SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
January , 2006, among China Natural Gas, Inc., a Delaware corporation (the
"Company"), and the investors identified on the signature pages hereto (each, an
"Investor" and collectively, the "Investors").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule
506 promulgated thereunder, the Company desires to issue and sell to each
Investor, and each Investor, severally and not jointly, desires to purchase from
the Company certain securities of the Company, as more fully described in this
Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144.
"Business Day" means any day except Saturday, Sunday and any day which is a
federal legal holiday or a day on which banking institutions in the State of New
York or State of Connecticut are authorized or required by law or other
governmental action to close.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Article II.
"Closing Date" means the Business Day immediately following the date on
which all of the conditions set forth in Sections 5.1 and 5.2 hereof are
satisfied, or such other date as the parties may agree.
"Commission" means the Securities and Exchange Commission.
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"Common Stock" means the common stock of the Company, par value $0.0001 per
share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company Counsel" means Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP.
"Company Deliverables" has the meaning set forth in Section 2.2(a).
"Disclosure Materials" has the meaning set forth in Section 3.1(h).
"Effective Date" means the date that the initial Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means U.S. generally accepted accounting principles.
"Intellectual Property Rights" has the meaning set forth in Section 3.1(o).
"Investment Amount" means, with respect to each Investor, the product of
the Per Unit Purchase Price multiplied by the number of Shares being purchased
by such Investor (as indicated on such Investor's signature page to this
Agreement).
"Investor Deliverables" has the meaning set forth in Section 2.2(b).
"Investor Party" has the meaning set forth in Section 4.7.
"Lien" means any lien, charge, encumbrance, security interest, right of
first refusal or other restrictions of any kind.
"Material Adverse Effect" means any of (i) a material and adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) an adverse impairment to the Company's
ability to perform on a timely basis its obligations under any Transaction
Document.
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"New York Courts" means the state and federal courts sitting in the City of
New York, Borough of Manhattan.
"Outside Date" means January 15, 2006.
"Per Unit Purchase Price" equals $2.80.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and the Investors, in
the form of Exhibit B hereto.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Investors of the Shares and the Warrant Shares.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" has the meaning set forth in Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to the
Investors pursuant to this Agreement.
"Short Sales" include, without limitation, all "short sales" as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, swaps and similar arrangements (including on a total return basis), and
sales and other transactions through non-US broker dealers or foreign regulated
brokers.
"Subsidiary" means any "significant subsidiary" as defined in Rule 1-02(w)
of Regulation S-X promulgated by the Commission under the Exchange Act.
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not quoted on any Trading Market,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the Pink Sheets, LLC (or any similar organization or agency
succeeding to its functions of reporting prices).
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"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the Nasdaq SmallCap Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
"Transaction Documents" means this Agreement, the Warrants, the
Registration Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"Warrants" means the Common Stock purchase warrants in the form of Exhibit
A, which are issuable to the Investors at the Closing.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares and the Warrants representing such Investor's Investment Amount. The
Closing shall take place at the offices of Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on the Closing Date or at
such other location or time as the parties may agree.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or
cause to be delivered to each Investor the following (the "Company
Deliverables"):
(i) a certificate evidencing the number of Shares indicated on such
Investor's signature page to this Agreement, registered in the name of such
Investor;
(ii) a Warrant, registered in the name of such Investor, pursuant to
which such Investor shall have the right to acquire the number of shares of
Common Stock equal to 35% of the Investment Amount, divided by $3.60 issuable to
such Investor pursuant to Section 2.2(a)(i);
(iii) the Registration Rights Agreement, duly executed by the Company;
and
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(iv) a legal opinion from counsel to the Company in form and substance
reasonably acceptable to the Investors.
(b) At the Closing, each Investor shall deliver or cause to be delivered
the following (the "Investor Deliverables"):
(i) its Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing for such
purpose; and
(ii) to the Company, the Registration Rights Agreement, duly executed by
such Investor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than as specified in the SEC Reports. The Company owns, directly or
indirectly, all of the capital stock of each Subsidiary free and clear of any
and all Liens, and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights.
(b) Organization and Qualification. The Company and each Subsidiary are
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. The Company and each Subsidiary are duly
qualified to conduct its respective businesses and are in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith. Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof, will constitute the valid and binding obligation of the
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Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, 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
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) the filing with the Commission of one or more Registration
Statements in accordance with the requirements of the Registration Rights
Agreement, (ii) filings required by state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the Commission under Regulation D of
the Securities Act, (iv) the filings required in accordance with Section 4.5 and
(v) those that have been made or obtained prior to the date of this Agreement.
