EXHIBIT 2.1
AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
BETWEEN
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
AND
XI'AN JIN CHI AN AUTOMOBILE DEVELOPMENT CO. LTD
INDEX
Page
ARTICLE I - PLAN OF EXCHANGE OF SECURITIES 4
1.1 - Plan of Exchange 4
1.2 - Cash Consideration and Escrow Requirements 5
1.3 - Distribution at Closing 5
1.4 - Shareholder Share Exchange 6
1.5 - Lockup-Leakout Agreement 6
1.6 - Exemption from Registration 6
1.7 - Change of Board Control 7
1.8 - Closing 7
1.9 - Due Diligence 7
1.10 - Representations and Warranties Correct 8
1.11 - Termination 8
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF JCA 8
2.1 - Organization 8
2.2 - Capital 8
2.3 - Subsidiaries 9
2.4 - Authority 9
2.5 - Corporate Power 9
2.6 - Directors and Officers 9
2.7 - Financial Statements 9
2.8 - Absence of Changes 10
2.9 - Absence of Undisclosed Liabilities 10
2.10 - Tax Returns 10
2.11 - Investigation of Financial Condition 10
2.12 - Patents, Trade Names and Rights 10
2.13 - Compliance with Laws 10
2.14 - Litigation 10
2.15 - Full Disclosure 10
2.16 - Assets 10
2.17 - Material Contracts 11
2.18 - Indemnification of Officers and Directors 11
2.19 - General 11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF NAGM 11
3.1 - Organization 11
3.2 - Capital 11
3.3 - Subsidiaries 12
3.4 - Directors and Officers 12
3.5 - Financial Statements 12
3.6 - Changes in Financial Condition 13
3.7 - Absence of Undisclosed Liabilities 13
3.8 - Tax Returns 13
3.9 - Investigation of Financial Condition 13
3.10 - Patents, Trade Names and Rights 13
3.11 - Compliance with Laws 13
3.12 - Litigation 13
3.13 - Authority 14
3.14 - Ability to Carry Out Obligations 14
3.15 - Full Disclosure 14
3.16 - Assets 14
3.17 - Material Contracts 14
3.18 - Market for Company Stock 15
3.19 - Minute Books 15
3.20 - Real Property Holding Corporation 15
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF JCA SHAREHOLDERS 16
4.1 - Share Ownership 16
4.2 - Investment Intent 16
4.3 - Legend 16
4.4 - ▇▇▇▇▇ Stocks 16
ARTICLE V COVENANTS 17
5.1 - Investigative Rights 17
5.2 - Conduct of Business 17
5.3 - Indemnification 17
ARTICLE VI - CONDITIONS PRECEDENT TO NAGM'S
PERFORMANCE 18
6.1 - Conditions 18
6.2 - Accuracy of Representations 18
6.3 - Performance 18
6.4 - Absence of Litigation 18
6.5 - Officer's Certificate 18
6.6 - Legal Opinion 19
6.7 - Form 8-K 19
6.8 - General 19
6.9 - Due Diligence 19
ARTICLE VII - CONDITIONS PRECEDENT TO JCA'S
PERFORMANCE 19
7.1 - Conditions 19
7.2 - Accuracy of Representations 19
7.3 - Performance 19
7.4 - Absence of Litigation 19
7.5 - Current Status 19
7.6 - Assets of NAGM 19
7.7 - Legal Opinion 20
ARTICLE VIII-CLOSING 20
8.1 - Closing 20
8.2 - Other Events Occurring at Closing 20
ARTICLE IX - MISCELLANEOUS 21
9.1 - Captions and Headings 21
9.2 - No Oral Change 21
9.3 - Non-Waiver 21
9.4 - Time of Essence 21
9.5 - Entire Agreement 21
9.6 - Choice of Law 21
9.7 - Counterparts 21
9.8 - Notices 21
9.9 - Binding Effect 22
9.10 - Mutual Cooperation 22
9.11 - Announcements 22
9.12 - Expenses 22
9.13 - Survival of Representations and Warranties 22
9.14 - Exhibits 22
AGREEMENT
THIS AGREEMENT made this 26th day of September, 2006, by and between NORTH
AMERICAN GAMING AND ENTERTAINMENT CORPORATION, a Delaware corporation ("NAGM"),
and XI'AN JIN CHI AN AUTOMOBILE DEVELOPMENT CO. LTD ("JCA"), a P.R.China's
Corporation that owns 78.75% of the equities of XI'AN JIN ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ YE
▇▇ ▇▇▇▇ GU FEN YOU ▇▇▇▇ ▇▇▇▇ SI ("XJAI") (which shall be collectively referred
to as "JCA" herein, unless the context clearly reflects otherwise), the
shareholders of JCA (the "Sellers") and certain individual stockholders of
NAGM.
BACKGROUND
Xi'An Jinyuan Automobile Industry Co., Ltd. ("XJAI") is a joint stock
limited liability company formed on September 8, 1988, under the laws of the
Peoples Republic of China ("PRC"), with its principal place of business in
Xi'an City, Shaanxi Province, PRC. In 2005, the company restructured to form a
joint stock company with authorized capital of 40,000,000 Renminbi ("RMB").
The company is an authorized Mitsubishi brand automobile distributor
specializing in the maintenance and repair of motor vehicles through 4 service
locations in Xi'an City, PRC.
North American Gaming and Entertainment Corporation ("NAGM") was
incorporated under the laws of the state of Delaware in 1969 and was previously
engaged in the amusement and recreation industry with operations in video
gaming and video poker located in the southern United States. In 2001, the
company sold its remaining operations and devoted its activities to the
location and acquisition of a private entity or other suitable assets. Since
2001, the company has not engaged in operations and has generated only limited
revenues.
The securities of NAGM are publicly traded in the US, in the over the
counter bulletin board ("OCBB") under the trading symbol "NAGM." NAGM is
obligated to file reports under the Securities Exchange Act of 1934, as amended
and has caused all such reports to be filed.
On or about September 19, 2006, NAGM and JCA entered into a letter of
intent regarding the acquisition of JCA through a reverse merger share
exchange transaction. Under the terms of the letter of intent, JCA will become
a wholly-owned subsidiary of NAGM and will continue the business of XJAI under
the direction of a newly appointed board of directors.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, the parties hereto agree as follows:
DEFINITIONS
For purposes of this agreement, the following definitions shall apply.
Accounting terms used in this Agreement and not otherwise defined herein shall
have the meanings provided by GAAP. Certain capitalized terms are used in this
Agreement as specifically defined in this Section as follows:
"NAGM" is defined in the Preamble.
"NAGM Parties" means NAGM and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"NAGM Financial Statements" means the audited and unaudited statements
filed by NAGM with the Securities & Exchange Commission
"NAGM Stock" is defined in Section 1.1.
"Affiliate" means any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with JCA (or other
specified Person) and shall include (a) any Person who is an officer, director
or beneficial holder of at least 10% of the outstanding capital stock of JCA
(or other specified Person), (b) any Person of which JCA (or other specified
Person) or any officer or director of JCA (or other specified Person) shall,
directly or indirectly, either beneficially own at least 10% of the outstanding
equity securities or constitute at least a 10% participant, and (c) in the case
of a specified Person who is an individual, Members of the Immediate Family of
such Person..
"Agreement" means this Acquisition Agreement, which may also be
sometimes called "Definitive Agreement" or "Plan of Exchange Agreement."
"Balance Sheet Date" is June 30, 2006.
"Bylaws" means all written rules, regulations, procedures and bylaws and
all other similar documents, relating to the management, governance or internal
regulation of a Person other than an individual, each as from time to time
amended or modified.
"Certificate of Designations" means the Certificate of
Designations,establishing the rights and preferences of the Series C
Convertible Preferred Stock of the Company, by resolution to be adopted at the
closing and as attached hereto.
"Charter" means the articles or certificate of incorporation, statute,
constitution, joint venture or partnership agreement or articles or other
charter of any Person other than an individual, each as from time to time
amended or modified.
"Closing" is defined as the process of actual exchange of cash,
securities, voting control and ownership, which is scheduled to occur in the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Attorney as soon as all approvals have been
obtained from government and regulatory authorities and the Board of Directors
of NAGM, unless extended by the parties.
