SUBSTITUTION AGREEMENT
This
Substitution Agreement (this "Agreement")
is made
and entered into effective as of June 17, 2006, by and between NT Holding Corp.,
a Nevada corporation ("NT'), and Grand Canal Entertainment, Inc., a Delaware
corporation ("Grand
Canal").
RECITALS
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A.
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NT
and Grand Canal are parties to a certain Agreement for Share Exchange,
dated April 7, 2006 (the "Exchange
Agreement"),
pursuant to which NT agreed to sell and transfer to Grand Canal all
of
NT's ownership in its wholly-owned subsidiary, Tagalder C3 Holdings,
Inc.,
a company organized under the laws of the British Virgin Islands
("Tader").
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B. In
consideration of such ownership of Tagalder, Grand Canal issued to NT a total
of
39,702,080 shares of the common stock of Grand Canal (the "Shares").
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C.
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The
purpose of the Exchange Agreement and the transactions contemplated
therein was to facilitate an acquisition transaction in which Tagalder
would acquire, through a subsidiary, the majority of the outstanding
stock
of Shanxi Jinyan Coal and Chemical Company Limited, a company organized
under the laws of the People's Republic of China ("Jinyan"). An agreement
relating
to such acquisition transaction was entered into by Jinyan, Tagalder
and
Grand Canal on
May 1, 2006 (the "Jinyan
Acquisition Agreement"
).
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D. The
Jinyan Acquisition Agreement has subsequently been canceled and all transactions
thereunder voided. There is no intention by the parties to further pursue those
transactions.
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E.
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In
light of the failure of the Jinyan acquisition and the purpose of
the
Tagalder transfer to Grand Canal,
and the corresponding cancellation and voiding of the Jinyan Acquisition
Agreement, NT
and Grand Canal desire to substitute the consideration paid by NT
under
the Exchange Agreement, subject and pursuant to the terms and conditions
set forth herein.
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AGREEMENT
NOW
THEREFORE, in consideration of the mutual premises and covenants contained
herein, and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
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1.
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Incorporation of Recitals.
The foregoing recitals are hereby incorporated in and made a part
of this
Agreement by this reference.
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| 2. |
Substitution
of Consideration.
The parties agree as follows:
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| 2.1. |
Upon
execution of this Agreement, Grand Canal will transfer and return,
and
without any additional action,
by
the parties shall conclusively be deemed to have transferred and
returned,
to NT all of the ownership of Tagalder (the "Return
Transfer").
Following such Return Transfer, Tagalder will be, for all purposes,
a
wholly-owned subsidiary of NT.
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| 2.2. |
Within
sixty (60) days following the Return Transfer, NT will provide and
contribute to Grand Canal an alternative acquisition entity and
transaction opportunity as a substitution of consideration under
the
Exchange Agreement for Tagalder and the canceled Jinyan acquisition
(the
"Substitution").
As
of the date hereof, the parties anticipate that such substitute
consideration will involve a transaction with Shanxi Zhonglu Coking
Company that is comparable in structure to the canceled Jinyan
acquisition; however, the actual transaction and structure thereof
is
subject to NT's ongoing negotiations and will be finalized pursuant
to
definitive documentation at the time of the Substitution. NT acknowledges
and agrees that Grand Canal in its absolute sole discretion will
review
the Substitution upon submission of same within the 60 day period,
and in
the event that Grand Canal determines that the Substitution is not
acceptable to Grand Canal and/or its counsel in their sole discretion,
the
Exchange Agreement and this Substitution Agreement may be terminated
and
the shares and other consideration unwind and returned to the respective
party (including without limitation return and/or cancellation of
the
"Shares")s. Unless otherwise agreed by the parties, no additional
consideration from Grand Canal will be paid or delivered in connection
with the Substitution.
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3.
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Certain
Assumptions.
The parties agree that the Return Transfer and Substitution does
not
constitute, for any purpose, a distribution or dividend to NT, or
other
taxable event. Each party covenants and agrees to take such actions
and to
provide such further assurances, as may be reasonably requested by
the
other party, to ensure such treatment of the Return Transfer and
Substitution, including without limitation to restructure and reform
this
Agreement as reasonably necessary in accordance with the
foregoing.
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4.
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Failure
to Perform; Remedy.
If
NT fails to perform the Substitution as set forth in Section 2.2
within
the time period set forth therein, or such extended time period as
may be
mutually agreed by the parties, then Grand Canal shall be entitled
to
cancel the Exchange Shares for reason of lack of
consideration.
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5.
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Representations;
Warranties.
Each of NT and Grand Canal represents and warrants to the other party
that
it has obtained all necessary approvals, including without limitation
board approvals, to authorize and approve the transactions contemplated
herein.
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6.
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Further
Assurances.
Each of the parties agrees to take such actions and steps as may
be
reasonably requested by the other party to effect the Return Transfer
set
forth in Section 2.1, including without limitation to execute and
deliver
any required filings with governmental authorities. Further, each
of NT
and Grand Canal shall take all reasonable actions necessary to comply
promptly with all legal requirements which may apply with respect
to the
transactions hereunder and will promptly cooperate with and furnish
information to the other party in connection with any such
requirements.
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7.
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Entire
Agreement; Amendments.
This Agreement constitutes the entire agreement between the parties
with
respect to the subject matter hereof, and supercedes and replaces
any
prior or contemporaneous agreements or understandings, whether written
or
oral, relating to such subject matter. This Agreement is not intended
to
confer upon any person other than the parties hereto any rights or
remedies hereunder. This Agreement may not be modified or amended
except
in writing signed by the parties.
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2
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8.
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Assignment.
Neither this Agreement, nor any of the rights or obligations hereunder,
may be assigned or transferred by either party without the prior
written
consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and
assigns.
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9.
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Counterparts.
This Agreement may be executed in one or more counterparts, each
of which
shall be deemed an original and together shall constitute one and
the same
instrument.
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10.
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Governing
Law.
This Agreement shall be governed and construed in accordance with
the laws
of the State of Nevada, without regard to principles of conflicts
of law.
Each party hereby irrevocably
submits to the jurisdiction of any Nevada state court or any federal
court
in the State
of
Nevada in respect of any suit, action or proceeding arising out of
or
relating to this Agreement,
and irrevocably accept for themselves and in respect of their property,
generally and
unconditionally, the jurisdiction of the aforesaid
courts.
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11.
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No
Remedy in Certain Circumstances.
Each party agrees that, should any court or other competent authority
hold
any provision of this Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action inconsistent
herewith
or not to take any action required herein, the other party shall
not be
entitled to specific performance of such provision or part hereof
or to
any other remedy, including but not limited to money damages, for
breach
hereof or of any other provision of this Agreement or part hereof
as a
result of such holding or order.
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IN
WITNESS WHEREOF, each party has caused this Agreement to be executed by its
authorized representative as of the date first set forth above.
| NT HOLDING CORP. | GRAND CANAL ENTERTAINMENT, INC. |
| By: ▇▇▇▇ ▇▇ Tsun |  |
| Print Name: ▇▇▇▇ ▇▇ Tsun |
Print
Name: M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
|
| Title: Authorized Officer |
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