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): September 14,
2010
|
China
New Energy Group Company
|
|
(Exact
name of Registrant as specified in its
charter)
|
|
Delaware
|
|
001-32691
|
|
65-0972647
|
|
(State or other jurisdiction
of Incorporation)
|
|
(Commission File Number)
|
|
(IRS Employer
Identification No.)
|
18
/
F, Block B1,
TianJin Emperor
Place
No. 85 NanJing
Road
HePing
District, Tianjin, 300042
People's
Republic of China
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (011)-86-22-2321 0508
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:
|
o
|
Written communications pursuant
to Rule 425 under the Securities
Act(17CFR230.425)
|
|
o
|
Soliciting material pursuant to
Rule14a-12 under the Exchange
Act(17CFR240.14a-12)
|
|
o
|
Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act
(17CFR240.14d-2(b))
|
|
o
|
Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act
(17CFR240.13e-4(c))
|
Item
1.01
Entry Into a Material Definitive
Agreement.
(A)
Financing
Preferred
Stock Offering
Securities Purchase
Agreement
On
September 14, 2009, China New Energy Group Company (the “
Company
”) entered
into and consummated the sale of securities pursuant to a Series C and Series D
Convertible Preferred Stock Securities Purchase Agreement (the “
Securities Purchase
Agreement
”) with China Hand Fund I, LLC (“
China Hand
”),
providing for the sale to China Hand of (i) 18.73 shares of the Company’s Series
C Convertible Preferred Stock (“
Series C Preferred
Stock
”), and (ii) 4 shares of the Company’s Series D Convertible
Preferred Stock (“
Series D Preferred
Stock
”) for an aggregate purchase price of $15,000,000 (the “
Private Placement
”).
The proceeds of the Private Placement will be used to finance first installment
of the purchase price due for the acquisition of by a wholly owned subsidiary of
the Company of (i) a 70% equity interest in each of Beijing Century Dadi Gas
Engineering Co., Ltd.,
a PRC limited liability
company (“
Century
Dadi
”) and (ii) Zhoulu Dadi Gas Co. Ltd., a PRC limited liability company
(“
Zhoulu
Dadi
”).
Immediately
following the closing of the Private Placement, China Hand transferred its
rights to the Series C Preferred Stock and to 2 of shares of Series D Preferred
Stock to Vicis Capital Master Fund (“
Vicis
”).
Backstop
Agreement
In
connection with the closing of the Private Placement, the Company and China Hand
entered into a Backstop Agreement dated as of September 14, 2010 (the “
Backstop Agreement
”).
The Backstop Agreement provides that China Hand has committed to provide
additional financing of up to $20,100,000 to the extent that the Company is
unable to raise capital from third party investors. The proceeds of the
additional financing will be used to fund in part the payment of second and
third installments of the purchase price due in connection with the acquisition
of Century Dadi and Zhoulu Dadi.
Registration Rights
Agreement
Also in
connection with the closing of the Private Placement, the Company and China Hand
entered into a Registration Rights Agreement dated as of September 14, 2010 (the
“
Registration Rights
Agreement”
) under which the Company granted China Hand piggy-back
registration rights exercisable after December 31, 2010 with respect to the
shares of common stock issuable upon conversion of Series C Preferred Stock and
Series D Preferred Stock that may not be sold without registration in accordance
with Rule 144.
The
foregoing summary does not purport to be a complete statement of the parties’
rights and obligations under the Securities Purchase Agreement, Backstop
Agreement and Registration Rights Agreement, or the transactions contemplated
thereby or a complete explanation of the material terms thereof. The
foregoing summary is qualified in its entirety by reference to the Securities
Purchase Agreement, Backstop Agreement and Registration Rights Agreement
attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively.
Notes
Offering
On
September 14, 2009, the Company entered into and consummated the sale to certain
accredited investors pursuant to the Note Purchase Agreements (the “
Note Purchase
Agreements
”) of Convertible Notes due October 15, 2010 (the “
Notes
”) in the
aggregate principal amount of $3,000,000.
The Notes
pay no interest and are convertible into a total of 1.67 shares of Series C
Preferred Stock if paid before the maturity date. If the Notes are not paid at
maturity, they will convert automatically into a total of 37.5 shares of Series
C Preferred Stock. The number of shares of Series C Preferred Stock issuable
upon conversion of the Notes is subject to adjustment for stock splits and
similar events.
The
foregoing summary does not purport to be a complete statement of the parties’
rights and obligations under the Note Purchase Agreements and the Notes, or the
transactions contemplated thereby or a complete explanation of the material
terms thereof. The foregoing summary is qualified in its entirety by
reference to forms of the Note Purchase Agreements and the Notes attached hereto
as Exhibits 10.4, and 10.5, respectively.