"Closing Date" shall be as per paragraph 1.8 or as soon thereafter as
all regulatory approvals have been obtained or at such other place and time as
the parties may otherwise agree.
"Code" means the federal Internal Revenue Code of 1986 or any successor
statute, and the rules and regulations there-under, as from time to time
amended and in effect.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act, the Exchange Act
or both.
"Contractual Obligation" means, with respect to any Person, any
contracts, agreements, deeds, mortgages, leases, licenses, other instruments,
commitments, undertakings, arrangements or understandings, written or oral, or
other documents, including any document or instrument evidencing indebtedness,
to which any such Person is a party or otherwise subject to or bound by or to
which any asset of any such Person is subject.
"Employee Benefit Plan" means each and all "employee benefit plans" as
defined in section 3(3) of ERISA, maintained or contributed to by either NAGM
or JCA, any of their Affiliates or any of their respective predecessors, or in
which either NAGM or XJAI, any of their Affiliates or any of their respective
predecessors participates or participated and which provides benefits to
employees of either NAGM or JCA or their spouses or covered dependents or with
respect to which either NAGM or JCA has or may have a material liability,
including, (i) any such plans that are "employee welfare plans" as defined in
section 3(1) of ERISA and (ii) any such plans that are "employee pension
benefit plans" as defined in section 3(2) of ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor statute and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any successor
section thereof, collectively and as from time to time amended and in effect.
"ERISA Group", with respect to any entity, means any Person which is a
member of the same "controlled group" or under "common control", within the
meaning of section 414(b) or (c) of the Code or section 4001(b)(1) of ERISA,
with such entity.
"Exchange Act" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as from time to time amended and in effect.
"GAAP" means United States generally accepted accounting principles, as
in effect from time to time, consistently applied.
"JCA" is defined in the Preamble.
"JCA Financial Statements" means the Financial Statements of XI'AN JIN
CHI AN AUTOMOBILE DEVELOPMENT CO., LTD For The Six Months Period Ended June 30,
2006and Xi'An Jinyuan Automobile Industry Co., Ltd. for The Years Ended
December 31, 2004 and 2005. .
"JCA Intellectual Property" is defined in Section 4.18(b).
"JCA Shareholders" means the beneficial owners of the shares represented
by the certificates of XI'AN JIN CHI AN AUTOMOBILE DEVELOPMENT CO. LTD AND
XI'AN JINYUAN AUTOMOBILE INDUSTRY CO., LTD., who are identified in a legal
opinion to NAGM as Gao Yinping owns 60% and Lei Teichang owns 40%.
"Legal Requirement" means any federal, state or local law, statute,
standard, ordinance, code, order, rule, regulation, resolution, promulgation or
any final order, judgment or decree of any court, arbitrator, tribunal or
governmental authority, or any license, franchise, permit or similar right
granted under any of the foregoing.
"Material Adverse Effect" means a material adverse effect upon the
business, assets, financial condition, income or prospects of the party in
question.
"Members of the Immediate Family," as applied to any individual, means
each parent, spouse, child, brother, sister or the spouse of a child, brother
or sister of the individual, and each trust created for the benefit of one or
more of such persons and each custodian of a property of one or more such
persons.
"NAGM Shareholders" means the legal and beneficial owners of the shares
represented by the certificates of NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION.
"Pension Plan" means each pension plan (as defined in section 3(2) of
ERISA) established or maintained, or to which contributions are or were made by
XJAI or any of its Subsidiaries or former Subsidiaries, or any Person which is
a member of the same ERISA Group with any of the foregoing.
"Person" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization and any
governmental department or agency or political subdivision.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be from time to time amended and in effect.
"Securities Exchange Act" or "Exchange Act" means the Securities
Exchange Act of 1934, as amended, or any successor federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall be
from time to time amended and in effect.
"Sellers" is defined in the Preamble.
"Subsidiary" means any Person of which either NAGM or JCA now or
hereafter shall at the time (a) own directly or indirectly through a Subsidiary
at least 50% of the outstanding capital stock (or other shares of beneficial
interest) entitled to vote generally or (b) constitute a general partner.
"Shareholders" means the beneficial owners of the shares represented by
the certificates
"XJAI Financial Statements" means the Financial Statements of XI'AN JIN
CHI AN AUTOMOBILE DEVELOPMENT CO., LTD For The one Month Period Ended August
30, 2006 and Xi'An Jinyuan Automobile Industry Co., Ltd. for The Years Ended
December 31, 2004 and 2005 and for Six Months Period Ended June 30, 2006.
"Welfare Plan" means each welfare plan (as defined in section 3(l) of
ERISA) established or maintained, or to which any contributions are or were
made, by JCA or any of its Subsidiaries or any Person which is a member of the
same ERISA Group with any of the foregoing.
ARTICLE I
PLAN OF EXCHANGE OF SECURITIES
1.1 Plan of Exchange. The parties intend to exchange securities such
that JCA shall become a wholly owned subsidiary of NAGM and the shareholders
of JCA shall effectively acquire voting and operational control of NAGM through
a "reverse acquisition." It is the intention of the parties hereto that this
entire transaction qualify as a corporate reorganization under Section
368(a)(1)(B) of the Code, and related or other applicable sections hereunder.
However, neither party is making any representations or warranties regarding
the tax treatment of this transaction.
(a) Reverse Stock Split. Subsequent to the closing of this transaction
upon obtaining approval of the shareholders, NAGM will effect a 1 for 10
reverse stock split effectively lowering its issued and outstanding shares to
approximately 45,000,000 issued and outstanding securities, on a fully diluted
basis. The rights and privileges associated with any outstanding options,
warrants or other securities shall be reversed correspondingly such that the
total capitalization of NAGM at the time of closing of this agreement shall be
equal to or less than 2,570,500 issuable shares of common stock on a fully
diluted basis, prior to the conversion of the Series "C" Convertible Preferred
Shares.
(b) Issuance of Series "C" Convertible Preferred Shares. At closing
NAGM will cause 500,000 newly issued shares of Series "C" Convertible Preferred
voting stock to Sellers, which shares shall each convert at a rate of 843
shares of common voting shares for each share of Series "C" Convertible
Preferred collectively represent not less than 93.6% of the total outstanding
common shares on a fully diluted basis. The Series "C" Convertible Preferred
voting stock shall be reduced by 10,676 shares in consideration of the payments
called for in 1.3(c) and 1.4 hereunder. NAGM shall authorize sufficient shares
to permit the valid and lawful issuance of certificates at closing. The
certificates shall bear NAGM's standard restrictive legend applicable to
unregistered shares. Subsequent to the Closing NAGM shall hold a stockholder
vote to authorize up to 500,000,000 shares of common voting stock to permit
conversion of the Series "C" Convertible Preferred Shares to common voting
shares and to authorize reverse stock split.
(c) Compliance with Chinese "WOFE" Regulations.. The parties
acknowledge that approval from Xi'An City and/or Shaanxi provincial governments
in the PRC may be required for transfer by JCA to NAGM and therefore give
advance consent to nominal changes needed for such approval. If necessary, in
the opinion of Chinese counsel, this may include transfer of 100% shares of JCA
to Best Century Investment Limited (BCI), a Hong Kong entity, which is a
nominee company of JCA, and JCA will be a wholly owned foreign entity (WOFE).
Provided, however, that the nominal transfer shall not alter the valuation or
operations of JCA. In that event, all of JCA's rights, responsibilities and
benefits under this Agreement shall be assigned to and assumed by BCI.
(d) Reverse Triangular Merger. The parties intend that this exchange
will be tax free under Section 368 of the Internal Revenue Code to the fullest
extent possible. If necessary in the opinion of tax counsel to preserve tax
free status, NAGM establish a special purpose Delaware corporation as a wholly
owned subsidiary designated as NAGM Merger Corporation or some similar name.
JCA shall merge with NAGM Merger Corporation and shall be the surviving entity.
The Board of Directors and Management of NAGM and JCA shall consent to all acts
reasonably necessary for the establishment of NAGM Merger Corporation and the
subsequent merger. To the extent required by applicable law, the merger shall
be approved by the shareholders of both corporation and this Acquisition
Agreement shall be incorporated by reference into any Plan of Exchange between
the companies. NAGM will file Articles of Merger or similar Articles effecting
the merger under Delaware law.
