Attached files
| file | filename |
|---|---|
| 8-K - China New Energy Group CO | v196995_8k.htm |
| EX-4.2 - China New Energy Group CO | v196995_ex4-2.htm |
| EX-10.5 - China New Energy Group CO | v196995_ex10-5.htm |
| EX-10.6 - China New Energy Group CO | v196995_ex10-6.htm |
| EX-10.4 - China New Energy Group CO | v196995_ex10-4.htm |
| EX-10.3 - China New Energy Group CO | v196995_ex10-3.htm |
| EX-10.7 - China New Energy Group CO | v196995_ex10-7.htm |
| EX-10.1 - China New Energy Group CO | v196995_ex10-1.htm |
| EX-10.8 - China New Energy Group CO | v196995_ex10-8.htm |
| EX-10.9 - China New Energy Group CO | v196995_ex10-9.htm |
| EX-10.2 - China New Energy Group CO | v196995_ex10-2.htm |
| EX-10.11 - China New Energy Group CO | v196995_ex10-11.htm |
| EX-10.14 - China New Energy Group CO | v196995_ex10-14.htm |
| EX-10.12 - China New Energy Group CO | v196995_ex10-12.htm |
| EX-10.13 - China New Energy Group CO | v196995_ex10-13.htm |
| EX-10.10 - China New Energy Group CO | v196995_ex10-10.htm |
CHINA
NEW ENERGY GROUP COMPANY
CERTIFICATE
OF DESIGNATIONS OF PREFERENCES,
RIGHTS
AND LIMITATIONS
OF
SERIES
C CONVERTIBLE PREFERRED STOCK
The
undersigned, Yang Kan Chong, does hereby certify
that:
1. He
is the Chief Executive Officer of CHINA NEW ENERGY GROUP
COMPANY, a Delaware corporation (the “Company”).
2. The
Company is authorized to issue 10,000,000 shares of Preferred Stock, par value
$0.001 per share (“Preferred Stock”), of
which (i) 5,500,000 shares are designated as Series A Convertible Preferred
Stock, par value $0.001 per share (“Series A Preferred
Stock”) and 2,098,918 shares of such Series A
Preferred Stock are issued and outstanding, and (ii) 2,000,000 shares
are designated as Series B Convertible Preferred Stock, par value $0.001 per
share (“Series B
Preferred Stock”) and 1,116,388 shares of such Series B
Preferred Stock are issued and outstanding.
3. The
following resolutions were duly adopted by the Board of Directors of the Company
(the “Board of
Directors”):
WHEREAS,
the Certificate of Incorporation of the Company provides for a class of its
authorized stock known as Preferred Stock, comprised of 10,000,000 shares,
$0.001 par value per share, issuable from time to time in one or more
series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights, dividend rate,
voting rights, conversion rights, rights and terms of redemption and liquidation
preferences of any wholly unissued series of Preferred Stock and the number of
shares constituting any series and the designation thereof, of any of them;
and
WHEREAS, it is the desire of the Board
of Directors, pursuant to its authority as aforesaid, to fix the rights,
preferences, restrictions and other matters relating to a series of the
preferred stock, which shall consist of 25 shares of the Preferred Stock, which
the Company has the authority to issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
the issuance of a series of Preferred Stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of Preferred
Stock as follows:
1
TERMS OF PREFERRED
STOCK
Section
1. Definitions. Capitalized terms used and
not otherwise defined herein shall have the meanings ascribed to such terms in
the Series C and Series D Convertible Preferred Stock Securities Purchase
Agreement by and between the Company, China Hand Fund, I, LLC, a Delaware
limited liability company (as amended, modified or supplemented from time to
time in accordance with its terms, a copy of which is on file at the principal
offices of the Company, the “Purchase Agreement”)
For the purposes hereof, the following terms shall have the following
meanings:
“Acquisition End Date”
shall have the meaning set forth in Section 6(b).
“Affiliate” means,
with respect to any Person, any other Person directly or indirectly controlling,
directly or indirectly controlled by, or under direct or indirect common control
with, such Person or a member of such Person's immediate family; or if such
Person is a partnership, any general partner of such Person or a Person
controlling any such general partner. For purposes of this
definition, "control" (including "controlled by" and "under common control
with") shall mean the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities, by contract or otherwise.
“Board of Directors”
means the Board of the Directors of the Company.
“Certificate” means
this Certificate of Designations of Preferences, Rights and Limitations of
Series C Convertible Preferred Stock of China New Energy Group Company, as
amended from time to time.
