Document:

Exhibit 10.12
 

    Debt
Forgiveness Agreement

    

    Date: Oct
1, 2008

    

    I, Tianfu
Li, am willing to waive the below direct debt of China Intelligent Electric Holding
Limited without any compensation. The category is as
following:

    

    Tianfu Li
is willing to waive account receivable of amount HKD1,647,965.24, say one
million, six hundred and forty seven thousand, nine hundred and sixty five HK
dollar, twenty four cents, ended as of September 30, 2008, from China Intelligent Electric Holding
Limited  without any compensation.

    

    There is
no any right and debt between Tianfu Li and China Intelligent Electric Holding
Limited from now on.

    

    /s/  Tianfu
Li

    

    Signature:
Tianfu LiExhibit 10.13
 

    Debt
Forgiveness Agreement

    

    Date: Dec
26, 2008

    

    I, Tianfu
Li, am willing to waive the below direct debt of Korea Hyundai Light &
Electric (International) Holding Limited without any compensation. The category
is as following:

    

    Tianfu Li
is willing to waive account receivable of amount HKD7,772,180.73, say seven
million, seven hundred and seventy two thousand, one hundred and eighty HK
dollar, seventy three cents, ended as of Dec 25, 2008, from Korea Hyundai Light
& Electric (International) Holding Limited  without any
compensation.

    

    There is
no any right and debt between Tianfu Li and Korea Hyundai Light & Electric
(International) Holding Limited from now on.

    

    /s/  Tianfu
Li

    

    Signature:
Tianfu LiUnassociated Document

                          SECURITIES
PURCHASE AGREEMENT (“Agreement”) dated as
of  November 30, 2009, between Sino Gas International Holdings, Inc.,
a Utah corporation (the “Company”), and each
person or entity listed as a Purchaser on Schedule I attached
to this Agreement (collectively and individually, the “Purchaser”).  Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Note.

     

    WITNESSETH:

     

    
      Whereas,
the Company desires to sell and issue to the Purchasers, and the Purchasers wish
to purchase from the Company, the 8% Senior Secured Convertible Notes in the
aggregate principal amount of up to Ten Million United States dollars (“Dollars”)
($10,000,000), subject to a twenty percent (20%) overallotment in the Company’s
sole discretion, substantially in the form attached hereto as Exhibit A (each a
“Note” and
collectively, the “Notes”) and warrants
(the “Warrants”; together
with the Notes, the “Securities”) to
purchase shares (“Warrant Shares”) of
the Company’s common stock par value $.001 (the “Common Stock”)
substantially in the form attached hereto as Exhibit B, on the
terms and conditions set forth herein (such transactions may be referred to as
the “Offering”
or the “Transaction”).

    

     

    
      Now,
Therefore, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

    

     

    ARTICLE
I

     

    Purchase and Sale of
Note

     

    Section
1.1   Issuance of
Note.  Upon the following terms and conditions, the Company
shall issue and sell to the Purchaser, and the Purchaser shall purchase from the
Company, the Notes.  Each Note shall be convertible into shares of
Common Stock (the “Conversion Shares”)
on the terms and conditions contained in the Notes.

     

    Section
1.2   Purchase Price.  The purchase
price for the Securities to be acquired by the Purchasers shall be equal to 100%
of the face amount of the Notes being acquired (the “Purchase
Price”).  The parties hereto agree that for U.S. federal income
tax purposes, the issue price of the Notes shall be not less than 99.25% of
their principal amount.

     

    Section
1.3   The
Closing.  Following the Initial Closing, there may be multiple
closings (together with the Initial Closing, each, a “Closing”) hereunder
on such other date or dates as the Company and the purchasers purchasing
Securities on such date may agree (together with the Initial Closing Date, each,
a “Closing
Date”); provided that the final Closing Date shall be no later than
December 30, 2009.  On the Closing Date, the Company shall deliver to
the Purchaser the Securities purchased hereunder, registered in the name of such
Purchaser or its nominee.  On or prior to the Closing Date, the
Purchaser shall deliver the Purchase Price (the “Escrowed Funds”) by
certified check made payable to the order of “Signature Bank, as Escrow Agent
for Sino Gas International Holdings, Inc.” or by wire transfer of immediately
available funds:

     

               Wire
transfers to the Escrow Agent shall be made as follows:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Wire
transfers to the Escrow Agent shall be made as follows:

     

    ABA#:
026013576

     

    Account#:
1500984569

    

    Re: Sino
Gas International Holdings, Inc. Signature Bank as escrow agent

     

    Attention:
Eva Gayer

     

    In
addition, each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Closing.  The Securities will be fully owned and paid for by the
Purchaser as of the Closing Date.  The account with Signature Bank
(the “Escrow
Agent”) shall be referred to herein as the “Escrow Account” and
such agreement setting forth the terms of the escrow arrangement, the “Escrow
Agreement”.  Unless the minimum amount of $5,000,000 is sold by
December 30, 2009 (the “Termination Date”),
or by March 1, 2010 (the “Final Termination
Date”) if the Termination Date has been extended by Company and the
Placement Agent, the Offering shall terminate and all funds shall be returned by
Escrow Agent to the Purchasers as per the terms of the Escrow
Agreement.

     

    Section
1.4   Warrant.  In
addition to the Note, at the Closing, the Company will execute and deliver to
each Purchaser a Warrant to purchase a number of shares of Common Stock equal to
forty percent (40%) of the number of Conversion Shares into which the Notes are
convertible on the Closing Date.  Such warrants shall have a three (3)
year term and an exercise price equal to $0.744 per share (the “Exercise
Price”).

     

    Section
1.5   As used herein, “Trading Day” shall
mean a day on which there is trading on the OTC Bulletin Board or such other
market or exchange on which the Common Stock is then principally
traded.

     

    ARTICLE
II

     

    Representations and
Warranties

     

    Section
2.1   Representations and
Warranties of the Company.  The Company hereby makes the
following representations and warranties to the Purchasers as of the date hereof
and the Closing Date:

    
      
         

      

      
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    (a)  Organization and Qualification;
Material Adverse Effect.  The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of Utah
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted.  Except where specifically indicated
to the contrary, all references in this Agreement to subsidiaries shall be
deemed to refer to all direct and indirect subsidiaries of the
Company.  Each Subsidiary has been duly incorporated and is in good
standing under the laws of its jurisdiction of incorporation.  The
Company and each Subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect.  “Material Adverse
Effect” means any adverse effect on the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, and which
is (either alone or together with all other adverse effects) material to the
Company and its Subsidiaries, if any, taken as a whole, and any material adverse
effect on the transactions contemplated under the Transaction Documents (as
defined below).  “Subsidiary” or “Subsidiaries” means
any Person (defined below) of which the Company and/or any of its other
Subsidiaries (as herein defined) directly or indirectly owns at the time at
least fifty percent (50%) of the outstanding voting
securities.  “Person” means an
individual, corporation, partnership, joint venture, trust, university, or
unincorporated organization, or a government, or any agency or political
subdivision thereof.

     

    (b)  Authorization;
Enforcement.  (i)  The Company has all requisite
corporate power and authority to enter into and perform its obligations under
the Transaction Documents and to issue the Notes and Warrants in accordance with
the terms hereof, (ii) the execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including the issuance of the Notes and Warrants, have been
duly authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) the Transaction
Documents have been duly executed and delivered by the Company, (iv) the
Transaction Documents constitute valid and binding obligations of the Company
enforceable against the Company, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors’ rights and remedies or by other equitable principles of general
application, and (B) to the extent the indemnification provisions contained in
this Agreement may be limited by applicable federal or state securities laws and
(v) the Notes and the Warrants, and the Conversion Shares and Warrant Shares
issuable upon the conversion and/or exercise thereof, have been duly authorized
and, upon issuance thereof and payment therefor in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-assessable, free and
clear of any and all liens, claims and encumbrances.

    
      
         

      

      
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    (c)  Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of
250,000,000 shares of Common Stock, of which as of the date hereof, 26,769,313 shares
are issued and outstanding and  150,000
shares are issuable and reserved for issuance pursuant to the Company’s stock
option plans and certain outstanding contracts, or securities exercisable or
exchangeable for, or convertible into, shares of Common Stock and 100,000,000
shares of Preferred Stock, of which as of the date hereof 5,000,000 shares have
been designated as Series B Preferred Stock of which 4,579,839 shares of Series
B Preferred Stock are outstanding, 3,000,000 shares have been designated Series
B-1 Preferred Stock of which 95,418 shares are outstanding and 20,000,000 shares
have been designated Series A Preferred Stock, of which 0 shares are
outstanding.  All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable.  As of
the date hereof, except as disclosed in Schedule 2.1(c), (i)
no shares of the Company’s capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended (“Securities Act” or
“1933 Act”)
(except for Section 6.2 of this Agreement), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, and (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance or
exercise of the Notes or Warrants as described in this Agreement.  The
Company has furnished to the Purchasers true and correct copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date
hereof (the “By-laws”), and the
terms of all securities convertible or exchangeable into or exercisable for
Common Stock and the material rights of the holders thereof in respect
thereto.  Schedule 2.1(c) also
lists all outstanding debt of the Company with sufficient detail acceptable to
Purchaser.

     

    (d)  Issuance and Ownership of
Securities.  Upon issuance in accordance with this Agreement
and the terms of the Notes, the Warrants and the Warrants issued to Axiom
Capital Management, Inc. (“Axiom” or the “Placement Agent”) as
placement agent (the “Placement Agent
Warrants”), the Conversion Shares and the Warrant Shares and the common
shares underlying the Placement Agent Warrants, will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.   The Company owns all outstanding shares
of the Subsidiaries, free and clear of any liens and other encumbrances except
as set forth in Schedule 2.1(d), and
there are no outstanding options, warrants or other rights to purchase equity of
any Subsidiary other than as set forth on Schedule
2.1(d).

     

    
      
         

      

      
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    (e)  No
Conflicts.  Except as disclosed in Schedule 2.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby and issuance of the Notes and Warrants, and the Conversion Shares and
Warrant Shares underlying any of the foregoing will not (i) result in a
violation of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) to the Company’s knowledge result
in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
the rules and regulations of the OTC Bulletin Board or other principal
securities exchange or trading market on which the Common Stock is traded or
listed (“Principal
Market”)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of clause (i), such conflicts that would not
have a Material Adverse Effect.

     

    (f) 
 SEC
Documents.  Since the filing of its Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 2009, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “1934 Act”) (all of
the foregoing filed prior to the Closing Date and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the “SEC
Documents”).  To the Company’s knowledge, as of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.  There
are no outstanding comment letters from the SEC relating to any of the SEC
Documents.

    
      
         

      

      
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    (g) 
Absence of
Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company’s Subsidiaries or any of the Company’s or the
Company’s Subsidiaries’ officers or directors in their capacities as such the
effect of which could reasonably be expected to result in a Material Adverse
Effect (i) except as set forth in SEC Documents which were filed at least
two business days before the date hereof and (ii) except as set forth in Schedule
2.1(g).

     

    (h) 
No Integrated
Offering.   Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to the Purchaser to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the Principal
Market or Subsequent Market, nor will the Company or any of its Subsidiaries
take any action or steps that would cause the offering of the Securities to be
integrated with other offerings.

     

    (i)  
Employee
Relations.  Neither the Company nor any of its Subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened, the effect of which would be
reasonably likely to result in a Material Adverse Effect.  Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement.

     

    (j)  
Intellectual Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted.  The Company and its Subsidiaries do not have any knowledge
of any infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule 2.1(j), there is no claim,
action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademarks, trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service mark registrations, trade
secrets or other infringement.

    
      
         

      

      
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    (k)  Compliance with
Law.  The business of the Company and its Subsidiaries has been
and is presently being conducted so as to comply with all applicable material
foreign, federal, state and local governmental laws, rules, regulations and
ordinances.

     

    (l)   Environmental
Laws.  The Company and its Subsidiaries (i) are to the
Company’s knowledge in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval where such noncompliance or failure to receive permits,
licenses or approvals referred to in clauses (i), (ii) or (iii) above could
have, individually or in the aggregate, a Material Adverse Effect.

     

    (m) Disclosure. No representation
or warranty by the Company in this Agreement, nor in any certificate, schedule,
document, exhibit or other instrument delivered or to be delivered pursuant to
this Agreement or otherwise in connection with the transactions contemplated by
the Transaction Documents, contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading or necessary to in
order fully and fairly to provide the information required to be provided in any
such certificate, schedule, document, exhibit or other instrument.  To
the knowledge of the Company and its Subsidiaries at the time of the execution
of this Agreement, there is no information concerning the Company and its
Subsidiaries or their respective businesses which has not heretofore been
disclosed to the Purchasers (or disclosed in the Company’s filings made with the
SEC under the 1934 Act) that would have a Material Adverse Effect.

     

    (n)  Title.  The Company
and its Subsidiaries have good and marketable title to all real property and
good and marketable title or valid land use rights granted by relevant
authorities in the People’s Republic of China to all personal property owned by
them which is material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, encumbrances and defects except such as
are described in Schedule 2.1(n) or
such as do not materially and adversely affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries.  Any real property and facilities
held under lease by the Company or any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.

     

    (o)  Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
such insurance is available and management of the Company believes to be prudent
and customary in the People’s Republic of China and in the businesses in which
the Company and its Subsidiaries are engaged.  All such insurance
policies are described on Schedule
2.1(o).

    
      
         

      

      
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    (p)  Permits.  The
Company and each of the Company’s Subsidiaries owns, holds, possesses, or
lawfully uses in its business all material approvals, authorizations,
certifications, franchises, licenses, permits, and similar authorities (“Permits”) that are
necessary for the conduct of their business as currently conducted or the
ownership and use of their assets or properties, in compliance with all
Laws.  All of such material Permits are listed on Schedule 2.1(p), and
true, complete and correct copies of each Permit listed on Schedule 2.1(p) have been
provided to the Purchasers.  Neither the Company nor any of the
Company’s Subsidiaries is in default under, or has received any notice of any
claim of default in respect of, any such Permits.  To the Company’s
knowledge, after due inquiry, all such Permits are renewable by their respective
terms in the ordinary course of business without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees.

     

    (q)  Foreign Corrupt Practices
Act.  To the Company’s knowledge, neither the Company, nor any
director, officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.

     

    (r)   Tax Status.  The
Company and each of its Subsidiaries has made or filed all United States federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject and all such returns, reports and
declarations are true, correct and accurate in all material respects; except
where failure to make or file such returns, reports, or declarations would not,
individually or in the aggregate, have a Material Adverse Effect.  The
Company has paid all taxes and other governmental assessments and charges, shown
or determined to be due on such returns, reports and declarations, except those
being contested in good faith, for which adequate reserves have been
established, in accordance with generally accepted accounting principles (“GAAP”).

    
      
         

      

      
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    (s)  Issuance of Conversion Shares and/or
Warrant Shares.  The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance and, upon conversion of the Notes
and/or exercise of the Warrants, as applicable, in accordance with the terms
thereof, such Conversion Shares and/or Warrant Shares will be validly issued,
fully paid and non-assessable, free and clear of any and all liens, claims and
encumbrances and the holders of such Conversion Shares and/or Warrant Shares
shall be entitled to all rights and preferences accorded to a holder of Common
Stock.  As of the date of this Agreement, the outstanding shares of
Common Stock are currently quoted on the OTC Bulletin Board.

     

    (t) Absence of Undisclosed
Liabilities.  The Company and its Subsidiaries have no
obligations or liabilities of any nature (matured, fixed or contingent) other
than (i) those adequately provided for in the Company’s financial statements
referenced in Section 2.1(u) and (ii) those obligations incurred in the ordinary
course of business in amounts consistent with prior periods which have not had
and will not have a Material Adverse Effect on the Company.

     

    (u)  Financial
Statements.  Except as set forth in Schedule 2.1(u), the
financial statements of the Company included in the Forms 10-K and the Forms
10-Q of the Company have been prepared from the books and records of the
Company, in accordance with GAAP, and fairly present in all material respects
the financial condition of the Company, as at their respective dates, and the
results of its operations and cash flows for the periods covered
thereby.

     

    (v)           Employee
Benefit Plans; ERISA.

     

    (i)   Schedule 2.1(v) sets
forth a true, correct and complete list of all employee benefit plans, programs,
policies and arrangements, whether written or unwritten (the “Company Plans”), that
the Company, any Subsidiary or any other corporation or business which is now or
at the relevant time was a member of a controlled group of companies or trades
or businesses including the Company or any Subsidiary, within the meaning of
section 414 of the Internal Revenue Code of 1986, as amended (the “Code”), maintain or
have maintained on behalf of current or former members, partners, principals,
directors, officers, managers, employees, consultants or other
personnel.

     

    (ii)  There
has been no prohibited transaction within the meaning of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section
4975 of the Code, with respect to any of the Company Plans; (ii) none of the
Company Plans is or was subject to Section 412 of the Code or Section 302 or
Title IV of ERISA; and (iv) each of the Company Plans has been operated and
administered in all material respects in accordance with all applicable laws,
including ERISA.  There are no actions, suits or claims pending or
threatened (other than routine claims for benefits), whether by participants,
the Internal Revenue Service, the Department of Labor or otherwise, with respect
to any Company Plan and no facts exist under which any such actions, suits or
claims are likely to be brought or under which the Company or any Subsidiary
could incur any liability with respect to a Company  Plan other than
in the ordinary course.  None of the Company Plans is or was a
multiemployer plan within the meaning of Section 3(37) of
ERISA.

    
      
         

      

      
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    (iii) 
Neither the Company nor any Subsidiary has announced, proposed or agreed to any
change in benefits under any Company Plan or the establishment of any new
Company Plan.  There have been no changes in the operation or
interpretation of any Company Plan since the most recent annual report, which
would have any material effect on the cost of operating, maintaining or
providing benefits under such Company Plan.

     

    (iv)  Neither
the Company nor any Subsidiary has incurred any liability for the
misclassification of employees as leased employees or independent
contractors.

     

    (v)  Except
as provided for in this Agreement and in the Transaction Documents, the
consummation of the transactions contemplated by this Agreement, either alone or
in combination with another event, will not (i) result in any individual
becoming entitled to any increase in the amount of compensation or benefits or
any additional payment from the Company or any Subsidiary (including, without
limitation, severance, golden parachute or bonus payments or otherwise), or (ii)
accelerate the vesting or timing of payment of any benefits or compensation
payable in respect of any individual.

     

    (w)  Restrictions on Business
Activities.  There is no judgment, order, decree, writ or
injunction binding upon the Company or any Subsidiary or, to the knowledge of
the Company or any Subsidiary, threatened that has or could prohibit or impair
the conduct of their respective businesses as currently conducted or any
business practice of the Company or any Subsidiary, including the acquisition of
property, the provision of services, the hiring of employees or the solicitation
of clients, in each case either individually or in the aggregate.

     

    (x)  Contracts.  Schedule 2.1(x) sets
forth all oral or written contracts, agreements, indentures, notes, bonds,
loans, instruments, leases, commitments, or other arrangements or commitments
(collectively, “Contracts”) to which
the Company or any of its Subsidiaries is a party or by which it is bound with a
value in excess of $75,000, in each case, of any of the following types
(collectively, the “Material
Contracts”):  (i) Contracts with any current or former officer
or director of the Company or any of the Company’s Subsidiaries or any other
employment, non-competition, severance, consulting, or similar agreement; (ii)
Contracts with any labor union or association representing any employee of the
Company or any of the Company’s Subsidiaries; (iii) Contracts for the sale of
any of the assets of the Company or any of the Company’s Subsidiaries other than
in the ordinary course of business or for the grant to any person of any
preferential rights to purchase any of their assets; (iv) joint venture
agreements; (v) Contracts containing covenants of the Company or any of the
Company’s Subsidiaries not to compete in any line of business or with any person
in any geographical area; (vi) Contracts relating to the acquisition by the
Company or any of the Company’s Subsidiaries of any operating business or the
capital stock of any other Person; (vii) Contracts relating to indebtedness; or
(viii) Contracts granting any registration or similar right in respect of
securities of the Company or any of the Company’s Subsidiaries.  There
have been made available to the Purchasers true and complete copies of all of
the Material Contracts and there are no other contracts material to the business
of the Company or any of its Subsidiaries.  Except as set forth on
Schedule
2.1(x), all of the Material Contracts and all other Contracts of the
Company and the Company’s Subsidiaries are in full force and effect and are the
legal, valid, and binding obligations of the Company and/or the Company’s
Subsidiaries, enforceable against them in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors’ rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).  Except as
set forth on Schedule
2.1(x), neither the Company nor any of the Company’s Subsidiaries is in
default in any material respect under any Material Contract or any other
Contract of the Company and its Subsidiaries, nor, to the Company’s knowledge,
after due inquiry, is any other party to any such Contract in default thereunder
in any material respect.