(B)
Acquisitions
Century
Dadi Agreements
Equity
Transfer Agreement for 70% Interest in Century Dadi
On
September 14, 2010, the Company’s wholly-owned PRC subsidiary, China New Energy
Investment Co., Ltd (“
Buyer
”), entered into
an Equity Transfer Agreement (the “
Century Dadi Acquisition
Agreement
”) with Beijing Fengyin Xianghe Scientific Technology Co., Ltd.
(“
Seller
”), a
PRC company controlled by Mr. Tang Zhixiang (“
Mr. Tang
”), to
acquire a 70% equity interest in Beijing Century Dadi Gas Engineering Co., Ltd.,
a PRC company (“
Century Dadi
”) from
the Seller.
The
Century Dadi Acquisition Agreement replaces the agreement originally executed on
March 8, 2010 between China New Energy Group Company and Mr. Tang (which
agreement was terminated pursuant to a Supplementary Agreement of Equity
Transfer Agreement dated September 14, 2010).
Century
Dadi and its affiliated companies are primarily engaged in the business of the
supply of natural gas and construction and development of a gas pipeline network
in urban areas.
Seller
and Mr. Tang currently collectively own approximately 48% percent of the equity
of Century Dadi. Within 45 days following the payment of the first installment
into the mutually managed account, Seller is required to have acquired 100% of
the equity of Century Dadi.
Purchase
Price
The total
purchase price for the 70% equity interest in Century Dadi is 135,000,000 RMB
(approximately $20 million US dollars). The purchase price is payable
in three installments. Each payment is subject to satisfaction of
certain preconditions as described below.
The
parties are required to open a mutually managed account within 3 business days
of the execution of the Century Dadi Acquisition Agreement.
First
Installment
The first
installment of 60,000,000 RMB (approximately $8.89 million US dollars) of the
purchase price is required to be paid into the mutually managed account within 5
business days of the execution of the agreement (with an additional 5 day grace)
with interest accruing thereafter on the payment due at the rate of 0.1% per day
capped at 5,000,000.00 RMB.
The first
installment will be released from the mutually managed account after
satisfaction of the certain conditions, including those set forth below (which
preconditions are required to be satisfied within 45 days of the transfer by the
Buyer of the first installment payment to the mutually managed bank account
unless extended as set forth below):
|
|
1)
|
Seller shall have completed the
purchase of 100% of the equity of the Century Dadi and the registration of
the transfer shall have been
completed.
|
|
|
2)
|
Century
Dadi shall own 100% of the equity of Beijing Century Dadi Transportation
Ltd., Co. (“
Dadi
Transportation
”) and the registration of transfer shall have been
completed.
|
|
|
3)
|
Seller
shall have transferred a 70% equity interest in Century Dadi to the Buyer
and the registration of transfer shall be complete and Century Dadi shall
have obtained the new business
license.
|
|
|
4)
|
Before
completion of the transfer, the Articles of Associations of Century Dadi
and its affiliated companies shall provide that: (i) resolutions of the
shareholders’ meeting with respect to the decision to amend the articles
of association of each company, increasing or decreasing the registered
capital or merging or dissolving the company, shall be passed by the
shareholders holding two-thirds of the shares entitled to vote;
and (ii) Seller or Century Dadi has the right to appoint all the directors
and executive officers of Century Dadi and its affiliated companies
and this right to elect all of the directors and officers shall be held by
the Buyer following the transfer.
|
|
|
5)
|
Century
Dadi shall have achieved the shareholder structure set forth in Annex
II.
|
|
|
6)
|
Mr.
Tang and Seller shall have entered into a written agreement with all of
shareholders of each of the affiliated companies of Century Dadi in which
Mr. Tang and the other shareholders shall agree that after completion of
the transfer (A) none of them will take part in any day-to-day operation
and management of Century Dadi and the affiliated companies; (B) Seller
shall have the right appoint 2 directors and the Buyer shall have the
right to appoint 5 directors and (C) each of them waive the right of first
refusal (if any) to purchase any equity sold by other shareholders of
Century Dad and its affiliated companies and each of them agrees that he
shall only have the rights to enjoy the dividends and vote for the
resolution of shareholder’s meeting according to his equity
proportion.
|
|
|
7)
|
Seller
and Century Dadi shall assist the Buyer to inspect
the fixed assets of the Century Dadi and its affiliated
companies.
|
|
|
8)
|
The
transfer shall be complete
|
|
|
9)
|
Seller
and Mr. Tang shall have caused all the other parties to the legal
documents regarding to certain planned projects to agree in writing that
(i) Seller and Mr. Tang and their affiliates are entitled to assign all of
their rights and liabilities thereunder to the Buyer for no additional
consideration; and (ii) the transfer of these rights and liabilities shall
not cause any adverse affect to the transferee. In addition, Seller is
required to obtain a written undertaking from Dadi Gas that Dadi Gas will
not take part in any of these planned projects without the prior written
consent of the Buyer.
