EXHIBIT 2.1
AGREEMENT
CONCERNING THE EXCHANGE OF COMMON STOCK
BETWEEN
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
AND
SHAANXI XXXXX XXXXX SI YOU XXXX XXXX XX XXXXX
GU FENG YOU XXXXX XXXX SI
TABLE OF CONTENTS
1.1 Plan of Exchange......................................................5
1.2 Xxxxxxx Money Deposit.................................................5
1.3 Cash Consideration and Escrow Requirements............................6
1.4 Distribution of Cash at Closing.......................................6
1.5 Distribution of Securities at Closing.................................6
1.6 Lockup-Leakout Agreement..............................................7
1.7 Exemption from Registration...........................................7
1.8 Change of Board Control...............................................8
1.9 Closing...............................................................8
1.10 Due Diligence.........................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF XXXX XXXXX.......................9
2.1 Organization..........................................................9
2.2 Capital...............................................................9
2.3 Subsidiaries.........................................................10
2.4 Authority............................................................10
2.5 Corporate Power......................................................10
2.6 Financial Statements.................................................10
2.7 Absence of Changes...................................................11
2.8 Absence of Undisclosed Liabilities...................................11
2.9 Tax Returns..........................................................11
2.10 Investigation of Financial Condition.................................11
2.11 Patents, Trade Names and Rights......................................11
2.12 Compliance with Laws.................................................11
2.13 Litigation...........................................................12
2.14 Full Disclosure......................................................12
2.15 Assets...............................................................12
2.16 Material Contracts...................................................12
2.17 Indemnification of Officers and Directors............................12
2.18 General..............................................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NAGM...........................13
3.1 Organization.........................................................13
3.2 Capital..............................................................13
3.3 Subsidiaries.........................................................13
3.4 Directors and Officers...............................................13
3.5 Financial Statements.................................................14
3.6 Changes in Financial Condition.......................................14
3.7 Absence of Undisclosed Liabilities...................................14
3.8 Tax Returns..........................................................15
3.9 Investigation of Financial Condition.................................15
3.10 Patents, Trade Names and Rights......................................15
3.11 Compliance with Laws.................................................15
3.12 Litigation...........................................................15
3.13 Authority............................................................16
3.14 Ability to Carry Out Obligations.....................................16
3.15 Full Disclosure......................................................16
3.16 Assets...............................................................16
3.17 Material Contracts...................................................17
3.18 Market for Company Stock.............................................17
3.19 Minute Books.........................................................18
3.20 Real Property Holding Corporation....................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF XXXX XXXXX SHAREHOLDERS
4.1 Share Ownership......................................................18
4.2 Investment Intent....................................................18
4.3 Legend...............................................................18
4.4 Xxxxx Stocks.........................................................19
ARTICLE V COVENANTS..........................................................19
5.1 Investigative Rights.................................................19
5.2 Conduct of Business..................................................19
5.3 Indemnification......................................................19
ARTICLE VI CONDITIONS PRECEDENT TO NAGM'S PERFORMANCE........................20
6.1 Conditions...........................................................21
6.2 Accuracy of Representations..........................................21
6.3 Performance..........................................................21
6.4 Absence of Litigation................................................21
6.5 Officer's Certificate................................................21
6.6 Legal Opinion........................................................22
6.7 Form 8-K.............................................................22
6.8 General..............................................................22
6.9 Due Diligence........................................................22
ARTICLE VII CONDITIONS PRECEDENT TO XXXX XXXXX `S PERFORMANCE................22
7.1 Conditions...........................................................22
7.2 Accuracy of Representations..........................................22
7.3 Performance..........................................................22
7.4 Absence of Litigation................................................22
7.5 Current Status.......................................................23
7.6 Assets of NAGM.......................................................23
7.7 Officer's Certificate................................................23
ARTICLE VIII CLOSING.........................................................23
8.1 Closing..............................................................23
8.2 Other Events Occurring at Closing....................................24
ARTICLE IX TERMINATION.......................................................24
9.1 Termination..........................................................24
9.2 Effect of Termination................................................25
9.3 Waiver...............................................................25
ARTICLE X MISCELLANEOUS......................................................26
10.1 Captions and Headings................................................26
10.2 No Oral Change.......................................................26
10.3 Non-Waiver...........................................................26
10.4 Time of Essence......................................................26
10.5 Entire Agreement.....................................................26
10.6 Choice of Law........................................................26
10.7 Counterparts.........................................................26
10.8 Notices..............................................................26
10.9 Binding Effect.......................................................27
10.10 Mutual Cooperation.................................................27
10.11 Announcements......................................................27
10.12 Expenses...........................................................27
10.13 Survival of Representations and Warranties.........................28
10.14 Exhibits...........................................................28
EXHIBIT A
EXHIBIT B
AGREEMENT
THIS AGREEMENT made this 30th day of May, 2007, by and among NORTH
AMERICAN GAMING AND ENTERTAINMENT CORPORATION, a Delaware corporation ("NAGM"),
and SHAANXI XXXX XXXXX SI YOU XXXX XXXX XX XXXXX GUFENG YOU XXXX XXXX SI
("XXXX XXXXX"), a P.R.China corporation, and the ultimate shareholders of XXXX
XXXXX ("Seller").
BACKGROUND
SHAANXI XXXX XXXXX SI YOU XXXX XXXX XX XXXXX GUFENG YOU XXXX XXXX
SI. is an energy research and development company in Shaanxi Province.
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, NAGM
sold its remaining operations and devoted its activities to the location and
acquisition of a private entity or other suitable assets. Since 2001, NAGM 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.
NAGM intends to enter a transaction regarding the acquisition of
XXXX XXXXX by NAGM through a share exchange transaction. Under the terms of
this Agreement, XXXX XXXXX will become indirectly a subsidiary of NAGM by the
WOFE method set forth in Definition and Section 1.1(b) hereunder and will
continue its existing business 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:
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with XXXX XXXXX (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 XXXX XXXXX (or other specified Person), (b) any Person of which XXXX XXXXX
(or other specified Person) or any officer or director of XXXX XXXXX (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 Agreement.
