UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): December 16 , 2009
China
New Energy Group Company
(Exact
name of Registrant as specified in its charter)
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Delaware
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001-32691
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65-0972647
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(State
or other jurisdiction
of
Incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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20/F, Center Plaza, No.188 Jie Fang
Road
He
Ping District, Tianjin, 300042
People's
Republic of China
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (011)-86-22-5829 9778
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities
Act(17CFR230.425)
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o
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Soliciting
material pursuant to Rule14a-12 under the Exchange
Act(17CFR240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under theExchange Act
(17CFR240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under theExchange Act
(17CFR240.13e-4(c))
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Item
1.01 Entry Into a Material
Definitive Agreement.
Lean
Zhongran
On
December 16, 2009, Willsky Development, Ltd., a British Virgin Islands company
and our wholly-owned subsidiary (“
Willsky
” or the
“
Transferee
”),
entered into an Equity Interest Purchase Agreement (the “
Agreement
”), to
acquire all of the outstanding equity interest of Fuzhou City Lean Zhongran Gas
Inc. a PRC company (“
Lean Zhongran
”), from
Flying Dragon Resource Development Limited (the “
Transferor
”).
The
effectiveness of the Agreement was subject to the approval of our Board of
Directors which approval was granted on December 2, 2009.
Under the
Agreement, Willsky has agreed to purchase 100% of the outstanding equity
interest of Lean Zhongran for a total purchase price of RMB 4,800,000
(approximately $702,782 US Dollars) which purchase price is based on an
appraised value of Lean Zhongran as of September 30, 2009. The
purchase price will be adjusted to reflect the appraised value of the assets as
of the closing date. The closing of the transaction is subject to
board approval.
The
following conditions are required to be satisfied prior to the closing of the
transaction:
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1)
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All
necessary permits, consents, licenses, approvals or authorizations,
relating to the legality, validity or enforceability of the
sale of the transferred equity shall have been issued by the relevant
government authorities, departments or other
organizations;
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2)
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All
necessary processes, formalities and procedures relating to the
transfer of the transferred equity shall have been completed or
performed; and
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3)
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The
transfer of the equity shall not result in the loss by the Lean Zhongran
of the right to operate the urban gas
pipeline.
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The
purchase price is payable in three installments. The first installment of 28% of
the total purchase price is payable within 5 business days of the satisfaction
of the following conditions:
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1)
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receipt
of written confirmation for the relevant government authority that
following the transfer Lean Zhongran will continue to have the continuous
and uninterrupted right to operate the local urban gas pipeline project;
and
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2)
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the
proposed equity transfer shall have been approved by the board of
directors and shareholders of Lean Zhongran all other necessary procedure
required by law or its charter documents shall have been
obtained. This condition has been
satisfied.
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The
governmental confirmation referred to in 1 above has not yet been obtained as
the governmental authority is requiring the transferor to increase the
registered capital to $15 million prior to issuing the
confirmation.
The above
condition was required to be satisfied before December 20, 2009, otherwise
Willsky has the right to terminate the agreement and the transferor shall be
required to pay the Transferee RMB 500,000 Yuan as a penalty and indemnify the
transferor for any losses.