    
      
         

      

      
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    Section
2.2   Representations and
Warranties of the Purchaser.  The Purchaser hereby makes the
following representations and warranties to the Company as of the date hereof
and the Closing Date:

     

    (a)  Accredited Investor Status;
Sophisticated Purchaser.  The Purchaser is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D under the 1933
Act.  The Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of the Note, the Warrant, the Conversion Shares and the Warrant
Shares.  The Purchaser is not registered as a broker or dealer under
Section 15(a) of the 1934 Act, affiliated with any broker or dealer registered
under Section 15(a) of the 1934 Act, or a member of the Financial Industry
Regulatory Authority, Inc. (FINRA).

     

    (b)  Information.  The
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company which have been
requested and materials relating to the offer and sale of the Note, the Warrant,
the Conversion Shares and the Warrant Shares which have been requested by the
Purchaser.  The Purchaser and its advisors, if any, have been afforded
the opportunity to ask questions of the Company.  In determining
whether to enter into this Agreement and purchase the Securities, the Purchaser
has relied solely on the written information supplied by Company employees in
response to any written due diligence information request provided by Purchaser
to the Company, and the Purchaser has not received nor relied upon any oral
representation or warranty relating to the Company, this Agreement, the
Securities, or any of the transactions or relationships contemplated
thereby.  The Purchaser understands that its purchase of the
Securities and Conversion Shares, and if applicable, the Warrant Shares involves
a high degree of risk.  The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Note and the Warrant
and, if applicable the Conversion Shares and the Warrant Shares.

     

    (c)  No Governmental
Review.  The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Note, the Warrant,
the Conversion Shares and Warrant Shares or the fairness or suitability of the
investment in the Note, the Warrant, the Conversion Shares and Warrant Shares
nor have such authorities passed upon or endorsed the merits
thereof.

    
      
         

      

      
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    (d)  Legends. The Company shall
issue the Note and the Warrants and, if applicable, certificates for the
Conversion Shares and the Warrant Shares, to the Purchaser without any legend
except as described in Article VI below.  The Purchaser covenants
that, in connection with any transfer of Conversion Shares or Warrant Shares by
the Purchaser pursuant to the registration statement contemplated by Section 6.2
hereof, it will comply with the applicable prospectus delivery requirements of
the 1933 Act, provided that copies of a current prospectus relating to such
effective registration statement are or have been supplied to the
Purchaser.

     

    (e)   Authorization;
Enforcement.  This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Purchaser and is a valid and
binding agreement of the Purchaser enforceable against the Purchaser in
accordance with their terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.  The
Purchaser has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and each other agreement entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement.

     

    (f)   No Conflicts.  The
execution, delivery and performance of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby will not
(i) result in a violation of the certificate of incorporation, by-laws or other
documents of organization of the Purchaser, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Purchaser is bound, or (iii) result in a violation of any law, rule,
regulation or decree applicable to the Purchaser.

     

    (g)  Investment
Representation.  The Purchaser is purchasing the Securities for
its own account for investment and not with a view to distribution or sale in
violation of the 1933 Act or any state securities laws or rules and regulations
promulgated thereunder.  The Purchaser has been advised and
understands that neither the Note, nor the Warrant, nor the Conversion Shares or
Warrant Shares issuable upon conversion or exercise thereof have been registered
under the 1933 Act or under the “blue sky” laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933 Act and any
applicable “blue sky” laws, or if an exemption from registration is available,
except under circumstances where neither such registration nor such an exemption
is required by law.  The Purchaser has been advised and understands
that the Company, in issuing the Note and the Warrant, is relying upon, among
other things, the representations and warranties of the Purchaser contained in
this Section 2.2 in concluding that such issuance is a “private offering” and is
exempt from the registration provisions of the 1933 Act.

    
      
         

      

      
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    (h)  Rule 144.  The
Purchaser understands that there is no public trading market for the Notes or
Warrants, that none is expected to develop, and that the Notes and Warrant must
be held indefinitely unless and until such Notes and Warrants, or if applicable,
the Conversion Shares or Warrant Shares received upon conversion or exercise
thereof are registered under the 1933 Act or an exemption from registration is
available.  The Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the 1933 Act, including the limitations
on the availability thereof.

     

    (i)   Brokers.  Except
with respect to the fees owed to Axiom under the PAA, the Purchaser has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder’s fees or similar payments by the Company or the Purchaser
relating to this Agreement or the transactions contemplated hereby.

     

    (j)  Reliance by the
Company.  The Purchaser understands that the Note and the
Warrant are being offered and sold in reliance on a transactional exemption from
the registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Purchaser to acquire the Note and the Warrant, and the
Conversion Shares and Warrant Shares issuable upon conversion or exercise
thereof.

     

    ARTICLE
III

     

    Covenants

     

    Section
3.1   Registration and Listing;
Effective Registration.  Until such time as the Notes are no
longer outstanding and the Warrants have expired, the Company will cause the
Common Stock to continue at all times to be registered under Sections 12(b) or
(g) of the 1934 Act, will comply in all material respects with its
reporting and filing obligations under the 1934 Act, and will not take any
action or file any document (whether or not permitted by the 1934 Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations.  Until such time as the Note and Warrant are no longer
outstanding, the Company shall use its best efforts to continue the listing or
trading of the Common Stock on the Principal Market or one of the Subsequent
Markets and shall comply in all material respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Subsequent Market
on which the Common Stock is listed.  The Company shall use its
commercially reasonable efforts to cause the Conversion Shares and Warrant
Shares to be listed on the Principal Market or one of the other Subsequent
Markets and shall use its best efforts to continue such listing(s) on one of the
Subsequent Markets, for so long as the Note or Warrant are
outstanding.

     

    
      
         

      

      
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    Section
3.2   Certificates on
Conversion.  Upon any conversion by the Purchaser (or then
holder of the Note) of the Note pursuant to the terms thereof, the Company shall
issue and deliver to the Purchaser (or holder) within seven (7) Trading Days of
the conversion date certificates for the Securities into which the Note is
convertible and, if applicable, a new Note or Notes for the aggregate principal
amount which the Purchaser (or holder) has not yet elected to convert but which
are evidenced in part by the Notes submitted to the Company in connection with
such conversion (with the denominations of such new Note(s) designated by the
Purchaser or holder).

     

    Section
3.3   Replacement
Notes.  The Note held by the Purchaser (or then holder) may be
exchanged by the Purchaser (or such holder) at any time and from time to time
for Note(s) with different denominations representing an equal aggregate
principal amount of Note(s), as requested by the Purchaser (or such holder) upon
surrendering the same at the expense of the Purchaser.

     

    Section
3.4   Securities
Compliance. The Company shall notify the SEC and the Principal Market, in
accordance with their requirements, of the transactions contemplated by this
Agreement, the Note, the Warrant,  and the Pledge and Guarantee
Agreement, as applicable, and any other ancillary documents contemplated by such
agreements, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Notes and Warrants hereunder and the Conversion Shares and
Warrant Shares issuable upon conversion or exercise thereof.

     

    Section
3.5   Notices.  The
Company agrees to provide all holders of Notes with copies of all notices and
information, including without limitation, notices and proxy or information
statements in connection with any meetings that are provided to the holders of
shares of Common Stock, contemporaneously with the delivery of such notices or
information to such Common Stock holders; it being understood that the Company’s
obligations under this Section 3.5 shall be limited to sending such notices and
information to the address of the Purchaser listed on Schedule I attached
hereto or notified to the Company from time to time pursuant to Section
9.7.

     

    Section
3.6   Reservation of Shares; Stock
Issuable Upon Conversion.  The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the Note and
exercise of the Warrant, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of the Notes, exercise of
the Warrants and exercise of the Placement Agent Warrant.

     

    Section
3.7   Best
Efforts.  The parties shall use their best efforts to satisfy
timely each of the conditions described in Article V of this
Agreement.

    
      
         

      

      
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    Section
3.8   Form D; Blue Sky
Laws.  The Company agrees to file a Form D with respect to the
Notes, the Warrants, and Common Stock, in accordance with Regulation D and to
provide a copy thereof to the Purchaser promptly after such
filing.  The Company shall, on or before the Closing Date, take such
action as the Company shall have reasonably determined is necessary to qualify
the Notes, the Warrants, the Conversion Shares and Warrant Shares for sale to
the Purchaser under applicable securities or “blue sky” laws of the states of
the United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Purchaser on or prior to the
Closing Date; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case, in any
jurisdiction where it is not now so subject.

     

    Section
3.9    Information.  The
Company agrees to send to the Purchaser for so long as the Note or Warrant are
outstanding copies of any notices and other information made available or given
to the stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders; it being understood that the
Company’s obligations under this Section 3.9 shall be limited to sending such
notices and information to the address of the Purchaser listed on Schedule I attached
hereto or notified to the Company from time to time pursuant to Section
9.7.

     

    Section
3.10  Prohibition on Net Short
Positions.  From and including the date of this Agreement and
for so long as the Purchaser holds any outstanding Notes, each Purchaser agrees
that it will neither sell any equity security of the Company short nor direct,
instruct or otherwise influence any of its affiliates, principals or advisors to
sell any such equity securities short.

     

    Section
3.11  Material
Changes.  On or before the Closing Date, the Company shall
forthwith notify the Purchasers of any material change affecting any of its
representations, warranties, undertakings and indemnity at any time prior to
payment being made to the Company on the Closing Date.

     

    Section
3.12  Prohibition on Certain
Actions.   The Company shall not, between the date hereof
and the Closing Date (both dates inclusive), take any action or decision which
(had the Note already been issued) would result in an adjustment of the
Conversion Price.

     

    Section
3.13  Senior
Status of Notes.   The obligations of the Company under
the Notes shall rank senior to all other debt of the Company and its
Subsidiaries, whether now or hereinafter existing. Beginning on the date of this
Agreement and for so long as any Notes remain outstanding, neither the Company
nor any Subsidiary of the Company shall, without the prior written consent of
Purchasers holding a majority of the aggregate outstanding Principal Amount of
the Notes, which consent shall not unreasonably withheld, incur or otherwise
become liable with respect to any indebtedness that would rank senior or pari passu to the Notes in
order of payment, other than (i) trade payables incurred in the ordinary course
of business, (ii) debt incurred pursuant to the Offering described herein; (iii)
the bank debt described on Schedule 3.13 hereof, or
(iv) indebtedness incurred by the Company and its Subsidiaries for working
capital purposes; provided, that, in no event shall the total debt incurred by
the Company pursuant this Section 3.13 (including the Notes) exceed five and
one-half (5.5) times the Company’s twelve months trailing EBITDA (earnings
before interest, taxes, depreciation and amortization).

    
      
         

      

      
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    Section
3.14  Use of
Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder substantially as set forth in Schedule 3.15 and not
for the satisfaction of any portion of the Company’s debt or to redeem any
Common Stock or Common Stock Equivalents.

     

    Section
3.15  Common
Stock Issuances. Except for the contemplated issuances of Common Stock
set forth in Schedule
2.1(c), the Company shall not, during the period that any Note remains
outstanding, issue additional shares of Common Stock or securities exercisable
or convertible into Common Stock (“Common Stock
Equivalents”).

     

    ARTICLE
IV

     

    Other
Agreements

     

    Section
4.1   Participation in Future
Financings.  For so long as at least $1,000,000 aggregate
principal amount of the Notes remains outstanding, the Purchasers shall be
notified at least ten (10) days prior to any proposed equity financing
(including any proposed issuance of convertible debt securities) by the Company
and will be given a ten (10) day option to participate in such proposed
financing, on the same terms as the other proposed investors. In addition, the
Company shall provide the Purchasers with the opportunity to purchase a minimum
of thirty percent (30%) of the securities sold in such proposed
financing.

     

    Section
4.2   Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of the Purchaser or its respective nominee(s), for the
Conversion Shares or Warrant Shares in such amounts as specified from time to
time by the Purchaser to the Company upon delivery of a conversion or exercise
notice (the “Irrevocable Transfer Agent
Instructions”).  The Company warrants that no instruction
relating to the Conversion Shares or Warrant Shares other than the Irrevocable
Transfer Agent Instructions referred to in this Article IV will be given by the
Company to its transfer agent and that the Conversion Shares and Warrant Shares
shall be freely transferable on the books and records of the Company as
contemplated by Article VI below when the legend referred to therein may be
removed.  Nothing in this Article IV shall affect in any way any
Purchaser’s obligations and agreements set forth in Section 2.2(d) to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares or Warrant Shares.  The Company shall instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legends
except as contemplated by Article VI.

     

    Section
4.3   Funding of Post-Closing
Expenditures.  The Company agrees that it will maintain a bank
account in the United States to hold at least $330,000 of the proceeds from the
Offering, for a period of two years following the Closing Date, solely for the
purpose of funding the expenditures set forth on Schedule
4.3.

     

    Section
4.4    Management
Lock-Up.  On or prior to the Initial Closing Date, the Company
will cause Yuchuan Liu to deliver “lock-up” letters substantially in the form of
Exhibit C (the
“Management Lock-up
Agreements”) pursuant to which such persons will agree not to sell any
shares of common stock of the Company until the earlier of (i) the second
anniversary of the Initial Closing date, or (ii) one hundred eighty (180) days
following the date on which the Company’s listing on a Major Stock Exchange (as
defined below) becomes effective.

    
      
         

      

      
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    Section
4.5    Board Representation.
For so long as any Notes are outstanding, the Purchasers shall have the right to
designate one member of the Company’s Board of Directors (the “Noteholder Designee”)
and the Company agrees to appoint such Noteholder Designee to its Board of
Directors and submit the name of such Noteholder Designee for election in
connection with any election of directors of the Company..   The
Company agrees that it will not increase the size of its Board of Directors
beyond seven members for as long as the Notes are outstanding with the consent
of the holders of a majority of the outstanding Notes. In addition, for so long
as any Notes are outstanding, Purchasers representing a majority of the
outstanding  principal of the Notes shall have the right to appoint
one observer to participate (in person or electronically) in each meeting of the
Company’s Board of Directors.  The Company covenants and agrees that
following the Initial Closing Date it shall use its best efforts to cause a
majority of the members of the Board of Directors to be “independent directors”
as such term is defined in NASDAQ Marketplace Rule 5605(a)(2) unless compliance
with a different definition shall be required by the Major Stock Exchange on the
which the Common Stock is then listed.

     

    Section
4.6    Trading Migration and
Reverse Stock Split.  The Company covenants and agrees to use
its commercially reasonable efforts to complete a reverse split (the “Reverse Split”) of
its Common Stock within 360 days of the Initial Closing Date sufficient to meet
the minimum share price requirements of a Major Stock Exchange (defined below)
and file for a listing of the Common Stock thereon as soon as practicable
following the consummation of the Reverse Split.  For purposes of this
Section 4.6, “Major
Stock Exchange” shall mean the NASDAQ Capital Market, the New York Stock
Exchange, or the NYSE Amex Equities.

     

    Section
4.7    Purchase of Notes by
Management.   The members of the Company’s management team
shall collectively purchase an aggregate principal amount of Notes equal to at
least 3% of the total aggregate principal amount of Notes sold hereunder through
the final Closing Date (the “Management
Notes”).  The Conversion Shares underlying such Management
Notes shall not be subject to the restrictions provided for in the Management
Lock-up Agreements.

     

    ARTICLE
V

     

    Conditions
to Closings

     

    Section
5.1    Conditions Precedent to the
Obligation of the Company to Sell.  The obligation hereunder of
the Company to issue and/or sell the Securities to the Purchaser at the
applicable Closing is subject to the satisfaction, at or before the applicable
Closing, of each of the applicable conditions set forth below.  These
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion.

     

    (a)  Accuracy of the Purchaser’s
Representations and Warranties.  The representations and
warranties of the Purchaser will be true and correct in all material respects as
of the date when made and as of the Closing Date, as though made at that
time.

    
      
         

      

      
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    (b)  Performance by the
Purchaser.  The Purchaser shall have performed all agreements
and satisfied all conditions required to be performed or satisfied by the
Purchaser at or prior to the Closing, including full payment of the Purchase
Price to the Company as provided herein.

     

    (c)   No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement, the Note, or the
Warrant.

     

    Section
5.2   Conditions Precedent to the
Obligation of the Purchaser to Purchase.  The obligation
hereunder of the Purchaser to acquire and pay for the Securities at the
applicable Closing is subject to the satisfaction, at or before the applicable
Closing, of each of the Company’s agreements contained herein required to be
performed on or prior to the Closing Date as well as the applicable conditions
set forth below.  These conditions are for the Purchaser’s benefit and
may be waived by the Purchaser at any time.

     

    (a)  Accuracy of the Company’s
Representations and Warranties.  The representations and
warranties of the Company shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties as of an earlier date, which shall be
true and correct in all material respects as of such date).

     

    (b)  No Injunction.  No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement, the Notes or the Warrant.  The Principal Market
shall not have objected or indicated that it may object to the consummation of
any of the transactions contemplated by this Agreement.

     

    (c)  Legal Opinions.  At
the Closing, the Purchasers shall have received an opinion of U.S. counsel to
the Company substantially in the form attached hereto as Exhibit D-1 and
an opinion of counsel to the Company and each Subsidiary issued by a law firm
authorized to practice in the People’s Republic of China in the form attached
hereto as Exhibit
D-2.

     

    (d)  Officer’s
Certificates.  The Company shall have delivered to the
Purchasers a certificate in form and substance satisfactory to the Purchasers
and the Purchasers’ counsel, executed by an officer of the Company, certifying
as to satisfaction of closing conditions, incumbency of signing officers, and
the true, correct and complete nature of the Certificate of Incorporation,
By-Laws, good standing and authorizing resolutions of the
Company.

    
      
         

      

      
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    (e)  Personal Guaranty. A personal
guaranty of the indebtedness evidenced by the Notes shall have been granted by
the Company’s Chief Executive Officer pursuant to a Guaranty (the “Guaranty”) in
substantially the form attached hereto as Exhibit
E.

     

    (f)   Pledge Agreement. A security
interest in certain shares of a Subsidiary of the Company (and proceeds thereof)
pursuant to a Pledge Agreement (the “Pledge Agreement”)
substantially in the form attached hereto as Exhibit
F.

     

    (g)  Warrants.  The
Company shall have executed and delivered the Warrants to the Purchasers in
substantially the form attached hereto as Exhibit
B.

     

    (h)  No Material Adverse
Change.  There shall not have occurred any event prior to the
Closing which, singly or taken together with any other event, could reasonably
be expected to have a Material Adverse Effect.

     

    (i)  Investment by
Management.   On or prior to the final Closing, the
members of the management team shall have collectively purchased an aggregate
principal amount of Notes equal to at least 3% of the Notes sold through the
final Closing Date up to a maximum of $300,000; provided, that, Management shall
have invested at least $100,000 in the Initial Closing.

     

    (j)  Voting
Agreement.  The holders of a majority of the outstanding Common
Stock on the Initial Closing Date shall have delivered a voting agreement (the
“Voting
Agreement”) in substantially the form attached hereto as Exhibit
F containing their agreement to vote for the Noteholder Designee at
any election of directors of the Company.

     

    (k) Minimum Closing and Maximum
Offering.  On the Initial Closing Date, Securities with a
minimum aggregate Purchase Price of $5,000,000 shall be issued. The Initial
Closing Date shall occur no later than December 30, 2009. The maximum aggregate
Purchase Price for all Securities issued hereunder shall not exceed $10,000,000
(subject to a twenty percent (20%) overallotment in the Company’s sole
discretion).

     

    This
Agreement, the Notes, the Warrants, the Guaranty, the Pledge Agreement, the
Voting Agreement, and the Management Lock-Up Agreements are sometimes referred
to herein collectively as the “Transaction
Documents”.

    
      
         

      

      
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    ARTICLE
VI

     

    Legend and Stock;
Registration Rights

     

    Section
6.1   Legends.   Upon
payment therefor as provided in this Agreement, the Company will issue the Note
in the name each Purchaser or its designees and in such denominations to be
specified by such Purchasers prior to (or from time to time subsequent to)
Closing.  The Securities and any certificate representing Conversion
Shares or Warrant Shares issued upon conversion or exercise thereof, prior to
such Conversion Shares or Warrant Shares being registered under the 1933 Act for
resale or available for resale under Rule 144 under the 1933 Act, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:

     

    These
Securities Have Not Been Registered For Offer or Sale Under The Securities Act
Of 1933, As Amended, Or Any State securities laws.  They May Not Be
Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement
Under Said Act And Any Applicable State Securities Law Or An Applicable
Exemption From Such Registration Requirements.

