5,725,000 Shares CHINA NATURAL GAS, INC. Common Stock UNDERWRITING AGREEMENT
EXHIBIT 1.1
5,725,000
Shares
Common
Stock
September
2, 2009
Xxxx
Capital Partners, LLC
00
Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxxx, XX 00000
Xxxxxxx
& Company International
000
Xxxxxxxxx Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Ladies
and Gentlemen:
China
Natural Gas, Inc., a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and sell to Xxxx
Capital Partners, LLC (“Xxxx”) and Xxxxxxx
& Company International (“Xxxxxxx”) (Xxxx and
Xxxxxxx may be individually referred to herein as an “Underwriter” and
shall be collectively referred to herein as the “Underwriters”) an
aggregate of 5,725,000 authorized but unissued shares (the “Underwritten Shares”)
of Common Stock, par value $0.0001 per share (the “Common Stock”), of
the Company. The
Company has granted the Underwriters the option to purchase an aggregate of up
to 858,750 additional shares of Common Stock (the “Additional Shares”)
as may be necessary to cover over-allotments made in connection with the
offering. The Underwritten Shares and Additional Shares are
collectively referred to as the “Shares.”
The
Company and the Underwriters hereby confirm their agreement as
follows:
1. Registration
Statement and Prospectus. The Company has prepared and filed
with the Securities and Exchange Commission (the “Commission”) a
registration statement on Form S-3 (File No. 333-160150) under the Securities
Act of 1933 (the “Securities Act”) and
the rules and regulations (the “Rules and
Regulations”) of the Commission thereunder, and such amendments to such
registration statement (including post effective amendments) as may have been
required to the date of this Agreement. Such registration statement,
as amended (including any post effective amendments), has been declared
effective by the Commission. Such registration statement, as amended
(including post effective amendments thereto), the exhibits and any schedules
thereto, the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Securities Act and the documents and information otherwise
deemed to be a part thereof or included therein by Rule 430B under the
Securities Act or otherwise pursuant to the Rules and Regulations, is herein
called the “Registration
Statement.” If the Company has filed or files an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the
“Rule 462 Registration
Statement”), then any reference herein to the term Registration Statement
shall include such Rule 462 Registration Statement.
The
Company has filed with the Commission pursuant to Rule 424 under the Securities
Act an issuer free writing prospectus (as defined in Section 2(a)(iii)(A)(2)
below) with a preliminary prospectus supplement and is filing a further issuer
free writing prospectus, in each case relating to the Shares and the form of
prospectus included in the Registration Statement. Such prospectus in
the form in which it appears in the Registration Statement is hereinafter called
the “Base
Prospectus,” and such preliminary prospectus supplement and issuer free
writing prospectuses as filed, along with the Base Prospectus, is hereinafter
called the “Final
Prospectus.” Such Final Prospectus, issuer free writing
prospectuses and preliminary prospectus supplement, in the form in which they
shall be filed with the Commission pursuant to Rule 424(b) under the Securities
Act (including the Base Prospectus as so supplemented) is hereinafter called
a “Prospectus.” Any
reference herein to the Base Prospectus, the Final Prospectus or a Prospectus
shall be deemed to include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Securities Act as of the date of such
Prospectus.
For
purposes of this Agreement, all references to the Registration Statement, the
Rule 462 Registration Statement, the Base Prospectus, the Final Prospectus, a
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Interactive
Data Electronic Applications system. All references in this
Agreement to financial statements and schedules and other information which is
“described,” “contained,” “included” or “stated” in the Registration
Statement, the Rule 462 Registration Statement, the Base Prospectus, the Final
Prospectus or a Prospectus (or other references of like import) shall be deemed
to mean and include all such financial statements, pro forma financial
information and schedules and other information which is incorporated by
reference in or otherwise deemed by the Rules and Regulations to be a part of or
included in the Registration Statement, the Rule 462 Registration Statement, the
Base Prospectus, the Final Prospectus or a Prospectus, as the case may be; and
all references in this Agreement to amendments or supplements to the
Registration Statement, the Rule 462 Registration Statement, the Base
Prospectus, the Final Prospectus or the Prospectus shall be deemed to mean and
include the subsequent filing of any document under the Securities Exchange Act
of 1934, as amended (the “Exchange
Act”), that is deemed to be incorporated therein by reference
therein or otherwise deemed by the Rules and Regulations to be a part
thereof.
2. Representations
and Warranties Regarding the Offering.
(a) The
Company represents and warrants to, and agrees with, the Underwriters, as of the
date hereof and as of the Closing Date (as defined in Section 5(c) below),
except as otherwise indicated, as follows:
(i) At
each time of effectiveness, at the date hereof and at the Closing Date, the
Registration Statement and any post-effective amendment thereto complied or will
comply in all material respects with the requirements of the Securities Act and
the Rules and Regulations and did not and will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading. The Time of Sale Disclosure Package (as defined in
Section 2(a)(iii)(A)(1) below) as of the date hereof and at the Closing Date,
and the Final Prospectus, as amended or supplemented, at the time of filing
pursuant to Rule 424(b) under the Securities Act and at the Closing Date, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences shall not apply to statements in or
omissions from the Registration Statement or any Prospectus in reliance upon,
and in conformity with, written information furnished to the Company by the
Underwriters specifically for use in the preparation thereof. The
Registration Statement (including each document incorporated by reference
therein) contains all exhibits and schedules required to be filed by the
Securities Act or the Rules and Regulations. No order preventing or
suspending the effectiveness or use of the Registration Statement or any
Prospectus is in effect and no proceedings for such purpose have been instituted
or are pending, or, to the knowledge of the Company, are contemplated or
threatened by the Commission.
(ii) The
documents incorporated by reference in the Registration Statement, the Time of
Sale Disclosure Package and any Prospectus, when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, were filed on a timely basis with the Commission and none of such
documents, when they were filed (or, if amendments to such documents were filed,
when such amendments were filed), contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Any further documents so filed and incorporated by
reference in the Registration Statement, the Time of Sale Disclosure Package or
a Prospectus, when such documents are filed with the Commission, will conform in
all material respects to the requirements of the Exchange Act, and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(iii) (A)
The Company has provided a copy to the Underwriters of each Issuer Free Writing
Prospectus (as defined below) used in the sale of Shares. The Company has
filed all Issuer Free Writing Prospectuses required to be so filed with the
Commission, and no order preventing or suspending the effectiveness or use of
any Issuer Free Writing Prospectus is in effect and no proceedings for such
purpose have been instituted or are pending, or, to the knowledge of the
Company, are contemplated or threatened by the Commission. When taken
together with the rest of the Time of Sale Disclosure Package or the
Prospectus, since its first use and at all relevant times since then,
no Issuer Free Writing Prospectus has, does or will include (1) any untrue
statement of a material fact or omission to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (2) information
that conflicted, conflicts or will conflict with the information contained
in the Registration Statement, the Time of Sale Disclosure Package or a
Prospectus. The representations and warranties set forth in the
immediately preceding sentence shall not apply to statements in or omissions
from the Registration Statement, Time of Sale Disclosure Package, a Prospectus
or any Issuer Free Writing Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by the Underwriters specifically
for use in the preparation thereof. As used in this paragraph and
elsewhere in this Agreement:
(1) “Time of Sale Disclosure
Package” means the Base Prospectus, the Prospectus most recently
filed with the Commission before the time of this Agreement, including any
preliminary prospectus supplement deemed to be a part thereof, each Issuer Free
Writing Prospectus, and any description of the transaction provided by the
Underwriters, in the form included on Schedule I.
(2) “Issuer Free Writing
Prospectus” means any “issuer free writing prospectus,” as defined in
Rule 433 under the Securities Act, relating to the Shares that (A) is required
to be filed with the Commission by the Company, or (B) is exempt from filing
pursuant to Rule 433(d)(5)(i) or (d)(8) under the Securities Act, in each
case in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to
Rule 433(g) under the Securities Act.
(B) At
the time of filing of the Registration Statement and at the date hereof, the
Company was not and is not an “ineligible issuer,” as defined in Rule 405 under
the Securities Act or an “excluded issuer” as defined in Rule 164 under the
Securities Act.
(C) Each
Issuer Free Writing Prospectus satisfied, as of its issue date and at all
subsequent times through the Prospectus Delivery Period, all other conditions as
may be applicable to its use as set forth in Rules 164 and 433 under the
Securities Act, including any legend, record-keeping or other
requirements.
(iv) The
financial statements of the Company, together with the related notes, included
or incorporated by reference in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus comply in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and fairly
present the financial condition of the Company as of the dates indicated and the
results of operations and changes in cash flows for the periods therein
specified in conformity with generally accepted accounting principles
consistently applied throughout the periods involved; and the supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. No other financial statements, pro
forma financial information or schedules are required under the Securities Act
to be included or incorporated by reference in the Registration Statement, the
Time of Sale Disclosure Package or the Prospectus. To the Company’s
knowledge, each of Xxxxx Xxxxxxxx Xxxxx Xxxxxx and Xxxxxx, LLP and Xxxxxx &
Company, Inc, which firms have expressed their opinions with respect to the
financial statements and schedules filed as a part of the Registration Statement
and included in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus is an independent public accounting firm with respect to the
Company within the meaning of the Securities Act and the Rules and
Regulations.
