Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into this 25th of December, 2004, by and among Basic Empire Corporation, a
corporation organized under the laws of the State of Delaware ("BEC"); China
Tailong Holdings Company Ltd., a corporation organized under the laws of Hong
Kong Special Administrative Region, People's Republic of China ("Tailong
Holdings"); and three individuals and a company who are the stockholders of
Tailong Holdings (the "Tailong Holdings Stockholders", a list of whom is
attached hereto as Exhibit "A").
WITNESSETH:
RECITALS
WHEREAS, the respective Boards of Directors of BEC and Tailong
Holdings have adopted resolutions pursuant to which BEC shall acquire and the
Tailong Holdings Stockholders shall exchange for shares of the common capital
stock of BEC 100% of the outstanding common stock of Tailong Holdings (the
"Tailong Holdings Shares"); and
WHEREAS, the sole consideration for the exchange of the Tailong
Holdings Shares shall be the receipt by the Tailong Holdings Stockholders of
shares of the common capital stock of BEC, $0.001 par value per share, as more
particularly set forth in Exhibit "B" hereto. The shares of BEC's common stock
shall be deemed "restricted securities" as defined under Rule 144 of the
Securities Act of 1933, as amended (the "Act"); and
WHEREAS, the Tailong Holdings Stockholders shall acquire in exchange
such "restricted securities" of BEC in a reorganization within the meaning of
Section 368(a) (1) (B) of the Internal Revenue Code of 1986, as amended, and/or
any other "tax free" exemptions thereunder that may be available for this
exchange, if and only to the extent that the Internal Revenue Code applies to
this Agreement and the transactions contemplated thereby;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, it is agreed:
Section 1
Exchange of Stock
1.1 Transfer and Number of Shares. The Tailong Holdings Stockholders
agree to transfer to BEC at the closing (the "Closing") the Tailong Holdings
Shares, in exchange for newly issued and restricted shares of common stock of
BEC as outlined in Exhibit "C". In connection with the acquisition of the
Tailong Holdings Shares, BEC shall issue to the Tailong Stockholders an
aggregate of Ten Million Six Hundred and Six Thousand and One Hundred Fifty
Eight (10,606,158) shares of BEC common stock, and such shares at the Closing
shall equal ninety percent (90%) of the issued and outstanding shares of BEC,
and shall be issued and/or transferred as set forth on Exhibit D attached
hereto. After the Closing, there will be 11,784,620 outstanding shares of common
stock of the reorganized BEC.
1.2 Exchange of Certificates by Tailong Holdings Stockholders. The
transfer of the Tailong Holdings Shares shall be effected by the delivery to BEC
at the Closing of stock certificates duly endorsed in blank or accompanied by
stock powers executed in blank with all signatures witnessed or guaranteed to
the satisfaction of BEC and with all necessary transfer taxes and other revenue
stamps affixed and acquired at the Tailong Holdings Stockholders' expense.
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1.3 Further Assurances. At the Closing and from time to time
thereafter, the Tailong Holdings Stockholders shall execute such additional
instruments and take such other action as BEC may request in order to exchange
and transfer clear title and ownership in the Tailong Holdings Shares to BEC.
1.4 Closing. The Closing shall be deemed to have occurred on the
Effective Date (as hereinafter defined). As used in this Agreement, the term
Closing Date shall be defined to be the same as the Effective Date.
1.5 Effective Date. The transactions contemplated by this Agreement
shall be deemed consummated at such time as the Company shall have filed with
the US Securities and Exchange Commission ("SEC") a Current Report on Form
8-Kwhich reports the change in control transaction effected by this Agreement
and includes therein, all required audited financial information of Tailong
Holdings and its controlled subsidiary (the "Current Report"). If the Current
Report is not filed on or before January 10, 2005, the Company shall have the
right, in its sole discretion, to either deem this Agreement terminated or
provide Tailong Holdings with an extension for filing the Current Report. The
effective date (the "Effective Date") of this Agreement shall thus be the date
the Company files the Current Report with the SEC. In addition, for the Closing
to be deemed to have occurred as of the Effective Date, all of the other
conditions precedent to the obligations of each of the parties hereto as
hereinafter set forth shall have been satisfied or shall have been waived. .
1.6 Resignations of Present Executive Officers and Designation of New
Directors and Executive Officers. On the Closing Date, the present directors and
executive officers of BEC shall designate the directors and executive officers
nominated by the Tailong Holdings Stockholders to serve in their place and
stead, until the next respective annual meeting of the stockholders and the
Board of Directors of the reorganized BEC, and until their respective successors
shall be elected and qualified or until their respective prior resignations or
terminations. The following shall be appointed directors and officers of BEC
upon the closing of the transactions contemplated herein: ▇▇ ▇▇▇▇▇,
Director/President/Chief Executive Officer/Secretary, ▇▇▇▇ ▇▇▇▇▇, Chief
financial Officer. The current directors and executive officers shall resign, in
seriatim, on the Closing Date.