|
|
|
10)
|
All
obligations of each party to the Supplementary Agreement for the Escrow
Terms and Conditions for the First Installment shall have been fully
performed.
|
If the
Seller fails to satisfy all the first installment payment release preconditions
prior to the expiration of the 45 day period and the Seller submits a list in
writing of the status of the preconditions on the last day of the 45 day period,
the Buyer will provide a cure period of 15 days during which the Seller will not
incur any penalty for its failure to satisfy all the release preconditions. If
the Seller fails to satisfy all the first installment payment release
preconditions prior to the expiration of the cure period, the Seller may request
an extension of the cure period by explaining the reasons for the failure to
satisfy all the first installment payment release preconditions. If the Buyer
determines that the explanation given is reasonable, the Buyer may grant the
Seller a further 15 day extension of the cure period. During that extended cure
period, the Seller will incur a penalty of 0.1% per day of the first payment
amount until the all the first installment payment release preconditions shall
be satisfied.
If the
Seller is unable to satisfy all the first installment payment release
preconditions prior the expiration of the cure period, the Buyer may take any of
the following actions:
(i) terminate
the agreement, have the first installment payment returned from the mutually
managed bank account and require the Seller to pay the Buyer 5,000,000 RMB as a
penalty;(ii) delay the first installment payment release until all the
preconditions are satisfied and require the Seller to pay the Buyer 5,000,000
RMB as a penalty; or
(ii) deduct
up to 5,000,000 RMB from the first installment payment.
Under the
terms of the Supplementary Agreement for the Escrow Terms and Condition for the
First Installment the Seller dated September 14, 2010, between Seller, Buyer and
Mr. Tang, Seller is entitled to borrow, in accordance with the terms and
conditions set forth in the agreement, from the mutually managed account 50% of
the amount of the first installment which funds are to be used to pay the
purchase price for the equity interests of Century Dadi and its affiliated
companies such that following the purchase Seller will 100% of the equity
interests of Century Dadi and Century Dadi will own at least a 70% equity
interest in each of the affiliated companies set forth in Annex II of the
agreement.
Second
Installment
The
second installment of 65,000,000 RMB (or approximately $9.63 million) is payable
within 180 days (with an additional 90 day grace period as described below) of
the release of the first installment payment subject to the satisfaction of the
following conditions:
|
|
1)
|
All
actions shall have been taken such that Century Dadi shall be the
registered owner of 70% equity interest of each of its affiliated
companies; and
|
|
|
2)
|
Century Dadi shall have achieved
the shareholding structure listed in Annex III. The business scope of all
the affiliated
companies shall remain the
same.
|
If the
Seller fails to satisfy all the second installment payment release preconditions
prior to the expiration of the 180 day period and submits a list in writing of
status of the preconditions on the last day of the 180 day period, the Buyer
will provide a cure period of 15 days during which the Seller will not incur any
penalty for its failure to satisfy all the first installment payment release
preconditions. If the Seller fails to satisfy all the first installment payment
release preconditions prior to the expiration of the cure period, the Seller may
request an extension of the cure period by explaining the reasons for the
failure to satisfy all the first installment payment release preconditions. If
the Buyer determines that the explanation given is reasonable, the Buyer may
grant the Seller a further 15 day extension of the cure period. During that
extended cure period, the Seller will incur a penalty of 0.1% per day of the
first payment amount until the all the first installment payment release
preconditions shall be satisfied.
If the
Seller is unable to satisfy all the second installment payment release
preconditions prior the expiration of the remedy period, the Buyer may take any
of the following actions:
(i) terminate
the Agreement, have the first installment payment returned and require the
Seller to pay the Buyer 5,000,000 RMB as a penalty;
(ii)
delay the second installment payment release until all the preconditions are
satisfied and require the Seller to pay the Buyer 5,000,000 RMB as a penalty;
or
(iii)
deduct up to 5,000,000 RMB from the second installment payment.
Notwithstanding
the foregoing, after the expiration of the 180 period for the payment of the
second installment payment, the Buyer is entitled to have a 90 day extension
without any penalty. After that 90 day extension expires if the Buyer fails to
pay the second installment to the Seller, the Buyer will have a 45 days grace
period. After that 45 day grace period expires, if the Buyer still fails to pay
the Buyer shall pay penalties at the rate of 0.1% per day of the amount of the
second installment capped at 5,000,000 RMB.
Third
Installment
The third
and final installment is 10,000,000 RMB and is required to be paid into the
managed account within 180 days after the payment of the second installment.