(v) The
Company had a reasonable basis for, and made in good faith, each
“forward-looking statement” (within the meaning of Section 27A of the Act or
Section 21E of the Exchange Act) contained or incorporated by reference in the
Registration Statement, the Time of Sale Disclosure Package or the
Prospectus.
(vi) All
statistical or market-related data included or incorporated by reference in the
Registration Statement, the Time of Sale Disclosure Package or the Prospectus
are based on or derived from sources that the Company reasonably believes to be
reliable and accurate, and the Company has obtained the written consent to the
use of such data from such sources, to the extent required.
(vii) The
Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is
included or approved for inclusion on the Nasdaq Global Market. There is no
action pending by the Company or, to the Company’s knowledge, the Nasdaq Global
Market to delist the Common Shares from the Nasdaq Global Market, nor has the
Company received any notification that the Nasdaq Global Market is contemplating
terminating such listing. When issued, the Shares will be listed on
the Nasdaq Global Market.
(viii) The
Company has not taken, directly or indirectly, any action that is designed to or
that has constituted or that would reasonably be expected to cause or result in
the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(ix) The
Company is not and during the past three years neither the Company nor any
predecessor was: (A) a blank check company as defined in Rule 419(a)(2) of the
Securities Act or (B) a shell company, other than a business combination shell
company, each as defined in Rule 405 of the Securities Act.
(x) The
Company is not and, after giving effect to the offering and sale of the Shares,
will not be an “investment company,” as such term is defined in the Investment
Company Act of 1940, as amended.
(xi) The
Company was at the time of filing the Registration Statement, and at the date
hereof, remains eligible to use Form S-3 under the Securities
Act.
(b) Any
certificate signed by any officer of the Company and delivered to the
Underwriters or to the Underwriters’ counsel shall be deemed a representation
and warranty by the Company to the Underwriters as to the matters covered
thereby.
3. Representations
and Warranties Regarding the Company.
(a) The
Company represents and warrants to and agrees with, the Underwriters, except as
set forth in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, as follows:
(i) Each
of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation. Each of the Company and its subsidiaries has the corporate power
and authority to own its properties and conduct its business as currently being
carried on and as described in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, and is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which it owns or
leases real property or in which the conduct of its business makes such
qualification necessary and in which the failure to so qualify would have or is
reasonably likely to result in a material adverse effect upon the business,
prospects, properties, operations, condition (financial or otherwise) or results
of operations of the Company and its subsidiaries, taken as a whole, or in its
ability to perform its obligations under this Agreement (“Material Adverse
Effect”).
(ii) The
Company has the power and authority to enter into this Agreement and to
authorize, issue and sell the Shares as contemplated by this
Agreement. This Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.
(iii) The
execution, delivery and performance of this Agreement and the consummation of
the transactions herein contemplated will not (A) result in a breach or
violation of any of the terms and provisions of, or constitute a default under,
any law, rule or regulation to which the Company or any of the PRC Entities (as
defined in Section 4(a)(i) hereof), is subject, or by which any property or
asset of the Company or of the PRC Entities is bound or affected, (B) conflict
with, result in any violation or breach of, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, lease, credit
facility, debt, note, bond, mortgage, indenture or other instrument (the “Contracts”) or
obligation or other understanding to which the Company or any of the PRC
Entities, is a party or by which any property or asset of the Company or any of
the PRC Entities, is bound or affected, or (C) result in a breach or violation
of any of the terms and provisions of, or constitute a default under, the
Company’s charter or by-laws, the Establishment Documents (as defined in Section
4(a)(ii) hereof) of any of the PRC Entities or the VIE Structuring Documents (as
defined in Section 4(a)(iii) hereof).
(iv) All
consents, approvals, orders, authorizations and filings required on the part of
the Company or any the PRC Entities, in connection with the execution, delivery
or performance of this Agreement have been obtained or made, other than such
consents, approvals, orders and authorizations the failure of which to make or
obtain is not reasonably likely to result in a Material Adverse
Effect.
(v) All
of the issued and outstanding shares of capital stock of the Company are duly
authorized and validly issued, fully paid and nonassessable, and have been
issued in compliance with all applicable securities laws, and conform to the
description thereof in the Registration Statement, the Time of Sale Disclosure
Package and the Prospectus. Except for the issuances of options or
restricted stock in the ordinary course of business, since the respective dates
as of which information is provided in the Registration Statement, the Time of
Sale Disclosure Package or the Prospectus, the Company has not entered into or
granted any convertible or exchangeable securities, options, warrants,
agreements, contracts or other rights in existence to purchase or acquire from
the Company any shares of the capital stock of the Company. The
Shares, when issued, will be duly authorized and validly issued, fully paid
and nonassessable, will be issued in compliance with all applicable securities
laws, and will be free of preemptive, registration or similar
rights.
(vi) Each
of the Company and the PRC Entities, has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof. Each
of the Company and the PRC Entities has paid all taxes (as hereinafter defined)
shown as due on such returns that were filed and has paid all taxes imposed on
or assessed against the Company or such PRC Entities. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. Except as disclosed
in writing to the Underwriters and as disclosed in the Registration Statement,
the Time of Sale Disclosure Package and the Prospectus, (i) no issues have been
raised (and are currently pending) by any taxing authority in connection with
any of the returns or taxes asserted as due from the Company or any of the PRC
Entities, and (ii) no waivers of statutes of limitation with respect to the
returns or collection of taxes have been given by or requested from the Company
or any of the PRC Entities. The term “taxes” mean all
federal, state, local, foreign, and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments, or charges of any kind whatever, together with any
interest and any penalties, additions to tax, or additional amounts with respect
thereto. The term “returns” means all
returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
(vii) Since
the respective dates as of which information is given in the Registration
Statement, the Time of Sale Disclosure Package or the Prospectus, (a) neither
the Company nor any of the PRC Entities, has incurred any material liabilities
or obligations, direct or contingent, or entered into any material transactions
other than in the ordinary course of business, (b) the Company has not declared
or paid any dividends or made any distribution of any kind with respect to its
capital stock; (c) there has not been any change in the capital stock of the
Company or any of the PRC Entities, (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or the issuance of restricted stock
awards or restricted stock units under the Company’s existing stock awards
plan, or any new grants thereof in the ordinary course of business), (d)
there has not been any material change in the Company’s long-term or short-term
debt or the debt of any of the PRC Entities, and (e) there has not been the
occurrence of any Material Adverse Effect.
(viii) There
is not pending or, to the knowledge of the Company, threatened, any action, suit
or proceeding to which the Company or any of the PRC Entities, is a party or of
which any property or assets of the Company or any of the PRC Entities is the
subject before or by any court or governmental agency, authority or body, or any
arbitrator or mediator, which is reasonably likely to result in a Material
Adverse Effect.
(ix) The
Company and each of the PRC Entities, holds, and is in compliance with, all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates and orders (“Permits”) of any
governmental or self-regulatory agency, authority or body required for the
conduct of its business, and all such Permits are in full force and effect, in
each case except where the failure to hold, or comply with, any of them is not
reasonably likely to result in a Material Adverse Effect.
(x) The
Company and each of the PRC Entities, have good and marketable title to all
property (whether real or personal) described in the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus as being owned by them that
are material to the business of the Company, in each case free and clear of all
liens, claims, security interests, other encumbrances or defects, except those
that are not reasonably likely to result in a Material Adverse
Effect. Except as disclosed in the Registration Statement, the Time
of Sale Disclosure Package and the Prospectus, the property held under lease or
pursuant to land use rights by the Company and the PRC Entities, is held by them
under valid, subsisting and enforceable leases or land use rights, as the case
may be, with only such exceptions with respect to any particular lease as do not
interfere in any material respect with the conduct of the business of the
Company and the PRC Entities.
(xi) The
Company and each of the PRC Entities owns or possesses or has valid right to use
all patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service xxxx registrations, copyrights, licenses,
inventions, trade secrets and similar rights (“Intellectual
Property”) necessary for the conduct of the business of the Company and
the PRC Entities, as currently carried on and as described in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus. To
the knowledge of the Company, no action or use by the Company or any of the PRC
Entities, will involve or give rise to any infringement of, or license or
similar fees for, any Intellectual Property of others, except where such action,
use, license or fee is not reasonably likely to result in a Material Adverse
Effect. Neither the Company nor any of the PRC Entities, has received
any notice alleging any such infringement or fee.
(xii) Except
as disclosed in the Registration Statement, the Time of Disclosure Sale Package
and the Prospectus, each of the Company and the PRC Entities, has complied with,
is not in violation of, and has not received any notice of violation relating to
any law, rule or regulation relating to the conduct of its business, or the
ownership or operation of its property and assets, including, without
limitation, (A) the Currency and Foreign Transactions Reporting Act of 1970, as
amended, or any money laundering laws, rules or regulations, (B) any laws, rules
or regulations related to health, safety or the environment, including those
relating to the regulation of hazardous substances, (C) the Xxxxxxxx-Xxxxx Act
and the rules and regulations of the Commission thereunder, (D) the Foreign
Corrupt Practices Act of 1977 and the rules and regulations thereunder, and (E)
the Employment Retirement Income Security Act of 1974 and the rules and
regulations thereunder, in each case except where the failure to be in
compliance is not reasonably likely to result in a Material Adverse
Effect.