"BALANCE SHEET DATE" is December 31, 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 as Exhibit A.
"XXXX XXXXX" is defined in the Preamble.
"XXXX XXXXX Financial Statements" means the Financial Statements of
S SHAANXI XXXX XXXXX SI YOU XXXX XXXX XX XXXXX GUFENG YOU XXXX XXXX SI..
"XXXX XXXXX Intellectual Property" is defined in Section 4.18(b).
"XXXX XXXXX Shareholders" means the beneficial owners of the shares
represented by the certificates of SHAANXI XXXX XXXXX SI YOU XXXX XXXX XX XXXXX
GUFENG YOU XXXX XXXX SI. or its ultimate parent corporation
"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 Xxxxxxx Xxxxxxx, Attorney.
"CLOSING DATE" shall be as soon as all approvals have been obtained
from government and regulatory authorities and the Board of Directors of NAGM,
and all other conditions set forth herein have been satisfied, unless extended
by the parties.
"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 XXXX XXXXX, any of their Affiliates or any of their respective
predecessors, or in which either NAGM or XXXX XXXXX, any of their Affiliates or
any of their respective predecessors participates or participated and which
provides benefits to employees of either NAGM or XXXX XXXXX or their spouses or
covered dependents or with respect to which either NAGM or XXXX XXXXX 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.
"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" is defined in the Preamble.
"NAGM Financial Statements" means the audited and unaudited
statements filed by NAGM with the Securities and Exchange Commission
"NAGM Stock" is defined in Section 1.1.
"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 XXXX XXXXX 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.
"SERIES C PREFERRED STOCK" shall mean the preferred shares of NAGM
having the rights and preferences set forth on Exhibit A.
"SUBSIDIARY" means any Person of which either NAGM or XXXX XXXXX
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
"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 XXXX XXXXX or any of its Subsidiaries or any Person which is a member
of the same ERISA Group with any of the foregoing.
"WOFE 1 Financial Statements" means the Financial Statements of a Chinese
company to be set up by trustees of all XXXX XXXXX'x shareholders for purpose
of governmental approval of this acquisition hereof which shall hold majority
shares of CHNA JIANG afterwards.
"WOFE2" means A Hong Kong company to be set up by trustees of all
XXXX XXXXX'x shareholders for purpose of governmental approval of this
acquisition hereof which shall hold 100% shares of WOFE 1 afterwards,
thereforce, WOFE 2 has 100% shares of XXXX0, XXXX0 has at least 80% or above
shares of XXXX XXXXX. The shareholders becomes final trustees of all XXXX XXXXX
shareholders or their beneficiaries. At the Closing the exchange shall take
place between the all shareholders of WOFE2 and NAGM.
ARTICLE I
PLAN OF EXCHANGE OF SECURITIES
1.1 Plan of Exchange
(a) Current Capitalization. NAGM presently has approximately
23,216,058 shares of common stock outstanding, options for an additional
1,000,000 shares, and no shares of preferred stock or other securities
outstanding. Of the outstanding shares, the breakdown is as follows:
13,124, 954 shares belonging to XX Xxxxx Trust, 535,556 shares belonging
to Xxxxxxx X Xxxxx, 2,535,673 shares belonging to Xxxxxx, 1,750,000
shares belonging to Xxxxx Case, 2,058,644 shares belonging to Xxxxxx, and
a public float of 3,211,231 shares. In addition, Crane owns options to
acquire up to 1,000,000 additional shares of common stock.
(b) Exchange. At the Closing, the XXXX XXXXX Shareholders (by
WOFE2's shareholders ), shall transfer to NAGM at least 80% or above the
outstanding shares of XXXX XXXXX (by WOFE1 and WOFE2 ), duly endorsed and
in good form for transfer. Also at Closing, NAGM shall issue to the
transferors 500,000 shares of Series C Convertible Preferred Stock (the
"Exchange"). Said shares of Series C Preferred Stock will carry the
right to 1,218 votes per share and will be convertible with common stock
at a rate sufficient to yield an aggregate of 609 Million pre-split
common shares upon conversion, as set forth in the Certificate of
Designations. It is the intent of this exchange that XXXX XXXXX will have
the ability to convert its preferred holdings to at least 96% of the
total issued and outstanding common stock, on a fully diluted basis.
(c) Compliance with Chinese "WOFE" Regulations. The parties
acknowledge that approval from Shaanxi provincial governments in the PRC
may be required for transfer by XXXX XXXXX 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 at least 80% shares of XXXX XXXXX to WOFE1 , then 100% shares of WOFE1
to WOFE2, then 100% shares of WOFE2 to NAGM, and finally XXXX XXXXX will
be indirectly a foreign entity (WOFE). Provided, however, that the
nominal transfer shall not alter the valuation or operations of XXXX
XXXXX. In that event, all of XXXX XXXXX'x rights, responsibilities and
benefits under this Agreement shall be assigned to and assumed by WOFE2.
All PRC approvals shall be obtained within 115 days of the execution of
this Agreement.
(d) Reverse Stock Split. After the closing of this transaction
(and upon obtaining regulatory approval and approval of the NAGM
shareholders), NAGM will effect a 10 for 1 reverse stock split or such
other reverse stock split so as to effectively lower NAGM's current
number of issued and outstanding shares to no more than 2,421,605.8
shares of common stock issued and outstanding at closing. The rights and
privileges associated with any outstanding options, warrants or other
securities shall be reversed correspondingly such that the total
capitalization of NAGM after the time of closing of this agreement shall
be equal to or less than 2,421,605.8 issuable shares of common stock on a
fully diluted basis, prior to the conversion of the Series "C"
Convertible Preferred Shares.
(e) Authorization of Additional Authorized Xxxxxxx.Xx is the
intent of this Agreement that XXXXX XXXXX will not convert its Series C
Preferred Stock until after the completion of the 10 for 1 reverse stock
split. In this case, no additional authorized common shares will be
required. If the reverse stock split does not occur for any reason, the
authorized capital of NAGM will be increased to a number of shares
sufficient to permit conversion of the Series C Preferred Stock into
common shares.
