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): January 5,
2010
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 the Exchange Act
(17CFR240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17CFR240.13e-4(c))
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Item
1.01 Entry Into a Material
Definitive Agreement.
Dongxiang
Project
On
January 5, 2010, 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 Stockholder Flying Dragon Gas
Inc. a PRC company (“
Stockholder
Zhongran
”), from Flying Dragon Resource Development Limited and Flying
Dragon Investment Management Limited (the “
Transferors
”).
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 Fuzhou Zhongran for a total purchase price of 26,000,000 RMB
(approximately $3.8 million US Dollars) which purchase price is based on an
appraised value of Fuzhou 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 Fuzhou 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% 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 a written certificate from local AIC approving the delay in the
contribution of registered capital of Fuzhou Zhongran;
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 Fuzhou Zhongran all other necessary
procedure required by law or its charter documents shall have been
obtained.
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The above
conditions were required to have been satisfied before January 20, 2010 and have
now been satisfied.
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 Transferors 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 January 31, 2010;
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2)
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obtain
the new business license and change the business scope
of Fuzhou Zhongran to include the investment, operation,
management and services of an urban gas
pipeline;
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3)
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assist
Fuzhou Zhongran to complete the examination of the completed
project;
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4)
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release
public statements in the proper local media (after consulting with and
obtaining prior approval Fuzhou Zhongran) to announce that
neither the Transferors or Fuzhou Zhongran is subject to any
pending litigation or arbitration or event or circumstance that might
result in the freezing or seizure of possession of their assets
and that none of such events are
threatened;
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5)
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Fuzhou
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 Fuzhou Zhongran shall be
transferred to and assumed by the Transferors 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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Transferors
and the Fuzhou 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 Fuzhou 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 53% 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 Fuzhou
Zhongran;
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2)
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Transferor
shall have assisted Fuzhou Zhongran to complete the comprehensive
examination of the vaporizing station and completed pipeline
(including examination and filing procedures of Construction Bureau,
Quality Supervision Bureau, Environmental Protection Bureau and Security
Supervision Bureau) and obtain the examination report from the relevant
authorities;
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3)
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Transferors
shall have transferred all collected and connection fees and receivables
to the transferred without any
conditions
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The above
conditions are required to be satisfied or completed before April 30, 2010,
otherwise the Transferee is entitled to terminate this Agreement and the
Transferor shall pay the Transferee 300,000 RMB as a penalty and indemnify the
Transferor for any losses.
The third
and final installment is 20% of the purchase price. In order to
ensure the smooth transition of the business and operations of Fuzhou 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.
The
Transferors agreed to assist Transferee to obtain all inspections and
examination reports required for the completed construction of Fuzhou Zhogran,
including completion and approval and filing procedures of relevant government
authorities as the request of the Transferee before April 30,
2010. If the Transferor breaches this obligation, Transferee is
entitled to reduce the purchase price payable by 300,000 RMB or to request
300,000 RMB as compensation for breach of this agreement by the
Transferor.
Transferor
has agreed that before the completion of the equity transfer in order to
maintain the continuity of the personnel of Fuzhou Zhogran, 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 500,000 RMB 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.
Fuzhou
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 in November 2006 under PRC
law.
On
November 11, 2007 , 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:
January 8, 2010
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CHINA
NEW ENERGY GROUP COMPANY
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(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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