effect or circumstance resulting from (i) the announcement, pendency or
consummation of the transactions contemplated by this Agreement, (ii) changes in
the United States securities markets generally, or (iii) changes in general
economic, currency exchange rate, political or regulatory conditions in
industries in which DFT or the Company, as the case may be, operate.
1.44 "Material Company Contract" means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Company or Jinche of the
type and nature that would be required to be filed with the Commission if the
Company was a reporting company.
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1.45 "Meller" means Mark Meller.
1.46 "Order" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any
Governmental Authority.
1.47 "Organizational Documents" means (a) the articles or certificate of
incorporation and the by-laws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the articles or certificate of formation and
operating agreement of a limited liability company; (e) any other document
performing a similar function to the documents specified in clauses (a), (b),
(c) and (d) adopted or filed in connection with the creation, formation or
organization of a Person; and (f) any and all amendments to any of the
foregoing.
1.48 "Outside Date" has the meaning set forth in Section 11.1.3.
1.49 "Permitted Liens" means (a) Liens for Taxes not yet payable or in
respect of which the validity thereof is being contested in good faith by
appropriate proceedings and for the payment of which the relevant party has made
adequate reserves; (b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation, carriers, warehousemen, mechanics,
laborers and materialmen and similar Liens, if the obligations secured by such
Liens are not then delinquent or are being contested in good faith by
appropriate proceedings conducted and for the payment of which the relevant
party has made adequate reserves; (c) statutory Liens incidental to the conduct
of the business of the relevant party which were not incurred in connection with
the borrowing of money or the obtaining of advances or credits and that do not
in the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business; and (d) Liens that
would not have a Material Adverse Effect.
1.50 "Person" means all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures and other entities, governments, agencies and political subdivisions.
1.51 "PRC" means the People's Republic of China.
1.52 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Authority.
1.53 "Proxy Statement" has the meaning set forth in Section 6.22.
1.54 "Regulation S" means Regulation S under the Securities Act, as the
same may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission.
1.55 "Retained Interest" means five percent (5%) of the Interests, which
shall be retained by Jinche, subject to the assignment of Rights With Respect to
Retained Interest.
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1.56 "Rule 144" means Rule 144 under the Securities Act, as the same may be
amended from time to time, or any successor statute.
1.57 "Rights With Respect to Retained Interest" means all rights, benefits
and obligations associated with the Retained Interest other than the right to
receive distributions upon a liquidation, sale or other transfer, in whole, of
the Company and the liabilities associated therewith.
1.58 "Schedules" means the several schedules referred to and identified
herein, setting forth certain disclosures, exceptions and other information,
data and documents referred to at various places throughout this Agreement.
1.59 "SEC Documents" has the meaning set forth in Section 6.13.
1.60 "Section 4(2)" means Section 4(2) under the Securities Act.
1.61 "Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will be in effect at the time.
1.62 "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, joint venture or partnership of which such Person (a)
beneficially owns, either directly or indirectly, more than 50% of (i) the total
combined voting power of all classes of voting securities of such entity, (ii)
the total combined equity interests, or (iii) the capital or profit interests,
in the case of a partnership; or (b) otherwise has the power to vote or to
direct the voting of sufficient securities to elect a majority of the board of
directors or similar governing body.
1.63 "Taxes" means all foreign, federal, state or local taxes, charges,
fees, levies, imposts, duties and other assessments, as applicable, including,
but not limited to, any income, alternative minimum or add-on, estimated, gross
income, gross receipts, sales, use, transfer, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital, paid-up
capital, profits, withholding, payroll, employment, unemployment, excise,
severance, stamp, occupation, premium, real property, recording, personal
property, federal highway use, commercial rent, environmental (including, but
not limited to, taxes under Section 59A of the Code) or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest, penalties or additions to
tax with respect to any of the foregoing; and "Tax" means any of the foregoing
1.64 "Tax Group" means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which DFT is now or was
formerly a member.
1.65 "Tax Return" means any return, declaration, report, claim for refund
or credit, information return, statement or other similar document filed with
any Governmental Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
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1.66 "Transaction Documents" means, collectively, all agreements,
instruments and other documents to be executed and delivered in connection with
the transactions contemplated hereby.
1.67 "U.S." means the United States of America.
1.68 "U.S. person" has the meaning set forth in Regulation S under the
Securities Act.
SECTION II
EXCHANGE OF INTERESTS AND CONSIDERATION
2.1 Exchange. Each of the JV Participants desires to transfer to, and DFT
desires to acquire from each JV Participant, the Interests set out beside the
respective names of the JV Participants on Schedule A, free and clear of all
Liens, for the consideration and on the terms set forth in this Agreement. The
aggregate consideration for the Interests and Rights With Respect to Retained
Interests acquired by DFT pursuant to this Agreement will be 73,745,909 shares
of DFT's Common Stock and 2,000,000 shares of DFT Class B Common Stock to be
issued to the JV Participants as set forth on Schedule 1.
2.2 Withholding. DFT shall be entitled to deduct and withhold from the DFT
Shares otherwise deliverable pursuant to this Agreement to any holder of
Interests DFT Shares equal in value to such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Code or any
provision of state, local, provincial or foreign Tax Law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of Interests in respect of
which such deduction and withholding was made.
2.3 Tax Treatment. For U.S. federal income tax purposes, the exchange by
the JV Participants of the Interests for DFT's Common Stock is intended to
constitute a "reorganization" within the meaning of Section 368(a)(1)(B) of the
Code and/or as a transfer described in Section 351 of the Code. The parties to
this Agreement hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations. Notwithstanding the foregoing or anything else to the contrary
contained in this Agreement, the parties acknowledge and agree that no party is
making any representation or warranty as to the qualification of the exchange by
the JV Participants of the Interests for DFT's Common Stock as a reorganization
under Section 368 of the Code and/or as a transfer described in Section 351 of
the Code or as to the effect, if any, that any transaction consummated prior to
the Closing has or may have on any such reorganization status. The parties
acknowledge and agree that each (i) has had the opportunity to obtain
independent legal and tax advice with respect to the transaction contemplated by
this Agreement, and (ii) is responsible for paying its own Taxes including
without limitation, any adverse Tax consequences that may result if the
transaction contemplated by this Agreement is not determined to qualify as a
reorganization under Section 368 of the Code and/or as a transfer described in
Section 351 of the Code.
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2.4 Directors of DFT at Closing. Mahoney shall resign from the Board
immediately prior to the Closing. Simultaneously with the Closing of the
transactions contemplated by this Agreement, Meller, as the sole director of
DFT, shall appoint Mr. Pang Guisan to fill the vacancy on DFT Board created by
Mahoney's resignation. Immediately thereafter, Meller shall resign as a director
of DFT and the remaining director of DFT shall appoint Mr. Scott Cray to fill
the resulting vacancy on the DFT Board. Prior to the Closing, the bylaws of DFT
shall be amended to provide for a nine member DFT Board and immediately
following the Closing, Messrs. Pang and Cray, as the two directors, shall
appoint the Persons listed on Schedule 2.4 to the DFT Board.
SECTION III
CLOSING
3.1 Closing. The closing (the "Closing") of the share exchange will occur
at the offices of Kramer Levin Naftalis & Frankel LLP, in New York, New York, on
such date as shall be two Business Days after all of the closing conditions set
forth in Sections 9 and 10 have been satisfied or waived (the "Closing Date").
At the Closing, each JV Participant will deliver to DFT instruments of
assignment, each in form and substance reasonably satisfactory to DFT
transferring the Interests (other than the Retained Interest) and transferring
the Rights With Respect to Retained Interest, to DFT, against delivery to each
JV Participant by DFT of certificates evidencing such JV Participant's share of
the DFT Shares (as set forth in Schedule 1).
SECTION IV
REPRESENTATIONS AND WARRANTIES OF JV PARTICIPANTS
4.1 Generally. Each JV Participant, severally and not jointly, hereby
represents and warrants to DFT:
4.1.1 Authority. Such JV Participant has the right, power, authority
and capacity to execute and deliver this Agreement and each of the Transaction
Documents to which such JV Participant is a party, to consummate the
transactions contemplated by this Agreement and each of the Transaction
Documents to which such JV Participant is a party, and to perform such JV
Participant's obligations under this Agreement and each of the Transaction
Documents to which such JV Participant is a party. This Agreement has been, and
each of the Transaction Documents to which such JV Participant is a party will
be, duly and validly authorized and approved, executed and delivered by such JV
Participant. Assuming this Agreement and the Transaction Documents have been
duly and validly authorized, executed and delivered by the parties thereto other
than such JV Participant, this Agreement is, and as of the Closing each of the
Transaction Documents to which such JV Participant is a party will have been,
duly authorized, executed and delivered by such JV Participant and constitute or
will constitute the legal, valid and binding obligation of such JV Participant,
enforceable against such JV Participant in accordance with their respective
terms, except as such enforcement is limited by general equitable principles, or
by bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
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4.1.2 No Conflict. Neither the execution or delivery by such JV
Participant of this Agreement or any Transaction Document to which such JV
Participant is a party, nor the consummation or performance by such JV
Participant of the transactions contemplated hereby or thereby will, directly or
indirectly, (a) contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of such JV Participant (if such JV
Participant is not a natural person); (b) contravene, conflict with, constitute
a default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or acceleration
of, any agreement or instrument to which such JV Participant is a party or by
which the properties or assets of such JV Participant are bound; or (c)
contravene, conflict with, or result in a violation of, any Law or Order to
which such JV Participant, or any of the properties or assets of such JV
Participant, may be subject.
4.1.3 Ownership of Interests. Such JV Participant owns, of record and
beneficially, and has good, valid and indefeasible title to and the right to
transfer to DFT pursuant to this Agreement, such JV Participant's Interest
and/or Rights With Respect to Retained Interest, as the case may be, free and
clear of any and all Liens. Except as disclosed in writing to DFT, there are no
options, rights, voting trusts, stockholder agreements or any other contracts or
understandings to which such JV Participant is a party or by which such JV
Participant or such JV Participant's Interest and Rights With Respect to
Retained Interest, as the case may be, is bound with respect to the issuance,
sale, transfer, voting or registration of such JV Participant's Interest or
Rights With Respect to Retained Interest, as the case may be. At the Closing,
DFT will acquire good, valid and marketable title to such JV Participant's
Interest and Rights With Respect to Retained Interest, as the case may be, free
and clear of any and all Liens. The Interests represent 100% of the authorized
and issued Equity Securities of the Company.
4.1.4 Litigation. There is no pending Proceeding against such JV
Participant that challenges, or may have the effect of preventing, delaying or
making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement and, to the knowledge of such JV Participant, no
such Proceeding has been threatened, and no event or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding.
4.1.5 No Brokers or Finders. Except as disclosed in Schedule 4.1.5, no
Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against such JV Participant for any commission, fee or
other compensation as a finder or broker, or in any similar capacity, and such
JV Participant will indemnify and hold DFT harmless against any liability or
expense arising out of, or in connection with, any such claim.
4.2 Investment Representations. Each JV Participant, severally and not
jointly, hereby represents and warrants to DFT:
4.2.1 Acknowledgment. Each JV Participant understands and agrees that
the DFT Shares have not been registered under the Securities Act or the
securities laws of any state of the U.S. and that the issuance of the DFT Shares
is being effected in reliance upon an exemption from registration afforded
either under Section 4(2) of the Securities Act for transactions by an issuer
not involving a public offering or Regulation S for offers and sales of
securities outside the U.S.
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4.2.2 Status. By its execution of this Agreement, each JV Participant,
severally and not jointly, represents and warrants to DFT as indicated on its
signature page to this Agreement, either that: (a) it is an Accredited Investor;
or (b) it is not a U.S. person. Each JV Participant severally understands that
the DFT Shares are being offered and sold to such JV Participant in reliance
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such JV Participant set forth in this
Agreement, in order that DFT may determine the applicability and availability of
the exemptions from registration of the DFT Shares on which DFT is relying.
4.2.3 Additional Representations and Warranties of Accredited
Investors. Each JV Participant indicating that it is an Accredited Investor on
its signature page to this Agreement, severally and not jointly, further makes
the representations and warranties to DFT set forth on Exhibit B.
4.2.4 Additional Representations and Warranties of Non-U.S. Persons.
Each JV Participant indicating that it is not a U.S. person on its signature
page to this Agreement, severally and not jointly, further makes the
representations and warranties to DFT set forth on Exhibit C.
