Document:

EXHBIT 10

 

 

 

 

 

 

 

EXHIBIT 10.3

 

ESCROW AGREEMENT

 

 

 

 

 

AMENDED AND RESTATED ESCROW AGREEMENT

THIS AMENDED AND RESTATED ESCROW AGREEMENT (this "Agreement") dated as of February 2, 2004, amends and restates that certain escrow agreement, dated as of November 10, 2003 among Zion Oil & Gas, Inc., a Delaware Corporation (the "Company"), COMMERCE BANK/DELAWARE, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America (the "Escrow Agent") and NETWORK 1 FINANCIAL SECURITIES, INC. (the "Underwriter").

WITNESSETH:

The Company, pursuant to a registration statement and preliminary prospectus filed with the Securities and Exchange Commission ("SEC") on Form SB-2 dated July 15, 2003, and subject to further amendment (the "Prospectus") is offering securities (the "Offering") to certain qualified subscribers (the "Subscribers") consisting of shares of the Company's common stock (the "Shares"), for a purchase price of $5.00 per Share.  The aggregate subscriptions that must be received before any subscription payments will be released to the Company from the escrow created pursuant to the terms and conditions contained herein is 1,300,000 Shares, or $6,500,000 (the "Minimum Subscription Amount"), which amount may be changed by the Company by amendment to the Prospectus and written notice to the Escrow Agent and Underwriter prior to the "Effective Date" (as hereinafter defined).  Thereafter, subscription payments will be released to the Company and commissions paid directly to the Underwriter upon written request by the Company and the Underwriter to the Escrow Agent.

The offering will be made on a "best efforts minimum/maximum" basis by the Underwriter, and by some other placement agents who are registered with the NASD, beginning on a day (the "Escrow Effective Date") designated by the Company promptly after being notified by the SEC that the registration statement is effective. If the Minimum Subscription Amount is not received by May 31, 2004 (or 90 days later if extended by the Company) the offering and sale of the Shares will terminate on such date (the "Minimum Offering Termination Date").  If the minimum is reached, then the maximum of 7,000,000 Shares or $35,000,000 may be accepted by the Company before December 31, 2004 (the "Maximum Offering Termination Date").  The minimum subscription is 100 Shares ($500) and all subscriptions that comply with the terms of the Prospectus will be denominated in $500 increments.

NOW, THEREFORE, the Company, the Underwriter and the Escrow Agent agree as follows:

1.  Deposits.  The Company agrees to provide the Escrow Agent, in writing, with the Escrow Effective Date promptly upon its determination.  Pursuant to the terms of the Offering, the Underwriter will deliver (or cause the other placement agents to deliver) to the Escrow Agent each subscription payment (a "Subscription Payment") received by the Company, the Underwriter and/or the other placement agents from subscribers. The Subscription Payments of such subscribers will be collectively held in one escrow account by the Escrow Agent on the terms and conditions hereinafter set forth.  The Underwriter will maintain all subscriber records and at least bi-weekly supply the Escrow Agent and the Company with a list showing each new subscriber not on any previous list with the subscriber's name, address and amount of Subscription Payment.  Each Subscription Payment received by the Underwriter from a subscriber shall be forwarded to the Escrow Agent along with a copy of the subscription

agreement signed by the subscriber, in the form of Annex A hereto (the "Subscription Agreement"), setting forth the name, address, social security number and telephone number of such subscriber, the number of Shares being purchased and the purchase price being paid for same.  If the Subscription Payment is in the form of a check, it shall be enclosed with the Subscription Agreement.  If the Subscription Payment is to be made by wire transfer, the Subscription Agreement shall also state the name, address and telephone number of the financial institution that will be wiring such Subscription Payment.

 

Each Subscription Payment received by the Escrow Agent from the Underwriter will be deposited and held in accordance with Section 6(a) below.  Such account will be held in the name of Zion Oil & Gas, Inc. Escrow Account (the "Escrow").  All monies in the Escrow shall be called, in the aggregate, the "Escrow Fund."  It is understood that all checks received by Escrow Agent are subject to clearance time and the funds represented thereby cannot be drawn upon or invested until such time as the same constitute good and collected funds.  It is additionally understood that should any checks be returned to the Escrow Agent as uncollectible, or returned because of insufficient funds, the Escrow Agent is authorized and instructed to charge expenses incurred by the Escrow Agent on such uncollected checks to the Escrow.  The Escrow Agent shall redeposit such check(s) for collection only upon the verbal instruction of the Underwriter; however, in no instance shall the check(s) be presented for collection more than two (2) times.  Should the check(s) be uncollectible after the second presentation, the Escrow Agent, shall promptly notify the Company and return the check(s) to the Company (or the placement agent who delivered it to the Escrow Agent).