1.2 Xxxxxxx Money Deposit
XXXX XXXXX shall deposit $50,000 US Dollars in escrow with its
counsel's trust account upon of the execution of this Agreement. If the
transaction fails to close for any reason other than fault of NAGM (this fault
includes but is not limited to a determination by NAGM that it is not satisfied
with its evaluation of the audited report on the XXXX XXXXX Financial
Statements) by NAGM by 28 August, 2007, then this xxxxxxx money deposit shall
be due and payable to NAGM, without recourse or setoff by XXXX XXXXX.
Otherwise, the closing shall occur and the xxxxxxx money shall be credited to
the total cash consideration to be paid by XXXX XXXXX.
1.3 Cash Consideration and Escrow Requirements
XXXX XXXXX as further consideration shall pay Three Hundred Twenty
Thousand U. S. Dollars ($320,000.00) cash to NAGM at closing. These funds
shall be used by NAGM to assign from the existing creditors to designees by
XXXX XXXXX as per Clause 1.4 (a) or liquidate and remove all debts or
liabilities of NAGM incurred prior to closing, including payments to its
attorneys and consultants, as provided in Section 1.4 hereof. XXXX XXXXX shall
have delivered to its escrow agent, Xxxxxxx X. Xxxxxxx, sufficiently prior to
Closing, cleared funds in U.S. Dollars sufficient to permit wire transfer on
the date of Closing.
1.4 Distribution of Cash at Closing
At Closing, Xxxxxxx X. Xxxxxxx as escrow agent shall be authorized to
deliver proceeds totaling Three Hundred Seventy Thousand U.S. Dollars
($370,000.00) cash at closing as follows:
(a) Cash. At least One Hundred Fifty Thousand Dollars
($150,000.00) to be used for the assignment from the current or existing
creditors to the designees by XXXX XXXXX or 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 Xxxxxxx X. Xxxxxxx, 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. It is understood that all these debts or
liabilities shall be assigned to the individual persons designated by
XXXX XXXXX, These new creditors shall have option to waive these debts
against NAGM.
(b) Consulting Fees. From the cash consideration, the sum of
$200,000 or other sum to be agreed between Capital Advisory Services,
Inc. and NAGM shall be paid hereunder by XXXX XXXXX to Capital Advisory
Services, Inc. at Closing in satisfaction of obligations of NAGM for
legal and consulting fees incurred prior to closing.
(c) Balance. The balance of funds, if any, shall be delivered to
the accounts of NAGM and distributed in accordance with the instructions
of the Board of NAGM as constituted immediately prior to closing.
1.5 Distribution of Securities at Closing
At Closing, NAGM shall cause securities to be distributed as follows:
(a) Distribution of Securities. NAGM shall cause 4,500,000
shares of newly issued common voting shares( pre-split ) to be issued to
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 XXXX XXXXX by an
appropriate number of 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.
(b) Shareholder Share Xxxxxxxx.Xx closing, 3,800,000 shares (pre-
split), which have been held longer that 2 years by non affiliates of
NAGM shall be transferred to XXXX XXXXX 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 (pre-split) common voting shares at closing to Xxxxxxx Xxxx, a
citizen and resident of Dallas, Texas in exchange for 2,090,000
shares(pre-split), 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 Xxxxx Xxxxxx, a citizen and
resident of Los Angeles, California in exchange for 1,710,000 shares
(pre-split), which have been held by Xx. Xxxxxx for more than 2 years.
NAGM makes no representation whether the shares so transferred will be
either free-trading shares or restricted shares capable of sale under SEC
Rule 144.
1.6 Lockup-Leakout Agreement
The current officers, directors and affiliates of NAGM shall execute
at closing lockup-leakout agreements ("lockup") in a form suitable to counsel
for XXXX XXXXX. 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 the end date of Closing
Date.
Specifically, NAGM shareholders, E X. Xxxxx Trust and any
shareholder entities controlled by him, Xxxxxxx X. Xxxxx and Xxxxx Case 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 the end day of closing until the expiration of 180 days
following the Closing Date;
(b) 5,000,000 pre-reverse split shares collectively shall be
released and permitted for resale after the expiration of 180 days
following the end day of closing until the expiration of 270 days
following the Closing Date;
(c) 5,000,000 pre-reverse split shares collectively shall be
released and permitted for resale after the expiration of 271 days
following the end day of closing until the expiration of 360 days
following the Closing Date.
(d) On the one year anniversary date of the Closing Date, the
lockup shall expire and all remaining shares shall be eligible for the
removal of the restrictive legend and resale in accordance with law.
1.7 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. It is understood these exemptions were
available because the issuances were made to a de minimus number of
sophisticated persons, in transactions not involving a private offering.
1.8 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 and upon filing of an Information Statement in compliance with
Rule 14f of the Securities Exchange Act. Such information statement must be
filed with the SEC and cleared for mailing to the NAGM Stockholders at least 10
days prior to Closing.
Effective on the Closing Date, the new NAGM Board shall elect new
officers of NAGM of its choosing and existing NAGM officers shall resign.
1.9 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, XXXX XXXXX 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 filing with the SEC and mailing to NAGM Stockholders of a Schedule
14F-1 Information Statement at least ten days prior to any change in majority
of the Board of Directors of NAGM.
In addition to other customary Closing requirements and items
provided for herein, NAGM shall have delivered to XXXX XXXXX 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 XXXX
XXXXX, 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.
In addition to other customary Closing requirements and items
provided for herein, XXXX XXXXX 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 XXXX XXXXX to be in compliance with the applicable laws and
regulations pertinent to XXXX XXXXX under the laws of the PRC and that the
transactions hereby have been authorized and approved by the governing bodies
of XXXX XXXXX and all governmental and regulatory authority.
1.10 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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XXXX XXXXX
Sellers and XXXX XXXXX hereby represent and warrant to NAGM that:
2.1 Organization
XXXX XXXXX is a corporation duly organized in 2004 and 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.
2.2 Capital
(a) The authorized capital stock of XXXX XXXXX consists solely of
RMB406,000,000, of which 406,000,000 shares are issued and outstanding.