The
process of completing the equity transfer will not begin until three business
days after the delivery of the first installment. If payment of the
first installment is not made the agreement will be
terminated. Following receipt of the first payment Transferor must
complete the following conditions otherwise the obligation to pay the second
installment will terminate:
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1)
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complete
the necessary registration procedures relating to the equity transfer
before December 31, 2009 including any and all documents required by the
Committed of Foreign Trade and Economic Co-Operation and
AIC;
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2)
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obtain
the new business license;
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3)
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assist
Lean Zhongran to obtain all necessary approvals and permits for the
environmental assessment, plan, construction, safety evaluation and other
procedures;
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4)
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release
public statements in the local media (after consulting with and
obtaining prior approval Lean Zhongran) to announce that
neither the Transferor or Lean Zhongran is not subject to any
pending litigation or arbitration or event or circumstance that might
result in the freezing or seizure of possession or their assets
and that none of such events are
threatened;
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5)
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Lean
Zhongran shall not be subject to any outstanding guarantee or mortgages
provided for the benefit of any third
party;
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6)
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prior
to the completion of the transfer, all rights (including the accounts
receivable), liabilities (contingent or otherwise) and obligations
(including accounts payable) with respect to contracts entered into prior
to the transfer of the equity of Lean Zhongran shall be
transferred to and assumed by the Transferor and Transferee shall be
indemnified against any losses. Transferor shall provide the
lists of creditors' rights and obligations to the
Transferee;
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7)
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Transferor
and the Lean Zhongran are required to assist the Transferee to complete
the transfer of the assets;
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8)
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Transferor
shall deliver to the Transferee all company stamps, certificates,
licenses, government permits and documents and materials of engineering,
finance, human resources and business contracts relating to the operation
of the business of Lean Zhongran;
and
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9)
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The
transfer of the equity shall be complete; including delivery of
shareholder certificates.
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The
second installment consists of 52% of the total purchase price and is payable on
April 30, 2010, subject to prior completion of the following additional
conditions:
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1)
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All
procedures required for the first installment shall have been completed
without any interruption to the business and operations of Lean
Zhongran;
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2)
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Transferor
shall have assisted Lean Zhongran to obtain the approvals and permits for
the plan, construction, environmental assessment, safety evaluation and
other procedures for the gas
project;
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3)
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Lean
Zhongran shall have satisfied Transferee as to satisfactory construction
of the completed pipelines.
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4)
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Transferor
shall deliver the originals of the above documents or satisfaction of
above conditions.
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The above
conditions shall be satisfied or completed before April 30, 2010, otherwise the
Transferee is entitled to terminate this Agreement and the Transferor shall pay
the Transferee RMB 300,000 Yuan as penalty and indemnify the transferor for any
losses.
The
Transferor has agreed to assist Transferee to obtain all the approvals and
permits required for the planning, construction, environmental assessment,
safety evaluation and other procedures of the gas project of Lean Zhongran
before April 30, 2010. If the Transferor breaches this obligation,
Transferee is entitled to reduce the purchase price payable by Renminbi
100,000Yuan or to request Renminbi 100,000 Yuan as compensation for breach of
this agreement by the Transferor.
Transferor
has agreed to ensure that before the completion of the equity transfer in order
to maintain the continuity of the personnel of Lean Zhogran, the hiring new
staff, salary adjustments or other changes shall not occur subject to certain
permitted exceptions. Transferor has also agreed that new construction advances
shall not be made subject to certain permitted exceptions. Transferee is
entitled to deduct from the purchase price any losses for any breach these
obligations.
The
Agreement also contains representations and warranties by the Transferor
customary for transactions of this nature the breach of which give the
Transferee the right to deduct RMB 500,000 from the purchase
price. Further, the Transferee is entitled to be fully
indemnified in the event of fraud or a material omission by Transferor. A breach
of representation or warranty by either party gives the non breaching party the
right to terminate the contract and sue for compensation.
The third
and final installment is 20% of the purchase price. In order to
ensure the smooth transition of the business and operations of Lean Zhongran the
Transferee will keep the third installment as a deposit, which will be paid to
the Transferor on August 31, 2010 on condition that all of the pre-transfer
liabilities were assumed by the Transferor and the target company shall be free
of all pre transfer liabilities.
Lean
Zhongran is primarily engaged in the business of the supply of natural gas and
construction and development of a gas pipeline network in urban
areas. It was incorporated on August 16, 2006 under PRC
law.
In August
2006, the company obtained an exclusive operating license from the local
government for the construction and development of a gas pipeline network and
gas supply in the county for 30 years.
Wuyaun
Zhongran
On
December 16, 2009, Willsky Development, Ltd., a British Virgin Islands company
and our wholly-owned subsidiary (“
Willsky
” or the
“
Transferee
”),
entered into an Equity Interest Purchase Agreement (the “
Agreement
”), to
acquire all of the outstanding equity interest of Wuyuan County
Zhongran Gas
Inc. a PRC company (“
Wuyaun Zhongran
”),
from Flying Dragon Investment Management Limited (the “
Transferor
”).