2.  Acceptance or Rejection of Subscription Payment.  The Company hereby certifies that the Subscription Agreement provides that the purchase of any Shares is subject to the approval of the Company.  The Company agrees to notify the Escrow Agent and the Underwriter in writing or telephonically with written confirmation as to which Subscriptions are being accepted and which rejected.  Subscription Payments for rejected subscriptions shall be promptly refunded to the respective subscribers in accordance with the provisions of SEC Rule 10b-9 at the close of the Escrow pursuant to the procedure described in Paragraph 4 hereof, as applicable, or as otherwise directed in writing by the Company.  Interest on rejected subscriptions shall be paid to the subscribers, pro rata.

3.  Release of Escrow Fund on Closing.  If on a Closing Date (as defined in the Prospectus) the Escrow Agent (a) holds Subscription Payments, representing subscriptions as to which the Company has notified the Escrow Agent, pursuant to paragraph 2 hereof, that the Company has accepted, and (b) has received from the Company and the Underwriter a certificate stating that all conditions to such Closing have been met (i.e. specifically, in the case of the Initial Closing, that the Minimum Subscription Amount has been accepted), then the Escrow Agent is authorized and instructed to make the following payments: (i) all principal amounts, and accumulated interest thereon, held by the Escrow Agent in the Escrow representing subscriptions as to which the Company and the Underwriter have notified the Escrow Agent, pursuant to Paragraph 2 hereof, that the Company has accepted, shall be paid to the Company and the Underwriter in the proportions designated in the certificate; (ii) all principal amounts held by the Escrow Agent in the Escrow, representing subscriptions as to which the Company has notified the Escrow Agent, pursuant to paragraph 2 hereof, that the Company has rejected, shall be paid to the rejected subscribers pro rata.  All payments to be made by the Escrow Agent to a subscriber shall be forwarded to the last known address of the subscriber, as communicated in writing to the Escrow

Agent by the Underwriter, mailed by first class mail. All payments to be made by the Escrow Agent to the Company shall be forwarded to the Company at 6510 Abrams Road, Suite 300, Dallas, Texas 75231, or transmitted by wire transfer to such account as the Company shall direct.  All payments to be made by the Escrow Agent to the Underwriter shall be transmitted by wire transfer to such account as the Underwriter shall direct.  Upon release of any funds pursuant to this Paragraph 3, the Escrow shall be closed as to the funds released; provided, however, that this Agreement shall remain in effect for further Subscription Payments received by the Escrow Agent from subscribers which shall be placed in Escrow and held by the Escrow Agent in accordance with the terms of this Agreement.

4.  Other Refunds.  If the Escrow Agent has received from the Company and the Underwriter a certificate stating that the Offering is being terminated without the Minimum Subscription Amount having been received, then the Escrow Agent is authorized and instructed to make the following payments: (i) all principal amounts held by the Escrow Agent in the Escrow shall be paid to the subscribers of the Company; (ii) all earnings, less the expenses incurred by the Escrow Agent for uncollected checks, if any, shall be paid to the subscribers pro rata.  All payments to be made by the Escrow Agent to a subscriber, as communicated in writing to the Escrow Agent by the Company, will be mailed by first class mail.  All payments to be made by the Escrow Agent to the Company shall be forwarded to the Company at 6510 Abrams Road, Suite 300, Dallas, TX 75231 or transmitted by wire transfer to such account as the Company may direct.  Upon release of the funds pursuant to this Paragraph 4, the Escrow Agent's duties as Escrow Agent will cease and the Escrow shall be closed.

5.  Fees.  The Company hereby agrees that the Escrow Agent shall be entitled to an acceptance fee of  $1,000, and an annual administration fee of $4,000 plus all out of pocket expenses (approved by the Company) incurred by the Escrow Agent (the "Escrow Fee"). The acceptance fee is due and payable by upon execution of the Escrow Agreement. The first year's annual administration fee is due and payable upon execution of the Escrow Agreement.    The Escrow Agent agrees that in the event that a subsidiary company to the Company is formed to facilitate investment in the Company, the Escrow Fee shall include services to the subsidiary Company which are the same as the services set forth herein to the Company and the Escrow Fee shall be prorated between the two companies

6. Rights, Liabilities and Indemnification of the Escrow Agent.

(a) The Escrow Fund shall be invested by the Escrow Agent in accordance with the signed, written instructions of chairman, the President, any executive vice-president or the Vice President of Finance of the Company (the "Authorized Officers"), which instructions shall comply with the investments permitted under SEC Rule 15c2-4 and SEC staff interpretations thereunder.  In the absence of written instructions from the above-named party, the Escrow Agent shall invest the Escrow Fund only in investments permitted under SEC Rule 15c2-4 and SEC staff interpretations thereunder.  