1.2 Cash Consideration and Escrow Requirements. JCA as further
consideration shall pay Three Hundred Fifty Thousand U. S. Dollars
($350,000.00) cash to NAGM at closing. These funds shall be used by NAGM to
liquidate and remove all debts or liabilities of NAGM incurred prior to
closing, including payments to its attorneys and consultants, as provided
herein under the heading "Distribution at Closing." JCA shall deposit $50,000
US Dollars in escrow with escrow agent on September 30, 2006, after completion
of due diligence. JCA shall have delivered to its escrow agent, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, sufficiently prior to closing, cleared funds in U.S. Dollars
sufficient to permit wire transfer on the date of closing.
1.3 Distribution at Closing. At closing, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as escrow
agent shall be authorized to deliver proceeds totaling Three Hundred Fifty
Thousand U.S. Dollars ($350,000.00) cash as follows:
(a) Cash. At least One Hundred Fifty Thousand Dollars ($150,000.00)
to be used for the reduction or liquidation of any pre-existing debts or
liabilities of NAGM. To the extent that any such debts of liabilities remain
outstanding of the date of closing, NAGM will provide ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
escrow agent a schedule of debts identifying the creditor, creditor's address,
amount owed, account number, if any, whether debt is disputed, payment or
wiring instructions. Any sums remaining after payment of outstanding debts and
liabilities shall be delivered to NAGM for disbursement in its discretion by
its current board of directors.
(b) Consulting Fees. From the cash consideration, the sum of $200,000
or other sum to be agreed between Capital Advisory Services and NAGM shall be
paid hereunder by JCA to Capital Advisory Services, Inc. by NAGM at Closing in
satisfaction of obligations of NAGM for legal and consulting fees incurred
prior to closing.
(c) Distribution of Securities. NAGM shall cause 4,500,000 shares of
newly issued common voting shares to be issued Capital Advisory Services, Inc.
in satisfaction of obligations of NAGM for legal and consulting fees incurred
prior to closing and shall reduce the Series "C" Convertible Preferred payable
to JCA by 5,338 shares. The shares shall be afforded "piggyback" registration
rights whereby the shares will be registered by NAGM at NAGM expense if NAGM
registers any other shares..
1.4 Shareholder Share ▇▇▇▇▇▇▇▇.▇▇ closing, 3,800,000 shares, which
have been held longer that 2 years by non affiliates of NAGM shall be
transferred to JCA or its designees in exchange for 4,500,000 newly issued
shares of NAGM (pre-split) common voting shares. To effect this condition,
NAGM shall cause to be issued 2,250,000 newly issued common voting shares at
closing to ▇▇▇▇ ▇▇▇▇, a citizen resident of Tulsa, Oklahoma in exchange
for 2,090,000 shares, which have been held by Mr. Case for more than 2 years.
In addition, NAGM shall also issue 2,250,000 newly issued (pre-split) common
voting shares at closing to ▇▇▇▇▇ ▇▇▇▇▇▇, a citizen and resident of Los
Angeles, California in exchange for 1,710,000 shares, which have been held by
▇▇. ▇▇▇▇▇▇ for more than 2 years.
1.5 Lockup-Leakout Agreement. The officers, directors and affiliates
of NAGM shall execute at closing lockup-leakout agreements ("lockup") in a form
suitable to counsel for JCA. Under the terms of the lockup, the current
officers, directors and affiliates shall agree that no restrictive legends
shall be removed nor shall any sales of restricted shares be completed, whether
in compliance with Rule 144 or otherwise, for a 90 day period following
closing.
Specifically, NAGM shareholders, ▇▇ ▇▇▇▇▇ and any shareholder entities
controlled by him, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ shall be subject to a lock
up leak out agreement executed and delivered at Closing The parties to the
lockup shall further agree that the company shall remove the restrictive legend
regarding the lock-up agreement and permit sales on a pro-rata basis thereafter
on the following schedule provided that the selling party complies with Rule
144 in effecting such sales:
(a) 5,000,000 pre-reverse split shares collectively shall be released
and permitted for resale after the expiration of 90 days following
closing until the expiration of 180 days following closing;
(b) 5,000,000 pre-reverse split shares collectively shall be released
and permitted for resale after the expiration of 180 days following
closing until the expiration of 270 days following closing;
(c) 5,000,000 pre-reverse split shares collectively shall be released
and permitted for resale after the expiration of 271 days following
closing until the expiration of 360 days following closing.
(d) On the one year anniversary date of closing, the lockup shall
expire and all remaining shares shall be eligible for the removal of
the restrictive legend and resale in accordance with law.
1.6 Exemption from Registration. The parties hereto intend that the
NAGM Shares to be issued to the Sellers shall be exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) of the Securities
Act and the rules and regulations promulgated thereunder. The parties believe
these transactions are private placements within the meaning of the rules and
regulations under the Securities Act. Each of these entities separately, and
through their intermediaries, had a pre-existing relationship that had existed
for at least 30 days. NAGM will rely upon the exemptions from registration
provided by Regulation S, Section 4(2) and Regulation D of the Securities Act,
and on comparable exemptions under the China Corporation Act and the China
Securities Act and other state and foreign laws. We believe these exemptions
were available because the issuances were made to a de minimus number of
sophisticated persons, in transactions not involving a private offering.
1.7 Change of Board Control. At closing, the current Board of
Directors shall tender resignations effective on Closing. Immediately prior to
resigning, the Board shall hold a meeting in compliance with the notice or
waiver of notice requirements of NAGM and shall then adopt resolutions fixing
the size of its Board of Directors of not less than three nor more than nine
directors, and shall elect a new Board of Directors which shall include in a
shareholder vote and upon filing a Schedule 14F-1 in compliance with Rule 14F
of the Securities Exchange Act:
Gao ▇▇▇ ▇▇▇▇ Chair
Lei Tie ▇▇▇▇▇ Director
Effective on the Closing Date, NAGM shall elect new officers of NAGM to
consist of, at least, the following persons:
Gao ▇▇▇ ▇▇▇▇ President and Executive Director
Lei Tie ▇▇▇▇▇ Supervisor
1.8 Closing. This AGREEMENT shall become effective immediately upon
approval and adoption by the parties hereto, in the manner provided by the law
of the places of incorporation and constituent corporate documents, and upon
compliance with governmental filing requirements, such as, without limitation,
filings under the Exchange Act , as such, JCA must document to NAGM's
satisfaction that it is prepared to file a Form 8-K within four business days
of closing that meets the requirements in Form 8-K for the acquisition of a
"shell" company. Closing shall occur when all conditions of closing have been
met or are waived by the parties, including all required government approvals.
The parties anticipate the filing of a Schedule 14F-1 Information Statement at
least ten days prior to any change in majority of the Board of Directors of
NAGM The Parties expect to make such filing after the Closing. The closing of
the Agreement (the "Closing") shall take place in Charlotte, North Carolina, at
the offices of attorney ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ immediately after all conditions have
been removed or as soon thereafter as all regulatory approvals have been
obtained, or at such other place and time as the parties may otherwise agree.
1.9 Due Diligence. Each party shall have furnished to the other party
certain corporate and financial information to conduct its respective due
diligence. If any party determines that there is a reason not to complete the
Agreement as a result of their due diligence examination, then they must give
written notice to the other party prior to the expiration of the due diligence
examination period.
NAGM shall have delivered to JCA copies of each of the following which
shall be true and correct copies in full force and effect as of the Closing
date: (i) the Certificate of Incorporation of NAGM as of the Closing date
certified by the Secretary of State of Delaware as of a date not more than ten
(10) days prior to the Closing; (ii) the Bylaws of NAGM, certified by NAGM's
secretary as of the Closing date; (iii) resolutions of the Board of Directors
of NAGM, certified by NAGM's secretary as of the Closing date, the form and
substance of which are reasonably satisfactory to JCA, authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby and thereby; and (iv) the most recent audit report and
auditor's letter including any items noted by the auditors to indicate a lack
of internal control or other deficiency; and (v) good standing Certificate of
NAGM.
