THIS AGREEMENT RELATES TO AN OFFERING OF SECURITIES IN AN OFFSHORE TRANSACTION
TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE 1933
ACT) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"). NONE OF THE SECURITIES TO WHICH THIS AGREEMENT RELATES
HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND,
UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN
THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE
CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 6th day of December, 2005
AMONG:
COVENTURE INTERNATIONAL INC., a corporation formed pursuant to the
laws of the State of Delaware and having an office for business
located at 000 Xxxxx Xxxxxx Xxxx, Xxxxx 000, XX Xxx 0000, Xxxxxxxx,
Xxxxxxx Xxxxxx X0X 0X0
("Coventure")
AND:
XIAN XILAN NATURAL GAS CO., LTD., a company formed pursuant to the
laws of the People's Republic of China and having an office for
business located at Tang Xing Shu Ma Building, Suite 418, Tang Xing
Road, Xian High Tech Area, Xian, Shaanxi Province, China
("Xilan Natural Gas")
AND:
The shareholders of Xilan Natural Gas, each of whom are set forth on
the signature page of this Agreement
(the "Xilan Natural Gas Shareholders")
WHEREAS:
A. The Xilan Natural Gas Shareholders own 69,000,000 registered shares of Xilan
Natural Gas, constututing 100% of the presently issued and outstanding Xilan
Natural Gas Shares;
B. Coventure is a reporting company whose common stock is quoted on the NASD
"Bulletin Board"; and
C. The respective Boards of Directors of Coventure, and Xilan Natural Gas deem
it advisable and in the best interests of Coventure and Xilan Natural Gas that
Xilan Natural Gas become a wholly-owned subsidiary of Coventure (the
"Acquisition") pursuant to this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement the following terms will have the following meanings:
(a) "Acquisition" means the Acquisition, at the Closing, of Xilan Natural
Gas by Coventure pursuant to this Agreement;
(b) "Acquisition Shares" means the 4,000,000 Coventure Common Shares to be
issued to the Xilan Natural Gas Shareholders at Closing pursuant to
the terms of the Acquisition;
(c) "Agreement" means this share purchase agreement among Coventure, Xilan
Natural Gas, and the Xilan Natural Gas Shareholders;
(d) "Closing" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 9 hereof;
(e) "Closing Date" means the day on which all conditions precedent to the
completion of the transaction as contemplated hereby have been
satisfied or waived;
(f) "Coventure Accounts Payable and Liabilities" means all accounts
payable and liabilities of Coventure, on a consolidated basis, due and
owing or otherwise constituting a binding obligation of Coventure and
its subsidiaries (other than a Coventure Material Contract) as of July
31, 2005 as set forth is Schedule "B" hereto;
(g) "Coventure Accounts Receivable" means all accounts receivable and
other debts owing to Coventure, on a consolidated basis, as of July
31, 2005 as set forth in Schedule "C" hereto;
(h) "Coventure Assets" means the undertaking and all the property and
assets of the Coventure Business of every kind and description
wheresoever situated including, without limitation, Coventure
Equipment, Coventure Inventory, Coventure Material Contracts,
Coventure Accounts Receivable, Coventure Cash, Coventure Intangible
Assets and Coventure Goodwill, and all credit cards, charge cards and
banking cards issued to Coventure;
2
(i) "Coventure Bank Accounts" means all of the bank accounts, lock boxes
and safety deposit boxes of Coventure and its subsidiaries or relating
to the Coventure Business as set forth in Schedule "D" hereto;
(j) "Coventure Business" means all aspects of any business conducted by
Coventure and its subsidiaries;
(k) "Coventure Cash" means all cash on hand or on deposit to the credit of
Coventure and its subsidiaries on the Closing Date;
(l) "Coventure Common Shares" means the shares of common stock in the
capital of Coventure;
(m) "Coventure Debt to Related Parties" means the debts owed by Coventure
to any affiliate, director or officer of Coventure as described in
Schedule "E" hereto;
(n) "Coventure Equipment" means all machinery, equipment, furniture, and
furnishings used in the Coventure Business, including, without
limitation, the items more particularly described in Schedule "F"
hereto;
(o) "Coventure Financial Statements" means, collectively, the audited
consolidated financial statements of Coventure for the two fiscal
years ended July 31, 2005, together with the unqualified auditors'
report thereon, true copies of which are attached as Schedule "A"
hereto;
(p) "Coventure Goodwill" means the goodwill of the Coventure Business
including the right to all corporate, operating and trade names
associated with the Coventure Business, or any variations of such
names as part of or in connection with the Coventure Business, all
books and records and other information relating to the Coventure
Business, all necessary licenses and authorizations and any other
rights used in connection with the Coventure Business;
(q) "Coventure Insurance Policies" means the public liability insurance
and insurance against loss or damage to the Coventure Assets and the
Coventure Business as described in Schedule "G" hereto;
(r) "Coventure Intangible Assets" means all of the intangible assets of
Coventure and its subsidiaries, including, without limitation,
Coventure Goodwill, all trademarks, logos, copyrights, designs, and
other intellectual and industrial property of Coventure and its
subsidiaries;
(s) "Coventure Inventory" means all inventory and supplies of the
Coventure Business as of July 31, 2005, as set forth in Schedule "H"
hereto;
(t) "Coventure Material Contracts" means the burden and benefit of and the
right, title and interest of Coventure and its subsidiaries in, to and
under all trade and non-trade contracts, engagements or commitments,
whether written or oral, to which Coventure or its subsidiaries are
entitled whereunder Coventure or its subsidiaries are obligated to pay
or entitled to receive the sum of $10,000 or more including, without
limitation, any pension plans, profit sharing plans, bonus plans, loan
agreements, security agreements, indemnities and guarantees, any
agreements with employees, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers, directors, attorneys or
others which cannot be terminated without liability on not more than
one month's notice, and those contracts listed in Schedule "I" hereto;
3
(u) "Place of Closing" means the offices of Sichenzia Xxxx Xxxxxxxx
Xxxxxxx LLP, or such other place as Coventure and Xilan Natural Gas
may mutually agree upon;
(v) "Xilan Natural Gas Accounts Payable and Liabilities" means all
accounts payable and liabilities of Xilan Natural Gas, due and owing
or otherwise constituting a binding obligation of Xilan Natural Gas
(other than a Xilan Natural Gas Material Contract) as of September 30,
2005 as set forth in Schedule "K" hereto;
(w) "Xilan Natural Gas Accounts Receivable" means all accounts receivable
and other debts owing to Xilan Natural Gas, as of September 30, 2005
as set forth in Schedule "L" hereto;
(x) "Xilan Natural Gas Assets" means the undertaking and all the property
and assets of the Xilan Natural Gas Business of every kind and
description wheresoever situated including, without limitation, Xilan
Natural Gas Equipment, Xilan Natural Gas Inventory, Xilan Natural Gas
Material Contracts, Xilan Natural Gas Accounts Receivable, Xilan
Natural Gas Cash, Xilan Natural Gas Intangible Assets and Xilan
Natural Gas Goodwill, and all credit cards, charge cards and banking
cards issued to Xilan Natural Gas;
(y) "Xilan Natural Gas Bank Accounts" means all of the bank accounts, lock
boxes and safety deposit boxes of Xilan Natural Gas or relating to the