Section 2
Closing
The Closing shall be effected by telephone and facsimile on the Closing Date
unless another place or time is agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier service,
conference telephone communications or as otherwise agreed by the respective
parties or their duly authorized representatives.
Section 3
Representations and Warranties of BEC
Except as set forth in BEC's disclosure schedule, BEC represents and
warrants to, and covenants with, the Tailong Holdings Stockholders and Tailong
Holdings as follows:
3.1 Corporate Status; Compliance with Securities Laws. BEC is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is licensed or qualified as a foreign corporation
in all jurisdictions in which the nature of its business or the character or
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ownership of its properties makes such licensing or qualification necessary. BEC
is a publicly-held company with a trade symbol "BSEC" on the OTCBB, and BEC is
not in violation of any applicable federal or state securities laws, rules or
regulations. Except as set forth above, there is at present no established
trading market for BEC's securities.
3.2 Capitalization. The authorized capital stock of BEC at Closing will
consist of 10,000,000 shares of preferred stock, of which none has been issued
and outstanding; and 100,000,000 shares of common voting stock, of which
1,178,462 shares are issued and outstanding, all fully paid and non-assessable.
There are no subscriptions, warrants, rights or calls or other commitments or
agreements to which BEC is a party or by which it is bound, pursuant to which
BEC is or may be required to issue or deliver securities of any class. Other
than as set forth in BEC's disclosure schedule, there are no outstanding
securities convertible or exchangeable, actually or contingently, into common
stock or any other securities of BEC. After the Closing, there will be
11,784,620, outstanding shares of common stock, on a fully diluted basis, of
BEC.
3.3 Financial Statements. The financial statements of BEC furnished to
the Tailong Holdings Stockholders and Tailong Holdings, consisting of audited
financial statements for the years ended December 31, 2002, 2003, and audited
interim financial statements for the nine months ending September 30, 2004, as
filed with the SEC and incorporated herein by reference, are correct and fairly
present the financial condition of BEC at such dates and for the periods
involved; such statements were prepared in accordance with generally accepted
accounting principles consistently applied, and no material change has occurred
in the matters disclosed therein. Such financial statements do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
3.4 Undisclosed Liabilities. BEC has no liabilities of any nature
except to the extent reflected or reserved against in its balance sheets,
whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due or to become due.
3.5 Interim Changes. Since September 30, 2004, there have been no (i)
changes in financial condition, assets, liabilities or business of BEC which, in
the aggregate, have been materially adverse; (ii) damages, destruction or losses
of or to property of BEC, payments of any dividend or other distribution in
respect of any class of stock of BEC, or any direct or indirect redemption,
purchase or other acquisition of any class of any such stock; or (iii) increases
paid or agreed to in the compensation, retirement benefits or other commitments
to its employees.
3.6 Title to Property. BEC has good and marketable title to all
properties and assets, real and personal, reflected in its balance sheets, and
the properties and assets of BEC are not subject to any mortgage, pledge, lien
or encumbrance, with respect to which no default exists.
3.7 Litigation. There is no litigation or proceeding pending, or to the
knowledge of BEC, threatened, against or relating to BEC, its properties or
business. Further, no officer, director or person who may be deemed to be an
"affiliate" of BEC is party to any material legal proceeding which could have an
adverse effect on BEC (financial or otherwise), and none is party to any action
or proceeding wherein any has an interest adverse to BEC.
3.8 Books and Records. BEC has delivered to legal counsel for the
Tailong Holdings Stockholders and Tailong Holdings all of BEC's books, records,
contracts and other corporate documents which are true and correct in all
material respects.
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3.9 Tax Returns. BEC has duly filed all tax returns required to be
filed by it other than tax returns (individually and in the aggregate) where the
failure to file would have no material adverse effect on the business or
prospects of BEC. All such tax returns were, when filed, and to the knowledge of
BEC are, accurate and complete in all material respects and were prepared in
conformity with applicable laws and regulations. BEC has paid or will pay in
full or has adequately reserved against all taxes otherwise assessed against it
through the Closing Date. BEC is not a party to any pending action or proceeding
by any governmental authority for the assessment of any tax, and, to the
knowledge of BEC, no claim for assessment or collection of any tax related to
BEC has been asserted against BEC that has not been paid. There are no tax liens
upon the assets of BEC. There is no valid basis, to BEC's knowledge, for any
assessment, deficiency, notice, 30-day letter or similar intention to assess any
tax to be issued to BEC by any governmental authority.