The
effectiveness of the Agreement was subject to the approval of the Board of
Directors of the Transferee which approval was granted on December 2,
2009.
Under the
Agreement, Wuyaun Zhongran agreed to purchase 100% of the outstanding equity
interest of Wuyaun Zhongran for a total purchase price of RMB 6,000,000
(approximately $877,477 US Dollars) which purchase price is based on an
appraised value of Wuyaun Zhongran as of September 30,
2009. The purchase price will be adjusted to reflect the appraised
value of the assets as of the closing date. The closing of the
transaction is subject to board approval.
The
following conditions are required to be satisfied prior to the closing of the
transaction:
|
|
1)
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All
necessary permits, consents, licenses, approvals or authorizations,
relating to the legality, validity or enforceability of the sale of the
transferred equity shall have been issued by the relevant government
authorities, departments or other
organizations;
|
|
|
2)
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All
the necessary processes, formalities and procedures relating to the
transfer of the transferred equity shall have been completed or performed;
and
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3)
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The
transfer of the equity shall not result in the loss by Wuyaun Zhongran of
the right to operate the urban gas
pipeline.
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The
purchase price is payable in three installments. The first installment of 27.5%
of the total purchase price is payable within 5 business days of the
satisfaction of the following conditions:
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|
1)
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receipt
of written confirmation for the relevant government authority that
following the transfer Wuyaun Zhongran will continue to have the
continuous and uninterrupted right to operate the local urban gas pipeline
project; and
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2)
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t
he
proposed equity transfer shall have been approved by the board of
directors and shareholders of Wuyaun Zhongran all other necessary
procedure required by law or its charter documents shall have been
obtained. This condition has been
satisfied.
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The
governmental confirmation referred to in 1 above conditions has been obtained
but is subject to the condition that it will be revoked in the event the gas
pipeline is not operational prior to July 2010.
The above
conditions were required to be satisfied before December 20, 2009, otherwise
Willsky is entitled to terminate the agreement and the transferor shall be
required to pay the Transferee RMB 500,000 Yuan as penalty and indemnify the
transferor for any losses.
The
process of completing the equity transfer will not begin until three business
days after the delivery of the first installment. If payment of the
first installment is not made the agreement will be
terminated. Following receipt of the first payment Transferor must
complete the following conditions otherwise the obligation to pay the second
installment will terminate:
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1)
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complete
the necessary registration procedures relating to the equity transfer
before December 31, 2009 and obtain the new business
license;
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2)
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assist
Wuyaun Zhongran to obtain the Land use right certificate for the land used
for the vaporizing station;
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3)
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assist
Wuyaun Zhongran to obtain all necessary approvals and permits for the
environmental assessment, plan, construction, safety evaluation and other
procedures;
|
|
|
4)
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release
public statements in the local media (after consulting with and
obtaining prior approval Wuyaun Zhongran) to announce that
neither the Transferor or Wuyaun Zhongran is not subject to any
pending litigation or arbitration or event or circumstance that might
result in the freezing or seizure of possession or their assets
and that none of such events are
threatened;
|
|
|
5)
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Wuyaun
Zhongran shall not be subject to any outstanding guarantee or mortgages
provided for the benefit of any third
party;
|
|
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6)
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prior
to the completion of the transfer, all rights, liabilities (contingent or
otherwise) and obligations (including accounts payable) with respect to
contracts entered into prior to the transfer of the equity of
Wuyaun Zhongran shall be transferred to and assumed by the Transferor and
Transferee shall be indemnified against any such
losses;
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7)
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Transferor
shall assist in handling the other alteration registration procedures
other than AIC alteration registration for the equity transfer, including
but not limited to alteration of tax registration, bank and other
procedure other relevant departments
request;
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8)
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Transferor
shall provide the lists of creditors' rights and obligations to the
Transferee;
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9)
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Transferor
and the Wuyaun Zhongran shall assist the Transferee to complete the
transfer of the assets;
|
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10)
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Transferor
shall deliver to the Transferee all company stamps, certificates,
licenses, government permits and documents and materials of engineering,
finance, human resources and business contracts relating to the operation
of the business of Wuyaun Zhongran;
and
|
|
|
11)
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The
transfer of the equity shall be complete; including delivery of
shareholder certificates.