     

    The
Company agrees to reissue the Notes and any Conversion Shares and Warrant Shares
without the legend set forth above, at such time as (i) the holder thereof is
permitted to dispose of such Notes, Conversion Shares and Warrant Shares
issuable upon conversion or exercise of the foregoing pursuant to Rule 144(b)(i)
under the 1933 Act, or (ii) such securities are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such shares publicly without registration under the 1933 Act,
or (iii) such securities have been registered under the 1933 Act.

     

    Prior to
the Registration Statement (as defined below) being declared effective, any
Warrant Shares issued pursuant to exercise of the Warrant shall bear a legend in
the same form as the legend indicated above; provided that such legend shall be
removed from such shares and the Company shall issue new certificates without
such legend if (i) the holder has sold or disposed of such shares pursuant to
Rule 144(b) under the 1933 Act, or the holder is permitted to dispose of such
shares pursuant to Rule 144(b)(i) under the 1933 Act, (ii) such shares are
registered for resale under the 1933 Act, or (iii) such shares are sold to a
purchaser or purchasers who (in the opinion of counsel to the seller or such
purchaser(s), in form and substance reasonably satisfactory to the Company and
its counsel) are able to dispose of such shares publicly without registration
under the 1933 Act.  Upon such Registration Statement becoming
effective, the Company agrees to promptly issue new certificates representing
such shares without such legend.  Any Warrant Shares issued after the
Registration Statement has become effective shall be free and clear of any
legends, transfer restrictions and stop transfer
orders.  Notwithstanding the removal of such legend, the Purchasers
agree to sell the Conversion Shares and Warrant Shares represented by the new
certificates in accordance with the applicable prospectus delivery requirements
(if copies of a current prospectus are provided to such Purchasers by the
Company) or in accordance with an exemption from the registration requirements
of the 1933 Act.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    Nothing
herein shall limit the right of any holder to pledge these securities pursuant
to a bona fide margin account or lending arrangement entered into in compliance
with law, including applicable securities laws.

     

    Section
6.2    Registration
Rights.

    

    (a)
 “Piggy-Back”
Registration.

     

    (i)        
If at any time after the date hereof until the first anniversary of the Initial
Closing Date, the Company shall file a registration statement on Form S-1 or
Form S-3 (or any similar or successor forms promulgated by the Commission)
pursuant to an offering of the Company’s Common Stock or Common Stock
Equivalents, except for an underwritten public offering in which case the
inclusion of Registrable Securities shall be subject to the consent and
allocation of the underwriter, the Company shall include the Conversion Shares
and the Warrant Shares (the “Registrable
Securities”) in such registration statement (the “Registration
Statement”); provided that the
amount of Registrable Securities shall be limited to not less than 100% of the
maximum amount (“Rule
415 Amount”) of Conversion Shares and the Warrant Shares which may be
included in a single registration statement without exceeding registration
limitations imposed by the Commission pursuant to Rule 415 of the Securities
Act; provided,
however, that
such piggy-back rights shall not apply to the registration statement on
Form S-1 (File No. 333-147998) and any amendments thereto.

     

    (ii)      the
Company will pay all expenses associated with the registration, including,
without limitation, filing and printing fees, and the Company’s counsel and
accounting fees and expenses, costs, if any, associated with clearing the
Registrable Securities for sale under applicable state securities
laws;

     

    (iii)       the
Company shall have the right to delay, including, without limitation, by
delaying the filing or effectiveness of the Registration Statement, the
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the reasonable opinion of the Company
in the best interest of the Company and, as applicable, suspend sales of
Registrable Securities under an effective registration statement or suspend
trading of its securities on any exchange; and

     

    (iv)      the
Company will use commercially reasonable efforts to cause the Registration
Statement with respect to the Purchasers to remain continuously effective for a
period (the “Effectiveness
Period”) that will terminate, with respect to the Purchasers, upon the
earlier of (x) the date on which all the Registrable Securities covered by the
Registration Statement have been sold or (y) the date on which all the
Registrable Securities covered by the Registration Statement may be sold
immediately without registration under the Securities Act and without volume
restrictions pursuant to Rule 144(b), as determined by reputable United States
securities 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 Purchasers, and will advise the
Purchasers when the Effectiveness Period has expired with respect to the
Purchasers.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (b)           
Purchaser
Information. Each Purchaser shall (A) furnish to the Company such
information regarding itself, the Registrable Securities, other securities of
the Company held by it and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably requested by the Company to effect
and maintain the effectiveness of the Registration Statement, (B) execute such
documents in connection with the Registration Statement as the Company may
reasonably request and (C) immediately discontinue disposition of Registrable
Securities pursuant to any registration statement upon notice from the Company
of (x) the issuance of any stop order or other suspension of effectiveness of
the Registration Statement by the Commission, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
by the applicable regulatory authorities or (y) the happening of any event, as
promptly as practicable after becoming aware of such event, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a 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 or
(z) the failure of the prospectus included in the Registration Statement,
as then in effect, to comply with the requirements of the Securities Act until
the Purchaser’s receipt of a supplemented or amended prospectus or receipt of
notice that no supplement or amendment is required.

     

    (c)          
  Indemnification.

     

    (i)        In
the event any Registrable Securities are included in the Registration Statement
under this Section 6.2, to the extent permitted by law, the Company will
indemnify and hold harmless the each of the Purchasers (including their
officers, directors, members and partners), any underwriter (as defined in the
Securities Act) for the Purchasers and each person, if any, who controls such
Purchaser or underwriter within the meaning of the Securities Act or the
Exchange Act (each a “Purchaser Indemnified
Person”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law (“Claims”), insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including any preliminary prospectus or
final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to the Purchaser Indemnified Person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any Claim; provided, however, that the
indemnity agreement contained in this Section 6.2(c)(i) shall not apply to
amounts paid in settlement of any such Claim if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld or delayed), nor shall the Company be liable to any Purchaser
Indemnified Person for any such Claim to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by the Purchaser Indemnified Person. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such Purchaser Indemnified Person and shall survive the transfer of the
Registrable Securities by the Purchasers.

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

      

    (ii)       In
the event any Registrable Securities are included in the Registration Statement
under this Section 6.2, to the extent permitted by law, each Purchaser shall,
severally and not jointly, indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 6.2(c)(i), the Company,
each of its directors, each of its officers who signs the registration statement
and each Person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act (each, a “Company Indemnified
Person”), against any Claim, insofar as such Claims arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in strict conformity with
written information furnished to the Company by such Purchaser expressly for use
in the Registration Statement; and, subject to Section 6.2(c)(iii), such
Purchaser will reimburse any legal or other expenses reasonably incurred by any
Company Indemnified Person in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6.2(c)(ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of the
indemnifying Purchaser, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Company Indemnified Person and shall
survive the transfer of the Registrable Securities by the
Purchasers.

     

                           (iii)      Promptly
after receipt by a Purchaser Indemnified Person or Company Indemnified Person
(each, an “Indemnified
Person”) under this Section 6.2 of notice of a Claim, such Indemnified
Person shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6.2, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall, by
giving at written notice to the Indemnified Party within fifteen days after the
Indemnified Party has given notice of the Claim, have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person; provided, however, that an Indemnified Person shall have the right to
retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnified Person to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Purchaser Indemnified Person or Company
Indemnified Person and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person and any
other party represented by such counsel in such proceeding. In the case of any
Company Indemnified Person, legal counsel referred to in the proviso of the
immediately preceding sentence shall be selected by the holders holding at least
a majority in interest of the Registrable Securities included in the
registration statement to which the Claim relates. The Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Person that relates to such action or Claim. The indemnifying party
shall keep the Indemnified Person reasonably apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Person of a
full and general release from all liability in respect to such Claim or
litigation, and such settlement (a) shall provide for the payment by the
Indemnifying Party of money as sole relief for the claimant, (b) shall not
include any finding or admission as to fault on the part of the Indemnified
Person and (c) shall have no effect on any other claims that may be made against
the Indemnified Party. 

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    

    Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person under
this Section 6.2, except to the extent that the indemnifying party is materially
prejudiced in its ability to defend such action.

     

    ARTICLE
VII

     

    Termination

     

    Section
7.1   Termination by Mutual
Consent.  This Agreement may be terminated at any time prior to
the Closing by the mutual written consent of the Company and the
Purchaser.

     

    ARTICLE
VIII

     

    Indemnification

     

    Section
8.1    Company
Indemnification.  In consideration of the Purchasers’ execution
and delivery of the this Agreement and acquiring the Securities hereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Purchasers and all of their respective partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person’s
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Purchaser
Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Purchaser
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Purchaser Indemnified
Liabilities”), incurred by any Purchaser Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby.  Notwithstanding the foregoing, Purchaser Indemnified
Liabilities shall not include any liability of any Purchaser Indemnitee arising
out of such Purchaser Indemnitee’s gross negligence or willful
misconduct.  To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Purchaser
Indemnified Liabilities which is permissible under applicable
law.

    
      
         

      

      
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    Section
8.2    Purchaser
Indemnification.  In consideration of the Company’s execution
and delivery of this Agreement and issuing the Securities hereunder and in
addition to all of the Purchaser’s other obligations under the Transaction
Documents, the Purchaser shall defend, protect, indemnify and hold harmless the
Company and all of its partners, officers, directors, employees, members and
direct and indirect investors and any of the foregoing person’s agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Company Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Company Indemnitee is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorney’s fees and disbursements (the “Company Indemnified
Liabilities”), incurred by any Company Indemnitee relating to violations
of the 1933 Act, as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Purchaser in the Transaction Documents or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Purchaser contained in the Transaction Documents or any other
certificate or document contemplated hereby or
thereby.  Notwithstanding the foregoing, Company Indemnified
Liabilities shall not include any liability of any Company Indemnitee arising
out of such Company Indemnitee’s gross negligence or willful misconduct and the
Purchaser shall only be required to make indemnification to the extent of the
aggregate dollar amount of the Notes purchased by it. To the extent that the
foregoing undertaking by the Purchaser may be unenforceable for any reason, the
Purchaser shall make the maximum contribution to the payment and satisfaction of
each of the Company Indemnified Liabilities which is permissible under
applicable law.

     

    ARTICLE
IX

     

    Governing Law;
Miscellaneous

     

    Section
9.1    Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts to be
wholly performed within such state and without regard to conflicts of laws
provisions.  Any legal action or proceeding arising out of or relating
to this Agreement and/or the Transaction Documents may be instituted in the
courts of the State of New York sitting in New York County or in the United
States of America for the Southern District of New York, and the parties hereto
irrevocably submit to the jurisdiction of each such court in any action or
proceeding.  Subscriber hereby irrevocably waives and agrees not to
assert, by way of motion, as a defense, or otherwise, in every suit, action or
other proceeding arising out of or based on this Agreement and/or the
Transaction Documents and brought in any such court, any claim that Subscriber
is not subject personally to the jurisdiction of the above named courts, that
Subscriber’s property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper.

    
      
         

      

      
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    Section
9.2    Counterparts.  This
Agreement may be executed by facsimile and in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute one
agreement.  Execution and delivery of this Agreement by facsimile
transmission (including delivery of documents in Adobe PDF format) shall
constitute execution and delivery of this Agreement for all purposes, with the
same force and effect as execution and delivery of an original manually signed
copy hereof.

     

    Section
9.3    Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    Section
9.4    Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

     

    Section
9.5   Costs and
Expenses.  All reasonable out-of-pocket costs and expenses
incurred by Axiom and the Purchasers with respect to this Agreement and the
Offering shall be paid by the Company at the Closing including, without
limitation, legal fees and expenses of up to $60,000.  The Company
shall also be responsible for the payment of Axiom’s and the Purchasers’
reasonable post-Closing expenses incurred in connection with the transactions
contemplated by this Agreement.  Such post-Closing expenses shall be
paid promptly after Axiom issues a request in writing but in no event later than
two (2) business days following such request.

     

    Section
9.6    Entire Agreement;
Amendments; Waivers.

     

    (a)   This
Agreement supersedes all other prior oral or written agreements between the
Purchasers, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein (including the other Transaction Documents)
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchasers, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought.

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    (b)  The
Purchasers may at any time elect, by notice to the Company, to waive (whether
permanently or temporarily, and subject to such conditions, if any, as the
Purchasers may specify in such notice) any of Purchasers’ rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Purchasers in accordance
with its terms; provided, however, that the
voluntary waiver contemplated by this sentence may not reduce the Purchasers’
obligations to the Company under the Transaction Documents.

     

    Section
9.7   Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing, must be delivered by
(i) courier, mail or hand delivery or (ii) facsimile,
and will be deemed to have been delivered upon receipt. The addresses and
facsimile numbers for such communications shall be:

     

    If to the
Company:

    

    Sino Gas
International Holdings, Inc.

    No.18
Zhong Guan Cun Dong St.

    Haidian
District

    Beijing, P.R. China

    Fax: (86-10) 8260-0042

    Attention:  Yuchuan
Liu, Chairman and CEO

    

    
      With a
copy to:

    

    

    Jiannan
Zhang

    Cadwalader,
Wickersham & Taft LLP

    2301
China Central Place Tower 2

    No. 79
Jianguo Road, Beijing 100025, China

    Fax:
(86-10) 6599-7300

    

    If to the
Purchasers, to the addresses listed on Schedule I
hereto:

    

    With a
copy to:

    

    Axiom Capital Management,
Inc.

    780 Third
Avenue, 43rd floor

    New York,
NY 10017-2024

    Fax:
(212) 521-3888

    Attention:
Mark D. Martino, President

    

    With a copy to:

    

    Wollmuth Maher & Deutsch
LLP

    500 Fifth Avenue

    New York, NY 10110

    Fax: (212) 382-0050

    Attention: Gerald Coviello,
Esq.

    
      
         

      

      
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    Each
party shall provide five (5) days prior written notice to the other party of any
change in address, telephone number or facsimile number.  Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated by
the sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided by an
internationally recognized overnight delivery service, shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

     

    Section
9.8    Successors and
Assigns.  Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any Permitted Assignee (as defined
below).  The Purchaser may assign some or all of its rights hereunder
to any assignee of the Note, the Warrants, the Conversion Shares, or Warrant
Shares (in each case, a “Permitted Assignee”);
provided,
however, that any such assignment shall not release the Purchaser from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption.

     

    Section
9.9    No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

     

    Section
9.10  Survival. The
representations, warranties, rights to indemnification and agreements of the
Company and the Purchaser contained in the Agreement shall survive the delivery
of the Notes.

     

    Section
9.11 Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    Section
9.12  No
Strict Construction.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.

     

    Section
9.13  Remedies.  The
Purchasers and each Permitted Assignee shall have all rights and remedies set
forth in this Agreement, the Pledge Agreement and the Notes and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law.  Any person having any rights under any provision of any such
Transaction Document shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any
breach of any provision thereof and to exercise all other rights granted by
law.  The Purchasers and each Permitted Assignee without prejudice may
withdraw, revoke or suspend its pursuit of any remedy at any time prior to its
complete recovery as a result of such remedy.

    
      
         

      

      
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    Section
9.14  Payment Set
Aside.  To the extent that the Company makes a payment or
payments to the Purchaser hereunder or under the Note or the Purchaser enforces
or exercises its rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

     

    Section
9.15  Days.  Unless
the context refers to “business days” or “Trading Days”, all references herein
to “days” shall mean calendar days.

     

    Section
9.16  Placement
Agent.  Other than the engagement of Axiom by the Company, the
Purchaser and the Company each acknowledges and warrants that it has not engaged
any placement agent in connection with the sale of the Securities, and the
Company and Purchasers shall indemnify and hold the other harmless against any
liability, loss, or expense (including without limitation, reasonable attorneys’
fees and out-of-pocket expenses) arising from any breach of said
warranty.

     

    [SIGNATURE PAGE
FOLLOWS]

    
      
         

      

      
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    IN WITNESS WHEREOF, the
parties hereto have caused this Securities Purchase Agreement to be duly
executed as of the date and year first above written.

    

    
      
        
          
            	
                    COMPANY:

                  
	 
      
	
                    SINO
      GAS INTERNATIONAL HOLDINGS, INC.

                  
	 
      
	
                    By:

                  	 
      	 
      
	
                    Name:

                  
	
                    Title:

                  
	 
      
	
                    PURCHASER

                  
	 
      
	
                    By:

                  	 
      	 
      
	
                    Name:

                  
	
                    Title:

                  

          

        

      

    

     

    
      
         

      

      
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    Schedule
I

    

    Schedule
of Purchasers

     

    
      
        	
                Investor/Name
      (issued)

              	 	
                Address

              	 	
                Amount

              
	
                Chestnut
      Ridge Partners LP

              	 	
                10
      Forest Avenue, Paramus, NJ 07652

                 

              	 	
                $200,000

              
	
                Crescent
      International Ltd.

              	 	
                84
      Avenue Louis Casar, CH 1216 Cointrin, Geneva Switzerland
      CH-1216

                 

              	 	
                $300,000

              
	
                Francis
      Nyon Seng Leong

              	 	
                262
      Millview Bay SW, Calgary Alberta Canada T2Y 3X9

                 

              	 	
                $77,500

              
	
                Tao
      Xu

              	 	
                Room
      2008, Tower A, Caizhi International Building, No. 18 Zhongguancun Dong
      Street, Haidian District, Beijing, China 100083

                 

              	 	
                $49,564

              
	
                Yugang
      Zhang

              	 	
                Room
      2008, Tower A, Caizhi International Building, No. 18 Zhongguancun Dong
      Street, Haidian District, Beijing, China 100083

                 

              	 	
                $49,975

              
	
                Yuchuan
      Liu

              	 	
                Room
      2008, Tower A, Caizhi International Building, No. 18 Zhongguancun Dong
      Street, Haidian District, Beijing, China 100083

                 

              	 	
                $49,985

              
	
                Zhicheng
      Zhou

              	 	
                Room
      2008, Tower A, Caizhi International Building, No. 18 Zhongguancun Dong
      Street, Haidian District, Beijing, China 100083

                 

              	 	
                $49,985

              
	
                Kinka
      Tai

              	 	
                44
      Locust Lane, Princeton, NJ 08540

                 

              	 	
                $20,000

              
	
                Lumen
      Capital LP

              	 	
                265
      West Trail, Stamford, CT 06903

                 

              	 	
                $200,000

              
	
                Investwide
      Capital LLC

              	 	
                620
      Vale Drive, Morganville, NJ 07751

                 

              	 	
                $750,000

              
	
                Jayhawk
      Private Equity Co-Invest Fund, LP

              	 	
                930
      Tahoe Blvd., 802-281, Incline Village, NV 89451

                 

              	 	
                $59,233

              
	
                Jayhawk
      Private Equity Fund, LP

              	 	
                930
      Tahoe Blvd., 802-281, Incline Village, NV 89451

                 

              	 	
                $940,767

              
	
                Silver
      Rock II, Ltd

              	 	
                c/o
      Sable Trust, 4th floor, Rodus Bldg., Roadtown, Tortola, BVI

                 

              	 	
                $402,973

              
	
                Gibralt
      Capital Corporation

              	 	
                2600-1075
      West Georgia Street, Vancouver BC Canada V6E 3C9

                 

              	 	
                $500,000

              
	
                Excalibur
      Special Opportunities LP

              	 	
                150
      Bloor Street West, Suite 14, Toronto Ontario M5S 2X9

                 

              	 	
                $500,000

              
	
                Palm
      Ridge Trust

              	 	
                1953
      N Howe Street, Chicago, IL 60614

                 

              	 	
                $100,000

              
	
                RMH
      2007 Irrevocable Trust

              	 	
                1953
      N Howe Street, Chicago, IL 60614

                 

              	 	
                $100,000

              
	
                Straus
      - GEPT Partners LP

              	 	
                320
      Park Avenue, 10th floor,  New York, NY 10022

                 

              	 	
                $200,000

              
	
                Straus
      Partners LP

              	 	
                320
      Park Avenue, 10th floor,  New York, NY 10022

                 

              	 	
                $300,000

              
	
                JW
      Partners LP

              	 	
                900
      Third Ave., New York, NY 10022

                 

              	 	
                $50,000

              
	
                GSB
      Holdings, Inc.