(xiii) Neither
the Company nor any of the PRC Entities, nor, to the knowledge of the Company,
any director, officer, employee, representative, agent or affiliate of the
Company or any of the PRC Entities, is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the
Company will not directly or indirectly use the proceeds of the offering of the
Shares contemplated hereby, or lend, contribute or otherwise make available such
proceeds to any person or entity, for the purpose of financing the activities of
any person currently subject to any U.S. sanctions administered by
OFAC.
(xiv) The
Company and each of the PRC Entities carries, or is covered by, insurance in
such amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for companies
engaged in similar businesses in similar industries in the PRC.
(xv) No
labor dispute with the employees of the Company or any of the PRC Entities,
exists or, to the knowledge of the Company, is imminent that is reasonably
likely to result in a Material Adverse Effect.
(xvi) Neither
the Company nor any of the PRC Entities, is in violation, breach or default
under its certificate of incorporation, by-laws or other equivalent
organizational or governing documents, except where the violation is not
reasonably likely to result in a Material Adverse Effect.
(xvii) Neither
the Company, any of the PRC Entities, nor, to the knowledge of the Company, any
other party is in violation, breach or default of any Contract that is
reasonably likely to result in a Material Adverse Effect.
(xviii)
No supplier, customer, distributor or sales agent of the Company or any of
the PRC Entities, has notified the Company or any of the PRC Entities,
that it intends to discontinue or decrease the rate of business
done with the Company or any the PRC Entities, except where such
decrease is not reasonably likely to result in a Material Adverse
Effect.
(xix) Except
as disclosed in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, other than the Underwriters, no person has the right to act
as an underwriter or as a financial advisor to the Company in connection with
the transactions contemplated hereby.
4. Representations
and Warranties of the Company Regarding the PRC.
(a) The
Company represents and warrants to, and agrees with, the Underwriters, as of the
date hereof and as of the Closing Date, as follows:
(i) The
Company conducts substantially all of its operations and generates substantially
all of its revenue through (i) Xilan Natural Gas Equipment Co., Ltd., a wholly
foreign-owned enterprise formed under the laws of the People’s Republic of China
(“Xilan” or the
PRC Subsidiary)
and (ii) Xi’an Xilan Natural Gas Co., Ltd., a company formed under
the laws of the PRC (“XXNGC”) and its
wholly owned subsidiaries, Henan Xilan Natural Gas Co., Ltd (“Henan”), Xi’an Xilan
Auto Body Shop Co., Ltd (“Xi’an”), Lingbao Yuxi
Natural Gas Co., Ltd (“Lingbao”)and Shaanxi
Jingbian Xilan LNG Co., Ltd (“Shaanxi”), (each of
Henan, Xi’an, Lingbao and Shaanxi shall be referred to as a XXNGC Subsidiary and
shall be collectively be referred to as the “XXNGC
Subsidiaries”). XXNGC and the XXNGC Subsidiaries shall be
collectively referred to herein as the “PRC
VIE”) The PRC Subsidiary, XXNGC and each of the XXNCG
Subsidiaries are collectively referred to hereinafter as the “PRC
Entities.”
(ii) Each
of the PRC Entities has been duly established, is validly existing as a company
in good standing under the laws of the PRC, has the corporate power and
authority to own, lease and operate its property and to conduct its business as
described in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing is not
reasonably likely to result in a Material Adverse Effect. Each PRC
Entity has applied for and obtained all requisite business licenses, clearances
and permits required under PRC laws and regulations as necessary for the conduct
of its businesses, and each PRC Entity has complied in all material respects
with all PRC laws and regulations in connection with foreign exchange, including
without limitation, carrying out all relevant filings, registrations and
applications for relevant permits with the PRC State Administration of Foreign
Exchange and any other relevant authorities, and all such permits are
in full force and effect, in each case except where the failure to hold, or
comply with, any of them is not reasonably likely to result in a Material
Adverse Effect. Except as disclosed in the Registration Statement,
the Time of Sale Disclosure Package and the Prospectus, the registered capital
of each PRC Entity has been fully paid up in accordance with the schedule of
payment stipulated in its respective articles of association, approval document,
certificate of approval and legal person business license (hereinafter referred
to as the “Establishment
Documents”) and in compliance with PRC laws and regulations, and there is
no outstanding capital contribution commitment for any PRC
Entity. The Establishment Documents of the PRC Entities have been
duly approved in accordance with the laws of the PRC and are valid and
enforceable. The business scope specified in the Establishment
Documents of each PRC Entity complies with the requirements of all relevant PRC
laws and regulations. The outstanding equity interests of each PRC
Entity is owned of record by the Company or a wholly owned subsidiary, except
for such specific entities or individuals identified as the registered holders
thereof in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus.
(iii) Except
as disclosed in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, no consents, approvals, authorizations, orders,
registrations, clearances, certificates, franchises, licenses, permits or
qualifications of or with any PRC governmental agency are required for the
Company’s or its subsidiaries’ contractual arrangements and agreements with the
PRC VIEs and their registered equity holders (the “VIE Structure”) or
the execution, delivery and performance of such contractual arrangements and
agreements (the “VIE
Structuring Documents”). None of the VIE Structuring Documents
has been revoked and, to the Company’s knowledge, no such revocation is pending
or threatened. Except as disclosed in the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus, each of the VIE Structuring
Documents has been entered into prior to the date thereof in compliance with all
applicable laws and regulations and constitutes a valid and legally binding
agreement, enforceable in accordance with its terms.
(iv) The
VIE Structure and the execution, delivery and performance of the VIE Structuring
Documents and the consummation of the transactions contemplated thereby did not
and do not (i) conflict with, or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which any PRC Entity is a party or by which any PRC Entity is bound or by which
any of the properties or assets of any PRC Entity is subject, (ii) violate
or conflict with the Establishment Documents of any PRC Entity, or
(iii) except as disclosed in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, violate or conflict with any applicable
laws, regulations, rules, orders, decrees, guidelines, notices or other
legislation of the PRC which conflict, breach, violation or imposition would, in
the cases of clauses (i) and (iii) above, either individually or in the
aggregate, have (x) a Material Adverse Effect or (y) a material adverse effect
upon the transactions contemplated herein and, in the case of clause (ii),
except as disclosed in the Registration Statement, the Time of Sale Disclosure
Package and the Prospectus.
(v) Except
as disclosed in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, the VIE Structure complies, and after the consummation of
the offering and sale of the Shares, will comply, with all applicable laws,
regulations, rules, orders, decrees, guidelines, notices or other legislation of
the PRC in which failure to comply would reasonably likely result in a Material
Adverse Effect; the VIE Structure has not been challenged by any PRC
governmental agency and there are no legal, arbitration, governmental or other
proceedings (including, without limitation, governmental investigations or
inquiries) pending before or, to the Company’s knowledge, threatened or
contemplated by any PRC governmental agency in respect of the VIE Structure; and
the Company reasonably believes that after the consummation of the offering and
sale of the Shares, the VIE Structure will not be challenged by any PRC
governmental agency.
(vi) The
Company possesses, directly or indirectly, the power to direct, or cause the
direction of, the management and policies of the PRC VIEs.
(vii) No
PRC Entity is currently prohibited, directly or indirectly, from paying any
dividends to the Company (or the Company’s subsidiary that holds the outstanding
equity interest of such PRC Entity), and no PRC VIE is currently prohibited,
directly or indirectly, from paying any of its obligations set forth in the VIE
Structuring Documents. No PRC Entity is prohibited, directly or
indirectly, from making any other distribution on such PRC Entity’s equity
capital, from repaying to the Company any loans or advances to such PRC Entity
from the Company or any of the Company’s subsidiaries.
(viii) None
of the PRC Entities nor any of their properties, assets or revenues are entitled
to any right of immunity on the grounds of sovereignty from any legal action,
suit or proceeding, from set-off or counterclaim, from the jurisdiction of any
court, from services of process, from attachment prior to or in aid of execution
of judgment, or from any other legal process or proceeding for the giving of any
relief or for the enforcement of any judgment.
(ix) No
transaction, stamp, capital or other issuance, registration, transaction,
transfer or withholding taxes or duties are payable in the PRC by or on behalf
of the Underwriters to any PRC taxing authority in connection with (i) the
issuance, sale and delivery of the Shares by the Company and the delivery of the
Shares to or for the account of the Underwriters, (ii) the purchase from
the Company and the initial sale and delivery by the Underwriters of the Shares
to purchasers thereof, or (iii) the execution and delivery of this
Agreement.
(x) Except
as disclosed in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, the Company has taken all necessary steps to comply with,
and has used its commercially reasonable efforts to ensure compliance by all of
the Company’s direct or indirect shareholders and option holders who are PRC
residents with, any applicable rules and regulations of the PRC State
Administration of Foreign Exchange of the PRC (the “SAFE Rules and
Regulations”).
(xi) Except
as disclosed in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, the Company has used its commercially reasonable efforts to
ensure compliance by each of its shareholders, option holders, directors,
officers and employees that is, or is directly or indirectly owned or controlled
by, a PRC resident or citizen with any applicable rules and regulations of the
relevant PRC government agencies (including but not limited to the PRC Ministry
of Commerce, the PRC National Development and Reform Commission and the PRC
State Administration of Foreign Exchange) relating to overseas investment by PRC
residents and citizens (the “PRC Overseas Investment and
Listing Regulations”).