	In investing the Escrow Fund, the Escrow Agent shall rely upon the written instructions of an Authorized Officer and the Escrow Agent shall be and hereby is relieved of all liability with respect to making, holding, redeeming or selling such investments in accordance with such instructions.  In the absence of the written investment instructions contemplated herein, for any reason whatsoever, the Escrow Agent shall be and hereby is relieved of all liability with respect to making, holding, redeeming or selling investments made in accordance with the preceding paragraph which prescribes the permissible investment vehicles for the Escrow Fund absent written instructions from an Authorized Officer.

	In accordance with SEC Rule 15c2-4 and SEC Staff interpretations, the Escrow Agent may invest the Escrow Fund in (1) bank accounts, (2) bank money-market accounts, (3) short-term certificates of deposit issued by a bank, and/or (4) short-term securities issued or guaranteed by the U.S. Government. 

	Escrow Agent agrees not to invest in an otherwise permissible investment under SEC Rule 15c2-4 if that investment's maturity date extends beyond the anticipated Closing Date, unless the investments can readily be disposed of for cash by the Closing Date without any dissipation of the Escrow Fund.

	Escrow Agent is and shall be under no duty to enforce the obligation of the Company to furnish written investment instructions.

(b) The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of any agreement between the Company and the Underwriter or its placement agents.

(c) The parties hereto represent to the Escrow Agent that they are authorized to enter into the Escrow Agreement by their duly authorized representatives and that the Escrow Agent is entitled to rely on this representation without the need to confirm the authority of the representatives.

(d) The duties and obligations of the Escrow Agent shall be limited to and determined solely by the express provisions of this Escrow Agreement and no implied duties or obligations shall be read into this Escrow Agreement against the Escrow Agent.

(e) The Escrow Agent is not bound by and is under no duty to inquire into the terms or validity of any other agreements or documents, including any agreements or documents which may be related to, referred to in or deposited with the Escrow Agent in connection with this Escrow Agreement.

(f) The Escrow Agent shall be entitled to rely upon and shall be protected in acting in reliance upon any instruction, notice, information, certificate, instrument or other document which is submitted to it in connection with its duties under this Escrow Agreement and which the Escrow Agent in good faith believes to have been signed or presented by the proper party or parties.  The Escrow Agent shall have no liability with respect to the form, execution, validity or authenticity thereof.

 

(g) The Escrow Agent shall not be liable for any act which the Escrow Agent may do or omit to do hereunder, or for any mistake of fact or law, or for any error of judgment, or for the misconduct of any employee, agent or attorney appointed by it, while acting in good faith, unless caused by or arising from its own gross negligence or willful misconduct.

(h) The Escrow Agent shall be entitled to consult with counsel of its own selection and the opinion of such counsel shall be full and complete authorization and protection to the Escrow

Agent in respect of any action taken or omitted by the Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

(i) The Escrow Agent shall have the right at any time to resign for cause and be discharged of its duties as Escrow Agent hereunder by giving written notice of its resignation to the other parties hereto at least sixty days prior to the date specified for such resignation to take effect. Such "cause" permitting the Escrow Agent to resign shall occur upon (i) the non-payment of any fees due from the Company hereunder for thirty (30) days after written notification of such non-payment from Escrow Agent; and (ii) the Company's receipt of a final, non-appealable cease and desist order from the SEC terminating the purchase and sale of the Shares in the public market place.  In addition to the forgoing, the Company shall have the right to terminate this Agreement for any reason or for no reason upon thirty (30) days written notice to the Escrow Agent.  All obligations of the Escrow Agent hereunder shall cease and terminate on the effective date of its resignation and its sole responsibility thereafter shall be to hold the Escrow Fund (including accrued interest thereon),  for a period of thirty days following the effective date of resignation.

(j) If a successor escrow agent shall have been appointed and written notice thereof shall have been given to the resigning Escrow Agent by parties hereto and the successor escrow agent, then the resigning Escrow Agent shall deliver the Escrow Fund (including accrued interest thereon), to the successor escrow agent.

(k) If a successor escrow agent shall not have been appointed, for any reason whatsoever, the resigning Escrow Agent shall deliver the Escrow Fund (including accrued interest thereon). to a court of competent jurisdiction and give written notice of the same to the parties hereto. The resigning Escrow Agent shall be entitled to be reimbursed by the Company for any reasonable expenses incurred in connection with its resignation and transfer of the Escrow Fund, pursuant to and in accordance with the provisions of this section.

(l) The Company and the Underwriter agree to indemnify and hold the Escrow Agent harmless from and against any and all liabilities, causes of action, claims, demands, judgments, damages, costs and expenses (including reasonable attorneys fees and expenses) that may arise out of or in connection with the Escrow Agent's good faith acceptance of or performance of its duties and obligations under this Escrow Agreement.