3.10 Confidentiality. BEC's current directors and officers and their
representatives will keep confidential any information which they obtain from
the Tailong Holdings Stockholders or from Tailong Holdings concerning the
properties, assets and business of Tailong Holdings.
3.11 Corporate Authority. BEC has full corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder and will
deliver to the Tailong Holdings Stockholders and Tailong Holdings or their
respective representatives at the Closing a certified copy of resolutions of its
Board of Directors authorizing execution of this Agreement by BEC's officers and
performance thereunder, and that the directors adopting and delivering such
resolutions are the duly elected and incumbent directors of BEC.
3.12 Due Authorization. At closing, the execution of this Agreement and
performance by BEC hereunder will have been duly authorized by all requisite
corporate action on the part of BEC, and this Agreement will constitute a valid
and binding obligation of BEC and performance hereunder will not violate any
provision of the Articles of Incorporation or other documents, Bylaws,
agreements, mortgages or other commitments of BEC, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application now or hereafter in effect relating to or
affecting the enforcement of creditors' right generally and the application of
general equitable principles in any action, legal or equitable.
3.13 Environmental Matters. BEC has no knowledge of any assertion by
any governmental agency or other regulatory authority of any environmental lien,
action or proceeding, or of any cause for any such lien, action or proceeding
related to the business operations of BEC. There are no substances or conditions
which may support a claim or cause of action against BEC or any of BEC' s
current or former officers, directors, agents or employees, whether by a
governmental agency or body, private party or individual, under any Hazardous
Materials Regulations. "Hazardous Materials" means any oil or petrochemical
products, PCB's, asbestos, urea formaldehyde, flammable explosives, radioactive
materials, solid or hazardous wastes, chemicals, toxic substances or related
materials, including, without limitation, any substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials" or "toxic substances" under any applicable federal or state laws or
regulations. "Hazardous Materials Regulations" means any regulations governing
the use, generation, handling, storage, treatment, disposal or release of
hazardous materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act and the Federal Water Pollution Control Act.
3.14 Access to Information Regarding Tailong Holdings. BEC acknowledges
that it has been delivered copies of documentation containing all material
information respecting Tailong Holdings (including its 90% owned subsidiary,
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PACIFIC DRAGON Fertilizer Co., Ltd ("PACIFIC DRAGON"), and Tailong Holdings'
present and contemplated business operations, potential acquisitions, and
management; that it has had a reasonable opportunity to review such
documentation and discuss it, to the extent desired, with its legal counsel,
directors and executive officers; that it has had, to the extent desired, the
opportunity to ask questions of and receive responses from the directors and
executive officers of Tailong Holdings, and with the legal and accounting firms
of Tailong Holdings, with respect to such documentation; and that to the extent
requested, all questions raised have been answered to BEC's complete
satisfaction.
3.15 Assets and Liabilities of BEC at Closing. BEC shall have no assets
and no liabilities on the Closing Date. BEC has good and marketable title to all
of the assets and properties as reflected on its most recent balance sheet.
3.16 Rule 144. To the best knowledge of BEC, the shares of BEC issued
in exchange for the Tailong Holdings Shares to the Tailong Holdings Stockholders
shall be eligible for resale pursuant to Rule 144, without registration under
the Act, after satisfaction by the Tailong Holdings Stockholders and BEC of the
provisions established by Rule 144, generally, and the Securities Exchange Act
of 1934.
3.17 Contracts and Other Commitments. Except as set forth in BEC's
public filings, BEC is not a party to any contracts or agreements.
3.18 Compliance with Laws and Regulations. BEC has complied and is
presently complying, in all material respects, with all laws, rules,
regulations, orders and requirements (federal, state and local and foreign)
applicable to it in all jurisdictions where the business of BEC is conducted or
to which BEC is subject.
3.19 No Omissions or Untrue Statements. To the best of BEC's knowledge
no representation or warranty made by BEC in this Agreement, the BEC disclosure
schedule or in any certificate of BEC officer required to be delivered pursuant
to the terms of this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading as of the date
hereof and as of the Closing Date.
Section 4
Representations, Warranties and Covenants of Tailong Holdings and the Tailong
Holdings Stockholders
Except as set forth in Tailong Holdings and Tailong Holdings
Stockholders disclosure schedule, Tailong Holdings and the Tailong Holdings
Stockholders represent and warrant to, and covenant with, BEC as follows:
4.1 Ownership of Tailong Holdings. The Tailong Holdings Stockholders
own the Tailong Holdings Shares free and clear of any liens or encumbrances of
any type or nature whatsoever, and have full right, power and authority to
convey the Tailong Holdings Shares that are owned by them without qualification.
