PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made and entered into as
of December 20, 2005, between John Hromyk (`Purchaser") and China Natural Gas,
Inc., a Delaware corporation (the "Company").
WHEREAS, the Company has recently acquired Xi'an Xilan Natural Gas Co.,
Ltd., a company formed under the laws of the People's Republic of China
("Xilan");
WHEREAS, prior to the acquisition of Xilan, the Company's sole
business consisted of its ownership of 100% of the issues and outstanding
capital stock of Coventure Canada, Inc., which was formed pursuant to the laws
of the Province of Alberta ("Coventure Canada"); and
WHEREAS, the Company has been unsuccessful to date in developing the
business of Coventure Canada and the Company believes it is in its best interest
to dispose of Coventure Canada, and focus its resources on the business and
operation of Xilan;
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereof, the parties hereto agree as follows:
ARTICLE I - PURCHASE AND SALE
1.1 Transfer of Coventure Canada
Subject to the terms and conditions hereof, on the Closing Date (as
defined below), the Company shall sell, convey, transfer, assign and deliver to
Purchaser and Purchaser shall purchase from the Company all of the issued and
outstanding common shares of Coventure Canada (the "Coventure Canada Stock"),
all debt due and owing to the Company by Coventure Canada (the "Coventure Canada
Debt") as well as all right title and interest in and to the business of
providing accounting, tax and business consulting services to small and medium
sized businesses carried on by Coventure through Coventure Canada (the
"Coventure Canada Business") including but not limited to the goodwill of the
Coventure Canada Business together with the exclusive right to represent itself
as carrying on the Coventure Canada Business in succession of the Company, and
the exclusive right to use any words indicating that the Coventure Canada
Business is so carried on, including the exclusive right to use the name
"Coventure" or any variation thereof in connection with the Coventure Canada
Business or any part thereof carried on or to be carried on by Coventure Canada,
the right to all corporate, operating and trade names associated with the
Coventure Canada Business, or any variations thereof, all telephone listings and
telephone advertising contracts, all lists of customers, books and records and
other information relating to the Coventure Canada Business, all necessary
licenses and authorizations and any other rights used in connection with the
Coventure Canada Business (collectively the "Coventure Canada Goodwill").
1.2 The Closing
The closing of this Agreement (the "Closing") shall occur on December
20, 2005 (the "Closing Date") at 10:00 a.m. local time at the offices of
Sichenzia Ross Friedman Ference LLP, New York, New York, or such other time or
location as the parties hereto shall agree.
1.3 Deliveries at the Closing
On the Closing Date in order to effectuate the transfer of the
Coventure Canada Stock, the Coventure Canada Debt, the Coventure Canada Business
and the Coventure Canada Goodwill:
(a) The Company shall deliver to Purchaser certificates representing
all of the Coventure Canada Stock, free and clear of any claim, lien, pledge,
option, charge, easement, security interest, right-of-way, encumbrance,
restriction on sale or transfer, preemptive right or option or any other right
of any third party of any nature whatsoever ("Encumbrance"), duly endorsed in
blank for transfer or accompanied by stock powers duly executed in blank.
(b) The Company shall deliver to Purchaser an assignment (the
"Assignment") of all of the Coventure Canada Debt, free and clear of any
Encumbrance.
(c) The Company shall deliver to Purchaser the charter documents of
Coventure Canada and all corporate records documents and instruments of
Coventure Canada, and all books and accounts of Coventure Canada (the "Coventure
Canada Records").
(d) Purchaser and the Company shall each deliver all documents,
certificates, agreements and instruments required to be delivered pursuant to
Articles IV and V; and
(e) All instruments and documents executed and delivered to any party
pursuant hereto shall be in a form and substance, and shall be executed in a
manner, reasonably satisfactory to the receiving party.
1.4 Purchase Price
Subject to the terms and conditions of this Agreement, the total
purchase price for the Coventure Canada Stock, the Coventure Canada Debt, the
Coventure Canada Business and the Coventure Canada Goodwill shall be the
forgiveness of USD$68,179.13 of debt or other obligations due and owing from the
Company to the Purchaser ("Company Obligations"), which forgiveness shall be
effected on the Closing Date by the delivery of the Coventure Canada Stock, the
Assignment and the Coventure Canada Records to the Purchaser.
