EQUITY REGISTRATION RIGHTS AGREEMENT dated as of January 29, 2008 by and between CHINA NATURAL GAS, INC. and ABAX LOTUS LTD
dated
as
of January 29, 2008
by
and
between
and
ABAX
LOTUS LTD
This
Equity Registration Rights Agreement (the “Agreement”)
is
made and entered into as of January 29, 2008, by and between (i) China Natural
Gas, Inc. (the “Company”),
and
(ii) Abax Lotus Ltd (“Abax”
or
the
“Purchaser”).
RECITALS
WHEREAS,
this
Agreement is made pursuant to the Securities Purchase Agreement, dated December
30, 2007, by and among the Company, the Purchaser and the other parties thereto
(as may be amended, restated or supplemented, the “Purchase
Agreement”), pursuant
to which the Purchaser has agreed to purchase an aggregate of up to
RMB363,000,000 principal amount of 5.0% Guaranteed Senior Notes due 2014 settled
in U.S.Dollars (the “Notes”)
of the
Company,
and
warrants to purchase a total of 2,900,000 shares of the Company’s Common Stock,
par value $0.0001 (the “Common
Stock”).
WHEREAS,
in
consideration of Purchaser’s entering into the Securities Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement.
WHEREAS,
the
execution and delivery of this Agreement is a condition to the obligations
of
the Purchaser set forth in Section 3 of the Purchase Agreement. Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
to
them in the Purchase Agreement.
AGREEMENT
The
parties hereby agree as follows:
|
SECTION
1.
|
DEFINITIONS.
|
As
used
in this Agreement, the following capitalized terms shall have the following
meanings:
“Affiliate”:
As
defined in Rule 144 of the Securities Act.
“Closing
Date”:
The
date hereof.
“Common
Stock”:
As
defined in the Recitals.
“Company”:
As
defined in the Preamble.
“Exchange
Act”:
The
Securities Exchange Act of 1934, as amended.
“Holder”:
Any
Person who holds Warrants or Registrable Securities. A Person is deemed to
be a
Holder whenever such Person owns Warrants or Registrable Securities or has
the
right to acquire such Registrable Securities by exercising Warrants held by
such
Person, whether or not such acquisition has actually been effected.
“Indemnified
Party”:
As
defined in Section
7
hereof.
1
“Inspectors”:
As
defined in Section
3
hereof.
“Notes”:
As
defined in the Recitals.
“Person”:
Any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
“Prospectus”:
The
prospectus included in a Registration Statement at the time such Registration
Statement is declared effective, as supplemented by any prospectus supplement,
and all material incorporated by reference into such prospectus.
“Purchase
Agreement”:
As
defined in the Recitals.
“Purchaser”:
As
defined in the Recitals.
“Recommencement
Date”:
As
defined in Section
5
hereof.
“Registrable
Securities”:
At any
time, any of (i) the Warrant Shares (whether or not the related Warrants have
been exercised) and (ii) any other securities issued or issuable with respect
to
any Warrant Shares by way of stock dividends or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (a) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (b) such securities have been sold to the public pursuant to Rule
144(k) (or any similar provisions then in force, but not Rule 144A) promulgated
under the Securities Act, (c) such securities may be sold without restriction
under Rule 144(k)(or successor rule), (d) such securities shall have been
otherwise transferred by the Holder thereof and new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company or its transfer agent and subsequent disposition of
such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (e) such securities
shall have ceased to be outstanding.
“Registration
Default”:
As
defined in Section
4
hereof.
“Registration
Statement”:
Any
registration statement of the Company relating to the registration for resale
of
Registrable Securities (in an amount permissible under the Rule 415 Interpretive
Position) that is filed pursuant to the provisions of this Agreement, including
the Prospectus included therein, all amendments thereto (including
post-effective amendments) and all exhibits and all material incorporated by
reference therein.
“Rule
415”:
Rule
415 promulgated by the SEC 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 SEC having substantially the same purpose and effect as such
Rule.
2
“Rule
415 Interpretative Position”:
The
then-current interpretation of the staff of the SEC regarding the availability
of Rule 415 for continuous or delayed offerings of securities for the account
of
selling securityholders.
“SEC”:
The
Securities and Exchange Commission.
“Securities
Act”:
The
Securities Act of 1933, as amended.
“Shelf
Registration”:
As
defined in Section 2
hereof.
“Suspension
Notice”:
As
defined in Section
5
hereof.