4.2 Ownership of PACIFIC DRAGON. Tailong Holdings owns 90% of PACIFIC
DRAGON, free and clear of any liens or encumbrances of any type or nature
whatsoever, and has full right, power and authority to convey the PACIFIC DRAGON
ownership that it owns without qualification.
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4.3 Corporate Status of Tailong Holdings. Tailong Holdings is a
corporation duly organized, validly existing and in good standing under the laws
of Hong Kong, People's Republic of China, and is licensed or qualified as a
foreign corporation in all jurisdictions or foreign countries and provinces in
which the nature of Tailong Holdings' business or the character or ownership of
Tailong Holdings' properties makes such licensing or qualification necessary.
4.4 Corporate Status of PACIFIC DRAGON. PACIFIC DRAGON is an Equity
Joint Venture Enterprise duly organized, validly existing and in good standing
under the laws of the People's Republic of China, and is licensed or qualified
as a foreign corporation in all states of the United States or foreign countries
and provinces in which the nature of its business or the character or ownership
of its properties makes such licensing or qualification necessary.
4.5 Capitalization of Tailong Holdings. The authorized capital stock of
Tailong Holdings consists of 10,000,000 shares of common stock, $1.00 par value
per share, of which 100 shares are issued and outstanding, and which are fully
paid and non-assessable. There are no outstanding options, warrants or calls
pursuant to which any person has the right to purchase any authorized and
unissued common or other securities of Tailong Holdings.
4.6 Capitalization of PACIFIC DRAGON. The paid-in capital of PACIFIC
DRAGON is US$500,000.00, all fully paid and non-assessable. There are no
outstanding options, warrants or calls pursuant to which any person has the
right to purchase any authorized and unissued common or other equities of
PACIFIC DRAGON.
4.7 Financial Statements. The financial statements of Tailong Holdings,
which includes the financial statements of PACIFIC DRAGON, furnished to BEC,
consisting of an audited compiled balance sheet and income statement for the
year ended December 31, 2002 and 2003, and unaudited financial statements for
the nine month period ended September 30, 2004, attached hereto as Exhibit "D"
and "D-1", respectfully, and incorporated herein by reference, are correct and
fairly present the combined financial condition of Tailong Holdings and PACIFIC
DRAGON as of these dates and for the periods involved; such statements were
prepared in accordance with US generally accepted accounting principles
consistently applied, and no material change has occurred in the matters
disclosed therein. These financial statements do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading.
4.8 Undisclosed Liabilities of Tailong Holdings. Tailong Holdings has
no material liabilities of any nature except to the extent reflected or reserved
against in its balance sheet, whether accrued, absolute, contingent or
otherwise, including, without limitation, tax liabilities and interest due or to
become due.
4.9 Undisclosed Liabilities of PACIFIC DRAGON. PACIFIC DRAGON has no
material liabilities of any nature except to the extent reflected or reserved
against in its balance sheet, whether accrued, absolute, contingent or
otherwise, including, without limitation, tax liabilities and interest due or to
become due.
4.10 Interim Changes of Tailong Holdings. Since September 30, 2004,
there have been no (i) changes in the financial condition, assets, liabilities
or business of Tailong Holdings, which in the aggregate, have been materially
adverse; (ii) damages, destruction or loss of or to the property of Tailong
Holdings, payment of any dividend or other distribution in respect of the
capital stock of Tailong Holdings, or any direct or indirect redemption,
purchase or other acquisition of any such stock; or (iii) increases paid or
agreed to in the compensation, retirement benefits or other commitments to their
employees.
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4.11 Interim Changes of PACIFIC DRAGON. Since September 30, 2004, there
have been no (i) changes in the financial condition, assets, liabilities or
business of PACIFIC DRAGON, which in the aggregate, have been materially
adverse; (ii) damages, destruction or loss of or to the property of PACIFIC
DRAGON, payment of any dividend or other distribution in respect of the capital
stock of PACIFIC DRAGON, or any direct or indirect redemption, purchase or other
acquisition of any such stock; or (iii) increases paid or agreed to in the
compensation, retirement benefits or other commitments to their employees.
4.12 Title to Property of Tailong Holdings. Tailong Holdings has good
and marketable title to all properties and assets, real and personal,
proprietary or otherwise, reflected in the Tailong Holdings balance sheet.
4.13 Title to Property of PACIFIC DRAGON. PACIFIC DRAGON has good and
marketable title to all properties and assets, real and personal, proprietary or
otherwise, reflected in its balance sheet.
4.14 Litigation of Tailong Holdings. There is no litigation or
proceeding pending, or to the knowledge of Tailong Holdings, threatened, against
or relating to Tailong Holdings or its properties or business. Further, no
officer, director or person who may be deemed to be an affiliate of Tailong
Holdings is party to any material legal proceeding which could have an adverse
effect on Tailong Holdings (financial or otherwise), and none is party to any
action or proceeding wherein any has an interest adverse to Tailong Holdings.