(m) In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Escrow Fund which, in its sole discretion, are in conflict either with other instructions received by it or with any provision of this Agreement, the Escrow Agent shall have the absolute right to suspend all further performance under this Escrow Agreement (except for the safekeeping of the Escrow Fund) until the resolution of such uncertainty or conflicting instructions to the Escrow Agent's sole satisfaction by final judgment of a court of competent jurisdiction, joint written instructions from all of the other parties hereto, or otherwise.

(n) In the event that any controversy arises between one or more of the parties hereto or any other party with respect to this Escrow Agreement or the Escrow Fund, the Escrow Agent shall not be required to determine the proper disposition of such controversy or the proper disposition of the Escrow Fund and shall have the absolute right, in its sole discretion, to deposit the Escrow Fund with the Clerk of a court of competent jurisdiction, file a suit in interpleader and obtain an

order from the court requiring all parties involved to litigate in such court their respective claims arising out of or in connection with the Escrow Fund.  Upon the deposit by the Escrow Agent of the Escrow Fund with the Clerk of a court of competent jurisdiction in accordance with this provision, the Escrow Agent shall be relieved of all further obligations and released from all liability hereunder.  

(o) Neither this Escrow Agreement, nor any other agreement between or among the Company, the Underwriter and the Escrow Agent shall be deemed to create a joint venture between or among the Escrow Agent, the Underwriter and the Company.  The Escrow Agent shall not be considered the alter ego of the Company or the Underwriter by virtue of this Agreement, or any other agreement.

7.  Modification, Amendment, Rescission.  No rescission, modification, amendment, supplement or change of this Escrow Agreement shall be valid or in effect unless notice thereof in writing is signed by all three parties hereto.

8.  Successors and Assigns.  The provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors or assigns.

9.  Copies.  This Escrow 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.

10.  Notices.  All notices, instructions and other communications under this Escrow Agreement shall be in writing except as otherwise specified herein and shall be deemed duly given if sent by (i) confirmed facsimile transmission or (ii) certified or registered mail, postage prepaid, return receipt requested and addressed as follows:

(a) If to the Escrow Agent:

	 	
Commerce Bank/Delaware, National Association

	 	
Attn: Corporate Trust Services

	 	
1701 Route 70 East

	 	
Cherry Hill, NJ 08034

	 	
Phone Number (856) 751-2737

	 	
Fax Number: (856) 470-6186

(b) If to the Company:

	 	
Zion Oil & Gas, Inc.

	 	
Attn:  Vice-President of Finance

	 	
6510 Abrams Road, Suite 300

	 	
Dallas, TX 75231

	 	
Phone Number 214-221-4610  

	 	
Fax Number: 214-221-6510

(c) If to the Underwriter:

	 	
Network 1 Financial Securities, Inc

	 	
Attn:  Michael Zarraga

	 	
Building 2 Penthouse

	 	
2 Bridge Street

	 	
Red Bank, NJ  07701

	 	
Phone Number: 800-886-7007

	 	
Fax Number: 732-758-6671

11.Applicable Law.  This Escrow Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on the day and year first above written.

 

ZION OIL & GAS, INC. (the "Company")                                                      

By:  /s/ E. A. Soltero                                                 

   

Title:  President                                              

COMMERCE BANK/DELAWARE, National Association (the "Escrow Agent")

By Authorized Officer: /s/ Arlene M. Murphy                                             

     

Title:  Corporate Trust Officer

 

NETWORK 1 FINANCIAL SECURITIES, INC. (the "Underwriter")

By Authorized Officer: /s/ William Hunt                                              

     

Title: President

ANNEX A 

Zion Oil & Gas, Inc.

SUBSCRIPTION AGREEMENT

 

The Investor named below, by payment of a wire transfer or check payable to ZION OIL & GAS, INC. - ESCROW ACCOUNT, hereby subscribes for shares of common stock, $.01 par value ("the Shares") indicated below (minimum purchase of 100 shares at a purchase price of $5.00 per Share) of Zion Oil & Gas, Inc. Shares must be purchased in increments of $500. By such payment, the named Investor acknowledges receipt of the Prospectus and any amendment, the terms of which govern the investment in the Shares. 

 

A.  INVESTMENT:

(1) No. of Shares purchased _________.  Dollar Amount: $___________ 

(2) [  ]Initial Purchase; or[  ]Additional Purchase

(3) [  ]Check Payment Enclosed:  Number:_________ Date:___/___/____; or

(4) [  ]Wire Transfer:  Sending Bank:______________________Wire #:_________ Date:___/___/____

Address_____________________________________Phone #_______________

 

B.  REGISTRATION: 

(1)  Registered Owner:[  ]Mr. [  ]Mrs.[  ]Ms.  ]Dr. [  ]Other _______________________________

 

Name:_______________________________________________________________________________

 

(2)  Co-owner: [  ]Mr. [  ]Mrs.[  ]Ms.[  ]Dr. [  ]Other _____________________________________

