EXHIBIT 10.1


 


NATURAL GAS SYSTEMS, INC.


 


Registrable Common Stock at $2.00 per Share


 


SUBSCRIPTION AGREEMENT


 


1.                                      Subscription:


 


(a)                                  The
undersigned (individually and/or collectively, the “Participant”) hereby
applies to become a participant in the registrable common stock (the “Shares”
or the “Common Stock”) of NATURAL GAS SYSTEMS, INC., a Nevada corporation (“NGS”
or the “Company”), in accordance with the terms and conditions of this
Subscription Agreement (the “Subscription”). 
The Company is offering up to 8,000,000 shares of Common Stock in this
offering, subject to the right of the Company to sell such lesser number of
shares of Common Stock as the Company may, in its sole discretion, deem
necessary or advisable.  The subscription
period will begin on June 11, 2004 and will terminate at 11:59 p.m., Eastern
time, on August 31, 2004, unless terminated or extended by the Company (which
termination or extension may be effected without notice) for up to an
additional 60 days.  The purchase and
sale of the Shares shall occur as soon as practicable after the execution of
this Subscription by the Company and each of the Participants.  On such date, the Company will deliver or
cause to be delivered one or more physical certificates representing the Shares
purchased by each Subscriber.


 


(b)                                 Before this subscription for participation in
the Shares is considered, the Participant must complete, execute and deliver to
the Company the following:


 


(i)                                     This Subscription;


 


(ii)                                  The Certificate of Accredited Investor Status
attached hereto as Exhibit A;


 


(iii)                               The NGS Registration Rights Agreement; and


 


(iv)                              The Participant’s check or wire transfer in
the amount of $                                    .


 


(c)                                  Participant hereby subscribes for                     
Shares at a purchase price of TWO DOLLARS ($2.00) per share.


 


(d)                                 This Subscription is irrevocable by the
Participant.


 


(e)                                  This Subscription is not transferable or
assignable by the Participant.


 


(f)                                    This Subscription shall be deemed to be
accepted only when this Subscription has been executed by an authorized officer
of the Company.  The deposit of
Participant’s check or wire transfer funds will not be deemed an acceptance of
this Subscription.


 


(g)                                 This Subscription may be rejected in whole or
in part by the Company in its sole discretion. 
In the event this Subscription is rejected in its entirety by the
Company, all funds (without interest) and documents tendered by the Participant
shall be returned.  In the event that
this Subscription is rejected in part by the Company, the Company shall return
to the Participant the part of the payment relating to such rejected portion
without interest.  The Company shall have
the right to allocate Shares


 





















 


among Participants in any manner it may
desire; provided, that no Participant shall be obligated to purchase more than
the number of Shares set forth in Section 1(c) above without such Participant’s
prior written consent.


 


(h)                                 Participant understands that separate
Subscriptions will be executed with other Participants for the remainder of the
Shares to be sold in this offering.


 


(i)                                     Placement agents and broker dealers, including  Laird Q. Cagan, registered representative of
Chadbourn Securities, Inc. (an NASD
broker-dealer), may be paid commissions in an amount up to but not to exceed
(i) selling commissions from the Company up to eight percent (8%) of the
aggregate proceeds from the sale of the Shares, and (iii) warrants to purchase
up to eight percent (8%) of the aggregate number of Shares sold in the
offering, exercisable for seven years at an exercise price equal to the
Offering Price, with a net exercise (“cashless exercise”) provision.


 


(j)                                     Until the registration statement contemplated
by the NGS Registration Rights Agreement is declared effective, Participant
hereby agrees not to, and will cause its affiliates not to, enter into any “put
equivalent position” as such term is defined in Rule 16a-1 under the Securities
Exchange Act of 1934, as amended, or short sale position with respect to the
Common Stock.


 


2.                                      Representations by
Participant.  In consideration of the Company’s acceptance
of participation, I make the following representations and warranties to the
Company, to its principals, and to participating broker-dealers, if any,
jointly and severally, which warranties and representations shall survive any
acceptance of my participation in the Shares:


 


(a)                                I have had the opportunity to ask questions
and receive any additional information from persons acting on behalf of the
Company to verify my understanding of the terms thereof and of the Company’s
business and status thereof, and that no oral information furnished to the
undersigned or my advisors in connection with my participation in the Shares
has been in any way inconsistent with other documentary information provided.


 


(b)                             I acknowledge that I have not seen, received,
been presented with, or been solicited by any leaflet, public promotional
meeting, newspaper or magazine article or advertisement, radio or television
advertisement, or any other form of advertising or general solicitation with
respect to my participation in the Shares.


