AGREEMENT FOR EXCHANGE OF STOCK FOR STOCK

THIS AGREEMENT for the Exchange of Stock for Stock is made effective as of the
1st day of April, 2006.

BETWEEN:

SERVICE AIR GROUP INC., a British Columbia, Canada corporation

(“SAGCA”)

AND:

SERVICE AIR GROUP, INC., a New Jersey corporation

(“SAG”)

RECITALS

WHEREAS:

A.

SAGCA and its shareholders desire to issue and transfer to SAG, 4,125,000 of its
Class B, Non-Voting, Shares without Par Value, in exchange for certain shares of
SAG’s common stock described herein;

B.

SAG is willing and desirous of acquiring the shares of SAGCA, in exchange for
SAG shares of common stock to be issued to SAGCA for the consideration and upon
the terms and conditions as set forth below; and

C.

The parties desire to make this transaction a tax-free exchange of stock under
the tax laws of the United States, insofar as possible.

AGREEMENT

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties have agreed as follows:

1.

CONSIDERATION, SALE, EXCHANGE OF SHARES

1.1

At the closing herein, SAGCA agrees to issue, transfer, assign and convey,
exclusively to SAG, 4,125,000 of SAGCA’s private, class-B, non-voting shares
without Par Value under the following term(s):

 

(a)

SAGCA is responsible to provide 2 prior years of annual audited financial
statements to SAG from the date of this agreement, as per SEC’s sb-2
requirements under US-GAAP standards.

 

 

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(b)

SAG may raise equity/debt capital in the amount of US$14,975,000 (Fourteen
Million Nine Hundred Seventy Five Thousand United States Dollars) to fund
SAGCA’s operations included but not limited to equipments and/or working capital
as required in SAGCA’s Business Plan. Working capital to be paid by SAG to SAGCA
would be recorded as an investment and not an inter-company loan. At its
sole-discretion, SAG may make these payments directly to SAGCA and/or its
designated supplier(s) as follows:

(1)

$4,975,000 (Working Capital)

 

(2)

$10,000,000 (Buy/Lease Aircraft)

(c)

Under this agreement, SAG becomes entitled to receive 90% of SAGCA’s Net
Operating Income (After Taxes) in the form of a dividend. Under this dividend
policy, SAG shall be paid out on an annual basis after SAGCA’s fiscal year has
been audited under US-GAAP standards.

(d)

Parties agree that regardless of SAG buys/leases aircrafts, SAGCA is bonded to
always lease/sub-lease required aircraft(s) only from/through SAG as a
permanent, mutually, pre-agreed arrangement between the parties; individual
leases for each aircraft shall be executed under a separate “Aircraft Lease
Agreement”. At the end of each lease term, SAG reserves the right to buy out the
aircraft from its suppliers, if aircraft was not purchased by SAG in the
beginning of the term.

(e)

Both parties to this agreement shall be exclusively responsible for their own
operating expenses from the date of this agreement. Any payments made by SAGCA
on SAG’s behalf shall be treated as an inter-company, interest free loan and
shall be repaid as the funds become available, on the other hand, any payments
made or to be made by SAG to SAGCA shall be treated as an investment and would
not be classified as an inter-company/interest-free loans.

(f)

SAG agrees to issue 4,125,000 shares (the “SAG Shares”) of its restricted,
common stock to SAGCA. The approval of three-quarters of the SAGCA shareholders
shall be required to approve this Agreement. SAGCA may transfer SAG’s shares to
its shareholders, Directors, Officers, affiliates and/or associates in exchange
of their services and/or financial contributions to SAGCA as long as all such
transactions are recorded under lock-up agreements with SAG being a party, SAGCA
is responsible to file/report these lock-up agreements to SEC.

(g)

After execution of this agreement, Mr. Jag Dhillon, President, CEO and
sole-director of SAGCA shall also be appointed as President, CEO and director of
SAG. Mr. Mohammad Sultan shall resign as President & CEO of SAG and shall be
appointed as CFO, Secretary/Treasurer & director of SAG. Management of SAGCA
shall also become management of SAG.

 

 

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2.

CLOSING

2.1

The closing (“Closing”) of this transaction shall be within 15 days from the
date of execution hereof (subject to extension upon the mutual agreement of the
parties), at the offices of SAGCA located at:

Vancouver International Airport

5455 Airport Road South

Richmond, B.C. Canada VB 1B5

Tel: (604)-233-7727; Fax :( 604)-233-7030

2.2

At Closing:

 

 

(a)

SAGCA will pay and deliver to SAG, the SAGCA Shares;

 

(b)

SAG will pay and deliver to SAGCA, the SAG Shares.

 

3.