JCA shall have delivered to NAGM an opinion of Chinese counsel, fluent
in English and Mandarin, to the effect that counsel has reviewed (i) the
Articles of Incorporation (ii) the Bylaws (iii) resolutions of the Board of
Directors and (iv) the most recent audit report and auditor's letter and found
JCA and XJAI to be in compliance with the applicable laws and regulations
pertinent to JCA under the laws of the PRC and that the transactions hereby
have been authorized and approved by the governing bodies of JCA and XJAI and
all governmental and regulatory authority.
1.10 Representations and Warranties Correct. The representations and
warranties made by the Parties herein shall have been true and correct when
made and shall be true and correct on and as of the Closing date with the same
force and effect as though made on and as of the Closing date. All
authorizations, approvals or permits of any governmental authority or
regulatory body that are required in connection with the lawful issuance and
sale of the NAGM Stock and the sale of JCA Stock pursuant to this Agreement
shall have been duly obtained and shall be in full force and effect.
1.11 Termination. The AGREEMENT may be terminated by written notice, at
any time prior to closing, (i) by mutual consent, (ii) by either party during
the due diligence phase, (iii) by either party, in the event that the
transaction represented by the anticipated PLAN OF EXCHANGE has not been
implemented and approved by the proper governmental authorities 90 days from
the date of this Agreement, or (iv) if payments scheduled in the Escrow
Agreement are not received when due. In the event that termination of the PLAN
OF EXCHANGE by either or both, as provided above, the PLAN OF EXCHANGE shall
become void and there shall be no liability on the part of either party.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF JCA and XJAI
Sellers, XJAI and JCA hereby represent and warrant to NAGM that:
2.1 Organization. JCA is a corporation duly organized on August 20,
2006, validly existing and in good standing under the laws of People's Republic
of China, has all necessary corporate powers to own its properties and to carry
on its business as now owned and operated by it, and is duly qualified to do
business and is in good standing in each of the states where its business
requires qualification. XJAI is a corporation duly organized on September 8,
1988, validly existing and in good standing under the laws of the People's
Republic of China, has all necessary corporate powers to own its properties and
to carry on its business as now owned and operated by it, and is duly qualified
to do business and is in good standing in each of the states where its business
requires qualification.
2.2 Capital.The authorized capital stock of XJAI consists solely of
40,000,000 RMB, of which 40,000,000 shares are issued and outstanding. All of
the issued and outstanding shares of XJAI are duly and validly issued, fully
paid and nonassessable. There are no outstanding subscriptions, options,
rights, warrants, debentures, instruments, convertible securities or other
agreements or commitments obligating XJAI to issue or to transfer from treasury
any additional shares of its capital stock of any class. JCA shall furnish a
legal opinion to NAGM to the effect that two natural persons own 100% of the
shares: Gao Yinping owns 60% and Lei Teichang owns 40%.
There is no other outstanding capital stock, warrants and options as of the
date of the Agreement. All of the outstanding shares of capital stock of JCA
and XJAI are validly issued, fully paid, nonassessable and subject to no lien
or restriction on transfer, except restrictions on transfer imposed by
applicable securities laws.
2.3 Subsidiaries. As of closing, XJAI shall be a 78.75% owned
subsidiary of JCA but shall have consolidated 100% of its assets and operations
with JCA. Neither JCA nor XJAI has other subsidiaries, affiliated companies or
other associated entities and does not own any interest in any other
enterprise, except as disclosed in the audit report. JCA shall become a wholly
owned subsidiary of NAGM by exchanging all authorized, issued, and unissued
shares to NAGM in consideration of this Agreement. If the situation mentioned
in 1.1(c) happens so that WOFE module has to be taken, then JCA shall be wholly
owned foreign entity of BCI, and BCI will become a wholly owned subsidiary of
NAGM.
2.4 Authority. The Board of Directors of JCA and XJAI have
authorized the execution of this Agreement and the consummation of the
transactions contemplated herein, and JCA has and XHIA have full power and
authority to execute, deliver and perform this Agreement, and this Agreement is
a legal, valid and binding obligation of JCA and XJAI and is enforceable in
accordance with its terms and conditions. All shareholder approval and
corporate action on the part of JCA necessary for the due authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein has been or will be taken prior to the Closing
date. This Agreement is a legal, valid and binding agreements of Sellers, JCA
and XJAI,, enforceable in accordance with their terms. The execution, delivery
and performance by Sellers of this Agreement and the sale of JCA shares will
not result in any violation of or be in conflict with, or result in a breach of
or constitute a default under, any term or provision of any Legal Requirement
to which any Seller, JCA or XJAI is subject, or any Charter or Bylaws of JCA or
XJAI, or any Contractual Obligation to which any Seller is a party or by which
JCA or XJAI is bound.
2.5 Corporate Power. Sellers have all necessary power and authority
to enter into and perform this Agreement and to sell the JCA shares hereunder.
JCA and XJAI have all necessary power and authority to own all the properties
owned by it and to carry on the businesses now conducted or presently proposed
to be conducted by it. Sellers, JCA and XJAI have taken all action necessary
to authorize this Agreement and the sale of the JCA shares to be sold
hereunder. The execution and delivery of this Agreement by JCA and XJAI and the
performance by JCA and XJAI of its obligations hereunder in the time and manner
contemplated will not cause, constitute or conflict with or result in (a) any
breach or violation of any of the provisions of or constitute a default under
any license, indenture, mortgage, instrument, article of incorporation, bylaw,
or other agreement or instrument to which JCA and XJAI is a party, or by which
it may be bound, nor will any consents or authorizations of any party other
than those hereto be required; (b) an event that would permit any party to any
agreement or instrument to terminate it or to accelerate the maturity of any
indebtedness or other obligation of JCA and XJAI; or (c) an event that would
result in the creation or imposition of any lien, charge or encumbrance on any
asset of JCA and XJAI.
2.6 Directors and Officers.The names and titles of all directors and
officers of JCA and XJAI as of the date of this Agreement are:
JCA:
Gao ▇▇▇ ▇▇▇▇ Chair
Lei Tie ▇▇▇▇▇ Director
Gao ▇▇▇ ▇▇▇▇ President and Executive Director
Lei Tie ▇▇▇▇▇ Supervisor
XJAI:
Dong Xin Chair, and Director, President
Dong Wenzhu Director
Guo Sixin Director
Hao Dachun Director
▇▇▇▇ ▇▇▇▇▇▇▇ Director
2.7 Financial Statements.Exhibit 2.7 hereto consists of the
consolidated unaudited financial statements of JCA AND XJAI for the years ended
December 31, 2004 and 2005 and for the six months period ended June 30, 2006.
The financial statements have been prepared in accordance with generally
accepted accounting principles and practices consistently followed throughout
the periods indicated, and fairly present the financial position as of the
dates of the balance sheets included in the financial statements and the
results of operations for the periods indicated.
2.8 Absence of Changes. Since the date of JCA and XJAI's most recent
financial statements included in Exhibit 2.5, there has not been any
undisclosed changes in the financial condition or operations of JCA or XJAI,
except for changes in the ordinary course of business, which changes have not
in the aggregate been materially adverse.
2.9 Absence of Undisclosed ▇▇▇▇▇▇▇▇▇▇▇.▇▇ of the date of JCA and
XJAI's most recent balance sheet, JCA did not have any material debt, liability
or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected in such
balance sheet.
2.10 Tax Returns. Within the times and in the manner prescribed by law,
JCA and XJAI have filed all federal, state and local tax returns required by
law and has paid all taxes, assessments and penalties due and payable except
for those for which returns are not yet due. The provisions for taxes, if any,
reflected in Exhibit 2.5 are adequate for the periods indicated. There are no
present disputes as to taxes of any nature payable by JCA and XJAI.
2.11 Investigation of Financial Condition.Without in any manner
reducing or otherwise mitigating the representations contained herein, NAGM and
its legal counsel and accountants shall have the opportunity to meet with JCA
and XJAI's legal counsel and accountants to discuss the financial condition of
JCA and XJAI. JCA and XJAI shall make available to NAGM all books and records
of JCA and XJAI.