4.2.5 Stock Legends. Each JV Participant hereby agrees with DFT as
follows:
(a) Securities Act Legend - Accredited Investors. The
certificates evidencing the DFT Shares issued to those JV Participants
who are Accredited Investors, and each certificate issued in transfer
thereof, will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE CORPORATION AN OPINION OF COUNSEL, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE CORPORATION,
THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
(b) Securities Act Legend - Non-U.S. Persons. The certificates
evidencing the DFT Shares issued to those JV Participants who are not
U.S. persons, and each certificate issued in transfer thereof, will
bear the following legend:
-10-
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND
BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE CORPORATION, THAT THE PROVISIONS OF
REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE CORPORATION AN OPINION OF COUNSEL, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE CORPORATION,
THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
(c) Other Legends. The certificates representing such DFT Shares,
and each certificate issued in transfer thereof, will also bear any
other legend required under any applicable Law, including, without
limitation, any U.S. state corporate and state securities law, or
contract.
(d) Opinion. No JV Participant will transfer any or all of the
DFT Shares pursuant to Regulation S or absent an effective
registration statement under the Securities Act and applicable state
securities law covering the disposition of such JV Participant's DFT
Shares, without first providing DFT with an opinion of counsel (which
counsel and opinion are reasonably satisfactory to DFT) to the effect
that such transfer will be made in compliance with Regulation S or
will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or
qualification requirements of any applicable U.S. state securities
laws.
(e) Consent. Each JV Participant understands and acknowledges
that DFT may refuse to transfer the DFT Shares, unless such JV
Participant complies with this Section 4.2.5. Each JV Participant
consents to DFT making a notation on its records or giving
instructions to any transfer agent of DFT's Common Stock in order to
implement the restrictions on transfer of the DFT Shares.
(f) No Subsidiaries. Jinche has no Subsidiaries and did not
contribute any Subsidiaries to the Company.
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SECTION V
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to DFT as follows:
5.1 Organization and Qualification. The Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to carry on its
business as presently conducted and to own, hold and operate its properties and
assets as now owned, held and operated by it, except where the failure to be so
organized, existing and in good standing or to have such authority and power,
governmental licenses, authorizations, consents or approvals would not have a
Material Adverse Effect. The Company is duly qualified, licensed or domesticated
as a foreign corporation in good standing in each jurisdiction wherein the
nature of its activities or its properties owned, held or operated makes such
qualification, licensing or domestication necessary, except where the failure to
be so duly qualified, licensed or domesticated and in good standing would not
have a Material Adverse Effect. Schedule 5.1 sets forth a true, complete and
correct list of the Company's jurisdiction of organization and each other
jurisdiction in which the Company presently conducts its business or owns, holds
and operates its properties and assets. The Company is a joint venture
established by the contribution of the JV Participants of the assets, interests
and securities as generally described on Schedule 5.1 hereto, in each case free
and clear of all Liens, except Permitted Liens.
5.2 Subsidiaries. The Company does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise.
5.3 Organizational Documents. True, correct and complete copies of the
Organizational Documents of the Company have been delivered to DFT prior to the
execution of this Agreement, and no action has been taken to amend or repeal
such Organizational Documents. The Company is not in violation or breach of any
of the provisions of its Organizational Documents, except for such violations or
breaches as, would not have a Material Adverse Effect. The Organizational
Documents of the Company are valid and subsisting and have been approved by all
applicable Governmental Authorities, including, without limitation, the State
Administration of Industry and Commerce Bureau of the PRC and the Ministry of
Foreign Trade and Economic Corporation/Ministry of Commerce, or their respective
delegated local authorities, which have jurisdiction over the registration of
the Company and to the Company's knowledge, there are no circumstances which may
lead to the Organizational Documents of the Company being revoked or terminated
prior to the expiration of its terms.
5.4 Authorization. Except as disclosed on Schedule 5.4, the Company has all
requisite authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to enter into this Agreement and each of
the Transaction Documents to which the Company is a party, to consummate the
transactions contemplated by this Agreement and each of the Transaction
Documents to which the Company is a party and to perform its obligations under
this Agreement and each of the Transaction Documents to which the Company
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is a party. The execution, delivery and performance by the Company of this
Agreement and each of the Transaction Documents to which the Company is a party
and the recording of the transfer of the Interests have been duly authorized by
all necessary corporate or other action and do not require from the Company
Board or the JV Participants any consent or approval that has not been validly
and lawfully obtained. The execution, delivery and performance by the Company of
this Agreement and each of the Transaction Documents to which the Company is a
party and the recording of the transfer of the Interests (other than Retained
Interests) and the Rights With Respect to Retained Interests requires no
authorization, consent, approval, license, exemption of or filing or
registration with any Governmental Authority or other Person other than (a) such
filings and mailings required by the Exchange Act and any other policy or
requirement of the Commission imposed in connection therewith (including,
without limitation, any requirement arising from any comments of the Commission
occasioned by the filing of the Proxy Statement, (b) consents and approvals by
the PRC and any subdivision thereof and (c) such other customary filings with
the Commission for transactions of the type contemplated by this Agreement which
approvals and consents shall be obtained prior to and in full force and effect
on and after the Closing.
5.5 No Violation. Except as set forth on Schedule 5.5, either the execution
or delivery by the Company of this Agreement or any Transaction Document to
which the Company is a party, nor the consummation or performance by the Company
of the transactions contemplated hereby or thereby will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of the Company; (b) contravene, conflict with,
constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination or
acceleration of, or result in the imposition or creation of any Lien under, any
agreement or instrument to which the Company is a party or by which the
properties or assets of the Company is bound; (c) contravene, conflict with, or
result in a violation of, any Law or Order to which the Company, or any of the
properties or assets owned or used by the Company, may be subject; or (d)
contravene, conflict with, or result in a violation of, the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by the Company or
that otherwise relate to the business of, or any of the properties or assets
owned or used by, the Company, except, in the case of clause (b), (c) or (d),
for any such contraventions, conflicts, violations, or other occurrences as
would not have a Material Adverse Effect.
5.6 Binding Obligations. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than the Company, this Agreement has been, and as of the
Closing each of the Transaction Documents to which the Company is a party will
be, duly authorized, executed and delivered by the Company and constitutes or
will constitute, as the case may be, the legal, valid and binding obligations of
the Company.
5.7 Capitalization and Related Matters.
5.7.1 Capitalization. The authorized capital of the Company consists
solely of the Interests. There are no outstanding or authorized options,
warrants, purchase agreements, participation agreements, subscription rights,
conversion rights, exchange rights or other
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securities or contracts that could require the Company to issue, sell or
otherwise cause to become outstanding any additional Interests, shares of
capital stock or any Equity Security or to create, authorize, issue, sell or
otherwise cause to become outstanding any new Interests or class of capital
stock. There are no outstanding agreements, voting trusts or arrangements,
registration rights agreements, rights of first refusal or other contracts
pertaining to the Interests. The Interests are duly authorized and validly
issued and have not been issued in violation of any preemptive or similar rights
of any Person or in violation of any Law.
5.7.2 No Redemption Requirements. There are no outstanding contractual
obligations (contingent or otherwise) of the Company to retire, repurchase,
redeem or otherwise acquire any ownership interests in the Company or to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in any other Person.
5.8 Financial Statements. Attached as Schedule 5.8 are the audited
financial statements of Jinche for the period ended December 31, 2004,
including, in each case, the notes thereto (the "Company Audited Financial
Statements"). The Company Audited Financial Statements (a) are in accordance
with the books and records of Jinche; (b) present fairly the financial condition
and the results of operations, changes in stockholder's equity and cash flow of
Jinche for the periods therein specified; and (c) have been prepared in
accordance with GAAP applied on a consistent basis during the periods concerned.
Specifically, but not by way of limitation, the Company Balance Sheets included
in the Company Audited Financial Statements disclose all of the debts,
liabilities and obligations of any nature (whether absolute, accrued, contingent
or otherwise and whether due or to become due) of Jinche for the periods therein
specified which must be disclosed on a balance sheet in accordance with GAAP.
All of the material properties and assets (real and personal) owned or leased by
Jinche are reflected on the Company Audited Financial Statements.
5.9 JV Participant. Schedule 1 contains a true and complete list of the
names and addresses of the record and beneficial holders of the Interests.
Except as expressly provided in this Agreement, no JV Participant or Holder of
any other security of the Company or any other Person is entitled to any
preemptive right, right of first refusal or similar right as a result of the
exchange of the Interests or otherwise. There is no voting trust, agreement or
arrangement among any of the JV Participants affecting the exercise of the
voting rights of any such Interests.
5.10 Compliance with Laws. Except as would not have a Material Adverse
Effect, the business and operations of the Company have been and are being
conducted in accordance with all applicable Laws and Orders. Except as would not
have a Material Adverse Effect, the Company has not received notice of any
violation (or any Proceeding involving an allegation of any violation) of any
applicable Law or Order by or affecting the Company and, to the knowledge of the
Company, no Proceeding involving an allegation of violation of any applicable
Law or Order is threatened or contemplated. Except as would not have a Material
Adverse Effect, the Company is not subject to any obligation or restriction of
any kind or character, nor is there, to the knowledge of the Company, any event
or circumstance relating to the Company that materially and adversely affects in
any way its business, properties, assets or prospects or that prohibits the
Company from entering into this Agreement or would prevent or make burdensome
its performance of or compliance with all or any part of this Agreement or the
consummation of the transactions contemplated hereby.
-14-
5.11 Certain Proceedings. There is no pending Proceeding that has been
commenced against the Company and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the knowledge of the Company, no
such Proceeding has been threatened.
5.12 No Brokers or Finders. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against the
Company for any commission, fee or other compensation as a finder or broker, or
in any similar capacity, and the Company will indemnify and hold DFT harmless
against any liability or expense arising out of, or in connection with, any such
claim.
5.13 Employees.
5.13.1 Except as would not have a Material Adverse Effect, the Company
is in compliance in all material respects with all Laws regarding employment,
wages, hours, benefits, the payment of Taxes, occupational safety and health.
The Company is not liable for the payment of any compensation, damages, Taxes,
fines, penalties or other amounts, however designated, for failure to comply
with any of the foregoing material Laws.
5.13.2 No director, officer or Key Employee of the Company is a party
to, or is otherwise bound by, any contract (including any confidentiality,
noncompetition or proprietary rights agreement) with any other Person that in
any way materially adversely affects (a) the performance of his or her duties as
a director, officer or Key Employee of the Company or (b) the ability of the
Company to conduct its business.
5.13.3 Schedule 5.13.3 sets forth a true, correct and complete list of
each Key Employee of the Company. Each such Key Employee has executed and
delivered to the Company a confidentiality agreement. The Company has delivered
to DFT the form of each of the confidentiality agreements. To the knowledge of
the Company, no Key Employee is in violation of his or her confidentiality
agreement and the Company will use its best efforts to prevent any such
violation.
5.14 Litigation; Orders. Except as would not have a Material Adverse
Effect, there is no Proceeding (whether federal, state, local or foreign)
pending or, to the knowledge of the Company, threatened against or affecting the
Company or the Company's properties, assets, business or employees. To the
knowledge of the Company, there is no fact that might result in or form the
basis for any such Proceeding. The Company is not subject to any Orders.
5.15 Licenses. Except as would not have a Material Adverse Effect, the
Company possesses from the appropriate Governmental Authority all licenses,
permits, authorizations, approvals, franchises and rights that are necessary for
the Company to engage in its business as currently conducted and to permit the
Company to own and use its properties and assets in the manner in which it
currently owns and uses such properties and assets (collectively, "Company
Permits"). The Company has not received notice from any Governmental Authority
or other Person that there is lacking any license, permit, authorization,
approval, franchise or right necessary for the Company to engage in its business
as currently conducted and to permit the Company to own and use its properties
and assets in the manner in which it currently owns and
-15-
uses such properties and assets. Except as would not have a Material Adverse
Effect, the Company Permits are valid and in full force and effect. Except as
would not have a Material Adverse Effect, no event has occurred or, to the
Company's knowledge, circumstance exists that may (with or without notice or
lapse of time): (a) constitute or result, directly or indirectly, in a violation
of or a failure to comply with any Company Permit; or (b) result, directly or
indirectly, in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any Company Permit. The Company has not
received notice from any Governmental Authority or any other Person regarding:
(a) any actual, alleged, possible or potential contravention of any Company
Permit; or (b) any actual, proposed, possible or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to, any
Company Permit. All applications required to have been filed for the renewal of
such Company Permits have been duly filed on a timely basis with the appropriate
Persons, and all other filings required to have been made with respect to such
Company Permits have been duly made on a timely basis with the appropriate
Persons. All Company Permits are renewable by their terms or in the ordinary
course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine fees or similar charges, all
of which, to the extent due, have been duly paid.
5.16 Interested Party Transactions. Except as disclosed on Schedule 5.16,
in the past 30 months, no Person has entered into any transaction or proposed
transaction with the Company which would be required to be disclosed pursuant to
Item 404 of Regulation S-B.