All of the issued and outstanding shares of XXXX XXXXX 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 XXXX
XXXXX to issue or to transfer from treasury any additional shares of its
capital stock of any class. 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 XXXX XXXXX is 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, XXXX XXXXX shall be a at least 80% owned subsidiary of
WOFE1, and WOFE1 shall be 100% owned subsidiary of WOFE2. Neither XXXX XXXXX
nor WOFE 1 and WOFE2 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.
2.4 Authority
The Board of Directors and shareholders of XXXX XXXXX has authorized
the execution of this Agreement and the consummation of the transactions
contemplated herein, and XXXX XXXXX has have full power and authority to
execute, deliver and perform this Agreement, and this Agreement is a legal,
valid and binding obligation of XXXX XXXXX and is enforceable in accordance
with its terms and conditions. All shareholder approval and corporate action on
the part of XXXX XXXXX 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, XXXX XXXXX,
enforceable in accordance with their terms. The execution, delivery and
performance by Sellers of this Agreement and the sale of XXXX XXXXX 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 or XXXX XXXXX is subject, or any Charter or Bylaws of XXXX
XXXXX, or any Contractual Obligation to which any Seller or XXXX XXXXX is a
party or by which XXXX XXXXX is bound.
2.5 Corporate Power
Sellers have all necessary power and authority to enter into and
perform this Agreement and to sell the XXXX XXXXX shares hereunder. XXXX XXXXX
has 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 and XXXX XXXXX have taken all action necessary to authorize
this Agreement and the sale of the XXXX XXXXX shares to be sold hereunder. The
execution and delivery of this Agreement by XXXX XXXXX and the performance by
XXXX XXXXX 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 XXXX XXXXX 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 XXXX XXXXX ; or (c) an event that would
result in the creation or imposition of any lien, charge or encumbrance on any
asset of XXXX XXXXX .
2.6 Financial Statements
Schedule 2.6 hereto consists of the consolidated unaudited financial
statements of XXXX XXXXX for the years ended December 31, 2006 and 2005. The
financial statements have been prepared in accordance with generally accepted
accounting principles and practices in the United States, 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. Audited financial statements
for such years and for any required interim period shall be delivered as a
condition to Closing.
2.7 Absence of Changes
Since the date of XXXX XXXXX'x most recent financial statements
included in Schedule 2.6, there has not been any undisclosed changes in the
financial condition or operations of XXXX XXXXX, except for changes in the
ordinary course of business, which changes have not in the aggregate been
materially adverse.
2.8 Absence of Undisclosed Liabilities
As of the date of XXXX XXXXX'x most recent balance sheet, XXXX XXXXX
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.
2.9 Tax Returns
Within the times and in the manner prescribed by law, XXXX XXXXX has
filed all central and provincial 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
Schedule 2.6 are adequate for the periods indicated. There are no present
disputes as to taxes of any nature payable by XXXX XXXXX .
2.10 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 XXXX XXXXX'x legal counsel and
accountants to discuss the financial condition of XXXX XXXXX. XXXX XXXXX
shall make available to NAGM all books and records of XXXX XXXXX.
2.11 Patents, Trade Names and Rights
To the best of its knowledge, XXXX XXXXX 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.
2.12 Compliance with Laws
XXXX XXXXX has complied with, and is not in violation of, applicable
central or local statutes, laws and regulations (including, without
limitation, and to the knowledge of the officers of XXXX XXXXX, any applicable
building, zoning or other law, ordinance or regulation) affecting its
properties or the operation of its business. At Closing XXXX XXXXX will provide
an opinion from its counsel in the PRC to the effect that this Agreement and
the transactions hereby are in full compliance with Chinese law and that Seller
has obtained all regulatory approvals.
2.13 Litigation
XXXX XXXXX is not 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 XXXX XXXXX , threatened against or
affecting XXXX XXXXX or its business, assets or financial condition XXXX XXXXX
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. XXXX XXXXX is engaged in any material lawsuits to recover
monies due it.
2.14 Full Disclosure
None of the representations and warranties made by XXXX XXXXX herein
or in any exhibit, certificate or memorandum furnished or to be furnished by
XXXX XXXXX, 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.
2.15 Assets
XXXX XXXXX has 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.
2.16 Material Contracts
XXXX XXXXX has no material contracts other than distribution
agreements, except as set forth on the financial statements or schedules
herein.
2.17 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.
2.18 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 XXXX XXXXX 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 XXXX XXXXX shall not be in default in the
performance of or compliance with any provisions of this Agreement. XXXX XXXXX
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 XXXX XXXXX 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 of 100,000,000 shares of authorized
common stock, of which 23,216,058 shares are issued and outstanding, and
10,000,000 shares of Preferred Stock, of which two series have been previously
designated; (i) 1,000,000 shares of Series A Preferred Stock, of which no
shares are issued, and (ii) 8,000,000 shares of Series B Preferred Stock, of
which no shares are issued. The outstanding shares of Common Stock are owned
13,124,954 by the X.X. Xxxxx Trust; 535,556 shares by Xxxxxxx X. Xxxxx;
2,535,673 shares by Xxxxx Xxxxxx; 1,750,000 shares by Xxxx X. Case; 2,058,644
shares owned by Xxxxx Xxxxxx, and a public float of 3,211,231 shares owned by
approximately 3,072 shareholders of record and an undetermined number of
beneficial holders. In addition, Crane owns option to acquire up to 1,000,000
shares of common stock. Except as stated 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.
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
--------------------- --- --------------------------------- -----
X.X. Xxxxx, XX 66 Director (Chairman), President, 1998
Chief Executive Officer and Chief
Financial Officer
Xxxxxxx X. Xxxxx, XX 66 Director and Secretary 1994
3.5 Financial Statements
XXXX XXXXX 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, 2006 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, 2005 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, 2006 and 2007 were prepared by the Company's auditors Xxxxxxx
Xxxxxxxxx & 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 Liabilities
As 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, XXXX XXXXX 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 XXXX XXXXX 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 XXXX XXXXX 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, 2006 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 XXXX XXXXX
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 XXXX XXXXX SHAREHOLDERS
By execution hereof, the attorney in fact of the current XXXX XXXXX
shareholders represents, among other things, that:
4.1 Share Ownership
Each XXXX XXXXX shareholder holds the number of XXXX XXXXX Shares set
forth on Schedule 4.1 of record. The shares are not subject to any lien,
encumbrances or pledge. Each XXXX XXXXX shareholder has the authority to
exchange their shares pursuant to this Agreement. Each XXXX XXXXX Shareholder
has named and nominated XXXXX XXX DONG as his or its attorney-in-fact to
execute and deliver this Agreement. Such appointment shall remain in effect
through the Closing Date.