2.12 Patents, Trade Names and Rights. To the best of its knowledge,
neither JCA nor XJAI is not infringing upon or otherwise acting adversely to
the right or claimed right of any person with respect to patents, trade names
and rights.
2.13 Compliance with Laws.JCA and XJAI have complied with, and are not
in violation of, applicable federal, state or local statutes, laws and
regulations (including, without limitation, and to the knowledge of the
officers of JCA and XJAI, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business.
2.14 Litigation. Neither JCA nor XJAI is a defendant to any suit,
action, arbitration or legal, administrative or other proceeding, or
governmental investigation which is pending or, to the best knowledge of JCA
and XJAI, threatened against or affecting JCA or XJAI or its business, assets
or financial condition. Neither JCA nor XJAI is in default with respect to any
order, writ, injunction or decree of any federal, state, local or foreign
court, department, agency or instrumentality applicable to it. Neither JCA nor
XJAI is engaged in any material lawsuits to recover monies due it.
2.15 Full Disclosure.None of the representations and warranties made by
JCA or XJAI herein or in any exhibit, certificate or memorandum furnished or to
be furnished by JCA or XJAI, or on its behalf, contains or will contain any
untrue statement of material fact or omit any material fact the omission of
which would be misleading.
2.16 Assets.JCA and XJAI have good and marketable title to all of its
property, free and clear of all liens, claims and encumbrances, except as
otherwise indicated in the financial statements.
2.17 Material Contracts. Neither JCA nor XJAI has any material
contracts other than distribution agreements, except as set forth on the
financial statements or schedules herein.
2.18 Indemnification of Officers and Directors.The parties acknowledge
and agree that prior to execution of this Agreement, each party had separately
adopted resolutions and bylaws affording indemnification, to the fullest extent
permitted by law, of all officers, directors, promoters, attorneys and other
responsible persons, past or present, which arises out of or pertains to any
non-intentional action or omission taken in good faith while serving in such
capacity on behalf of the Corporation. The parties hereby agree that each
shall, to the fullest extent permitted by law, retain and maintain such
indemnification provisions with respect to its officers and directors and that
each party shall hereafter continuously maintain the fullest indemnification of
officers and directors as permitted by law.
2.19 General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance and JCA and XJAI shall have
received copies of all documents, including records of corporate proceedings
and officers' certificates, which they may have reasonably requested in
connection therewith. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Parties on or prior to
the Closing shall have been performed or complied with and JCA and XJAI shall
not be in default in the performance of or compliance with any provisions of
this Agreement. JCA and XJAI shall have delivered to the other an Officer's
Certificate from the chief executive officer or chief financial officer or
acceptable agent thereof, dated the date of the Closing date, certifying to all
representations and warranties required by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NAGM
NAGM represents and warrants to JCA and Sellers that:
3.1 Organization.NAGM is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the states where its business requires qualification.
3.2 Capital. The capital stock of NAGM consists common voting stock,
preferred stock and options to purchase stock. There are no outstanding
subscriptions, options, rights, warrants, debentures, instruments, convertible
securities or other agreements, commitments or obligations of NAGM to issue or
to transfer from treasury any additional shares of its capital stock of any
class, except as set forth in Section 3.2. .
(a) Common Stock. The authorized capital stock of NAGM consists of
100,000,000 shares of common stock, $0.01 par value of which 24,216,058 shares
of common stock are currently issued and outstanding.
(b) Preferred Stock. The Company has also authorized 1,600,000 shares
of Class A Preferred Stock. The Class A Preferred Stock has a par value of
$3.00, bears a 10% annual cumulative dividend, payable monthly and is
convertible into common stock on a 6.4 to 1 basis. The Company has authorized
10,000,000 shares of preferred stock with attributes as determined by the Board
of Directors. No shares of Class A Preferred Stock are issued or outstanding.
The Board of Directors designated a series of preferred stock, Preferred Stock
Series "B". The maximum shares under the series is 8,000,000. The Preferred
Stock Series B has a par value of $.01, accrues no dividends and converts on a
1 to 1 basis into common stock. No shares of Preferred Stock Series "B" are
issued or outstanding.
(c) Stock Options. In January 2000, the Company granted two directors
stock options, whereby each may acquire 1,000,000 shares of common stock, at an
exercise price of $.03125 per share. The shares were fully vested as of the
date of grant and expire five years from the date of grant. In November of
2002, one director resigned as a director of NAGM upon which time his 1,000,000
option was cancelled. No options to purchase the Company's common stock were
issued or granted in 2004 or 2005, and all existing stock options (for
1,000,000 shares of common stock) expired in January 2005. In March 2006, the
board of directors of the Company extended the stock options for 1,000,000
shares of common stock noted in the previous paragraph, for a term of five
years (expiring in March 2011), at the exercise price of $.03125 per share. The
shares are fully vested as of the date of grant. The stock options for the
1,000,000 will be reversed in the reverse split such that the post split shares
will total 100,000.
3.3 Subsidiaries.NAGM does not have any subsidiaries or own any
interest in any other enterprise.
3.4 Directors and Officers.The names and titles of all directors and
officers of NAGM as of the date of this Agreement are:
NAME AGE POSITION SINCE
▇.▇. ▇▇▇▇▇, ▇▇ 67 Director (Chairman), 1998
President, Chief
Executive Officer and
Chief Financial Officer
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.66 Director and Secretary 1994
3.5 Financial Statements.JCA has been furnished with complete and
correct copies of the following financial statements of NAGM (the "NAGM
Financial Statements"): (a) the audited balance sheet of NAGM as of December
31, 2005 and the respective related consolidated statements of income, retained
earnings and cash flows for the twelve month period then ended, and (b) the
audited consolidated balance sheet of NAGM as of December 31, 2004 together
with the related consolidated statements of operations, retained earnings and
cash flows for the twelve month period then ended. The NAGM Financial
Statements have been prepared in accordance with GAAP consistently applied, and
fairly and accurately present the financial condition of NAGM at the date
thereof and the results of its operations for the period covered thereby. All
the books, records and accounts of NAGM are accurate and complete, are in
accordance with good business practice and all laws, regulations and rules
applicable to NAGM the conduct of its business and accurately present and
reflect all of the transactions described therein.
The parties acknowledge that an audit for the period ending December 31,
2005 were prepared by the Company's auditors ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Co., Tulsa,
Oklahoma. There have been no material disagreements with the auditors, all
auditing invoices have been paid in full and the Company will obtain consents
as necessary to change auditors if requested by the Company's newly elected
Board of Directors. The financial statements filed with Forms 10-KSB and 10-QSB
have been prepared in accordance with the rules and guidelines of the Public
Company Accounting Oversight Board ("PCAOB") and generally accepted accounting
principles and practices ("GAAP") consistently followed by NAGM throughout the
period indicated, and fairly present the financial position of NAGM as of the
date of the balance sheet included in the financial statements and the results
of operations for the period indicated.
3.6 Changes in Financial Condition.Since the Balance Sheet Date, there
have occurred no event or events that, individually or in the aggregate, have
caused or will cause a Material Adverse Effect. NAGM has not (a) declared any
dividend or other distribution on any shares of its capital stock, (b) made any
payment (other than compensation to its directors, officers and employees at
rates in effect prior to the Balance Sheet Date or for bonuses accrued in
accordance with normal practice prior to the Balance Sheet Date) to any of its
Affiliates, (c) increased the compensation, including bonuses, payable or to be
payable to any of its directors, officers, employees or Affiliates, or (d)
entered into any Contractual Obligation, or entered into or performed any other
transaction, not in the ordinary and usual course of business and consistent
with past practice, other than as specifically contemplated by this Agreement.
3.7 Absence of Undisclosed ▇▇▇▇▇▇▇▇▇▇▇.▇▇ of the closing date NAGM
does not have any liabilities or obligations, contingent or otherwise, which
are not reflected or provided for in the Distribution of Proceeds contained in
Article I. NAGM (i) does not have any outstanding indebtedness for borrowed
money or for any other purpose and (ii) except as reflected, is not a guarantor
or otherwise contingently liable on such indebtedness of any other Person. At
closing NAGM shall not have any material debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due.