Xilan Natural Gas Business as set forth in Schedule "M" hereto;
(z) "Xilan Natural Gas Business" means all aspects of the business
conducted by Xilan Natural Gas;
(aa) "Xilan Natural Gas Cash" means all cash on hand or on deposit to the
credit of Xilan Natural Gas on the Closing Date;
(bb) "Xilan Natural Gas Debt to Related Parties" means the debts owed by
Xilan Natural Gas and its subsidiaries to the Xilan Natural Gas
Shareholders or to any family member thereof, or to any affiliate,
director or officer of Xilan Natural Gas or the Xilan Natural Gas
Shareholders as described in Schedule "N";
(cc) "Xilan Natural Gas Equipment" means all machinery, equipment,
furniture, and furnishings used in the Xilan Natural Gas Business,
including, without limitation, the items more particularly described
in Schedule "O" hereto;
(dd) "Xilan Natural Gas Financial Statements" means collectively, the
audited consolidated financial statements of Xilan Natural Gas for two
year period ended December 31, 2004, together with the reviewed
financial statements for the nine month period ended September 30,
2005, true copies of which are attached as Schedule "J" hereto;
(ee) "Xilan Natural Gas Goodwill" means the goodwill of the Xilan Natural
Gas Business together with the exclusive right of Coventure to
represent itself as carrying on the Xilan Natural Gas Business in
succession of Xilan Natural Gas subject to the terms hereof, and the
right to use any words indicating that the Xilan Natural Gas Business
4
is so carried on including the right to use the name "Xilan Natural
Gas" or "Xilan Natural Gas International" or any variation thereof as
part of the name of or in connection with the Xilan Natural Gas
Business or any part thereof carried on or to be carried on by Xilan
Natural Gas, the right to all corporate, operating and trade names
associated with the Xilan Natural Gas Business, or any variations of
such names as part of or in connection with the Xilan Natural Gas
Business, all telephone listings and telephone advertising contracts,
all lists of customers, books and records and other information
relating to the Xilan Natural Gas Business, all necessary licenses and
authorizations and any other rights used in connection with the Xilan
Natural Gas Business;
(ff) "Xilan Natural Gas Insurance Policies" means the public liability
insurance and insurance against loss or damage to Xilan Natural Gas
Assets and the Xilan Natural Gas Business as described in Schedule "P"
hereto;
(gg) "Xilan Natural Gas Intangible Assets" means all of the intangible
assets of Xilan Natural Gas, including, without limitation, Xilan
Natural Gas Goodwill, all trademarks, logos, copyrights, designs, and
other intellectual and industrial property of Xilan Natural Gas and
its subsidiaries;
(hh) "Xilan Natural Gas Inventory" means all inventory and supplies of the
Xilan Natural Gas Business as of September 30, 2005 as set forth in
Schedule "Q" hereto;
(ii) "Xilan Natural Gas Material Contracts" means the burden and benefit of
and the right, title and interest of Xilan Natural Gas in, to and
under all trade and non-trade contracts, engagements or commitments,
whether written or oral, to which Xilan Natural Gas is entitled in
connection with the Xilan Natural Gas Business whereunder Xilan
Natural Gas is obligated to pay or entitled to receive the sum of
$10,000 or more including, without limitation, any pension plans,
profit sharing plans, bonus plans, loan agreements, security
agreements, indemnities and guarantees, any agreements with employees,
lessees, licensees, managers, accountants, suppliers, agents,
distributors, officers, directors, attorneys or others which cannot be
terminated without liability on not more than one month's notice, and
those contracts listed in Schedule "R" hereto;
(jj) "Xilan Natural Gas Related Party Debts" means the debts owed by the
Xilan Natural Gas Shareholders or by any family member thereof, or by
any affiliate, director or officer of Xilan Natural Gas or the Xilan
Natural Gas Shareholders, to Xilan Natural Gas as described in
Schedule "S"; and
(kk) "Xilan Natural Gas Shares" means all of the issued and outstanding
shares of Xilan Natural Gas's equity stock.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
Captions and Section Numbers
1.2 The headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
5
Section References and Schedules
1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
Information concerning Coventure
Schedule "A" Coventure Financial Statements
Schedule "B" Coventure Accounts Payable and Liabilities
Schedule "C" Coventure Accounts Receivable
Schedule "D" Coventure Bank Accounts
Schedule "E" Coventure Debts to Related Parties
Schedule "F" Coventure Equipment
Schedule "G" Coventure Insurance Policies
Schedule "H" Coventure Inventory
Schedule "I" Coventure Material Contracts
Information concerning Xilan Natural Gas
Schedule "J" Xilan Natural Gas Financial Statements
Schedule "K" Xilan Natural Gas Accounts Payable and Liabilities
Schedule "L" Xilan Natural Gas Accounts Receivable
Schedule "M" Xilan Natural Gas Bank Accounts
Schedule "N" Xilan Natural Gas Debts to Related Parties
Schedule "O" Xilan Natural Gas Equipment
Schedule "P" Xilan Natural Gas Insurance Policies
Schedule "Q" Xilan Natural Gas Inventory
Schedule "R" Xilan Natural Gas Material Contracts
Schedule "S" Xilan Natural Gas Related Party Debts
Severability of Clauses
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
ARTICLE 2
THE ACQUISITION
Sale of Shares
2.1 The Xilan Natural Gas Shareholders hereby agree to sell to Coventure the
Xilan Natural Gas Shares in exchange for the Acquisition Shares on the Closing
Date and to transfer to Coventure on the Closing Date a 100% undivided interest
in and to the Xilan Natural Gas Shares free from all liens, mortgages, charges,
pledges, encumbrances or other burdens with all rights now or thereafter
attached thereto.
6
Allocation of Consideration
2.2 The Acquisition Shares shall be allocated to the Xilan Natural Gas
Shareholders, as set forth on Schedule 2.2 attached hereto and made a part
hereof.
Adherence with Applicable Securities Laws
2.3 The Xilan Natural Gas Shareholders agree that they are acquiring the
Acquisition Shares for investment purposes and will not offer, sell or otherwise
transfer, pledge or hypothecate any of the Acquisition Shares issued to them
(other than pursuant to an effective Registration Statement under the Securities
Act of 1933, as amended) directly or indirectly unless:
(a) the sale is to Coventure;
(b) the sale is made pursuant to the exemption from registration under the
Securities Act of 1933, as amended, provided by Rule 144 thereunder;
or
(c) the Acquisition Shares are sold in a transaction that does not require
registration under the Securities Act of 1933, as amended, or any
applicable United States state laws and regulations governing the
offer and sale of securities, and the vendor has furnished to
Coventure an opinion of counsel to that effect or such other written
opinion as may be reasonably required by Coventure.
The Xilan Natural Gas Shareholders acknowledge that the certificates
representing the Acquisition Shares shall bear the following legend:
"THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO
PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN)
PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). ACCORDINGLY, NONE
OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE
BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE
SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE
OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR
INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH
CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH
THE 1933 ACT."