REPRESENTATION AND WARRANTIES OF SAGCA

 

SAGCA represents and warrants that:

3.1

SAGCA is a corporation duly organized, validly existing, and in good standing
under the laws of the Province of British Columbia, Canada; it has all of the
authority necessary to enter into this agreement and be bound by the terms and
covenants of performance herein.

3.2

SAGCA will be acquiring the SAG Shares for its own account and not with a view
to any distribution within the meaning of the Securities Act of 1933, as amended
(the “Act”). As a “purchaser”, SAGCA acknowledges that it has been advised and
is aware that:

 

(a)

the issuer of the shares (SAG) is relying upon an exemption from registration
under the Act predicated upon the representations and warranties of SAGCA
contained in this Agreement; and

 

(b)

the SAG Shares issued to SAGCA pursuant to this Agreement will be restricted
stock within the meaning of the rules and regulations (Rules) promulgated by the
United States Securities and Exchange Commission (SEC) pursuant to the Act.

Unless, and until, the SAG Shares are registered under the Act, they will be
subject to limitations upon resale set forth in the Rules or in other
administrative interpretations by the SEC in effect at the time of the proposed
sale or other disposition. SAGCA hereby irrevocably and unconditionally agrees
not to issue any new stock/shares to anyone from the date of closing and agrees
that its financial statements can be audited any time by SAG at its sole
discretion and that SAGCA will act exclusively as an operational wing of SAG
from the Closing date.

3.3

SAGCA has received all of the information it considers necessary or appropriate
for determining whether to acquire the SAG Shares pursuant to this Agreement.
SAGCA is

 

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familiar with the business, affairs, risks and properties of SAG. SAGCA has had
an opportunity to ask questions of and receive answers from SAG and its
officers, directors and other representatives regarding SAG and the terms and
conditions of the offering of the SAG Shares. SAGCA has had the opportunity to
obtain any additional information SAG possesses or could acquire without
unreasonable effort or expense, necessary to verify the accuracy of the
information furnished.

3.4

SAGCA has such knowledge and expertise in financial and business matters that it
is capable of evaluating the merits and substantial risks of an investment in
the SAG Shares and is able to bear the economic risks relevant to the
acquisition of the Shares hereunder.

3.5

SAGCA is relying solely upon its own due diligence, or upon independent
consultation with its professional, legal, tax and accounting advisors or such
others as SAGCA deems to be appropriate in acquiring the SAG Shares; SAGCA have
been advised to, and have consulted with, their professional tax and legal
advisors with respect to any tax consequences of acquiring the SAG Shares from
SAG.

3.6

SAGCA recognizes that an acquisition of the SAG Shares involves substantial risk
and understands all of the risk factors related to the purchase of the Shares,
including the fact that SAGCA understand there may be no market for the SAG
Shares.

3.7

SAGCA’s financial condition is such that SAGCA is under no present or
contemplated future need to dispose of any portion of SAG Shares to satisfy any
existing or contemplated undertaking, need or indebtedness.

3.8

Without in any way limiting the representation set forth above, SAGCA further
agrees not to make any disposition of all or any portion of the Shares unless
and until:

 

(a)

There is then in effect a registration statement under the Act covering such
proposed disposition and such disposition is made in accordance with such
registration statement; or

 

(b)

SAGCA shall have notified SAG of the proposed disposition and shall have
furnished SAG with a detailed statement of the circumstances surrounding the
proposed disposition, and if requested by SAG, SAGCA shall have furnished SAG
with an opinion of counsel, reasonably satisfactory to SAG and its counsel, that
such disposition will not require registration under the Act.

3.9

It is understood and agreed by the SAGCA Shareholders that the certificates
evidencing the Shares will bear substantially the following legend:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION
TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933
ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN

 

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THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S.
PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

3.10

The SAGCA confers full authority upon SAG to affix the above legend to the
certificate or certificates representing the SAG Shares; and to instruct SAG’s
transfer agent not to transfer any of the Shares issued hereunder until the
transfer agent has received written approval from SAG or its counsel.

3.11

SAGCA understands that SAG is relying upon the representations and warranties
made by SAGCA as contained in this Agreement and any subscription agreement or
private placement disclosure document utilized in the issuance of the SAG Shares
pursuant to an exemption from registration, in consummating the sale and
transfer of the SAG Shares without registering them under the Act or any law.
Therefore, SAGCA agrees to indemnify SAG against, and hold it harmless from, all
losses, liabilities, costs, penalties and expenses (including attorney’s fees)
which arise as a result of a sale, exchange or other transfer of the SAG Shares
other than as permitted under this Agreement. SAGCA further understands and
agrees that SAG will make an appropriate notation on its transfer records of the
restrictions applicable to the SAG Shares.