 

Name:_______________________________________________________________________________

 

(3)  Mailing Address: __________________________________________________________________

 

(4)  Residence Address (if different from above):_____________________________________________ 

 

(5)  Telephone#:(Home)(_____) _____ - ________ (Office) (_____) _____ - ________________

 

(6) Email Address:_____________________________________________________________________

 

(7)  Birth Date:______ /______ /____(8)Birth Date Co-Owner_____/_____/________

 

(9)  Please indicate Citizenship Status: [  ]U.S. Citizen[  ]Other_________________________

 

(10)Social Security or (National Identity) Number:___________________________________________

 

(11) Co-Owner:_______________________________________________________________________

 

Corporate or Custodial Taxpayer ID#: __________________________________________________

 

C.  OWNERSHIP:[  ]Individual Ownership  [  ]IRA or Keogh  [  ]Joint Tenants with Rights of Survivorship  [  ]Trust/Date of Trust Established Pension/Trust  ___ / ___ / ___  (S.E.P.)

[  ]Tenants in Common   [  ]Tenants by the Entirety  [  ]Corporate Ownership  [  ]Partnership

[  ]Other _____________________________________________________________________________ 

Zion Oil & Gas, Inc.-Subscription Agreement, page 2

D.  SIGNATURES: By signing below, I/we represent that I/we have relied on the information set forth in the Prospectus, as and if amended, and on no other statement whatever, whether written or oral. 

 

Signatures - Registered Owner: ___________________Co-Owner: _____________________________

 

	Print Names of Custodian or Trustee:

 

_____________________________________________________________  Date:__________________ 

 

Authorized Signature: ________________________Witness Signature:  __________________________

 

F.  RETURN OF PAYMENT SHOULD BE SENT TO (IF DIFFERENT FROM REGISTERED OWNER):

Name: _________________________________c/o: __________________________________________

 

Address: _____________________________________________________________________________

Account #___________________________Phone: (_____) ______ - _____________

 

G.  BENEFICIAL OWNER(S): All reports and financial statements will normally be sent to the registered owner at the address in Section B. If reports and financial statements are to be sent to the Beneficial Owner of an IRA or Keogh, insert name of the Beneficial Owner. 

 

Name of Beneficial Owner Only: _______________________________Phone: (___)___- ___________

 

Address: _____________________________________________________________________________

 

H.   BROKER-DEALER/REGISTERED REPRESENTATIVE DATA (broker-dealer use only): 

 

Broker-Dealer NASD Firm Name: ________________________Telephone Number: (___)___- _______

 

Main Office Address: __________________________________________________________________

 

Authorized Signature: ______________________________________________Date: ______________

 

Print or Type Name of Registered Representative:____________________________________________

 

Signature: _________________________________________________Phone: (__)______- _________

 

Branch Office Address: _________________________________________________________________

SEND TO:Network 1 Financial Securities, Inc.ACCEPTED:

Attn:  Mr. Mike Zarraga, Vice President        ZION OIL & GAS, INC.

2 Bridge Avenue, Penthouse Suite

Red Bank, NJ  07701        By:_______________________

Phone (800) 886-7007       Fax (732) 758-6671Title:Date:[Exhibit 10.1 - Contract, dated January 29, 2004, between Qiang Long Real Estate
Development Co. Ltd. and the Company]

                                    Contract

Party A: Minghua Group International Holdings Ltd.
Address: Guangdong Bian Fang Building, 10th Floor
Fujing Road, Futian District, Shenzhen, 518033,
People's Republic of China
Chairman: Li Chuquan

Party B:   Beijing Qiang Long Real Estate Development Co. Ltd.
Address:   95 West Road, Badaling Industrial Development Zone,
           Yanqing County, Beijing City
Chairman:  Li Changde

In view of the following background:

1. Party B is a company  registered  in Beijing,  China,  with  strong  economic
force,  thinking  environmental  protection  vehicle has good  prospect,  and is
dedicated to the undertaking of the environmental protection vehicle.

2. Party A is a public reporting  company in USA, whose securities are quoted on
the Over-the-Counter Bulletin Board (OTCBB: MGHA.OB).

Article 1 Investment Terms

1. Party B hereby agrees that it shall pay USD$29,400,000 to Party A.

2. Party A hereby  agrees that it shall  issue,  in the  aggregate,  140 million
shares of Party A's common  stock to Party B upon receipt of payment in full for
such shares.

3. The price per share equals USD$0.21.

4. The investment shall be effected in two installments:

      (a) Party B shall pay Party A  USD$12,600,000  on or before April 15, 2004
and within  sixty days of receiving  such funds,  Party A shall issue 60 million
shares of Party A's common stock to Party B; and

      (b)  Party B shall  pay to  Party A  USD$16,800,000  within  fifteen  days
following a shareholders' meeting of Party A at which the shareholders will vote
upon an amendment to Party A's certificate of incorporation  that would increase
the number of Party A's  authorized  share capital such that Party A may satisfy
its obligations hereunder.