              	 	
                P.O.
      Box 1090, Loxahatchee, FL 33470

                 

              	 	
                $450,000

              

      

    

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    Schedule
2.1(c)

    

    Capitalization

    

    Preferred
stock:

    

    
      
        
          
            
              	
                      Series
      B Convertible Preferred Stock

                    	 	 	 
	
                       
      Total

                    	 	 	4,579,839	 
	 
      	 	 	 	 
	
                      Series
      B-1 Convertible Preferred Stock

                    	 	 	 	 
	
                       
      Total

                    	 	 	95,418	 

            

          

        

      

    

    

    Warrants:

    

    
      
        
          
            	
                     
      Series C Warrants @ $3.375

                  	 	 	3,083,589	 
	
                     
      Series F Warrants @ $4.84

                  	 	 	271,074	 
	
                     
      Series R Warrants @ $4.84

                  	 	 	271,074	 
	
                     
      Series A Warrants @ $3.84

                  	 	 	241,708	 
	
                     
      Series G Warrants @ $3.84

                  	 	 	109,489	 
	
                     
      Total

                  	 	 	3,976,934	 
	
                     
      IR Outstanding Option @ $3.00

                  	 	 	100,000	 
	
                     
      Total outstanding warrants

                  	 	 	4,076,934	 

          

        

      

    

    

    The
Company is in the process of registering with the SEC, pursuant to certain
agreements, the following Common Stock:

    

    8,340,762
shares of Common Stock

    271,074 shares
of Common Stock issuable upon exercise of certain placement agent
warrants.

    

    Lock up
agreements:

    

    Lock up
agreement dated Sept 7, 2006

    Section
3.20 “lock up” of stock purchase agreement dated Oct 20, 2006

    Section
4.14 “lock up” of stock purchase agreement dated Sept 13, 2007

    

    First
right of refusal

    

    For the
transaction entered into on October 20, 2006 and September 7, 2006, the right of
first refusal provision is as follows:

    

    For a
period of two (2) years following the effective date of the registration
statement providing for the resale of the shares issuable upon conversion of the
Series B Stock and shares issuable upon exercise of the warrants, the Company is
to provide the Series B Purchasers a right of refusal as to any proposed offer
or sale to any third party by the Company, of Common Stock or any debt or equity
securities convertible, exercisable or exchangeable into Common Stock, with
certain exceptions.

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

    

    Outstanding
debt:

    

    
      
        
          
            
              
                
                  	
                          Name of Bank

                        	 	
                          Due Date

                        	 	
                          Interest Rate

                        	 	 	
                          9/30/2009

                        	 
	
                          Bank
      of Dalian

                        	 	
                          12/18/2009

                        	 	 	6.69	%	 	$	2,193,752	 
	
                          Total

                        	 	 
      	 	 	 	 	 	$	2,193,752	 

                

              

            

          

        

      

    

    

    Contemplated
issuances of Common Stock:

    

    The
Company may issue Common Stock or Common Stock Equivalents in connection with
executive and director compensation, as well as compensation for investor
relations, public relations, consulting and other advisory services, which
issuance may be pursuant to the adoption of a stock plan for the issuance of
stock awards and stock options with registration of the shares of Common Stock
underlying such plan on a registration statement on Form S-8, provided that as
long as the Notes are outstanding, such issuances of Common Stock and Common
Stock Equivalents shall not exceed an aggregate of 2 million shares of Common
Stock (whether or not under a stock plan ) as executive compensation and as
compensation for investor relations, public relations, consulting and other
advisory services during any twelve-month period.

    

    Additionally,
as long as the Notes are outstanding, for equity financing purposes, the Company
may issue Common Stock or Common Stock Equivalents for equity financing purposes
with the maximum value of 4.0X the EBITDA of the trailing twelve months. This
upper limit shall be calculated on post-transaction basis. If the equity
financing is related to the Company’s merger and acquisition transactions, the
EBITDA value shall be inclusive of the target company’s
EBITDA.

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

    Schedule
2.1(d)

    

    Issuance
and Ownership of Securities

    

    Encumbrances
on the shares of the Subsidiaries that the Company owns:

    

    100% of
the shares of Beijing ChenGuang, a subsidiary of the Company, was pledged as
collateral for the short term loan from the Bank of Dalian described in Schedule
2.1(c)

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

    Schedule
2.1(e)

    

    No
Conflicts

    

    None.

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

    Schedule
2.1(g)

    

    Absence
of Litigation

    

    None.

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    Schedule
2.1(j)

    

    Intellectual
Property Rights

    

    None.

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

    Schedule
2.1(n)

    

    Title

    

    None.

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

    Section
2.1(o)

    

    Insurance

    

    Motor
Vehicle insurance,

    Cargo
insurance

    Property
insurance

    Liability
insurance

    Key
personnel insurance

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    Schedule
2.1(p)

    

    Permits

    

    This
Schedule should list all material Permits held by the Company or its
Subsidiaries that are necessary for the conduct of their business as currently
conducted or the ownership and use of their assets or properties.

    

    
      
        
          
            
              
                
                  
                    
                      
                        	
                                Name of Subsidiary

                              	 	
                                Operation

                                Licence

                              	 	
                                Permit of Operation of

                                Natural Gas

                              	 
	
                                Beijing
      Zhongran

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Langfang

                              	 	
                                Yes

                              	 	
                                N/A

                              	 
	
                                Peixian

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Shihong

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Wuhe

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Sixian

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Guannan

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Hebei
      Jiushun

                              	 	
                                Yes

                              	 	
                                N/A

                              	 
	
                                Changli

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Yutian

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Yuxian

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Xiahuayuan

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Wuqiao

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Jinzhou

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Shenzhou

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Ningjin

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Linzhang

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Hengshui

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Longrao

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Xingtang

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Gucheng

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Nangong

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Xinhe

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Beijing
      Chengguang

                              	 	
                                Yes

                              	 	
                                Yes

                              	 
	
                                Baishan

                              	 	
                                Yes

                              	 	
                                Yes

                              	 

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    Schedule
2.1(u)

    

    Financial
Statements

    

    None.

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

    Schedule
2.1(v)

    

    Employee
Benefit Plans; ERISA

    

    Benefits
required by local PRC labor laws and regulations, such as medical insurance,
retirement funds, and housing fund.

    

    Employee
stock option incentive plan (to be instituted in December).

     

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    
      Schedule
2.1(x)

      

      Contracts

      

      Employee
Agreements:

      CEO &
Chairman (with Beijing Zhongran, subsidiary of Sino Gas), COO (with Beijing
Zhongran, subsidiary of Sino Gas)and CFO (with Sino Gas)

      

      Joint
venture agreements:

      JV
agreement with Qujing Gas Co., Ltd.

      

      Contracts
relating to indebtedness:

      Loan
Agreement between the Company and the Bank of Dalian

      

      Material
Contracts or Contracts that are not in full force and effect and that are not
the legal, valid, and binding obligations of the Company and/or the Company’s
Subsidiaries:

      

      None

      

      Material
Contracts or Contracts that the Company or the Company’s Subsidiaries is in
default under, or has knowledge that the other party to the agreement is in
default under:

      

      None

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

      Schedule
3.13

      

      Bank
Debt

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Name of Bank

                                    	 	
                                      Due Date

                                    	 	
                                      Interest Rate

                                    	 	 	
                                      9/30/2009

                                    	 
	
                                      Bank
      of Dalian

                                    	 	
                                      12/18/2009

                                    	 	 	6.69	%	 	$	2,193,752	 
	
                                      Total

                                    	 	 
      	 	 	 	 	 	$	2,193,752	 

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

       

      Schedule
3.15

      

      Use of
Proceeds

      

      Assuming
the Company receives $8 million or more at the Closing:

      

      
        	
                (1)

              	
                $5
      million or more for working capital and SG&A expenses for existing
      projects.

              

      

      

      
        	
                (2)

              	
                $2
      million for developing the coal-bed methane project and industrial
      projects.

              

      

      

      
        	
                (3)

              	
                $1
      million for developing the Qujing project and other
    projects.

              

      

      

      Schedule
4.3

      

      Funding
of Post-Closing Expenditures

      

      
        	
                (1)

              	
                $300,000
      for U.S. legal and auditing fees

              

      

      

      
        	
                (2)

              	
                $30,000
      for investor relations and public relations
fees

              

      

      
        
           

        

        
          45

          
            

          

        

        
           

        

      

      EXHIBIT
A

      

      NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY
IS  CONVERTIBLE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION; HEDGING TRANSACTIONS INVOLVING
THE SHARES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.

       

      
        	
                No. 2009-
        

              	
                                                $

              

      

       

      SINO
GAS INTERNATIONAL HOLDINGS, INC.

       

      8%
Senior Secured Convertible Note

        

      Due
November 30, 2012

       

      This 8%
Senior Secured Convertible Note (the “Note”) is issued by
SINO GAS INTERNATIONAL
HOLDINGS, INC., a Utah corporation (the “Obligor”), to ____________ (the “Holder”), pursuant to
that certain Securities Purchase Agreement (the “Purchase Agreement”)
of even date herewith and is part of a series of notes (the “Notes”) that may be
issued from time to time by the Obligor in an aggregate principal amount not to
exceed ten million dollars ($10,000,000), subject to a twenty percent (20%)
over-allotment in the Company’s sole discretion, as provided in the Purchase
Agreement.  Capitalized terms not otherwise defined shall have the
meaning set forth in the Purchase Agreement.

       

      FOR VALUE RECEIVED, the
Obligor hereby promises to pay to the Holder or its successors and assigns the
principal sum of _________ Dollars ($________ )
together with accrued but unpaid interest and premium thereon in one installment
on or before November 30,
2012 (the “Maturity Date”) in
accordance with the following terms:

       

      Interest.  Subject
to Section 2 below,
interest shall accrue on the outstanding principal balance hereof from the date
of this Note at an annual rate equal to eight percent (8%) and shall be payable
quarterly in cash on the first day of January, April, July and October of each
year and on the Maturity Date, commencing January 1, 2010 (each an “Interest Payment
Date”); provided that if such
Interest Payment Date is not a business day in either New York City or Beijing
then such interest payment may be made on the succeeding day that is a business
day in both New York City and Beijing.  Interest shall be calculated
on the basis of a 365-day year and the actual number of days elapsed, to the
extent permitted by applicable law.  Interest hereunder will be paid
to the Holder or its assignee in whose name this Note is registered on the
records of the Obligor regarding registration and transfers of Notes.
Notwithstanding anything to the contrary contained herein, this Note shall bear
interest (“Default
Interest”) at a rate equal to the lower of eighteen percent (18%) or the
highest rate permitted by law (the “Default Rate”) upon
the occurrence of an Event of Default retroactive to the Issuance Date of this
Note on the unpaid Principal Amount of this Note outstanding from time to time
through the date on which such Event of Default ceases to exist.

       

      Pledge
Agreement and Guaranty.  This Note is secured by the pledge of
100% of the shares of Gas Investment China Co., Ltd., an International Business
Company incorporated in the British Virgin Islands and a wholly owned subsidiary
of the Obligor, for the benefit of the holders of this Note and the other Notes
pursuant to a pledge agreement of even date herewith (the “Pledge Agreement”)
and a Guaranty of even date herewith (the “Guaranty”) from Mr.
Yuchuan Liu (the “Founder”).

       

      This Note
is subject to the following additional provisions:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Section
1.                      
Events of
Default.

       

      (a)           An
“Event of
Default”, wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body): 

      

      (i)         
   Any default in the payment of the principal of, interest on or
other charges in respect of this Note, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by acceleration or
otherwise);

       

      (ii)           
The Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Note (except as may be covered by Section 1(a)(i) hereof) or
any Transaction Document (as defined in Section 5) which is not cured
within twenty (20) business days of receipt of written notice of such default
from the Holder;

       

      (iii)          
The Obligor or any Subsidiary shall commence, or there shall be commenced
against the Obligor or any Subsidiary under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor thereto, or the
Obligor or any Subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Obligor or any material subsidiary of the
Obligor or there is commenced against the Obligor or any Subsidiary any such
bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 61 days; or the Obligor or any Subsidiary is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Obligor or any Subsidiary suffers any appointment
of any custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any Subsidiary makes a general
assignment for the benefit of creditors; or the Obligor or any Subsidiary shall
fail to pay, or shall state that it is unable to pay, or shall be unable to pay,
its debts generally as they become due; or the Obligor or any Subsidiary shall
call a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or the Obligor or any Subsidiary shall
by any act or failure to act expressly indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other action is taken
by the Obligor or any Subsidiary for the purpose of effecting any of the
foregoing;

       

      (iv)           The
Obligor or any Subsidiary shall default in any of its obligations related to
payment of any principal or interest under any other Note or any mortgage,
credit agreement or other facility, indenture agreement, factoring agreement or
other instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Obligor or any Subsidiary is
in an amount exceeding $1,000,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would otherwise
become due and payable;

      

      (v)            Any
representation or warranty made by the Obligor under any of the Transaction
Documents was, when made, untrue or misleading, the result of which is
reasonably likely to have a Material Adverse Effect; or

       

      (vi)           The
Obligor shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversions of this Note in accordance with the terms hereof. 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (b)           If
at any time while this Note is outstanding any Event of Default has occurred,
the full principal amount of this Note, together with accrued and unpaid
interest and other amounts owing in respect thereof, to the date of acceleration
shall become at the Holder's election, immediately due and payable in cash,
provided however, the
Holder may request (but shall have no obligation to request) payment of such
amounts in Common Stock of the Obligor. In addition to any other remedies, the
Holder shall have the right (but not the obligation) to convert this Note and
all then accrued and unpaid interest at any time after an Event of Default at
the Conversion Price (as defined in Section 3(c)(i) ) then
in-effect.  The Holder need not provide and the Obligor hereby waives
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Holder at any
time prior to payment hereunder. No such rescission or annulment shall affect
any subsequent Event of Default or impair any right consequent
thereon.  Upon an Event of Default, notwithstanding any other
provision of this Note or any Transaction Document, the Holder shall have no
obligation to comply with or adhere to any limitations, if any, on the
conversion of this Note or the sale of the Underlying Shares.

       

      Section
2.        Redemption
Rights.

      

                 (a)           Early Redemption at Option
of Holders.  The Holder shall have the right to require the
Obligor to repurchase this Note in whole or in part at the Early Redemption
Amount upon the occurrence of any Change of Control Transaction or if the Common
Stock shall cease to be quoted for trading or listing for trading on either the
OTC Bulletin Board, or if then listed on the NASDAQ Capital Market, the New York
Stock Exchange or NYSE Amex Equities (each, a “Subsequent Market”)
shall cease to be quoted for trading or listing on such Subsequent Market and
shall not again be quoted or listed for trading on the OTC Bulletin Board or, if
then listed on a Subsequent Market, such Subsequent Market within thirty (30)
Trading Days of such delisting.  At any time following the occurrence
of an event described in the preceding sentence, the Holder may elect to
exercise such Holder’s repurchase right by sending the Obligor a notice briefly
describing the event that has given rise to such Holder’s repurchase right and
specifying the portion of this Note with respect to which such Holder wishes to
exercise such Holder’s repurchase right and a date not less than 30 days nor
more than 60 days from the date of the notice on which the Note is to be
repurchased.   “Early Redemption Amount” shall mean an amount
equal to 100% of the aggregate principal amount of this Note plus a premium such
that the total cash yield to maturity of this Note (calculated to the date of
repurchase by the Obligor) shall be 15% per annum; provided that such yield to
maturity shall be 18% per annum if an Event of Default has occurred on or prior
to the date of repurchase.

      

      (b)           Early Redemption at the
Option of the Company.  The Obligor shall have the right to
redeem either 50% or 100% of the outstanding principal amount of this Note on
November __, 2010 (the “Early Redemption
Date”) at the Early Redemption Amount by sending the Holder a notice
specifying the aggregate principal amount to be redeemed not less than 10 days
nor more than 30 days prior to the Early Redemption Date.  The Holder
shall have the right to convert any portion of this Note called for redemption
up until the Early Redemption Date by following the procedures specified in
Section
3(a).  If the Common Stock is not quoted for trading or listing
on a Subsequent Market at the time the Obligor sends the notice specified in
this Section 2(b) to the Holder, then, in addition to the Early Redemption
Amount, the Holder shall also receive additional warrants with the same
expiration date, adjusted exercise price and other terms as the Warrants issued
pursuant to the Purchase Agreement entitling the Holder to purchase shares of
Common Stock equal to 15% of the number of shares into which the portion of this
Note which is called for redemption would be convertible on the Early Redemption
Date, regardless of whether any portion of  this Note is in fact
converted into shares of Common Stock on or prior to such Early Redemption
Date.

      

      Section
3.       Conversion.

       

      (a)           
Conversion at Option
of Holder.

       

      (i)     
      This Note shall be convertible into validly
issued, fully paid and non-assessable shares of Common Stock at the option of
the Holder, in whole or in part, at any time. On or prior to the Maturity Date,
the number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding principal amount of this
Note as of the Conversion Date by (y) the Conversion Price. After the Maturity
Date, the number of shares of Common Stock issuable upon a conversion hereunder
equals the quotient obtained by dividing (x) the then outstanding principal
amount of this Note together with all accrued and unpaid interest thereon as of
the Conversion Date by (y) the Conversion Price.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (ii)           The
Holder shall effect conversion by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”).  The date on which a Conversion Notice is delivered
is a “Conversion
Date.” The Holder is required to physically surrender this Note to the
Obligor in order to effect the conversion hereof. In case of less than full
conversion, the Obligor shall, upon each such conversion, execute and deliver to
the Holder a new certificate representing the unconverted portion of this
Note.

      

      (b)           
Conversion Price and
Adjustments to Conversion Price.

       

      (i)        
   The conversion price in effect on any Conversion Date shall be
$0.62 (the “Conversion
Price”). The Conversion Price may be adjusted pursuant to the other terms
of this Note and shall automatically reset effective as of January 1, 2010 to a
new Conversion Price that is 80% of the Conversion Price then in effect if the
Obligor does not meet the Fiscal Year 2009 Performance
Threshold.  “Fiscal Year 2009 Performance
Threshold” shall mean, for the fiscal year ending December 31, 2009, the
achievement by the Obligor of Net Income of at least $3.5 million.  In
addition, the Conversion Price shall automatically reset effective as of January
1, 2011 to a new Conversion Price that is 80% of the Conversion Price then in
effect if the Obligor does not meet the Fiscal Year 2010 Performance
Threshold.  “Fiscal Year 2010 Performance
Threshold” shall mean, for the fiscal year ending December 31, 2010, the
achievement by the Obligor of Net Income of at least $5.25
million.  “Net Income” shall
mean the sum of (A) the audited net income as reported in the Obligor’s annual
report on Form 10-K for such fiscal year plus (B) any non-cash charges incurred
by the Obligor in such fiscal year as a result of the transactions contemplated
by the Transaction Documents plus (C) cash commissions and legal charges
incurred by the Obligor in such fiscal year as a result of the transactions
contemplated by the Transaction Documents.

       

      (ii)           If
the Obligor, at any time while this Note is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Obligor, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.

        

      (iii)           If
the Obligor, at any time while this Note is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Conversion Price (the “New Securities Issuance
Price”), then the Conversion Price shall be reduced effective
concurrently with such issuance to the New Securities Issuance
Price.

       

      (iv)           If
the Obligor or any subsidiary thereof, as applicable, at any time while this
Note is outstanding, shall issue shares of Common Stock or Common Stock
Equivalents, other than Excluded Issuances, entitling any Person to acquire
shares of Common Stock, at a New Securities Issuance Price less than the
Conversion Price (if the holder of the Common Stock or Common Stock Equivalents
so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at a price per
share which is less than the Conversion Price, such issuance shall be deemed to
have occurred for less than the Conversion Price), then the Conversion Price
shall be reduced effective concurrently with such issuance to the New Securities
Issuance Price. The Obligor shall notify the Holder in writing, no later than
one (1) business day following the issuance of any Common Stock or Common Stock
Equivalents subject to this subsection, indicating therein the applicable
issuance price, or if applicable reset price, exchange price, conversion price
and other pricing terms. No adjustment under this Section shall be made as a
result of issuances and exercises of options to purchase shares of Common Stock
issued for compensatory purposes pursuant to any of the Obligor's stock option
or stock purchase plans. “Excluded Issuances”
means (i) Common Stock issued in connection with the conversion or exercise of
any  Common Stock Equivalents outstanding on the date of the Purchase
Agreement and (ii) issuances of Common Stock and Common Stock Equivalents
described in Schedule 2.1(c)(8) to the Purchase Agreement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (v)           If
the Obligor, at any time while this Note is outstanding, shall distribute to all
holders of Common Stock (and not to the Holder) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security (other
than Common Stock or Common Stock Equivalents), then in each such case the
Conversion Price at which this Note shall thereafter be convertible shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Closing Bid
Price determined as of the record date mentioned above, and of which the
numerator shall be such Closing Bid Price on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above. 