3.8 Tax Returns. Within the times and in the manner prescribed by law
NAGM has filed all federal, state and local tax and information returns which
are required to be filed by it and such returns are true and correct. NAGM has
paid all taxes, interest and penalties, if any, reflected in such tax returns
or otherwise due and payable by it. NAGM has no knowledge of any material
additional assessments or any basis therefore. NAGM has withheld or collected
from each payment made to its employees the amount of all taxes required to be
withheld or collected therefrom and has paid over such amounts to the
appropriate taxing authorities. There are no present disputes as to taxes of
any nature payable to NAGM and the Company has no actual knowledge or notice of
any returns due or any unpaid tax, lien, claim of lien, penalty, interest,
assessment or charge by a taxing authority .Any deficiencies proposed as a
result of any governmental audits of such tax returns have been paid or settled
or are being contested in good faith, and there are no present disputes as to
taxes payable by NAGM.
3.9 Investigation of Financial Condition.Without in any manner
reducing or otherwise mitigating the representations contained herein, JCA and
its legal counsel and accountants shall have the opportunity to meet with
NAGM's legal counsel and accountants to discuss the financial condition of
NAGM. NAGM shall make available to JCA all books and records of NAGM.
3.10 Patents, Trade Names and Rights. To the best of its knowledge,
NAGM is not infringing upon or otherwise acting adversely to the right or
claimed right of any person with respect to any of the foregoing.
3.11 Compliance with Laws.NAGM has complied with, and is not in
violation of, applicable federal, state or local statutes, laws and regulations
(including, without limitation, any applicable building, zoning or other law,
ordinance or regulation) affecting its properties or the operation of its
business.
3.12 Litigation. NAGM is not now a named or threatened party to any
suit, action, arbitration or legal, administrative or other proceeding, or
governmental investigation which is pending or, to the best knowledge of NAGM
threatened against or affecting NAGM or its business, assets or financial
condition. NAGM is not in default with respect to any order, writ, injunction
or decree of any federal, state, local or foreign court, department, agency or
instrumentality applicable to it. NAGM is not engaged in any material lawsuits
to recover monies due it. no litigation or proceeding before, or investigation
by, any foreign, federal, state or municipal board or other governmental or
administrative agency or any arbitrator is pending or, to NAGM's knowledge,
threatened (nor to NAGM's knowledge, does any basis exist therefore) against
NAGM or, to NAGM's knowledge, any officer of NAGM, which individually or in the
aggregate could result in any material liability or which may otherwise result
in a Material Adverse Effect, or which seeks equitable relief, rescission of,
seeks to enjoin the consummation of, or which questions the validity of, this
Agreement or any other Related Agreement or any of the transactions
contemplated hereby or thereby.
3.13 Authority. The Board of Directors of NAGM has authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein, and NAGM has full power and authority to execute, deliver
and perform this Agreement, and this Agreement is a legal, valid and binding
obligation of NAGM and is enforceable in accordance with its terms and
conditions. As of the Closing, the Shareholders shall have approved this
Agreement and the transactions described herein as required by Delaware law.
All consents and approvals to the transactions contemplated by this Agreement
required to be obtained by any Seller from any third party shall have been
obtained by such Seller. All authorizations, approvals or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the NAGM Stock and the sale of JCA Stock
pursuant to this Agreement shall have been duly obtained and shall be in full
force and effect. No additional consent, approval, qualification, order or
authorization of, or filing with any governmental authority is required in
connection any NAGM Parties' execution or delivery of valid stock certificates
or other performance of the this Agreements or the offer, issue or sale of the
NAGM Stock by Shareholders or the consummation of any other transaction
pursuant to this Agreement on the part of any NAGM Party, except for filings
under applicable federal securities or blue sky laws.
3.14 Ability to Carry Out Obligations.The execution and delivery of
this Agreement by NAGM and the performance by NAGM of its obligations hereunder
in the time and manner contemplated will not cause, constitute or conflict with
or result in (a) any breach or violation of any of the provisions of or
constitute a default under any license, indenture, mortgage, instrument,
article of incorporation, bylaw, or other agreement or instrument to which NAGM
is a party, or by which it may be bound, nor will any consents or
authorizations of any party other than those hereto be required; (b) an event
that would permit any party to any agreement or instrument to terminate it or
to accelerate the maturity of any indebtedness or other obligation of NAGM; or
(c) an event that would result in the creation or imposition of any lien,
charge or encumbrance on any asset of NAGM.
3.15 Full Disclosure.None of the representations and warranties made by
NAGM herein or in any exhibit, certificate or memorandum furnished or to be
furnished by NAGM or on its behalf, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which
would be misleading. NAGM's Annual Report the year ended December 31, 2005 will
not contain any untrue statement of a material fact, nor omit to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. Neither
this Agreement, nor any agreement, certificate, statement or document furnished
in writing by or on behalf of NAGM to Sellers in connection herewith or
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
3.16 Assets.NAGM has good and marketable title to all of its property,
free and clear of all liens, claims and encumbrances.
3.17 Material Contracts. Except as set forth on Schedule 3.17, NAGM
has no material contracts with any other party and no other agreement shall be
breached by the entry of this Acquisition Agreement, including without
limitation:
(a) Collective bargaining agreements, employment, bonus or
consulting agreements, all pension, profit sharing, deferred
compensation, stock option, stock purchase, retirement, welfare or
incentive plans or agreements, and all plans, agreements or practices
that constitute "fringe benefits" to any of the employees of NAGM.
(b) Contractual Obligations under which NAGM is restricted from
carrying on any business, venture or other activities anywhere in the
world.
(c) Contractual Obligations to sell or lease (as lessor) any of
the properties or assets of NAGM, except in the ordinary course of
business, or to purchase or lease (as lessee) any real property.
(d) Contractual Obligations pursuant to which NAGM guarantees
any liability of any Person, or pursuant to which any Person guarantees
any liability of NAGM.
(e) Contractual Obligations pursuant to which NAGM provides
goods or services involving payments to NAGM of more than $1,000
annually, which Contractual Obligation is not terminable by NAGM without
penalty upon notice of thirty (30) days or less.
(f) Contractual Obligations with any Affiliate of NAGM.
Contractual Obligations providing for the disposition of the business,
assets or shares of NAGM or the merger or consolidation or sale or
purchase of all or substantially all of the assets or business of any
Person, and any letters of intent relating to the foregoing.
(g) Contractual Obligations of NAGM relating to the borrowing
of money or to the mortgaging or pledging of, or otherwise placing a
lien on, any asset of NAGM (including liens imposed by operation of law
in favor of landlords, suppliers, mechanics or others who provide
services to NAGM).
(h) All of the Contractual Obligations of NAGM that are
enforceable against NAGM and, to NAGM's knowledge, the other parties
thereto in accordance with their terms, except that enforceability may
be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws, from time to time in effect, which
affect enforcement of creditors' rights generally. NAGM is not in
default under nor, to NAGM's knowledge, are there any liabilities
arising from any breach or default by any Person prior to the date of
this Agreement of, any provision of any such Contractual Obligation.
3.18 Market for Company Stock. NAGM has been advised that at least
three (3) NASD members presently make markets in the Company's common stock as
of the date of closing pursuant to the Rules and regulations of the NASD. The
Company's stock has been given the symbol "NAGM" and is eligible for continued
trading on the NASD OTC bulletin board. While the Company has no arrangements
or understanding with any market maker to make or maintain any market, the
Company has no knowledge of any intention to terminate making markets in the
securities by any of its present market makers.
3.19 Minute Books. The minute books of NAGM shall be provided to
counsel for XJAI prior to the Closing and shall contain a complete record of
actions taken at all meetings of directors and Shareholders during the four
year period immediately preceding the date of this Agreement and reflect all
such actions accurately in all material respects.
3.20. Real Property Holding Corporation. NAGM is not a "United States
real property holding corporation" as defined in section 897(c)(2) of the Code
and Treasury Regulation section 1.897-2(b).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JCA SHAREHOLDERS
By execution hereof, the attorney in fact of the current JCA shareholders
represents, among other things, that:
4.1 Share Ownership.Each JCA shareholder holds the number of JCA
Shares set forth on Schedule 4.1 of record. The shares are not subject to any
lien, encumbrances or pledge. Each JCA shareholder has the authority to
exchange their shares pursuant to this Agreement.