5.17 Title to and Condition of Properties. Except as would not have a
Material Adverse Effect, the Company owns (with good and marketable title in the
case of real property owned) or holds under valid leases or other rights to use
all real property, plants, machinery, equipment and other personal property
necessary for the conduct of its business as presently conducted, free and clear
of all Liens, except Permitted Liens. The material buildings, plants, machinery
and equipment necessary for the conduct of the business of the Company as
presently conducted are in good operating condition and repair and are adequate
for the uses to which they are being put. The buildings, plants, machinery,
equipment and other personal property of the Company is sufficient for the
continued conduct of the Company's businesses after the Closing in substantially
the same manner as conducted prior to the Closing.
5.18 Board Recommendation; JV Participant Approval. The Company Board, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office), determined that this
Agreement and the transactions contemplated by this Agreement, are advisable and
in the best interests of the Company and the JV Participants. The JV
Participants, in their capacities as holders of Interests, by unanimous written
consent, have approved this Agreement and the transactions contemplated by this
Agreement.
5.19 Absence of Undisclosed Liabilities. Except as reflected in the Company
Audited Financial Statements or disclosed on Schedule 5.19, the Company does not
have any debt, obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due) arising out of any
transaction entered into at or prior to the Closing, or any act or omission at
or prior to the Closing, except for liabilities incurred and obligations under
-16-
agreements entered into, in the usual and ordinary course of business since
December 31, 2004, none of which would have a Material Adverse Effect.
5.20 Changes. Except as set forth on Schedule 5.20, the Company has not,
since December 31, 2004, conducted its business or entered into any transaction
other than in the usual and ordinary course of business, except for this
Agreement and has not (a) suffered or experienced any change in, or affecting,
its condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects other than changes,
events or conditions in the usual and ordinary course of its business, none of
which would have a Material Adverse Effect; (b) made any loans or advances to
any Person other than travel advances and reimbursement of expenses made to
employees, officers and directors in the ordinary course of business; (c)
created or permitted to exist any Lien on any material property or asset of the
Company, other than Permitted Liens; (d) issued, sold, disposed of or
encumbered, or authorized the issuance, sale, disposition or encumbrance of, or
granted or issued any option to acquire any shares of its capital stock or any
other of its securities or any Equity Security, or altered the term of any of
its outstanding securities or made any change in its outstanding shares of
capital stock or its capitalization, whether by reason of reclassification,
recapitalization, stock split, combination, exchange or readjustment of shares,
stock dividend or otherwise; (e) declared, set aside, made or paid any dividend
or other distribution to any of its stockholders; (f) materially increased the
compensation or other remuneration or benefits payable or to become payable to
any of its directors, executive officers or employees, except for increases in
the ordinary course of business, or entered into any employment, severance or
similar contracts with any of the foregoing; (g) adopted, amended or increased
the payments to or benefits under any Company Benefit Plan; (h) Terminated or
modified any Material Company Contract; (i) released, waived or cancelled any
claims or rights relating to or affecting the Company in excess of $250,000 in
the aggregate or instituted or settled any Proceeding involving in excess of
$250,000 in the aggregate; (j) paid, discharged or satisfied any claim,
obligation or liability in excess of $250,000 in the aggregate, except for
liabilities incurred prior to the date of this Agreement in the ordinary course
of business; (k) created, incurred, assumed or otherwise become liable for any
Indebtedness in excess of $250,000 in the aggregate; (l) guaranteed or endorsed
in a material amount any obligation or net worth of any Person; (m) acquired the
capital stock or other securities or any ownership interest in, or substantially
all of the assets of, any other; (n) changed its method of accounting or the
accounting principles or practices utilized in the preparation of its financial
statements, other than as required by GAAP; (o) granted any license, sublicense
or other rights of use with respect to any Intellectual Property of the Company;
(p) entered into any agreement, or otherwise obligated itself, to do any of the
foregoing.
5.21 Material Company Contracts.
5.21.1 The Company has made available to DFT, prior to the date of
this Agreement, true, correct and complete copies of each written Material
Company Contract, including each amendment, supplement and modification relating
thereto. Each Material Company Contract is a valid and binding agreement of the
Company, and is in full force and effect.
5.21.2 Except as would not have a Material Adverse Effect, the Company
is not in breach or default of any Material Company Contract to which it is a
party and, to the
-17-
knowledge of the Company, no other party to any Material Company Contract is in
breach or default thereof. Except as would not have a Material Adverse Effect,
no event has occurred or, to the Company's knowledge, circumstance exists that
(with or without notice or lapse of time), would (a) contravene, conflict with
or result in a violation or breach of, or become a default or event of default
under, any provision of any Material Company Contract or (b) permit the Company
or any other Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel, terminate or
modify any Material Company Contract. The Company has not received written
notice of the pending or threatened cancellation, revocation or termination of
any Material Company Contract to which it is a party. There are no
renegotiations of, or attempts to renegotiate, or outstanding rights to
renegotiate any material terms of any Material Company Contract.
5.22 Tax Matters.
5.22.1 Except as set forth on Schedule 5.22.1, (a) all material Tax
Returns required to be filed by or on behalf of the Company have been timely
filed and all such Tax Returns were (at the time they were filed) and are true,
correct and complete in all material respects; (b) all material Taxes of the
Company (whether or not reflected on any Tax Return) have been fully and timely
paid, except those Taxes which are presently being contested in good faith or
for which an adequate reserve for the payment of such Taxes has been established
on the Company Balance Sheet; (c) no waivers of statutes of limitation have been
given or requested with respect to the Company in connection with any Tax
Returns covering the Company or with respect to any Taxes payable by it; (d) no
Governmental Authority in a jurisdiction where the Company does not file Tax
Returns has made a claim, assertion or threat to the Company that the Company is
or may be subject to taxation by such jurisdiction; (e) the Company has duly and
timely collected or withheld, and paid over and reported to the appropriate
Governmental Authority all amounts required to be so collected or withheld and
paid over for all periods under all applicable Laws; (f) there are no Liens with
respect to Taxes on the Company's property or assets other than Permitted Liens;
(g) there are no Tax rulings, requests for rulings, or closing agreements
relating to the Company for any period (or portion of a period) that would
affect any period after the date hereof; and (h) any adjustment of Taxes of the
Company made by a Governmental Authority in any examination that the Company is
required to report to the appropriate state, local or foreign taxing authorities
has been reported, and any additional Taxes due with respect thereto have been
paid.
5.22.2 Except as set forth on Schedule 5.22.2, the Company is treated
as a corporation for U.S. federal income tax purposes, and the Company has not
made an election under Treasury Regulation Section 301.7701-3 to be treated as a
partnership.
5.22.3 The Company is not, and has never been, a controlled foreign
corporation, as that term is defined in Section 957 of the Code and the Treasury
Regulations promulgated thereunder.
5.22.4 There is no pending Proceeding with respect to any Taxes of the
Company, nor, to the knowledge of the Company, is any such Proceeding
threatened. The Company has made available to DFT, prior to the date of this
Agreement, true, correct and complete copies of all Tax Returns, examination
reports and statements of deficiencies assessed
-18-
or asserted against or agreed to by the Company since its inception and any and
all correspondence with respect to the foregoing.
5.22.5 The Company is not liable for the Taxes of any other Person,
whether as a result of being part of an affiliated, unitary, consolidated or
similar group, pursuant to a tax sharing or similar agreement.
5.23 Material Assets. The Company has, and will continue to have upon
consummation of the transaction contemplated by this Agreement, good and
marketable title to, or a valid leasehold interest in, its properties and
assets, free and clear of all Liens, other than Permitted Liens. Such properties
and assets are sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted prior to the
Closing. No Person other than DFT has any contract, right or option to purchase
or acquire any of such properties or assets from the Company. No Affiliate of
the Company or the JV Participants owns or otherwise has any interest in or
right to use any properties or assets used or held for use in, or otherwise
arising from or relating to, the business of the Company.
5.24 Insurance Coverage. The Company has made available to DFT, prior to
the date of this Agreement, true, correct and complete copies of all insurance
policies maintained by the Company on its properties and assets. Except as would
not have a Material Adverse Effect, all of such policies
(a) taken together, provide adequate insurance coverage for the
properties, assets and operations of the Company for all risks
normally insured against by a Person carrying on the same business as
the Company in the PRC, and
(b) are sufficient for compliance with all applicable Laws and
Material Company Contracts. Except as would not have a Material
Adverse Effect, all of such policies are valid, outstanding and in
full force and effect and, by their express terms, will continue in
full force and effect following the consummation of the transactions
contemplated by this Agreement. There are no pending claims with
respect to the Company or its properties or assets under any such
insurance policies, and there are no claims as to which the insurers
have notified the Company that they intend to deny liability. There is
no existing default under any such insurance policy.
5.25 Intellectual Property. Except as set forth on Schedule 5.25(a), the
Company owns, licenses or otherwise has the legal right to use all Intellectual
Property for its business as currently conducted. Schedule 5.25(b) sets forth a
true, correct and complete list of all Intellectual Property of the Company.
There are no outstanding options, licenses or agreements of any kind relating to
the foregoing, nor is the Company bound by or a party to any options, licenses
or agreements of any kind with respect to the Intellectual Property of any other
Person other than licenses or agreements arising from the purchase of "off the
shelf" or standard products. Except as would not have a Material Adverse Effect,
the Company's Intellectual Property is in compliance will all applicable legal
requirements. No Intellectual Property of the Company has been or is now
involved in any dispute, opposition, invalidation or cancellation proceeding,
and no such action has been threatened in writing. No Intellectual Property,
wherever situated or registered, of the Company, to the knowledge of the Company
is infringed,
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or has been challenged or, to the knowledge of the Company, threatened in any
way, and no Intellectual Property of the Company interferes with or is alleged
to infringe or interfere with the Intellectual Property of any other Person.
Except as would not have a Material Adverse Effect, the Company has not taken
any action that would result in the voiding or invalidation of any of its
Intellectual Property. The Company is not aware that any of its employees,
officers or consultants is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
Order, that would interfere with their duties to the Company or that would
conflict with the business of the Company as currently conducted. To the
knowledge of the Company, it is not necessary for it to utilize in its business
any inventions, trade secrets or proprietary information of any of its officers,
employees, consultants or persons it currently intends to hire made prior to
their employment with any the Company, except for inventions, trade secrets or
proprietary information that have been assigned to the Company. Knowledge for
purposes of this Section 5.25 means knowledge of the Company's executive
officers.
5.26 Employee Benefits.
5.26.1 The Company has made available to DFT, prior to the date of
this Agreement, copies of each written Company Benefit Plan and any related
agreements and other contracts.
5.26.2 Except as would not have a Material Adverse Effect, all Company
Benefit Plans have been established, maintained and operated in accordance with
their terms and the requirements of applicable Law, have been maintained in good
standing with applicable Government Authorities, and may by their terms be
amended and/or terminated at any time to the greatest extent permitted by
applicable Law. The Company has made in respect of its employees and has paid
all required social welfare payments and made all social welfare filings as
required by relevant laws and regulations of the PRC. No event has occurred and,
to the knowledge of the Company, there does not now exist any condition or set
of circumstances, that could subject the Company to any liability arising under
any applicable Law, or under any indemnity agreement to which the Company is a
party, excluding liability for benefit claims and funding obligations payable in
the ordinary course.
5.26.3 There are no outstanding or unpaid material severance or
employee-related obligations or amounts due to employees or former employees of
the Company.
5.26.4 Neither the consummation of the transactions contemplated
hereby alone, nor in combination with another event, with respect to each
director, officer, employee and consultant of the Company, will not result in
(a) any payment (including, without limitation, severance, unemployment
compensation or bonus payments) becoming due from the Company or under any
Company Benefit Plan, (b) any increase in the amount of compensation or benefits
payable to any such individual or (c) any acceleration of the vesting or timing
of payment of benefits or compensation payable to any such individual. No
Company Benefit Plan provides benefits or payments contingent upon, triggered
by, or increased as a result of a change in the ownership or effective control
of the Company.
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5.27 Environmental and Safety Matters.
5.27.1 The Company has at all times been and is in material compliance
with all Environmental Laws applicable to the Company. The Company has obtained
the necessary environmental protection approval from the requisite PRC
Governmental Authority in respect of the PRC operations and activities of the
Company, except where the failure to obtain such approvals would not have a
Material Adverse Effect.
5.27.2 There are no Proceedings pending, or to the knowledge of the
Company, threatened in writing against any Company alleging the violation of any
Environmental Law or Environmental Permit applicable to the Company, or alleging
that the Company is a potentially responsible party for any environmental site
contamination.
5.27.3 Neither this Agreement nor the consummation of the transactions
contemplated by this Agreement shall impose any obligations to notify or obtain
the consent of any Governmental Authority or third Persons under any
Environmental Laws applicable to the Company.