 


(c)                              The Shares are being purchased for my own
account for long-term investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the
meanings of the Securities Act of 1933, as amended (the “Securities Act”), and
any applicable state securities laws.  No
other person or entity will have any direct or indirect beneficial interest in,
or right to, the Shares.  I or my agents
or investment advisors have such knowledge and experience in financial and
business matters relating to an investment of this type that will enable me to
utilize the information made available to me in connection with the
participation in the Shares to evaluate the merits and risks of participation
and to make an informed investment decision.


 


(d)                             I understand that (A) the Shares (1) have not
been registered under the Securities Act or any state securities laws, (2) will
be issued in reliance upon an exemption from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) and/or
Regulation D thereof and (3) will be issued in reliance upon exemptions from
the registration and prospectus delivery requirements of state securities laws
which relate to private offerings, and (B) I must therefore bear the economic
risk of such investment indefinitely unless a subsequent disposition thereof is
registered under


 





















 


the Securities Act and applicable state
securities laws or is exempt therefrom. 
I further understand that such exemptions depend upon, among other
things, the bona fide nature of my investment intent as expressed herein.  Pursuant to the foregoing, I acknowledge that
the certificates representing the Shares acquired pursuant to this Subscription
shall bear a restrictive legend substantially as follows:


 


“THE SHARES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS, AND MAY NOT BE OFFERED FOR
SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS (I)
REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR (II) AN OPINION OF COUNSEL,
WHICH OPINION AND COUNSEL ARE BOTH REASONABLY SATISFACTORY TO THE COMPANY, HAS
BEEN DELIVERED TO THE COMPANY AND SUCH OPINION STATES THAT THE SHARES MAY BE
TRANSFERRED WITHOUT SUCH REGISTRATION.”


 


(e)                                  I acknowledge that I have been advised that:


 


(i)                                     The Shares offered hereby have not been
approved or disapproved by the Securities and Exchange Commission (“SEC”) or
any state securities commission nor has the SEC or any state securities
commission passed upon the accuracy or adequacy of any representations by the
Company.  Any representation to the
contrary is a criminal offense.


 


(ii)                                  In making an investment decision, I must rely
on my own examination of the Company and the terms of the offering of the
Shares, including the merits and risks involved.  The Shares have not been recommended by any
federal or state securities commission or regulatory authority.  Furthermore, the foregoing authorities have
not confirmed the accuracy or determined the adequacy of any
representation.  Any representation to
the contrary is a criminal offense.


 


(iii)                               The Shares are “Restricted Securities” within
the meaning of Rule 144 under the Securities Act, are subject to restrictions
on transferability and resale and may not be transferred or resold except as
permitted under the Securities Act and applicable state securities laws,
pursuant to registration or exemption therefrom.


 


(f)                                  Other than the rights specifically set forth
in the NGS Registration Rights Agreement, I represent, warrant and agree that
the Company and the officers of the Company (the “Company’s Officers”) are
under no obligation to register or qualify the participation in the Shares
under the Securities Act or under any state securities law, or to assist the
undersigned in complying with any exemption from registration and
qualification.


 


(g)                               I represent that I am an “accredited investor”
within the meaning of Rule 501 of Regulation D under the Securities Act and I
have executed the Certificate of Accredited Investor Status, attached hereto as
Exhibit A.


 


(h)                               I understand that the participation in the
Shares is illiquid, cannot be readily sold as there will not be a public market
for them and that I may not be able to sell or dispose of my participation in
the Shares, or to utilize the Shares as collateral for a loan.  I understand that the purchase of the Shares
is a speculative investment and involves substantial risks and that I could lose
my entire investment in the


 





















 


Shares.  I must not purchase
participation in the Shares unless I have liquid assets sufficient to assure
myself that such purchase will cause me no undue financial difficulties and
that I can still provide for my current and possible personal contingencies,
and that the commitment herein for participation in the Shares, combined with
other investments of mine, is reasonable in relation to my net worth.


 


(i)                                 I understand that my right to transfer my
participation in the Shares will be restricted against transfers unless the
transfer is not in violation of the Securities Act, the Nevada Securities Law,
and any other applicable state securities laws (including investment suitability
standards), that the Company will not consent to a transfer of participation in
the Shares unless the transferee represents that such transferee meets the
financial suitability standards required of an initial participant and that the
Company has the right, in its absolute discretion, to refuse to consent to such
transfer.


 


(j)                                 I have been advised to consult with my own
attorney or attorneys regarding all legal matters concerning an investment in
the Company and the tax consequences of participation in the Shares, and have
done so, to the extent I consider necessary.


