STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made and entered into this 25th day of August 2006 by and among DIVERSIFAX, INC., a Delaware corporation (“DFAX” or the “Company”), IRWIN HOROWITZ (“Horowitz” or the “Stockholder”), and Juxiang Yu (the “Purchaser”).
A. Horowitz is the owner of more than 70% of the outstanding shares of the common stock, par value $.001 per share, of DFAX (the “Common Stock”), currently outstanding, exclusive of any shares issuable upon exercise of outstanding warrants, options or similar rights to purchase Common Stock;
B. It is the intention of the parties hereto that:
(i) the Purchaser shall acquire from Horowitz 70% of the outstanding shares of the Common Stock of DFAX on a fully diluted basis, in consideration for the payment described below (the “Stock Purchase”); and (ii) the Stock Purchase shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933 (the “Act”).
There are currently outstanding no shares of preferred stock, no options, warrants or other rights exercisable or convertible into preferred stock, 51,726,200 shares of Common Stock and options, warrants and other rights exercisable for or convertible into 15,613,097 shares of Common Stock. To facilitate the consummation of the transaction contemplated hereby the Company shall cause to be cancelled all but no more than 95,000 of the outstanding options, warrants and other rights to acquire shares of Common Stock. Thus, assuming the satisfaction of the conditions provided for herein, the number of shares of Common Stock to be acquired by the Purchaser (herein, the “Shares”) will equal 36,208,340 shares of Common Stock.
C. The Stockholder and Purchaser agree that in order to facilitate the Stock Purchase that the Stockholder will deposit the Shares with its counsel (or at the Stockholder’s option, counsel for the Purchaser) who shall cause the same to be reissued in the name of Purchaser and the Purchaser will deposit, $425,000.00 with their counsel pending the closing of the Stock Purchase.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agrees as follows:
SECTION 1. PURCHASE OF SHARES.
1.1. Stock Purchase; Cancellation of Options and Warrants. The Stockholder and the Purchaser hereby agree that the Purchaser shall on the Closing Date purchase from the Stockholder the Shares in consideration for $425,000.00 and other consideration as hereinafter provided. As of the Closing, the Company and the Stockholder shall cause to be cancelled all of the outstanding options, warrants and other rights to acquire shares of Common Stock except options to purchase 95,000 shares of Common Stock.
1.2. Discharge of Certain Expenses. In addition to the $425,000, the Purchaser shall pay to Stockholder the sum of $7,000 to reimburse him for expenses incurred on behalf of the Company. Except for such amount as may be due Stockholder and which shall be deemed satisfied as a result of the payment of the aforesaid $7,000, at the time of the closing of this transaction, DFAX shall have no liabilities.
1.3. Investment Intent. The Shares have not been registered under the Act and may not be resold unless the Shares are registered under the Act or an exemption from such registration is available. The Purchaser represents and warrants that he is acquiring the Shares for his own account, for investment, and not with a view to the sale or distribution of the Shares. Each certificate representing the Shares will have legends thereon incorporating language as follows:
“The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”). The shares have been acquired for investment and may not be sold or transferred in the absence of an effective Registration Statement for the shares under the Act unless, in the opinion of counsel satisfactory to the Company, registration is not required under the Act.”
1.4. Deposit Arrangements. Upon execution hereof by the Stockholder and the Purchaser and pending the closing, $425,000.00 shall be deposited in a non-interest bearing escrow account of counsel for the Purchaser and the Shares shall be deposited in escrow with counsel for the Stockholder or, at Stockholder’s option, counsel for the Purchaser. Subject to satisfaction of the terms and conditions of this Agreement, on the Closing Date, the Purchaser and the Stockholder shall direct their respective counsel to deliver the cash or the Shares, as the case may be. Each counsel shall act only on direction of its client and shall have no liability to the other party hereto.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants as follows:
2.1. No Breach. The Purchaser is duly authorized to acquire the Shares, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not violate, conflict with or result in the breach or a default under any contract or agreement to which the Purchaser is a party.
2.2. Brokers or Finders. No broker’s or finder’s fee will be payable by the Purchaser in connection with the transactions contemplated by this Agreement, nor will any such fee be incurred by the Stockholder as a result of any actions by the Purchaser.