5.28 Product Liability and Recalls.
5.28.1 Except as would not have a Material Adverse Effect, there are
no losses, damages, expenses or liabilities (whether absolute, accrued,
contingent or otherwise) against the Company asserted and arising out of or
based upon incidents occurring on or prior to the date hereof with respect to:
(a) any product liability or any similar claim that relates to any of the
products designed, developed, manufactured, produced, distributed, supplied or
sold by the Company to others; (b) the delivery of faulty services; or (c) any
claim for the breach of any express or limited product warranty, or any similar
claim that relates to any product designed, developed, manufactured, produced,
distributed, supplied or sold, or any service delivered, by the Company, and the
Company has no knowledge of any product or service defects which could give rise
to any such losses, claims, damages, expenses or liabilities. For purposes of
this Section 5.28.1 and Section 5.28.2, "knowledge" means knowledge of the
Company's executive officers.
5.28.2 To the knowledge of the Company, there exists no basis for the
recall, withdrawal or suspension by order of any Governmental Authority of any
product designed, developed, manufactured, produced, distributed, supplied or
sold by the Company. To the knowledge of the Company, there are no defects in
the designs, specifications, or process with respect to any product designed,
manufactured, sold, supplied or distributed by the Company that will give rise
to any liability. There has been no recall, withdrawal, or suspension from the
market of any product designed, manufactured, sold, supplied or distributed by
the Company.
5.29 Receivables and Payables. All accounts and notes receivable of the
Company as of the date hereof have arisen in the ordinary course of business,
represent valid obligations to the Company arising from bona fide transactions
in the ordinary course of business and, to the Company's knowledge, no material
amounts are subject to claims or set-off or other defenses or counterclaims. All
accounts and notes payable by the Company as of the date hereof arose in bona
fide transactions in the ordinary course of business. All items which are
required by GAAP
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to be reflected as receivables and payables in the Company Audited Financial
Statements and on the books and records of the Company are so reflected and have
been recorded in accordance with GAAP in a manner consistent with past practice.
5.30 Ethical Business Practices.
(a) The Company and the officers, directors, employees, shareholders,
or agents of the Company, acting for or on behalf of the Company, have not
offered, promised, paid, or authorized the payment, directly or indirectly
through any other party, of anything of value to any government official or
employee (including an employee of a state-owned entity), political party
or candidate for public office, for the purpose of influencing any acts or
decisions of such official or of the government to obtain or retain
business or direct business to any person.
(b) No owner, officer, director, Key Employee or, to the Company's
knowledge, other employee of the Company is an official or employee of any
government or governmental entity.
(c) The Company maintains its books and records, and prepares its
periodic statements of accounts in accordance with generally accepted
accounting principles. The Company makes and keeps books, records, and
accounts which, in reasonable detail, accurately and fairly reflect the
transactions and disposition of the assets of the Company. The Company has
in place a system of internal accounting controls to ensure that
transactions have been recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability of assets.
5.31 Money Laundering Laws. The operations of the Company are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes in all applicable U.S. and
non-U.S. jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any Governmental Authority (collectively, the "Money Laundering Laws") and no
Proceeding involving the Company with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company, threatened.
5.32 Customers and Suppliers. To the knowledge of the Company, all supplies
and services necessary for the conduct of the Company's business as presently
conducted may be obtained from readily available alternate sources on terms and
conditions comparable to those presently available to the Company. There exists
no actual or, to the knowledge of the Company, threatened, termination,
cancellation or material limitation of, or any material change in, the business
relationship of the Company with any customer or supplier, the loss of which
could reasonably be expected, together with any other customers or suppliers
with respect to which there has been any such actual or threatened termination,
cancellation, material limitation or material change, to have or result in a
Material Adverse Effect. To the knowledge of the Company, no customer or
supplier of the Company, the loss of which could reasonably be expected,
together with any other customers or suppliers who have experienced any material
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work stoppage or adverse circumstances or condition, to have or result in a
Material Adverse Effect, has experienced any material work stoppage or other
material adverse circumstance or condition that is reasonably likely to
jeopardize or adversely affect the Company's future relationship with such
customer or supplier. There are no pending material disputes or controversies
between any customer or supplier of the Company. No customer of the Company has
any right to any credit or refund for products sold or services rendered or to
be rendered by the Company pursuant to any contract or practice of the Company
other than pursuant to the normal course return policy of the Company.
5.33 Governmental Inquiry. The Company has not received any material
written inspection report, questionnaire, inquiry, demand or request for
information from a Governmental Authority.
5.34 Proxy Statement. Subject to the accuracy of the representations of DFT
in Section 6.22, the information supplied by the JV Participants and the Company
in writing specifically for inclusion in the Proxy Statement will not, on the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders or at the time of the DFT Stockholders Meeting,
contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the DFT Stockholders Meeting which has become
false or misleading. If at any time prior to the Closing any event relating to
the Company or any JV Participant or any of their respective affiliates,
officers or directors should be discovered by the Company or any JV Participant
which should be set forth in a supplement to the Proxy Statement, the Company or
such JV Participant, as applicable, will promptly inform DFT.
SECTION VI
REPRESENTATIONS AND WARRANTIES OF DFT
DFT represents and warrants to the JV Participants and the Company as
follows:
6.1 Organization and Qualification. DFT is duly organized, validly existing
and in good standing under the laws of the State of New Jersey, has all
requisite authority and power (corporate and other), governmental licenses,
authorizations, consents and approvals to carry on its business as presently
conducted and to own, hold and operate its properties and assets as now owned,
held and operated by it, except where the failure to be so organized, existing
and in good standing, or to have such authority and power, governmental
licenses, authorizations, consents or approvals would not have a Material
Adverse Effect. DFT is duly qualified, licensed or domesticated as a foreign
corporation in good standing in each jurisdiction wherein the nature of its
activities or its properties owned, held or operated makes such qualification,
licensing or domestication necessary, except where the failure to be so duly
qualified, licensed or domesticated and in good standing would not have a
Material Adverse Effect.
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6.2 Subsidiaries. DFT does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture or other
entity or enterprise.
6.3 Organizational Documents. True, correct and complete copies of the
Organizational Documents of DFT have been delivered to the Company prior to the
execution of this Agreement, and no action has been taken to amend or repeal
such Organizational Documents. DFT is not in violation or breach of any of the
provisions of its Organizational Documents, except for such violations or
breaches as would not have a Material Adverse Effect.
6.4 Authorization. DFT has all requisite authority and power (corporate and
other), governmental licenses, authorizations, consents and approvals to enter
into this Agreement and each of the Transaction Documents to which DFT is a
party, and, subject to obtaining the DFT Stockholder Approval, to consummate the
transactions contemplated by this Agreement and each of the Transaction
Documents to which DFT is a party and to perform its obligations under this
Agreement and each of the Transaction Documents to which DFT is a party. The
execution, delivery and performance by DFT of this Agreement and each of the
Transaction Documents to which DFT is a party have been duly authorized by all
necessary corporate action (other than the approval of the transactions
contemplated by this Agreement and the Transaction Documents, to the extent
required by Law by DFT's stockholders) and do not require from the DFT Board any
consent or approval that has not been validly and lawfully obtained. The
execution, delivery and performance by DFT of this Agreement and each of the
Transaction Documents to which DFT is a party requires no authorization,
consent, approval, license, exemption of or filing or registration with any
Governmental Authority or other Person other than (a) the filing of the Articles
of Share Exchange with the Secretary of State of the State of New Jersey, (b)
such filings and mailings required by the Exchange Act and any other policy or
requirement of the Commission imposed in connection therewith (including,
without limitation, the Proxy Statement and any requirement arising from any
comments of the Commission occasioned by the filing of the Proxy Statement), (c)
the filing of a Form D with the Commission, and any applicable state securities
law filings, if required, (d) such other customary filings with the Commission
for transactions of the type contemplated by this Agreement and (e) such
approval by the stockholders of DFT as may be required by Law.
6.5 No Violation. Neither the execution or delivery by DFT of this
Agreement or any Transaction Document to which DFT is a party, nor the
consummation or performance by DFT of the transactions contemplated hereby or
thereby will, directly or indirectly, (a) contravene, conflict with, or result
in a violation of any provision of the Organizational Documents of DFT; (b)
contravene, conflict with, constitute a default (or an event or condition which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination or acceleration of, or result in the imposition or
creation of any Lien under, any agreement or instrument to which DFT is a party
or by which the properties or assets of DFT is bound; (c) contravene, conflict
with, or result in a violation of, any Law or Order to which DFT or any of the
properties or assets owned or used by DFT may be subject; or (d) contravene,
conflict with, or result in a violation of, the terms or requirements of, or
give any Governmental Authority the right to revoke, withdraw, suspend, cancel,
terminate or modify, any licenses, permits, authorizations, approvals,
franchises or other rights held by DFT or that otherwise relate to the business
of, or any of the properties or assets owned or used by DFT except, in the case
of clause
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(b), (c), or (d), for any such contraventions, conflicts, violations, or other
occurrences as would not have a Material Adverse Effect.
6.6 Securities Laws. Assuming the accuracy of the representations and
warranties of the JV Participants contained in Section 4 and Exhibits C and D,
the issuance of the DFT Shares pursuant to this Agreement are and will be (a)
exempt from the registration and prospectus delivery requirements of the
Securities Act, (b) registered or qualified (or are exempt from registration and
qualification) under the registration permit or qualification requirements of
all applicable state securities laws, and (c) accomplished in conformity with
all other applicable federal and state securities laws.
6.7 Binding Obligations. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than DFT, this Agreement has been, and as of the Closing
each of the Transaction Documents to which DFT is a party will be, duly
authorized, executed and delivered by DFT and constitutes or will constitute, as
the case may be, the legal, valid and binding obligations of DFT, enforceable
against DFT in accordance with their respective terms, except as such
enforcement is limited by general equitable principles, or by bankruptcy,
insolvency and other similar Laws affecting the enforcement of creditors rights
generally.
6.8 Duly Authorized. The issuance of the DFT Shares has been duly
authorized and, upon delivery to the JV Participants of certificates therefore
in accordance with the terms of this Agreement, the DFT Shares will have been
validly issued and fully paid, and will be nonassessable, have the rights,
preferences and privileges specified, will be free of preemptive rights and will
be free and clear of all Liens and restrictions, other than Liens created by the
JV Participants and restrictions on transfer imposed by this Agreement, state
securities laws and the Securities Act.
6.9 Certain Proceedings. There is no pending Proceeding that has been
commenced against DFT and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated by this Agreement. To the knowledge of DFT, no such Proceeding has
been threatened.
6.10 No Brokers or Finders. No Person has, or as a result of the
transactions contemplated herein will have, any right or valid claim against DFT
for any commission, fee or other compensation as a finder or broker, or in any
similar capacity, and DFT will indemnify and hold the Company harmless against
any liability or expense arising out of, or in connection with, any such claim.
6.11 Material DFT Contracts. DFT has made available to the Company, prior
to the date of this Agreement, true, correct and complete copies of each
Material DFT Contract, including each amendment, supplement and modification
thereto.
6.12 Material Assets. The financial statements of DFT set forth in the SEC
Documents reflect the material properties and assets (real and personal) owned
or leased by DFT.
6.13 SEC Documents; Financial Statements. DFT has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the
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three years preceding the date hereof (or such shorter period as DFT was
required by law to file such material) (the foregoing materials, together with
DFT's registration statement on Form SB-2, Registration No. 333-120506 (together
with all amendments thereto), being collectively referred to herein as the "SEC
Documents") and has filed any such SEC Documents prior to the expiration of any
such extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statement therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which DFT is a party or to which the property or assets of DFT are
subject have been appropriately filed as exhibits to the SEC Documents as and to
the extent required under the Exchange Act. The financial statements of DFT
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto, or, in the case of unaudited statements
as permitted by Form 10-Q of the Commission), and fairly present in all material
respects (subject in the case of unaudited statements, to normal, recurring
audit adjustments) the financial position of DFT as at the dates thereof and the
results of its operations and cash flows for the periods then ended. DFT's
Common Stock is quoted on the Over the Counter Bulletin Board, and DFT is not
aware of any facts which would make DFT's Common Stock ineligible for quotation
on the Over the Counter Bulletin Board.
6.14 Board Recommendation. The DFT Board, at a meeting duly called and
held, has determined that this Agreement and the transactions contemplated by
this Agreement are advisable and in the best interests of DFT's stockholders and
has duly authorized this Agreement and the transactions contemplated by this
Agreement.
6.15 Compliance with Laws. Except as would not have a Material Adverse
Effect, the business and operations of DFT have been and are being conducted in
accordance with all applicable Laws and Orders. Except as would not have a
Material Adverse Effect, DFT has not received notice of any violation (or any
Proceeding involving an allegation of any violation) of any applicable Law or
Order by or affecting DFT and, to the knowledge of the Company, no Proceeding
involving an allegation of violation of any applicable Law or Order is
threatened or contemplated. Except as would not have a Material Adverse Effect,
DFT is not subject to any obligation or restriction of any kind or character,
nor is there, to the knowledge of DFT, any event or circumstance relating to DFT
that materially and adversely affects in any way its business, properties,
assets or prospects or that prohibits DFT from entering into this Agreement or
would prevent or make burdensome its performance of or compliance with all or
any part of this Agreement or the consummation of the transactions contemplated
hereby.