“Commission” means the
Securities and Exchange Commission of the United States of America.
“Common Stock” means
the Company’s common stock, par value $0.001 per share, and stock of any other
class into which such shares may hereafter have been reclassified or
changed.
“Company” means China
New Energy Group Company, a Delaware corporation.
“Conversion Date”
shall have the meaning set forth in Section 6(a).
“Conversion Price”
shall mean $0.14179.
“Conversion Ratio”
shall mean the number of shares of Common Stock issuable upon conversion of one
share of Series C Preferred Stock. Each share of Series C
Preferred Stock shall be initially convertible into 5,647,011 shares of Common
Stock.
“Conversion Shares”
means, collectively, the shares of Common Stock issuable upon conversion of the
shares of Series C Preferred Stock in accordance with the terms of the Purchase
Agreement and this Certificate.
“Dadi” means Beijing
Century Dadi Gas Engineering Co., Ltd.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Holder” shall have
the meaning set forth in Section 2 hereof.
2
“Liquidation” shall
have the meaning set forth in Section 5 hereof.
“Liquidation Value”
shall have the meaning set forth in Section 5 hereof.
“Original Purchase
Price” shall mean $800,854.24 per whole share.
“Person” means a
corporation, an association, a partnership, a limited liability company, a
business association, an individual, a trust, a government or political
subdivision thereof or a governmental agency.
“Purchaser” means any
purchaser who purchased shares of Series C Preferred Stock pursuant to the
Purchase Agreement.
“Registration Rights
Agreement(s)” means the Registration Rights Agreement(s), to which the
Company and the Purchasers are parties, as amended, modified or supplemented
from time to time in accordance with its terms.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series C Preferred
Stock” shall have the meaning set forth in Section 2 hereof.
“Subsidiary” shall
mean a corporation, limited liability company, partnership, joint venture or
other business entity of which the Company owns beneficially or of record more
than a majority of the equity interests.
“Trading Day” means a
day on which the Common Stock is traded on a Trading Market.
“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the New York Stock Exchange, the New York
Stock Exchange Amex, the NASDAQ Global Select Market, the NASDAQ Global Market,
the NASDAQ Capital Market or the OTC Bulletin Board.
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function;
(b) if the Common Stock is not then listed or quoted on the Trading Market
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in
all other cases, the fair market value of a share of Common Stock as determined
by a nationally recognized-independent appraiser selected in good faith by the
Majority Holders.
Rank of Series or
Classes. For purposes of this Certificate, any stock of any
series or class of the Company shall be deemed to rank:
3
(a)
senior to the shares of Series C Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if the holders of
such class or classes shall be entitled to the receipt of dividends or of
amounts distributable upon dissolution, liquidation or winding up of the
Company, as the case may be, in preference or priority to the
Holders;
(b) on a
parity with shares of Series C Preferred Stock, as to dividends or upon
liquidation, dissolution or winding up, as the case may be, whether or not the
dividend rates, dividend payment dates or redemption or liquidation prices per
share or sinking fund provisions, if any, be different from those of Series C
Preferred Stock, if the holders of such stock shall be entitled to the receipt
of dividends or of amounts distributable upon dissolution, liquidation or
winding up of the Company, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority, one over
the other, as between the holders of such stock and the Holders;
(c)
junior to shares of Series C Preferred Stock as to dividends or upon
liquidation, dissolution or winding up, as the case may be, if such class shall
be Common Stock or if the Holders shall be entitled to receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding up of the
Company, as the case may be, in preference or priority to the holders of shares
of such class or classes.
Section
2. Designation
and Amount. The series of Preferred Stock, par value $0.001
per share shall be designated as the Company’s Series C Convertible Preferred
Stock (the “Series C
Preferred Stock”) and the number of shares so designated shall be 25
(which shall not be subject to increase without the consent of all of the
holders of at least 50% of the then outstanding shares of Series C Preferred
Stock (each a “Holder” and
collectively, the “Holders”). The
Company may issue fractional shares of the Series C Preferred Stock. In the
event of the conversion of shares of Series C Preferred Stock into Common Stock,
pursuant to Section 6 hereof, or in the event that the Company shall otherwise
acquire and cancel any shares of Series C Preferred Stock, the shares of Series
C Preferred Stock so converted or otherwise acquired and canceled shall have the
status of authorized but unissued shares of Preferred Stock, without designation
as to series until such stock is once more designated as part of a particular
series by the Board of Directors. In addition, if the Company shall
not issue the maximum number of shares of Series C Preferred Stock, the Company
may, from time to time, by resolution of the Board of Directors and the approval
of the holders of a majority of the outstanding shares of Series C Preferred
Stock (the “Majority
Holders”), reduce the number of shares of Series C Preferred Stock
authorized, provided, that no such reduction shall reduce the number of
authorized shares to a number which is less than the number of shares of Series
C Preferred Stock then issued or reserved for issuance. The number of
shares by which the Series C Preferred Stock is reduced shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, until such stock is once more designated as part of a particular series
by the Company’s Board of Directors. The Board of Directors shall
cause to be filed with the Secretary of State of the State of Delaware such
certificate as shall be necessary to reflect any reduction in the number of
shares constituting the Series C Preferred Stock.