(f) Issuance of the Securities. The Securities have been duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. As of the Closing, the Company will have reserved from its duly
authorized capital stock the shares of Common Stock issuable pursuant to this
Agreement and the Warrants in order to issue the Shares and the Warrant Shares.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of Common
Stock reserved for issuance under the Company's various option and incentive
plans, is specified in the SEC Reports. Except as specified in the SEC Reports,
no securities of the Company are entitled to preemptive or similar rights, and
no Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
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contemplated by the Transaction Documents. Except as specified in the SEC
Reports, there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issue and sale of the Securities will not, immediately or with the passage
of time, obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Investors) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement (if any), the "Disclosure Materials") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables, accrued expenses and other liabilities incurred
in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
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stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option or
restricted stock plans. The Company does not have pending before the Commission
any request for confidential treatment of information.
(j) Litigation. There is no Action which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as specifically disclosed in the SEC
Reports, could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or officer
thereof (in his or her capacity as such), is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty, except as specifically
disclosed in the SEC Reports. There has not been, and to the knowledge of the
Company, there is not pending any investigation by the Commission involving the
Company or any current or former director or officer of the Company (in his or
her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company.
(l) Compliance. Except as disclosed in the SEC Reports, neither the
Company nor any Subsidiary (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or lapse of time
or both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.
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(n) Title to Assets. Except as disclosed in the SEC Reports, the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to their respective businesses and good
and marketable title in all personal property owned by them that is material to
their respective businesses, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance, except as could not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect (collectively, the "Intellectual Property
Rights"). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. Except as set forth in the
SEC Reports, to the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(p) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(q) Internal Accounting Controls. Except as disclosed in the SEC
Reports, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(r) Solvency. Based on the financial condition of the Company as of the
Closing Date (and assuming that the Closing shall have occurred), (i) the
Company's fair saleable value of its assets exceeds the amount that will be
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required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(s) Certain Fees. The Investors shall have no obligation with respect to
any fees or with respect to any claims (other than such fees or commissions owed
by an Investor pursuant to written agreements executed by such Investor which
fees or commissions shall be the sole responsibility of such Investor) made by
or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by this
Agreement.
(t) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer and sale of the
Shares and Warrant Shares by the Company to the Investors under the Transaction
Documents. The Company is eligible to register the resale of its Common Stock
for resale by the Investors under Form SB-2 promulgated under the Securities
Act. The Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(u) Investment Company. The Company is not, and is not an Affiliate of,
and immediately following the Closing will not have become, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(v) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.
(w) No Additional Agreements. The Company does not have any agreement or
understanding with any Investor with respect to the transactions contemplated by
the Transaction Documents other than as specified in the Transaction Documents.
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(x) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any Investor or its respective agents or
counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(y) Patriot Act. The Company, its Subsidiaries and/or their affiliates
have not engaged in transactions involving funds derived from illegal activity
including money laundering, and are not under investigation for and have not
been previously charged with violating any laws prohibiting money laundering,
including but not limited to: (a) the Bank Secrecy Act, as amended by the USA
PATRIOT ACT of 2001 (the "PATRIOT Act"), and its implementing regulations, and
all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations and (b) the Executive Orders and Sanctions Programs administered by
the U.S. Department of the Treasury's Office Foreign Assets Control ("OFAC"),
including but not limited to Executive Order No. 13224 of September 23, 2001
entitled, "Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism," and all regulations contained
in 31 C.F.R., Subtitle B, Chapter V (collectively, the "Anti-Money Laundering
and Anti-Terrorism Laws/OFAC laws"); and (c) the laws and regulations of the
jurisdictions in which the Company and its Subsidiaries operate.
None of the Company, its Subsidiaries or their affiliates are, to the best
of their knowledge after reasonable due diligence, acting, directly or
indirectly, on behalf of terrorists, terrorist organizations or narcotics
traffickers, including those persons or entities that appear on the Specially
Designated Nationals and Blocked Persons List ("SDN List") administered by OFAC
(see xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/) and any individual or
entity included on any list of terrorists or terrorist organizations maintained
by the United Nations, the European Union and\or the countries in which the
Company and its Subsidiaries operate.
None of the Company, its Subsidiaries or their affiliates or, to the best
of their knowledge, any of their brokers or other agents: (i) conducts any
business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any person included on the SDN List; (ii)
deals in, or otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Sanctions Programs administered by
OFAC; or (iii) engages in or conspires to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in any anti-money laundering and
anti-terrorism laws to which they are subject.
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None of the Company or its Subsidiaries or any officer or director of the
Company or its Subsidiaries: (a) appears on the SDN List or (b) is a politically
exposed person (as defined in guidance issued by the Financial Action Task Force
(see xxxx://xxx.xxxx-xxxx.xxx/) or a senior foreign political figure(1) or a
family member or close associate of such a figure (see
xxxx://xxx.xxxxx.xxx/xxxxx/xxxxxxxx/xxxx/xxxxxxxx.xxx).