6.16 Litigation; Orders. Except as would not have a Material Adverse
Effect, there is no Proceeding (whether federal, state, local or foreign)
pending or, to the knowledge of DFT, threatened against or affecting DFT or
DFT's properties, assets, business or employees. To the knowledge of DFT, there
is no fact that might result in or form the basis for any such Proceeding. DFT
is not subject to any Orders.
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6.17 Foreign Corrupt Practices Act. Neither DFT, nor any director, officer,
agent, employee or other Person associated with or acting on behalf of DFT has
used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any Governmental Authority from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977 in connection with the operations of DFT; or made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment in connection
with the operations of DFT.
6.18 Money Laundering Laws. The operations of DFT and have been conducted
at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Money Laundering Laws and no Proceeding involving DFT with
respect to the Money Laundering Laws is pending or, to the knowledge of DFT ,
threatened.
6.19 Absence of Certain Changes or Events. Since September 30, 2005, DFT
has conducted its business in the ordinary course and there has not occurred any
development or circumstance constituting, individually or in the aggregate, a
Material Adverse Effect; (ii) any material change by DFT in its accounting
methods, principles or practices (other than changes required by GAAP after the
date of this Agreement) or (iii) any material tax election, any material change
in method of accounting with respect to Taxes or any compromise or settlement of
any proceeding with respect to any material Tax liability.
6.20 Capitalization. The authorized capital stock of DFT consists of (a)
10,000,000,000 shares of DFT's Common Stock, of which 13,013,984 shares are
issued and outstanding, (b) 50,000,000 shares of Class B Common Stock, par value
$0.01 per share, none of which shares are issued and outstanding, (c) 20,000,000
shares of Class C Common Stock, par value $0.01 per share, none of which shares
are issued and outstanding and 1,000,000 shares of preferred stock none of which
shares are issued and outstanding. All issued and outstanding shares of the
DFT's Common Stock are duly authorized, validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive or
similar rights. On the Closing Date, DFT will have sufficient authorized and
unissued DFT's Common Stock to consummate the transactions contemplated hereby.
Except as disclosed on Schedule 6.20 or in the SEC Documents, there are no
outstanding or authorized options, warrants, purchase agreements, participation
agreements, subscription rights, conversion rights, exchange rights or other
securities or contracts that could require DFT to issue, sell or otherwise cause
to become outstanding any of its authorized but unissued shares of capital stock
or any securities convertible into, exchangeable for or carrying a right or
option to purchase shares of capital stock or to create, authorize, issue, sell
or otherwise cause to become outstanding any new class of capital stock.
6.21 Tax Matters.
6.21.1 Except as set forth on Schedule 6.21.1, (a) all material Tax
Returns required to be filed by or on behalf of DFT have been timely filed and
all such Tax Returns were (at the time they were filed) and are true, correct
and complete in all material respects; (b) all material Taxes of DFT (whether or
not reflected on any Tax Return) have been fully and timely paid, except those
Taxes which are presently being contested in good faith or for which an
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adequate reserve for the payment of such Taxes has been established DFT Balance
Sheet; (c) no waivers of statutes of limitation have been given or requested
with respect to DFT in connection with any Tax Returns covering DFT or with
respect to any Taxes payable by it; (d) no Governmental Authority in a
jurisdiction where DFT does not file Tax Returns has made a claim, assertion or
threat to DFT that DFT is or may be subject to taxation by such jurisdiction;
(e) DFT has duly and timely collected or withheld, and paid over and reported to
the appropriate Governmental Authority all amounts required to be so collected
or withheld and paid over for all periods under all applicable Laws; (f) there
are no Liens with respect to Taxes on DFT's property or assets other than
Permitted Liens; (g) there are no Tax rulings, requests for rulings, or closing
agreements relating to DFT for any period (or portion of a period) that would
affect any period after the date hereof; and (h) any adjustment of Taxes of DFT
made by a Governmental Authority in any examination that DFT is required to
report to the appropriate state, local or foreign taxing authorities has been
reported, and any additional Taxes due with respect thereto have been paid.
6.21.2 There is no pending Proceeding with respect to any Taxes of
DFT, nor, to the knowledge of DFT, is any such Proceeding threatened.
6.21.3 DFT is not liable for the Taxes of any other Person, whether as
a result of being part of an affiliated, unitary, consolidated or similar group,
pursuant to a tax sharing or similar agreement.
6.22 Proxy Statement. The information supplied by DFT in writing
specifically for inclusion in the proxy statement to be sent to the stockholders
of DFT in connection with the meeting of the stockholders of DFT to consider the
transactions contemplated by this Agreement and the Transaction Documents to the
extent required by Law (the "DFT Stockholders Meeting") (such proxy statement as
amended or supplemented being referred to herein as the "Proxy Statement") will
not, on the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to stockholders or at the time of the DFT Stockholders
Meeting, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made therein not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the DFT Stockholders Meeting
which has become false or misleading. If at any time prior to the Closing any
event relating to DFT or any of its respective affiliates, officers or directors
should be discovered by DFT which should be set forth in a supplement to the
Proxy Statement, DFT shall promptly inform the Company. The Proxy Statement
shall comply as to form in all material respects with the requirements of the
Exchange Act.
SECTION VII
COVENANTS OF THE COMPANY AND THE JV PARTICIPANTS
7.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, the Company will (a) afford DFT and its agents, advisors and
attorneys during normal business hours, and upon reasonable notice, full and
free access to the Company's senior
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personnel, properties, contracts, books and records, and other documents and
data, (b) furnish DFT and its agents, advisors and attorneys with copies of all
such contracts, books and records, and other existing documents and data as DFT
may reasonably request, and (c) furnish DFT and its agents, advisors and
attorneys with such additional financial, operating, and other data and
information as DFT may reasonably request.
7.2 Operation of the Business of the Company.
7.2.1 Between the date of this Agreement and the Closing Date, the
Company will:
(a) conduct its business only in the ordinary course of business
consistent with past practice;
(b) use its best efforts to preserve intact its current business
organization and business relationships, including, without limitation,
relationships with suppliers, customers, landlords, creditors, officers,
employees and agents;
(c) not create any new, or capitalize or conduct any business through,
any Subsidiary;
(d) issue any Equity Securities; and
(e) perform any act that would require the consent of the JV
Participants or any of them.
7.2.2 Notwithstanding the foregoing, between the date of this
Agreement and the Closing Date, the Company will not directly or indirectly,
without the prior written consent of DFT, engage in any transaction with, or
enter into any agreement with any officer, director or stockholder of the
Company or, or any Affiliate or "associate" (as such term is defined in Rule 405
of the Commission under the Securities Act) of any such Person.
7.3 No Transfers of Interests.
7.3.1 Between the date of this Agreement and the Closing Date, no JV
Participant shall assign, transfer, mortgage, pledge or otherwise dispose of any
or all of the Interests (or any interest therein) or grant any Person the option
or right to acquire such Interests (or any interest therein).
7.4 Required Filings and Approvals.
7.4.1 As promptly as practicable after the date of this Agreement, the
Company will make all filings required to be made by it in order to consummate
the transactions contemplated by this Agreement. Between the date of this
Agreement and the Closing Date, the Company will, (a) cooperate with DFT with
respect to all filings that DFT elects to make or is required to make in
connection with the transactions contemplated by this Agreement, and (b)
cooperate with DFT in obtaining any consents or approvals required to be
obtained by DFT in connection herewith.
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7.4.2 Without limiting the foregoing, the Company and the JV
Participants shall promptly furnish to DFT any information reasonably requested
by DFT in connection with the preparation, filing and mailing of the Proxy
Statement, including, without limitation, information concerning the Company and
the JV Participants. The Company and each JV Participant, severally and not
jointly, represent and warrant to DFT that the information supplied in writing
by the Company and each JV Participant expressly for inclusion in the Proxy
Statement will not, on the date the Proxy Statement is filed with the Commission
or first mailed to the stockholders of DFT, contain any statement which, at such
time and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not false or misleading. If, at any time prior to the Closing Date, any
information should be discovered by the Company or any JV Participant which
should be set forth in an amendment to the Proxy Statement so that such Proxy
Statement would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Company or such JV
Participant, as the case may be, shall promptly notify DFT.
7.5 Notification. Between the date of this Agreement and the Closing Date,
the Company and the JV Participants will promptly notify DFT in writing if the
Company or the JV Participants becomes aware of any fact or condition that
causes or constitutes a breach of any of the representations and warranties of
the Company or the JV Participants, as the case may be, as of the date of this
Agreement, or if the Company or any JV Participant becomes aware of the
occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the Schedules
to this Agreement if the Schedules to the Agreement were dated the date of the
occurrence or discovery of any such fact or condition, the Company or the JV
Participants, as the case may be, will promptly deliver to DFT a supplement to
the Schedules to the Agreement specifying such change; provided, however, that
such delivery shall not materially adversely affect any rights of DFT set forth
herein. During the same period, the Company and the JV Participants will
promptly notify DFT of the occurrence of any breach of any covenant of the
Company or the JV Participants in this Section 7 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 9 impossible
or unlikely.
7.6 Closing Conditions. Between the date of this Agreement and the Closing
Date, each of the Company and the JV Participants will use its commercially
reasonable efforts to cause the conditions in Section 9 to be satisfied.
SECTION VIII
COVENANTS OF DFT
8.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, DFT will (a) afford the Company and its agents, advisors and
attorneys during normal business hours and upon reasonable notice, full and free
access to DFT's senior personnel, properties, contracts, books and records, and
other documents and data, (b) furnish the Company
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and its agents, advisors and attorneys with copies of all such contracts, books
and records, and other existing documents and data as the Company may reasonably
request, and (c) furnish the Company and its agents, advisors and attorneys with
such additional financial, operating, and other data and information as the
Company may reasonably request.
8.2 Operation of the Business of DFT. Between the date of this Agreement
and the Closing Date, DFT, to the extent consistent with the exercise by the DFT
Board of its fiduciary duties to DFT and its shareholders, will:
8.2.1 conduct its business only in the ordinary course of business;
8.2.2 use its best efforts to preserve intact the current business
organization and business relationships, including, without limitation,
relationships with suppliers, customers, landlords, creditors, officers,
employees and agents;
8.2.3 not perform any act that would require the consent of the
shareholders of DFT;
8.2.4 not engage, directly or indirectly, without the consent of the
Company, in any transaction with, or enter into any agreement with any officer,
director of the Company, or any Affiliate or associate of any such Person; or
8.2.5 issue any Equity Securities.
8.3 Required Filings and Approvals.
8.3.1 As promptly as practicable after the date of this Agreement, DFT
will make all filings required to be made by it in order to consummate the
transactions contemplated by this Agreement. Between the date of this Agreement
and the Closing Date, DFT will cooperate with the Company with respect to all
filings that the Company elects to make or is required to make in connection
with the transactions contemplated by this Agreement, and cooperate with the
Company in obtaining any consents or approvals required to be obtained by the
Company in connection herewith.
8.3.2 Without limiting the foregoing, as promptly as practicable after
the execution of this Agreement, DFT shall prepare and file the Proxy Statement
with the Commission. DFT will advise the Company, promptly after it receives
notice thereof, of any request by the Commission for the amendment of the Proxy
Statement or comments thereon and responses thereto or requests by the
Commission for additional information. DFT shall mail the Proxy Statement to its
stockholders as promptly as practicable pursuant to the Securities Act, the
Exchange Act and the rules and regulations of the Commission related thereto.
8.4 Notification. Between the date of this Agreement and the Closing Date,
DFT will promptly notify the Company and the JV Participants in writing if DFT
becomes aware of any fact or condition that causes or constitutes a breach of
any of the representations and warranties of DFT, as of the date of this
Agreement, or if DFT becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a breach of any such representation or
warranty had such
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representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Schedules to this Agreement if the Schedules to the Agreement were dated
the date of the occurrence or discovery of any such fact or condition, DFT will
promptly deliver to the Company and the JV Participants a supplement to the
Schedules to the Agreement specifying such change; provided, however, that such
delivery shall not materially adversely affect any rights of the JV Participants
set forth herein. During the same period, DFT will promptly notify the Company
and the JV Participants of the occurrence of any breach of any covenant of DFT
in this Section 8 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 10 impossible or unlikely.
8.5 Closing Conditions. Between the date of this Agreement and the Closing
Date, DFT will use commercially reasonable efforts to cause the conditions in
Section 10 to be satisfied.
8.6 Indemnification and Insurance.
8.6.1 The indemnification provisions set forth in the Organizational
Documents of DFT shall not be amended, modified or otherwise repealed for a
period of six years from the Closing Date in any manner that would adversely
affect the rights thereunder as of the Closing Date of individuals who at the
Closing Date were directors, officers, employees or agents of DFT, unless such
modification is required after the Closing Date by Law and then only to the
minimum extent required by such Law.