4.15 Litigation of PACIFIC DRAGON. There is no litigation or proceeding
pending, or to the knowledge of PACIFIC DRAGON, threatened, against or relating
to PACIFIC DRAGON or its properties or business. Further, no officer, director
or person who may be deemed to be an affiliate of PACIFIC DRAGON is party to any
material legal proceeding which could have an adverse effect on PACIFIC DRAGON
(financial or otherwise), and none is party to any action or proceeding wherein
any has an interest adverse to PACIFIC DRAGON.
4.16 Books and Records of Tailong Holdings. The Tailong Holdings has
(i) given to BEC and its representatives full access to all of its offices,
books, records, contracts and other corporate documents and properties so that
BEC could inspect and audit them; and (ii) furnished such information concerning
the properties and affairs of Tailong Holdings as BEC has requested.
4.17 Books and Records of PACIFIC DRAGON. PACIFIC DRAGON has (i) given
to BEC and its representatives full access to all of its offices, books,
records, contracts and other corporate documents and properties so that BEC
could inspect and audit them; and (ii) furnished such information concerning the
properties and affairs of PACIFIC DRAGON as BEC requested.
4.18 Tax Returns of Tailong Holdings. Tailong Holdings has filed all
income tax or other tax returns required to be filed in Hong Kong or has
received currently effective extensions of the required filing dates.
4.19 Tax Returns of PACIFIC DRAGON. PACIFIC DRAGON has filed all income
or other tax returns required to be filed in China or has received currently
effective extensions of the required filing dates.
4.20 Investment Intent. The Tailong Holdings Stockholders are acquiring
the securities to be exchanged and delivered to them under this Agreement for
investment and not with a view to the sale or distribution thereof, and they
have no commitment or present intention to sell or distribute the BEC securities
to be received hereunder.
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4.21 Corporate Authority of Tailong Holdings. Tailong Holdings and the
Tailong Holdings Stockholders have full corporate power and authority to enter
into this Agreement and to carry out their obligations hereunder and will
deliver to BEC or its representative at the Closing certified copies of
resolutions of Tailong Holdings' Board of Directors authorizing execution of
this Agreement by its officers and performance thereunder.
4.22 Due Authorization. Execution of this Agreement and performance by
Tailong Holdings and the Tailong Holdings Stockholders hereunder have been duly
authorized by all requisite corporate action on the part of Tailong Holdings and
the Tailong Holdings Stockholders, and this Agreement constitutes a valid and
binding obligation of Tailong Holdings and the Tailong Holdings Stockholders and
performance hereunder will not violate any provision of the Articles of
Association or other Charter documents, Bylaws, agreements, mortgages or other
commitments of Tailong Holdings or the Tailong Holdings Stockholders, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application now or
hereafter in effect relating to or affecting the enforcement of creditors'
rights generally and the application of general equitable principles in any
action, legal or equitable.
4.23 Environmental Matters. Tailong Holdings and PACIFIC DRAGON have no
knowledge of any assertion by any governmental agency or other regulatory
authority of any environmental lien, action or proceeding, or of any cause for
any such lien, action or proceeding related to the business operations of
Tailong Holdings or its predecessors. In addition, to the best knowledge of
Tailong Holdings and PACIFIC DRAGON, there are no substances or conditions which
may support a claim or cause of action against Tailong Holdings and PACIFIC
DRAGON or any of its current or former officers, directors, agents, employees or
predecessors, whether by a governmental agency or body, private party or
individual, under the current Chinese laws.
4.24 Access to Information Regarding BEC. Tailong Holdings and the
Tailong Holdings Stockholders acknowledge that they have been delivered copies
of what has been represented to be documentation containing all material
information respecting BEC and its present and contemplated business operations,
potential acquisitions, management and other factors, by delivery to them and/or
by access to such information in the ▇▇▇▇▇ Archives of the Securities and
Exchange Commission at ▇▇▇.▇▇▇.▇▇▇; that they have had a reasonable opportunity
to review such documentation and to discuss it, to the extent desired, with
their legal counsel, directors and executive officers; that they have had, to
the extent desired, the opportunity to ask questions of and receive responses
from the directors and executive officers of BEC, and with the legal and
accounting firms of BEC, with respect to such documentation; and that to the
extent requested, all questions raised have been answered to their complete
satisfaction.
4.25 Residency of Tailong Holdings Stockholders. Each of the Tailong
Holdings Stockholders is a non-resident of the United States.