(z) Foreign Corrupt Practices Act. Neither the Company or any of its
Subsidiaries, nor any director, officer, agent or employee of the Company or any
of its Subsidiaries has made, directly or indirectly, any payment or promise to
pay, or gift or promise to give or authorized such a promise or gift, of any
money or anything of value, directly or indirectly, to: (a) any foreign official
(as such term is defined in the Foreign Corrupt Practices Act (the "FCPA") for
the purpose of influencing any official act or decision of such official or
inducing him or her to use his or her influence to affect any act or decision of
a governmental authority or (b) any foreign political party or official thereof
or candidate for foreign political office for the purpose of influencing any
official act or decision of such party, official or candidate or inducing such
party, official or candidate to use his, her or its influence to affect any act
or decision of a foreign governmental authority, in the case of both (a) and (b)
above in order to assist the Company or any of its Subsidiaries to obtain or
retain business for, or direct business to the Company or any of its
Subsidiaries, as applicable, and under circumstances which would subject the
Company or any of its Subsidiaries to liability under the FCPA or any
corresponding foreign laws. Neither the Company nor any of its Subsidiaries has
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of funds or received or retained any funds in violation of any law, rule
or regulation.
(aa) Use of Proceeds. No part of the proceeds of the sale of the Shares
and Warrants will be used, directly or indirectly, for any payments to: (a) any
individual or entity listed on the SDN List and/or any other similar lists
administered by OFAC pursuant to any authorizing statute, Executive Order or
regulation; (b) the government of any country subject to an OFAC Sanctions
Program; (c) any individual or entity included on any list of terrorists or
terrorist organizations maintained by the United Nations, the European Union
and/or the
________________________
1 A "senior foreign political figure" is defined as a current or former
senior official in the executive, legislative, administrative, military
or judicial branches of a non-U.S. government (whether elected or not),
a current or former senior official of a major non-U.S. political party,
or a current or former senior executive of a non-U.S. government-owned
corporation. In addition, a "senior foreign political figure" includes
any corporation, business or other entity that has been formed by, or
for the benefit of, a senior foreign political figure. "Immediate
family" of a senior foreign political figure typically includes the
figure's parents, siblings, spouse, children and in-laws. A "close
associate" of a senior foreign political figure is a person who is
widely and publicly known to maintain an unusually close relationship
with the senior foreign political figure, and includes a person who is
in a position to conduct substantial U.S. and non-U.S. financial
transactions on behalf of the senior foreign political figure.
12
(bb) Xxxxxxxx-Xxxxx Compliance. The Company and each of its Subsidiaries
are in compliance in all material respects with all applicable requirements of
the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and regulations promulgated
by the Commission thereunder.
(cc) No Manipulation of Stock. Neither the Company nor any of its
Subsidiaries has taken, in violation of applicable law, any action designed to
or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the transactions
contemplated hereby or the sale or resale of the Shares or the Warrant Shares.
3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the transactions
contemplated by this Agreement has been duly authorized by all necessary
corporate or, if such Investor is not a corporation, such partnership, limited
liability company or other applicable like action, on the part of such Investor.
Each of this Agreement and the Registration Rights Agreement has been duly
executed by such Investor, and when delivered by such Investor in accordance
with terms hereof, will constitute the valid and legally binding obligation of
such Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws. Subject to the immediately preceding
sentence, nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Securities for any period of time. Such Investor
does not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
13
exercises Warrants it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Securities;
(ii) access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(f) Certain Trading Activities. Such Investor has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (1) the time that such
Investor was first contacted by the Company or others regarding an investment in
the Company and (2) the 30th calendar day prior to the date of this Agreement.
Such Investor covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions in the
securities of the Company (including Short Sales) prior to the time that the
transactions contemplated by this Agreement are publicly disclosed.
(g) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction Documents, and such Investor confirms that it has not relied on the
advice of any other Investor's business and/or legal counsel in making such
decision. Such Investor has not relied on the business or legal advice of any
other person in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.
14
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), if reasonably necessary, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act.
(b) Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE
SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE SECURITIES]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from time to time
pledge, and/or grant a security interest in some or all of the Securities
pursuant to a bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or account, such
Investor may transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval or consent
of the Company and no legal opinion of legal counsel to the pledgee, secured
party or pledgor shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer following
default by the Investor transferee of the pledge. No notice shall be required of
such pledge. At the appropriate Investor's expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
15
Securities including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)): (i)
following a sale or transfer of such Securities pursuant to an effective
registration statement (including the Registration Statement), or (ii) following
a sale or transfer of such Shares or Warrant Shares pursuant to Rule 144
(assuming the transferor is not an Affiliate of the Company), or (iii) while
such Shares or Warrant Shares are eligible for sale under Rule 144(k). The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section.