Section
3. Dividends. The
Series C Preferred Stock shall be entitled to receive dividends on an as
converted basis with the holders of the Company’s Common Stock.
4
Section
4. Voting
Rights.
(a) Except
as otherwise provided herein or by law and in addition to any right to vote as a
separate class as provided by law, the holders of the Series C Preferred Stock
shall have full voting rights and powers equal to the voting rights such holders
would have if the Series C Preferred Stock were converted at the date that a
vote is taken. The Series C Preferred Stock holders shall be entitled
to notice of any stockholders meeting in accordance with the Bylaws of the
Company, and shall be entitled to vote, with respect to any question upon which
holders of Common Stock have the right to vote, including, without limitation,
the right to vote for the election of directors, voting together with the
holders of Common Stock as one class.
(b) For
so long as any shares of Series C Preferred Stock shall remain outstanding,
without the affirmative approval of the Holders of 75% of the shares of the
Series C Preferred Stock then outstanding (by vote or written consent, as
provided by law), the Company shall not:
i. in
any manner authorize, issue or create (by reclassification or otherwise) any new
class or series of shares having rights, preferences or privileges equal or
senior to the Series C Preferred Stock;
ii. adversely
alter or change the rights, preferences, designations or privileges of the
Series C Preferred Stock;
iii. amend
the Company’s Articles of Incorporation or By-laws in a manner that adversely
affects the rights, preferences, designations or privileges of the
Holders;
iv. increase
or decrease the authorized number of shares of preferred stock of the Company or
otherwise reclassify the Company's outstanding securities;
v. redeem,
purchase or otherwise acquire (or pay into or set funds aside for a sinking fund
for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however,
that this restriction shall not apply to repurchases of shares of Common Stock
from employees, officers, directors, consultants or other persons performing
services for the Company or any subsidiary pursuant to agreements that are
approved by the Board under which the Company has the option to repurchase such
shares at cost upon the occurrence of certain events, such as the termination of
employment, or through the exercise of any right of first refusal; and provided further, that this
restriction shall not apply to any conversion, redemption or other acquisition
of shares of Series C Convertible Stock pursuant to this Certificate, any
Transaction Documents, Series A Financing Transaction Documents or Series B
Financing Transaction Documents (as defined in the Purchase Agreement);
or
vi. voluntarily
file for bankruptcy, liquidate the Company’s assets or make an assignment for
the benefit of the Company’s creditors.
(c) Whenever
Holders are required or permitted to take any action by vote, such action may be
taken without a meeting on written consent, setting forth the action so taken
and signed by the holders of the outstanding capital stock of the Company having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
5
Section
5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (each, a “Liquidation Event”),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Series C Preferred
Stock an amount equal to the Original Purchase Price, plus any accumulated but
unpaid dividends thereon (the “Liquidation Value”),
before any distribution or payment shall be made to the holders of any
securities which are junior to the Series C Preferred Stock upon the occurrence
of a Liquidation Event and after any distributions or payments made to holders
of any class or series of securities which are senior to the Series C Preferred
Stock upon the occurrence of a Liquidation Event. Upon the occurrence
of a Liquidation Event, the right of the Holders to receive Liquidation Value
hereunder shall rank pari passu with that of the holders of Series A Preferred
Stock (the “A
Holders”) and Series B Preferred Stock (the “B
Holders”). If the assets of the Company shall be insufficient
to pay in full such amounts, then the entire assets to be distributed to the
Holders shall be distributed among the Holders, the A Holders and the B Holders
ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. In the event
the assets of the Company available for distribution to the holders of shares of
Series C Preferred Stock upon the occurrence of a Liquidation Event shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to this Section 5, no distribution shall be made on account of any
shares of any other class or series of capital stock of the Company ranking on a
parity with the shares of Series C Preferred Stock upon the occurrence of such
Liquidation Event unless proportionate distributive amounts shall be paid on
account of the shares of Series C Preferred Stock, ratably, in proportion to the
full distributable amounts for which holders of all such parity shares are
respectively entitled upon the occurrence of such Liquidation
Event. At the election of a Holder made by written notice delivered
to the Company at least two (2) business days prior to the effective date of the
subject transaction, as to the shares of Series C Preferred Stock held by such
Holder, a Fundamental Transaction or Change in Control shall be treated as a
Liquidation Event as to such Holder.