“Warrant
Agreement”:
The
Warrant Agreement dated the Closing Date by and between the Company, the
Purchaser and The Hongkong and Shanghai Banking Corporation, as Warrant Agent.
“Warrant
Shares”:
The
Common Stock or other securities that any Holder may acquire upon exercise
of a
Warrant, together with any other securities which such Holder may acquire on
account of any such securities, including, without limitation, as the result
of
any dividend or other distribution on Common Stock or any split or combination
of such Common Stock as provided for in the Warrant Agreement.
“Warrants”:
The
warrants of the Company issued and sold pursuant to the Purchase
Agreement and
the
Warrant Agreement, together with any warrants issued in substitution or
replacement therefor.
|
SECTION
2.
|
FILING
OF REGISTRATION STATEMENT.
|
(a) As
soon
as reasonably practicable after the Closing Date, but in any event no later
than
the later of (i) 45 days from the Closing Date and (ii) March 4, 2008, the
Company shall prepare and cause to be filed with the SEC pursuant to Rule 415
a
Registration Statement on the appropriate form relating to resales of all
Registrable Securities (the “Shelf
Registration”)
provided,
that
the Company shall only be required to register registrable securities up to
an
amount permitted to be registered by the SEC pursuant to the Rule 415
Interpretive Position. The Company shall use its best efforts to cause any
such
Registration Statement to be declared effective by the SEC as soon as reasonably
practicable and no later than June 27, 2008. In the event any Registrable
Securities are excluded from the Registration Statement due to the Rule 415
Interpretative Position, the Registrable Securities to be excluded shall be
allocated among all Holders on a pro
rata
basis
based on the total number of Registrable Securities proposed to be included
in
such Registration Statement.
To
the
extent necessary to ensure that the Registration Statement is available for
sales of Registrable Securities by the Holders thereof entitled to the benefit
of this Section
2(a),
the
Company shall use its reasonable best efforts to keep any Registration Statement
required by this Section
2(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section
2(a)
hereof
and in conformity with the requirements of this Agreement, the Securities Act
and the rules and regulations of the SEC promulgated thereunder from time to
time (including (A) preparing and filing with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary
to
keep such Registration Statement effective; (B) cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be
filed pursuant to Rule 424 under the Securities Act, and complying fully
with Rules 424, 430A and 462, as applicable, under the Securities Act in a
timely manner; and (C) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement), until the date when all Registrable Securities covered by the
Registration Statement (i) have been sold pursuant thereto or (ii) may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
and acceptable to the Company’s transfer agent and the affected
Holders.
3
(b) No
Holder
may include any of its Registrable Securities in any Registration Statement
pursuant to this Agreement unless and until such Holder furnishes in writing
to
the Company within 10 business days of a request therefor, such information
as
is requested by the Company regarding such Holder, the Registrable Securities
held by such Holder and the intended method of disposition of the Registrable
Securities held by such Holder, as shall be reasonably required (but in no
event
shall such information provided be less than the information required by
Regulation S-K and other applicable SEC rules, regulations and interpretations
or such as is requested by the staff of the SEC pursuant to any comment letter
with respect to the Registration Statement) to effect the registration of such
Registrable Securities. Each selling Holder agrees to promptly furnish (but
in
no event more than five (5) business days following the Company’s request)
additional information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
The Company shall not have any obligation to include in a Registration Statement
Registrable Securities held by a Holder that does not furnish the information
requested by the Company pursuant to this Section
2(b).
(c) The
Company shall be deemed not to have used its reasonable best efforts to keep
the
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Registrable Securities covered
thereby not being able to offer and sell such Registrable Securities during
that
period, unless such action is required by applicable law or this
Agreement.
|
SECTION
3.
|
REGISTRATION
PROCEDURES.
|
In
connection with the Shelf Registration, the following provisions shall
apply:
(a) The
Company shall (i) furnish to the Holders, prior to the filing thereof with
the
SEC, an electronic copy of the Registration Statement and each amendment thereof
(and if a Holder so requests in writing, electronic copies of all documents
incorporated therein by reference) and each supplement, if any, to the
Prospectus, which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
business days, and the Company will not file any such Registration Statement
or
related Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus to which Holders of a majority of the Registrable
Securities shall reasonably object within five (5) business days after the
receipt thereof; and (ii) include the names of the Holders who propose to sell
Registrable Securities pursuant to the Registration Statement as selling
securityholders. A Holder’s objection shall be deemed to be a reasonable
objection to such filing if such Registration Statement, amendment, related
Prospectus or supplement, as applicable, as proposed to be filed, contains
an
untrue statement of a material fact or omits to state any material fact
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading or fails
to comply with the applicable requirements of the Securities Act.