4.2 Investment Intent
XXXX XXXXX and each XXXX XXXXX 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 XXXX XXXXX 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 XXXX XXXXX 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 XXXX XXXXX 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;
(e) Each XXXX XXXXX shareholder is able to bear the economic risk
of an investment in the NAGM Shares; and
(f) Each XXXX XXXXX 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.
(g) Each XXXX XXXXX Shareholder further represents and warrants
to the Subscription Representations contained in Exhibit B attached
hereto.
4.3 Legend
XXXX XXXXX and each XXXX XXXXX 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 Xxxxx Stocks
The NAGM Shares being exchanged are "xxxxx 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 xxxxx
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 and XXXX XXXXX 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 bef re 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 XXXX XXXXX 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 XXXX XXXXX as Seller in this Agreement or in any written
statement that shall be delivered to NAGM by XXXX XXXXX under this Agreement
shall be true and accurate on and as of the Closing Date as though made at that
time.
6.3 Performance
XXXX XXXXX 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 Litigation
No 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 XXXX
XXXXX as Seller on or before the Closing Date.
6.5 Officer's Certificate
. XXXX XXXXX shall have delivered to NAGM a certificate dated the
Closing Date and signed by the President of XXXX XXXXX 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 Xxxxxxx Xxxxxxx, Attorney at
Law, and from XXXX XXXXX'x Chinese counsel in form acceptable to NAGM's
counsel and dated as of the Closing Date.
6.7 Form 8-K
XXXX XXXXX shall provide a copy of the Form 8-K required to be filed
upon Closing.
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 XXXX XXXXX and shall be reasonably satisfied with the results of its
examination.
ARTICLE VII
CONDITIONS PRECEDENT TO XXXX XXXXX `S PERFORMANCE
7.1 Conditions
XXXX XXXXX'x obligations hereunder shall be subject to the
satisfaction at or before the Closing of all the conditions set forth in this
Article VII. XXXX XXXXX 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 XXXX XXXXX of any other condition of or
any of XXXX XXXXX 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 XXXX XXXXX 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 Litigation
No 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 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 or as provided in Section 1.3.
7.7 Officer's Certificate
NAGM shall have delivered to XXXX XXXXX 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 of this transaction shall be held at the offices of
Xxxxxxx X. Xxxxxxx, 0000 Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000 as
specified in Article I. At the closing:
(a) XXXX XXXXX shall deliver to NAGM WOFE2's stock certificates
as indicated in Article I executed by its agent, together with
certificates and/or stock powers representing all of the outstanding
WOFE2 Shares duly endorsed to NAGM;
(b) NAGM shall deliver to XXXX XXXXX certificates representing
500,000 shares of Series C Preferred Stock and 3,800,000 (pre-split )
shares of Common Stock for which the WOFE2 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 XXXX XXXXX, and (iii) assignment letter signed by all current and
existing creditors to the endorsee or designees by XXXX XXXXX in
corresponding to the amount of $150,000 as in Clause 1.4 (a) hereof, and
(iv) NAGM's company kits and seal or chops and records of minutes of
meeting of boards;
(d) NAGM shall deliver a signed consent and/or Minutes of the
Meetings of the Board of Directors of NAGM approving this Agreement and
each matter to be approved by the directors of NAGM under this Agreement;
(e) XXXX XXXXX 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 XXXX XXXXX 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) XXXX XXXXX shall deliver a signed consent and/or minutes of
the directors of XXXX XXXXX approving this Agreement and each matter to
be approved by the directors of XXXX XXXXX 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 XXXX XXXXX shall have been appointed.
(b) 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 XXXX XXXXX.
(c) 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 XXXX XXXXX.
(d) All of the certificates representing the WOFE2 Stock shall be
delivered to NAGM, duly and validly endorsed for transfer to NAGM.
(e) 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 XXXX XXXXX for delivery to Shareholders.
(f) NAGM shall deliver to XXXX XXXXX 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.
(g) XXXX XXXXX shall deliver to NAGM a certificate of good
standing of XXXX XXXXX issued by the Delaware Division of Corporations
and such certificate dated no earlier than ten (10) business days prior
to the Closing.
ARTICLE IX
TERMINATION
9.1 Termination
This Agreement may be terminated at any time prior to the Closing
Date:
(a) by mutual written consent of NAGM and XXXX XXXXX;
(b) by either NAGM and XXXX XXXXX if the other party shall have
failed to comply in any material respect with any of its covenants or
agreements contained in this Agreement required to be complied with prior
to the date of such termination, which failure to comply has not been
cured within thirty business days following receipt by such other party
of written notice from the nonbreaching party of such failure to comply;
(c) by either NAGM and XXXX XXXXX if there has been (i) a breach
by the other party (in the case of XXXX XXXXX, including any breach by
Seller) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or
warranty not true and correct in all material respects or (ii) a breach
by the other party (in the case of XXXX XXXXX, including any breach by
Seller) of any representation or warranty, in each case which breach has
not been cured within thirty business days following receipt by the
breaching party from the nonbreaching party of written notice of the
breach;
(d) by NAGM and XXXX XXXXX if the transactions contemplated by
this Agreement have not been effected on or prior to the close of
business on the date that is 180 days after the date of this Agreement;
provided, however, that the right to terminate this Agreement pursuant to
this Section 9.1(d) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the sale of the Assets to have
occurred on or prior to the aforesaid date;
(e) by NAGM and XXXX XXXXX if any court or other Governmental
Body having jurisdiction over a party hereto shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Exchange and
such order, decree, ruling or other action shall have become final and
nonappealable;
The right of any party hereto to terminate this Agreement pursuant
to this Section 9.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
Person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
9.2 Effect of Termination
In the event of termination of this Agreement by either NAGM and XXXX
XXXXX , as provided in Section 9.1, this Agreement shall forthwith become void,
and there shall be no liability hereunder on the part of Seller, NAGM and XXXX
XXXXX or their respective officers or directors; provided, however, that
nothing contained in this Section 9.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
9.3 Waiver
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein
which may legally be waived. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE X
MISCELLANEOUS
10.1 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.