The Xilan Natural Gas Shareholders further represent and acknowledge that:
(a) The Xilan Natural Gas Shareholders are located outside the United
States;
7
(b) The Xilan Natural Gas Shareholders are not aware of any advertisement
of any of the shares be issued hereunder;
(c) The Xilan Natural Gas Shareholders will not acquire the shares as a
result of and will not itself engage in, any "directed selling efforts" (as
defined in Regulation S under the 0000 Xxx) in the United States in respect of
the shares which would include any activities undertaken for the purpose of, or
that could reasonably be expected to have the effect of, conditioning the market
in the United States for the resale of the shares; provided, however, that the
Xilan Natural Gas Shareholders may sell or otherwise dispose of the shares
pursuant to registration of the shares pursuant to the 1933 Act and any
applicable state and provincial securities laws or under an exemption from such
registration requirements and as otherwise provided herein;
(d) The Xilan Natural Gas Shareholders agree that the Company will refuse
to register any transfer of the shares not made in accordance with the
provisions of Regulation S, pursuant to an effective registration statement
under the 1933 Act or pursuant to an available exemption from the registration
requirements of the 1933 Act and in accordance with applicable state and
provincial securities laws; and
(e) The Xilan Natural Gas Shareholders understand and agree that offers and
sales of any of the shares, prior to the expiration of a period of one year
after the date of transfer of the shares (the "Distribution Compliance Period"),
shall only be made in compliance with the safe harbor provisions set forth in
Regulation S, pursuant to the registration provisions of the 1933 Act or an
exemption therefrom, and that all offers and sales after the Distribution
Compliance Period shall be made only in compliance with the registration
provisions of the 1933 Act or an exemption therefrom and in each case only in
accordance with all applicable securities laws;
(f) The Xilan Natural Gas Shareholders understand and agree not to engage
in any hedging transactions involving the Acquisition Shares prior to the end of
the Distribution Compliance Period unless such transactions are in compliance
with the provisions of the 1933 Act;
(g) The Xilan Natural Gas Shareholders hereby acknowledge and agree to
Coventure making a notation on its records or giving instructions to the
registrar and transfer agent of the Company in order to implement the
restrictions on transfer set forth and described herein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF COVENTURE
Representations and Warranties
3.1 Coventure hereby represents and warrants in all material respects to Xilan
Natural Gas and the Xilan Natural Gas Shareholders, with the intent that Xilan
Natural Gas and the Xilan Natural Gas Shareholders will rely thereon in entering
into this Agreement and in approving and completing the transactions
contemplated hereby, that:
8
Coventure - Corporate Status and Capacity
(a) Incorporation. Coventure is a corporation duly incorporated and
validly subsisting under the laws of the State of Delaware, and is in
good standing with the office of the Secretary of State for the State
of Delaware;
(b) Carrying on Business. Coventure conducts the business described in its
filings with the Securities and Exchange Commission and does not
conduct any other business. Coventure is duly authorized to carry on
such business in Alberta, Canada. The nature of the Coventure Business
does not require Coventure to register or otherwise be qualified to
carry on business in any other jurisdictions;
(c) Corporate Capacity. Coventure has the corporate power, capacity and
authority to own the Coventure Assets and to enter into and complete
this Agreement;
(d) Reporting Status; Listing. Coventure is required to file current
reports with the Securities and Exchange Commission pursuant to
section 12(g) of the Securities Exchange Act of 1934, the Coventure
Common Shares are quoted on the NASD "Bulletin Board", and all reports
required to be filed by Coventure with the Securities and Exchange
Commission or NASD have been timely filed;
Coventure - Capitalization
(e) Authorized Capital. The authorized capital of Coventure consists of
30,000,000 Coventure Common Shares, $0.0001 par value and 5,000,000
shares of preferred stock. $0.0001 par value, of which 7,022,200
Coventure Common Shares, and no shares of preferred stock are
presently issued and outstanding;
(f) No Option, Warrant or Other Right. No person, firm or corporation has
any agreement, option, warrant, preemptive right or any other right
capable of becoming an agreement, option, warrant or right for the
acquisition of Coventure Common Shares or for the purchase,
subscription or issuance of any of the unissued shares in the capital
of Coventure;
Coventure - Records and Financial Statements
(g) Charter Documents. The charter documents of Coventure and its
subsidiaries have not been altered since the incorporation of each,
respectively, except as filed in the record books of Coventure or its
subsidiaries, as the case may be;
(h) Corporate Minute Books. The corporate minute books of Coventure and
its subsidiaries are complete and each of the minutes contained
therein accurately reflect the actions that were taken at a duly
called and held meeting or by consent without a meeting. All actions
by Coventure and its subsidiaries which required director or
shareholder approval are reflected on the corporate minute books of
Coventure and its subsidiaries. Coventure and its subsidiaries are not
in violation or breach of, or in default with respect to, any term of
their respective Certificates of Incorporation (or other charter
documents) or By-laws.
(i) Coventure Financial Statements. The Coventure Financial Statements
present fairly, in all material respects, the assets and liabilities
(whether accrued, absolute, contingent or otherwise) of Coventure, on
a consolidated basis, as of the respective dates thereof, and the
sales and earnings of the Coventure Business during the periods
covered thereby, in all material respects and have been prepared in
substantial accordance with generally accepted accounting principles
consistently applied;
9
(j) Coventure Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of Coventure or its subsidiaries
which are not disclosed in Schedule "B" hereto or reflected in the
Coventure Financial Statements except those incurred in the ordinary
course of business since the date of the said schedule and the
Coventure Financial Statements, and neither Coventure nor its
subsidiaries have guaranteed or agreed to guarantee any debt,
liability or other obligation of any person, firm or corporation.
Without limiting the generality of the foregoing, all accounts payable
and liabilities of Coventure as of July 31, 2005, are described in
Schedule "B" hereto;
(k) Coventure Accounts Receivable. All the Coventure Accounts Receivable
result from bona fide business transactions and services actually
rendered without, to the knowledge and belief of Coventure, any claim
by the obligor for set-off or counterclaim. Without limiting the
generality of the foregoing, all accounts receivable of Coventure as
of July 31, 2005, are described in Schedule "C" hereto;
(l) Coventure Bank Accounts. All of the Coventure Bank Accounts, their
location, numbers and the authorized signatories thereto are as set
forth in Schedule "D" hereto;
(m) No Debt to Related Parties. Except as disclosed in Schedule "E"
hereto, neither Coventure nor any of its subsidiaries is, and on
Closing will not be, indebted to any affiliate, director or officer of
Coventure except accounts payable on account of bona fide business
transactions of Coventure incurred in normal course of the Coventure
Business, including employment agreements, none of which are more than
30 days in arrears;
(n) No Related Party Debt to Coventure. No director or officer or
affiliate of Coventure is now indebted to or under any financial
obligation to Coventure or any subsidiary on any account whatsoever,
except for advances on account of travel and other expenses not
exceeding $1,000 in total;
(o) No Dividends. No dividends or other distributions on any shares in the
capital of Coventure have been made, declared or authorized since the
date of Coventure Financial Statements;
(p) No Payments. No payments of any kind have been made or authorized
since the date of the Coventure Financial Statements to or on behalf
of officers, directors, shareholders or employees of Coventure or its
subsidiaries or under any management agreements with Coventure or its
subsidiaries, except payments made in the ordinary course of business
and at the regular rates of salary or other remuneration payable to
them;
(q) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting Coventure;
(r) No Adverse Events. Since the date of the Coventure Financial
Statements
(i) there has not been any material adverse change in the
consolidated financial position or condition of Coventure, its
subsidiaries, its liabilities or the Coventure Assets or any
damage, loss or other change in circumstances materially
10
affecting Coventure, the Coventure Business or the Coventure
Assets or Coventure' right to carry on the Coventure Business,
other than changes in the ordinary course of business,
(ii) there has not been any damage, destruction, loss or other event
(whether or not covered by insurance) materially and adversely
affecting Coventure, its subsidiaries, the Coventure Business or
the Coventure Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by Coventure to any of Coventure'
officers, employees or agents or any bonus, payment or
arrangement made to or with any of them,
(iv) the Coventure Business has been and continues to be carried on in
the ordinary course,
(v) Coventure has not waived or surrendered any right of material
value,
(vi) neither Coventure nor its subsidiaries have discharged or
satisfied or paid any lien or encumbrance or obligation or
liability other than current liabilities in the ordinary course
of business, and
(vii) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made.