Section 5
Conditions Precedent to Obligations of Tailong Holdings and the Tailong Holdings
Stockholders
All obligations of Tailong Holdings and the Tailong Holdings
Stockholders under this Agreement are subject, at their option, to the
fulfillment, before or at the Closing, of each of the following conditions:
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5.1 Representations and Warranties True at Closing. The representations
and warranties of BEC contained in this Agreement shall be deemed to have been
made again at and as of the Closing and shall then be true in all material
respects and shall survive the Closing.
5.2 Due Performance. BEC shall have performed and complied with all of
the terms and conditions required by this Agreement to be performed or complied
with by it before the Closing.
5.3 Officers' Certificate. Tailong Holdings shall have been furnished
with a certificate signed by the President of BEC, in such capacity, attached
hereto as Exhibit "E" and incorporated herein by reference, dated as of the date
hereof, and updated as necessary as of the Closing, certifying (i) that all
representations and warranties of BEC contained herein are true and correct; and
(ii) that since the date of the financial statements as described in Section
3.3, 3.4, 3.6, and 3.7 of this Agreement, there has been no material adverse
change in the financial condition, business or properties of BEC, taken as a
whole
5.4 Assets and Liabilities of BEC. BEC shall have no assets and no
liabilities at Closing, and all costs, expenses and fees incident to the
Agreement shall have been paid.
5.5 Documents. All documents and instruments required hereunder to be
delivered by BEC at the Closing shall be delivered in form and substance
reasonably satisfactory to Tailong Holdings and Tailong Holdings Stockholders
and their counsel.
5.6 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or threatened.
5.7 Material Adverse Change. Except for operations in the ordinary
course of business, no material adverse change shall have occurred subsequent to
September 30, 2004 in the financial position, results of operations, assets, or
liabilities of BEC, nor shall any event or circumstance have occurred which
would result in a material adverse change in the financial position, results of
operations, assets, or liabilities of BEC.
5.8 Approval Board of Directors. The board of directors of BEC shall
have approved this Agreement and the transactions contemplated hereby.
5.9 Satisfaction with Due Diligence. Tailong Holdings shall have been
satisfied with its due diligence review of BEC, its subsidiaries and their
operations.
5.10 Resignations of Present Executive Officers and Designation of New
Directors and Executive Officers. On the Closing Date, the present director and
executive officers of BEC shall resign and the following individuals shall be
appointed the director and executive officers of BEC: ▇▇ ▇▇▇▇▇,
Director/President/Chief Executive Officer/Secretary and ▇▇▇▇ ▇▇▇▇▇, Chief
Financial Officer.
5.11 Regulatory Compliance. BEC shall have received any and all
regulatory approvals and consents required to complete the transactions
contemplated hereby
Section 6
Conditions Precedent to Obligations of BEC
In addition to the filing of the Current Report, all obligations of BEC
under this Agreement are subject, at BEC's option, to the fulfillment, before or
at the Closing, of each of the following conditions:
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6.1 Representations and Warranties True at Closing. The representations
and warranties of Tailong Holdings, the Tailong Holdings Stockholders and
PACIFIC DRAGON contained in this Agreement shall be deemed to have been made
again at and as of the Closing and shall then be true in all material respects
and shall survive the Closing.
6.2 Due Performance. Tailong Holdings and the Tailong Holdings
Stockholders shall have performed and complied with all of the terms and
conditions required by this Agreement to be performed or complied with by them
before the Closing.
6.3 Officers' Certificate. BEC shall have been furnished with a
certificate signed by the President of Tailong Holdings, in such capacity,
attached hereto as Exhibit "F" and incorporated herein by reference, dated as of
the date hereof, and updated as necessary as of the Closing, certifying (i) that
all representations and warranties of Tailong Holdings and the Tailong Holdings
Stockholders contained herein are true and correct; and (ii) that since the date
of the financial statements (Exhibit D & D-1), there has been no material
adverse change in the financial condition, business or properties of Tailong
Holdings, taken as a whole.
Section 7
General Provisions
7.1 Further Assurances. At any time, and from time to time, after the
Closing, the parties will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Agreement.
7.2 Waiver. Any failure on the part of any party hereto to comply with
any its or their obligations, agreements or conditions hereunder may only be
waived in writing by the party to whom such compliance is owed.
7.3 Brokers. Each party represents to the other parties hereunder that
there are no brokers or finders are retained in connection with this Agreement,
each party agrees to indemnify and hold harmless the other parties against any
fee, loss or expense arising out of claims by brokers or finders employed or
alleged to have been employed by he/she/it.
7.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class registered or certified mail, return receipt requested, as
follows:
If to BEC's Management Prior to Closing:
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Tailong Holdings:
▇▇▇▇▇▇▇ Law
King and Wood LLP
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
10
If to the Tailong Holdings Stockholders:
▇▇▇▇▇▇▇ Law
King and Wood LLP
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ fax
7.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof.