3.12

SAGCA, through its officers or directors, has fully disclosed its financial
condition to SAG or its agent. At Closing, the management of SAGCA will deliver
a certificate attesting, among other things, that there will have been no
material changes in the condition of the business or its finances as reflected
in its financial statements, which shall be audited in accordance with generally
accepted accounting principles within not more than 60 days after closing; that
all authority has been duly taken to enter into and close this transaction; that
there are no material undisclosed liabilities, claims, or judgments against that
company; and that all legal and governmental regulations or authorities will
have been complied with, or allowance made for compliance, including for any
such outstanding liabilities, claims, or judgments.

4.

REPRESENTATIONS AND WARRANTIES OF SAG

SAG represents and warrants that:

4.1

It is a corporation duly organized, validly existing, and in good standing under
the laws of the State of New Jersey, United States of America.

4.2

There are presently issued and outstanding 5,250,000 common voting shares of
SAG.

4.3

SAG has all necessary corporate power and authority under the laws of New Jersey
and all other applicable provisions of law to own its properties and other
assets now owned

 

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by it, to carry on its business as now being conducted, and to execute, deliver
and carry out the provisions of this Agreement.

4.4

All corporate action on the part of SAG required for the lawful execution and
delivery of this Agreement and the issuance, execution and delivery of the SAG
Shares has been duly and effectively taken. Upon execution and delivery, this
Agreement will constitute a valid and binding obligation of SAG, enforceable in
accordance with its terms, except as the enforceability may be limited by
applicable bankruptcy, insolvency or similar laws and judicial decisions
affecting creditors’ rights generally.

5.

SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1

The representations, warranties and covenants made respectively by SAGCA and SAG
in this Agreement shall survive the closing and the exchange of the SAG Shares
hereunder.

6.

MISCELLANEOUS

The following miscellaneous provisions, standard to commercial contracts of this
nature, are made part hereof:

6.1

In the event any one or more of the provisions contained in this Agreement are
for any reason held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not effect any other provisions
of this Agreement. This Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.

6.2

This Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, legal representatives, successors and permitted assigns.
The parties may not transfer or assign all or any part of their rights or
obligations except to the extent expressly permitted by this Agreement.

6.3

This Agreement constitutes the entire agreement and understanding between the
parties, and supersedes any/all prior written and/or verbal agreements including
amendments, and may not be modified or amended except in writing signed by both
parties.

6.4

No term or condition of this Agreement shall be deemed to have been waived nor
there any estoppel to enforce any provision of this Agreement except by written
instrument of the party charged with such waiver or estoppel.

6.5

British Columbia law applicable to contracts to be performed in that
jurisdiction shall interpret this Agreement.

6.6

This agreement may be executed in one or more counterparts, including electronic
mail or facsimile, each of which may be considered an original copy hereof.

 

 

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7.

TAX-FREE EXCHANGE

7.1

Insofar as possible, the parties agree that the exchange of shares for shares
called for hereunder shall be a tax-free exchange under the tax laws and the
Internal Revenue Code (as amended) of the United States, and not a purchase of
assets.

8.

CONDITIONS TO CLOSING

The Closing called for hereunder shall be subject to, among other things:

8.1

The delivery of share certificates representing the SAG Shares to SAGCA; and the
delivery to SAG by SAGCA of share certificates representing the SAGCA Shares
called for herein;

8.2

The conduct of due diligence of SAGCA by SAG or its agent, satisfactory to the
management of SAG that the books, records, shares of stock outstanding, assets
and liabilities of SAGCA are in fact as have been represented;

8.3

Resolutions by the respective boards of directors of SAGCA and SAG ratifying
this transaction;

8.4

An opinion of counsel satisfactory to SAG that SAGCA is a validly existing
corporation in good standing in its place of domicile; that all actions called
for hereunder have been duly taken; that, to such counsel’s knowledge, there are
no outstanding or threatened adverse legal actions, claims, or judgments, or the
like, other than may have been duly disclosed in writing by management of SAGCA;
that shares of SAGCA will be legally transferred to SAG;

8.5

A certificate of estoppel by the management of SAGCA as of the day of Closing,
in substantially the form and content set forth in paragraph 3.12, above,
certifying among other things, that since the execution of this Agreement and
until Closing hereof, there has been no material change in the conduct of the
business of SAGCA, and that its business has been conducted in the normal
course.

8.6

The delivery to SAGCA of a subscription form, substantially in form and
substance satisfactory to counsel for SAGCA.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

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SERVICE AIR GROUP INC. (BC, CANADA)

 

 

By:

/s/

 

 

Jagbir S. Dillon, President/CEO

SERVICE AIR GROUP INC. (NJ, USA)

 

 

Per:

/s/

 

 

Mohammad T. Sultan, President/CEO

 

 

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