Coventure - Income Tax Matters
(s) Tax Returns. All tax returns and reports of Coventure and its
subsidiaries required by law to be filed have been filed and are true,
complete and correct, and any taxes payable in accordance with any
return filed by Coventure and its subsidiaries or in accordance with
any notice of assessment or reassessment issued by any taxing
authority have been so paid;
(t) Current Taxes. Adequate provisions have been made for taxes payable
for the current period for which tax returns are not yet required to
be filed and there are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the filing of any
tax return by, or payment of, any tax, governmental charge or
deficiency by Coventure or its subsidiaries. Coventure is not aware of
any contingent tax liabilities or any grounds which would prompt a
reassessment including aggressive treatment of income and expenses in
filing earlier tax returns;
Coventure - Applicable Laws and Legal Matters
(u) Licenses. Coventure and its subsidiaries hold all licenses and permits
as may be requisite for carrying on the Coventure Business in the
manner in which it has heretofore been carried on, which licenses and
permits have been maintained and continue to be in good standing
except where the failure to obtain or maintain such licenses or
permits would not have a material adverse effect on the Coventure
Business;
(v) Applicable Laws. Neither Coventure nor its subsidiaries have been
charged with or received notice of breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which they are
subject or which apply to them the violation of which would have a
11
material adverse effect on the Coventure Business, and to Coventure'
knowledge, neither Coventure nor its subsidiaries are in breach of any
laws, ordinances, statutes, regulations, bylaws, orders or decrees the
contravention of which would result in a material adverse impact on
the Coventure Business;
(w) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding pending or threatened
against or relating to Coventure, its subsidiaries, the Coventure
Business, or any of the Coventure Assets nor does Coventure have any
knowledge of any deliberate act or omission of Coventure or its
subsidiaries that would form any material basis for any such action or
proceeding;
(x) No Bankruptcy. Neither Coventure nor its subsidiaries have made any
voluntary assignment or proposal under applicable laws relating to
insolvency and bankruptcy and no bankruptcy petition has been filed or
presented against Coventure or its subsidiaries and no order has been
made or a resolution passed for the winding-up, dissolution or
liquidation of Coventure or its subsidiaries;
(y) Labor Matters. Neither Coventure nor its subsidiaries are party to any
collective agreement relating to the Coventure Business with any labor
union or other association of employees and no part of the Coventure
Business has been certified as a unit appropriate for collective
bargaining or, to the knowledge of Coventure, has made any attempt in
that regard;
(z) Finder's Fees. Neither Coventure nor its subsidiaries are party to any
agreement which provides for the payment of finder's fees, brokerage
fees, commissions or other fees or amounts which are or may become
payable to any third party in connection with the execution and
delivery of this Agreement and the transactions contemplated herein;
Execution and Performance of Agreement
(aa) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate
action on the part of Coventure;
(bb) No Violation or Breach. The execution and performance of this
Agreement will not:
(i) violate the charter documents of Coventure or result in any
breach of, or default under, any loan agreement, mortgage, deed
of trust, or any other agreement to which Coventure or its
subsidiaries are party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, the Coventure Material Contracts,
or any right or rights enjoyed by Coventure or its subsidiaries,
(iii) result in any alteration of Coventure' or its subsidiaries'
obligations under any agreement to which Coventure or its
subsidiaries are party including, without limitation, the
Coventure Material Contracts,
(iv) result in the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever in favor of a third party
upon or against the Coventure Assets,
(v) result in the imposition of any tax liability to Coventure or its
subsidiaries relating to the Coventure Assets, or
(vi) violate any court order or decree to which either Coventure or
its subsidiaries are subject;
The Coventure Assets - Ownership and Condition
(cc) Business Assets. The Coventure Assets comprise all of the property and
assets of the Coventure Business, and no other person, firm or
corporation owns any assets used by Coventure or its subsidiaries in
operating the Coventure Business, whether under a lease, rental
agreement or other arrangement, other than as disclosed in Schedules
"F" or "I" hereto;
(dd) Title. Coventure or its subsidiaries are the legal and beneficial
owner of the Coventure Assets, free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed in Schedules "F" or "I"
hereto;
(ee) No Option. No person, firm or corporation has any agreement or option
or a right capable of becoming an agreement for the purchase of any of
the Coventure Assets;
(ff) Coventure Insurance Policies. Coventure and its subsidiaries maintain
the public liability insurance and insurance against loss or damage to
the Coventure Assets and the Coventure Business as described in
Schedule "G" hereto;
(gg) Coventure Material Contracts. The Coventure Material Contracts listed
in Schedule "I" constitute all of the material contracts of Coventure
and its subsidiaries;
(hh) No Default. There has not been any default in any material obligation
of Coventure or any other party to be performed under any of the
Coventure Material Contracts, each of which is in good standing and in
full force and effect and unamended (except as disclosed in Schedule
"I" hereto), and Coventure is not aware of any default in the
obligations of any other party to any of the Coventure Material
Contracts;
(ii) No Compensation on Termination. There are no agreements, commitments
or understandings relating to severance pay or separation allowances
on termination of employment of any employee of Coventure or its
subsidiaries. Neither Coventure nor its subsidiaries are obliged to
pay benefits or share profits with any employee after termination of
employment except as required by law;
Coventure Assets - Coventure Equipment
(jj) Coventure Equipment. The Coventure Equipment has been maintained in a
manner consistent with that of a reasonably prudent owner and such
equipment is in good working condition;
Coventure Assets - Coventure Goodwill and Other Assets
(kk) Coventure Goodwill. Coventure and its subsidiaries does not carry on
the Coventure Business under any other business or trade names.
Coventure does not have any knowledge of any infringement by Coventure
or its subsidiaries of any patent, trademarks, copyright or trade
secret;
12
The Coventure Business
(ll) Maintenance of Business. Since the date of the Coventure Financial
Statements, Coventure and its subsidiaries have not entered into any
material agreement or commitment except in the ordinary course and
except as disclosed herein;
(mm) Subsidiaries. Except for the Coventure Canada, Inc., Coventure does
not own any subsidiaries and does not otherwise own, directly or
indirectly, any shares or interest in any other corporation,
partnership, joint venture or firm; and
Coventure - Acquisition Shares
(nn) Acquisition Shares. The Acquisition Shares when delivered to the Xilan
Natural Gas Shareholders pursuant to the Acquisition shall be validly
issued and outstanding as fully paid and non-assessable shares and the
Acquisition Shares shall be transferable upon the books of Coventure,
in all cases subject to the provisions and restrictions of all
applicable securities laws.
Non-Merger and Survival
3.2 The representations and warranties of Coventure contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by Xilan Natural Gas or
the Xilan Natural Gas Shareholders, the representations and warranties of
Coventure shall survive the Closing.
Indemnity
3.3 Coventure agrees to indemnify and save harmless Xilan Natural Gas and the
Xilan Natural Gas Shareholders from and against any and all claims, demands,
actions, suits, proceedings, assessments, judgments, damages, costs, losses and
expenses, including any payment made in good faith in settlement of any claim
(subject to the right of Coventure to defend any such claim), resulting from the
breach by it of any representation or warranty made under this Agreement or from
any misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by Coventure to Xilan Natural Gas or the Xilan
Natural Gas Shareholders hereunder.
ARTICLE 4
COVENANTS OF COVENTURE
Covenants
4.1 Coventure covenants and agrees with Xilan Natural Gas and the Xilan Natural
Gas Shareholders that it will:
(a) Conduct of Business. Until the Closing, conduct the Coventure Business
diligently and in the ordinary course consistent with the manner in
which the Coventure Business generally has been operated up to the
date of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use its best efforts to
preserve the Coventure Business and the Coventure Assets and, without
limitation, preserve for Xilan Natural Gas Coventure's and its
subsidiaries' relationships with any third party having business
relations with them;
13
(c) Access. Until the Closing, give Xilan Natural Gas, the Xilan Natural
Gas Shareholders, and their representatives full access to all of the
properties, books, contracts, commitments and records of Coventure,
and furnish to Xilan Natural Gas, the Xilan Natural Gas Shareholders
and their representatives all such information as they may reasonably
request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party consents
required to permit the Acquisition and to preserve and maintain the
Coventure Assets notwithstanding the change in control of Xilan
Natural Gas arising from the Acquisition;
(e) Stock Dividend. Within ten (10) days from the Closing Date, Coventure
shall effectuate a four-for-one forward split of the Coventure Common
Shares by way of stock dividend;
(f) Name Change. Forthwith after the Closing, take such steps are required
to change the name of Coventure to "Asia Natural Gas, Inc." or such
similar name as may be acceptable to the board of directors of Xilan
Natural Gas;
(g) Sale of Business. Within thirty (30) days from the Closing Date,
Coventure shall sell its business operations, as they exist
immediately prior to the Closing, to Xxxx Xxxxxx. In consideration of
the sale, Xx. Xxxxxx shall forgive all debt owned to him by Coventure
(in the amount of $43,179.13). Other than indebtedness of Xilan
Natural Gas, Coventure shall have no indebtedness or other liability
of any kind or nature after the sale of the business to Xx. Xxxxxx,
save and except for liabilities incurred in connection with the
Acquisition; and
(h) Return of Shares. Concurrently with the Closing, Xxxx Xxxxxx shall
return to Coventure without further consideration the 5,971,178
Coventure Common Shares which he owns.
Authorization
4.2 Coventure hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting Coventure and its subsidiaries to release any and
all information in their possession respecting Coventure and its subsidiaries to
the Xilan Natural Gas Shareholders. Coventure shall promptly execute and deliver
to the Xilan Natural Gas Shareholders any and all consents to the release of
information and specific authorizations which the Xilan Natural Gas Shareholders
reasonably requires to gain access to any and all such information.