      

      (vi)          In
case of any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the Holder shall have the right thereafter to, at its
option,  (A) convert the then outstanding principal amount, together
with all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Note into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of the Common Stock
following such reclassification or share exchange, and the Holder of this Note
shall be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Obligor into which the then
outstanding principal amount, together with all accrued but unpaid interest and
any other amounts then owing hereunder in respect of this Note could have been
converted immediately prior to such reclassification or share exchange would
have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Note, plus all interest and other amounts due and
payable thereon. The entire prepayment price shall be paid in
cash.  This provision shall similarly apply to successive
reclassifications or share exchanges.

       

      (vii)         All
calculations under this Section 3 shall be rounded up
to the nearest $0.001 or whole share.

       

      (viii)        Whenever
the Conversion Price is adjusted pursuant to Section 3 hereof, the Obligor
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

       

      (ix)           If
(A) the Obligor shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Obligor shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Obligor shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Obligor shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Obligor is a party, any sale or transfer of all or substantially all of the
assets of the Obligor, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Obligor; then, in each case, the Obligor shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be mailed to the Holder at its last address as it shall
appear on the records of the Obligor, at least twenty (20) calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled to convert this Note during
the 20-day calendar period commencing the date of such notice to the effective
date of the event triggering such notice.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (x)           In
case of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor in
one or a series of related transactions, a Holder shall have the right to (A)
exercise any rights under Section 2, (B) convert the
then outstanding principal amount of this Note into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale, and such
Holder shall be entitled upon such event or series of related events to receive
such amount of securities, cash and property as the shares of Common Stock into
which such principal amount of this Note could have been converted immediately
prior to such merger, consolidation or sales would have been entitled, or (C) in
the case of a merger or consolidation, require the surviving entity to issue to
the Holder a convertible note with a principal amount equal to the principal
amount of this Note then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which newly issued convertible note
shall have terms identical (including with respect to conversion) to the terms
of this Note, and shall be entitled to all of the rights and privileges of the
Holder of this Note set forth herein and the agreements pursuant to which this
Note was issued. In the case of clause (C), the conversion price applicable for
the newly issued convertible notes shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.

        

      (d)           
Other
Provisions.

       

      (i)           The
Obligor covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Note as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holder, not less than such number of shares of the Common Stock as shall be
issuable (taking into account the adjustments of Section 3(c)) upon the
conversion of the outstanding principal amount of this Note and payment of
interest hereunder. The Obligor covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, nonassessable.

       

      (ii)           Upon
a conversion hereunder the Obligor shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the Closing Bid Price at such time. If the Obligor elects not, or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.

       

      (iii)           The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such Note so converted and the Obligor shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that such
tax has been paid.

       

      (iv)          Nothing
herein shall limit a Holder's right to pursue actual damages or declare an Event
of Default pursuant to Section
1 herein for the Obligor’s failure to deliver certificates representing
shares of Common Stock upon conversion and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief, in each
case without the need to post a bond or provide other security. The exercise of
any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Section
4.               
Transfer. This
Note has been issued subject to investment representations of the original
Holder hereof and may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended, and other applicable state and foreign
securities laws and the terms of the Purchase Agreement.  In the event
of any proposed transfer of this Note, the Obligor may require, prior to
issuance of a new Note in the name of such other person, that it receive
reasonable transfer documentation that is sufficient to evidence that such
proposed transfer complies with the Act and other applicable state and foreign
securities laws and the terms of the Purchase Agreement.  Prior to due
presentment for transfer of this Note, the Obligor and any agent of the Obligor
may treat the person in whose name this Note is duly registered on the records
of the Obligor as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Note be overdue,
and neither the Obligor nor any such agent shall be affected by notice to the
contrary.

      

      Section
5.                
Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof must be in writing and will be deemed to have been
delivered:  (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party)
or electronic mail; or (iii) one (1) trading day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same.  The addresses and facsimile numbers for
such communications shall be: 

       

      
        	
                If
      to the Company, to:

              	
                Sino
      Gas International Holdings, Inc.

              
	 
      	
                No.
      18 Zhong Guan Cun Dong St.

              
	 
      	
                Haidian
      District

              
	 
      	
                Beijing,
      PRC 100082

              
	 
      	
                Attention:   Yuchuan
      Liu

              
	 
      	
                Telephone:                    

              
	 
      	
                Facsimile:

              
	 
      	
                Email:

              
	 
      	 
      
	
                With
      a copy to:

              	 
      
	 
      	 
      
	 
      	
                Attention:      

              
	 
      	
                Telephone:   

              
	 
      	
                Facsimile

              
	 
      	
                Email:

              
	 
      	 
      
	
                If
      to the Holder:

              	
                At
      the address specified on Schedule 1 to the Purchase
    Agreement

              

      

      

      or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such
change.  Written confirmation of receipt (i) given by the recipient of
such notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

       

      Section
6.                     Definitions.
  For the purposes hereof, the following terms shall have the
following meanings:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      “Change of Control
Transaction” means the occurrence of (a) an acquisition after the date
hereof by an individual or legal entity or “group” (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Obligor, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of
the assets of the Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity (other than an entity
controlled by the Obligor), or (d) the execution by the Obligor of an agreement
to which the Obligor is a party or by which it is bound, providing for any of
the events set forth above in (a), (b) or (c). 

      

      “Closing Bid Price”
means the price per share in the last reported trade of the Common Stock on the
OTC Bulletin Board or on the Subsequent Market  which the Common Stock
is then listed as quoted by Bloomberg, LP.

       

      “Common Stock” means
the common stock, par value $0.001, of the Obligor and stock of any other class
into which such shares may hereafter be changed or reclassified.

       

      “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time shares of Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that are at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, shares of
Common Stock.

       

      “Conversion Date”
shall mean the date upon which the Obligor notifies the Holder of the mandatory
conversion of this Note into shares of the Company’s Common Stock, or upon which
the Holder gives the Obligor notice of their intention to effectuate a
conversion of this Note into shares of the Company’s Common Stock, both as
outlined herein; provided that no Event of Default has occurred.

       

       “Transaction
Documents” means the Purchase Agreement or any other agreement delivered
in connection with the Purchase Agreement, including, without limitation, this
Note, the Warrant, the Guarantee and the Pledge Agreement.

       

      Section
7.            Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligations of the Obligor, which are absolute and unconditional, to pay the
principal of, interest and other charges (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed.  This
Note is a direct obligation of the Obligor. This Note and the other notes issued
pursuant to the Transaction Documents shall rank senior to all indebtedness of
the Company, second only to bank loans and working capital facilities. As long
as this Note is outstanding, the Obligor shall not and shall cause the
Subsidiaries not to, without the consent of the Holder, (i) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holder; (ii) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.

       

      Section
8.            This
Note shall not entitle the Holder to any of the rights of a stockholder of the
Obligor, including without limitation, the right to vote, to receive dividends
and other distributions, or, subject to the provisions of the Purchase
Agreement, to receive any notice of, or to attend, meetings of stockholders or
any other proceedings of the Obligor, unless and to the extent converted into
shares of Common Stock in accordance with the terms hereof.

       

      Section
9.            If
this Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a
new Note for the principal amount of this Note so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Note, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Obligor.

       

      Section
10.           Without
the Holder’s consent, the Obligor will not and will not permit any of the
Subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind except as provided in Section 3.13
of the Purchase Agreement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Section
11.           This
Note shall be governed by and construed in accordance with the laws of the State
of New York, without giving effect to conflicts of laws thereof.  Each
of the parties consents to the jurisdiction of the Superior Courts of the State
of New York and the U.S. District Court for the District of New York
sitting in New York County in connection with any dispute arising under this
Note and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens to the
bringing of any such proceeding in such jurisdictions.

        

      Section
12.           If
the Obligor fails to strictly comply with the terms of this Note, then the
Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
including, without limitation, attorneys’ fees and expenses incurred by the
Holder in any action in connection with this Note, including, without
limitation, those incurred: (i) during any workout, attempted workout, and/or in
connection with the rendering of legal advice as to the Holder’s rights,
remedies and obligations, (ii) collecting any sums which become due to the
Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any
proceeding or appeal; or (iv) the protection, preservation or enforcement of any
rights or remedies of the Holder.

       

      Section
13.           Any
waiver by the Holder of a breach of any provision of this Note shall not operate
as or be construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Note. The failure of the Holder to
insist upon strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this Note. Any
waiver must be in writing.

       

      Section
14.           If any
provision of this Note is invalid, illegal or unenforceable, the balance of this
Note shall remain in effect, and if any provision is inapplicable to any person
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder shall violate applicable laws governing usury, the
applicable rate of interest due hereunder shall automatically be lowered to
equal the maximum permitted rate of interest. The Obligor covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law or other law which would prohibit or forgive
the Obligor from paying all or any portion of the principal of or interest on
this Note as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
indenture.

       

      Section
15.            Whenever
any payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business
Day.

       

      Section
16.           THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY.  THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      IN WITNESS WHEREOF, the
Obligor has caused this 8% Senior Secured Convertible Note to be duly executed
by a duly authorized officer as of the date set forth above.

       

      
        
          
            
              
                	 
      	
                        SINO
      GAS INTERNATIONAL HOLDINGS, INC.

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	   
      
	 
      	
                        Name:  Yuchuan
      Liu

                      
	 
      	
                        Title:  Chief
      Executive
Officer

                      

              

            

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      EXHIBIT
“A”

       

      NOTICE OF
CONVERSION

       

      (To
be executed by the Holder in order to convert the Note)

      

      
        	
                TO:

              

      

      

      The
undersigned hereby irrevocably elects to convert $___________ of the principal
amount and $_______ of accrued and unpaid interest of the above Note into Shares
of Common Stock of Sino Gas International Holdings, Inc., according to the
conditions stated therein, as of the Conversion Date written below.

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            	
                                                    Conversion
      Date:

                                                  	 	 
      
	
                                                    Applicable
      Conversion Price:

                                                  	 	 
      
	
                                                    Signature:

                                                  	 	 
      
	
                                                    Name:

                                                  	 	 
      
	
                                                    Address:

                                                  	 	 
      
	
                                                    Amount
      to be converted:

                                                  	 	
                                                    $                                                                                     
       

                                                  
	
                                                    Amount
      unconverted:

                                                  	 	
                                                    $

                                                  
	
                                                    Conversion
      Price per share:

                                                  	 	
                                                    $                                                                                     
       

                                                  
	
                                                    Number
      of shares of Common Stock to be issued:

                                                  	 	 
      
	
                                                    Please
      issue the shares of Common Stock in the following name and to the
      following address:

                                                  	 	 
      
	
                                                    Issue
      to:

                                                  	 	 
      
	
                                                    Authorized
      Signature:

                                                  	 	 
      
	
                                                    Name:

                                                  	 	 
      
	
                                                    Title:

                                                  	 	 
      
	
                                                    Phone
      Number:

                                                  	 	 
      
	
                                                    Broker
      DTC Participant Code:

                                                  	 	 
      
	
                                                    Account
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      EXHIBIT
B

      

      SINO
GAS INTERNATIONAL HOLDINGS, INC.

       

      WARRANT

      

       NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO
REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM REGISTRATION; HEDGING TRANSACTIONS INVOLVING THE SHARES
REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.

       

      
        	
                Warrant
      No. X-2009-

              	 
      	
                Dated:
      November 30 ,
      2009

              

      

       

      Sino Gas
International Holdings, Inc., a Utah corporation (the “Company”), hereby
certifies that, for value received, ____________ or its registered
assigns (including permitted transferees, the “Holder”), is entitled
to purchase from the Company up to a total of __________   shares (as adjusted
from time to time as provided in Section 10, the
“Warrant
Shares” ) of Common Stock (as
defined below), at an exercise price equal to $0.744 per share (as adjusted from
time to time as provided in Section 10, the
“Exercise
Price”), at any time and from time to time after November 30, 2009 (the “Initial Exercise
Date”) until November 30 , 2012 (the “Expiration
Date”).

       

      This
Warrant is issued pursuant to the Purchase Agreement (as defined in Section 1)
and is subject to such additional terms and conditions hereinafter. Capitalized
terms not otherwise defined shall have the meanings set forth in the Purchase
Agreement.

       

      1.           
Definitions.
The following capitalized terms shall have the meanings set forth in this
Section 1:

       

       
“Common Stock”
means the common stock of the Company, $0.001 par value per share, as
constituted on the date hereof.

       

       
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time shares of Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that are at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, shares of
Common Stock.

       

       
“Market Price”
shall mean (i) if the principal trading market for such securities is an
exchange, the average of the last reported sale prices per share for the last
ten previous Trading Days in which a sale was reported, as officially reported
on the consolidated tape of any Subsequent Market, (ii) if clause (i)
is not applicable, the average of the closing bid price per share for the last
ten previous Trading Days as reported by the OTC Bulletin Board or (iii) if
clauses (i) and (ii) are not applicable, the average of the closing bid
price per share for the last ten previous Trading Days as set forth in the Pink
Sheets listing for such securities. Notwithstanding the foregoing, if there is
no reported sales price or closing bid price, as the case may be, on any of the
ten Trading Days preceding the event requiring a determination of Market Price
hereunder, then the Market Price shall be determined in good faith by resolution
of the Board of Directors of the Company, based on the best information
available to it.

      

       
“Notes” means
the Company’s 8% Senior Secured Convertible Notes due November 30, 2012, issued
pursuant to the Purchase Agreement.

       

       
“Other
Securities” refers to any capital stock (other than Common Stock) and
other securities of the Company or any other Person which the Holder of this
Warrant at any time shall be entitled to receive, or shall have received, upon
the exercise of this Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section 8 hereof
or otherwise.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       
“Purchase
Agreement” means that certain Securities Purchase Agreement of even date
herewith among, inter
alia, the Company and the initial Holder.

      

       
“Subsequent
Market” means any one of the following: the NASDAQ Capital Market, the
New York Stock Exchange or NYSE Amex Equities.

       

               
    “Warrant Shares” shall
initially mean shares of Common Stock and in addition may include Other
Securities and Distributed Property (as defined in Section 10(c))
issued or issuable from time to time upon exercise of this Warrant.

       

      2.           Registration of
Warrant. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time. The Company may deem
and treat the registered Holder of this Warrant as the absolute owner hereof for
the purpose of any exercise hereof or any distribution to the Holder, and for
all other purposes, absent actual notice to the contrary.

       

      3.           Registration of
Transfers. The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto as Appendix A duly completed and signed, to
the Company at its address specified herein. Upon any such registration and
transfer, a new warrant in substantially the form of the Warrant (any such new
warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and
obligations of a holder of a Warrant.

       

      4.           Investment
Representation.  The Warrant Holder by accepting this Warrant
represents that the Warrant Holder is acquiring this Warrant for its own account
or the account of an affiliate for investment purposes and not with the view to
any offering or distribution and that the Warrant Holder will not sell or
otherwise dispose of this Warrant or the underlying Warrant Shares in violation
of applicable securities laws. The Warrant Holder acknowledges that the
certificates representing any Warrant Shares will bear a legend indicating that
they have not been registered under the United States Securities Act of 1933, as
amended (the “1933
Act”) and may not be sold by the Warrant Holder except pursuant to an
effective registration statement or pursuant to an exemption from registration
requirements of the 1933 Act and in accordance with federal and state securities
laws.  If this Warrant was acquired by the Warrant Holder pursuant to
the exemption from the registration requirements of the 1933 Act afforded by
Regulation S thereunder, the Warrant Holder acknowledges and covenants that this
Warrant may not be exercised by or on behalf of a Person during the one year
distribution compliance period (as defined in Regulation S) following the date
hereof.

       

      5.           Exercise and Duration of
Warrant.

       

      (a)           A
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto as Appendix B (the
“Exercise
Notice”), appropriately completed, duly signed and delivered in
compliance with Section 13, and (ii)
if applicable, payment of the Exercise Price for the number of Warrant Shares as
to which this Warrant is being exercised (as set forth in Section 5(b)
below), and the date such items are received by the Company is an “Exercise
Date.”  Execution and delivery of an Exercise Notice in respect
of less than all of the shares issuable upon exercise of this Warrant shall
result in the cancellation of the original Warrant and issuance of a New Warrant
evidencing the right to purchase the remaining number of Warrant Shares. At
5:00 P.M. New York City time on the Expiration Date, any unexercised
portion of this Warrant shall be and become void and of no
value.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (b)           The
Holder shall pay the Exercise Price in cash, by certified bank check payable to
the order of the Company or by wire transfer of immediately available funds in
accordance with the Company’s instructions.

      

      (c)           If
at any time (i) this Warrant is exercised after eighteen (18) months from the
date of issuance of this Warrant but before the Expiration Date and (ii) on the
Trading Day immediately preceding the Holder's delivery of an Exercise Notice in
respect of such exercise, a Registration Statement (as defined in the Purchase
Agreement) covering the Warrant Shares that are the subject of the Exercise
Notice (the “Unavailable Warrant
Shares”) is not available for the resale of such Unavailable Warrant
Shares, the Holder of this Warrant also may exercise this Warrant as to any or
all of such Unavailable Warrant Shares and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment
of the aggregate Exercise Price, elect instead to receive upon such exercise a
reduced number of shares of Common Stock (the “Net Number”)
determined according to the following formula (a “Cashless
Exercise”):

       

      
        
          
            
              	
                      Net Number =

                    	
                      (A x B) - (A x C)

                    
	 
      	
                      B

                    

            

          

        

      

      

      For
purposes of the foregoing formula:

      

      A= the
total number of shares with respect to which this Warrant is then being
exercised in a Cashless Exercise.

      

      B= the
Market Price on the Trading Day immediately preceding the date of the Exercise
Notice.

      

      C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

      

      There
cannot be a Cashless Exercise unless “B” exceeds “C”.

       

      6.          
Delivery of Warrant
Shares.

       

      (a)           Upon
each exercise of this Warrant, the Company shall promptly issue or cause to be
issued and deliver or cause to be delivered to the Holder, in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise (the “Certificate”). The
Holder, or any Person so designated by the Holder to receive the Warrant Shares,
shall be deemed to have become holder of record of such Warrant Shares as of the
Exercise Date.

       

      (b)           This
Warrant is exercisable, either in its entirety or, from time to time, for a
portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.

       

      7.           Charges, Taxes and
Expenses. Issuance and delivery of certificates for shares of Common
Stock upon exercise of this Warrant shall be made without charge to the Holder
for any issue or transfer tax, withholding tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all
of which taxes and expenses shall be paid by the Company; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue, delivery or registration of any certificates for
Warrant Shares or New Warrant in a name other than that of the Holder and that
the Holder will be required to pay any tax with respect to cash received in lieu
of fractional shares. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      8.           Replacement of
Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation hereof, or in lieu of and in substitution for this Warrant, a
New Warrant at the expense of the Holder, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested.

       

      9.           Reservation of Warrant
Shares. The Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from all taxes, liens, claims, encumbrances with respect to the
issuance of such Warrant Shares and will not be subject to any pre-emptive
rights or similar rights (taking into account the adjustments and restrictions
of Section 10 hereof). The Company covenants that all Warrant Shares so
issuable and deliverable shall, upon issuance and the payment of the applicable
Exercise Price in accordance with the terms hereof, be duly and validly
authorized, issued, fully paid and nonassessable. The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of any securities exchange or automated quotation system
upon which the Common Stock may be listed or quoted, as the case may
be.

       

      10.         Certain Adjustments.
The Exercise Price and/or number of Warrant Shares issuable upon exercise of
this Warrant are subject to adjustment from time to time as set forth in this
Section 10.

       

      (a)           
Stock Dividends. If the
Company, at any time while this Warrant is outstanding, pays a dividend on its
Common Stock payable in additional shares of Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, then in each such case the Exercise Price shall be multiplied by a
fraction, (A) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the opening of business on the day
after the record date for the determination of stockholders entitle to receive
such dividend or distribution and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 10(a)
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution.