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1.5 Assistance in Consummation of this Agreement
Purchaser and the Company shall provide all reasonable assistance to,
and shall cooperate with, each other to bring about the consummation of the
purchase and sale of the Coventure Canada Stock, the Coventure Canada Debt, the
Coventure Canada Business and the Coventure Canada Goodwill and the other
transactions contemplated herein as soon as possible in accordance with the
terms and conditions of this Agreement.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Purchaser, as of the date
of this Agreement and as of the Closing (which representations and warranties
shall survive the Closing Date to the extent provided in Section 7.5 hereof):
2.1 Good Title
The Coventure Canada Stock, the Coventure Canada Debt, the Coventure
Canada Business and the Coventure Canada Goodwill are owned by the Company with
good and marketable title thereto, free and clear of any Encumbrance.
2.2 Organization, Good Standing
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware, and has all requisite corporate power
and authority to own, operate and lease its properties and assets and to carry
on its business as now conducted.
Coventure Canada is a corporation duly incorporated, validly existing
and in good standing under the laws of Alberta.
2.3 Authorization
The Company has the full corporate power and authority enter into this
Agreement and each of the documents to which it is a party, and to carry out the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Company, and this Agreement is, and will be, on
the Closing Date, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with the terms of this Agreement.
2.4 No Approvals or Notices Required; No Conflicts With Instruments
The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will not
(a) constitute a violation (with or without the giving of notice or lapse of
time, or both) of any provision of law or any judgment, decree, order,
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regulation or rule of any court or other governmental authority applicable to
the Company, or (b) require any consent, approval or authorization of, or
declaration, filing or registration with, any person, corporation, partnership,
joint venture, association, organization, other entity or governmental or
regulatory authority (a "Person").
2.5 Authorized Capitalization of Coventure Canada
Coventure Canada's authorized capital stock consists solely of common
shares of which 100 shares are issued and outstanding on the date of this
Agreement and entirely held by the Company. All issued and outstanding shares of
Coventure Canada Stock are validly issued, fully paid and nonassessable. The
Company is the sole owner of all issued and outstanding shares of capital stock
of Coventure Canada. There are no outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments or other agreements of any
character which obligate or may obligate Coventure Canada to issue any
additional shares of any of its capital stock or any securities convertible into
or evidencing the right to subscribe for any shares of any such capital stock.
There are no voting trusts or other agreements or understandings with respect to
the capital stock of Coventure Canada to which the Company is a party or by
which the Company is bound.
2.6 Coventure Canada Debt
The amount of the Coventure Canada Debt as at the date hereof is
$38,371.12. The Company has good and marketable title to the Coventure Canada
Debt and has not assigned the Coventure Canada Debt, or any interest therein, to
any other party. The Coventure Canada Debt is payable on demand by the Company
without set off or counterclaim. The Coventure Canada Debt does not bear
interest.
2.7 Brokers and Finders
The Company has not retained any broker or finder in connection with
the transactions contemplated by this Agreement.
2.8 Change of Name
The Company will change its name to a name which does not use the term
"Coventure" within 30 days hereof.
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ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser represents and warrants to the Company, as of the date of
this Agreement and as of the Closing (which representations and warranties shall
survive the Closing to the extent provided in Section 7.5 hereto):
3.1 Authority
Purchaser has full power and authority to execute, deliver and perform
this Agreement and to carry out the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Purchaser, and this Agreement
is, and will be, on the Closing Date, a legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms.
3.2 No Approvals or Notices Required; No Conflicts With Instruments
The execution, delivery and performance of this Agreement by Purchaser
and the consummation of the transactions contemplated hereby will not (a)
constitute a violation (with or without the giving of notice or lapse of time,
or both) of any provision of law or any judgment, decree, order, regulation or
rule of any court or other governmental authority applicable to Purchaser, or
(b) require any consent, approval or authorization of, or declaration, filing or
registration with, any Person.
3.4 Satisfaction of Company Obligations
Upon satisfaction of the Company Obligations pursuant to the terms of
this Agreement, the Company shall have no further debts, liabilities, duties or
obligations of any kind or nature due or owing to the Purchaser.
3.5 Brokers and Finders
Purchaser has not retained any broker or finder in connection with the
transactions contemplated by this Agreement.