Section
6. Conversion.
(a) Conversion at Option of
Holder. Each share of Series C Preferred Stock shall
be convertible, at any time and from time to time, at the option of
the Holders, into such number of shares of Common Stock determined by
multiplying the number of shares of Series C Convertible preferred Stock to be
converted by the Conversion Ratio. A Holder shall effect conversions
by providing the Company with the form of conversion notice attached hereto as
Annex A (a
“Notice of
Conversion”) as fully and originally executed by the Holder, together
with the delivery by the Holder to the Company of the stock certificate(s)
representing the number of shares of Series C Preferred Stock to be converted,
with such stock certificates being duly endorsed in full for transfer to the
Company or with an applicable stock power duly executed by the Holder in the
manner and form as deemed reasonable by the Company’s transfer agent for the
Common Stock. Each Notice of Conversion shall specify the number of shares of
Series C Preferred Stock to be converted, the number of shares of Series C
Preferred Stock owned prior to the conversion at issue, the number of shares of
Series C Preferred Stock owned subsequent to the conversion at issue, the stock
certificate number and the shares of Series C Preferred Stock represented
thereby which are accompanying the Notice of Conversion, and the date on which
such conversion is to be effected, which date may not be prior to two Trading
Days following the date the Holder mails such Notice of Conversion and the
applicable stock certificates to the Company by overnight delivery service (the
“Conversion
Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the Trading Day immediately following
the date that such Notice of Conversion and applicable stock certificates are
received by the Company. The calculations and entries set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical
error. Shares of Series C Preferred Stock converted into Common Stock
in accordance with the terms hereof shall be canceled and may not be
reissued.
6
(b) Automatic Conversion.
All of the outstanding shares of Series C Preferred Stock shall be automatically
converted into the Conversion Shares after all adjustments in Section 7 below
are completed and upon the latest to occur of: (i) May 31, 2010 or (ii) the date
upon which the Company’s completes the acquisition of at least 70% of the equity
interests in Beijing Century Dadi Gas Engineering Co., Ltd. (“Dadi”) and/or its
Affiliates (the “Acquisition End
Date”).
(c) Mechanics of
Conversion
i. Delivery of Certificate Upon
Conversion. Except as otherwise set forth herein, not later than ten (10)
Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver to the Holder a certificate or
certificates which, after the effective date of the Registration Statement
covering the sale of the Conversion Shares of such Holder (the “Effective Date”),
shall be free of restrictive legends and trading restrictions (other than those
required by the Purchase Agreements) representing the number of Conversion
Shares being acquired upon the conversion of shares of Series C Preferred
Stock. After the Effective Date, the Company shall, upon request of
the Holder, deliver any certificate or certificates required to be delivered by
the Company under this Section electronically through the Depository Trust
Company or another established clearing Company performing similar functions if
the Company’s transfer agent has the ability to deliver shares of Common Stock
in such manner. If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder by the third Trading Day after the Conversion Date, the Holder
shall be entitled to elect by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the shares of Series C Preferred Stock tendered for
conversion.