5. Within 20 days after this  contract is signed,  Party B will pay  USD$602,410
(RMB5  million) to Party A as a performance  bond,  which will be applied to the
first  installment due hereunder and which will be forefeited by Party B if such
installment is not paid by Party B.

Article 2: Applicable law and dispute settlement

This contract will be governed and construed in accordance  with the laws of the
State of New York,  without  giving effect to the  conflicts of laws  principles
thereof.  Each party hereto hereby  consents to the  jurisdiction of the federal
and state courts sitting within the State of New York.

<PAGE>

Article 3: Contract Effectiveness

This contract will become effective after meeting the following conditions:

1. Both parties sign and stamp;

2. The boards of directors of both parties resolve to approve this contract;

3. After Party B pays RMB5 million as the down payment.

Article 4: Miscellaneous

1. This contract is in six copies, with three copies for each party;

Article 5: Representations and Warranties of Party B

Party B hereby represents and warrants to Party A as follows:

      1.    Access to  Information.  Party B, in making the decision to purchase
            the Shares, has relied upon its independent  investigations  made by
            it and/or its  representatives,  if any. Except as set forth in this
            contract,  no  representations,  assurances or warranties  have been
            made  to  Party  B or  its  advisers,  by  Party  A or by any of its
            respective officers,  directors,  agents,  employees, or affiliates,
            nor anyone else on their behalf, concerning, among other things, the
            future profitability of Party A or Party B's investment in it. Party
            B and/or its representatives  during the course of this transaction,
            and prior to the purchase of any Shares,  has had the opportunity to
            ask questions of and receive  answers from the management of Party A
            concerning  the  business of Party A and to receive  any  additional
            information,  documents, records and books relative to the business,
            assets,  financial condition,  results of operations and liabilities
            (contingent or otherwise) of Party A. Party B has obtained copies of
            the  reports  filed  by  Party A with the  Securities  and  Exchange
            Commission  (the  "SEC")  since the filing of Party A's last  annual
            report on Form 10-KSB (the "SEC Filings"),  including Party A's most
            recently filed  quarterly and current reports filed with the SEC and
            has carefully  reviewed all of the information  contained in the SEC
            Filings,  including  the risk factors  contained in such reports and
            fully understands all of the disclosure  contained therein.  Party B
            recognizes that Party A has limited  financial or operating  history
            and that the Shares as an investment involve significant risks.

      2.    Sophistication and Knowledge. Party B and/or its representatives has
            such knowledge and experience in financial and business matters that
            it can represent  itself and is capable of evaluating the merits and
            risks of the purchase of the Shares. Party B is not relying on Party
            A with respect to the tax and other  economic  considerations  of an
            investment  in the Shares,  and Party B has relied on the advice of,
            or has  consulted  with,  only  Party  B's own  advisor(s).  Party B
            represents  that it has  not  been  organized  for  the  purpose  of
            acquiring the Shares.

      3.    Lack of  Liquidity.  Party B  acknowledges  that the purchase of the
            Shares involves a high degree of risk and further  acknowledges that
            it can  bear  the  economic  risk  of the  purchase  of the  Shares,
            including the total loss of its investment. Party B acknowledges and
            understands  that the  Shares  may not be sold to a U.S.  Person (as
            hereinafter  defined) or into the United  States for a period of one
            (1) year from the date of  purchase  and that Party B has no present
            need for liquidity in connection with its purchase of the Shares.

      4.    No Public Solicitation. Party B is not subscribing for the Shares as
            a result of or subsequent to any advertisement,  article,  notice or
            other communication published in any newspaper,  magazine or similar
            media or broadcast  over  television  or radio,  or presented at any
            seminar or  meeting,  or any  solicitation  of a  subscription  by a
            person  not  previously   known  to  Party  B  in  connection   with
            investments in securities generally. Neither Party A nor Party B has
            engaged in any `Directed  Selling Efforts in the U.S.' as defined in
            Regulation S promulgated  by the SEC pursuant to The  Securities Act
            of 1933 (the "Securities Act").

                                       2
<PAGE>

      5.    Authority.  Party B has full  right  and  power  to  enter  into and
            perform pursuant to this contract and make an investment in Party A,
            and this contract  constitutes  Party B's valid and legally  binding
            obligation,  enforceable  in accordance  with its terms.  Party B is
            authorized  and  otherwise  duly  qualified to purchase and hold the
            Shares and to enter into this contract.

      6.    Brokers or Finders.  No person has or will have,  as a result of the
            transactions  contemplated by this contract,  any right, interest or
            valid claim against or upon Party A for any commission, fee or other
            compensation as a finder or broker because of any act or omission by
            such Party B or its respective agents.