(xii) The
Company is aware of, and has been advised as to, the content of the Rules on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors jointly
promulgated on August 8, 2006, as revised on June 22, 2009, by the PRC Ministry
of Commerce, the PRC State Assets Supervision and Administration Commission, the
PRC State Administration of Taxation, the PRC State Administration of Industry
and Commerce, the China Securities Regulatory Commission (“CSRC”) and the PRC
State Administration of Foreign Exchange of the PRC (the “M&A Rules”), in
particular the relevant provisions thereof that purport to require offshore
special purpose vehicles controlled directly or indirectly by PRC-incorporated
companies or PRC residents and established for the purpose of obtaining a stock
exchange listing outside of the PRC to obtain the approval of the CSRC prior to
the listing and trading of their securities on any stock exchange located
outside of the PRC.
(xiii) To
the knowledge of the Company, each of the PRC Entities is in compliance with all
requirements under all applicable PRC laws and regulations to qualify for their
exemptions from enterprise income tax or other income tax benefits (the “Tax Benefits”) as
described in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, and the actual operations and business activities of each such
PRC Entity are sufficient to meet the qualifications for the Tax
Benefits. No submissions made to any PRC government authority in
connection with obtaining the Tax Benefits contained any misstatement or
omission that would, to the knowledge of the Company, have affected the granting
of the Tax Benefits. No PRC Entity has received notice of any
deficiency in its respective applications for the Tax Benefits, and the Company
is not aware of any reason why any such PRC Entity might not qualify for, or be
in compliance with the requirements for, the Tax Benefits.
(xiv) To
the knowledge of the Company, all local and national PRC governmental tax
holidays, exemptions, waivers, financial subsidies, and other local and national
PRC tax relief, concessions and preferential treatment enjoyed by any PRC Entity
as described in the Registration Statement, the Time of Disclosure Package and
the Prospectus are valid, binding and enforceable.
5. Purchase,
Sale and Delivery of Shares.
(a) On
the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the Company agrees to
issue and sell the Underwritten Shares to the Underwriters, and the Underwriters
agree to purchase the Underwritten Shares. The purchase price for
each Underwritten Share shall be $8.3125 per share (the “Per Share
Price”).
(c) The
Underwritten Shares will be delivered by the Company to the Underwriters against
payment of the purchase price therefor by wire transfer of same day funds
payable to the order of the Company at the offices of Xxxx Capital Partners,
LLC, 00 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX 00000, or such other location as may
be mutually acceptable, at 6:00 a.m. PST, on the third (or if the Underwritten
Shares are priced, as contemplated by Rule 15c6-1(c) under the Exchange Act,
after 4:30 p.m. Eastern time, the fourth) full business day following the date
hereof, or at such other time and date as the Underwriters and the Company
determine pursuant to Rule 15c6-1(a) under the Exchange Act, or, in the case of
the Additional Shares, at such date and time set forth in the Option
Notice. The time and date of delivery of the Underwritten Shares or
the Additional Shares, as applicable, is referred to herein as the “Closing
Date.” Delivery of the Underwritten Shares or the Additional
Shares, as applicable shall be made on the applicable Closing Date through the
electronic DWAC facilities of Interwest Transfer Company, Inc., and such Shares
shall be registered in such name or names and shall be in such denominations, as
instructed by the Underwriters.
6. Covenants.
(a) The
Company covenants and agrees with the Underwriters as follows:
(i) During
the period beginning on the date hereof and ending on the later of the Closing
Date or such date as determined by the Underwriters the Prospectus is no longer
required by law to be delivered in connection with sales by an underwriter or
dealer (the “Prospectus Delivery
Period”), prior to amending or supplementing the Registration Statement,
including any Rule 462 Registration Statement, the Time of Sale Disclosure
Package or the Prospectus, the Company shall furnish to the Underwriters for
review and comment a copy of each such proposed amendment or supplement, and the
Company shall not file any such proposed amendment or supplement to which the
Underwriters reasonably object.
(ii) From
the date of this Agreement until the end of the Prospectus Delivery Period, the
Company shall promptly advise the Underwriters in writing (A) of the receipt of
any comments of, or requests for additional or supplemental information from,
the Commission, (B) of the time and date of any filing of any post-effective
amendment to the Registration Statement or any amendment or supplement to the
Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus, (C) of the time and date that any post-effective amendment to the
Registration Statement becomes effective, and (D) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending its use or the use of the
Time of Sale Disclosure Package or any Issuer Free Writing Prospectus, or of any
proceedings to remove, suspend or terminate from listing or quotation the Common
Stock from any securities exchange upon which it is listed for trading or
included or designated for quotation, or of the threatening or initiation of any
proceedings for any of such purposes. If the Commission shall enter
any such stop order at any time during the Prospectus Delivery Period, the
Company will use its reasonable efforts to obtain the lifting of such order at
the earliest possible moment. Additionally, the Company agrees that
it shall comply with the provisions of Rules 424(b), 430A and 430B, as
applicable, under the Securities Act and will use its reasonable efforts to
confirm that any filings made by the Company under Rule 424(b) or Rule 433 were
received in a timely manner by the Commission (without reliance on Rule
424(b)(8) or 164(b) of the Securities Act).
(iii) (A)
During the Prospectus Delivery Period, the Company will comply with all
requirements imposed upon it by the Securities Act, as now and hereafter
amended, and by the Rules and Regulations, as from time to time in force, and by
the Exchange Act, as now and hereafter amended, so far as necessary to permit
the continuance of sales of or dealings in the Shares as contemplated by the
provisions hereof, the Time of Sale Disclosure Package, the Registration
Statement and the Prospectus. If during such period any event occurs
the result of which the Prospectus (or if the Prospectus is not yet available to
prospective purchasers, the Time of Sale Disclosure Package) would include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances then existing,
not misleading, or if during such period it is necessary or appropriate in the
opinion of the Company or its counsel or the Underwriters or their counsel to
amend the Registration Statement or supplement the Prospectus (or if the
Prospectus is not yet available to prospective purchasers, the Time of Sale
Disclosure Package) to comply with the Securities Act or to file under the
Exchange Act any document that would be deemed to be incorporated by reference
in the Prospectus in order to comply with the Securities Act or the Exchange
Act, the Company will promptly notify the Underwriters and will amend the
Registration Statement or supplement the Prospectus (or if the Prospectus is not
yet available to prospective purchasers, the Time of Sale Disclosure Package) or
file such document (at the expense of the Company) so as to correct such
statement or omission or effect such compliance.
(B) If
at any time following the issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development the result of which such Issuer Free
Writing Prospectus conflicted or would conflict with the information contained
in the Registration Statement, the Time of Sale Disclosure Package or the
Prospectus or included or would include an untrue statement of a material fact
or omitted or would omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances prevailing at that
subsequent time, not misleading, the Company has promptly notified or promptly
will notify the Underwriters and has promptly amended or will promptly amend or
supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or omission.
(iv) The
Company shall take or cause to be taken all necessary action to qualify the
Shares for sale under the securities laws of such jurisdictions as the
Underwriters reasonably designate and to continue such qualifications in effect
so long as required for the distribution of the Shares, except that the Company
shall not be required in connection therewith to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified, to execute a general consent to service of process in any state or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise subject.
(v) The
Company will furnish to the Underwriters and the counsel for the Underwriters
copies of the Registration Statement, each Prospectus, any Issuer Free Writing
Prospectus, and all amendments and supplements to such documents, in each case
as soon as available and in such quantities as the Underwriters may from time to
time reasonably request.
(vi) The
Company will make generally available to its security holders as soon as
practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement (which need not be
audited) covering a 12-month period that shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Rules and
Regulations.
(vii) The
Company, whether or not the transactions contemplated hereunder are consummated
or this Agreement is terminated, will pay or cause to be paid (A) all
expenses (including transfer taxes allocated to the respective transferees)
incurred in connection with the delivery to the Underwriters of the Shares, (B)
all expenses and fees (including, without limitation, fees and expenses of the
Company’s counsel and accountants) in connection with the preparation, printing,
filing, delivery, and shipping of the Registration Statement (including the
financial statements therein and all amendments, schedules, and exhibits
thereto), the Shares, the Time of Sale Disclosure Package, the Prospectus, any
Issuer Free Writing Prospectus and any amendment thereof or supplement thereto,
(C) all reasonable filing fees in connection with the qualification of the
Shares for offering and sale by the Underwriters or by dealers under the
securities or blue sky laws of the states and other jurisdictions that the
Underwriters shall designate, (D) the fees and expenses of any transfer agent or
registrar, (E) listing fees, if any, and (F) filing fees with the Financial
Industry Regulatory Authority. The Underwriters shall bear and be responsible
for the legal costs and expenses of the offering customarily borne by
underwriters for transactions of the type set forth herein including, without
limitation, the fees and disbursements of their legal counsel(s) and their own
associated with the roadshow.
(viii) The
Company intends to apply the net proceeds from the sale of the Shares to be sold
by it hereunder for the purposes set forth in the Time of Sale Disclosure
Package and in the Prospectus.
(ix) The
Company will not take, directly or indirectly, during the Prospectus Delivery
Period, any action designed to or which might reasonably be expected to cause or
result in, or that has constituted, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares.