8.6.2 DFT shall to the fullest extent permitted under applicable Law
or its Organizational Documents, indemnify and hold harmless, each present and
former director, officer or employee of DFT (collectively, the "Indemnified
Parties") against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any Proceeding ("each a "Loss") (x) arising out of or pertaining
to the transactions contemplated by this Agreement or (y) otherwise with respect
to any acts or omissions occurring at or prior to the Closing Date, to the same
extent as provided in DFT's Organizational Documents or any applicable contract
or agreement as in effect on the date hereof, in each case for a period of six
years after the Closing Date, except to the extent any such Loss arises from
such Indemnified Party's gross negligence or willful misconduct. In the event of
any such Proceeding (whether arising before or after the Closing Date), (i) any
counsel retained by the Indemnified Parties for any period after the Closing
Date shall be reasonably satisfactory to DFT, (ii) after the Closing Date, DFT
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefore are received, provided that the Indemnified Parties shall
be required to reimburse DFT for such payments in the circumstances and to the
extent required by DFT's Organizational Documents, any applicable contract or
agreement or applicable Law, and (iii) DFT will cooperate in the defense of any
such matter; provided, however, that DFT shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld); and provided, further, that, in the event that any claim or claims
for indemnification are asserted or made within such six-year period, all rights
to indemnification in respect of any such claim or claims shall continue until
the disposition of any and all such claims. The Indemnified Parties as a group
may retain only one law firm to represent them in each applicable jurisdiction
with respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue
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between the positions of any two or more Indemnified Parties, in which case each
Indemnified Person with respect to whom such a conflict exists (or group of such
Indemnified Persons who among them have no such conflict) may retain one
separate law firm in each applicable jurisdiction. Notwithstanding the
foregoing, to the extent that it may wish, DFT will be entitled to assume the
defense of any Proceeding, with counsel reasonably satisfactory to the
Indemnified Parties. After notice from DFT of its election to assume the defense
thereof, DFT will not be liable to the Indemnified Parties for any legal or
other expenses subsequently incurred by the Indemnified Parties in connection
with the defense thereof. The Indemnified Parties shall have the right to employ
counsel in such Proceeding but the fees expenses of such counsel incurred after
notice from DFT of its assumption of the defense thereof shall be at the expense
of the Indemnified Parties, unless counsel for DFT shall have concluded that
there may be a conflict of interest between DFT and such Indemnified Parties in
which case DFT shall pay the reasonable fees and expenses of one separate
counsel for the Indemnified Parties.
8.6.3 In addition, DFT will provide, for a period of not less than six
years after the Closing Date, DFT's current directors and officers with an
insurance and indemnification policy that provides coverage for events occurring
at or prior to the Closing Date (the "D&O Insurance") that is no less favorable
than the existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; provided, however, DFT shall not be
required to pay an annual premium for the D&O Insurance in excess of 300% of the
annual premium currently paid by DFT for such insurance, but in such case shall
purchase as much such coverage as possible for such amount.
8.6.4 This Section 8.6 shall survive the consummation of the
transactions contemplated by this Agreement at the Closing Date, is intended to
benefit the Indemnified Parties, shall be binding on all successors and assigns
of DFT and shall be enforceable by the Indemnified Parties, and may not be
amended without the prior written consent of the Indemnified Parties.
8.7 Rule 144 Reporting. With a view to making available to DFT's
stockholders the benefit of certain rules and regulations of the Commission
which may permit the sale of the DFT Common Stock to the public without
registration, from and after the Closing Date, DFT agrees to use reasonable
commercial efforts to:
8.7.1 Make and keep public information available, as those terms are
understood and defined in Rule 144; and
8.7.2 File with the Commission, in a timely manner, all reports and
other documents required of DFT under the Exchange Act.
8.8 Books and Records. DFT shall maintain all of the books and records of
DFT that are currently in its possession as of the date hereof, for a period of
at least six (6) years after the Closing Date.
8.9 New Subsidiary. As promptly as practicable following the Closing, DFT
shall create a new subsidiary under the laws of the State of New Jersey,
contribute the assets comprising the "unified messaging system" business of DFT
to such subsidiary and retain such
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assets in such subsidiary until such time as the spin off transaction referred
to in the Consulting Agreements is completed.
8.10 Proxy Statement. As promptly as practicable after the execution of
this Agreement, DFT shall prepare and file with the SEC preliminary proxy
materials which shall constitute the Proxy Statement. As promptly as practicable
after comments are received from the SEC thereon and after the furnishing by DFT
of all information required to be contained therein, DFT shall file with the SEC
the definitive Proxy Statement relating to the approval of the transactions
contemplated by this Agreement and the Transaction Documents to the extent
required by Law and the adoption of this Agreement by the stockholders of DFT
pursuant to this Agreement. The Company and the JV Participants shall furnish
all information required to be included in the Proxy Statement in connection
with the transactions contemplated by this Agreement. The Company and the JV
Participants shall fully cooperate with DFT in order to make all required
filings in connection therewith.
8.11 DFT Stockholders Meeting.
8.11.1 DFT shall call the DFT Stockholders Meeting as promptly as
practicable for the purpose of voting upon the approval of the this Agreement
and the transactions contemplated by this Agreement and the Transaction
Documents to the extent required by Law (the "DFT Stockholder Approval"). The
Proxy Statement shall include the recommendation of the DFT Board in favor of
this Agreement and the transactions contemplated by this Agreement and the
Transaction Documents to the extent required by Law. DFT shall solicit from its
stockholders proxies in favor of approval of this Agreement and the transactions
contemplated by this Agreement and the Transaction Documents to the extent
required by Law and shall take all other reasonable action necessary or
advisable to secure the vote or consent of stockholders in favor of such
approval. Notwithstanding anything to the contrary herein, DFT shall not be
obligated to take any of the actions set forth in the two preceding sentences of
this Section 8.11 (but not the first sentence of this Section 8.11) to the
extent that the DFT Board determines in good faith (on the advice of independent
counsel) that there is a reasonable risk that any such action would be
inconsistent with the proper discharge of its fiduciary duties.
8.11.2 Subject to the fiduciary duties of the DFT Board, the
affirmative recommendation of the DFT Board to the stockholders of DFT with
respect to the adoption of this Agreement and the transactions contemplated by
this Agreement and the Transaction Documents to the extent required by Law shall
be included in the Proxy Statement, and the DFT Board shall take all lawful
action to solicit the adoption of this Agreement by the stockholders of DFT.
SECTION IX
CONDITIONS PRECEDENT TO DFT'S OBLIGATION TO CLOSE
DFT's obligation to acquire the Interests and to take the other actions
required to be taken by DFT at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by DFT, in whole or in part):
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9.1 Accuracy of Representations. The representations and warranties of the
Company and the JV Participants set forth in this Agreement or in any Schedule
or certificate delivered pursuant hereto that are not qualified as to
materiality shall be true and correct in all material respects as of the date of
this Agreement, and shall be deemed repeated as of the Closing Date and shall
then be true and correct in all material respects, except to the extent a
representation or warranty is expressly limited by its terms to another date and
without giving effect to any supplemental Schedule. The representations and
warranties of the Company and the JV Participants set forth in this Agreement or
in any Exhibit, Schedule or certificate delivered pursuant hereto that are
qualified as to materiality shall be true and correct in all respects as of the
date of this Agreement, and shall be deemed repeated as of the Closing Date and
shall then be true and correct in all respects, except to the extent a
representation or warranty is expressly limited by its terms to another date and
without giving effect to any supplemental Schedule.
9.2 Performance by the Company and JV Participants.
9.2.1 All of the covenants and obligations that the Company and JV
Participants are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
9.2.2 Each document required to be delivered by the Company and the JV
Participants pursuant to this Agreement at or prior to Closing must have been
delivered.
9.3 No Force Majeur Event. There shall not have been any delay, error,
failure or interruption in the conduct of the business of the Company, or any
loss, injury, delay, damage, distress, or other casualty, due to force majeur
including but not limited to (a) acts of God; (b)fire or explosion; (c) war,
acts of terrorism or other civil unrest; or (d) national emergency.
9.4 Certificate of Officer. The Company will have delivered to DFT a
certificate, dated the Closing Date, executed by an officer of the Company,
certifying the satisfaction of the conditions specified in Sections 9.1, 9.2 and
9.3.
9.5 Certificate of JV Participants. Each JV Participant will have delivered
to DFT a certificate, dated the Closing Date, executed by such JV Participant,
if a natural person, or an authorized officer of the JV Participant, if an
entity, certifying the satisfaction of the conditions specified in Sections 9.1,
9.2, 9.6, 9.8 and 9.9.
9.6 Consents.
9.6.1 All consents, waivers, approvals, authorizations or orders
required to be obtained, and all filings required to be made, by the Company
and/or the JV Participants for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated by this
Agreement and the other Transaction Documents to the extent required by Law,
shall have been obtained and made by the Company or the JV Participants, as the
case may be, except where the failure to receive such consents, waivers,
approvals,
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authorizations or orders or to make such filings could not be expected to have a
Material Adverse Effect on the Company or DFT; it being understood that all
consents, waivers, approvals, authorizations or orders of the PRC or any
subdivision thereof are required to be delivered at or prior to Closing.
9.6.2 Without limiting the foregoing, the Proxy Statement shall have
been mailed to the stockholders of DFT as required by law. No Proceeding
occasioned by the Proxy Statement shall have been initiated or threatened by the
Commission (which Proceeding remains unresolved as of the Closing Date).
9.7 Documents. The Company and the JV Participants must have caused the
following documents to be delivered to DFT:
9.7.1 assignments of the Interests (other than the Retained Interests)
and Rights with Respect to Retained Interests held by each JV Participant and
Rights with Respect to Retained Interests, each in form and substance reasonably
satisfactory to DFT, transferring such Interests to DFT and any necessary
approvals thereof or consents thereto;
9.7.2 a Secretary's Certificate of the Company, dated the Closing
Date, certifying attached copies of (A) the Organizational Documents of the
Company, (B) the resolutions of the Company Board and the JV Participants
approving this Agreement and the transactions contemplated hereby; and (C) the
incumbency of each authorized officer of the Company signing this Agreement and
any other agreement or instrument contemplated hereby to which the Company is a
party;
9.7.3 each of the Transaction Documents (including without limitation
the Consultant Agreements) to which the Company and/or the JV Participants is a
party, duly executed;
9.7.4 a certified certificate of good standing (or in the case of PRC
entities, a Letter from the Administrator of Commerce and Industry to the effect
that such entity is subsisting and has paid its taxes), or equivalent thereof of
the Company and each JV Participant who is not an individual.
9.7.5 true, correct and complete English translations of each Material
Company Contract suitable for filing with the SEC; and
9.7.6 such other documents as DFT may reasonably request for the
purpose of (i) evidencing the accuracy of any of the representations and
warranties of the Company and the JV Participants pursuant to Section 9.1, (ii)
evidencing the performance of, or compliance by the Company and the JV
Participants with, any covenant or obligation required to be performed or
complied with by the Company or the JV Participants, as the case may be, (iii)
evidencing the satisfaction of any condition referred to in this Section 9
(including, without limitation such opinions of PRC counsel to the Company or
the JV Participants that all consents and approvals of PRC Governmental
Authorities necessary or required to consummate the Transactions including
without limitation the transfer of the Interests as provided herein, free and
clear of all, Liens have been obtained and are in full force and effect), or
(iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement.
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9.8 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened against DFT, the Company or any JV Participant, or
against any Affiliate thereof, any Proceeding (which Proceeding remains
unresolved as of the Closing Date) (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
by this Agreement and the other Transaction Documents, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the transactions contemplated by this Agreement and the other Transaction
Documents.
9.9 No Claim Regarding Ownership or Consideration. There must not have been
made or threatened by any Person any claim asserting that such Person (a) is the
holder of, or has the right to acquire or to obtain beneficial ownership of the
Interests or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the DFT Shares.
9.10 Satisfactory Due Diligence. DFT shall have completed and reasonably
satisfied itself with the final results of its due diligence review of the
Company's contracts, books, records and other information or documents
reasonably requested by DFT.
9.11 Financial Statements. DFT shall have received with respect to the
Company and Jinche all financial statements and all other materials required to
be filed with the SEC pursuant to Regulation S-B and such financial statements
and other materials shall be adequate, in the opinion of DFT's auditors, to meet
the requirements of Regulations S-K and S-X for purposes of filing a
registration statement on Form SB-2.
9.12 Stockholder Approval. To the extent required by Law, this Agreement
and transactions contemplated hereby and by the Transaction Documents shall have
been approved and adopted by the requisite vote of the stockholders of DFT.