|
The
second installment consists of 52.5% of the total purchase price and is payable
on April 30, 2010, subject to prior completion of the following additional
conditions:
|
|
1)
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All
procedures requested for the first installment are completed without any
interruption to the business and operations of Wuyaun
Zhongran;
|
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2)
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Transferor
shall have assisted Wuyaun Zhongran to obtain the approvals and permits
for
the
construction, environmental assessment, safety evaluation and other
procedures for the gas
project;
|
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3)
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Wuyaun
Zhongran shall have obtained the land use right
certificate;
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4)
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Transferor
shall deliver the originals of the above documents or satisfaction of
above conditions.
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The above
conditions shall be satisfied or completed before April 30, 2010, otherwise the
Transferee is entitled to terminate this Agreement and the Transferor shall pay
the Transferee RMB 300,000 Yuan as penalty and indemnify the transferor for any
losses.
The
Transferor has agreed to assist Transferee to obtain all the approvals and
permits required for the planning, construction, environmental assessment,
safety evaluation and other procedures of the gas project of Wuyaun Zhongran
before April 30, 2010. If the Transferor breaches this obligation,
Transferee is entitled to reduce the purchase price payable by Renminbi
100,000Yuan or to request Renminbi 100,000 Yuan as compensation for breach of
this agreement by the Transferor.
The
Transferor has agreed to assist the Target Company to obtain the Land Use Right
Certificate at the request of the Transferee on April 30, 2010. If the
Transferor fails to fulfill the foregoing obligations before the second
installment payment, then the Transferee is entitled to reduce the amount of
Renminbi 100,000 Yuan from the purchase price or to
request Renminbi 100,000 Yuan as compensation of breach of Agreement from the
Transferor.
Transferor
has agreed to assist Wuyaun Zhogran to pay the full amount of registered capital
or reduce the registered capital to HK Dollars 10 MM before April 30,
2010. If the Transferor fails to fulfill this obligation, Transferee
is entitled to reduce the purchase price payable by Renminbi 100,000 Yuan or to
request Renminbi 100,000 Yuan as compensation of breach of this agreement by the
Transferor.
Transferor
has agreed to ensure that before the completion of the equity transfer in order
to maintain the continuity of the personnel of Wuyaun Zhogran, the hiring of new
staff, salary adjustments or other changes shall not occur subject to certain
permitted exceptions. Transferor has also agreed that new construction advances
shall not be made subject to certain permitted exceptions. Transferee is
entitled to deduct from the purchase price any losses for any breach these
obligations.
The
Agreement also contains representations and warranties by the Transferor
customary for transactions of this nature the breach of which give the
Transferee the right to deduct RMB 500,000 from the purchase
price. Further, the Transferee is entitled to be fully
indemnified in the event of fraud or a material omission by Transferor. A breach
of representation or warranty by either party gives the non breaching party the
right to terminate the contract and sue for compensation.
The third
and final installment is 20% of the purchase price. In order to
ensure the smooth transition of the business and operations of Wuyaun Zhongran
the Transferee will keep the third installment as a deposit, which will be paid
to the Transferor on August 31, 2010 on condition that all of the pre-transfer
liabilities were assumed by the Transferor and the target company shall be free
of all pre transfer liabilities.
Wuyuan
Zhongran is primarily engaged in the business of the supply of natural gas
and the construction and development of a gas pipeline network in
urban areas. It is incorporated November 31, 2006 under PRC
laws.
In
December, 2006, the company obtained an exclusive operating license from the
local government for the construction and development of a gas pipeline network
and gas supply in the county for 30 years.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this current report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date:
December 22, 2009
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CHINA
NEW ENERGY GROUP COMPANY
(Registrant)
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By:
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/s/ Yangkan
Chong
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Yangkan
Chong
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Chief
Executive Officer
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