10.2 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.
10.3 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.
10.4 Time of Essence
Time is of the essence of this Agreement and of each and every
provision.
10.5 Entire Agreement
This Agreement contains the entire Agreement and understanding between
the parties hereto and supersedes all prior agreements and understandings.
10.6 Choice of Law
This Agreement and its application shall be governed by the laws of
the State of Delaware.
10.7 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.
10.8 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 & Entertainment Corporation
00000 Xxxx Xxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: X. X. Xxxxx, XX
Copies to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
XXXX XXXXX
Xi'an City, P.R., China
Copies to:
Xxxxxxx X. Xxxxxxx, Attorney
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
10.9 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. All document signed by fax or email shall have the
same effect as original one .
10.10 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.
10.11 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 the date when this Agreement is signed by each party and receipt
of the xxxxxxx by the escrow agent Xxxxxxx Xxxxxxx (the later date will prevail
if the times are not consistent). 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.
10.12 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.
10.13 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.
10.14 Exhibits
As 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.
***Signatures Follow***
AGREED AND ACCEPTED as of the date first above written.
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION
By: /s/ X. X. Xxxxx, XX
-------------------
X. X. Xxxxx, XX, CEO
SHAANXI XXXX XXXXX SI YOU XXXX XXXX GU FENG
YOU XXXXX XXXX SI.
By: /s/ Xxxx Xxx Dong
-----------------
Xxxx Xxx Dong, President
SHAREHOLDERS OF XXXX XXXXX
[signatures illegible]
[LIST]
By: [signature illegible]
Name:
Attorney-in-Fact for Shareholders
of XXXX XXXXX
EXHIBIT A
SERIES C PREFERRED STOCK
CERTIFICATE OF SECRETARY OF
NORTH AMERICAN GAMING & ENTERTAINMENT CORPORATION
________, 2007
The undersigned Secretary of North American Gaming & Entertainment
Corporation hereby certifies that the following is a copy of a resolution duly
adopted by the Board of Directors at a meeting on _________, 2007, and that
such resolution is in full force and effect.
RESOLVED, that pursuant to the authority vested in the
Board of Directors of the Corporation in accordance with
the provisions of its Certificate of Incorporation,
effective as of ________, 2007 a series of Preferred Stock
of the Corporation be, and it hereby is, created, such
series of Preferred Stock to be designated Series C
Convertible Preferred Stock, to consist of 500,000 shares
with a par value of $_____ per share and to have the
dividend rate, rights of redemption and prices at which
shares of such series may be redeemed as set forth in
Exhibit A attached hereto.
RESOLVED FURTHER, that the officers shall file Exhibit A
with the Delaware Secretary of State.
EXECUTED the date first above written.
----------------------------------
Secretary
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
NORTH AMERICAN GAMING & ENTERTAINMENT CORPORATION
It is certified that:
A. The name of the company is NORTH AMERICAN GAMING &
ENTERTAINMENT CORPORATION, a Delaware corporation (hereinafter the "COMPANY").
B. The Certificate of Incorporation of the Company, as amended,
authorizes the issuance of 10,000,000 shares of Preferred Stock, $_______ par
value per share, and expressly vests in the Board of Directors of the Company
the authority provided therein to issue all of said shares in one or more
series by means of resolution or resolutions to establish the designation and
number and to fix the relative rights and preferences of each series to be
issued.
C. The Board of Directors of the Company, pursuant to the
authority expressly vested in it, has adopted a resolution (which resolution
was duly adopted by all necessary action on the part of the Company) creating
the Series C Convertible Preferred Stock as follows:
1. Designation and Amount. There shall be a series of Preferred
Stock of the Company which shall be designated as "Series C Convertible
Preferred Stock" (the "SERIES C PREFERRED STOCK"), having a par value of
$______ per share and a preference upon liquidation as specified in Section 4
below. The number of shares constituting the Series C Preferred Stock shall be
500,000 and such number of shares may be decreased by resolutions of the Board
of Directors; provided, that no decrease shall reduce the number of shares of
Series C Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of outstanding
rights, convertible notes, options or warrants or upon conversion of
outstanding securities issued by the Company. The Company may issue fractional
shares of Series C Preferred Stock.
2. Dividends.
(a) Unless otherwise declared from time to time by the Board of
Directors, out of funds legally available thereof, the holders of shares
of the outstanding shares of Series C Preferred Stock shall not be
entitled to receive dividends.
(b) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C Preferred Stock from the date of issuance.
The Board of Directors may fix a record date for the determination of
holders of shares of Series C Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall
be no more than 60 days prior to the date fixed for the payment thereof.
A-2
(c) The Company shall not declare or pay any dividends in respect
of any Junior Security or repurchase, redeem or acquire any shares of
common stock of the Company (the "COMMON STOCK"), or any other classes of
equity securities of the Company, including any warrants, options or
rights to acquire any such equity securities (collectively, "JUNIOR
SECURITIES"), or otherwise make a distribution or other payment in
respect of any Junior Security, directly or indirectly, in cash,
property, assets, rights, securities or other consideration unless,
simultaneously with such declaration or payment, the Company shall pay to
each holder of Series C Preferred Stock the sum of (i) all accrued but
unpaid dividends on such holder's Series C Preferred Stock, and (ii) the
amount that such holder of Series C Preferred Stock would be entitled to
received if all shares of Series C Preferred Stock had been converted to
Common Stock immediately prior to the record date for such payment, at
the then current Conversion Rate (as defined in Section 3(a) below).