SECTION X
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
AND THE JV PARTICIPANTS TO THE CLOSING
The JV Participants' obligation to transfer the Interests and the
obligations of the Company to take the other actions required to be taken by the
Company at the Closing are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by the
Company and the JV Participants, in whole or in part):
10.1 Accuracy of Representations. The representations and warranties of DFT
set forth in this Agreement or in any Schedule or certificate delivered pursuant
hereto that are not qualified as to materiality shall be true and correct in all
material respects as of the date of this Agreement, and shall be deemed repeated
as of the Closing Date and shall then be true and correct in all material
respects, except to the extent a representation or warranty is expressly limited
by its terms to another date and without giving effect to any supplemental
Exhibit or Schedule. The representations and warranties of DFT set forth in this
Agreement or in any Exhibit or Schedule or certificate delivered pursuant hereto
that are qualified as to materiality shall be true and correct in all respects
as of the date of this Agreement, and shall be deemed repeated as of the Closing
Date and shall then be true and correct in all respects, except to the
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extent a representation or warranty is expressly limited by its terms to another
date and without giving effect to any supplemental Schedule.
10.2 Performance by DFT.
10.2.1 All of the covenants and obligations that DFT is required to
perform or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), must have been performed and complied with in all
respects.
10.2.2 Each document required to be delivered by DFT pursuant to this
Agreement at or prior to Closing must have been delivered.
10.3 No Force Majeur Event. There shall not have been any delay, error,
failure or interruption in the conduct of the business of DFT, or any loss,
injury, delay, damage, distress, or other casualty, due to force majeur
including but not limited to (a) acts of God; (b)fire or explosion; (c) war,
acts of terrorism or other civil unrest; or (d) national emergency.
10.4 Certificate of Officer. DFT will have delivered to the Company a
certificate, dated the Closing Date, executed by an officer of DFT, certifying
the satisfaction of the conditions specified in Sections 10.1, 10.2, 10.3, 10.5
and 10.7.
10.5 Consents.
10.5.1 All consents, waivers, approvals, authorizations or orders
required to be obtained, and all filings required to be made, by DFT for the
authorization, execution and delivery of this Agreement and the consummation by
it of the transactions contemplated by this Agreement and the other Transactions
Documents, shall have been obtained and made by DFT, except where the failure to
receive such consents, waivers, approvals, authorizations or orders or to make
such filings could not be expected to have a Material Adverse Effect on the
Company or DFT.
10.5.2 Without limiting the foregoing, the Proxy Statement shall have
been mailed to the stockholders of DFT as required by law. No Proceeding
occasioned by the Proxy Statement shall have been initiated or threatened by the
Commission (which Proceeding remains unresolved as of the Closing Date).
10.6 Documents. DFT must have caused the following documents to be
delivered to the Company and/or the JV Participants:
10.6.1 share certificates evidencing each JV Participant's share of
the DFT Shares (as set forth on Schedule 1);
10.6.2 a certificate of good standing of DFT;
10.6.3 a Secretary's Certificate, dated the Closing Date certifying
attached copies of (A) the Organizational Documents of DFT, (B) the resolutions
of the DFT Board approving this Agreement and the transactions contemplated
hereby; and (C) the incumbency of each
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authorized officer of DFT signing this Agreement and any other agreement or
instrument contemplated hereby to which DFT is a party;
10.6.4 each of the Transaction Documents (including without limitation
the Consultant Agreements) to which DFT is a party, duly executed; and
10.6.5 such other documents as the Company may reasonably request for
the purpose of (i) evidencing the accuracy of any representation or warranty of
DFT pursuant to Section 10.1, (ii) evidencing the performance by DFT of, or the
compliance by DFT with, any covenant or obligation required to be performed or
complied with by DFT, (iii) evidencing the satisfaction of any condition
referred to in this Section 10, or (iv) otherwise facilitating the consummation
of any of the transactions contemplated by this Agreement.
10.7 No Proceedings. Since the date of this Agreement, there must not have
been commenced or threatened against DFT, the Company or any JV Participant, or
against any Affiliate thereof, any Proceeding (which Proceeding remains
unresolved as of the Closing Date) (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
by this Agreement and the other Transaction Documents, or (b) that may have the
effect of preventing, delaying, making illegal, or otherwise interfering with
any of the transactions contemplated by this Agreement and the other Transaction
Documents.
10.8 Resignation of Officers. On the Closing Date, each officer and
director of DFT shall execute and deliver to the Company a letter of resignation
(as contemplated, in the case of the directors, by Section 2.4).
10.9 D&O Insurance. Between the date hereof and the Closing Date, DFT shall
notify its D&O Insurance carrier of its pending change in control.
10.10 Convertible Debenture. DFT shall have obtained financing in the form
of a convertible debenture, or other resulting in the gross proceeds to DFT of
not less than $4,000,000, it being understood that any such convertible
debenture or other instrument will provide for conversion at a discounted rate.
10.11 Stockholder Approval. To the extent required by Law, this Agreement
and transactions contemplated hereby and by the Transaction Documents shall have
been approved and adopted by the requisite vote of the stockholders of DFT.
10.12 Indemnification Agreement
DFT shall have entered into an indemnification agreement with Mayflower Auto
Group and its members in from and substance reasonably satisfactory to them,
indemnifying them for losses resulting from events prior to the closing.
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SECTION XI
TERMINATION
11.1 Termination Events. This Agreement may, by notice given prior to or at
the Closing, be terminated:
11.1.1 by mutual consent of DFT and the JV Participants (acting
jointly);
11.1.2 by DFT, if any of the conditions in Section 9 have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of DFT to comply with its
obligations under this Agreement) and DFT has not waived such condition on or
before the Closing Date; or (ii) by the JV Participants (acting jointly), if any
of the conditions in Section 10 have not been satisfied as of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of any JV Participant to comply with its obligations under
this Agreement) and the JV Participants (acting jointly) have not waived such
condition on or before the Closing Date;
11.1.3 by DFT or the JV Participants (acting jointly), if the Closing
has not occurred other than due to the failure of DFT (in the event DFT seeks to
terminate this Agreement) or any JV Participant (in the case the JV Participants
(acting jointly) seek to terminate this Agreement) to comply with their
respective obligations under this Agreement, sixty (60) days after the final
mailing of the Proxy Statement to the stockholders of DFT (which mailing shall
occur within two (2) Business Days after the end of the SEC review period of the
Proxy Statement),or such later date as the parties may agree upon ( the "Outside
Date");
11.1.4 by either DFT or the JV Participants (acting jointly), if there
shall have been entered a final, nonappealable order or injunction of any
Governmental Authority restraining or prohibiting the consummation of the
transactions contemplated hereby;
11.1.5 by DFT, if, prior to the Closing Date, the Company or any JV
Participant is in material breach of any representation, warranty, covenant or
agreement herein contained and such breach shall not be cured within 10 days of
the date of notice of default served by DFT claiming such breach; provided,
however, that the right to terminate this Agreement pursuant to this Section
11.1.5 shall not be available to DFT if DFT is in material breach of this
Agreement at the time notice of termination is delivered; and
11.1.6 by the JV Participants (acting jointly), if, prior to the
Closing Date, DFT is in material breach of any representation, warranty,
covenant or agreement herein contained and such breach shall not be cured within
10 days of the date of notice of default served by the JV Participants claiming
such breach or, if such breach is not curable within such 10 day period, such
longer period of time as is necessary to cure such breach; provided, however,
that the right to terminate this Agreement pursuant to this Section 11.1.6 shall
not be available to the JV Participants (acting jointly) if any JV Participant
is in material breach of this Agreement at the time notice of termination is
delivered.
11.2 Effect of Termination.
11.2.1 Each party's right of termination under Section 11.1 is in
addition to any other rights it may have under this Agreement or otherwise, and
the exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 11.1, all further obligations
of the parties under this Agreement will terminate, except that the obligations
in Sections 5.12, 6.11, 11.2, and 12 will survive; provided, however, that if
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this Agreement is terminated by a party because of the breach of the Agreement
by another party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of another
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
SECTION XII
GENERAL PROVISIONS
12.1 Expenses. Except as otherwise expressly provided in this Agreement,
DFT will bear the reasonable expenses of all parties to the Transaction
Documents incurred in connection with the preparation, execution, and
performance of this Agreement and the transactions contemplated by this
Agreement, including all fees and expenses of agents, representatives, counsel,
and accountants. In the event of termination of this Agreement, each party will
bear its respective expense, which obligation will be subject to any rights of
such party arising from a breach of this Agreement by another party.
12.2 Public Announcements. DFT shall promptly, but no later than three days
following the effective date of this Agreement, issue a press release disclosing
the transactions contemplated hereby. Between the date of this Agreement and the
Closing Date, the Company and DFT shall consult with each other in issuing any
other press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is
required by law, in which case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication
and shall incorporate into such public statement, filing or other communication
the reasonable comments of the other party.
12.3 Confidentiality.
12.3.1 Subsequent to the date of this Agreement, DFT, the JV
Participants and the Company will maintain in confidence, and will cause their
respective directors, officers, employees, agents, and advisors to maintain in
confidence, any written, oral, or other information obtained in confidence from
another party in connection with this Agreement or the transactions contemplated
by this Agreement, unless (a) such information is already known to such party or
to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any required filing with the
Commission or other Governmental Authority, or obtaining any consent or approval
required for the consummation of the transactions contemplated by this
Agreement, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
12.3.2 In the event that any party is required to disclose any
information of another party pursuant to clause (b) or (c) of Section 12.3.1,
the party requested or required to make the disclosure (the "disclosing party")
shall provide the party that provided such information (the "providing party")
with prompt notice of any such requirement so that the providing party may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 12.3. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the providing party, the disclosing
party is
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nonetheless, in the opinion of counsel, legally compelled to disclose the
information of the providing party, the disclosing party may, without liability
hereunder, disclose only that portion of the providing party's information which
such counsel advises is legally required to be disclosed, provided that the
disclosing party exercises its reasonable efforts to preserve the
confidentiality of the providing party's information, including, without
limitation, by cooperating with the providing party to obtain an appropriate
protective order or other relief assurance that confidential treatment will be
accorded the providing party's information.
12.3.3 If the transactions contemplated by this Agreement are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
12.4 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to DFT: with a copy to:
Deep Field Technologies, Inc. Kramer Levin Naftalis & Frankel LLP
750 Highway 34 1177 Avenue of the Americas
Matawan, New Jersey 07747 New York, New York 10036
Attention: Mr. Mark Meller Attention: Scott S. Rosenblum, Esq.
Telephone No.: 732-441-7700 Telephone No.: (212) 715-9411
Facsimile No.: Facsimile No.: (212) 715-8000
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If to Company: with a copy to:
Beijing Jinche Yingang Automobile
Service Center Holland & Knight LLP
27th Floor, Tower A, Cyber Tower No. 2 195 Broadway
South Avenue Zhongguacun New York, New York 10007
Haidian District Attention: Kenneth J. Stuart, Esq.
Beijing, China 10086 Telephone No.: (212) 513-3227
Attention: Mr. Pang Guisan Facsimile No.: (212) 341-7114
Telephone No.: 86-10-51588899
Facsimile No.: 86-010-51627706
and with a copy to:
Holland & Knight LLP
2099 Pennsylvania Avenue, N.W.
Washington, D.C.
Attention: Xiaohua Zhao, Esq.
Telephone No.: (202) 419-2496
Facsimile No.: (202) 955-5564
12.5 Arbitration. Any dispute or controversy under this Agreement shall be
settled exclusively by arbitration in the City of New York, County of New York
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The award of the arbitrators shall be final and binding on all
parties, and any party may apply to a court of competent jurisdiction for the
enforcement of such an award. The arbitration fee, reasonable attorney's fees
and all other related costs shall be paid by the non-prevailing party. During
the period when a dispute is subject to an arbitration, the parties shall
continue to perform all obligations under this Agreement and the other
Transaction Documents that are the not the subject of such arbitration. The
provisions of this Section 12.5 shall survive the termination or other
expiration of this Agreement.
12.6 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
12.7 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be by
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the
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right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
12.8 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
Letter of Intent between DFT and the Company, dated October 29, 2005) and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party against whom the enforcement of such
amendment is sought.
12.9 Assignments, Successors, and No Third-Party Rights. No party may
assign any of its rights under this Agreement without the prior consent of the
other parties. Subject to the preceding sentence, this Agreement will apply to,
be binding in all respects upon, and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties. Except as set
forth in Section 8.6, nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
12.10 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.11 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.12 Governing Law. This Agreement will be governed by the laws of the
State of New York without regard to conflicts of laws principles.
12.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
12.14 Survival. The representations and warranties of the respective
parties shall not survive the Closing Date and the consummation of the
transaction herein contemplated.
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COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed and delivered this Securities
Exchange and Merger Agreement as of the date first written above.
DFT:
DEEP FIELD TECHNOLOGIES INC.