       

      (b)           
Stock Splits. If the
Company, at any time while this Warrant is outstanding, (i) subdivides
outstanding shares of Common Stock into a larger number of shares, or
(ii) combines outstanding shares of Common Stock into a smaller number of
shares, then in each such case the Exercise Price shall be multiplied by a
fraction, (A) the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such event and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment pursuant to this Section 10(b)
shall become effective immediately after the effective date of such subdivision
or combination.

       

      (c)            Other Distributions. If the
Company, at any time while this Warrant is outstanding, distributes to holders
of Common Stock (i) evidences of its indebtedness, (ii) shares of any
class of capital stock (other than Common Stock or Common Stock Equivalents),
(iii) rights or warrants to subscribe for or purchase any shares of any
class of capital stock (other than Common Stock or Common Stock Equivalents) or
(iv) any other asset, other than a distribution of Common Stock covered by
Section 10(a),
(in each case, “Distributed
Property”), then in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution (and the Exercise Price thereafter
applicable) shall be adjusted (effective on and after such record date) to equal
the product of such Exercise Price multiplied by a fraction, (A) the
numerator of which shall be the Market Price on such record date less the then
fair market value of the Distributed Property distributed in respect of one
outstanding share of Common Stock, which, if the Distributed Property is other
than cash or marketable securities, shall be as determined in good faith by the
Board of Directors of the Company whose determination shall be described in a
board resolution, and (B) the denominator of which shall be the Market
Price on such record date.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (d)           Other
Issuances.  If the Company or any subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall issue shares of
Common Stock or Common Stock Equivalents, other than Excluded Issuances,
entitling any Person to acquire shares of Common Stock, at a price per share
(the “New Securities
Issuance Price”) less than the Exercise Price (if the holder of the
Common Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which is issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price per share which is less than the
Exercise Price, such issuance shall be deemed to have occurred for less than the
Exercise Price), then the Exercise Price shall be reduced effective concurrently
with such issuance to the New Securities Issuance Price. The Company shall
notify the Holder in writing, no later than one (1) business day following the
issuance of any Common Stock or Common Stock Equivalents subject to this
Section, indicating therein the applicable issuance price, or if applicable
reset price, exchange price, conversion price and other pricing terms. No
adjustment under this Section shall be made as a result of issuances and
exercises of options to purchase shares of Common Stock issued for compensatory
purposes pursuant to any of the Company's stock option or stock purchase plans.
“Excluded
Issuances” means (i) Common Stock issued in connection with the
conversion or exercise of any  Common Stock Equivalents outstanding on
the date of the Purchase Agreement and (ii) issuances of Common Stock and Common
Stock Equivalents described in Schedule 2.1(c)(8) to the Purchase
Agreement.

       

      (e)           Fundamental Transactions. If,
at any time while this Warrant is outstanding, (i) the Company effects any
merger or consolidation of the Company with or into another Person, (ii) the
Company effects any sale of all or substantially all of its assets in one or a
series of related transactions or (iii) there shall occur any merger of
another Person into the Company whereby the Common Stock is cancelled, converted
or reclassified into or exchanged for other securities, cash or property (in any
such case, a “Fundamental
Transaction”), then, as a condition to the consummation of such
Fundamental Transaction, the Company shall (or, in the case of any Fundamental
Transaction in which the Company is not the surviving entity, the Company shall
take all reasonable steps to cause such other Person to) execute and deliver to
the Holder of this Warrant a written instrument providing that: 

       

      (i)           so
long as any Warrant remains outstanding, each Warrant, upon the exercise thereof
at any time on or after the consummation of such Fundamental Transaction and on
such terms and subject to such conditions as shall be nearly equivalent as may
be practicable to the provisions set forth in this Warrant, shall be exercisable
into, in lieu of Common Stock issuable upon such exercise prior to such
consummation, the securities or other property (the “Substituted
Property”) that would have been received in connection with such
Fundamental Transaction by a holder of the number of shares of Common Stock into
which such Warrant was exercisable immediately prior to such Fundamental
Transaction, assuming such holder of Common Stock:

       

      (A)      is
not a Person with which the Company consolidated or into which the Company
merged or which merged into the Company or to which such sale or transfer was
made, as the case may be (a “Constituent Person”),
or an Affiliate of a Constituent Person; and

       

      (B)      failed
to exercise such Holder’s rights of election, if any, as to the kind or amount
of securities, cash and other property receivable in connection with such
Fundamental Transaction (provided, however, that if
the kind or amount of securities, cash or other property receivable in
connection with such Fundamental Transaction is not the same for each share of
Common Stock held immediately prior to such Fundamental Transaction by a Person
other than a Constituent Person or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised (a “Non-Electing Share”),
then, for the purposes of this Section 10(e) ,
the kind and amount of securities, cash and other property receivable in
connection with such Fundamental Transaction by each Non-Electing Share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares); and

       

      (ii)           the
rights and obligations of the Company (or, in the event of a transaction in
which the Company is not the surviving Person, such other Person) and the Holder
in respect of Substituted Property shall be as nearly equivalent as may be
practicable to the rights and obligations of the Company and Holder in respect
of Common Stock hereunder.

       

      Such
written instrument shall provide for adjustments which, for events subsequent to
the effective date of such written instrument, shall be as nearly equivalent as
may be practicable to the adjustments provided for in Section 10. The
above provisions of this Section 10(e)
shall similarly apply to successive Fundamental Transactions.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       (f)         
Adjustment of Warrant
Shares. Simultaneously with any adjustment to the Exercise Price pursuant
to paragraphs (a) through (d) of this Section 10, the
number of Warrant Shares that may be purchased upon exercise of this Warrant
shall be increased or decreased proportionately, so that after such adjustment
the aggregate Exercise Price payable hereunder for the increased or decreased
number of Warrant Shares shall be the same as the aggregate Exercise Price
payable for the Warrant Shares immediately prior to such
adjustment.

       

      (g)         
Calculations. All
calculations under this Section 10 shall
be made to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.

       

      (h)          
Adjustments.
Notwithstanding any provision of this Section 10, no
adjustment of the Exercise Price shall be required if such adjustment is less
than $0.01; provided,
however, that any adjustments which by reason of this Section 10(h)
are not required to be made shall be carried forward and taken into account for
purposes of any subsequent adjustment.

       

      (i)        
  Notice of
Adjustments. Upon the occurrence of each adjustment pursuant to this
Section 10, the
Company will promptly deliver to the Holder a certificate executed by the
Company’s Chief Financial Officer setting forth, in reasonable detail, the event
requiring such adjustment and the method by which such adjustment was
calculated, the adjusted Exercise Price and the adjusted number or type of
Warrant Shares or other securities issuable upon exercise of this Warrant (as
applicable). The Company will retain at its office copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by the Holder or any prospective purchaser of the
Warrant designated by the Holder.

       

      (j)           
Notice of Corporate
Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including, without limitation, any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any subsidiary of
the Company, (ii) authorizes, approves, enters into any agreement
contemplating, or solicits stockholder approval for, any Fundamental Transaction
or (iii) authorizes the voluntary dissolution, liquidation or winding up of
the affairs of the Company, then the Company shall deliver to the Holder a
notice describing the material terms and conditions of such transaction at least
15 calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to ensure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote with
respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

       

      11.           
Fractional
Shares. The Company shall not be required to issue or cause to be issued
fractional Warrant Shares on the exercise of this Warrant. If any fraction of a
Warrant Share would, except for the provisions of this Section, be issuable upon
exercise of this Warrant, the Company shall pay for such fractional shares in
cash.

       

      12.           
Remedies. The
Company stipulates that the remedies at law of the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant are not and will not be
adequate, and that such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.

       

      13.           
Notices. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be mailed
by certified mail, return receipt requested, or by a nationally recognized
courier service or delivered (in person or by facsimile), against receipt to the
party to whom such notice or other communication is to be given. Any notice or
other communication given by means permitted by this Section 13 shall be deemed
given at the time of receipt thereof. The address for such notices or
communications shall be as set forth below:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      
        
          	 
      	
                  If
      to the Company:

                	
                  Sino
      Gas International Holdings, Inc.

                
	 
      	 
      	
                  No.
      18 Zhong Guan Cun Dong St. 

                
	 
      	 
      	
                  Haidian
      District 

                
	 
      	 
      	
                  Beijing,
      PRC 100083 

                
	 
      	 
      	
                  Attn:
       
      Mr. Yuchuan Liu 

                
	 
      	 
      	
                  Fax:

                
	 
      	 
      	 
      
	 
      	
                  If
      to the Holder:  

                	
                  As
      set forth in Schedule I to the Purchase
  Agreement

                

        

      

       

      Or such
other address as is provided to such other party in accordance with this Section
13.

       

         
     
 14.           
Warrant Agent.
The Company shall serve as warrant agent under this Warrant. Upon 30 days’
notice to the Holder, the Company may appoint a new warrant agent. Any Person
into which any new warrant agent may be merged, any Person resulting from any
consolidation to which any new warrant agent shall be a party or any Person to
which any new warrant agent transfers substantially all of its corporate trust
or shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder’s last address as shown on
the Warrant Register.

       

         
     
 15.           
Miscellaneous.

       

            
(a)           This
Warrant may be assigned by the Holder. This Warrant may not be assigned by the
Company, except to a successor in the event of a Fundamental Transaction. This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.

       

            
(b)           The Company
will not, by amendment of its governing documents or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder against impairment. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any Warrant Shares above the
amount payable therefor upon exercise thereof, and (ii) will take all such
action as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares on the
exercise of this Warrant, free from all taxes, liens, claims and encumbrances
and (iii) will not close its shareholder books or records in any manner which
interferes with the timely exercise of this Warrant.

       

            
(c)           This
Warrant shall be governed by and construed and enforced in accordance with the
laws of the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and Federal courts sitting in the County of
New York, New York, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding that it is not personally subject to the jurisdiction of
any such court or that such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

            
(d)           Neither
party shall be deemed in default of any provision of this Warrant, to the extent
that performance of its obligations or attempts to cure a breach hereof are
delayed or prevented by any event reasonably beyond the control of such party,
including, without limitation, war, hostilities, acts of terrorism, revolution,
riot, civil commotion, national emergency, strike, lockout, unavailability of
supplies, epidemic, fire, flood, earthquake, force of nature, explosion,
embargo, or any other Act of God, or any law, proclamation, regulation,
ordinance, or other act or order of any court, government or governmental
agency, provided that
such party gives the other party written notice thereof promptly upon discovery
thereof and uses reasonable efforts to cure or mitigate the delay or failure to
perform.

        

           
 (e)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

       

            
(f)           In case any
one or more of the provisions of this Warrant shall be deemed invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

        

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,

       

      SIGNATURE
PAGE FOLLOWS]

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

       

      
        
          
            
              
                
                  	 
      	
                          SINO
      GAS INTERNATIONAL HOLDINGS, INC.

                        
	 
      	 
      	 
      
	 
      	
                          By:

                        	  
      
	 
      	 
      	
                          Name:
      Yuchuan Liu

                        
	 
      	 
      	
                          Title:
      Chief Executive
Officer

                        

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
C

      

      SHAREHOLDER
LOCK-UP AGREEMENT

       

      THIS
AGREEMENT (this “Agreement”) is dated
as of November 30, 2009 by and between Sino Gas International Holdings, Inc., a
Utah corporation (the “Company”), and the
persons set forth on the signature pages hereto (each a “Management
Shareholder” and collectively, the “Management
Shareholders”).  Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Securities Purchase
Agreement.

       

      WHEREAS,
the Company intends to enter into a private placement financing transaction with
certain accredited investors (the “Purchasers”) whereby
the Company will sell and issue to the Purchasers, the Company’s 8% Senior
Secured Convertible Notes in the aggregate principal amount of up to Ten Million
United States dollars (“Dollars”)
($10,000,000), subject to a twenty percent (20%) over-allotment in the Company’s
sole discretion.

      

      WHEREAS,
in connection with the Financing Transaction, the Company entered into a
Securities Purchase Agreement, dated as of the date hereof (the “Securities Purchase
Agreement”), by and among the Company and the Purchasers, and certain
other papers, agreements, documents, instruments and certificates necessary to
carry out the purposes thereof (collectively, the “Transaction
Documents”).

      

      WHEREAS,
in order to induce the Company and the Purchasers to enter into the Financing
Transaction, the Management Shareholders have agreed not to sell any shares of
the Company’s Common Stock that such Management Shareholders presently own on
the date hereof, or may acquire on or after the date hereof, except in
accordance with the terms and conditions set forth herein (collectively, the
“Lock-Up
Shares”).

       

      NOW,
THEREFORE, in consideration of the covenants and conditions hereinafter
contained, the parties hereto agree as follows:

       

      1.            Restriction on Transfer;
Term. Each Management Shareholder hereby agrees with the Company that
such Management Shareholder will not offer, sell, contract to sell, assign,
transfer, hypothecate, gift, pledge or grant a security interest in, or
otherwise dispose of, or enter into any transaction which is designed to, or
might reasonably be expected to, result in the disposition of (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise, directly or indirectly) (each, a “Transfer”), any of
the Lock-Up Shares and shall not Transfer such shares until the earlier of (i)
two years from the date hereof and (ii) one hundred eighty (180) days following
the date on which the Company’s listing on a Major Stock Exchange becomes
effective.  Notwithstanding the foregoing, the entry by the Management
Shareholders into the Pledge Agreement of even date herewith and the performance
by the Management Shareholders of their obligations under such Pledge Agreement
shall not be deemed a Transfer in contravention of this Agreement.

       

      2.            Ownership. During the
Lock-Up Period, the Management Shareholders shall retain all rights of ownership
in the Lock-Up Shares, including, without limitation, voting rights and the
right to receive any dividends that may be declared in respect thereof, except
as otherwise provided in the Pledge Agreement or the other Transaction Documents
whereby any benefits, rights, title or otherwise shall inure to the
Purchasers. 

      

      3.            Company and Transfer
Agent. The Company is hereby authorized and required to disclose the
existence of this Agreement to its transfer agent. The Company and its transfer
agent are hereby authorized and required to decline to make any transfer of the
Common Stock if such transfer would constitute a violation or breach of this
Agreement and/or the Pledge Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      4.            Notices. All notices,
demands, consents, requests, instructions and other communications to be given
or delivered or permitted under or by reason of the provisions of this Agreement
or in connection with the transactions contemplated hereby shall be in writing
and shall be deemed to be delivered and received by the intended recipient as
follows: (i) if personally delivered, on the business day of such delivery (as
evidenced by the receipt of the personal delivery service), (ii) if mailed
certified or registered mail return receipt requested, two (2) business days
after being mailed, (iii) if delivered by overnight courier (with all charges
having been prepaid), on the business day of such delivery (as evidenced by the
receipt of the overnight courier service of recognized standing), or (iv) if
delivered by electronic mail or facsimile transmission, on the business day of
such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent
after that time, on the next succeeding business day (as evidenced, in the case
of facsimile transmissions by the printed confirmation of delivery generated by
the sending party’s telecopier machine). If any notice, demand, consent,
request, instruction or other communication cannot be delivered because of a
changed address of which no notice was given (in accordance with this Section
4), or the refusal to accept same, the notice, demand, consent, request,
instruction or other communication shall be deemed received on the second
business day the notice is sent (as evidenced by a sworn affidavit of the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers as
applicable.

       

      If to the
Company:

      

      Sino Gas
International Holdings, Inc.

      No. 18
Zhong Guan Cun Dong St.

      Haidian
District

      Beijing,
P.R. China

      Attention:
Yuchuan Liu, Chairman and CEO

       

      With a
copy to:

      

      Jiannan
Zhang

      Cadwalader,
Wickersham & Taft LLP

      2301
China Central Place Tower 2

      No. 79
Jianguo Road, Beijing 100025, China

      Fax:
(86-10) 6599-7300

       

      If to the
Purchasers, to the addresses listed on Schedule I
hereto:

      

      With a
copy to:

      

      Axiom
Capital Management, Inc.

      780 Third
Avenue, 43rd floor

      New York,
NY 10017-2024

      Fax:
(212) 521-3888

      Attention:  Mark
D. Martino, President

      

      If to the
Management Shareholders, to such Management Shareholder c/o of the Company
at the address set forth above.

      

      or to
such other address as any party may specify by notice given to the other party
in accordance with this Section 4.

       

      5.            Amendment. This
Agreement may not be modified, amended, altered or supplemented, except by a
written agreement executed by each of the parties hereto following the prior
written consent of the holders of a majority in aggregate principal amount of
the Notes.

       

      6.            Entire Agreement.
This Agreement contains the entire understanding and agreement of the parties
relating to the subject matter hereof and supersedes all prior and/or
contemporaneous understandings and agreements of any kind and nature (whether
written or oral) among the parties with respect to such subject
matter.

      

      7.            Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed in that
state, without regard to any of its principles of conflicts of laws or other
laws which would result in the application of the laws of another jurisdiction.
This Agreement shall be construed and interpreted without regard to any
presumption against the party causing this Agreement to be
drafted.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      8.            Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE
PARTIES UNCONDITIONALLY AND IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE
FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK WITH RESPECT TO ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN NEW YORK COUNTY OR SUCH
DISTRICT, AND AGREES THAT SERVICE OF ANY SUMMONS, COMPLAINT, NOTICE OR OTHER
PROCESS RELATING TO SUCH SUIT, ACTION OR OTHER PROCEEDING MAY BE EFFECTED IN THE
MANNER PROVIDED IN SECTION 4.

       

      9.            Severability. The
parties agree that if any provision of this Agreement be held to be invalid,
illegal or unenforceable in any jurisdiction, that holding shall be effective
only to the extent of such invalidity, illegally or unenforceability without
invalidating or rendering illegal or unenforceable the remaining provisions
hereof, and any such invalidity, illegally or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is the intent of the parties that this Agreement be fully
enforced to the fullest extent permitted by applicable law.

       

      10.            Binding Effect;
Assignment. This Agreement and the rights and obligations hereunder may
not be assigned by any Management Shareholder without the prior written consent
of the Company and the holders of a majority in aggregate principal amount of
the Notes. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and permitted
assigns.

       

      11.            Headings. The section
headings contained in this Agreement (including, without limitation, section
headings and headings in the exhibits and schedules) are inserted for reference
purposes only and shall not affect in any way the meaning, construction or
interpretation of this Agreement. Any reference to the masculine, feminine, or
neuter gender shall be a reference to such other gender as is appropriate.
References to the singular shall include the plural and vice versa.

       

      12.            Counterparts. This
Agreement may be executed in two or more counterparts, and by the different
parties hereto in separate counterparts, by facsimile or other electronic
transmission, each of which when executed shall be deemed to be an original, and
all of which, when taken together, shall constitute one and the same document.
This Agreement shall become effective when one or more counterparts, taken
together, shall have been executed and delivered by all of the parties
hereto.

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       [SIGNATURE
PAGE TO LOCK-UP AGREEMENT]

      

      IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above herein.

       

      
        
          
            
              
                
                  
                    
                      	 
      	
                              SINO
      GAS INTERNATIONAL HOLDINGS, INC.

                            	 
      
	 
      	 
      	 
      	 
      
	
                                

                            	
                              By:

                            	
                                 

                            	 
      
	 
      	 
      	
                              Name:

                            	 
      
	 
      	 
      	
                              Title:

                            	 
      
	 
      	 
      	 
      
	
                                

                            	
                              SHAREHOLDER

                            	 
      
	 
      	 
      	 
      	 
      
	
                                

                            	
                              By:

                            	
                                 

                            	 
      
	 
      	 
      	
                              Name:

                            	 
      
	 
      	 
      	 
      
	 
      	
                              SHAREHOLDER

                            	 
      
	 
      	 
      	 
      	 
      
	
                                

                            	
                              By:

                            	
                                 

                            	 
      
	 
      	 
      	
                              Name:

                            	 
      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
D-1

       

      
        
          
            	
                    

                  	
                     

                     

                    The
      Judge Building

                    Eight
      East Broadway, Suite 410

                    Salt
      Lake City, Utah 84111

                    (801)
      746-6300 (Office)

                    (801)
      746-6301 (Fax)

                    www.lhwplaw.com

                  

          

        

        

        November
30, 2009

        

        Purchasers

        c/o Axiom
Capital Management, Inc. as Placement Agent

        
          780 Third
Avenue, 43rd
Floor

        

        New York,
NY 10017-2024

        

        Re:     
Securities Purchase Agreement

        

        Ladies
and Gentlemen:

        

        We have
been retained by Sino Gas International Holdings, Inc., a Utah corporation (the
“Company”), to render an opinion
in connection with the transactions contemplated by the Securities Purchase
Agreement, dated as of November 25, 2009 (the “Securities Purchase Agreement”),
between the Company and certain Purchasers (the “Purchasers”), relating to the offer
and sale of 8% Senior Secured Convertible Notes in the aggregate principal
amount of up to Ten Million U.S. Dollars, subject to a twenty (20%)
overallotment (the “Notes”), and
warrants (the “Warrants”) to
purchase shares (the “Warrant
Shares”) of the Company’s common stock, par value $0.001 (“Common Stock”). This opinion letter is
being delivered pursuant to Section 5.2(c) of the Securities Purchase Agreement.
The Securities Purchase Agreement, Notes, Warrants and other documents
referenced in the Securities Purchase Agreement, including a Management Lock-Up
Agreement, Guaranty, Pledge Agreement, and Voting Agreement, are herein
sometimes collectively called the “Transaction Documents.” All
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Securities Purchase Agreement.