7.6 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware. Any actions
permitted hereunder shall be brought in the State of Delaware.
7.8 Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns.
7.9 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.10 Default. In the event of any default hereunder, the prevailing
party in any action to enforce the terms and provisions hereof shall be entitled
to recover reasonable attorney's fees and related costs.
7.11 Expenses. Each party shall each pay its own expenses incident to
the negotiation, preparation, and carrying out of this Agreement, including
legal and accounting and audit fees. BEC's expenses shall be paid prior to the
Closing.
Section 8
Additional Covenants
8.1 Reverse Stock Split. The Tailong Holdings Stockholders acknowledge
and agree that they will ensure that BEC effects a 1.14-for-one forward stock
split (the "Forward Split") of its common stock within 30 days of the Effective
Date. This Section 8.1 shall survive the Closing.
8.2 Registration Rights. BEC hereby agrees to use its best efforts to
cause the shares of BEC's common stock held by Halter Financial Group, Inc.
("HFG")(the "Registrable Securities") to be registered under the Securities Act
of 1933 (the "Act") pursuant to a registration statement on a suitable form to
be submitted to the SEC (the " Registration Statement"). BEC shall file the
Registration Statement by no later than January 20, 2005. Until such time as all
the Registrable Shares have been sold into the market, or are available for
resale pursuant to the provisions of Rule 144 under the Act, BEC agrees to keep
the Registration Statement effective and to prepare and file with the SEC such
11
amendments as may be necessary, and to comply with the provisions of the Act
with respect to the sale or other disposition of all securities proposed to be
registered in the Registration Statement or any prospectus (including any
preliminary prospectus and any amended or supplemented prospectus) in conformity
with the requirements of the Act, and to prepare and file such other documents
as HFG may reasonably request in order to effect the offering and sale of the
Registrable Securities to be offered or sold. Except as otherwise prohibited by
applicable law, BEC will pay all fees and expenses, including, without
limitation, printing and reproduction costs and fees and expenses of counsel for
HFG, incurred in connection with the registration of the Registrable Securities;
provided, that transfer taxes, if any, solely attributable to the sale of the
Registrable Securities, shall be borne by HFG. In addition, BEC agrees that it
shall provide HFG copies of the preliminary prospectus and prospectus included
in the Registration Statement and each amendment and supplement thereto; use its
best efforts to register or qualify the Registrable Securities for resale under
state law and to keep such registration or qualification in effect for so long
as the Registration Statement remains in effect; and notify HFG at any time when
a prospectus is required to be delivered by HFG under the Act, upon discovery by
BEC that the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, whereupon
HFG shall suspend any offers or sales of the Registrable Securities until such
time as such prospectus, as amended or supplemented from time to time, shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. HFG agrees to cooperate
fully with BEC in connection with effecting the registration pursuant to this
Section, including, but not limited to, furnishing such information as BEC may
from time to time reasonably request and as shall be required by law or by the
SEC in connection with such registration. This Section 8.2 shall survive the
Closing, and the Tailong Holdings Stockholders acknowledge and agree to ensure
the satisfaction of the obligations of this Section 8.2.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Reorganization effective the latest date hereof.
Basic Empire Corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Date: 12/25/04
China Tailong Holdings Company Ltd.
/s/ ▇▇▇▇▇ ▇▇
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By: ▇▇▇▇▇ ▇▇, Chairman
Date:
12
Stockholders of China Tailong Holdings Company Ltd.
/s/ ▇▇▇▇▇ ▇▇
------------
▇▇▇▇▇ ▇▇
/s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
------------------
▇▇▇▇ ▇▇▇▇ Yong
/s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
------------------------
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇
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▇▇▇▇▇ ▇▇, Its President
China Tailong Group Limited
Halter Financial Group, Inc. (solely for the purposes of Section 8.2 hereof)
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Date: 12/25/04
13
FIRST AMENDMENT AND SUPPLEMENT TO AGREEMENT AND PLAN OF
REORGANIZATION
THIS FIRST AMENDMENT AND SUPPLEMENT TO AGREEMENT AND PLAN OF
REORGANIZATION SUPPLEMENT, is dated as of February 2, 2005 (this "First
Amendment") amends that certain AGREEMENT AND PLAN OF REORGANIZATION, dated as
of December 25, 2004 (the "Reorganization Agreement"), by and among Basic Empire
Corporation, a corporation organized under the laws of the State of Delaware
("BEC"); China Tailong Holdings Company Ltd., a corporation organized under the
laws of Hong Kong Special Administrative Region, People's Republic of China
("Tailong Holdings"); and three individuals and a company who are the
stockholders of Tailong Holdings (the "Tailong Holdings Stockholders"), a list
of whom is attached to Exhibit A of the Reorganization Agreement.