4
(b) The
Company shall give written notice to the Holders:
(i) when
the
Registration Statement or any amendment thereto has been filed with the SEC
and
when the Registration Statement or any post-effective amendment thereto has
become effective;
(ii) of
any
request by the SEC for amendments or supplements to the Registration Statement
or the Prospectus or for additional information;
(iii) of
the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that
purpose;
(iv) of
the
receipt by the Company or its legal counsel of any notification with respect
to
the suspension of the qualification of the Registrable Securities for sale
in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of
the
occurrence of any event that requires the Company to make changes in the
Registration Statement or the Prospectus in order that the Registration
Statement or the Prospectus does not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not
misleading.
(c) The
Company shall make every commercially reasonable effort to obtain the withdrawal
at the earliest possible time, of any order suspending the effectiveness of
the
Registration Statement.
(d) The
Company shall furnish to each Holder, without charge, at least one electronic
copy of the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and if the Holder so request
in
writing, all exhibits thereto (including those, if any, incorporated by
reference) after the filing of such documents with the SEC.
(e) The
Company shall, during the period which the Registration Statement is effective,
deliver to each Holder an electronic copy of the Prospectus (including each
preliminary Prospectus) included in the Registration Statement as such Holder
may reasonably request. The Company consents, subject to the provisions of
this
Agreement, to the use of the Prospectus by each of the Holders in connection
with the offering and sale of Registrable Securities except after the giving
of
any notice pursuant to Sections
3(b)(ii)-(v).
5
(f) Prior
to
any public offering of the Registrable Securities pursuant to any Registration
Statement the Company shall use commercially reasonable efforts to register
or
qualify or cooperate with the Holders and their respective counsel in connection
with the registration or qualification of the Registrable Securities for offer
and sale under the securities or “blue sky” laws of such states of the United
States as any Holder reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Registrable Securities; provided,
however,
that
the Company shall not be required to (i) qualify generally to do business in
any
jurisdiction where it is not then so qualified or (ii) take any action which
would subject it to general service of process or to taxation in more than
a
nominal amount in any jurisdiction where it is not then so subject.
(g) If
requested by the Holders, the Company shall cooperate with the Holders or
underwriters to facilitate the preparation and delivery of certificates
representing the Registrable Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may request a reasonable period of
time
prior to sales of the Registrable Securities pursuant to such Registration
Statement.
(h) Upon
the
occurrence of any event contemplated by paragraphs (ii) through (v) of
Section
3(b)
above
during the period for which the Company is required to maintain an effective
Registration Statement and subject to Section 5 of this Agreement, the Company
shall as promptly as reasonably possible prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus and any other required document so that, as thereafter delivered
to
Holders or purchasers of Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(i) Use
its
commercially reasonable efforts to cause all such Registrable Securities to
be
listed on each securities exchange or quoted on each automates quotation system
on which similar securities by the Company are then listed or quoted and to
provide a transfer agent and registrar for such Registrable Securities covered
by such registration statement no later than the effective date of such
registration statement.
(j) Upon
their execution of commercially customary confidentiality agreements for
securities offerings, the Company will make available for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to
any Registration Statement, and any attorney, accountant or other agent retained
by any Holder or underwriter (collectively, the “Inspectors”),
all
financial and other records, pertinent corporate documents and properties of
the
Company and its subsidiaries, if any, as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company’s and
its subsidiaries’ officers, directors and employees to supply all information
and respond to all inquiries reasonably requested by any such Inspector in
connection with such registration statement.