3. Conversion Rights. The holders of Series C Preferred Stock
shall have the following conversion rights (collectively, the "CONVERSION
RIGHTS"):
(a) Automatic Conversion. Each issued and outstanding share of
Series C Preferred Stock shall automatically convert upon the filing by
the Company of an amendment (the "AMENDMENT") to its Articles of
Incorporation, increasing the number of authorized shares of Common Stock
to 200,000,000 shares, changing the Company's name and implementing a
one-for-ten reverse stock split, into that number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
Purchase Price (as adjusted for stock dividends, stock splits,
combinations, recapitalizations or other similar events affecting the
Series C Preferred Stock) by the Conversion Rate. The "CONVERSION RATE"
shall initially be equal to 1,218 shares of Common Stock for each share
of Series C Preferred Stock. This initial Conversion Rate shall be
subject to adjustment as hereinafter provided.
(b) Stock Reclassifications; Stock Splits, Combinations and
Dividends. If the Common Stock issuable upon the conversion of the Series
C Preferred Stock shall be changed into the same or different number of
shares of any class or classes of stock, whether by reclassification,
stock split, stock dividend, or similar event, then and in each such
event, the Conversion Rate shall be adjusted so that the holder of each
share of Series C Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such capital reorganization,
reclassification or other change which such holder would have received
had its shares of Series C Preferred Stock been converted immediately
prior to such capital reorganization, reclassification or other change.
(c) Capital Reorganization, Merger or Sale of Assets. If at any
time or from time to time there shall be a capital reorganization of the
Common Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for in Section 3(c) above) or a merger or
consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and assets
to any other person, or any transaction or series of related transactions
in which more than ten percent (10%) of the outstanding voting securities
of the Company (on an as converted basis) are sold or assigned (any of
which events is herein referred to as a "REORGANIZATION"), then as a part
of such Reorganization, the Conversion Rate shall be adjusted so that the
holders of the Series C Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series C Preferred Stock, the number of
shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such Reorganization, to which such
holder would have been entitled if such holder had converted its shares
of Series C Preferred Stock immediately prior to such Reorganization. In
any such case, appropriate adjustment shall be made in the application of
the provisions of this Section 3 with respect to the rights of the
holders of the Series C Preferred Stock after the Reorganization, to the
end that the provisions of this Section 3 (including adjustment of the
number of shares issuable upon conversion of the Series C Preferred
Stock) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.
A-3
(d) Exercise of Conversion Rights. From and after the date that
the Amendment has been filed, and if for any reason the Series C
Preferred Stock has not been automatically converted, the holders of
Series C Preferred Stock may exercise their Conversion Rights by
telecopying an executed and completed notice (a "NOTICE OF CONVERSION")
to the Company and delivering the original Notice of Conversion and the
certificate representing the Series C Preferred Stock by express courier.
Each business day on which a Notice of Conversion is telecopied to and
received by the Company along with a copy of the originally executed
Series C Preferred Stock certificates in accordance with the provisions
hereof shall be deemed a "CONVERSION DATE." For purposes hereof, the
term "business day" refers the hours between 9:00 a.m. and 5:00 p.m. on
any day on which banks are open for business in Dallas, Texas. Provided
that the Company has received the original Notice of Conversion and
Series C Preferred Stock certificate being so converted, the Company will
transmit, or instruct its transfer agent to transmit, the certificates
representing shares of Common Stock issuable upon conversion of any share
of Series C Preferred Stock (together with the certificates representing
the Series C Preferred Stock not so converted) to the holder thereof via
express courier, by electronic transfer or otherwise, three business days
after the receipt by the Company of the original Series C Preferred Stock
Certificate representing the shares being converted. In addition to any
other remedies which may be available to the holders of shares of Series
C Preferred Stock, in the event that the Company fails to deliver, or has
failed to contact its transfer agent to deliver, such shares of Common
Stock within such three (3) business day period, the holder will be
entitled to revoke the relevant Notice of Conversion by delivering a
notice to such effect to the Company whereupon the Company and the holder
shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion. The Notice of Conversion and
Series C Preferred Stock certificates representing the portion of the
Series C Preferred Stock converted shall be delivered to the following
address:
Telephone:
A-4
Upon delivery of a Notice of Conversion in proper form, the Series
C Preferred Stock covered by such Notice of Conversion shall be deemed to be
converted for all purposes, without further action required on the part of the
holder thereof or on the part of the Company.
(e) Lost or Stolen Certificates. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Series C
Preferred Stock certificate(s), and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and
upon the cancellation of the Series C Preferred Stock certificate(s), if
mutilated, the Company shall execute and deliver new certificates for
Series C Preferred Stock of like tenure and date. However, the Company
shall not be obligated to reissue such lost or stolen certificates for
shares of Series C Preferred Stock if the holder contemporaneously
requests the Company to convert such Series C Preferred Stock into Common
Stock.
(f) Fractional Shares. The Company will not issue fractional
shares of Common Stock upon the conversion of shares of Series C
Preferred Stock. Rather, the Company will round the number of shares
issuable upon conversion of the Series C Preferred Stock up to the
nearest whole share.
(g) Partial Conversion. In the event some but not all of the
shares of Series C Preferred Stock represented by a certificate or
certificates surrendered by a holder are converted, the Company shall
execute and deliver to or to the order of the holder, at the expense of
the Company, a new certificate representing the number of shares of
Series C Preferred Stock which were not converted.
(h) Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series C Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient or as may be
available to effect the conversion of all outstanding shares of the
Series C Preferred Stock, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding shares of the Series C Preferred
Stock, the Company shall use its best efforts to take such corporate
action as may be necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose.
4. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Company, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred Stock
unless, prior thereto, the holders of shares of Series C Preferred Stock
shall have received per share, an amount equal to the greater of (i) the
Purchase Price, plus the amount of all declared but unpaid dividends an
distributions thereon, if any (the "SERIES C LIQUIDATION PREFERENCE") and
(ii) the per share consideration then payable to holders of the Common
Stock upon such liquidation, whether or not the holders of the Series C
Preferred Stock shall have converted their shares.