        

        In
connection with the preparation of this opinion letter, we have examined the
Transaction Documents and such other documents and such matters of law and made
such inquiries as we have deemed necessary or appropriate for the purposes
hereof. As to certain factual matters, we have relied in part upon the
representations and warranties of the Company in the Securities Purchase
Agreement, certificates of officers of the Company and upon certificates of
representative of governmental authorities, and while we believe such reliance
is reasonable, we have not conducted an independent review or investigation of
such matters. With regard to the opinions expressed in paragraph 1 below, we
have relied solely on a Certificate of Good Standing for the Company from the
Utah Department of Commerce, Division of Corporations, dated November 24,
2009.

        

        Based
upon such review and inquiries, and subject to the assumptions and limitations
hereinafter set forth, we are of the opinion that:

        

        1.        
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Utah.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Board of
Directors

        Sino Gas
International Holdings, Inc.

        November
30, 2009

        Page
2

         

        2.        
The Company has all necessary corporate power and authority to execute, deliver,
enter into and perform its obligations under each of the Transaction Documents
and to consummate the transactions contemplated thereby. The execution,
delivery, and performance of each of the Transaction Documents have been duly
authorized by all necessary corporate action on the part of the
Company.

        

        3.        
The Transaction Documents have been duly executed and delivered by the Company
and constitute legal, valid and binding obligations of the Company and are
enforceable against the Company in accordance with their respective terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy.

        

        4.        
The Notes and Warrants to be issued pursuant to the Securities Purchase
Agreement have been duly authorized by the Company’s Board of
Directors.

        

        5.        
The Notes and Warrants, upon issuance and receipt by the Company of the purchase
price of the Notes and Warrants from the Purchasers, will constitute legal,
valid and binding obligations of the Company and are enforceable against the
Company in accordance with their respective terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy. The shares of Common
Stock to be issued upon conversion of the Notes or exercise of the Warrants and
the Placement Agent Warrants (as defined in the Securities Purchase Agreement),
if converted or exercised in accordance with their respective terms, will be
validly issued, fully paid and non-assessable.

        

        6.        
The execution and delivery by the Company of the Transaction Documents do not
and the consummation of the transactions contemplated thereby will not (A)
violate any provision of the Articles of Incorporation or By-laws of the
Company, or, to our best knowledge (B) violate any Utah or federal law, statute,
rule, regulation, order, judgment or decree of any court or governmental
authority which, to our knowledge, is applicable to the Company, or (C) conflict
with, or constitute a material default (or an event that with notice or lapse of
time or both would become a default) under, or require a consent under, any
material agreement included or incorporated by reference as an exhibit in the
Company’s S-1 Registration Statement filing on November 20, 2009, with the U.S.
Securities and Exchange Commission, except for, in the case of clauses (B) and
(C), any violation, breach or default which would not reasonably be expected to
have a material adverse effect to the Company’s business, operations or
financial condition.

        

        7.        
Except for filings, authorizations or approvals contemplated by the Securities
Purchase Agreement or which may be required under applicable blue sky laws, to
our knowledge no authorizations or approvals of, and no filings with, any
governmental authority are necessary or required by the Company for the
execution and delivery of the Transaction Documents or the consummation of the
transactions contemplated thereby.

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Board of
Directors

        Sino Gas
International Holdings, Inc.

        November
30, 2009

        Page
3

         

        8.        
Assuming (i) the accuracy of the information and representations and warranties
provided by each of the Purchasers in the Transaction Documents including the
relevant information with respect to the status of each Purchaser as an
“accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended (the “Securities Act”), (ii) that the
Placement Agent has complied in all respects with the requirements of Section
4(2) of the Securities Act (including, without limitation, the provisions of
Regulation D promulgated thereunder), (iii) the absence of any form of general
solicitation or general advertising with respect to the offer or sale of the
Notes and Warrants, (iv) the registration or qualification of the Placement
Agent as a licensed broker-dealer in each jurisdiction in which the Placement
Agent has placed or attempted to place the Notes and Warrants, (v) the
observance of all limitations on resale of the Notes and Warrants, and (vi) the
timely filing of a Form D with respect to the offer or sale of the Notes and
Warrants, to our best knowledge, the issuance and sale of the Notes and Warrants
by the Company to the Purchasers is exempt from registration under the
Securities Act by virtue of Regulation D promulgated thereunder.

        

        We are
attorneys licensed to practice law in the State of Utah. This opinion is limited
to matters governed by the federal laws of the United States, the laws of the
State of Utah (as to matters addressed in paragraphs 1, 2, 3, 4, 5 and 6 above),
in effect on the date hereof, to the extent such laws are involved in the
opinions set forth herein, and we express no opinion on any matter governed by
the law of any other jurisdiction. No opinion is expressed as to the effect that
the law of any other jurisdiction might have upon the subject matter of the
opinions expressed herein under conflicts of law principles or
otherwise.

        

        The
opinions expressed in paragraph 6 are based on a review of the Articles of
Incorporation and By-laws of the Company, a review of material contracts filed
by the Company and included or incorporated by reference in the S-1 Registration
Statement referenced above, and such information and representations from the
Company as we deemed appropriate in the circumstances. We have not undertaken an
independent review or investigation of any transactions to which the Company was
a party.

        

        We have
assumed throughout this opinion (i) that there has been no (and will not be any)
fraud in connection with the transactions contemplated by the Securities
Purchase Agreement, (ii) the accuracy of the representations and warranties in
the Transaction Documents and in the certificates provided to us as to factual
matters; and (iii) the accuracy of material contracts included as exhibits to
the Company’s S-1 Registration Statement referenced above. The opinions
expressed herein are being delivered to you as of the date hereof and we assume
no obligations to advise you of any changes of law or fact that may occur after
the date hereof, notwithstanding that such changes may affect the legal analysis
or conclusions contained herein.

         

        
          
             

          

          
             

            
              

            

          

          
             

          

        

        Board of
Directors

        Sino Gas
International Holdings, Inc.

        November
30, 2009

        Page
4

         

        This
opinion letter is limited to the matters set forth herein. No opinion is
expressed or may be inferred beyond the matters expressly contained herein. This
opinion letter is delivered to you solely in connection with the Transaction
Documents, and this opinion letter and the opinions stated herein may not be
relied upon for any other purpose or by any person other than the Company or the
Purchasers. Accordingly, this opinion letter may not be quoted, filed with any
governmental authority or regulatory agency or otherwise circulated or utilized
for any purpose without our prior written consent.

        

        
          
            	 
      	
                    Sincerely,

                  
	 
      	
                    

                  
	 
      	
                    

                      

                        

                          

                            Lewis,
      Hansen, Waldo & Pleshe, LLC

                          

                        

                      

                    

                  

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
D-2

      

      
        

        
          
            	
                    

                  	
                    

                  	 
      
	
                     

                    15/F Tower 1, China Central Place No. 81 Jianguo Road, Beijing 100025, China

                     

                    Tel: (86 10) 6584 6688 Fax: (86 10) 6584 6666/6677

                     

                    http://www.globallawoffice.corn.cn

                  	 
      

          

        

         

        November
25, 2009

         

        
          To: The
Purchaser listed on Schedule I attached to the Purchase Agreement (as defined
below)

        

         

        Ladies
and Gentlemen:

         

        We are
qualified lawyers of the People’s Republic of China (the “PRC”) and as such are qualified to issue
this opinion on the PRC laws, regulations, rules, orders, decrees, guidelines
and notices effective as at the date hereof (the “PRC Laws”).
We have acted as PRC legal counsel for Sino Gas International Holdings,
Inc., a company incorporated under the laws of the State of Utah (the “Company”),
its subsidiary, GAS Investment China Co., Ltd., a company organized under
the laws of the British Virgin Islands (“Gas BVI”),
and each of the Company’s subsidiaries
organized under PRC Law, a list of which is set forth on Exhibit A to this
opinion (each a “PRC Subsidiary” and collectively, the “PRC Subsidiaries”).

        
This
opinion is issued and delivered pursuant to the Securities Purchase Agreement
dated November 25, 2009, between the Company and the Purchaser (the “Purchase Agreement”).
Capitalized terms used herein but not otherwise defined herein shall have
the same meanings ascribed to them in the Purchase Agreement.

         

        For the
purposes of this opinion, we have examined relevant documents provided by the
Company and/or the PRC Subsidiaries as we consider necessary or appropriate. In
examining such documents, we have made the following assumptions:

         

        
          	
                  (a)

                	
                  that
      all documents submitted to us as originals are authentic and all documents
      submitted to us as copies conform to their
  originals;

                

        

         

        
          	
                  (b)

                	
                  that
      all documents have been validly authorized, executed and delivered by all
      of the parties thereto;

                

        

         

        
          	
                  (c)

                	
                  all
      factual statements in the documents provided to us are accurate and
      complete. Where important facts were not independently established by us,
      we have relied upon certificates issued by governmental agencies and
      representatives of the Company with proper authority, and also upon
      representations, oral or written, made by the Company, Gas BVI and the PRC
      Subsidiaries;

                

        

        
          
             

          

          
            1
/ 7

            
              

            

          

          
             

          

        

         

        
          	
                  (d)

                	
                  No
      insolvency proceedings, bankruptcy or liquidation are in force or have
      been commenced in relation to the PRC
  Subsidiaries;

                

        

         

        
          	
                  (e)

                	
                  that
      the signatures, seals and chops on the documents submitted to us are
      genuine;

                

        

         

        
          	
                  (f)

                	
                  all
      documents submitted to us are latest without further updates after being
      submitted to us; and

                

        

         

        
          	
                  (g)

                	
                  Gas
      BVI, the PRC Subsidiaries and the Company have drawn to our attention all
      matters relevant to our information
requests.

                

        

         

        Based on
the foregoing examinations and assumptions and our review of the relevant
documents, we are of the opinion that:

         

        
          	
                  I.

                	
                   

                	
                  Each
      of the PRC Subsidiaries has been duly organized and is validly existing as
      a company with limited liability under the PRC Laws. Each PRC Subsidiary’s
      business license is in full force and effect. The articles of association
      of each PRC Subsidiary comply with the requirements of applicable PRC Laws
      in all material respects and are in full force and effect. GAS BVI
      directly or indirectly owns all or partial equity interest in each PRC
      Subsidiary set forth on Exhibit A
hereto.

                

        

         

        
          	
                  II.

                	
                   

                	
                  Each
      of the Project Agreements, a list of which is set forth on Exhibit B
      hereto, constitutes a legal, valid and binding obligation of the parties
      thereto and is enforceable against such parties in accordance with its
      respective terms and conditions.

                

        

         

        
          	
                  III.

                	
                   

                	
                  To
      the best of our knowledge, subject to the Purchase Agreement and other
      provisions contained herein, there are no other outstanding equity
      interests, rights, warrants or options to acquire, or instruments
      convertible into or exchangeable for, nor any agreements or other
      obligations to issue, or other rights to convert any obligation into, any
      equity interest in any of the PRC
Subsidiaries.

                

        

         

        
          	
                  IV.

                	
                   

                	
                  Subject
      to the completion of the declaration and filing procedure referred to in
      Article IX herein and relevant taxation under the PRC Laws, all dividends
      declared and payable upon the equity interests in Beijing Zhong Ran Wei Ye
      Gas Co., Ltd. may, under PRC Laws, be paid to Gas BVI in Renminbi that may
      be converted into U.S. dollars and transferred out of the
    PRC.

                

        

         

        
          	
                  V.

                	
                   

                	
                  To
      the best of our knowledge, subject to the Purchase Agreement and other
      provisions contained herein, no PRC Subsidiary is (X) in violation of its
      articles of association, business licenses or permits or (Y) in default in
      the performance or observance of any material obligation, agreement,
      covenant or condition contained in any legal documents known to us to
      which it is a party or by which it or any of its properties may be
      bound.

                

        

        
          
             

          

          
            2
/ 7

            
              

            

          

          
             

          

        

         

        
          	
                  VI.

                	
                   

                	
                  To
      the best of our knowledge, there are no legal, arbitration or governmental
      proceedings in the PRC pending to which any PRC Subsidiary is a party or
      of which any property of any of them is the subject; and, to the best of
      our knowledge, no such proceedings are threatened or contemplated by any
      governmental agency or other parties in the
PRC.

                

        

         

        
          	
                  VII.

                	
                   

                	
                  To
      the best of our knowledge, the issue and sale of the securities being sold
      under, and the compliance by the Company with all of the provisions of,
      the Purchase Agreement and the other Transaction Documents (as defined in
      the Purchase Agreement), and the consummation of the transactions therein
      contemplated, will not conflict with or result in a breach or violation of
      any of the terms or provisions of, or constitute a default under any legal
      documents known to us to which any PRC Subsidiary is a party or by which
      PRC Subsidiary is bound.

                

        

         

        
          	
                  VIII.

                	
                   

                	
                  No
      governmental authorization of or with any governmental agency in the PRC
      is required for the issue and sale of the securities or the consummation
      of the transactions contemplated by the Purchase Agreement, except such
      governmental authorizations as have been duly obtained in compliance with
      the PRC Laws and are in full force and
effect.

                

        

         

        
          	
                  IX.

                	
                   

                	
                  According
      to the documents and information that we have received from the Company,
      Mr. Liu Yu Chuan, who is a PRC individual resident, has made the requisite
      declaration and filing with the local branch of the State Administration
      of Foreign Exchange (“SAFE”) in connection
      with his ownership of share capital of the Company. There are other PRC
      individual resident shareholders of the Company who need to complete the
      requisite declaration and filing with the local branch of SAFE in
      accordance with relevant PRC Laws; however, as of the date hereof,we have
      not received any document indicating that the said declaration and filing
      for such shareholders have been
completed.

                

        

         

        This
opinion is rendered only with respect to the current prevailing PRC Laws and we
have made no investigations in any other jurisdiction and no opinion is
expressed or implied as to the laws of any other jurisdiction. Additionally, we
take no responsibility to update this opinion after the date
hereof.

         

        This
opinion is given solely for the benefit of the persons to whom it is addressed.
It may not, without our prior written permission, be relied upon by anyone
else.

        
          
             

          

          
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        Yours
faithfully,

        

        
          
            
              
                
                  
                    	 
	
                            Global
      Law
Office

                          

                  

                

              

            

          

        

         

        
          
             

          

          
            4
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        EXHIBIT A

         

        List
of PRC Subsidiaries

         

        1.       Beijing
Zhong Ran Wei Ye Gas Co., Ltd.

        2.       Beijing
Chenguang Gas Co., Ltd.

        3.       Hengshui
Weiye Gas Co., Ltd.

        4.       Hebei
Jiushun Gas Appliances Sale Co., Ltd.

        5.       Xingtang
County Weiye Gas Co., Ltd.

        6.       Sihong
Weiye Gas Co., Ltd.

        7.       Longyao
County Zhongran Weiye Gas Co., Ltd.

        8.       Changli
Weiye Gas Co., Ltd.

        9.       Baishan
City Weiye Gas Co., Ltd.

        10.     Nangong
City Weiye Gas Co., Ltd.

        11.     Yu
County Jinli Gas Co., Ltd

        12.     Gucheng
Weiye Gas Co., Ltd

        13.     Wuqiao
County Gas Co., Ltd.

        14.     Langfang
Development Zone Weiye Dangerous Articles Transportation Co., Ltd.

        15.     Xinhe
County Weiye Gas Co., Ltd.

        16.     Jinzhou
City Weiye Gas Co., Ltd.

        17.     Pei
County Weiye Gas Co., Ltd.

        18.     Wuhe
County Weiye Gas Co., Ltd.

        19.     Guannan
County Weiye Gas Co., Ltd.

        20.     Yutian
County Zhongran Weiye Gas Co., Ltd.

        21.     Zhangjiakou
City Xiahuayuan Jinli Gas Co., Ltd.

        22.     Sixian
Weiye Gas Co., Ltd.

        23.     Ningjin
County Weiye Gas Co., Ltd.

        24.     Linzhang
County Weiye Gas Co., Ltd.

        25.     Shenzhou
Weiye Gas Co., Ltd.

        
          
             

          

          
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        EXHIBIT
B

         

        List
of Project Agreements

         

        
          	
                  1.

                	
                  Franchise
      Agreement on Pipe Gas of Guannan County dated July 15, 2005 entered into
      between People’s Government of Guannan County and Guannan County Zhongyuan
      Natural Gas Development Co., Ltd;

                

        

        
          	
                  2.

                	
                  Franchise
      Agreement on Peicheng Pipe Gas Project of Pei County dated July 22, 2005
      entered into between Construction Bureau of Pei County and Beijing Zhong
      Ran Wei Ye Gas Co., Ltd.;

                

        

        
          	
                  3.

                	
                  Municipal Gas
      Development Agreement dated July 2, 2004, entered into between Construction
      Bureau of Changli County and Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.;

                

        

        
          
          

        

        
          	
                  4.

                	
                  Municipal
      Gas Development Contract dated May 26, 2004, entered into between Town
      Government of Taishitun, Miyun County, Beijing City and Beijing Zhong Ran
      Wei Ye Gas Co., Ltd.;

                

        

        
          	
                  5.

                	
                  Municipal
      Public Utility Franchise Agreement dated November 27, 2003, entered into
      between Construction Bureau of Yutian County and Beijing Zhong Ran Wei Ye
      Gas Co., Ltd.;

                

        

        
          	
                  6.

                	
                  Franchise
      Agreement on Pipe Gas of Yu County, Zhangjiakou City dated December 26,
      2006, entered into between Public Utility Administration Section of Yu
      County and Yu County Jinli Gas Co.,
Ltd.;

                

        

        
          	
                  7.

                	
                  Franchise
      Agreement on Pipe Gas of Xiahuayuan District, Zhangjiakou City dated
      December 27, 2006, entered into between Construction Bureau of Xiahuayuan
      District, Zhangjiakou City and Zhangjiakou City Xiahuayuan Jinli Gas Co.,
      Ltd.;

                

        

        
          	
                  8.

                	
                  Exclusive
      Operation Agreement on Pipe Gas of Gangshang Village dated August 20,
      2007, entered into between Village Committee of Gangshang Village and
      Beijing Chenguang Gas Co., Ltd.;

                

        

        
          	
                  9.

                	
                  Co-operative
      Development Agreement on Natural Gas Project of Xinji City dated May 30,
      2006, entered into between Xinji City Liquefied Gas Co., Ltd. and Beijing
      Chenguang Gas Co., Ltd. witnessed by Construction Bureau of Xinji
      City;

                

        

        
          	
                  10.

                	
                  Contract
      on Development of Pipe Natural Gas Project of Sihong County dated July 23,
      2004, entered into between Construction Bureau of Sihong County and
      Beijing Zhong Ran Wei Ye Gas Co.,
Ltd.;

                

        

        
          	
                  11.

                	
                  Franchise
      Agreement on Pipe Gas of Si County dated April 28, 2007, entered into
      between Municipal Administration Bureau of Si County and Beijing Zhong Ran
      Wei Ye Gas Co., Ltd.;

                

        

        
          
            	
                    12.

                  	
                    Franchise
      Agreement on Municipal Pipe Gas dated August 17, 2006, entered into
      between Construction Bureau of Wuhe County and Beijing Zhong Ran Wei Ye
      Gas Co., Ltd.

                  

          

          
            	
                    13.

                  	
                    Municipal
      Gas Development Agreement dated November 1, 2003, entered into between
      Construction Bureau of Jinzhou City and Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.;

                  

          

        

         

        
          
            
               

            

            
              6
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                  14.

                	
                  Municipal
      Gas Development Agreement dated August 25, 2003, entered into between
      Construction Bureau of Linzhang County and Beijing Zhong Ran Wei Ye
      Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.);

                

        

        
          	
                  15.