ii. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue and deliver the
Conversion Shares upon conversion of Series C Preferred Stock in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of such Conversion Shares. In
the event a Holder shall elect to convert any or all of its Series C Preferred
Stock, the Company may not refuse conversion based on any claim that such Holder
or any one associated or affiliated with the Holder has been engaged in any
violation of law, agreement or for any other reason unless an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of this Series C Preferred Stock shall have been sought and obtained
and the Company posts a surety bond for the benefit of the Holder in the amount
of 150% of the Liquidation Value of Series C Preferred Stock which is subject to
the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder to the extent it obtains judgment. In the absence of
an injunction precluding the same, the Company shall issue Conversion Shares or,
if applicable, cash, upon a properly noticed conversion. Nothing
herein shall limit a Holder’s right to pursue actual damages for the Company’s
failure to deliver certificates representing the Conversion Shares upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
7
iii. Compensation for “Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. If the
Company fails to deliver to the Holder such certificate or certificates by a
Share Delivery Date, and if after such Share Delivery Date the Holder purchases
(in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares which the Holder
was entitled to receive upon the conversion relating to such Share Delivery Date
(a “Buy-In”),
then the Company shall pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive from the
conversion at issue multiplied by (2) the price at which the sell order giving
rise to such purchase obligation was executed. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of shares of Series C Preferred
Stock with respect to which the aggregate sale price giving rise to such
purchase obligation is $10,000, the Company shall be required to pay the Holder
$1,000 hereunder. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In, together with
applicable confirmations and other evidence reasonably requested by the Company.
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common
Stock upon conversion of the shares of Series C Preferred Stock as required
pursuant to the terms hereof.
(d) Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the Series C
Preferred Stock, each as herein provided, free from preemptive rights or any
other actual or contingent purchase rights of persons other than the Holders,
not less than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreements) be issuable upon the conversion of all
outstanding shares of Series C Preferred Stock. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid,
nonassessable. The Company shall immediately, in accordance with the
laws of the State of Delaware, increase the authorized amount of its Common
Stock if, at any time, the authorized amount of its Common Stock, remaining
unissued shall not be sufficient to permit the conversion of all shares of
Series C Preferred Stock.
(e) Fractional Shares. No
fractional shares shall be issued upon the conversion of any share or shares of
the Series C Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole share. The number of
shares issuable upon conversion shall be determined on the basis of the total
number of shares of Series C Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
8
(f) No Charge for Conversion;
Transfer Taxes. The issuance of certificates for shares of
Common Stock upon the conversion of shares of Series C Preferred Stock shall be
made without charge to the converting Holders for such certificates. The
issuance of certificates for shares of the Common Stock on conversion of the
Series C Preferred Stock shall be made without charge to the Holders thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name
other than that of the Holder of such shares of Series C Preferred Stock so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(g) Absolute
Obligation. Except as expressly provided herein, no provision
of this Certificate shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the liquidated damages (if any) on, the
shares of Series C Preferred Stock at the time, place, and rate, and in the coin
or currency, herein prescribed.
Section
7. Certain
Adjustments.
(a) Adjustment Upon Dilutive
Issuances.
i. In
the event the Company during the period beginning after the last issuance of
Series C Preferred Stock and ending on the Acquisition End Date closes on the
sale or issuance of (A) Common Stock, or (B) any securities convertible into or
exchangeable for, directly or indirectly, Common Stock (“Convertible
Securities”), or any rights or warrants or options to purchase any such
Common Stock or Convertible Securities (collectively, the “Additional
Issuances”), with a price, conversion price, or exercise price which is
less than the Conversion Price (“Dilutive Issuance
Price”), the Conversion Ratio shall be adjusted by multiplying the
Conversion Ratio by the result of the Conversion Price divided by such Dilutive
Issuance Price.
ii. Notwithstanding
anything to the contrary set forth in Section 7(c)(i), no adjustment shall be
made to the number of Conversion Shares and/or the Conversion Ratio with regard
to (i) securities issued pursuant to the conversion or exercise of convertible
or exercisable securities issued or outstanding on or prior to the Closing Date,
issued pursuant to the Series A Financing Transaction Documents, the Series B
Financing Transaction Documents or the Purchase Agreement (so long as the
conversion or exercise price in such securities are not amended to lower such
price and/or adversely affect the Holders), (ii) securities issued in connection
with bona fide strategic license agreements or other partnering arrangements so
long as such issuances are not for the purpose of raising capital and provided
that the issuance of such securities in connection with such bona fide strategic
license, agreements or other partnering arrangements has been approved in
advance by the Majority Holders, (iii) Common Stock issued or the issuance or
grants of options to purchase Common Stock pursuant to the Company’s equity
incentive plans outstanding as they exist on the closing date of the Series A
Financing, (iv) the issuance or grants of options to purchase Common Stock to
employees, officers or directors of the Company pursuant to any equity incentive
plan duly adopted by the Board of Directors or a committee thereof established
for such purpose so long as such issuances in the aggregate do not exceed ten
percent (10)% of the issued and outstanding shares of Common Stock as of the
Closing Date and the specified price at which the options may be exercised is
equal to or greater than the VWAP as of the date of such grant (or the last
closing price in the event no VWAP is available), and (v) any warrants, shares
of Common Stock or other securities issued to a placement agent and its
designees for the transactions contemplated by the Series A Financing
Transaction Documents, the Series B Financing Transaction Documents or the
Purchase Agreement (each an “Exempt
Issuance”).