(x) The
Company represents and agrees that, unless it obtains the prior written consent
of Xxxx, and the Underwriters represent and agree that, unless they obtain the
prior written consent of the Company, they have not made and will not make any
offer relating to the Shares that would constitute an Issuer Free Writing
Prospectus; provided that the prior written consent of the parties hereto shall
be deemed to have been given in respect of the free writing prospectuses
included in Schedule
I. Any such free writing prospectus consented to by the
Company and the Underwriters is hereinafter referred to as a “Permitted Free Writing
Prospectus.” The Company represents that it has treated or
agrees that it will treat each Permitted Free Writing Prospectus as an “issuer
free writing prospectus,” as defined in Rule 433, and has complied or will
comply with the requirements of Rule 433 applicable to any Permitted Free
Writing Prospectus, including timely Commission filing where required, legending
and record-keeping.
(xi) The
Company hereby agrees that, without the prior written consent of Xxxx, it will
not, during the period ending 60 days after the date hereof (“Lock-Up Period”), (A)
offer, pledge, issue, sell, contract to sell, purchase, contract to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock; or (B) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (A) or (B)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise; or (C) file any registration statement with the Commission
relating to the offering of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock. The
restrictions contained in the preceding sentence shall not apply to (1) the
Shares to be sold hereunder, (2) the issuance of Common Stock upon
the exercise of options or warrants disclosed as outstanding in the Registration
Statement (excluding exhibits thereto) or the Prospectus, or (3) the issuance of
employee stock options not exercisable during the Lock-Up Period and the grant
of restricted stock awards or restricted stock units pursuant to equity
incentive plans described in the Registration Statement (excluding exhibits
thereto) and the Prospectus. Notwithstanding the foregoing, if (x)
the Company issues an earnings release or material news, or a material event
relating to the Company occurs, during the last 17 days of the Lock-Up Period,
or (y) prior to the expiration of the Lock-Up Period, the Company announces that
it will release earnings results during the 16-day period beginning on the last
day of the Lock-Up Period, the restrictions imposed by this clause shall
continue to apply until the expiration of the 18-day period beginning on the
issuance of the earnings release or the occurrence of the material news or
material event, unless Xxxx waives such extension in writing.
7. Conditions of the
Underwriters’ Obligations. The obligations of the Underwriters
hereunder to purchase the Shares are subject to the accuracy, as of the date
hereof and at the Closing Date (as if made at the Closing Date), of and
compliance with all representations, warranties and agreements of the Company
contained herein, the performance by the Company of its obligations hereunder
and the following additional conditions:
(a) If
the filing of the Prospectus, or any amendment or supplement thereto, or any
Issuer Free Writing Prospectus, is required under the Securities Act or the
Rules and Regulations, the Company shall have filed the Prospectus (or such
amendment or supplement) or such Issuer Free Writing Prospectus with the
Commission in the manner and within the time period so required (without
reliance on Rule 424(b)(8) or 164(b) under the Securities Act); the Registration
Statement shall remain effective; no stop order suspending the effectiveness of
the Registration Statement or any part thereof, any Rule 462 Registration
Statement, or any amendment thereof, nor suspending or preventing the use of the
Time of Sale Disclosure Package, the Prospectus or any Issuer Free Writing
Prospectus shall have been issued; no proceedings for the issuance of such an
order shall have been initiated or threatened; any request of the Commission or
the Underwriters for additional information (to be included in the Registration
Statement, the Time of Sale Disclosure Package, the Prospectus, any Issuer Free
Writing Prospectus or otherwise) shall have been complied with to the
Underwriters’ satisfaction.
(b) The
Underwriters shall not have reasonably determined, and advised the Company, that
the Registration Statement, the Time of Sale Disclosure Package or the
Prospectus, or any amendment thereof or supplement thereto, or any Issuer Free
Writing Prospectus, contains an untrue statement of fact which, in the
Underwriters’ reasonable opinion, is material, or omits to state a fact which,
in the Underwriters’ reasonable opinion, is material and is required to be
stated therein or necessary to make the statements therein not
misleading.
(c) On
the Closing Date, there shall have been furnished to the Underwriters the
opinion and negative assurance letter of DLA Piper LLP (Hong Kong), dated the
Closing Date and addressed to the Underwriters, in form and substance reasonably
satisfactory to the Underwriters, substantially to the effect set forth in Schedule II.
(d) On
the Closing Date, there shall have been furnished to the Underwriters the
opinion of Shaanxi Jiarui Law Firm, the Company’s PRC counsel, dated the
Closing Date and addressed to the Underwriters, in form and substance reasonably
satisfactory to the Underwriters, substantially to the effect set forth in Schedule III.
(e) On
the Closing Date, the Underwriters shall have received letters of Xxxxx Xxxxxxxx
Xxxxx Xxxxxx and Xxxxxx, LLP and Xxxxxx & Company Inc, each dated the
Closing Date and addressed to the Underwriters, confirming that they are
independent public accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the qualifications of
accountants under Rule 2-01 of Regulation S-X of the Commission, and confirming,
as of the date of each such letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Time of Sale Disclosure Package, as of a
date not prior to the date hereof or more than five days prior to the date of
such letter), the conclusions and findings of said firm with respect to the
financial information and other matters covered by its letter delivered to the
Underwriters concurrently with the execution of this Agreement.
(f) On
the Closing Date, there shall have been furnished to the Underwriters a
certificate, dated the Closing Date and addressed to the Underwriters, signed by
the chief executive officer and the chief financial officer of the Company, in
their capacity as officers of the Company, to the effect that:
(i) The
representations and warranties of the Company in this Agreement are true and
correct, in all material respects, as if made at and as of the Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the Closing
Date;
(ii) No
stop order or other order (A) suspending the effectiveness of the Registration
Statement or any part thereof or any amendment thereof, (B) suspending the
qualification of the Shares for offering or sale, or (C) suspending or
preventing the use of the Time of Sale Disclosure Package, the Prospectus or any
Issuer Free Writing Prospectus, has been issued, and no proceeding for that
purpose has been instituted or, to their knowledge, is contemplated by the
Commission or any state or regulatory body; and
(iii) There
has been no occurrence of any event resulting or reasonably likely to result in
a Material Adverse Effect during the period from and after the date of this
Agreement and prior to the Closing Date.
(g) On
or before the date hereof, the Underwriters shall have received duly executed
“lock-up” agreements, in substantially the form set forth in Schedule IV, with those
persons set forth on Schedule
V.
(h) The
Company shall have furnished to the Underwriters and heir counsel such
additional documents, certificates and evidence as the Underwriters or their
counsel may have reasonably requested.
If
any condition specified in this Section 7 shall not have been fulfilled when and
as required to be fulfilled, this Agreement may be terminated by the
Underwriters by notice to the Company at any time at or prior to the Closing
Date and such termination shall be without liability of any party to any other
party, except that Section 6(a)(vii) (solely to the extent of out-of-pocket
accountable expenses incurred by the Underwriters or persons associated with the
Underwriters in contemplation of performing their respective obligations
hereunder), and Section 8 shall survive any such termination and remain in full
force and effect.
8. Indemnification
and Contribution.
(a) The
Company agrees to indemnify, defend and hold harmless the Underwriters, their
respective affiliates, directors and officers and employees, and each person, if
any, who controls such Underwriters within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any
losses, claims, damages or liabilities to which the Underwriters or such person
may become subject, under the Securities Act or otherwise (including in
settlement of any litigation if such settlement is effected with the written
consent of the Company), insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, including the information deemed to be a part of the
Registration Statement at the time of effectiveness and at any subsequent time
pursuant to Rules 430A and 430B of the Rules and Regulations, the Time of Sale
Disclosure Package, the Prospectus, or any amendment or supplement thereto
(including any documents filed under the Exchange Act and deemed to be
incorporated by reference into the Registration Statement or the Prospectus), or
any Issuer Free Writing Prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and will reimburse the
Underwriters for any legal or other expense incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Time of Sale Disclosure
Package, the Prospectus, or any amendment or supplement thereto, any Issuer Free
Writing Prospectus, in reliance upon and in conformity with written information
furnished to the Company by the Underwriters specifically for use in the
preparation thereof.
(b) The
Underwriters will indemnify, defend and hold harmless the Company, its
affiliates, directors, officers and employees, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any losses, claims, damages
or liabilities to which the Company may become subject,
under the Securities Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Time of Sale Disclosure Package, the Prospectus, or any amendment
or supplement thereto, or any Issuer Free Writing Prospectus , or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, the Time of Sale Disclosure Package, the
Prospectus, or any amendment or supplement thereto, any Issuer Free Writing
Prospectus in reliance upon and in conformity with written information furnished
to the Company by such Underwriter specifically for use in
the preparation thereof, and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending against any such loss, claim, damage, liability or
action.
(c) Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the failure to notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may have to any indemnified party
except to the extent such indemnifying party has been materially prejudiced by
such failure. In case any such action shall be brought against any
indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of the indemnifying party’s election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof; provided,
however, that if (i)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(ii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party), or (iii) the indemnifying
party has not in fact employed counsel reasonably satisfactory to the
indemnified party to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, the indemnified party
shall have the right to employ a single counsel to represent it in any claim in
respect of which indemnity may be sought under subsection (a) or (b) of this
Section 8, in which event the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party or parties and reimbursed to
the indemnified party as incurred.
The
indemnifying party under this Section 8 shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement, compromise or consent to the entry of judgment in
any pending or threatened action, suit or proceeding in respect of which any
indemnified party is a party or could be named and indemnity was or would be
sought hereunder by such indemnified party, unless such settlement, compromise
or consent (a) includes an unconditional release of such indemnified party from
all liability for claims that are the subject matter of such action, suit or
proceeding and (b) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified
party.