Survival
4.3 The covenants set forth in this Article shall survive the Closing for the
benefit of Xilan Natural Gas and the Xilan Natural Gas Shareholders.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
THE XILAN NATURAL GAS SHAREHOLDERS
Representations and Warranties
5.1 The Xilan Natural Gas Shareholders hereby jointly and severaly represent and
warrant in all material respects to Coventure, with the intent that it will rely
thereon in entering into this Agreement and in approving and completing the
transactions contemplated hereby, that:
Xilan Natural Gas - Company Status and Capacity
(a) Formation. Xilan Natural Gas is a company duly formed and validly
subsisting under the laws of the People's Republic of China;
(b) Carrying on Business. Xilan Natural Gas carries on the Xilan Natural
Gas Business primarily in the People's Republic of China and does not
carry on any material business activity in any other jurisdiction.
Xilan Natural Gas is duly authorized to carry on the Xilan Natural Gas
Business in the People's Republic of China. The nature of the Xilan
Natural Gas Business does not require Xilan Natural Gas to register or
otherwise be qualified to carry on business in any other jurisdiction;
(c) Legal Capacity. Xilan Natural Gas has the legal power, capacity and
authority to own Xilan Natural Gas Assets, to carry on the Business of
Xilan Natural Gas and to enter into and complete this Agreement;
Xilan Natural Gas - Capitalization
(d) Authorized Capital. The authorized capital of Xilan Natural Gas
consists of 69,000,000 shares of capital stock;
(e) Ownership of Xilan Natural Gas Shares. The registered, issued and
outstanding share capital of Xilan Natural Gas will on Closing consist
of 69,000,000 capital shares (being the Xilan Natural Gas Shares),
which shares on Closing shall be validly issued and outstanding as
fully paid and non-assessable shares. The Xilan Natural Gas
Shareholders will be at Closing the registered and beneficial owners
of the 69,000,000 Xilan Natural Gas Shares. The Xilan Natural Gas
Shares owned by the Xilan Natural Gas Shareholders will on Closing be
free and clear of any and all liens, charges, pledges, encumbrances,
restrictions on transfer and adverse claims whatsoever;
(f) No Option, Warrant or Other Right. No person, firm or corporation has
any agreement, option, warrant, preemptive right or any other right
capable of becoming an agreement, option, warrant or right for the
acquisition of Xilan Natural Gas Shares held by the Xilan Natural Gas
Shareholders or for the purchase, subscription or issuance of any of
the unissued shares in the capital of Xilan Natural Gas;
(g) No Restrictions. There are no restrictions on the transfer, sale or
other disposition of Xilan Natural Gas Shares contained in the charter
documents of Xilan Natural Gas or under any agreement;
15
Xilan Natural Gas - Records and Financial Statements
(h) Charter Documents. The charter documents of Xilan Natural Gas have not
been altered since its formation date, except as filed in the record
books of Xilan Natural Gas;
(i) Minute Books. The minute books of Xilan Natural Gas are complete and
each of the minutes contained therein accurately reflect the actions
that were taken at a duly called and held meeting or by consent
without a meeting. All actions by Xilan Natural Gas which required
director or shareholder approval are reflected on the corporate minute
books of Xilan Natural Gas. Xilan Natural Gas is not in violation or
breach of, or in default with respect to, any term of its Certificate
of Incorporation (or other charter documents) or by-laws.
(j) Xilan Natural Gas Financial Statements. The Xilan Natural Gas
Financial Statements present fairly, in all material respects, the
assets and liabilities (whether accrued, absolute, contingent or
otherwise) of Xilan Natural Gas as of the date thereof, and the sales
and earnings of the Xilan Natural Gas Business during the periods
covered thereby, in all material respects, and have been prepared in
substantial accordance with generally accepted accounting principles
consistently applied;
(k) Xilan Natural Gas Accounts Payable and Liabilities. There are no
material liabilities, contingent or otherwise, of Xilan Natural Gas
which are not disclosed in Schedule "K" hereto or reflected in the
Xilan Natural Gas Financial Statements except those incurred in the
ordinary course of business since the date of the said schedule and
the Xilan Natural Gas Financial Statements, and Xilan Natural Gas has
not guaranteed or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation. Without limiting the
generality of the foregoing, all accounts payable and liabilities of
Xilan Natural Gas as of September 30, 2005 are described in Schedule
"K" hereto;
(l) Xilan Natural Gas Accounts Receivable. All the Xilan Natural Gas
Accounts Receivable result from bona fide business transactions and
services actually rendered without, to the knowledge and belief of the
Xilan Natural Gas Shareholders, any claim by the obligor for set-off
or counterclaim. Without limiting the generality of the foregoing, all
accounts receivable of Xilan Natural Gas as of September 30, 2005, are
described in Schedule "L" hereto;
(m) Xilan Natural Gas Bank Accounts. All of the Xilan Natural Gas Bank
Accounts, their location, numbers and the authorized signatories
thereto are as set forth in Schedule "M" hereto;
(n) No Debt to Related Parties. Except as disclosed in Schedule "N"
hereto, Xilan Natural Gas is not and on Closing will not be, indebted
to the Xilan Natural Gas Shareholders nor to any family member
thereof, nor to any affiliate, director or officer of Xilan Natural
Gas or the Xilan Natural Gas Shareholders except accounts payable on
account of bona fide business transactions of Xilan Natural Gas
incurred in normal course of Xilan Natural Gas Business, including
employment agreements with the Xilan Natural Gas Shareholders, none of
which are more than 30 days in arrears;
(o) No Related Party Debt to Xilan Natural Gas. Except as set forth on
Schedule "S" hereto, no Xilan Natural Gas Shareholder nor any
16
director, officer or affiliate of Xilan Natural Gas is now indebted to
or under any financial obligation to Xilan Natural Gas on any account
whatsoever, except for advances on account of travel and other
expenses not exceeding $5,000 in total;
(p) No Dividends. No dividends or other distributions on any shares in the
capital of Xilan Natural Gas have been made, declared or authorized
since the date of the Xilan Natural Gas Financial Statements;
(q) No Payments. No payments of any kind have been made or authorized
since the date of the Xilan Natural Gas Financial Statements to or on
behalf of the Xilan Natural Gas Shareholders or to or on behalf of
officers, directors, shareholders or employees of Xilan Natural Gas or
under any management agreements with Xilan Natural Gas, except
payments made in the ordinary course of business and at the regular
rates of salary or other remuneration payable to them;
(r) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting Xilan Natural Gas, except as set forth in the Xilan Natural
Gas Financial Statements;
(s) No Adverse Events. Since the date of the Xilan Natural Gas Financial
Statements:
(i) there has not been any material adverse change in the
consolidated financial position or condition of Xilan Natural
Gas, its liabilities or the Xilan Natural Gas Assets or any
damage, loss or other change in circumstances materially
affecting Xilan Natural Gas, the Xilan Natural Gas Business or
the Xilan Natural Gas Assets or Xilan Natural Gas's right to
carry on the Xilan Natural Gas Business, other than changes in
the ordinary course of business,
(ii) there has not been any damage, destruction, loss or other event
(whether or not covered by insurance) materially and adversely
affecting Xilan Natural Gas, the Xilan Natural Gas Business or
the Xilan Natural Gas Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by Xilan Natural Gas to the Xilan
Natural Gas Shareholders or to any of Xilan Natural Gas's
officers, employees or agents or any bonus, payment or
arrangement made to or with any of them,
(iv) the Xilan Natural Gas Business has been and continues to be
carried on in the ordinary course,
(v) Xilan Natural Gas has not waived or surrendered any right of
material value,
(vi) Xilan Natural Gas has not discharged or satisfied or paid any
lien or encumbrance or obligation or liability other than current
liabilities in the ordinary course of business, and
(vii) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made;
Xilan Natural Gas - Income Tax Matters