      7.    Compliance  with Local  Laws.  Any  resale of the Shares  during the
            'distribution  compliance  period'  as  defined  in Rule  902(f)  to
            Regulation S shall only be made in compliance  with  exemptions from
            registration afforded by Regulation S. Further, any such sale of the
            Shares in any jurisdiction outside of the United States will be made
            in compliance with the securities laws of such jurisdiction. Party B
            will not offer to sell or sell the Shares in any jurisdiction unless
            Party B obtains all required consents, if any.

      8.    Regulation S Exemption. Party B understands, acknowledges and agrees
            that the  offering  and sale of the  Shares  to Party B has not been
            registered  under the Securities  Act or under any state  securities
            laws or  regulations  and that the Shares are being offered and sold
            to it in reliance on an exemption from the registration requirements
            of United States federal and state  securities laws under Regulation
            S promulgated  under the  Securities Act and that Party A is relying
            upon the  truth and  accuracy  of the  representations,  warranties,
            agreements,  acknowledgments and understandings of Party B set forth
            herein in order to determine the  applicability  of such  exemptions
            and the  suitability  of  Party B to  acquire  the  Shares.  In this
            regard, Party B represents, warrants and agrees that:

            a.    Party B is not a U.S.  Person (as defined below) and is not an
                  affiliate (as defined in Rule 501(b) under the Securities Act)
                  of Party A. A U.S. Person means any one of the following:

                  (1)   any  natural  person  resident  in the United  States of
                        America;

                  (2)   any partnership or corporation organized or incorporated
                        under the laws of the United States of America;

                  (3)   any estate of which any executor or  administrator  is a
                        U.S. person;

                  (4)   any trust of which any trustee is a U.S. person;

                  (5)   any agency or branch of a foreign  entity located in the
                        United States of America;

                  (6)   any non-discretionary  account or similar account (other
                        than an  estate  or  trust)  held by a  dealer  or other
                        fiduciary for the benefit or account of a U.S. person;

                  (7)   any discretionary account or similar account (other than
                        an estate or trust) held by a dealer or other  fiduciary
                        organized,  incorporated or (if an individual)  resident
                        in the United States of America; and

                  (8)   any partnership or corporation if:

                        (a)   organized  or  incorporated  under the laws of any
                              foreign jurisdiction; and

                                       3
<PAGE>

                        (b)   formed  by  a  U.S.  person  principally  for  the
                              purpose of investing in securities  not registered
                              under the Securities  Act,  unless it is organized
                              or   incorporated,   and  owned,   by   accredited
                              investors  (as  defined in Rule  501(a)  under the
                              Securities  Act)  who  are  not  natural  persons,
                              estates or trusts.

                  b.    At the time of the  origination  of  contact  concerning
                        this contract and the date of the execution and delivery
                        of this  contract,  Party B was  outside  of the  United
                        States.

                  c.    Party B will not,  during the period  commencing  on the
                        date of  issuance  of the Shares and ending on the first
                        anniversary  of such date, or such shorter period as may
                        be  permitted  by  Regulation  S  or  other   applicable
                        securities law (the "Restricted  Period"),  offer, sell,
                        pledge or  otherwise  transfer  the Shares in the United
                        States,  or to a U.S.  Person for the account or for the
                        benefit of a U.S. Person,  or otherwise in a manner that
                        is not in compliance with Regulation S. At no time shall
                        Party B  offer  or  sell  the  Shares  unless  they  are
                        registered  under the  Securities Act or are exempt from
                        the registration  requirements of the Securities Act and
                        any  applicable  state  or  foreign  securities  laws or
                        regulations.

                  d.    Party B will, after expiration of the Restricted Period,
                        offer,  sell,  pledge or  otherwise  transfer the Shares
                        only pursuant to  registration  under the Securities Act
                        or an available  exemption  therein  and, in  accordance
                        with all applicable state and foreign securities laws.

                  e.    Party B has not in the United  States,  engaged  in, and
                        prior to the  expiration of the  Restricted  Period will
                        not directly or indirectly  engage in, any short selling
                        of or any hedging or similar transaction with respect to
                        the Shares, including without limitation,  any put, call
                        or other option  transaction,  option  writing or equity
                        swap.

                  f.    Neither  Party B nor or any person  acting on its behalf
                        has engaged,  nor will engage,  in any directed  selling
                        efforts to a U.S.  Person with respect to the Shares and
                        Party  B and  any  person  acting  on  its  behalf  have
                        complied   and   will   comply   with   the    "offering
                        restrictions"  requirements  of  Regulation  S under the
                        Securities Act.