(d) If
the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above, (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering and sale
of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Final Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters and the parties’ relevant intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriters agree that it would not be
just and equitable if contributions pursuant to this subsection (d) were to be
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the first
sentence of this subsection (d). The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending against any action or claim that is the subject
of this subsection (d). Notwithstanding the provisions of this
subsection (d), the
Underwriters shall not be required to contribute any amount in excess of the
amount of the Underwriters’ commissions referenced in the Prospectus actually
received by the Underwriters pursuant to this Agreement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The
obligations of the Company under this Section 8 shall be in addition to any
liability that the Company may otherwise have and the benefits of such
obligations shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability that the
Underwriters may otherwise have and the benefits of such obligations shall
extend, upon the same terms and conditions, to the Company, and its officers,
directors and each person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act.
(f) For
purposes of this Agreement, the Underwriters confirm, and the Company
acknowledges, that there is no information concerning the Underwriters furnished
in writing to the Company by the Underwriters specifically for preparation of or
inclusion in the Registration Statement, the Time of Sale Disclosure Package,
the Prospectus or any Issuer Free Writing Prospectus, other than the statements
set forth in the last paragraph on the cover page of the Prospectus, the
statements set forth in the “Underwriting” section of the Prospectus and Time of
Sale Disclosure Package, only insofar as such statements relate to the amount of
selling concession and re-allowance or to over-allotment and related activities
that may be undertaken by the Underwriters and the information set forth in the
Final Term Sheet portion of the cover page of the Free Writing Prospectus, in
the form attached hereto as Schedule I.
9. Representations
and Agreements to Survive Delivery. All representations,
warranties, and agreements of the Company herein or in certificates delivered
pursuant hereto, including, but not limited to, the agreements of the
Underwriters and the Company contained in Section 6(a)(vii) and Section 8
hereof, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriters or any controlling person
thereof, or the Company or any of its officers, directors, or controlling
persons, and shall survive delivery of, and payment for, the Shares to and by
the Underwriters hereunder.
10. Termination of
this Agreement.
(a) Xxxx
shall have the right to terminate this Agreement on behalf of the Underwriters
by giving notice to the Company as hereinafter specified at any time at or prior
to the Closing Date, if (i) trading in the Company’s Common Stock shall have
been suspended by the Commission or the Nasdaq Global Market or trading in
securities generally on the Nasdaq Global Market, New York Stock Exchange or
NYSE Amex shall have been suspended, (ii) minimum or maximum prices for trading
shall have been fixed, or maximum ranges for prices for securities shall have
been required, on the Nasdaq Global Market, New York Stock Exchange or NYSE
Amex, by such exchange or by order of the Commission or any other governmental
authority having jurisdiction, (iii) a banking moratorium shall have been
declared by federal or state or the PRC authorities, (iv) there shall have
occurred any attack on, outbreak or escalation of hostilities or act of
terrorism involving the United States or the PRC, any declaration by the United
States or the PRC of a national emergency or war, any change in financial
markets, any substantial change or development involving a prospective
substantial change in United States or the PRC or other international political,
financial or economic conditions or any other calamity or crisis, or (v) the
Company suffers any loss by strike, fire, flood, earthquake, accident or other
calamity, whether or not covered by insurance, the effect of which, in each case
described in this subsection (a), in Xxxx’x reasonable judgment is material and
adverse and makes it impractical or inadvisable to proceed with the completion
of the sale of and payment for the Shares. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 6(a)(vii) (solely to the extent of
out-of-pocket accountable expenses incurred by the Underwriters or persons
associated with the Underwriters in contemplation of performing their respective
obligations hereunder), and Section 8 hereof shall at all times be effective and
shall survive such termination.
(b) If
Xxxx elects to terminate this Agreement as provided in this Section, the Company
shall be notified promptly by Xxxx by telephone, confirmed by
letter.
11. Notices. Except
as otherwise provided herein, all communications hereunder shall be in writing
and, if to the Underwriters, shall be mailed, delivered or telecopied to Xxxx
Capital Partners, LLC, 00 Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxx, XX 00000, telecopy
number: (000) 000-0000, Attention: Managing Director; and if to the
Company, shall be mailed, delivered or telecopied to it at China Natural Gas,
Inc. Tang Xing Shu Ma Building, Suite 418, Tang Xing Road, Xi’an High Tech Area,
Xi’an, Shaanxi Province, The People’s Republic of China, telecopy number:
x00 00 00000000, Attention: Chief Executive Officer; or in each case
to such other address as the person to be notified may have requested in
writing. Any party to this Agreement may change such address for
notices by sending to the parties to this Agreement written notice of a new
address for such purpose.
12. Persons Entitled
to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 8. Nothing in this Agreement is intended or
shall be construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term “successors and assigns” as herein used
shall not include any purchaser, as such purchaser, of any of the Shares from
the Underwriters.
13. Absence of
Fiduciary Relationship. The Company acknowledges and agrees
that: (a) the Underwriters have been retained solely to act as underwriter in
connection with the sale of the Shares and that no fiduciary, advisory or agency
relationship between the Company and any of the Underwriters has been created in
respect of any of the transactions contemplated by this Agreement, irrespective
of whether any of the Underwriters has advised or is advising the Company on
other matters; (b) the price and other terms of the Shares set forth in this
Agreement were established by the Company following discussions and arms-length
negotiations with the Underwriters and the Company is capable of evaluating and
understanding and understands and accepts the terms, risks and conditions of the
transactions contemplated by this Agreement; (c) it has been advised that the
Underwriters and their respective affiliates are engaged in a broad range of
transactions that may involve interests that differ from those of the Company
and neither of the Underwriters has any obligation to disclose such interest and
transactions to the Company by virtue of any fiduciary, advisory or agency
relationship; (d) it has been advised that the Underwriters are acting, in
respect of the transactions contemplated by this Agreement, solely for the
benefit of the Underwriters, and not on behalf of the Company.
14. Amendments and
Waivers. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall
not be deemed to or otherwise constitute a waiver of such right or remedy in the
future. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (regardless of
whether similar), nor shall any such waiver be deemed or constitute a continuing
waiver unless otherwise expressly provided.
15. Partial
Unenforceability. The invalidity or unenforceability of any
section, paragraph, clause or provision of this Agreement shall not affect the
validity or enforceability of any other section, paragraph, clause or
provision.
16. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17. Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission and
electronic mail attaching a portable document file (.pdf)) in one or more
counterparts and, if executed and delivered in more than one counterpart, the
executed counterparts shall each be deemed to be an original and all such
counterparts shall together constitute one and the same instrument.
Please
sign and return to the Company the enclosed duplicates of this letter whereupon
this letter will become a binding agreement between the Company and the
Underwriters in accordance with its terms.
Very
truly yours,
By: /s/ Qinan Ji
Name:
Qinan Ji
Title:
Chief Executive Officer
Confirmed
as of the date first above-
mentioned
by the Underwriter.
XXXX
CAPITAL PARTNERS, LLC
By: /s/ Xxxxx X.
Xxxxxxxx
Name:
Xxxxx X.
Xxxxxxxx
Title:
Head of Equity Capital
Markets
XXXXXXX
& COMPANY INTERNATIONAL
By: /s/ Xxx X. Xxxxx
Xx.
Name:
Xxx X. Xxxxx
Xx.
Title:
Managing
Director
SCHEDULE
I
FREE
WRITING PROSPECTUS
Filed
Pursuant to Rule 433
Supplementing
the Preliminary Prospectus Supplement dated September 1, 2009
Registration
Statement No. 333-160150
Dated
September 2, 0000
XXXXX
NATURAL GAS, INC.
5,725,000
Shares of Common Stock
Final
Term Sheet
|
Issuer:
|
China
Natural Gas, Inc (the “Company”)
|
|
Security:
|
Common
stock, par value $0.0001 per share
|
|
Size:
|
5,725,000
shares of common stock
|
|
Over-allotment
option:
|
858,750
additional shares of common stock
|
|
Public
offering price:
|
$8.75
per share
|
|
Underwriting
discounts and commissions:
|
$0.4375
per share
|
|
Net
proceeds (excluding the over-allotment):
|
$[47,589,063]1 (after deducting the underwriters’
discounts and commissions and estimated offering expenses payable by the
Company)
|
|
Form
of Offering:
|
Firm
commitment underwritten public offering pursuant to a registration
statement of Form S-3 that was filed on June 22, 2009 and declared
effective on August 20, 2009
|
|
Listing:
|
The
Shares are listed on the NASDAQ Global Market under the symbol
“CHNG”
|
|
Trade
date:
|
September
3, 2009
|
|
Settlement
date:
|
September
9, 2009
|
|
Underwriters:
|
Xxxx
Capital Partners, LLC and Xxxxxxx & Company
International
|
|
[In
addition to the foregoing information, the free writing prospectus will
include capitalization and other information that relates to or is
affected by the sale of the Shares]
|
|
The
issuer has filed a registration statement (including a prospectus) with the SEC
for the offering to which this communication relates. Before you
invest, you should read the prospectus in that registration statement and other
documents the issuer has filed with the SEC for more complete information about
the issuer and this offering. You may obtain these documents for free
from the SEC Web site at xxx.xxx.xxx. Alternatively,
the issuer, any underwriter or any dealer participating in the offering will
arrange to send you the prospectus if you request it from Xxxx Capital Partners,
LLC, Attention: Equity Capital Markets, 00 Xxxxxxxxx Xxxxx Xxxxx, Xxxxxxx Xxxxx,
XX, 00000, by telephone at 0-000-000-0000, by e-mail to xxxxxxx@xxxx.xxx, or by
fax to (000) 000-0000.