4.2 Investment Intent. JCA and each JCA shareholder understands that
the NAGM Shares are being offered for exchange in reliance upon the exemption
provided in Section 4(2) of the Act for nonpublic offerings and that:
(a) The NAGM Shares are being acquired solely for the
account of each JCA shareholder, for investment purposes only, and not
with a view to, or for sale in connection with, any distribution
thereof and with no present intention of distributing or reselling any
part of the NAGM Shares;
(b) Each JCA shareholder will not dispose of the NAGM
Shares or any portion thereof unless and until counsel for NAGM shall
have determined that the intended disposition is permissible and does
not violate the Act or any applicable state securities laws, or the
rules and regulations thereunder;
(c) NAGM has made all documentation pertaining to all
aspects of this Agreement available to him and to his qualified
representatives, if any, and has offered such person or persons any
opportunity to discuss the Exchange Offer with the officers of NAGM;
(d) Each JCA shareholder has relied solely upon NAGM's
Prospectus dated October 26, 1993, the filings with the SEC subsequent
to that date and any independent investigations made by such
shareholder or his representatives;
(e) Each JCA shareholder is knowledgeable and experienced
in making and evaluating investments of this nature and desires to
accept the NAGM Shares on the terms and conditions set forth;
(f) Each JCA shareholder is able to bear the economic
risk of an investment in the NAGM Shares; and
(g) Each JCA shareholder understands that an investment
in the NAGM Shares is not liquid, and such shareholder has adequate
means of providing for current needs and personal contingencies and has
no need for liquidity in this investment.
4.3 Legend.JCA and each JCA shareholder acknowledges that the
certificates evidencing the NAGM Shares acquired pursuant to this Agreement
will have a legend placed thereon stating that the NAGM Shares have not been
registered under the Act or any state securities laws and setting forth or
referring to the restrictions on transferability and sale of the NAGM Shares.
4.4 ▇▇▇▇▇ Stocks.The NAGM Shares being exchanged are "▇▇▇▇▇ stocks"
within the definition of that term as contained in the Exchange Act, which are
generally equity securities with a price of less than $5.00. NAGM's shares will
then be subject to rules that impose sales practice and disclosure requirements
on certain broker-dealers who engage in certain transactions involving a ▇▇▇▇▇
stock. These will impose restrictions on the marketability of the common stock.
ARTICLE V
COVENANTS
5.1 Investigative Rights.From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsel, accountants, auditors and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request.
5.2 Conduct of Business.Prior to Closing, NAGM, JCA and XJAI shall
each conduct its business in the normal course and shall not sell, pledge or
assign any assets without the prior written approval of the other party, except
in the normal course of business. Neither party shall amend its Articles of
Incorporation or Bylaws (except as may be described in this Agreement), declare
dividends, redeem or sell stock or other securities, incur additional or newly-
funded liabilities, acquire or dispose of fixed assets, change employment
terms, enter into any material or long-term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for less than
its stated amount, pay more on any liability than its stated amount, or enter
into any other transaction other than in the normal course of business.
5.3 INDEMNIFICATION
(a) NAGM Claims. Sellers shall indemnify and hold
harmless NAGM, its successors and assigns, against, and in respect of any and
all damages, losses, liabilities, costs, and expenses incurred or suffered by
NAGM that result from, relate to, or arise out of (i) any failure by Sellers
to carry out any covenant or agreement contained in this Agreement; (ii) any
material misrepresentation or breach of warranty by Sellers contained in this
Agreement, or any certificate, furnished to NAGM by Sellers pursuant hereto;
(iii) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Sellers'
dealings, agreement, or arrangement with such Person; or (iv)any and all
actions, suits, claims, proceedings, investigations, demands, assessments,
audits, fines, judgments, costs, and other expenses (including, without
limitation, reasonable legal fees and expenses) incident to any of the
foregoing including all such expenses reasonably incurred in mitigating any
damages resulting to NAGM from any matter set forth in subsection (i) above.
(b) Sellers Claims . NAGM shall indemnify and hold
harmless Sellers against, and in respect of, any and all damages, claims,
losses, liabilities, and expenses, including without limitation, legal,
accounting and other expenses, which may arise out of: (a) any material breach
or violation by NAGM of any covenant set forth herein or any failure to fulfill
any obligation set forth herein, including, but not limited to, the obligation
to satisfy the Assumed Liabilities; (b) any material breach of any of the
representations or warranties made in this Agreement by NAGM; or (c) any claim
by any Person for any brokerage or finder's fee or commission in respect of the
transactions contemplated hereby as a result of NAGM's dealings, agreement, or
arrangement with such Person.
(c) Offset. The amount of any liability of under this
Section 5.3 shall be computed net of any tax benefit to the other party from
the matter giving rise to the claim for indemnification hereunder and net of
any insurance proceeds received with respect to the matter out of which such
liability arose.
(d) Survival. The representations and warranties of
Sellers contained in this Agreement, or any certificate delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect
for a period until the expiration of any applicable statutes of limitation
provided by law ("Survival Period"). Anything to the contrary notwithstanding,
the Survival period shall be extended automatically to include any time period
necessary to resolve a written claim for indemnification which was
made in reasonable detail before expiration of the Survival Period but not
resolved prior to its expiration, and any such extension shall apply only as
to the claims so asserted and not so resolved within the Survival Period.
Liability for any such item shall continue until such claim shall have been
finally settled, decided, or adjudicated.
(e) Claims Procedures. A claimant under this section
shall provide written notice to the other party of any claim for
indemnification under this Article as soon as practicable; provided, however,
that failure to provide such notice on a timely basis shall not bar a
claimant's ability to assert any such claim except to the extent that the other
party is actually prejudiced thereby, provided that such notice is received
during the applicable Survival Period. NAGM shall make commercially reasonable
efforts to mitigate any damages, expenses, etc. resulting from any matter
giving rise to liability under this Section.
(f) Defense of Third-Party Claims. With respect to any
claim under this Section, relating to a third party claim or demand, each
party shall provide the other with prompt written notice thereof, who may
defend, in good faith and at its expense, by legal counsel chosen by it and
reasonably acceptable to the claimant any such claim or demand, and all
parties at their expense, shall have the right to participate in the defense of
any such third party claim. So long as the party is defending in good faith
any such third party claim, claimant shall not settle or compromise such third
party claim. In any event all parties shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
ARTICLE VI
CONDITIONS PRECEDENT TO NAGM'S PERFORMANCE
6.1 Conditions. NAGM's obligations hereunder shall be subject to the
satisfaction at or before the Closing of all the conditions set forth in this
Article VI. NAGM may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by NAGM of any other condition of or any of NAGM's
other rights or remedies, at law or in equity, if JCA and XJAI as Seller shall
be in default of any of its representations, warranties or covenants under this
Agreement.
6.2 Accuracy of Representations.Except as otherwise permitted by this
Agreement, all representations and warranties by JCA and XJAI as Seller in this
Agreement or in any written statement that shall be delivered to NAGM by JCA
under this Agreement shall be true and accurate on and as of the Closing Date
as though made at that time.
6.3 Performance. JCA and XJAI as Seller shall have performed,
satisfied and complied with all covenants, agreements and conditions required
by this Agreement to be performed or complied with by it on or before the
Closing Date.
6.4 Absence of ▇▇▇▇▇▇▇▇▇▇.▇▇ action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against JCA and XJAI as Seller on or before the
Closing Date.
6.5 Officer's Certificate.JCA and XJAI shall have delivered to NAGM a
certificate dated the Closing Date and signed by the President of JCA and XJAI
certifying that each of the conditions specified in Sections 6.1 through 6.7
hereof have been fulfilled.
6.6 Legal Opinion.NAGM shall have received an opinion of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Attorney at Law, and from JCA and XJAI's Chinese counsel in form
acceptable to NAGM's counsel and dated as of the Closing Date.
6.7 Form 8-K. JCA shall provide a copy of the Form 8-K required to be
filed upon closing of the exchange.