4.2 Furnishing of Information. As long as any Investor owns the Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Investor owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Investors and make
publicly available in accordance with Rule 144(c) such information as is
required for the Investors to sell the Shares and Warrant Shares under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell the Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market in a manner that would require stockholder
approval of the sale of the securities to the Investors.
4.4 Securities Laws Disclosure; Publicity. As soon as reasonably
practicable, and in no event later than by 9:00 a.m. (New York time) on the
Trading Day following the execution of this Agreement, and by 9:00 a.m. (New
York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed.
16
4.5 Indemnification of Investors. In addition to the indemnity provided in
the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, officers, shareholders, partners, employees and
agents (each, an "Investor Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation (collectively, "Losses") that any
such Investor Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.6 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.7 Listing of Securities. The Company agrees, (i) if the Company applies
to have the Common Stock traded on any other Trading Market, it will include in
such application the Shares and Warrant Shares, and will take such other action
as is necessary or desirable to cause the Shares and Warrant Shares to be listed
on such other Trading Market as promptly as possible, and (ii) it will take all
action reasonably necessary to continue the listing and trading of its Common
Stock on a Trading Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the Trading Market.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of the Investors to Purchase
Securities. The obligation of each Investor to acquire Securities at the Closing
is subject to the satisfaction or waiver by such Investor, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date;
(b) Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
17
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect;
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the
Common Stock shall not have been suspended by the Commission or any Trading
Market (except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the Company) at
any time since the date of execution of this Agreement, and the Common Stock
shall have been at all times since such date listed for trading on a Trading
Market; and
(f) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a).
(g) Change of Name. The Company shall have changed its name to China
Natural Gas, Inc.
(h) Change of Ticker Symbol. The Company shall have changed its ticker
symbol to "CHNG."
(i) Dividend Payment. The Company shall have effectuated and paid a
three-for-one share dividend on its shares of Common Stock .
5.2 Conditions Precedent to the Obligations of the Company to sell
Securities. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction or waiver by the Company, at or before the Closing,
of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of each Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date;
(b) Performance. Each Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents; and
(d) Investors Deliverables. Each Investor shall have delivered its
Investors Deliverables in accordance with Section 2.2(b).
18
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of the Transaction Documents. Notwithstanding the foregoing, the
Company shall pay the fees of one counsel for Investors in an amount not to
exceed $25,000. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Shares.
6.2 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: China Natural Gas, Inc.
Tang Xing Shu Ma Building, Suite 418
Tang Xing Road
Xian High Tech Area
Xian, Shaanxi Province, China
Facsimile:
Attention: Xxxxxxx Xx, CEO
With a copy to: Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn.: Xxxxxx X. Xxxx, Esq.
If to an Investor: To the address set forth under such
Investor's name on the signature pages
hereof;
19
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed by the
Company and the Investors holding a majority of the Shares. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right. No
consideration shall be offered or paid to any Investor to amend or consent to a
waiver or modification of any provision of any Transaction Document unless the
same consideration is also offered to all Investors who then hold Shares.
6.5 Termination. This Agreement may be terminated prior to Closing:
(a) by written agreement of the Investors and the Company; and
(b) by the Company or an Investor (as to itself but no other Investor)
upon written notice to the other, if the Closing shall not have taken place by
6:30 p.m. Eastern time on the Outside Date; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time.
In the event of a termination pursuant to this Section, the Company shall
promptly notify all non-terminating Investors. Upon a termination in accordance
with this Section 6.5, the Company and the terminating Investor(s) shall not
have any further obligation or liability (including as arising from such
termination) to the other and no Investor will have any liability to any other
Investor under the Transaction Documents as a result therefrom.
6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the provisions
hereof that apply to the "Investors."
20
6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Securities.
6.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
21
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not timely perform
its related obligations within the periods therein provided, then such Investor
may rescind or withdraw, in its sole discretion from time to time upon written
notice to the Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights.
6.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
6.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
22
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
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SIGNATURE PAGES FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
CHINA NATURAL GAS, INC.
By:_____________________________
Name: Xxxxxxx Xx
Title: CEO
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SIGNATURE PAGES FOR INVESTORS FOLLOW]
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
NAME OF INVESTOR
By: ______________________________________________________
Name:
Title:
Number of Shares being purchased:
Tax ID No.: ______________________________________________
ADDRESS FOR NOTICE
c/o: ______________________________________________
Street: ______________________________________________
City/State/Zip:___________________________________________
Attention: ______________________________________________
Tel: ______________________________________________
Fax: ______________________________________________
DELIVERY INSTRUCTIONS
(if different from above)
c/o: ______________________________________________
Street: ______________________________________________
City/State/Zip: __________________________________________
Attention: ______________________________________________
Tel: ______________________________________________