Signed:
---------------------------------------
Printed name: Mark Meller
Title: President and Chief Executive Officer:
Company:
BEIJING SINO-US JINCHE YINGANG AUTO
TECHNOLOGICAL SERVICES LIMITED
Signed:
---------------------------------------
Printed name:
Title:
JV Participants:
Signed:
---------------------------------------
Printed name:
Title:
CHUEN KIN QUEK
MAYFLOWER AUTO GROUP LLC
Signed:
---------------------------------------
Printed name:
Title:
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SCHEDULE 1
----------
EXHIBIT A
---------
1. The Consulting Agreements for each of Mahoney and Meller shall be on the
substantively same material terms and conditions as their current
respective employment agreements, except as otherwise provided herein.
2. Each of Mahoney and Meller shall be paid a $2,000,000 bonus, plus any loans
and unpaid salary reflected on DFT's balance sheet on the Closing Date, all
such amounts to be paid in cash or promissory notes convertible into DFT
Common Stock, at the discretion of DFT.
3. Any portion of the obligations of DFT to Mahoney or Meller, as applicable,
present or future, that DFT elects to pay in DFT Common Stock shall be
convertible to DFT Common Stock, based upon a price equal to 80% of the
lowest closing bid price of DFT Common Stock during the five trading days
immediately preceding the date of issuance. Notwithstanding the foregoing,
neither Mahoney nor Meller shall be entitled to convert in any of the
obligations owing to him into DFT Common Stock if it results on the day of
such conversion in his respective aggregate holdings of DFT Common Stock
exceeding 9.9% of the outstanding shares of DFT Common Stock.
4. DFT shall reserve 500,000,000 shares of DFT Common Stock for issuance upon
the conversion of any outstanding obligations of DFT to Mahoney or Meller.
Such reserved shares shall be held by an escrow agent to be mutually agreed
upon until the earlier of the issuance or repayment, in cash of all
outstanding obligations of the Company to Mahoney and Meller. Such shares
shall also be registered, at DFT's expense, for resale with the SEC as
promptly as practicable after the Closing.
5. Each of Mahoney and Meller shall deliver at the Closing to Jinche his
irrevocable proxy to vote all shares of DFT stock beneficially owned by
him.
6. The Consulting Agreements shall each have a five year term and shall
provide for annual consulting payments of $145,000. There will be
protection for termination without cause but not for any change in control
or termination upon death, permanent disability or cause. Upon any
termination, all of DFT's obligations to Mahoney and Meller will accelerate
7. On the Closing Date, each of Mahoney and Meller will receive two years
payment under his Consulting Agreement, in advance, which amounts are not
refundable.
8. There will be no provision for health benefits, vacation, car allowances
and similar benefits.
Schedule 1
JV Participants
- --------------------------- ---------------- --------------- -------------------
Names and addresses Class A Common Class B Common Pre-Closing
of JV Participants Stock Stock Ownership Interest
of Company
- --------------------------- ---------------- --------------- -------------------
Pang Guisan 16.75% 54,658,733 1,260,000 67.75%
Wang Shanhui 17%
Pang Liyong 17%
Ren Bing 17%
No. 102-2, Building No 3,
Wan Liu Xin Ji Yuan,
Haidian district,
Beijing, China
- --------------------------- ---------------- --------------- -------------------
Chuen Kin Quek 4,337,994 100,000 5%
20 Lewis Terrace, Unit 1,
Newton, MA, 02458
- --------------------------- ---------------- --------------- -------------------
Mayflower Auto Group LLC 14,749,182 640,000 27.25%
2222 Second Street
Fort Myers, FL 33901
- --------------------------- ---------------- --------------- -------------------
Total 73,745,909 2,000,000
- --------------------------- ---------------- --------------- -------------------
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DISCLOSURE SCHEDULES OF BEIJING SINO-US JINCHE YINGANG AUTO
TECHNOLOGICAL SERVICES LIMITED
DATED AS OF JANUARY 12, 2006
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Schedule 4.1.5:
No Person has, or as a result of the transactions contemplated herein will have,
any right or valid claim against any JV Participant for any commission, fee or
other compensation as a finder or broker or in any similar capacity, except for
the following:
None.
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Schedule 5.1:
Part 1:
True, complete and correct list of the Company's jurisdiction of organization
and each jurisdiction in which the Company presently conducts its business or
owns, holds or operates its properties and assets:
Haidian District, Fengtai District, Chaoyang District, Changping District,
Xicheng District of Beijing, The Peoples Republic of China.
Part 2:
General description of assets, interests and securities contributed by the JV
Participants to the Company:
The Company is a joint venture established by the contribution by the JV
Participants as follows:
Mr. Chuen Kin Quek: Consulting services.
Mayflower Auto Group LLC: Cash and financing services.
Jinche: All of its assets, including but not limited to, employment contracts
and/or arrangements with personnel, equipment, facilities and houses, policies
with auto insurance customers, auto customers' data base and customers base,
software developed for the operation, new technology, know-how, intellectual
property, cash, accounts receivable, leases (including real property leases),
other contracts, inventory of spare parts and other assets.
-v-
Schedule 5.4:
The Company has all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to enter into, to
consummate the transactions contemplated by, and to perform its obligations
under the Agreement and the Transaction Documents to which it is a party, except
for the following:
Approval from the State Administration of Industries and Commerce.
-vi-
Schedule 5.5:
Neither the execution or delivery by the Company of the Agreement or any
Transaction Document to which the Company is a party, nor the consummation or
performance by the Company of the transactions contemplated hereby or thereby
will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of the Company; except for the following:
None
(b) contravene, conflict with, constitute a default (or an event or condition
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or acceleration of, or result in the imposition or
creation of any Lien under, any agreement or instrument to which the Company is
a party or by which the properties or assets of the Company is bound; except for
the following:
None.
(c) contravene, conflict with, or result in a violation of, any Law or Order to
which the Company, or any of the properties or assets owned or used by the
Company, may be subject; except for the following:
None.
(d) contravene, conflict with, or result in a violation of, the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by the Company or
that otherwise relate to the business of, or any of the properties or assets
owned or used by, the Company, except, in the case of clause (b), (c) or (d),
for any such contraventions, conflicts, violations, or other occurrences as
would not have a Material Adverse Effect; except for the following:
None.
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Schedule 5.8:
Attached are audited financial statements of Jinche for the period ended
December 31, 2004.
Please see the attachment.
-viii-
Schedule 5.13.3
Key Employees of the Company:
(a) Mr. Guisan Pang, Chairman of the Board and CEO (Senior Economist)
(b) Mr. Shanhui Wang, Vice President (Senior Economist)
(c) Mr. Liyong Pang, Vive President (Senior Engineer)
(d) Mr. Bin Ren, Vice President (Senior Economist)
(e) Mr. Bogang Li, Manager of Customer Relations (Senior Economist)
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Schedule 5.16:
In the past 30 months, no Person has entered into any transaction or proposed
transaction with the Company which would be required to be disclosed pursuant to
item 404 of Regulation S-B; except for the following:
Please see Schedule 5.19
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Schedule 5.19:
The Company has the following debts, obligations and liabilities, which are not
reflected in the Company Audited Financial Statements, and which are not
liabilities incurred or obligations under agreements entered into in the usual
and ordinary course of business:
Pursuant to an Assignment and Assumption Agreement dated December 21, 2005, the
Company has assumed the obligations of Mayflower Auto Group LLC to Cornell
Capital Partners LP pursuant to a Promissory Note in the amount of $1.850,000
dollars. Of said amount $1,200,000 had previously been advanced from Cornell
Capital Partners LP to Mayflower Auto Group LLC and from Mayflower Auto Group
LLC to the Company. The remainder of the amount covered legal, accounting and
other service fees.
-xi-
Schedule 5.20
Since December 31, 2004, the Company has not conducted its business or entered
into any transaction other than in the usual and ordinary course of business,
except for the following:
None.
Since December 31, 2004 the Company has not:
(a) suffered or experienced any change in, or affecting, its condition
(financial or otherwise), properties, assets, liabilities, business, operations,
results of operations or prospects other than changes, events or conditions in
the usual and ordinary course of its business, none of which would have a
Material Adverse Effect; except for the following:
None.
(b) made any loans or advances to any Person other than travel advances and
reimbursement of expenses made to employees, officers and directors in the
ordinary course of business; except for the following:
No exceptions.
(c) created or permitted to exist any Lien on any material property or asset of
the Company, other than Permitted Liens; except for the following:
No exceptions.
(d) issued, sold, disposed of or encumbered, or authorized the issuance, sale,
disposition or encumbrance of, or granted or issued any option to acquire any
shares of its capital stock or any other of its securities or any Equity
Security, or altered the term of any of its outstanding securities or made any
change in its outstanding shares of capital stock or its capitalization, whether
by reason of reclassification, recapitalization, stock split, combination,
exchange or readjustment of shares, stock dividend or otherwise; except for the
following:
No exceptions.
(e) declared, set aside, made or paid any dividend or other distribution to any
of its stockholders; except for the following:
None.
(f) materially increased the compensation or other remuneration or benefits
payable or to become payable to any of its directors, executive officers or
employees, except for increases in the
-xii-
ordinary course of business, or entered into any employment, severance or
similar contracts with any of the foregoing; except for the following:
No exceptions.
(g) adopted, amended or increased the payments to or benefits under any Company
Benefit Plan; except for the following:
None
(h) Terminated or modified any Material Company Contract; except for the
following:
None.
(i) released, waived or cancelled any claims or rights relating to or affecting
the Company in excess of $250,000 in the aggregate or instituted or settled any
Proceeding involving in excess of $250,000 in the aggregate; except for the
following:
No exceptions.
(j) paid, discharged or satisfied any claim, obligation or liability in excess
of $250,000 in the aggregate, except for liabilities incurred prior to the date
of this Agreement in the ordinary course of business; except for the following:
None.
(k) created, incurred, assumed or otherwise become liable for any Indebtedness
in excess of $250,000 in the aggregate; except for the following:
Please see Indebtedness disclosed in Schedule 5.19.
(l) guaranteed or endorsed in a material amount any obligation or net worth of
any Person; except for the following:
None.
(m) acquired the capital stock or other securities or any ownership interest in,
or substantially all of the assets of, any other; except for the following:
None.
-xiii-
(n) changed its method of accounting or the accounting principles or practices
utilized in the preparation of its financial statements, other than as required
by GAAP; except for the following:
None.
(o) granted any license, sublicense or other rights of use with respect to any
Intellectual Property of the Company; except for the following:
None.
(p) entered into any agreement, or otherwise obligated itself, to do any of the
foregoing; except for the following:
None.
-xiv-
Schedule 5.22.1
(a) all material Tax Returns required to be filed by or on behalf of the Company
have been timely filed and all such Tax Returns were (at the time they were
filed) and are true, correct and complete in all material respects; except for
the following:
None.
(b) all material Taxes of the Company (whether or not reflected on any Tax
Return) have been fully and timely paid, except those Taxes which are presently
being contested in good faith or for which an adequate reserve for the payment
of such Taxes has been established on the Company Balance Sheet; except for the
following:
No exceptions.
(c) no waivers of statutes of limitation have been given or requested with
respect to the Company in connection with any Tax Returns covering the Company
or with respect to any Taxes payable by it; except for the following:
None.
(d) no Governmental Authority in a jurisdiction where the Company does not file
Tax Returns has made a claim, assertion or threat to the Company that the
Company is or may be subject to taxation by such jurisdiction; except for the
following:
None.
(e) the Company has duly and timely collected or withheld, and paid over and
reported to the appropriate Governmental Authority all amounts required to be so
collected or withheld and paid over for all periods under all applicable Laws;
except for the following:
None.
(f) there are no Liens with respect to Taxes on the Company's property or assets
other than Permitted Liens; except for the following:
None.
(g) there are no Tax rulings, requests for rulings, or closing agreements
relating to the Company for any period (or portion of a period) that would
affect any period after the date hereof; except for the following:
-xv-
None.
(h) any adjustment of Taxes of the Company made by a Governmental Authority in
any examination that the Company is required to report to the appropriate state,
local or foreign taxing authorities has been reported, and any additional Taxes
due with respect thereto have been paid; except for the following:
None.
-xvi-
Schedule 5.22.2:
The Company is treated as a corporation for U.S. federal income tax purposes,
and the Company has not made an election under Treasury Regulation Section
301.7701-3 to be treated as a disregarded entity; except for the following
exceptions:
No exceptions.
-xvii-
Schedule 5.25(a)
The Company owns, licenses or otherwise has the legal right to use all
Intellectual Property for its business as currently conducted; except for:
No exceptions.
-xviii-
Schedule 25(b)
True, correct and complete list of all Intellectual Property of the Company:
Trademark:
[AUTOMART LOGO]
Electronic Auto Operation Software.
- -----------------------------------
-xix-