6
(k) If
requested by the managing underwriter or underwriters or any Holder, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriters, each selling Holder and the Company
agree should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold
to
such underwriters, the purchase price being paid therefor by such underwriters
and with respect to any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
(l) Cooperate
with the selling Holders and each underwriter or agent participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with or any other securities
exchange and/or the NASD;
(m) The
Company will comply with all applicable rules and regulations of the SEC and
make available to its security holders, within the required time periods, an
earning statement covering a period of at least twelve months, beginning with
the first month after the effective date of the registration statement (as
the
term “effective date” is defined in Rule 158(c) under the Securities Act), which
earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder or any successor provisions
thereto.
| SECTION 4. |
REGISTRATION
DEFAULT.
|
The
Company agrees that, in the event that (i) the Registration Statement has not
been declared effective by the SEC on or before June
27,
2008, or (ii) if effectiveness of the Registration Statement is suspended at
any
time other than pursuant to a Suspension Notice while any Registrable Securities
remain outstanding (each, a “Registration
Default”),
unless otherwise agreed to in writing by the Purchaser, pursuant to the
Indenture dated as of even date herewith by and among The Company and DB
Trustees (Hong Kong) Limited, as trustee, the interest rate payable on the
Company’s 5.0% Senior Notes due 2014 issued to the Purchaser shall be increased
1% for each 90-day period for which a Registration Default exists, up to a
maximum interest of ten percent (10%). Upon the curing of such Registration
Default the interest rate payable on the Notes shall immediately be reduced
to
the interest rate in effect immediately prior to the occurrence of the
Registration Default.
7
|
SECTION
5.
|
LIMITATIONS,
CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER REGISTRATION
COVENANTS.
|
The
obligations of the Company described in Section
2
of this
Agreement are subject to each of the following limitations, conditions and
qualifications:
(a) Subject
to the next sentence of this paragraph, the Company shall be entitled to
postpone, for a reasonable period of time, the filing of effectiveness of,
or
suspend the right of any Holder to make sales pursuant to, any Registration
Statement otherwise required to be prepared, filed and made and kept effective
by it under the registration covenants described in Section
2
hereof;
provided,
however,
that
the duration of such postponement or suspension may not exceed 90 days in any
365-day period. Such postponement or suspension may be effected only if (i)
(A) an event or circumstance occurs and is continuing as a result of which
such Registration Statement, any related Prospectus or any document incorporated
therein by reference as then amended or supplemented or proposed to be filed
would, in the Company’s good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein (in the case of the Prospectus, in the light of the
circumstances under which they were made) not misleading and (B)(1) the Company
determines in its good faith judgment that the disclosure of the event at that
time would have a material adverse effect on the business, operations or
prospects of the Company or (2) the disclosure otherwise relates to a material
business transaction or development that has not yet been publicly disclosed
or
(ii) the Company shall have received a notice referred to Sections
3b(ii)-(iv)
hereof.
If the Company shall so postpone the filing or effectiveness of, or suspend
the
rights of any Holders to make sales pursuant to, a Registration Statement it
shall, as promptly as possible, notify the Holders of such determination (in
each case, a “Suspension
Notice”).
Upon
receipt of such Suspension Notice, each Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section
3(h)
hereof,
or (ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus (in
each case, the “Recommencement
Date”).
Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder’s possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company’s
expense) all copies, other than permanent file copies, then in such Holder’s
possession of the Prospectus covering such Registrable Securities that was
current at the time of receipt of the Suspension Notice.
(b) The
Company’s obligations shall be subject to the obligations of the Holders to
furnish all information and materials and to take any and all actions as may
be
required under federal and state securities laws and regulations (including
any
comments issued by the SEC staff with respect to the Registration Statement
or
the matters related thereto) to permit the Company to comply with all applicable
requirements of the SEC and to obtain any acceleration of the effective date
of
such Registration Statement.
8
|
SECTION
6.
|
REGISTRATION
EXPENSES.
|
(a) All
expenses incident to the Company’s performance of and compliance with this
Agreement will be borne by the Company, including without limitation:
(i) all
registration and filing fees and expenses;
(ii) all
fees
and expenses of compliance with federal securities and state “blue sky” or
securities laws;
(iii) all
expenses of printing (including printing certificates for the Registrable
Securities and printing of prospectuses), messenger and delivery services and
telephone usage;
(iv) if
the
Holders intend to distribute Registrable Securities by means of an underwriting,
all fees and expenses customarily paid by an issuer in connection with an
underwritten offering (which shall include reasonable legal fees and
disbursements payable to one counsel for all of the Holders, if appointed,
but
in no event including any expenses in connection with any “roadshow” or similar
expenses);
(v) all
fees
and disbursements of counsel for the Company; and
(vi) all
fees
and disbursements of independent certified public accountants of the Company
(including the expenses of any special audit required by or incident to such
performance); provided
however,
that the
Company shall not be required to pay any registration expenses as a result
of
the withdrawal or termination of a registration statement at the request of
a
majority in interest of the Holders, the registration statement does not become
effective, unless the withdrawal or termination of a registration statement
is
in response to either (i) a Suspension Notice by the Company pursuant to
Section
5(b) or
(ii)
an event described in Section
3(b)(v).