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
The obligations of Purchaser to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by them at or
prior to the Closing Date shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date, which condition may be expressly
waived in writing by Purchaser.
4.1 Accuracy of Representations and Warranties
The representations and warranties of the Company contained herein
shall have been true in all material respects when made and shall be true as of
the Closing Date as though made on that date, except as affected by transactions
contemplated hereby and except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true in all material respects as of the specified date.
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4.2 Performance of Agreement
The Company shall have performed in all material respects all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed and complied with by them at or
prior to the Closing Date.
4.3 Resignations
Purchaser shall have received resignations effective as of the Closing
Date of all the officers and directors of Coventure Canada, other than the
Purchaser.
4.4 Delivery of Coventure Canada Stock, Assignment and Coventure
Canada Records
Purchaser shall have received certificates representing the Coventure
Canada Stock, together with stock powers duly endorsed in blank, as well as the
Assignment and the Coventure Canada Records.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company to perform and observe the covenants,
agreements and conditions hereof to be performed and observed by it at or prior
to the Closing Date shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date, which conditions may be expressly
waived in writing by the Company.
5.1 Accuracy of Representations and Warranties
The representations and warranties of Purchaser contained herein shall
have been true in all material respects when made and shall be true in all
material respects as of the Closing Date as though made on that date, except as
affected by transactions contemplated hereby and except and to the extent that
such representations and warranties are made as of a specified date, in which
case such representations and warranties shall be true as of the specified date.
5.2 Performance of Agreement
Purchaser shall have performed all obligations and agreements and
complied with all covenants and conditions contained in this Agreement to be
performed and complied with by them at or prior to the Closing Date.
ARTICLE VI - TERMINATION
This Agreement may be terminated at any time prior to the Closing:
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(a) by the mutual consent of Purchaser and the Company;
(b) by either party if the Closing has not occurred by December 20,
2005.
Such termination shall not prejudice any party's right to seek remedies
for another party's breach of this Agreement.
ARTICLE VII - GENERAL
7.1 Cooperation
Each party hereto will fully cooperate with the other parties, their
counsel and accountants in connection with any steps required to be taken as
part of its obligations under this Agreement. Each party will use its reasonable
best efforts to cause all conditions to this Agreement to be satisfied as
promptly as possible and to obtain all consents and approvals necessary for the
due and punctual performance of this Agreement and for the satisfaction of the
conditions hereof. No party will undertake any course of action inconsistent
with this Agreement or which would make any representations, warranties or
agreements made by such party in this Agreement untrue or any conditions
precedent to this Agreement unable to be satisfied at or prior to the Closing.
7.2 Confidentiality
In connection with the transactions contemplated herein, the Company
and Purchaser are furnishing each other with certain information which is either
nonpublic, confidential or proprietary in nature. All such information furnished
by one party to the other or its representatives is hereinafter referred to as
the "Confidential Information." As used in this Agreement, the "representatives"
of any party shall mean such party's officers, employees, agents or other
representatives, including, without limitation, attorneys, accountants,
consultants and financial advisors. In consideration of each party's being
furnished with the Confidential Information of the other, each party agrees
that:
(a) The Confidential Information will be kept confidential and
except as required by law will not, without the prior written consent of the
party supplying the information, be disclosed by the receiving party or its
representatives during such three-year period in any manner whatsoever, in whole
or in part, and will not be used by the receiving party or its representatives
directly or indirectly for any purpose other than evaluating and facilitating
the transactions contemplated herein; provided, however, that upon the execution
of this Agreement by the parties, the Company and its representatives will be
free to use the Confidential Information to the extent required by law in any
subsequent filings with federal or state authorities relating to the
transactions contemplated herein. Each party agrees to transmit the Confidential
Information only to those of its representatives who need to know the
Confidential Information for the purpose of advising it regarding any of the
purposes for which it is permitted to use the Confidential Information under the
terms of this Agreement, who are informed by the party supplying such
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information of the confidential nature of the Confidential Information and who
are directed by such party to comply with the terms of this Agreement. Each
party will be responsible for any material breach of this Agreement by its
representatives.
(b) Without the prior written consent of the other parties to
this Agreement, no party or any of its representatives will disclose to any
other Person the fact that the Confidential Information has been made available,
or any of the terms, conditions or other facts with respect to the transactions
contemplated herein, including the status thereof, except as required by law or
permitted under the terms of this Agreement.