(t) Tax Returns. All tax returns and reports of Xilan Natural Gas required
by law to be filed have been filed and are true, complete and correct,
17
and any taxes payable in accordance with any return filed by Xilan
Natural Gas or in accordance with any notice of assessment or
reassessment issued by any taxing authority have been so paid;
(u) Current Taxes. Adequate provisions have been made for taxes payable
for the current period for which tax returns are not yet required to
be filed and there are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the filing of any
tax return by, or payment of, any tax, governmental charge or
deficiency by Xilan Natural Gas. Xilan Natural Gas is not aware of any
contingent tax liabilities or any grounds which would prompt a
reassessment including aggressive treatment of income and expenses in
filing earlier tax returns;
Xilan Natural Gas - Applicable Laws and Legal Matters
(v) Licenses. Xilan Natural Gas holds all licenses and permits as may be
requisite for carrying on the Xilan Natural Gas Business in the manner
in which it has heretofore been carried on, which licenses and permits
have been maintained and continue to be in good standing except where
the failure to obtain or maintain such licenses or permits would not
have a material adverse effect on the Xilan Natural Gas Business;
(w) Applicable Laws. Xilan Natural Gas has not been charged with or
received notice of breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees to which they are subject or
which applies to them the violation of which would have a material
adverse effect on the Xilan Natural Gas Business, and, to the
knowledge of the Xilan Natural Gas Shareholders, Xilan Natural Gas is
not in breach of any laws, ordinances, statutes, regulations, by-laws,
orders or decrees the contravention of which would result in a
material adverse impact on the Xilan Natural Gas Business;
(x) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding pending or threatened
against or relating to Xilan Natural Gas, the Xilan Natural Gas
Business, or any of the Xilan Natural Gas Assets, nor do the Xilan
Natural Gas Shareholders have any knowledge of any deliberate act or
omission of Xilan Natural Gas that would form any material basis for
any such action or proceeding;
(y) No Bankruptcy. Xilan Natural Gas has not made any voluntary assignment
or proposal under applicable laws relating to insolvency and
bankruptcy and no bankruptcy petition has been filed or presented
against Xilan Natural Gas and no order has been made or a resolution
passed for the winding-up, dissolution or liquidation of Xilan Natural
Gas;
(z) Labor Matters. Xilan Natural Gas is not party to any collective
agreement relating to the Xilan Natural Gas Business with any labor
union or other association of employees and no part of the Xilan
Natural Gas Business has been certified as a unit appropriate for
collective bargaining or, to the knowledge of the Xilan Natural Gas
Shareholders, has made any attempt in that regard;
(aa) Finder's Fees. Xilan Natural Gas is not a party to any agreement which
provides for the payment of finder's fees, brokerage fees, commissions
or other fees or amounts which are or may become payable to any third
party in connection with the execution and delivery of this Agreement
and the transactions contemplated herein;
18
Execution and Performance of Agreement
(bb) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate
action on the part of Xilan Natural Gas;
(cc) No Violation or Breach. The execution and performance of this
Agreement will not
(i) violate the charter documents of Xilan Natural Gas or result in
any breach of, or default under, any loan agreement, mortgage,
deed of trust, or any other agreement to which Xilan Natural Gas
is a party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, Xilan Natural Gas Material
Contracts, or any right or rights enjoyed by Xilan Natural Gas,
(iii) result in any alteration of Xilan Natural Gas's obligations
under any agreement to which Xilan Natural Gas is a party
including, without limitation, the Xilan Natural Gas Material
Contracts,
(iv) result in the creation or imposition of any lien, encumbrance or
restriction of any nature whatsoever in favor of a third party
upon or against the Xilan Natural Gas Assets,
(v) result in the imposition of any tax liability to Xilan Natural
Gas relating to Xilan Natural Gas Assets or the Xilan Natural Gas
Shares, or
(vi) violate any court order or decree to which either Xilan Natural
Gas is subject;
Xilan Natural Gas Assets - Ownership and Condition
(dd) Business Assets. The Xilan Natural Gas Assets, comprise all of the
property and assets of the Xilan Natural Gas Business, and neither the
Xilan Natural Gas Shareholders nor any other person, firm or
corporation owns any assets used by Xilan Natural Gas in operating the
Xilan Natural Gas Business, whether under a lease, rental agreement or
other arrangement, other than as disclosed in Schedules "O" or "R"
hereto;
(ee) Title. Xilan Natural Gas is the legal and beneficial owner of the
Xilan Natural Gas Assets, free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed in Schedules "O" or "R"
hereto;
(ff) No Option. No person, firm or corporation has any agreement or option
or a right capable of becoming an agreement for the purchase of any of
the Xilan Natural Gas Assets;
(gg) Xilan Natural Gas Insurance Policies. Xilan Natural Gas maintains the
public liability insurance and insurance against loss or damage to the
Xilan Natural Gas Assets and the Xilan Natural Gas Business as
described in Schedule "P" hereto;
19
(hh) Xilan Natural Gas Material Contracts. The Xilan Natural Gas Material
Contracts listed in Schedule "R" constitute all of the material
contracts of Xilan Natural Gas;
(ii) No Default. There has not been any default in any material obligation
of Xilan Natural Gas or any other party to be performed under any of
Xilan Natural Gas Material Contracts, each of which is in good
standing and in full force and effect and unamended (except as
disclosed in Schedule "R"), and Xilan Natural Gas is not aware of any
default in the obligations of any other party to any of the Xilan
Natural Gas Material Contracts;
(jj) No Compensation on Termination. There are no agreements, commitments
or understandings relating to severance pay or separation allowances
on termination of employment of any employee of Xilan Natural Gas.
Xilan Natural Gas is not obliged to pay benefits or share profits with
any employee after termination of employment except as required by
law;
Xilan Natural Gas Assets - Xilan Natural Gas Equipment
(kk) Xilan Natural Gas Equipment. The Xilan Natural Gas Equipment has been
maintained in a manner consistent with that of a reasonably prudent
owner and such equipment is in good working condition;
Xilan Natural Gas Assets - Xilan Natural Gas Goodwill and Other Assets
(ll) Xilan Natural Gas Goodwill. Xilan Natural Gas carries on the Xilan
Natural Gas Business only under the name "Xi'an Xilan Natural Gas Co.,
Ltd." and variations thereof and under no other business or trade
names. The Xilan Natural Gas Shareholders do not have any knowledge of
any infringement by Xilan Natural Gas of any patent, trademark,
copyright or trade secret;
The Business of Xilan Natural Gas
(mm) Maintenance of Business. Since the date of the Xilan Natural Gas
Financial Statements, the Xilan Natural Gas Business has been carried
on in the ordinary course and Xilan Natural Gas has not entered into
any material agreement or commitment except in the ordinary course;
and
(nn) Subsidiaries. Xilan Natural Gas does not own any subsidiaries and does
not otherwise own, directly or indirectly, any shares or interest in
any other corporation, partnership, joint venture or firm and Xilan
Natural Gas does not own any subsidiary and does not otherwise own,
directly or indirectly, any shares or interest in any other
corporation, partnership, joint venture or firm.
Non-Merger and Survival
5.2 The representations and warranties of Xilan Natural Gas contained herein
will be true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by Coventure, the
representations and warranties of Xilan Natural Gas shall survive the Closing.
20
Indemnity
5.3 The Xilan Natural Gas Shareholders agree to indemnify and save harmless
Coventure from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of the Xilan Natural Gas Shareholders to defend any such claim),
resulting from the breach by any of them of any representation or warranty of
such party made under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
by Xilan Natural Gas or the Xilan Natural Gas Shareholders to Coventure
hereunder.