(b) The
Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any Person, including special experts, retained by the Company.
(c) All
selling expenses, including without limitation, all underwriting discounts
and
selling commissions applicable to the sale of the Registrable Securities, shall
be borne pro
rata by
the
Holders.
9
|
SECTION
7.
|
INDEMNIFICATION.
|
(a) To
the
extent permitted by law, the Company agrees to indemnify and hold harmless
each
Holder and each Person, if any, who controls such Holder within the meaning
of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof (including, but not limited to, any losses, claims,
damages, liabilities or actions relating to purchases and sales of the
Registrable Securities) to which each Indemnified Party (as defined in
Section
7(c)
below)
may become subject under the Securities Act, the Exchange Act, other United
States securities laws or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement
or
alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary Prospectus relating to a Registration, or arise out of, or are
based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in the case
of
the Prospectus, in light of the circumstances under which they were made) not
misleading, and shall reimburse, within thirty (30) days after a request for
reimbursement has been received by the Company. The Indemnified Parties for
any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action
in
respect thereof; provided,
however,
(i)
that the Company shall not be liable (A) in any such case to the extent that
such loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
in
the Registration Statement or Prospectus or in any amendment or supplement
thereto or in any preliminary Prospectus relating to a Registration Statement
in
reliance upon and in conformity with written information pertaining to such
Holder or such Holder’s proposed method of distribution of Registrable
Securities and furnished to the Company by or on behalf of such Holder
specifically for inclusion therein; (B) in the case of the use by such Holder
of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective; and (ii) with respect
to any untrue statement or omission or alleged untrue statement or omission
made
in any preliminary Prospectus relating to the Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Holder from whom the Person asserting any such losses, claims,
damages or liabilities purchased the Registrable Securities concerned, to the
extent that the Prospectus was required to be delivered by such Holder under
the
Securities Act in connection with such purchase and any such loss, claim, damage
or liability of such Holder results from the fact that there was not sent or
given to such Person, at or prior to the written confirmation of the sale of
such Registrable Securities to such Person, a copy of the final Prospectus
if
the Company had previously furnished copies thereof to such Holder or a copy
of
the final Prospectus was otherwise available to such Holder on the SEC’s Xxxxx
website; and (iii) the indemnity agreement contained in this Section 7(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld; provided
further, however,
that
this indemnity agreement will be in addition to any liability which the Company
may otherwise have to such Indemnified Party.
(b) Each
Holder of the Registrable Securities, severally and not jointly, will indemnify
and hold harmless the Company, each of its officers and directors, and each
other Holder and each Person, if any, who controls the Company or any such
other
Holder within the meaning of Section 15 of the Securities Act or Section 20
of
the Exchange Act from and against any losses, claims, damages or liabilities
or
any actions in respect thereof, to which the Company, such other Holder or
any
such controlling Person may become subject under the Securities Act, the
Exchange Act, other United States securities laws or otherwise, insofar as
such
losses, claims, damages, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained
in
a Registration Statement or Prospectus or in any amendment or supplement thereto
or in any preliminary Prospectus relating to a Registration Statement, or arise
out of or are based upon the omission or alleged omission to state therein
a
material fact necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, but in each case only (i) to the extent that the untrue statement
or
omission or alleged untrue statement or omission was made in reliance upon
and
in conformity with written information furnished to the Company by or on behalf
of a Holder specifically for inclusion therein or (ii) as a result of the use
by
such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective;
and, subject to the limitation set forth immediately preceding this clause,
shall reimburse, within thirty (30) days after a request for reimbursement
has
been received by the Company, the Company and each such other Holder for any
legal or other expenses reasonably incurred by the Company, such other Holder
or
any such controlling Person in connection with investigating or defending any
loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may otherwise
have to the Company, such other Holder or any such controlling Persons. No
Holder shall be liable under this Section
7(b)
for any
amounts exceeding the amount of any proceeds received by such Holder from the
sale of Registrable Securities pursuant to the Registration Statement giving
rise to the indemnification obligation.