 


(k)                              I acknowledge that the tax consequences to me
of investing in the Company will depend on my particular circumstances, and
neither the Company, the Company’s officers, any other investors, nor the
partners, shareholders, members, managers, agents, officers, directors,
employees, affiliates or consultants of any of them, will be responsible or
liable for the tax consequences to me of an investment in the Company.  I will look solely to and rely upon my own
advisers with respect to the tax consequences of this investment.


 


(l)                                 I acknowledge that I have made the decision
to invest in the Shares solely on the basis of the information set forth in the
Company’s Private Placement Memorandum (the “Memorandum”), dated June 11, 2004,
included herewith, and that no officer, director, or other person affiliated
with the Company has given me any information or made any representations, oral
or written, other than as provided in the Memorandum, on which I have relied
upon in deciding to invest in the Shares, including without limitation, any
information with respect to future operations of the Company or the economic
returns which may accrue as a result of the purchase of the Shares.


 


(m)                           All information which I have provided to the
Company concerning myself, my financial position and my knowledge of financial
and business matters is truthful, accurate, correct and complete as of the date
set forth herein.  I agree to furnish the
Company such other information as the Company may reasonably request in order
to verify the accuracy of the information contained herein and agree to notify
the Company immediately of any material change in the information provided
herein that occurs prior to the Company’s acceptance of this Subscription.


 


(n)                                 I and my affiliates do not have, and during
the 30 day period prior to the date of this Subscription, I and my affiliates
have not entered into, any “put equivalent position” or short sale positions
with respect to the Common Stock.


 


(o)                                 If I am not a United States person, I hereby
represent that I have satisfied myself as to the full observance of the laws of
my applicable jurisdiction in connection with any invitation to subscribe for
the Shares or any use of this Subscription, including (i) the legal
requirements within such jurisdiction for the purchase of the Shares, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale or transfer of the Shares. My subscription
and payment for, and my continued beneficial ownership of the Shares, will not
violate any applicable securities or other laws of such jurisdiction.


 





















 


3.                                      Agreement to Indemnify
Company.  I hereby agree to indemnify and hold harmless
the Company, its principals, the Company’s officers, directors and attorneys,
from any and all damages, costs and expenses (including actual attorneys’ fees)
which they may incur (i) by reason of my failure to fulfill any of the terms
and conditions of participation, (ii) by reason of my breach of any of my
representations, warranties or agreements contained herein; (iii) with respect
to any and all claims made by or involving any person, other than me
personally, claiming any interest, right, title, power or authority in respect
to my participation.  I further agree and
acknowledge that these indemnifications shall survive any sale or transfer, or
attempted sale or transfer, of any portion of my participation.


 


4.                                      Subscription Binding on
Heirs, etc.  This Subscription, upon acceptance by the
Company, shall be binding upon the heirs, executors, administrators, successors
and assigns of the Participant.  If the
undersigned is more than one person, the obligations of the undersigned shall
be joint and several and the representations and warranties shall be deemed to
be made by and be binding on each such person and his heirs, executors,
administrators, successors, and assigns.


 


5.                                      Execution Authorized.  If
this Subscription is executed on behalf of a corporation, partnership, trust or
other entity, the undersigned has been duly authorized and empowered to legally
represent such entity and to execute this Subscription and all other
instruments in connection with participation in the Shares and the signature of
the person is binding upon such entity.


 


6.                                      Adoption of Terms and
Provisions.  The Participant hereby adopts, accepts and
agrees to be bound by all the terms and provisions hereof.


 


7.                                      Governing Law.  This
Subscription shall be construed in accordance with the laws of the State of
Nevada.


 


8.                                      Counsel.  The
Participant hereby acknowledges that the Company and its counsel, Steven D.
Lee, Attorney-At-Law., represent the interests of the Company and not those of
the Participant in any agreement (including this Subscription) to which the
Company is a party.


 


9.                                      Investor Information:


 


 


	
  (The information below
  should be consistent with the form of ownership selected below.)