SCHEDULE
II
Company
Opinions
|
|
1.
|
The
Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware with the
requisite corporate power and authority necessary to own or lease, as the
case may be, and operate its properties and to conduct its business as it
is described in the Registration Statement and the
Prospectus.
|
|
|
2.
|
The
statements in the Prospectus under the caption "Description of Securities"
and in the Registration Statement in Part II, Item 15, to the extent they
purport to summarize legal matters, agreements or documents discussed
therein, fairly summarize such legal matters, agreements or documents in
all material respects.
|
|
|
3.
|
The
issuance of the Securities has been duly and validly authorized by the
Company and, when issued and sold by the Company and paid for in
accordance with the terms of the Underwriting Agreement, the Shares will
be validly issued, fully paid and
non-assessable.
|
|
|
4.
|
Except
for rights that have been expressly waived and except as disclosed in the
Registration Statement and the Prospectus, there are no preemptive rights,
right of first offer, right of first refusal or other similar rights to
subscribe for or to purchase any Securities pursuant to (i) the
Organizational Documents or (ii) the Material
Agreements.
|
|
|
5.
|
To
our knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by the Underwriting
Agreement triggers any rights for or relating to the registration of any
shares of Common Stock or other securities of the Company, except for
rights that have been expressly waived or that have failed to be exercised
within the time or times required under the terms and conditions of such
right.
|
|
|
6.
|
The
Registration Statement has become effective under the Securities Act, and
we have been orally advised by the Staff of the Commission that no stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereof has been issued by the Commission and, to
our knowledge, no proceeding for that purpose is pending before or is
threatened by the Commission.
|
|
|
7.
|
The
Registration Statement, the Prospectus and any further amendments or
supplements thereto, each as of their respective effective or issue dates
(other than the financial statements and related notes and schedules and
other financial, accounting, and statistical information included therein
or omitted therefrom, as to which we express no opinion), complied as to
form in all material respects with the requirements of the 1933 Act and
the regulations thereunder. Any required filing of the Prospectus and any
required supplement thereto, pursuant to Rule 424(b) under the Securities
Act, has been made in the manner and within the time period required by
Rule 424(b).
|
|
|
8.
|
The
Underwriting Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered
by the Company.
|
|
|
9.
|
The
execution and delivery of the Underwriting Agreement by the Company and
the issuance and sale by the Company of the Shares and the consummation at
the Closing by the Company of the transactions contemplated by the
Underwriting Agreement do not, and will not, (a) violate any provision of
the Organizational Documents, (b) violate any U.S. federal statute, rule
or regulation which in our experience is typically applicable to
transactions of the nature contemplated by the Underwriting Agreement and
is applicable to the Company or Delaware General Corporation Law ("Delaware Law") (other
than regarding the state securities or "blue sky" laws and rules of FINRA,
as to which we express no opinion and provide no related statement), (c)
violate any decree, judgment or order known to us to have been entered
against the Company, or (d) result in a breach or default under (nor
constitute any event that with notice, lapse of time or both would result
in any breach or default under), or conflict with any provision of any
material license, permit, indenture, mortgage, deed of trust, note, bank
loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement filed pursuant to Item
601(b)(10) of Regulation S-K as an exhibit to, or incorporated by
reference into, the Company's annual report on Form 10-K for the year
ended December 31, 2008 (the "Material Agreements"),
in the case of (b) through (d), the violation, breach or default of which
would have a Material Adverse Effect on the
Company.
|
|
|
10.
|
The
Company is not, and will not be after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as
described in the Prospectus under the caption "Use of Proceeds", required
to register as an "investment company" as defined in the Investment
Company Act of 1940, as amended.
|
|
|
11.
|
Except
for such as have been duly obtained or made, and except for such consents,
approvals, authorizations, registrations or qualifications as may be
required under the bylaws or rules or regulations of FINRA and applicable
state securities or "blue sky" laws (as to which we express no opinion and
provide no related statement), no approval, authorization, consent, order,
qualification of or with any U.S. federal, Delaware corporate
or governmental agency, court or body, or approval of the
stockholders of the Company, is required in connection with the execution
and delivery of the Underwriting Agreement by the Company or the
performance by the Company of its obligations under the Underwriting
Agreement.
|
Negative
Assurance
In the
course of the preparation by the Company of the Registration Statement and the
Prospectus, we have participated in discussions with representatives of the
Underwriters, PRC and U.S. counsel to the Underwriters, and certain officers and
other representatives of the Company, in which the business and affairs of the
Company were discussed. Although we have not undertaken (except to
the extent stated in opinion paragraphs 2 and 7 of our legal opinion of even
date herewith) to determine independently, and do not assume any responsibility
for, the accuracy, completeness or fairness of the statements contained in the
Registration Statement, the Prospectus or the Time of Sale Disclosure Package,
or any amendments or supplements thereto, nothing has come to our attention to
cause us to believe that (i) as of its effective date, the Registration
Statement or any amendment thereto contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) as of 6:00a.m. PDT
on [●], 2009 (which you have informed us is a time before the time of the first
sale of the Shares by any Underwriter), the Time of Sale Disclosure Package
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or (iii) as of its
issue date and as of the date hereof, the Prospectus or any amendment or
supplement thereto contained or contains an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (it being understood, without limitation, that we express
no statement or belief herein with respect to the financial statements and
schedules, and other financial or statistical data, included in any of the
documents mentioned in this paragraph).
SCHEDULE
III
China
Opinions
1. Xi’an
Xilan Natural Gas Equipment Ltd. (“XXNGE”) has been duly organized and is
validly existing as a wholly foreign owned enterprise with limited liability
under the PRC laws and regulations; its business license is in full force and
effect; it has been duly qualified as a foreign invested enterprise; 100% of the
equity interests of XXNGE are owned by China Natural Gas, Inc., and to our
Knowledge, such equity interests are free and clear of all liens, encumbrances,
equities or claims; and the articles of association, the business license and
other constituent documents of XXNGE comply with the requirements of applicable
PRC laws and regulations and are in full force and effect.
2. Xi’an
Xilan Natural Gas Co., Ltd. (“XXNGC”) has been duly organized and is validly
existing as a limited liability company under the PRC laws and regulations; its
business license is in full force and effect; 100% of the equity interests of
XXNGC are owned by Qinan Ji, Xiang Ji, Shaohu Jia, Xxxxxx Xxx, Xxxxxxx Xxx,
Xxxxxxxx Xxx, Xxxxxxxxx Xx, Xxxxxx Xxx, Yuai She, Liyin Shi, Jiaoyin Shi, Xi’an
Sunway Technology and Industry Co., Ltd., and to our Knowledge, such equity
interests are free and clear of all liens, encumbrances, equities or claims; and
the articles of association, the business license and other constituent
documents of XXNGC comply with the requirements of applicable PRC laws and
regulations and are in full force and effect.
3. Each
of (i) Shaanxi Jingbian Xilan LNG Co., Ltd., (ii) Henan Xilan Natural Gas Co.,
Ltd., (iii) Xi’an Xilan Auto Body Shop Co., Ltd., and (iv) Lingbao Yuxi Natural
Gas Co., Ltd. (collectively, with XXNGE and XXNGC, the “PRC Entities”) has been
duly organized and is validly existing as a limited liability company under the
PRC laws and regulations; its business license is in full force and effect; 100%
of its equity interests are owned by XXNGC, and to our Knowledge, such equity
interests are free and clear of all liens, encumbrances, equities or claims; and
the articles of association, the business license and other constituent
documents of each PRC Entity comply with the requirements of applicable PRC laws
and regulations and are in full force and effect.
4. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, each of the PRC Entities has full corporate right, power and
authority and has all necessary governmental authorizations of and from, and has
made all necessary declarations and filings with, all governmental agencies to
own, lease, license and use its properties, assets and conduct its business, and
such governmental authorizations contain no materially burdensome restrictions
or conditions; to our Knowledge, none of the PRC Entities has any reason to
believe that any regulatory body is considering modifying, suspending, revoking
or not renewing any such governmental authorizations; and each of the PRC
Entities is in compliance in all material respects with the provisions of all
such governmental authorizations and conducts its business in all material
respects in accordance with any PRC laws and regulations to which it is subject
or by which it is bound.
5. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, none of the PRC Entities has taken any action nor have any
steps been taken or legal or administrative proceedings been commenced or
threatened for the winding up, dissolution or liquidation of any of the PRC
Entities or for the suspension, withdrawal, revocation or cancellation of any of
their respective business license.
6. The
ownership structure of the PRC Entities does not violate any prohibitory
provisions of the applicable PRC laws and regulations and the transactions
conducted in the PRC involving the PRC Entities relating to the establishment of
such ownership structure, in each case, did not and do not violate any explicit
provisions of the applicable PRC laws and regulations.
7. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, each of the PRC Entities owns or otherwise has the legal
right to use, or can acquire on reasonable terms, the intellectual property
(“Intellectual Property”) as currently used or as currently contemplated to be
used by the PRC Entities.
8. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, to our Knowledge, none of the PRC Entities is infringing,
misappropriating or violating any intellectual property right of any third party
in the PRC; no Intellectual Property is subject to any outstanding decree,
order, injunction, judgment or ruling restricting the use of such Intellectual
Property in the PRC that would impair the validity or enforceability of such
Intellectual Property; and none of the Company or any of the PRC Entities has
received any notice of any claim of infringement or conflict with any such
rights of others.
9. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, there are no legal, arbitration or governmental proceedings
in progress or pending or, to our Knowledge, threatened, in the PRC to which the
Company, or any of the PRC Entities is a party or of which any property of any
of the PRC Entities is subject.
10. On
August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of
Commerce, the State Assets Supervision and Administration Commission, the State
Administration for Taxation, the State Administration for Industry and Commerce,
the China Securities Regulatory Commission (“CSRC”), and the State
Administration of Foreign Exchange, jointly adopted the Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A
Rule”), which became effective on September 8, 2006. The New M&A
Rule purports, among other things to require offshore special purpose vehicles,
or SPVs, formed for overseas listing purposes through acquisitions of PRC
domestic companies and controlled directly or indirectly by PRC companies or
individuals, to obtain the approval of the CSRC prior to publicly listing their
securities on an overseas stock exchange. On September 21, 2006, pursuant to the
New M&A Rule and other PRC laws and regulations, the CSRC, in its official
website, promulgated relevant guidance with respect to the issues of listing and
trading of domestic enterprises’ securities on overseas stock exchanges,
including a list of application materials with respect to the listing on
overseas stock exchanges by SPVs. Based on our understanding of current PRC laws
and regulations, we believe that CSRC approval is not required in respect of
this Offering.
11. Except
as set forth in the Registration Statement, the Time of Sale Disclosure Package
and the Prospectus, the current beneficial owners of the Company who are PRC
residents, have registered with the applicable local office of the SAFE in
accordance with the SAFE’s Notice on Relevant Issues Concerning Foreign Exchange
Administration for PRC Residents to Engage in Financing and Inbound Investment
via Overseas Special Purpose Vehicles, issued on October 21, 2005.
12. As
a matter of PRC laws and regulations, none of the PRC Entities or their
properties, assets or revenues has any right of immunity, on any grounds, from
any legal action, suit or proceeding, from the giving of any relief in any such
legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, attachment upon or prior to
judgment, or attachment in aid of execution of judgment, or from execution of a
judgment, or other legal process or proceeding for the giving of any relief with
respect to their respective obligations, liabilities or any other matter under
or arising out of or in connection with the transactions contemplated by the
Underwriting Agreement.
13. The
sale of the Shares and the compliance by the Company with all of the provisions
of the Underwriting Agreement and the consummation of the transactions
contemplated thereby do not result in any violation of the provisions of the
articles of association, business license or any other constituent documents of
any of the PRC Entities or any applicable statute or any order, rule or
regulation, including without limitation the New M&A Rule, of any
governmental agency having jurisdiction over any of the PRC Entities or any of
its properties. No governmental authorization of any governmental
agency in the PRC is required for the consummation of the transactions
contemplated by the Underwriting Agreement, other than those already
obtained. It is not necessary that the Underwriting Agreement, the
Registration Statement, the Time of Sale Disclosure Package, the Prospectus or
any other document be filed or recorded with any governmental agency, court or
other authority in the PRC.
14. All
local and national PRC governmental tax holidays, exemptions, waivers, financial
subsidies, and other local and national PRC tax relief, concessions and
preferential treatment enjoyed by any of the PRC Entities as described in the
Registration Statement, the Time of Disclosure Package and the Prospectus are
valid, binding and enforceable and do not violate any laws, regulations, rules,
orders, decrees, guidelines, judicial interpretations, notices or other
legislation of the PRC.
15. The
entry into, and performance or enforcement of the Underwriting Agreement in
accordance with its terms will not subject the Underwriter to any requirement to
be licensed or otherwise qualified to do business in the PRC, nor will the
Underwriter be deemed to be resident, domiciled, carrying on business or subject
to taxation through an establishment or place in the PRC or in breach of any
laws or regulations in the PRC by reason of entry into, performance or
enforcement of the Underwriting Agreement or any transaction contemplated by the
Registration Statement, the Time of Sale Disclosure Package or the
Prospectus.
16. No
stamp or other issuance or transfer taxes or duties and no capital gains,
income, withholding or other taxes are payable by the Underwriter to the
government of the PRC or to any political subdivision or taxing authority
thereof or therein in connection with the execution and delivery of the
Underwriting Agreement, the sale and delivery by the Company of the Shares to or
for the account of the Underwriter, the sale and delivery outside the PRC by the
Underwriter of the Shares to the purchasers thereof in the manner contemplated
in the Underwriting Agreement, or the consummation of any other transaction
contemplated in the Underwriting Agreement.
Although
we do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus, we have no reason to believe, that (i)
when it became of effective, any part of the Registration Statement (other than
the financial statements and related schedules therein, as to which we express
no opinion) describing or summarizing PRC laws and regulations or documents,
agreements or proceedings governed by PRC laws and regulations contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; (ii) as of the date of
the Underwriting Agreement and the date hereof, any part of the Time of Sale
Disclosure Package (other than the financial statements and related schedules
therein, as to which we express no opinion) describing or summarizing PRC laws
and regulations or documents, agreements or proceedings governed by PRC laws and
regulations contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements therein not
misleading; or (iii) at the time the Prospectus was filed with the Commission or
at the date hereof, any part of the Prospectus (other than the financial
statements and related schedules therein, as to which we express no opinion)
describing or summarizing PRC laws and regulations or documents, agreements or
proceedings governed by PRC laws and regulations contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein not misleading.
The term
“Knowledge” as used in this opinion shall mean the actual knowledge of the
attorneys who have been directly involved in representing the Company after due
and reasonable inquiry.
SCHEDULE
IV
Lock-Up
Agreement
___________
__, 2009
Xxxx
Capital Partners, LLC
00
Xxxxxxxxx Xxxxx
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Ladies
and Gentlemen:
The
undersigned understands that Xxxx Capital Partners, LLC (the “RCP” or “Underwriter”) proposes to
enter into an Underwriting Agreement (the “Underwriting Agreement”) with
China Natural Gas, Inc., a Delaware corporation (the “Company”), providing for the
public offering (the “Public
Offering”) by the Underwriter of shares (the “Shares”) of the common stock,
par value $0.0001 per share, of the Company (the “Common Stock”).
To induce
the underwriters that may participate in the Public Offering to continue their
efforts in connection with the Public Offering, the undersigned hereby agrees
that, without the prior written consent of RCP, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the final
prospectus supplement relating to the Public Offering (the “Prospectus”) (the “Lock-Up Period”), (1) offer,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or (2) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) a
pledge of our Common Stock or securities convertible into or exchangeable for
shares of Common Stock, (b) transactions relating to shares of Common Stock or
other securities acquired in open market transactions after the completion of
the Public Offering,
provided that no filing under Section 16(a) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) shall be
required or shall be voluntarily made in connection with subsequent sales of
Common Stock or other securities acquired in such open market transactions, or
(c) transfers of shares of Common Stock or any security convertible into Common
Stock as a bona fide gift, by will or intestacy or to a family member or trust
for the benefit of a family member; provided that in the case of
any transfer or distribution pursuant to clause (c), (i) each donee or
distributee shall sign and deliver a lock-up letter substantially in the form of
this letter and (ii) no filing under Section 16(a) of the Exchange Act,
reporting a reduction in beneficial ownership of shares of Common Stock, shall
be required or shall be voluntarily made during the Lock-up
Period. In addition, the undersigned agrees that, without the prior
written consent of RCP, it will not, during the period commencing on the date
hereof and ending 180 days after the date of the Prospectus, make any demand for
or exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company’s transfer agent and registrar against
the transfer of the undersigned’s shares of Common Stock except in compliance
with the foregoing restrictions.
If (i)
the Company issues an earnings release or material news, or a material event
relating to the Company occurs, during the last 17 days of the Lock-Up Period,
or (ii) prior to the expiration of the Lock-Up Period, the Company announces
that it will release earnings results during the 16-day period beginning on the
last day of the Lock-Up Period, the restrictions imposed by this agreement shall
continue to apply until the expiration of the 18-day period beginning on the
issuance of the earnings release or the occurrence of the material news or
material event, unless RCP waives such extension.
No
provision in this agreement shall be deemed to restrict or prohibit the exercise
or exchange by the undersigned of any option or warrant to acquire shares of
Common Stock, or securities exchangeable or exercisable for or convertible into
Common Stock, provided
that the undersigned does not transfer the Common Stock acquired on such
exercise or exchange during the Lock-Up Period, unless otherwise permitted
pursuant to the terms of this agreement. In addition, no provision
herein shall be deemed to restrict or prohibit the entry into or modification of
a so-called “10b5-1” plan at any time (other than the entry into or modification
of such a plan in such a manner as to cause the sale of any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock within the Lock-Up Period).
The
undersigned understands that the Company and the Underwriter are relying upon
this agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this agreement is
irrevocable and shall be binding upon the undersigned’s heirs, legal
representatives, successors and assigns.
The
undersigned understands that, if the Underwriting Agreement is not executed by
September 30, 2009, or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Stock to be sold thereunder, the
undersigned shall be released from all obligations under this letter
agreement.
Whether
or not the Public Offering actually occurs depends on a number of factors,
including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriter.
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SCHEDULE
V
Persons
Subject to Lock-Up Agreements
Qinan
Ji