After the expiration of the 180 period the Buyer is entitled to have a 45 day
extension without any penalty. After that 45 day grace period expires, if the
Buyer still fails to pay the Buyer shall pay penalties at the rate of 0.1% per
day of the amount of the second installment capped at 500,000 RMB.
Within 3
years after the completion of the transfer, in the event that the Seller
breaches any provisions of the agreement, the Buyer is entitled to have the
penalty or damages for such breach paid to it out of the mutually managed bank
account. If the amount in the account is not sufficient then the Seller is
required to pay the difference. After the expiration of such period of 3 years,
if the Seller is not in breach or has already completed the remedy of any breach
of the agreement, the Buyer shall withdraw its management of such mutual
management bank account after the expiration of such period of 3
years.
The
following conditions are required to be satisfied prior to the closing of the
transaction:
|
|
1)
|
All necessary permits, consents,
licenses, governmental approvals or authorizations, relating to
the legality, validity or enforceability of the sale of the transferred
equity shall have been
obtained
|
|
|
2)
|
All necessary
processes, formalities and procedures relating to the transfer
of the equity interest shall have been completed or performed;
and
|
|
|
3)
|
The transfer of the equity
interest will not result in the loss by Century Dadi and its affiliated
companies of their respective rights to operate their urban gas
pipelines.
|
Unless
otherwise provided in the agreement, Buyer is entitled to terminate the
agreement unilaterally without any liability for breach of the agreement if some
or all of the conditions have not been satisfied before the completion of the
transfer. In the event of termination by the Buyer, any installments of the
purchase price previously paid shall be returned to the Buyer and the Buyer is
entitled to a penalty of 5,000,000.00 RMB. If the penalty does not cover the
damages or losses suffered by the Buyer the Seller is required to compensate the
Buyer for the shortfall.
Exclusive
Option Agreement/Equity Transfer Agreement Relating to Remaining 30% Interest in
Century Dadi
In
connection with the execution of the Century Dadi Agreement, Seller, Buyer and
Century Dadi entered into an Exclusive Option Agreement (the “
Option Agreement
”)
and a second Equity Transfer Agreement. Under the Option Agreement after the
completion of the transfer of the 70% interest under the Century Dade Agreement
Buyer has the right to purchase the remaining 30% equity interest in Century
Dadi then owned by Seller for a purchase price of 65,000,000RMB (approximately
$9.63 million).
Under a
related equity transfer agreement entered into between the parties, Seller has
agreed so sell the remaining 30% of Century Dadi to Buyer following exercise by
Buyer of the option.
The
purchase price is payable in one installment and is payable after the following
conditions are satisfied (which conditions are required to be satisfied within
30 days of the exercise of the option):
|
|
1)
|
All
necessary permits, consents, licenses, governmental approvals or
authorizations, relating to the legality, validity or
enforceability of the sale of the transferred equity shall have been
obtained; and
|
|
|
2)
|
All necessary
processes, formalities and procedures relating to the transfer
of the equity interest shall have been completed or
performed.
|
Zhoulu
Dadi Agreements
Equity
Transfer Agreement for 70% Interest in Zhoulu Dadi
On
September 14, 2010, Buyer entered into an Equity Transfer Agreement (the “
Zhoulu Dadi
Agreement
”) with Seller and Mr. Tang, to acquire a 70% equity interest in
Zhoulu Dadi Gas Co. Ltd., a PRC company (“Zhoulu Dadi”) from the
Seller.
Zhoulu
Dadi and its affiliated companies intend to invest in a number of projects as
set forth in Annex VII of the Zhoulu Dadi Agreement.
Within 45
days following the payment of the first installment into the mutually managed
bank account Seller is required to have acquired 100% of the equity of
Zhoulu Dadi.
Purchase
Price
The total
purchase price for the 70% equity interest in Zhoulu Dadi is 135,000,000 RMB
(approximately $20 million US dollars). The purchase price is payable
in three installments. Each payment is subject to satisfaction of
certain preconditions as described below.
The
parties are required to open a mutually managed account within 3 business days
of the execution of the agreement.
First
Installment
The first
installment of 60,000,000 RMB (approximately $8.89 million US dollars) of the
purchase price is required to be paid into the mutually managed account within 5
business days of the execution of the agreement (with an additional 5 day grace)
with interest accruing thereafter on the payment due at the rate of 0.1% per day
capped at 5,000,000.00 RMB.