  
	
   

  	
   

  
	
  Name (please print):

  	
   

  	
   

  
	
   

  	
   

  
	
  If entity named above

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  
	
  Social Security or
  Taxpayer I.D. Number:

  	
   

  	
   

  
	
   

  
	
  Business Address
  (including zip code):

  	
   

  
	
   

  	
   

  
	
   

  
	
  Business Phone: 

  	
   

  	
   

  
	
   

  
	
  Business Fax: 

  	
   

  	
   

  
	
   

  
	
  Residence Address
  (including zip code):

  	
   

  
														



 





















 


	
  Residence Phone:

  	
   

  	
   

  



 


All communications to be sent
to:


 


	
   

  	
   

  	
  Business or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Residence
  Address

  



 





















 


Please
indicate below the form in which you will hold title to your interest in the
Shares.  PLEASE CONSIDER CAREFULLY.  ONCE YOUR SUBSCRIPTION IS ACCEPTED, A CHANGE
IN THE FORM OF TITLE CON­STI­TUTES A TRANSFER OF THE INTEREST IN THE SHARES AND
MAY THEREFORE BE RESTRICTED BY THE TERMS OF THIS SUBSCRIPTION, AND MAY RESULT
IN ADDITIONAL COSTS TO YOU.  Subscribers
should seek the advice of their attorneys in deciding in which of the forms
they should take ownership of the interest in the Shares, because different
forms of ownership can have varying gift tax, estate tax, income tax, and other
consequences, depending on the state of the inves­tor’s domicile and his or her
particular personal circumstances.


 


	
   

  	
   

  	
  INDIVIDUAL OWNERSHIP (one
  signature required)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  JOINT TENANTS WITH RIGHT
  OF SURVIVORSHIP AND NOT AS TENANTS IN COMMON (both or all parties must sign)

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COMMUNITY PROPERTY (one
  signature required if interest held in one name, i.e., managing spouse; two
  signatures required if interest held in both names)

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TENANTS IN COMMON (both or
  all parties must sign)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL PARTNERSHIP (fill
  out all documents in the name of the PARTNERSHIP, by a PARTNER authorized to
  sign, and include a copy of the Partnership Agreement)

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIMITED PARTNERSHIP (fill
  out all documents in the name of the LIMITED PARTNERSHIP, by a GENERAL
  PARTNER autho­rized to sign, and include a copy of the Limited Partnership
  Agreement and any other document showing that the investment is authorized)

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIMITED LIABILITY COMPANY
  (fill out all documents in the name of the LIMITED LIABILITY COMPANY, by a
  member authorized to sign, and include a copy of the LIMITED LIABILITY
  COMPANY’s Operating Agreement and any other documents necessary to show the
  investment is authorized.)

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CORPORATION (fill out all documents in the name of the CORPORATION,
  by the President or other officer authorized to sign, and include a copy of
  the Corporation’s Articles and certified Corporate Resolution authorizing the
  signature)

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TRUST (fill out all
  documents in the name of the TRUST, by the Trustee, and include a copy of the
  instrument creating the trust and any other documents necessary to show the
  investment by the Trustee is authorized. The date of the trust must appear on
  the Notarial where indicated.)

  
	
   

  
	
   

  



 





















 


Subject to acceptance by the Company, the undersigned has completed
this Subscription Agreement to evidence his/her subscription for participation
in the Shares of the Company, this        day
of                    ,
2004, at                            ,
                                         .


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participant

  



 


 


The Company has accepted this subscription as
of the                day of                          , 2004.


 


 


	
   

  	
  NATURAL
  GAS SYSTEMS, INC.,

  
	
   

  	
  a
  Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Print:

  	
   

  
				



 





















 


Exhibit
A


 


CERTIFICATE OF ACCREDITED INVESTOR STATUS


 


Except as may
be indicated by the undersigned below, the undersigned is an “accredited
investor,” as that term is defined in Regulation D under the Securities Act of
1933, as amended (the “Securities Act”). 
The undersigned has checked the box below indicating the basis on which
he is representing his status as an “accredited investor”:


 


o                                    a
bank as defined in Section 3(a)(2) of the Securities Act, or any savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act whether acting in its individual or fiduciary capacity; a broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934, as amended (the “Securities Exchange Act”); an insurance company
as defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; a small business investment
company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of
its employees, and such plan has total assets in excess of $5,000,000; an
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary,
as defined in Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are “accredited
investors”;


 


o                                    a
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;


 


o                                    an
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;


 


o                                    a
natural person whose individual net worth, or joint net worth with the
undersigned’s spouse, at the time of this purchase exceeds $1,000,000;


 


o                                    a
natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with the undersigned’s spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;


 


o                                    a
trust with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
person who has such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the prospective
investment; or


 


o                                    an
entity in which all of the equity holders are “accredited investors” by virtue
of their meeting one or more of the above standards.


 


o                                    an
individual who is a director or executive officer of Natural Gas Systems, Inc.


 





















 


IN WITNESS
WHEREOF, the undersigned has executed this Certificate of Accredited Investor
Status effective as of                                    ,
2004.


 


 


	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name of
  Participant

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								



 


 


[Signature Page to Certificate of Accredited Investor Status]