(c) In the event the parties do not proceed with the
transactions contemplated herein, the Confidential Information and all copies
thereof will be destroyed or returned promptly without retaining any copies
thereof.
(d) This Section 7.2 shall be inoperative as to such portions
of the Confidential Information which (i) are or become generally available to
the public other than as a result of a disclosure by the receiving party or its
representatives which is not required by law; (ii) become available to the
receiving party from a source with no obligation of confidentiality to the other
party; (iii) describe technology independently developed by the receiving party;
or (iv) were known to the receiving party on a non-confidential basis prior to
its disclosure to the receiving party by the supplying party or one of its
representatives.
(e) In the event that a receiving party or any of its
representatives is requested or becomes legally compelled (by written or oral
interrogatories, subpoena, civil investigative demand or similar process) to
disclose any of the Confidential Information for purposes not permitted by this
Agreement, the receiving party will provide the supplying party with prompt
written notice so that the supplying party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Agreement. In the event that such protective order or other remedy is not
obtained, or that the supplying party waives compliance with the provisions of
this Agreement, the receiving party will furnish only that portion of the
Confidential Information which is legally required, and will exercise good-faith
efforts to obtain reliable assurance that confidential treatment will be
accorded the Confidential Information.
(f) Each party agrees that the other parties shall be entitled
to equitable relief, including injunction and specific performance, in the event
of any breach of the provisions of clause (a), (b), (c) or (e) of this Section
7.2. Such remedies shall not be deemed to be the exclusive remedies for a breach
of this Section 7.2 by any party or its representatives but shall be in addition
to all other remedies available at law or equity.
(g) It is further understood and agreed that no failure or
delay by any party in exercising any right, power or privilege under this
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Section 7.2 shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or
privilege hereunder.
7.3 Further Acts
After the Closing Date, each party hereto, at the request of and
without any further cost or expense to the other parties, will take any further
actions necessary or desirable to carry out the purposes of this Agreement.
7.4 Amendment
The parties may amend, modify or supplement this Agreement at any time,
but only in writing duly executed on behalf of each of the parties to be bound
thereby.
7.5 Survival of Warranties
The representations and warranties contained in this Agreement shall
survive the Closing for a period of one (1) year from the Closing.
7.6 Counterparts
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings
The headings preceding the text of Articles and Sections of this
Agreement are for convenience only and shall not be deemed parts thereof
7.8 Applicable Law
This Agreement, including all matters of construction, validity and
performance, shall be governed by and construed and enforced in accordance with
the laws of the state of New York, as applied to contracts executed and to be
fully performed in such state by citizens of such state.
7.9 Parties in Interest
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, whether herein so expressed or not, but
neither this Agreement nor any of the rights, interests or obligations hereunder
of any party hereto shall be assigned without the prior written consent of the
other parties. This Agreement is not intended, nor shall it be construed, to
confer any enforceable rights on any Person not a party hereto.
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7.10 Notices
Any notice or demand desired or required to be given hereunder shall be
in writing given by personal delivery or certified or registered mail, reputable
overnight courier service, telegram or confirmed facsimile transmission,
addressed as respectively set forth below or to such other address as any party
shall have previously designated by such a notice, The effective date of any
notice or request shall be three days from the date it is mailed by the
addressor, upon delivery of the courier package if it is sent by courier, upon
delivery to a telegraph company properly addressed with charges prepaid, upon
confirmation of a successful facsimile transmission, or in any event upon
personal delivery.
Notices to Purchaser and the Company shall be sent as follows:
To Purchaser:
Mr. John Hromyk
118 First Avenue West, Suite 206, PO Box 1900
Cochrane, Alberta, Canada T4C 1A5
Phone: (403) 851-2607
Telecopier: (403) 851-2044
To the Company:
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: Minqing Lu, CEO
Phone: 86-29-88323325
Telecopier: 86-29-88390609
Copy to:
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas, 21st Floor
New York, New York 10018
Attn: Marc Ross, Esq.
Phone: (212) 930-9700
Telecopier: (212) 930-9725
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
PURCHASER
/s/ JOHN HROMYK
---------------
John Hromyk
CHINA NATURAL GAS, INC.
By: /s/ MINQING LU
------------------
Name: Minqing Lu
Title: CEO
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