RECITALS
WHEREAS, the parties wish to amend the Reorganization Agreement with
respect to a Section 8.2 thereof as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Section 1.5. Section 1.5 of the Reorganization Agreement is hereby
amended and restated in its entirety to read as follows:
"1.5 Effective Date. The transactions contemplated by this Agreement
shall be deemed consummated at such time as the Company shall have filed with
the US Securities and Exchange Commission ("SEC") a Current Report on Form
8-Kwhich reports the change in control transaction effected by this Agreement
and includes therein, all required audited financial information of Tailong
Holdings and its controlled subsidiary (the "Current Report"). If the Current
Report is not filed on or before February 5, 2005, the Company shall have the
right, in its sole discretion, to either deem this Agreement terminated or
provide Tailong Holdings with an extension for filing the Current Report. The
effective date (the "Effective Date") of this Agreement shall thus be the date
the Company files the Current Report with the SEC. In addition, for the Closing
to be deemed to have occurred as of the Effective Date, all of the other
conditions precedent to the obligations of each of the parties hereto as
hereinafter set forth shall have been satisfied or shall have been waived."
SECTION 2. Section 8.2. Section 8.2 of the Reorganization Agreement is hereby
amended and restated in its entirety to read as follows:
"8.2 Registration Rights. BEC hereby agrees to use its best efforts to
cause the shares of BEC's common stock held by Halter Financial Group, Inc.
("HFG")(the "Registrable Securities") to be registered for resale under the
Securities Act of 1933, as amended (the "Act") pursuant to a registration
statement on a suitable form to be submitted to the SEC (the "Registration
Statement"). BEC shall file the Registration Statement by no later than thirty
(30) days after the Effective Date. Until such time as all the Registrable
Shares have been sold into the market, or are available for resale pursuant to
the provisions of Rule 144 under the Act, BEC agrees to keep the Registration
Statement effective and to prepare and file with the SEC such amendments as may
be necessary, and to comply with the provisions of the Act with respect to the
sale or other disposition of all securities proposed to be registered in the
Registration Statement or any prospectus (including any preliminary prospectus
and any amended or supplemented prospectus) in conformity with the requirements
of the Act, and to prepare and file such other documents as HFG may reasonably
request in order to effect the offering and sale of the Registrable Securities
to be offered or sold. Except as otherwise prohibited by applicable law, BEC
will pay all fees and expenses, including, without limitation, printing and
reproduction costs and fees and expenses of counsel for HFG, incurred in
connection with the registration of the Registrable Securities; provided, that
transfer taxes, if any, solely attributable to the sale of the Registrable
Securities, shall be borne by HFG. In addition, BEC agrees that it shall provide
HFG copies of the preliminary prospectus and prospectus included in the
Registration Statement and each amendment and supplement thereto; use its best
efforts to register or qualify the Registrable Securities for resale under state
law and to keep such registration or qualification in effect for so long as the
Registration Statement remains in effect; and notify HFG at any time when a
prospectus is required to be delivered by HFG under the Act, upon discovery by
BEC that the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, whereupon
HFG shall suspend any offers or sales of the Registrable Securities until such
time as such prospectus, as amended or supplemented from time to time, shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing. HFG agrees to cooperate
fully with BEC in connection with effecting the registration pursuant to this
Section, including, but not limited to, furnishing such information as BEC may
from time to time reasonably request and as shall be required by law or by the
SEC in connection with such registration. This Section 8.2 shall survive the
Closing, and the Tailong Holdings Stockholders acknowledge and agree to ensure
the satisfaction of the obligations of this Section 8.2.
SECTION 3. Defined Terms.
Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Reorganization Agreement.
SECTION 4. Governing Law.
This First Amendment shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
SECTION 5. Counterparts.
This First Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
SECTION 6. Effectiveness.
This First Amendment shall be effective as of the date of the
Reorganization Agreement.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed as of the date first above written.
Basic Empire Corporation
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
CHINA TAILONG HOLDINGS COMPANY LTD.
/s/ ▇▇▇▇▇ ▇▇
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▇▇▇▇▇ ▇▇, Chairman
STOCKHOLDERS OF CHINA TAILONG HOLDINGS COMPANY LTD.
/s/ ▇▇▇▇▇ ▇▇
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▇▇▇▇▇ ▇▇
/s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
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▇▇▇▇ ▇▇▇▇ Yong
/s/ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
CHINA TAILONG GROUP LIMITED
▇▇▇▇▇ ▇▇
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▇▇▇▇▇ ▇▇, President
HALTER FINANCIAL GROUP, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President