ARTICLE 6
COVENANTS OF XILAN NATURAL GAS AND
THE XILAN NATURAL GAS SHAREHOLDERS
Covenants
6.1 Xilan Natural Gas and the Xilan Natural Gas Shareholders covenant and agree
with Coventure that they will:
(a) Conduct of Business. Until the Closing, conduct the Xilan Natural Gas
Business diligently and in the ordinary course consistent with the
manner in which the Xilan Natural Gas Business generally has been
operated up to the date of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best efforts to
preserve the Xilan Natural Gas Business and the Xilan Natural Gas
Assets and, without limitation, preserve for Coventure Xilan Natural
Gas's relationships with their suppliers, customers and others having
business relations with them;
(c) Access. Until the Closing, give Coventure and its representatives full
access to all of the properties, books, contracts, commitments and
records of Xilan Natural Gas relating to Xilan Natural Gas, the Xilan
Natural Gas Business and the Xilan Natural Gas Assets, and furnish to
Coventure and its representatives all such information as they may
reasonably request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party consents
required to permit the Acquisition and to preserve and maintain the
Xilan Natural Gas Assets, including the Xilan Natural Gas Material
Contracts, notwithstanding the change in control of Xilan Natural Gas
arising from the Acquisition;
(e) Reporting and Internal Controls. From and after the Closing, the Xilan
Natural Gas Shareholders shall forthwith take all required actions to
implement internal controls on the business of Xilan Natural Gas to
ensure that Xilan Natural Gas and Coventure comply with Section
13(b)(2) of the Securities and Exchange Act of 1934;
(f) Stock Dividend. Within ten (10) days from the Closing Date, Xilan
Natural Gas and the Xilan Natural Gas Shareholders shall cause
Coventure to effectuate a four-for-one forward split of the Coventure
Common Shares by way of stock dividend;
21
(g) Name Change. Forthwith after the Closing, Xilan Natural Gas and the
Xilan Natural Gas Shareholders shall take such steps are required to
change the name of Coventure to "Asia Natural Gas, Inc." or such
similar name as may be acceptable to the board of directors of
Coventure;
(h) Sale of Business. Within thirty (30) days from the Closing Date,
Coventure shall sell its business operations, as they exist
immediately prior to the Closing, to Xxxx Xxxxxx. In consideration of
the sale, Xx. Xxxxxx shall forgive all debt owned to him by Coventure
(in the amount of $43,179.13);
(i) No Reverse Stock Splits. For a period of twelve (12) months following
the Closing, take any action to cause or result in any way in a
reverse stock split of the capital stock of Coventure; and
(j) 1934 Act Reports. From and after the Closing Date, take all such steps
as are necessary to discharge all reporting obligations imposed upon
them by the Securities Exchange Act of 1934.
Authorization
6.2 Xilan Natural Gas hereby agrees to authorize and direct any and all federal,
state, municipal, foreign and international governments and regulatory
authorities having jurisdiction respecting Xilan Natural Gas to release any and
all information in their possession respecting Xilan Natural Gas to Coventure.
Xilan Natural Gas shall promptly execute and deliver to Coventure any and all
consents to the release of information and specific authorizations which
Coventure reasonably require to gain access to any and all such information.
Xilan Natural Gas Shareholders hereby authorize Xxxxxxx Xx to execute all
certificates or other representations required to complete the transactions
contemplated by this Agreement.
Survival
6.3 The covenants set forth in this Article shall survive the Closing for the
benefit of Coventure.
ARTICLE 7
CONDITIONS PRECEDENT
Conditions Precedent in favor of Coventure
7.1 Coventure's obligations to carry out the transactions contemplated hereby
are subject to the fulfillment of each of the following conditions precedent on
or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to Coventure hereunder will have been so executed and
delivered;
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by Xilan Natural Gas or the Xilan Natural
Gas Shareholders at or prior to the Closing will have been complied
with or performed;
(c) title to the Xilan Natural Gas Shares held by the Xilan Natural Gas
Shareholders and to the Xilan Natural Gas Assets will be free and
clear of all mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever, save and except as disclosed
herein, and the Xilan Natural Gas Shares shall be duly transferred to
Coventure;
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(d) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of Xilan Natural Gas, its liabilities or the Xilan
Natural Gas Assets or any damage, loss or other change in
circumstances materially and adversely affecting Xilan Natural
Gas, the Xilan Natural Gas Business or the Xilan Natural Gas
Assets or Xilan Natural Gas's right to carry on the Xilan Natural
Gas Business, other than changes in the ordinary course of
business, none of which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including changes
to any laws or statutes applicable to Xilan Natural Gas or the
Xilan Natural Gas Business (whether or not covered by insurance)
materially and adversely affecting Xilan Natural Gas, the Xilan
Natural Gas Business or the Xilan Natural Gas Assets; and
(e) the transactions contemplated hereby shall have been approved by all
other regulatory authorities having jurisdiction over the subject
matter hereof, if any.
Waiver by Coventure
7.2 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of Coventure and any such condition may be waived in whole
or in part by Coventure at or prior to the Closing by delivering to Xilan
Natural Gas a written waiver to that effect signed by Coventure. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing, Coventure shall be released from all obligations under
this Agreement.
Conditions Precedent in Favor of Xilan Natural Gas and the Xilan Natural Gas
Shareholders
7.3 The obligations of Xilan Natural Gas and the Xilan Natural Gas Shareholders
to carry out the transactions contemplated hereby are subject to the fulfillment
of each of the following conditions precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to Xilan Natural Gas hereunder will have been so executed
and delivered;
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by Coventure at or prior to the Closing
will have been complied with or performed;
(c) Coventure will have delivered the Acquisition Shares to be issued
pursuant to the terms of the Acquisition to Xilan Natural Gas at the
Closing and the Acquisition Shares will be registered on the books of
Coventure in the name of the holder of Xilan Natural Gas Shares at the
time of Closing;
(d) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances
or other claims whatsoever;
(e) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of Coventure, its subsidiaries, their liabilities or
23
the Coventure Assets or any damage, loss or other change in
circumstances materially and adversely affecting Coventure, the
Coventure Business or the Coventure Assets or Coventure' right to
carry on the Coventure Business, other than changes in the
ordinary course of business, none of which has been materially
adverse, or
(ii) any damage, destruction, loss or other event, including changes
to any laws or statutes applicable to Coventure or the Coventure
Business (whether or not covered by insurance) materially and
adversely affecting Coventure, its subsidiaries, the Coventure
Business or the Coventure Assets;
(f) the transactions contemplated hereby shall have been approved by all
other regulatory authorities having jurisdiction over the subject
matter hereof, if any; and
(g) the satisfaction of all liabilities of Coventure on or prior to the
Closing Date, other than those liabilities to be transferred to Xx.
Xxxxxx, save and except for liabilities incurred in connection with
the Acquisition.
Waiver by Xilan Natural Gas and the Xilan Natural Gas Shareholders
7.4 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of Xilan Natural Gas and the Xilan Natural Gas
Shareholders and any such condition may be waived in whole or in part by Xilan
Natural Gas or the Xilan Natural Gas Shareholders at or prior to the Closing by
delivering to Coventure a written waiver to that effect signed by Xilan Natural
Gas and the Xilan Natural Gas Shareholders. In the event that the conditions
precedent set out in the preceding section are not satisfied on or before the
Closing, Xilan Natural Gas and the Xilan Natural Gas Shareholders shall be
released from all obligations under this Agreement.
Nature of Conditions Precedent
7.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favor of the other party or parties set forth in this
Article.
Termination
7.6 Notwithstanding any provision herein to the contrary, if the Closing does
not occur on or before December 15, 2005, this Agreement will be at an end and
will have no further force or effect, unless otherwise agreed upon by the
parties in writing.
Confidentiality
7.7 Notwithstanding any provision herein to the contrary, the parties hereto
agree that the existence and terms of this Agreement are confidential and that
if this Agreement is terminated pursuant to the preceding section the parties
agree to return to one another any and all financial, technical and business
documents delivered to the other party or parties in connection with the
negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from Xilan Natural Gas and
Coventure and the contents thereof confidential and not utilize nor reveal or
release same, provided, however, that Coventure will be required to issue a news
24
release regarding the execution and consummation of this Agreement and file a
Current Report on Form 8-K with the Securities and Exchange Commission
respecting the proposed Acquisition contemplated hereby together with such other
documents as are required to maintain the currency of Coventure's filings with
the Securities and Exchange Commission.
ARTICLE 8
RISK
Material Change in the Business of Xilan Natural Gas
8.1 If any material loss or damage to the Xilan Natural Gas Business occurs
prior to Closing and such loss or damage, in Coventure' reasonable opinion,
cannot be substantially repaired or replaced within sixty (60) days, Coventure
shall, within two (2) days following any such loss or damage, by notice in
writing to Xilan Natural Gas, at its option, either:
(a) terminate this Agreement, in which case no party will be under any
further obligation to any other party; or
(b) elect to complete the Acquisition and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or damage
will, as a condition precedent to Coventure' obligations to carry out
the transactions contemplated hereby, be vested in Xilan Natural Gas
or otherwise adequately secured to the satisfaction of Coventure on or
before the Closing Date.