6.8 General. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance and NAGM shall have received
copies of all documents, including records of corporate proceedings and
officers' certificates, which they may have reasonably requested in connection
therewith. All covenants, agreements and conditions contained in this Agreement
to be performed or complied with by the Parties on or prior to the Closing
shall have been performed or complied with and NAGM shall not be in default in
the performance of or compliance with any provisions of this Agreement. NAGM
shall have delivered to the other an Officer's Certificate from the chief
executive officer or chief financial officer or acceptable agent thereof, dated
the date of the Closing date, certifying to all representations and warranties
required by this Agreement.
6.9 Due Diligence. NAGM shall have completed its examination of the
properties and records of JCA and XJIA and shall be reasonably satisfied with
the results of its examination.
ARTICLE VII
CONDITIONS PRECEDENT TO JCA `S PERFORMANCE
7.1 Conditions. JCA and XJAI's obligations hereunder shall be subject
to the satisfaction at or before the Closing of all the conditions set forth in
this Article VII. JCA may waive any or all of these conditions in whole or in
part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by JCA of any other condition of or any of
JCA other rights or remedies, at law or in equity, if NAGM shall be in default
of any of its representations, warranties or covenants under this Agreement.
7.2 Accuracy of Representations.Except as otherwise permitted by this
Agreement, all representations and warranties by NAGM in this Agreement or in
any written statement that shall be delivered to JCA by NAGM under this
Agreement shall be true and accurate on and as of the Closing Date as though
made at that time.
7.3 Performance. NAGM shall have performed, satisfied and complied
with all covenants, agreements and conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
7.4 Absence of ▇▇▇▇▇▇▇▇▇▇.▇▇ action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against NAGM on or before the Closing Date. There have
been no regulatory actions, formal or informal, by the Securities & Exchange
Commission, the NASD, any state securities regulatory board, or other
regulatory body or agency.
7.5 Current Status.NAGM shall have prepared and filed with the
Commission all periodic reports required to be filed prior to the closing date
under the Exchange Act. The capitalization of NAGM shall not have changed since
the signing of this Agreement and there shall have been no new issuances of
securities of any type or kind. The financial condition of NAGM has not
materially changed.
7.6 Assets of NAGM. On the Closing Date, the assets of NAGM will
include at least $1,000.00 in cash; and no unpaid liabilities except in the
ordinary course of business.
7.7 Officer's Certificate.NAGM shall have delivered to JCA a
certificate dated the Closing Date and signed by the President of NAGM
certifying that each of the conditions specified in Sections 7.1 through 7.7
hereof have been fulfilled.
ARTICLE VIII
CLOSING
8.1 Closing.The closing this transaction shall be held at the offices
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ as
specified in Article I. At the closing:
(a) JCA shall deliver to NAGM stock certificates as indicated
in Article I executed by its agent, together with certificates and/or
stock powers representing all of the outstanding JCA Shares duly
endorsed to NAGM;
(b) NAGM shall deliver to JCA certificates and stock powers
representing 42,149,000 NAGM Shares for which the JCA Shares have been
exchanged, pursuant to the share computations set forth in Article I
hereto;
(c) NAGM shall deliver (i) an officer's certificate dated the
Closing Date, that all representations, warranties, covenants and
conditions set forth in this Agreement on behalf of NAGM are true and
correct as of, or have been fully performed and complied with by, the
Closing Date and (ii) the legal opinion of its counsel in form
acceptable to JCA.
(d) NAGM shall deliver a signed consent and/or Minutes of the
Meetings of the Board of Directors and Shareholders of NAGM approving
this Agreement and each matter to be approved by the directors of NAGM
under this Agreement;
(e) JCA shall deliver (i) an officer's certificate dated the
Closing Date, that all representations, warranties, covenants and
conditions set forth in this Agreement on behalf of JCA are true and
correct as of, or have been fully performed and complied with by, the
Closing Date and (ii) the legal opinion of its counsel; and
(f) JCA shall deliver a signed consent and/or minutes of the
directors of JCA approving this Agreement and each matter to be
approved by the directors of JCA under this Agreement.
8.2 Other Events Occurring at Closing. At Closing, the following shall
be accomplished:
(a) All of the officers and directors of NAGM shall resign and
the nominees identified by JCA shall have been appointed.
(b) Investment Letters in the form attached hereto as Exhibit
"A", shall have been duly authorized, executed and delivered by the
parties thereto and a copy of such executed agreements shall have been
delivered to both NAGM and JCA.
(c) This Agreement shall have been duly authorized, executed
and delivered by the parties hereto and a copy of such executed
agreement shall have been delivered to both NAGM and JCA.
(d) Such other instruments, documents and certificates, if any,
as are required to be delivered pursuant to the provisions of this
Agreement shall have been duly authorized, executed and delivered by the
parties thereto and a copy of such executed instruments, documents and
certificates shall have been delivered to both NAGM and JCA.
(e) All of the certificates representing the JCA Stock shall be
delivered to NAGM, duly and validly endorsed for transfer to NAGM.
(f) The NAGM Stock certificates representing the shares to be
issued and sold to the Shareholders as described herein shall be
delivered to a representative of JCA for delivery to Shareholders.
(g) NAGM shall deliver to JCA a certificate of good standing of
NAGM issued by the Secretary of State of Delaware and such certificate
dated no earlier than ten (10) business days prior to the Closing.
(h) JCA shall deliver to NAGM a certificate of good standing of
JCA issued by the Delaware Division of Corporations and such certificate
dated no earlier than ten (10) business days prior to the Closing.
ARTICLE IX
MISCELLANEOUS
9.1 Captions and Headings.The article and paragraph headings
throughout this Agreement are for convenience and reference only and shall not
define, limit or add to the meaning of any provision of this Agreement.
9.2 No Oral Change.This Agreement and any provision hereof may not be
waived, changed, modified or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver,
change, modification or discharge is sought.
9.3 Non-Waiver. The failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be
construed as a waiver or relinquishment for the future of any such provisions,
covenants or conditions. No waiver by any party of one breach by another party
shall be construed as a waiver with respect to any other subsequent breach.
9.4 Time of Essence.Time is of the essence of this Agreement and of
each and every provision.
9.5 Entire Agreement. This Agreement contains the entire Agreement
and understanding between the parties hereto and supersedes all prior
agreements and understandings.
9.6 Choice of Law.This Agreement and its application shall be governed
by the laws of the State of Delaware.
9.7 Counterparts.This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
9.8 Notices.All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
North American Gaming Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇
Copies to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Attorney
▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
JCA
▇▇. ▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇'▇▇ ▇▇▇▇, ▇.▇., ▇▇▇▇▇
Copies to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. Attorney
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
9.9 Binding Effect.This Agreement shall inure to and be binding upon
the heirs, executors, personal representatives, successors and assigns of each
of the parties to this Agreement.
9.10 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement and shall execute such other and
further documents and take such other and further actions as may be necessary
or convenient to effect the transaction described herein.
9.11 Announcements.The parties will consult and cooperate with each
other as to the timing and content of any public announcements regarding this
Agreement. NAGM must issue an appropriate press release on Dun & Bradstreet,
Business Wire, Vintage Filings, Disclosure, Inc. or similar service of the
content of this Agreement on 26th Sept. 2006 when this Agreement is signed by
each party. A copy of the press release shall be obtained from the issuing
agency and shall be furnished to PCA when issued. Preference will be given to
services that issue in the PRC as well as the United States.
9.12 Expenses. Each party will pay its own legal, accounting, escrow
and other out of pocket expenses incurred in connection with this Agreement,
whether or not this Agreement is consummated.
9.13 Survival of Representations and Warranties.The representations,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion or other writing providing for in
it, shall survive the Closing.
9.14 ▇▇▇▇▇▇▇▇.▇▇ of the execution hereof, the parties have provided
each other with the exhibits described herein. Any material changes to the
exhibits shall be immediately disclosed to the other party.
AGREED AND ACCEPTED as of the date first above written.
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION
By:/s/ ▇.▇. ▇▇▇▇▇, ▇▇,
--------------------------
▇.▇. ▇▇▇▇▇, ▇▇, CEO
XI'AN JIN CHI AN AUTOMOBILE DEVELOPMENT CO. LTD
By:/s/ Gao ▇▇▇ ▇▇▇▇
-------------------------------------
Gao ▇▇▇ ▇▇▇▇, Attorney in Fact