                	
                  Municipal
      Gas Development Agreement dated January 12, 2004, entered into between
      Construction Bureau of Longyao County and Beijing Zhong Ran Wei Ye
      Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.);

                

        

        
          	
                  16.

                	
                  Municipal
      Gas Development Agreement dated September 2005, entered into between
      Construction Bureau of Nangong City and Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.;

                

        

        
          	
                  17.

                	
                  Municipal
      Gas Development Agreement dated August 8, 2003, entered into between
      Construction Bureau of Ningjin County and Beijing Zhong Ran Wei Ye
      Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.);

                

        

        
          	
                  18.

                	
                  Municipal
      Gas Development Agreement dated February 21, 2004, entered into between
      Construction Bureau of Shenzhou City and Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.;

                

        

        
          	
                  19.

                	
                  Municipal
      Gas Development Agreement dated January 8, 2004, entered into between
      Government of Wentang Town, Pingshan County and Beijing Zhong Ran Wei Ye
      Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye Gas Co.,
      Ltd.);

                

        

        
          	
                  20.

                	
                  Municipal
      Gas Development Agreement dated August 29, 2003, entered into between
      Construction Bureau of Wuqiao County, Hebei Province and Beijing Zhong Ran
      Wei Ye Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye Gas
      Co., Ltd.);

                

        

        
          	
                  21.

                	
                  Municipal
      Gas Development Agreement dated September 19, 2003, entered into between
      Urban and Suburban Construction Bureau of Xinhe County and Beijing Zhong
      Ran Wei Ye Investment Co., Ltd. (previous name of Beijing Zhong Ran Wei Ye
      Gas Co., Ltd.);

                

        

        
          	
                  22.

                	
                  Agreement
      on the Development of Pipe Natural Gas of Xingtang County dated August 27,
      2003 and Beijing Zhong Ran Wei Ye Investment Co., Ltd. (previous name of
      Beijing Zhong Ran Wei Ye Gas Co.,
Ltd.);

                

        

        
          	
                  23.

                	
                  Franchise
      Agreement on Pipe Gas of Zaoqiang County, Hebei Province dated June 20,
      2006, entered into between Construction Bureau of Zaoqiang County and
      Beijing Zhong Ran Wei Ye Gas Co.,
Ltd.;

                

        

        
          	
                  24.

                	
                  Municipal
      Gas Development Agreement dated April 7, 2005, entered into between
      Construction Bureau of Gucheng County and Beijing Zhong Ran Wei Ye Gas
      Co., Ltd.;

                

        

        
          	
                  25.

                	
                  Franchise
      Agreement on Pipe Gas of Jize County, Hebei Province dated March 12, 2008,
      entered into between Construction Bureau of Jize County, Hebei Province
      and Beijing Zhong Ran Wei Ye Gas Co.,
Ltd.;

                

        

        
          	
                  26.

                	
                  Franchise
      Agreement on Pipe Gas of Baishan City dated July 9, 2007, entered into
      Real Estate Administration Bureau of Baishan City and Beijing Zhong Ran
      Wei Ye Gas Co., Ltd.

                

        

         

        
          
            
            

          

          
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      EXHIBIT
E

      

      FORM OF
GUARANTY

      

      GUARANTY,
dated as of November 30, 2009 (this “Guaranty”), made by
the signatory hereto (together with any other entity that may become a party
hereto as provided herein, (each, a “Guarantor”), in favor
of the purchasers signatory (the “Purchasers”) to
certain Securities Purchase Agreements, dated on or after the date hereof, by
and among, inter alia,
Sino Gas  International Holdings, Inc., a Utah corporation (the “Company”) and the
Purchasers party thereto (the “Purchase
Agreements”). Capitalized terms not otherwise defined shall have the
meaning set forth in the Purchase Agreements.

      

      WITNESSETH:

      

      WHEREAS,
  the Company shall
issue and sell to the Purchasers, as provided in the Purchase Agreements, and
the Purchasers shall purchase up to Ten Million Dollars ($10,000,000) of the
Notes and Warrants (subject to a 20% over-allotment provision);

      

      WHEREAS,
the Guarantor is the Chairman, Chief Executive Officer and largest shareholder
of the Company and will therefore derive substantial benefits from the issuance
and sale of the Notes and the Warrants; and

      

      WHEREAS,
the Company has agreed to pledge 10,000,000 common shares of GAS Investment
China co., Ltd, a corporation organized under the laws of the British Virgin
Islands (the “BVI
Company”), representing all of the outstanding shares of the BVI Company
owned by the Company pursuant to a Pledge Agreement dated as of the date hereof
upon the expiration of the lock-up agreement pursuant to which such shares are
currently encumbered (the “Pledge
Agreement”).

      

      NOW,
THEREFORE, in consideration of the premises and to induce the Purchasers to
enter into the Purchase Agreements and to carry out the transactions
contemplated thereby, each Guarantor hereby guarantees as follows:

      

      1.           Guaranty.

      

      1.1                      Guaranty.  Guarantor
hereby unconditionally and irrevocably guarantees, jointly and severally with
any other Guarantor, the punctual payment, performance and observance when due,
whether at stated maturity, by acceleration or otherwise, of all of the
obligations of the Company under the Purchase Agreements, the Pledge Agreement
and the Notes (collectively, the “Obligations”) now or
hereafter existing, whether for principal, interest (including, without
limitation, all interest that accrues after the commencement of any insolvency,
bankruptcy or reorganization of the Company, whether or not constituting an
allowed claim in such proceeding), fees, commissions, expense reimbursements,
liquidated damages, indemnifications or otherwise (such obligations, to the
extent not paid by the Company being the “Guaranteed
Obligations”), and agrees to pay any and all reasonable costs, fees and
expenses (including reasonable counsel fees and expenses) incurred by the
Collateral Agent (as defined in the Pledge Agreement) and the Purchasers in
enforcing any rights under the guaranty set forth herein.  Without
limiting the generality of the foregoing, Guarantor’s liability shall extend to
all amounts that constitute part of the Guaranteed Obligations and would be owed
by the Company to Collateral Agent and the Purchasers, but for the fact that
they are unenforceable or not allowable due to the existence of an insolvency,
bankruptcy or reorganization involving the Company.

       

      1.2                      Guaranty
Absolute.  Guarantor guarantees that the Guaranteed Obligations
will be paid strictly in accordance with the terms of the Guaranteed
Obligations, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of
Collateral Agent or the Purchasers with respect thereto.  The
obligations of Guarantor under this Guaranty are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted
against Guarantor to enforce such obligations, irrespective of whether any
action is brought against the Company or any other Guarantor or whether Company
or any other Guarantor is joined in any such action or actions.  The
liability of Guarantor under this Guaranty constitutes a primary obligation, and
not a contract of surety, and to the extent permitted by law, shall be
irrevocable, absolute and unconditional irrespective of, and Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to, any or all of the following:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (a)         any
lack of validity or enforceability of the Notes or any agreement or instrument
relating to any Guaranteed Obligation;

       

      (b)         any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Guaranteed Obligations, or any other amendment or waiver of or any
consent to departure from the Notes, including, without limitation, any increase
in the Guaranteed Obligations resulting from the extension of additional credit
to the Company or otherwise;

       

      (c)         any
taking, exchange, release, subordination or non-perfection of any Collateral (as
defined in the Pledge Agreement), or any taking, release or amendment or waiver
of or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;

       

      (d)         any
change, restructuring or termination of the corporate, limited liability company
or partnership structure or existence of the Company; or

       

      (e)         any
other circumstance (including, without limitation, any statute of limitations)
or any existence of or reliance on any representation by Collateral Agent or the
Company that might otherwise constitute a defense available to, or a discharge
of, the Company or any other guarantor or surety.

       

      This
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Guaranteed Obligations is rescinded or
must otherwise be returned by Collateral Agent, any Purchaser or any other
entity upon the insolvency, bankruptcy or reorganization of the Company or
otherwise (and whether as a result of any demand, settlement, litigation or
otherwise), all as though such payment had not been made.

       

      1.3       Waiver.  Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that Collateral Agent or the Purchasers exhaust any right or take
any action against the Company or any other person or entity or any
Collateral.  Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated herein and that
the waiver set forth in this Section 1.3 is
knowingly made in contemplation of such benefits.  Guarantor hereby
waives any right to revoke this Guaranty, and acknowledges that this Guaranty is
continuing in nature and applies to all Guaranteed Obligations, whether existing
now or in the future.

       

      1.4       Continuing Guaranty;
Assignments.  This Guaranty is a continuing guaranty and shall
(a) remain in full force and effect until the later of the indefeasible cash
payment in full of the Guaranteed Obligations and all other amounts payable
under this Guaranty, the Purchase Agreements and Notes, (b) be binding upon
Guarantor, its successors and assigns and (c) inure to the benefit of and be
enforceable by the Purchasers and their successors, pledgees, transferees and
assigns.  Without limiting the generality of the foregoing
clause (c), any Purchaser may pledge, assign or otherwise transfer all or
any portion of its rights and obligations under this Guaranty (including,
without limitation, all or any portion of its Notes owing to it) to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted such Collateral Agent or Purchaser herein or
otherwise.

       

      1.5        Subrogation.  No
Guarantor will exercise any rights that it may now or hereafter acquire against
the Collateral Agent or any Purchaser or other Guarantor (if any) that arise
from the existence, payment, performance or enforcement of such Guarantor’s
obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Collateral Agent or any Purchaser or other Guarantor (if any),
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security solely on account of such claim, remedy or right,
unless and until all of the Guaranteed Obligations and all other amounts payable
under this Guaranty shall have been indefeasibly paid in full in
cash.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.6       Maximum Obligations.
Notwithstanding any provision herein contained to the contrary, Guarantor’s
liability with respect to the Obligations shall be limited to an amount not to
exceed, as of any date of determination, the amount that could be claimed by the
Purchasers from Guarantor without rendering such claim voidable or avoidable
under Section 548 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or
common law.

       

      2.           Miscellaneous.

       

      2.1           Expenses.  Guarantor
shall pay to the Collateral Agent and the Purchasers, on demand, the amount of
any and all reasonable expenses, including, without limitation, attorneys' fees,
legal expenses and brokers' fees, which they may incur in connection with
exercise or enforcement of any the rights, remedies or powers of the Collateral
Agent or the Purchasers hereunder or with respect to any or all of the
Obligations.

      

      2.2           Waivers, Amendment and
Remedies.  No course of dealing by the Purchasers and no
failure by the Collateral Agent or the Purchasers to exercise, or delay by the
Collateral Agent or any Purchaser in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right, remedy or power of the Collateral Agent or any
Purchaser.  No amendment, modification or waiver of any provision of
this Guaranty and no consent to any departure by Guarantor therefrom, shall, in
any event, be effective unless contained in a writing signed by the holders of a
majority of the outstanding Notes or the Holder or Holders against whom such
amendment, modification or waiver is sought, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.  The rights, remedies and powers of the Collateral
Agent and the Purchasers, not only hereunder, but also under any instruments and
agreements evidencing or securing the Obligations and under applicable law are
cumulative, and may be exercised by the Collateral Agent and the Purchasers from
time to time in such order as they may elect.

      

      2.3           Notices.  All
notices or other communications given or made hereunder shall be in writing and
shall be personally delivered or deemed delivered the first business day after
being faxed (provided that a copy is delivered by first class mail) to the party
to receive the same at its address set forth below or to such other address as
either party shall hereafter give to the other by notice duly made under this
Section:

      

      To
Guarantor, to:

      

      Sino Gas
International Holdings, Inc.

      No.18
Zhong Guan Cun Dong St.

      Haidian
District

      Beijing,
P.R. China

      Attention:
Yuchuan Liu, Chairman and CEO

      

      With a
copy to:

      

      Jiannan
Zhang

      Cadwalader,
Wickersham & Taft LLP

      2301
China Central Place Tower 2

      No. 79
Jianguo Road, Beijing 100025, China

      Fax:
(86-10) 6599-7300

       

      To
Purchasers:                   To
the addresses and telecopier numbers set

      forth in
the Purchase Agreements

      

      With a
copy by telecopier only to:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      To the
Collateral Agent:

      

      Salvatore
M. Di Costanzo, Esq.

      McMillan,
Constabile, Maker & Perone, LLP

      2180
Boston Post Road

      Larchmont,
New York 10538

      Telephone:
(914) 834-3500

      Facsimile:
(914) 834-0620

      

      Any party
may change its address by written notice in accordance with this
paragraph.

      

      2.4           Term; Binding
Effect.  This Guaranty shall (a) remain in full force and
effect until payment and satisfaction in full of all of the Obligations; (b) be
binding upon Guarantor and its successors and permitted assigns; and (c) inure
to the benefit of the Purchasers and their respective successors and
assigns.  All the rights and benefits granted by Guarantor to the
Collateral Agent and Purchasers hereunder and other agreements and documents
delivered in connection therewith are deemed granted to both the Collateral
Agent and the Purchasers.  Upon the payment in full of the
Obligations, (i) this Guaranty shall terminate and (ii) the Purchasers will,
upon Guarantor's request and at Guarantor's expense, execute and deliver to
Guarantor such documents as Guarantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse
whatsoever.

      

      2.5           Captions.  The
captions of Paragraphs, Articles and Sections in this Guaranty have been
included for convenience of reference only, and shall not define or limit the
provisions hereof and have no legal or other significance
whatsoever.

      

      2.6           Governing Law; Venue;
Severability.  This Guaranty shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts or choice of law.  Any legal action or
proceeding against Guarantor with respect to this Guaranty may be brought in the
courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Guaranty, Guarantor
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid
courts.  Guarantor hereby irrevocably waives any objection which they
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty brought in the
aforesaid courts and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.  If any
provision of this Guaranty, or the application thereof to any person or
circumstance, is held invalid, such invalidity shall not affect any other
provisions which can be given effect without the invalid provision or
application, and to this end the provisions hereof shall be severable and the
remaining, valid provisions shall remain of full force and
effect.  This
Guaranty shall be deemed an unconditional obligation of Guarantor for the
payment of money and, without limitation to any other remedies of the Collateral
Agent or the Purchasers, may be enforced against Guarantor by summary proceeding
pursuant to New York Civil Procedure Law and Rules Section 3213 or any similar
rule or statute in the jurisdiction where enforcement is sought.  For
purposes of such rule or statute, any other document or agreement to which the
Collateral Agent or the Purchasers and Guarantor are parties or which Guarantor
delivered to the Purchasers or the Collateral Agent, which may be convenient or
necessary to determine Collateral Agent’s and Purchasers’ rights hereunder or
Guarantor’s obligations are deemed a part of this Guaranty, whether or not such
other document or agreement was delivered together herewith or was executed
apart from this Guaranty.

       

      2.7           Satisfaction of
Obligations.  For all purposes of this Guaranty, the payment in
full of the Obligations shall be conclusively deemed to have occurred when
either the Obligations have been indefeasibly paid in cash or all outstanding
Notes have been converted to common stock pursuant to the terms of the Notes and
the Purchase Agreements.

      

      2.8           Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument.  This Agreement may be executed by facsimile
signature and delivered by facsimile transmission.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      [THE
BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

       

      IN WITNESS WHEREOF, the
undersigned have executed and delivered this Guaranty, as of the date first
written above.

      

      “GUARANTOR”

      

      
        
          
            
              	
                      By:

                    	
                       

                    
	
                      Yuchuan
      Liu

                    

            

          

        

      

      

      This
Guaranty Agreement may be signed by facsimile signature and

      delivered
by confirmed facsimile transmission.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
F

      

      

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

      EXHIBIT
G

      

      FORM OF
VOTING AGREEMENT

       

      THIS
VOTING AGREEMENT is made as of the 30 day of November, 2009, by and among
Investwide Capital LLC and LP and Jayhawk Private Equity Fund, LP (the “Lead Investor”) and
the shareholders listed on the signature pages hereto (the “Shareholders”).

       

      WHEREAS,
in order to induce the various purchasers (the “Purchasers”) of the
8% Senior Secured Convertible Notes  (the “Notes”) of Sino Gas
International Holdings Inc. (the “Company”) to purchase
the Notes, the Shareholders have agreed to execute this Voting Agreement
pursuant to the terms and conditions set forth below; and

       

      NOW,
THEREFORE, it is hereby agreed as follows:

       

      1.           Agreement to Vote.
Each of the Shareholders agrees to vote, or cause to be voted, at any meeting of
stockholders of the Company all shares of Common Stock of the Company owned by
such Shareholder or any entity affiliated with such Shareholder (“Subject Securities”),
or act by written consent of stockholders in lieu of any such meeting, as the
case may be, in favor of the election to the Board of Directors of the Company
of one person designated by the Lead Investor on behalf of the
Purchasers.

      

      2.           Grant of Irrevocable
Proxy. EACH SHAREHOLDER HEREBY IRREVOCABLY GRANTS TO, AND APPOINTS, [LEAD
INVESTOR] AS SUCH SHAREHOLDER’S PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION), FOR AND IN THE NAME, PLACE AND STEAD OF SUCH SHAREHOLDER, TO VOTE
ALL SUCH SHAREHOLDER’S SUBJECT SECURITIES (OWNED OF RECORD OR BENEFICIALLY), OR
GRANT A CONSENT OR APPROVAL IN RESPECT OF SUCH SUBJECT SECURITIES WITH VOTING
POWER, IN FAVOR OF THE ELECTION TO THE COMPANY’S BOARD OF DIRECTORS OF ONE
PERSON DESIGNATED BY [LEAD INVESTOR]. Each Shareholder represents that any
proxies heretofore given in respect of such Shareholder’s Subject Securities are
not irrevocable, and that all such proxies are hereby revoked. Each Shareholder
hereby affirms that the irrevocable proxy set forth in this Section 2 is given
to secure the performance of such Shareholder’s duties under this Agreement.
Each Shareholder hereby further affirms that the irrevocable proxy set forth in
this Section 2 is coupled with an interest and may under no circumstances be
revoked unless and until this Agreement is terminated in accordance with Section
3 of this Agreement. Each Shareholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Each
such irrevocable proxy is executed and intended to be irrevocable in accordance
with the provisions of applicable law.

       

      3.           Termination. This
Agreement and all rights granted hereby shall terminate and will cease to be of
any further force or effect when less than $1,000,000 of the Notes remain
outstanding.

        

      4.           Amendments. This
Agreement may not be amended, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written agreement
executed by the parties hereto.

      

      5.           Enforceability/Severability.
The parties hereto agree that each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law.
If any provision of this Agreement shall nevertheless be held to be prohibited
by or invalid under applicable law, (a) such provision shall be effective only
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement, and
(b) the parties shall, to the extent permissible by applicable law, amend this
Agreement, so as to make effective and enforceable the intent of this
Agreement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      6.           Representations by
Shareholders. Each Shareholder hereby represents and warrants, severally
and not jointly, that the execution and delivery of this Agreement and
compliance with the provisions hereof do not and will not conflict with, or
result in any violation or breach of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of, or result in,
termination, cancellation or acceleration of any obligation, or to loss of a
material benefit under, or result in the creation of any lien in or upon any of
the Subject Securities under, or give rise to any increased, additional,
accelerated or guaranteed rights or entitlements under, any provision of (A) any
contract, agreement or instrument to which he is a party or (B) any statute,
law, ordinance, rule or regulation or judgment, order, writ, injunction,
stipulation or decree, in each case, applicable to him, other than any such
conflicts, violations, breaches, defaults, rights, losses, liens or entitlements
that individually or in the aggregate could not reasonably be expected to impair
in any material respect his ability to perform his obligations under this
Agreement.

      

      7.           Further Assurances.
Each Shareholder shall from time to time execute and deliver, or cause to be
executed and delivered, such additional or further consents, documents and other
instruments as Lead Investor may request for the purpose of effectuating the
matters covered by this Agreement, including the grant of the irrevocable
proxies set forth in Section 2.

      

      8.           Assignment. Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties hereto without the prior written consent of the
other parties hereto. Any purported assignment in violation of this Section 8
shall be void.  Subject to the preceding sentences of this Section 8,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by, the parties hereto and their respective successors and assigns.

      

      9.           Governing Law. This
Agreement shall be governed by and construed under the laws of the State of New
York as applied to contracts among New York residents entered into and to be
performed entirely within New York.

      

      10.           Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. A telephone line facsimile transmission or an electronic
transmission of this Agreement bearing a signature on behalf of a party hereto
shall be legal and binding on such party.

       

      [Signature
page follows.]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year herein above first written.

       

      SHAREHOLDERS:

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