The first
installment will be released from the mutually managed account after
satisfaction of the certain conditions, including those set forth below (which
preconditions are required to be satisfied within 45 days of the transfer of the
first installment payment to the mutually managed bank account unless extended
as set forth below):
|
|
1)
|
Seller shall have completed the
purchase of 100% of the equity of the Zhoulu Dadi and the registration of
the transfer shall have been
completed.
|
|
|
2)
|
Zhoulu
Dadi shall own the respective percentages of the affiliated companies as
set forth in Annex II of the agreement and the corresponding registration
of transfer shall have been completed.
|
|
|
|
|
Seller
shall have transferred a 70% equity interest in Zhoulu Dadi to Buyer and
the registration of transfer shall be complete and Zhoulu Dadi shall have
obtained the new business license.
|
|
|
4)
|
Before
completion of the transfer, the Articles of Associations of Zhoulu Dadi
and its affiliated companies shall provide that: (i) resolutions of the
shareholders’ meeting with respect to the decision to amend the articles
of association of each company, increasing or decreasing the registered
capital or merging or dissolving the company, shall be passed by the
shareholders holding two-thirds of the shares entitled to vote;
and (ii) Seller or Zhoulu Dadi has the right to appoint all the directors
and executive officers of Zhoulu Dadi and its affiliated companies
and this right to elect all of the directors and officers shall be held by
Buyer following the transfer.
|
|
|
5)
|
Zhoulu
Dadi shall have achieved the shareholder structure set forth in Annex
II.
|
|
|
6)
|
Mr.
Tang and Seller shall have entered into a written agreement with all of
shareholders of Zhoulu Dadi and each of its affiliated companies in which
Mr. Tang and the other shareholders shall agree that after completion of
the transfer (A) none of them will take part in any day-to-day operation
and management of Zhoulu Dadi and the affiliated companies; (B) Seller
shall have the right appoint 2 directors and Buyer shall have the right to
appoint 5 directors and (C) each of them waive the right of first refusal
(if any) to purchase any equity sold by other shareholders of Zhoulu Dadi
and its affiliated companies and each of them agrees that it shall only
have the rights to enjoy the dividends and vote for the resolution of
shareholder’s meeting according to his equity
proportion.
|
|
|
|
Seller and Zhoulu Dadi shall assist
Buyer to inspect the fixed assets of the Zhoulu Dadi and its affiliated
companies.
|
|
|
8)
|
The
transfer shall be complete.
|
|
|
9)
|
Seller
and Mr. Tang shall have caused all the other parties to the legal
documents regarding to certain planned projects to agree in writing that
(i) Seller and Mr. Tang and their affiliates are entitled to assign all of
their rights and liabilities thereunder to the Company for no additional
consideration; and (ii) the transfer of these rights and liabilities shall
not cause any adverse affect to the Company. In addition, Seller is
required to obtain a written undertaking from Dadi Gas that Dadi Gas will
not take part in any of these planned projects without the prior written
consent of the Company; and
|
|
|
10)
|
All
obligations of each party to the Supplementary Agreement for the Escrow
Terms and Conditions for the First Installment shall have been fully
performed.
|
If the
Seller fails to satisfy all the first installment payment release preconditions
prior to the expiration of the 45 day period and the Seller submits a list in
writing of the status of the preconditions on the last day of the 45 day period,
Buyer will provide a cure period of 15 days during which the Seller will not
incur any penalty for its failure to satisfy all release preconditions. If
Seller fails to satisfy all the first installment payment release preconditions
prior to the expiration of the cure period, the Seller may request an extension
of the cure period by explaining the reasons for the failure to satisfy all the
release preconditions. If the Buyer determines that the explanation given is
reasonable, the Buyer may grant the Seller a further 15 day extension of the
cure period. During that extended cure period, the Seller will incur a penalty
of 0.1% per day of the first payment amount until the all the first installment
payment release preconditions shall be satisfied.
If the
Seller is unable to satisfy all the first installment payment release
preconditions prior the expiration of the remedy period, the Buyer may take any
of the following actions:
(i) terminate
the Agreement, have the first installment payment returned and require the
Seller to pay the Buyer 5,000,000 RMB as a penalty;
(ii)
delay the first installment payment release until all the preconditions are
satisfied and require the Seller to pay the Buyer 5,000,000 RMB as a penalty;
or
(iv)
deduct up to 5,000,000 RMB from the first installment payment.
Under the
terms of the Supplementary Agreement for the Escrow Terms and Condition for the
First Installment the Seller dated September 14, 2010, between Seller, Buyer and
Mr. Tang, Seller is entitled to borrow, in accordance with the terms and
conditions set forth in the agreement, from the mutually managed account 50% of
the amount of the first installment which funds are to be used to pay the
purchase price for the equity interests of Zhoulu Dadi and its affiliated
companies such that following the purchase Seller will 100% of the equity
interests of Zhoulu Dadi and Zhoulu Dadi will own at least a 70% equity interest
in each of the affiliated companies set forth in Annex II of the
agreement.