                  g.    The transactions  contemplated by this contract have not
                        been  pre-arranged  with a buyer  located  in the United
                        States or with a U.S. Person, and are not part of a plan
                        or scheme to evade the registration  requirements of the
                        Securities Act.

                  h.    Neither  Party B nor any person acting on its behalf has
                        undertaken  or carried out any  activity for the purpose
                        of, or that could  reasonably  be  expected  to have the
                        effect of, conditioning the market in the United States,
                        its territories or  possessions,  for any of the Shares.
                        Party B agrees  not to cause  any  advertisement  of the
                        Shares to be published in any newspaper or periodical or
                        posted in any public place and not to issue any circular
                        relating to the Shares,  except such advertisements that
                        include the  statements  required by  Regulation S under
                        the  Securities  Act,  and only  offshore and not in the
                        U.S. or its territories, and only in compliance with any
                        local applicable securities laws.

      9.    Legends.  Each  certificate  representing the shares of common stock
            included in the Shares and each warrant certificate representing the
            warrants  included in the Unit shall be endorsed  with the following
            legends,  in  addition  to any other  legend  required  to be placed
            thereon by applicable federal or state securities laws:

                                       4
<PAGE>

            a.    "THESE  SECURITIES  ARE BEING OFFERED TO INVESTORS WHO ARE NOT
                  U.S.  PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES
                  ACT OF 1933,  AS AMENDED ("THE  SECURITIES  ACT")) AND WITHOUT
                  REGISTRATION  WITH THE UNITED STATES  SECURITIES  AND EXCHANGE
                  COMMISSION   UNDER  THE   SECURITIES   ACT  IN  RELIANCE  UPON
                  REGULATION S PROMULGATED UNDER THE SECURITIES ACT."

            b.    "TRANSFER  OF  THESE  SECURITIES  IS  PROHIBITED,   EXCEPT  IN
                  ACCORDANCE  WITH THE  PROVISIONS  OF REGULATION S, PURSUANT TO
                  REGISTRATION   UNDER  THE  SECURITIES   ACT,  OR  PURSUANT  TO
                  AVAILABLE  EXEMPTION FROM REGISTRATION.  HEDGING  TRANSACTIONS
                  MAY NOT BE CONDUCTED  UNLESS IN COMPLIANCE WITH THE SECURITIES
                  ACT."

      10.   Stop Transfer Orders.  Party B consents to Party A making a notation
            on its records or giving instructions to any transfer agent of Party
            A in order to implement the  restrictions  on transfer of the Shares
            set forth in this agreement and as required by Regulation S.

      11.   PATRIOT  Act.  Party  B is  not,  nor  is it  acting  as  an  agent,
            representative,  intermediary or nominee for, a person identified on
            the list of  blocked  persons  maintained  by the  Office of Foreign
            Assets Control,  U.S. Department of Treasury.  In addition,  Party B
            has complied with all applicable U.S. laws, regulations, directives,
            and executive  orders relating to anti-money  laundering , including
            but  not  limited  to  the  following  laws:  (1)  the  Uniting  and
            Strengthening  America by Providing  Appropriate  Tools  Required to
            Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and
            (2)  Executive  Order  13224  (Blocking   Property  and  Prohibiting
            Transactions with Persons Who Commit, Threaten to Commit, or Support
            Terrorism)  of  September  23,  2001.  Party B shall  ensure that it
            obtains  a   representation   similar  to  the  foregoing  from  any
            transferee  of the Shares of Party A's  Common  Stock  purchased  by
            Party B pursuant to this contract.

                                       5
<PAGE>

                  Further,  this transaction and any resale of Shares by Party B
                  to  transferees  shall not violate the  statutes  mentioned in
                  this representation.

         12.      Transfers  Must  Comply  with  Regulation  S.  Notwithstanding
                  anything contained herein to the contrary,  Party A may refuse
                  to  register  any  transfer  of the Shares of common  stock of
                  Party A that are not made in  accordance  with  Regulation  S,
                  pursuant  to the  registration  under  the  Securities  Act or
                  pursuant to an available exemption from registration.

Article 6: Indemnity

Party  B  understands  and   acknowledges   that  Party  A  is  relying  on  the
representations  made by Party B herein,  and, thus,  hereby agrees to indemnify
Party A, and its  respective  officers and  directors,  agents,  attorneys,  and
employees,  and agrees to hold them  harmless from and against any and all loss,
damage, liability, or expense,  including reasonable attorney's fees, that it or
any of them may suffer, sustain, or incur by reason of or in connection with any
misrepresentation  or breach of warranty or agreement made by Party A under this
contract.

Party A: Minghua Group International Holdings Limited

By: /s/
   --------------------------------
   Name:
   Title:

Party B: Beijing Qiang Long Real Estate Development Co., Ltd.

By: /s/
   --------------------------------
   Name:
   Title:

This contract is signed January 29, 2004 in Shenzhen.

                                       6

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