10
(c) Promptly
after receipt by any Person in respect of which indemnity may be sought pursuant
to Section
7(a)
or
(b)
(any
such Person, an “Indemnified
Party”)
under
this Section
7
of
notice of the commencement of any action or proceeding (including a governmental
investigation), such Indemnified Party will, if a claim in respect thereof
is to
be made against the indemnifying party under this Section
7,
notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not, in any event, relieve the indemnifying
party from any obligations to any Indemnified Party unless the indemnifying
party is materially prejudiced. In case any such action is brought against
any
Indemnified Party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and,
to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory
to
such Indemnified Party (whose approval shall not be unreasonably withheld,
but
who shall not, except with the written consent of the indemnified party, be
counsel to the indemnifying party in the event of any apparent or perceived
conflict of interest), and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof the
indemnifying party will not be liable to such Indemnified Party under this
Section
7
for any
legal expenses, other than reasonable costs of investigation, subsequently
incurred by such Indemnified Party in connection with the defense thereof.
No
indemnifying party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened action in respect
of
which any Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party unless such settlement
includes an unconditional release of such Indemnified Party from all liability
on any claims that are the subject matter of such action, and does not include
a
statement as to or an admission of fault, culpability or a failure to act by
or
on behalf of any Indemnified Party. The indemnifying party shall not be liable
for the costs and expenses of any settlement of such action effected by such
Indemnified Party without the consent of the indemnifying party, which consent
shall not be unreasonably withheld.
11
(d) If
the
indemnification provided for in this Section
7
is held
by a court of competent jurisdiction to be unavailable to or insufficient to
hold harmless an Indemnified Party under subsections (a) or (b) above, then
each
indemnifying party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the losses, claims, damages or liabilities
(or
actions in respect thereof) referred to in subsection (a) or (b) above (i)
in
such proportion as is appropriate to reflect the relative benefits received
by
the indemnifying party or parties on the one hand and the Indemnified Party
on
the other from the sale of the Registrable Securities by the Holders, or (ii)
if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law or not applicable as where the Company is the indemnifying party
and no securities are sold by the Company in the transaction which is the
subject of the action or proceeding, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also
the relative fault of the indemnifying party or parties on the one hand and
the
Indemnified Party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Holder or such other Indemnified
Party, as the case may be, on the other, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid by an Indemnified Party as a result
of
the losses, claims, damages or liabilities referred to in the first sentence
of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any action or claim which is the subject of this subsection (d).
Notwithstanding any other provision of this Section
7(d),
the
Holders of the Registrable Securities shall not be required to contribute any
amount in excess of the amount by which any proceeds received by such Holders
from the sale of the Registrable Securities pursuant to the Registration
Statement exceeds the amount of damages that such Holders have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each Person, if any,
who
controls such Indemnified Party within the meaning of the Securities Act or
the
Exchange Act shall have the same rights to contribution as such Indemnified
Party, and each Person, if any, who controls the Company within the meaning
of
the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The
agreements contained in this Section
7
shall
survive the sale of the Registrable Securities pursuant to the Registration
Statement and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by
or on
behalf of any Indemnified Party.
|
SECTION
8.
|
RULE
144.
|
The
Company shall use its commercially reasonable efforts to file the reports
required to be filed by it under the Exchange Act in a timely manner and, if
at
any time the Company is not required to file such reports, it will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rule 144. The Company
covenants that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable such Holder
to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144. Upon the request of
any
Holder, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements.
12
|
SECTION
9.
|
MISCELLANEOUS.
|
(a) Remedies.
The
Company acknowledges and agrees that any failure by the Company to comply with
its obligations under Section
2
hereof
may result in material irreparable injury to the Holders for which there is
no
adequate remedy at law, that it will not be possible to measure damages for
such
injuries precisely and that, in the event of any such failure, any Holder may
obtain such relief as may be required to specifically enforce the Company’s
obligations under Section
2
hereof.
The Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No
Inconsistent Agreements.
The
Company will not on or after the date of this Agreement enter into any agreement
with respect to its securities that is inconsistent with the rights granted
to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with
and
are not inconsistent with the rights granted to the holders of the Company’s
securities under any agreement in effect on the Closing Date.
(c) Amendments
and Waivers.
The
provisions of this Agreement may not be amended, modified or supplemented,
and
waivers or consents to departures from the provisions hereof may not be given,
except by the Company and the written consent of the Holders of a majority
of
the Registrable Securities affected by such amendment, modification, supplement,
waiver or consent.
(d) Notices.