Second
Installment
The
second installment of 65,000,000 RMB (or approximately $9.63 million) is payable
within 180 days (with an additional 90 day grace period as described below) of
the release of the first installment payment subject to the satisfaction of the
following conditions:
|
|
1)
|
All
actions shall have been taken such that Zhoulu Dadi shall be the
registered owner of 70% equity interest of each of its affiliated
companies; and
|
|
|
2)
|
Zhoulu Dadi shall have achieved
the shareholding structure listed in Annex III. The business scope of all
the affiliated
companies shall
remain the
same.
|
If the
Seller fails to satisfy all the second installment payment release preconditions
prior to the expiration of the 180 day period and submits a list in writing of
the status of the preconditions on the last day of the 180 day period, Buyer
will provide a cure period of 15 days during which time Seller will not incur
any penalty for its failure to satisfy all the first installment payment release
preconditions. If Seller fails to satisfy all the first installment payment
release preconditions prior to the expiration of the cure period, Seller may
request an extension of the cure period by explaining the reasons for the
failure to satisfy all the first installment payment release preconditions. If
Buyer determines that the explanation given is reasonable, Buyer may grant the
Seller a further 15 day extension of the cure period. During that extended cure
period, the Seller will incur a penalty of 0.1% per day of the first payment
amount until the all the first installment payment release preconditions shall
be satisfied.
If the
Seller is unable to satisfy all the second installment payment release
preconditions prior the expiration of the remedy period, Buyer may take any of
the following actions:
(i) terminate
the agreement, have the first installment payment returned and require the
Seller to pay the Buyer 5,000,000 RMB as a penalty;
(ii)
delay the second installment payment release until all the preconditions are
satisfied and require the Seller to pay Buyer 5,000,000 RMB as a penalty;
or
(v)deduct
up to 5,000,000 RMB from the second installment payment.
Notwithstanding
the foregoing, after the expiration of the 180 period for the payment of the
second installment payment, the Buyer is entitled to have a 90 day extension
without any penalty. After that 90 day extension expires if Buyer fails to pay
the second installment to Seller, the Buyer will have a 45 days grace period.
After that 45 day grace period expires, if the Buyer still fails to pay Seller
the Buyer shall pay penalties at the rate of 0.1% per day of the amount of the
second installment capped at 5,000,000 RMB.
Third
Installment
The third
and final installment is 10,000,000 RMB and is required to be paid into the
managed account within 180 days after the payment of the second installment.
After the expiration of the 180 period the Buyer is entitled to have a 45 day
extension without any penalty. After that 45 day grace period expires, if the
Buyer still fails to pay the Buyer shall pay penalties at the rate of 0.1% per
day of the amount of the second installment capped at 500,000 RMB.
Within 3
years after the completion of the Transfer, in the event that Seller breaches
any provisions of the agreement, Buyer is entitled to have the penalty or
damages for such breach paid to it out of the mutually managed bank account. If
the amount in the account is not sufficient then the Seller is required to pay
the difference. After the expiration of such period of 3 years, if the Seller is
not in breach or has already completed the remedy of any breach of the
agreement, Buyer shall withdraw its management of such mutual management bank
account after the expiration of such period of 3 years.
The
following conditions are required to be satisfied prior to the closing of the
transaction:
|
|
1)
|
All necessary permits, consents,
licenses, governmental approvals or authorizations, relating to
the legality, validity or enforceability of the sale of the transferred
equity shall have been
obtained
|
|
|
2)
|
All necessary
processes, formalities and procedures relating to the transfer
of the equity interest shall have been completed or performed;
and
|
|
|
3)
|
The transfer of the equity
interest will not result in the loss by Zhoulu Dadi and its affiliated
companies of their respective rights to operate their urban gas
pipelines.
|
Unless
otherwise provided in the agreement, the Buyer is entitled to terminate the
agreement unilaterally without any liability for breach of the agreement if some
or all of the conditions have not been satisfied before the completion of the
transfer. In the event of such termination by the Buyer, any installments of the
purchase price previously paid shall be returned to the Buyer and the Buyer is
entitled to a penalty of 5,000,000.00 RMB. If the penalty does not cover the
damages or losses suffered by the Buyer the Seller is required to compensate the
Buyer for the shortfall.
Exclusive
Option Agreement/Equity Transfer Agreement Relating to Remaining 30% Interest in
Zhoulu Dadi
In
connection with the execution of the Zhoulu Dadi Agreement, Seller, Buyer and
Zhoulu Dadi entered into an Exclusive Option Agreement (the “
Option Agreement
”)
and a second Equity Transfer Agreement. Under the Option Agreement after the
completion of the transfer of the 70% interest under the Zhoulu Dadi Agreement,
Buyer has the right to purchase the remaining 30% equity interest in Zhoulu Dadi
from Seller for a purchase price of 65,000,000RMB (approximately $9.63
million).