A-5
(b) In the event there are not sufficient assets available to
permit payment in full of the Series C Liquidation Preference plus
accrued but unpaid dividends, then all of the assets available for
distribution shall be distributed ratably to the holders of Series C
Preferred Stock in proportion to the amount that would be paid to such
holders if such assets were sufficient to permit payment in full.
(c) For purposes of this Section 4, a liquidation, dissolution or
winding up of this Company shall be deemed to be occasioned by, or to
include (a) the acquisition of the Company by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger, consolidation, issuance of new
securities or transfer of issued and outstanding securities) that results
in the transfer of fifty percent (50%) or more of the outstanding voting
power of the Company or (b) a sale or other disposition of all or
substantially all of the assets of the Company, unless, in any event,
within 30 days after delivery of written notice of any such transaction
by the Company to the holders of the Series C Preferred Stock, the
holders of at least a majority of the shares of the Series C Preferred
Stock then outstanding provide the Company with written notice that such
transaction shall not be deemed a liquidation, dissolution or winding up
of the Company for purposes of this Section 4. The Company shall give
each holder of the Series C Preferred Stock written notice of any
transaction referenced in subclauses (a) and (b) of this Section 4(c) no
less than 30 days prior to the occurrence thereof.
5. Voting Rights. Except as expressly provided otherwise
herein, or as required by law, the holders of shares of Series C Preferred
Stock shall vote together as a single class with the holders of the Common
Stock, on an as-converted basis.
6. No Reissuance of Series C Preferred Stock. Any share or
shares of Series C Preferred Stock acquired by the Company by reason of
redemption, purchase, conversion or otherwise shall be cancelled, shall return
to the status of authorized but unissued preferred stock of no designated
series, and shall not be reissuable by the Company as Series C Preferred Stock.
7. Notices of Record Date. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the
holders thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company,
any merger of the Company, or any transfer of all or substantially all of
the assets of the Company to any other corporation, or any other entity
or person, or
A-6
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, and in each such event the Company shall mail or cause to be mailed to
each holder of Series C Preferred Stock a notice specifying: (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right; and a description of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, merger, dissolution, liquidation or winding up is
expected to become effective; and (iii) the time, if any, that is to be fixed,
as to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least ten (10) business days
prior to the date specified in such notice on which such action is to be taken.
8. Ranking. The Series C Preferred Stock shall rank senior as
to dividends and redemption, and upon liquidation, dissolution or winding up to
all other shares of common or preferred stock issued by the Company whether
previously or subsequently issued.
9. Transfer and Exchange. Upon surrender of any shares of
Series C Preferred Stock at the principal executive office of the Company for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered Holder of such Series C Preferred
Stock or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Series C Preferred Stock or part
thereof), the Company shall execute and deliver, at the Company's expense, one
or more new shares of Series C Preferred Stock (as requested by the Holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Series C Preferred Stock. Each such
new share of Series C Preferred Stock shall be payable to such Person as such
Holder may request and shall be substantially in the form specified herein.
A-7
EXHIBIT B
SUBSCRIPTION REPRESENTATIONS
FOR NON-U.S. INVESTORS:
1. By checking this box, I represent that I am not a citizen of
the United States, a "Resident Alien" of the United States, or otherwise a
"U.S. Person" (FOR INDIVIDUAL INVESTORS ONLY) {square}
2. We represent that NONE of the Shares we are acquiring are
being acquired by a "U.S. Person" or by a person or entity that is owned,
directly or indirectly, in whole or in part, by a U.S. Person (except to the
extent that the indirect ownership by a U.S. Person would not result in the
acquiring entity being classified as a U.S. Person under applicable provisions
of Regulation S under the Securities Act of 1933, as amended). (FOR
CORPORATIONS, PARTNERSHIPS, ESTATES, TRUSTS AND OTHER ENTITIES ONLY) {square}
3. We represent that we are not acquiring any of the Shares for
the benefit of, or with an intent or under any obligation (including any option
or other right) to resell such Shares to, any U.S. Person or any entity that is
owned, directly or indirectly, in whole or in part, by any U.S. Person (except
to the extent that the indirect ownership by a U.S. Person would not result in
the acquiring entity being classified as a U.S. Person under applicable
provisions of Regulation S under the Securities Act of 1933, as amended). We
represent that we were not solicited for the purchase of Shares while we were
in the United States. If we were solicited while in the United States, we are
either (x) fiduciaries acting with discretion for persons who are not U.S.
Persons or (y) agents acting without discretion for such persons who are also
"accredited investors" under Regulation D of the U.S. Securities and Exchange
Commission (the "Commission"). We represent that we qualify as each of the
following: (a) an "accredited investor" within the meaning of Regulation D
promulgated by the U.S. Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act") and (b) a
"qualified purchaser" within the meaning of Section 2(a)(51) of the Investment
Company Act of 1940, as amended.
4. We represent that we are fully informed as to the legal and
tax requirements within our own country or countries regarding a purchase of
Shares.
5. We represent that we or our beneficial owner is not a person,
government, country or entity: (i) that is listed in the Annex to, or is
otherwise subject to the provisions of, United States Executive Order 13224, as
issued on September 24, 2001 ("EO 13224") (which list is published at
xxxx://xxx.xxxxxxxx.xxx/xxxxxxxxx.xxxx); (ii) whose name appears on the most
current U.S. Office of Foreign Assets Control ("OFAC") list of "Specifically
Designated Nationals and Blocked Persons" (which list is published on the OFAC
website, xxxx://xxx.xxxxx.xxx/xxxx); (iii) who commits, threatens to commit or
supports "terrorism", as that term is defined in EO 13224; or (iv) who is
otherwise affiliated with any person, government, country or entity listed
above. Any funds used by us to invest in the Fund were not, directly or
indirectly, derived from activities that may contravene U.S. federal and/or
state laws and regulations, including anti-money laundering laws, or that may
contravene the anti-money laundering laws of any other jurisdiction.
B-1
6. We agree not to transfer any Shares except with the prior
consent of the Company. We also agree to notify the Company if we change our
citizenship or residence, and we understand that our Shares may be redeemed if
we are no longer eligible investors in the Company in order to avoid adverse
tax or regulatory consequences to the Company or its other shareholders.
B-2