All
notices and other communications provided for or permitted hereunder shall
be
made in writing by hand delivery, first-class mail, facsimile transmission,
or
air courier which guarantees overnight delivery:
(1) if
to a
Holder of the Securities, at the most current address given by such Holder
to
the Company or Warrant Agent.
(2) if
to the
Company, at its address as follows:
00xx
Xxxxx, Xxxxxxxx X, Xxx Xxxxxxxxxx
Xx.
00
Xxxxxx Xxxx
Xxxx
Xxxx
Xxxx
Xi’an
710065
P.R.
China
Attention:
Chief Financial Officer
Facsimile
No.: x00 00000000
00
Xxxx
Xxx Xxxxx# 0000
00
Xxx
Xxxx,
XX 00000
Attention:
Taylor Zhang
Fax: x0
000 000 - 7371
with
a
copy to:
Xxxxx
Rozynko LLP
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
U.S.A.
Attention: Xxxxxxxx
X. Xxxxxxx, Esq.
Facsimile
No.: x0 000 000 0000
(3) if
to the
Purchaser, at its address as indicated on Schedule
I
to the
Purchase Agreement.
All
such
notices and communications shall be deemed to have been duly given: at the
time
delivered by hand, if personally delivered; three business days after being
deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged
by the recipient’s facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(e) Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit the Company,
the
Holders and their respective successors and assigns. In addition, and whether
or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the Purchaser shall also be for the
benefit of and enforceable by any subsequent Holder, subject to the terms and
conditions contained in this Agreement. Each Purchaser and any Holder shall
provide written notice to the Company of any assignment of their rights
hereunder or any transfer of Registrable Securities which are entitled to such
rights under the terms of this Agreement; provided
that the
failure to provide such notice shall not affect any such rights of any Purchaser
or any Holder.
(f) Counterparts.
This
Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and
the
same agreement.
(g) Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
(h) Governing
Law; Jurisdiction.
THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. The
Company agrees that any suit, action or proceeding against it arising out of
or
based upon this Agreement or the transactions contemplated hereby may be
instituted in any State or U.S. federal court in The City of New York and County
of New York, and waives any objection which it may now or hereafter have to
the
laying of venue of any such proceeding, and irrevocably submits to the
non-exclusive jurisdiction of such courts in any suit, action or
proceeding.
14
(i) Severability.
If any
one or more of the provisions contained herein, or the application thereof
in
any circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect and
of
the remaining provisions contained herein shall not be affected or impaired
thereby.
(j) Securities
Held by the Company.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the
Company or its Affiliates (other than subsequent Holders of Registrable
Securities if such subsequent Holders are deemed to be Affiliates solely by
reason of their holdings of such Registrable Securities) shall not be counted
in
determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Business
Combinations.
Without
the prior written consent of the Holders, the Company shall not consolidate
with
or enter into any merger, consolidation or other business combination
transaction (for the purposes of this Section
9(k),
a
“business
combination”)
with
another Person (whether or not the Company is the surviving entity) or sell,
transfer or distribute all or substantially all of its assets, whether in a
single transaction or through a series of related transactions, to another
Person or group of affiliated Persons or permit any of its subsidiaries to
enter
into any such transaction or transactions, where the business combination or
sale, transfer or distribution involves the payment by any Person of any
securities to, or the exchange by any Person of any securities with, the Company
or any holders of Common Stock of the Company, unless the issuer of such
securities agrees to be bound by the terms of this Agreement with Holders
relating to such securities or otherwise enters into a new registration rights
agreement which shall contain terms substantially similar to this Agreement
and
shall otherwise be in a form satisfactory to the Holders.
(l) Independent
Nature of Holders’ Obligations and Rights.
The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible
in
any way for the performance of the obligation of any other Holder hereunder.
Nothing contained herein or in any other agreement of document delivered at
any
closing, and no action taken by any Holder pursuant hereto or thereto, shall
be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled
to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to
be
joined as an additional party in any proceeding for such purpose.
[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
15
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
| CHINA NATURAL GAS, INC. | |||
| By: |
/s/
Qinan Ji
|
||
| Name: | |||
| Title: | |||
[SIGNATURE
PAGE TO EQUITY REGISTRATION RIGHTS AGREEMENT]
Accepted and Agreed to:
ABAX
LOTUS LTD
| By: |
/s/
Xxxx Xxxxx Dong
|
| Name: | |
| Title: Authorized Signatory |
[SIGNATURE
PAGE TO EQUITY REGISTRATION RIGHTS AGREEMENT]