Under a
related equity transfer agreement entered into between the parties, Seller has
agreed so sell the remaining 30% of Zhoulu Dadi to Buyer following exercise by
Buyer of the option.
The
purchase price is payable in one installment and is payable after the following
conditions are satisfied (which conditions are required to be satisfied within
30 days of the exercise of the option):
|
|
1)
|
All
necessary permits, consents, licenses, governmental approvals or
authorizations, relating to the legality, validity or
enforceability of the sale of the transferred equity shall have been
obtained; and
|
|
|
2)
|
All necessary
processes, formalities and procedures relating to the transfer
of the equity interest shall have been completed or
performed.
|
General
Framework Agreement for Cooperation
On
September 14, 2010 in connection with the execution of the agreements, Buyer and
Seller entered into a General Framework for Cooperation in which the parties
agreed to use their reasonable efforts to complete the acquisitions on the terms
set forth in the acquisition agreements and the option agreement.
Item
2.03
Creation of a Direct Financial
Obligation
The
information pertaining to the Notes in Item 1.01 is incorporated herein by
reference in its entirety.
Item
3.02
Unregistered Sales of Equity
Securities
The
information pertaining to the Series C Preferred Stock and Series D Preferred
Stock in Item 1.01 is incorporated herein by reference in its entirety. Neither
the shares of Series C Preferred Stock, Series D Preferred Stock or the shares
of the Company’s common stock issuable upon conversion of the Series C Preferred
Stock, Series D Preferred Stock or the Notes have been registered under the
Securities Act of 1933, as amended (the “1933 Act”), and may not be offered or
sold in the United States absent registration or an applicable exemption from
registration requirements. The Company issued these securities in reliance on
the exemption from registration provided by Section 4(2) of the 1933 Act and
Regulation D promulgated thereunder. This current report on Form 8-K does not
constitute an offer to sell, or a solicitation of an offer to buy, any security
and shall not constitution an offer, solicitation or sale in any jurisdiction in
which such offering would be unlawful.
Item
3.03
Material Modification to Rights of
Security Holders
In
connection with the Private Placement, the Company filed with the Secretary of
State of the State of Delaware a Certificate of Designations of Preferences,
Rights and Limitations of Series C Preferred Stock (the “
Series C
Certificate
”) and a Certificate of Designations of Preferences, Rights
and Limitations of Series D Preferred Stock (the “
Series D
Certificate
”). Pursuant to the Series C Certificate, there are 25 shares
of Series C Preferred Stock authorized. Pursuant to the Series D Certificate,
there are 4 shares of Series D Preferred Stock authorized. The Series C
Preferred Stock is entitled to receive dividends on an as converted basis with
the holders of the Company’s common stock. The Series D Preferred Stock is not
entitled to dividends.
The
holders of the Series C Preferred Stock are entitled to vote together with the
holders of the Company’s common stock, with each such holder of Series C
Preferred Stock entitled to the number of votes equal to the number of shares of
the Company’s common stock into which such Series C Preferred Stock would be
converted if converted on the record date for the taking of a vote. The
holders of the Series D Preferred Stock have no voting rights.
Each
share of Series C Preferred Stock is initially convertible, at any time at the
sole option of the holder, into 5,647,011 shares of the Company’s common stock,
subject to future adjustments as provided for in the Series C Certificate. The
Series C Preferred Stock shall automatically convert into shares of the
Company’s common stock upon the latest to occur of: (i) May 31, 2011 or (ii) the
date upon which the Company’s completes the acquisition of at least 70% of the
equity interests in Dadi and/or its affiliates (the “Acquisition End
Date”).
Each
share of Series D Preferred Stock converts automatically upon the latest to
occur of: (i) May 31, 2011 or (ii) the Acquisition End Date into a number of
shares of common stock determined according to the following
formula:
A = (B *
(.72/.28) - C – D)/4
Where:
A = total
number of common shares into which Series D will be convertible.
B =
219,605,986
C =
number of shares of common stock into which Series C Preferred Stock may be
converted on the issuance date of the Series D Preferred Stock plus any shares
of Common Stock into which shares of Series C Preferred Stock may be converted
upon conversion of any convertible promissory notes convertible into such
preferred stock and outstanding on the Issuance Date.
D =
number of shares of outstanding common stock, plus the number of shares of
common stock into which any convertible preferred stock, debt or other
convertible securities are convertible, issued to new investors between October
1, 2010 and April 30, 2011, which result in gross proceeds to the Company not
exceeding $54,500,000.