Material Change in the Coventure Business
8.2 If any material loss or damage to the Coventure Business occurs prior to
Closing and such loss or damage, in Xilan Natural Gas's reasonable opinion,
cannot be substantially repaired or replaced within sixty (60) days, Xilan
Natural Gas shall, within two (2) days following any such loss or damage, by
notice in writing to Coventure, at its option, either:
(a) terminate this Agreement, in which case no party will be under any
further obligation to any other party; or
(b) elect to complete the Acquisition and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or damage
will, as a condition precedent to Xilan Natural Gas's obligations to
carry out the transactions contemplated hereby, be vested in Coventure
or otherwise adequately secured to the satisfaction of Xilan Natural
Gas on or before the Closing Date.
ARTICLE 9
CLOSING
Closing
9.1 The Acquisition and the other transactions contemplated by this Agreement
will be closed at the Place of Closing in accordance with the closing procedure
set out in this Article.
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Documents to be Delivered by Xilan Natural Gas
9.2 On or before the Closing, Xilan Natural Gas and the Xilan Natural Gas
Shareholders will deliver or cause to be delivered to Coventure:
(a) the original or certified copies of the charter documents of Xilan
Natural Gas and all corporate records documents and instruments of
Xilan Natural Gas, the corporate seal of Xilan Natural Gas and all
books and accounts of Xilan Natural Gas;
(b) all reasonable consents or approvals required to be obtained by Xilan
Natural Gas for the purposes of completing the Acquisition and
preserving and maintaining the interests of Xilan Natural Gas under
any and all Xilan Natural Gas Material Contracts and in relation to
Xilan Natural Gas Assets;
(c) certified copies of such resolutions of the directors of Xilan Natural
Gas as are required to be passed to authorize the execution, delivery
and implementation of this Agreement;
(d) an acknowledgement from Xilan Natural Gas and the Xilan Natural Gas
Shareholders of the satisfaction of the conditions precedent set forth
in section 7.3 hereof;
(e) the certificates or other evidence of ownership of the Xilan Natural
Gas Shares, together with such other documents or instruments required
to effect transfer of ownership of the Xilan Natural Gas Shares to
Coventure; and
(f) such other documents as Coventure may reasonably require to give
effect to the terms and intention of this Agreement.
Documents to be Delivered by Coventure
9.3 On or before the Closing, Coventure shall deliver or cause to be delivered
to Xilan Natural Gas and the Xilan Natural Gas Shareholders:
(a) share certificates representing the Acquisition Shares duly registered
in the names of the holders of shares of Xilan Natural Gas Common
Stock;
(b) certified copies of such resolutions of the directors of Coventure as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement;
(c) a certified copy of a resolution of the directors of Coventure dated
as of the Closing Date appointing the nominees of Xilan Natural Gas as
officers of Xilan Natural Gas and appointing the nominee of the Xilan
Natural Gas Shareholders to the board of directors of Coventure;
(d) undated resignation of Xxxx Xxxxxx as a director of Coventure;
(e) an acknowledgement from Coventure of the satisfaction of the
conditions precedent set forth in section 7.1 hereof;
(f) such other documents as Xilan Natural Gas may reasonably require to
give effect to the terms and intention of this Agreement.
26
ARTICLE 10
POST-CLOSING MATTERS
Forthwith after the Closing, Coventure, Xilan Natural Gas and the Xilan
Natural Gas Shareholders, as the case may be, agree to use all their best
efforts to:
(a) issue a news release reporting the Closing;
(b) file with the Securities and Exchange Commission a report on Form 14f1
disclosing the change in control of Coventure and, 10 days after such
filing, forthwith date and accept the resignation of Xxxx Xxxxxx as a
director of Coventure;
(c) file a Form 8-K with the Securities and Exchange Commission disclosing
the terms of this Agreement within 4 business days of the Closing
which includes full Form 10 disclosure and the audited financial
statements of Xilan Natural Gas, as well as pro forma financial
information of Xilan Natural Gas and Coventure as required by Item 310
of Regulation SB as promulgated by the Securities and Exchange
Commission;
(d) file reports on Forms 13D and 3 with the Securities and Exchange
Commission disclosing the acquisition of the Acquisition Shares by the
Xilan Natural Gas Shareholders;
(e) within 10 days of the Closing, take such steps are required to change
the name of Coventure to "Asia Natural Gas, Inc." or such similar name
as may be acceptable to the board of directors of Coventure; and
(f) within 10 days of the Closing, take such steps are required to
effectuate a four-for-one forward split of the Coventure Common Shares
by way of stock dividend.
ARTICLE 11
GENERAL PROVISIONS
Arbitration
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of New York, New York.
Notice
11.2 Any notice required or permitted to be given by any party will be deemed to
be given when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid single certified or registered mail, or
telecopier. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by telecopier shall be deemed to have been received on
the actual date of delivery.
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Addresses for Service
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) Coventure:
Coventure International Inc.
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
PO Box 1900
Xxxxxxxx, Xxxxxxx, Canada T4C 1A5
Attn: Xxxx Xxxxxx, President
Phone: (000) 000-0000
Telecopier: (000) 000-0000
(b) Xilan Natural Gas or the Xilan Natural Gas Shareholders:
Xi'an Xilan Natural Gas Co., Ltd.
Tang Xing Shu Ma Building, Suite 418
Tang Xing Road
Xian High Tech Area
Xian, Shaanxi Province
China
Attn: Xxxxxxx Xx, CEO
Phone: 00-00-00000000
Telecopier: 00-00-00000000
With a copy to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxx, Esq.
Phone: (000) 000-0000
Telecopier: (000) 000-0000
Change of Address
11.4 Any party may, by notice to the other parties change its address for notice
to some other address and will so change its address for notice whenever the
existing address or notice ceases to be adequate for delivery by hand. A post
office box may not be used as an address for service.
Further Assurances
11.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
Time of the Essence
11.6 Time is expressly declared to be the essence of this Agreement.
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Entire Agreement
11.7 The provisions contained herein constitute the entire agreement among Xilan
Natural Gas, the Xilan Natural Gas Shareholders and Coventure respecting the
subject matter hereof and supersede all previous communications, representations
and agreements, whether verbal or written, among Xilan Natural Gas, the Xilan
Natural Gas Shareholders and Coventure with respect to the subject matter
hereof.
Enurement
11.8 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Assignment
11.9 This Agreement is not assignable without the prior written consent of the
parties hereto.
Counterparts
11.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
11.11 This Agreement is subject to the laws of the State of New York.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF the parties have executed this Agreement effective as of
the day and year first above written.
COVENTURE INTERNATIONAL INC.
By: /s/ XXXX XXXXXX
----------------------
Xxxx Xxxxxx, President
XI'AN XILAN NATURAL GAS CO., LTD.
By: /s/ QINAN JI
----------------
Qinan Ji, Chairman
SHAREHOLDERS
/s/ QINAN JI
---------------------
Qinan Ji
/s/ XIANG JI
-----------------
Xiang Ji
/s/ SHAOHU JIA
Shaohu Jia
/s/ XXXX XXX
----------------
Xxxx Xxx
/s/ XXXXXXX XX
------------------
Xxxxxxx Xx
/s/ XXXXXXXX XXX
--------------------
Xxxxxxxx Xxx
/s/ XXX XXXXX
--------------------
Xxx Xxxxx
/s/ XXXXXXX XX
---------------------
Xxxxxxx Xx
/s/ LIYIN SHI
---------------
Liyin Shi
/s/ SHENGMING LI
----------------------
Shengming Li
/s/ YUAI SHE
-------------------
Yuai She
XIAN SUNWAY TECHNOLOGY &
INDUSTRY CO., LTD.
By: /s/ XXXXXXX XX
-----------------------
Name: Lingjuhn Hu
Title: CEO
YANGLING BODISEN BIOTECH
DEVELOPMENT CO., LTD.
By:/s/ XXXXX XXXX
------------------
Name: Xxxxx Xxxx
Title: CEO, Chairman