The
foregoing summary does not purport to be a complete statement of the parties’
rights and obligations under the Series C Certificate and Series D Certificate
or a complete explanation of the material terms thereof. The foregoing summary
is qualified in its entirety by reference to the Certificate attached hereto as
Exhibits 4.1 and 4.2.
Item
9.01
Financial Statements And
Exhibits
(d)
Exhibits
|
Exhibit
No.
|
|
Description
|
|
4.1
|
|
Certificate
of Designations of Preferences, Rights and Limitations of Series C
Convertible Preferred Stock
|
|
|
|
|
|
4.2
|
|
Certificate
of Designations of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock
|
|
|
|
|
|
10.1
|
|
Series
C and Series D Convertible Preferred Stock Securities Purchase Agreement,
by and between China New Energy Group Company and China Hand Fund I, LLC,
dated September 14, 2010.
|
|
|
|
|
|
10.2
|
|
Backstop
Agreement, by and between China New Energy Group Company and China Hand
Fund I, LLC, dated September 14, 2010.
|
|
|
|
|
|
10.3
|
|
Registration
Rights Agreement, between China New Energy Group Company and China Hand
Fund I, LLC, dated September 14, 2010.
|
|
|
|
|
|
10.4
|
|
Form
of the Note Purchase Agreement, by and between China New Energy Group
Company and the investor named therein, dated September 14,
2010.
|
|
|
|
|
|
10.5
|
|
Form
of Convertible Note due October 15,
2010.
|
|
10.6
|
|
Equity
Transfer Agreement, dated September 14, 2010, by and among China New
Energy Investment Co., Ltd, Beijing Fengyin Xianghe Scientific Technology
Co., Ltd. and Mr. Tang Zhixiang (relating to the acquisition of a 70%
equity interest in Beijing Century Dadi Gas Engineering Co.,
Ltd.).
|
|
|
|
|
|
10.7
|
|
Exclusive
Option Agreement, by and among China New Energy Investment Co., Ltd, and
Beijing Fengyin Xianghe Scientific Technology Co., Ltd. (relating to the
option to purchase the remaining 30% equity interest in Beijing Century
Dadi Gas Engineering Co., Ltd.).
|
|
|
|
|
|
10.8
|
|
Equity
Transfer Agreement, by and among China New Energy Investment Co., Ltd,
Beijing Fengyin Xianghe Scientific Technology Co., Ltd. and Mr. Tang
Zhixiang (relating to the acquisition of the remaining 30% equity
interest in Beijing Century Dadi Gas Engineering Co.,
Ltd).
|
|
|
|
|
|
10.9
|
|
Equity
Transfer Agreement, dated September 14, 2010, by and among China New
Energy Investment Co., Ltd, Beijing Fengyin Xianghe Scientific Technology
Co., Ltd. and Mr. Tang Zhixiang (relating to the acquisition of a 70%
equity interest in Zhoulu Dadi Gas Co., Ltd).
|
|
|
|
|
|
10.10
|
|
Exclusive
Option Agreement, by and among China New Energy Investment Co., Ltd, and
Beijing Fengyin Xianghe Scientific Technology Co., Ltd.
|
|
|
|
|
|
10.11
|
|
Equity
Transfer Agreement, by and among China New Energy Investment Co., Ltd,
Beijing Fengyin Xianghe Scientific Technology Co., Ltd. and Mr. Tang
Zhixiang (relating to the acquisition of the remaining 30% equity
interest in Zhoulu Dadi Gas Co., Ltd).
|
|
|
|
|
|
10.12
|
|
Supplementary
Agreement of Equity Transfer Agreement, dated September 14, 2010, by and
among China New Energy Group Company, China New Energy Investment Co.,
Ltd, Beijing Fengyin Xianghe Scientific Technology Co., Ltd. and Mr. Tang
Zhixiang
|
|
|
|
|
|
10.13
|
|
Supplementary
Agreement for the Escrow Terms and Conditions for First Installment, dated
September 14, 2010, by and among China New Energy Investment Co., Ltd, and
Beijing Fengyin Xianghe Scientific Technology Co., Ltd. and Mr.
Tang.
|
|
|
|
|
|
10.14
|
|
General
Framework Agreement For Cooperation, dated September 14, 2010, by and
among China New Energy Investment Co., Ltd, Beijing Fengyin Xianghe
Scientific Technology Co., Ltd.
|
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:
September 20, 2010
|
|
CHINA
NEW ENERGY GROUP COMPANY
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
By:
|
/s/ Yangkan
Chong
|
|
|
|
|
Yangkan
Chong
|
|
|
|
|
Chief
Executive Officer
|
|
China New Energy (PK) (USOTC:CNER)
Historical Stock Chart
From Nov 2024 to Dec 2024
China New Energy (PK) (USOTC:CNER)
Historical Stock Chart
From Dec 2023 to Dec 2024