9
(b) Pro Rata
Distributions. If the Company, at any time after the Closing, shall
distribute to all holders of Common Stock (and not to Holders) evidences of its
indebtedness or assets or rights or warrants to subscribe for or purchase any
security, then in each such case the Conversion Ratio shall be determined by
multiplying such Conversion Ratio in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(c) Calculations. All
calculations under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any of its
subsidiaries. For purposes of this Section 7, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding treasury shares and
shares owned by subsidiaries, if any) actually issued and
outstanding.
(d) Notice to
Holders.
i. Adjustments. Whenever
an adjustment of the number of Conversion Shares or the Conversion Ratio is
required pursuant to any of this Section 7, the Company shall promptly mail to
each Holder a notice setting forth the number of Conversion Shares or the
Conversion Ratio after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
ii. Notices of Other
Events. If (A) the Company shall declare a redemption of the
Common Stock; (B) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; (C) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock or any Fundamental Transaction, (D) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then in each such case, the Company
shall cause to be filed at each office or agency maintained for the purpose of
conversion of the Series C Preferred Stock, and shall cause to be mailed to the
Holders at their last addresses as they shall appear upon the stock
books of the Company, at least 10 calendar days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification is expected to become effective or close,
and the date as of which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification or
Fundamental Transaction; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
10
Section
8. Miscellaneous.
(a) Transfer
Restriction. The Series C Preferred Stock is not
transferable except as between Affiliates and as between China Hand Fund I, LLC,
a limited liability company organized and existing under the laws of the State
of Delaware and Vicis Master Fund (“Vicis”), which shall
not be deemed Affiliate to China Hand based solely on this Section
8(a). Vicis may also transfer shares of Series C Preferred Stock to
its affiliates.
(b) Notices. Any
and all notices or other communications or deliveries to be provided by the
Holders hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service, addressed to the Company, at its principal
address as reflected in its most recent filing with the
Commission. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service addressed to each Holder at the facsimile telephone number or address of
such Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of the
Holder. Any notice or other communication or deliveries hereunder
shall be deemed given when received, and any notice by telecopier shall be
effective if confirmation of receipt is given by the party to whom the notice is
transmitted.
(c) Lost or Mutilated Preferred
Stock Certificate. If a Holder’s Series C Preferred Stock
certificate shall be mutilated, lost, stolen or destroyed, the Company shall
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated certificate, or in lieu of or in substitution for a lost, stolen or
destroyed certificate, a new certificate for the shares of Series C Preferred
Stock so mutilated, lost, stolen or destroyed but only upon receipt of evidence
of such loss, theft or destruction of such certificate, and of the ownership
thereof, and indemnity, if requested, all reasonably satisfactory to the
Company.
(d) Next Trading
Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Trading Day, such payment shall be made on the next
succeeding Trading Day.
(e) Headings. The
headings contained herein are for convenience only, do not constitute a part of
this Certificate and shall not be deemed to limit or affect any of the
provisions hereof.
(f) Amendment. This
Certificate constitutes an agreement between the Company and the Holders. For as
long as any shares of Series C Preferred Stock shall remain outstanding, there
terms hereof may be amended, modified, repealed or waived only by the
affirmative vote or written consent of holders of a majority of the then
outstanding shares of Series C Preferred Stock, voting together as a class and
series.
11
RESOLVED, FURTHER, that the
Chairman, the president or any vice-president, and the secretary or any
assistant secretary, of the Company be and they hereby are authorized and
directed to prepare and file a Certificate of Designation of Preferences, Rights
and Limitations in accordance with the foregoing resolution and the provisions
of Delaware law.
IN
WITNESS WHEREOF, the undersigned has executed this Certificate as of September
13, 2010.
| /s/ Yang Kan Chong | |
|
Name:
Yang Kan Chong
Title: Chairman
and Chief
Executive
Officer
|
12
ANNEX
A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES C
PREFERRED STOCK)
The undersigned hereby
elects to convert the number of shares of Series C Convertible Preferred
Stock indicated below, into shares of common stock, par value $0.001 per share
(the “Common
Stock”), of CHINA
NEW ENERGY GROUP COMPANY, a Delaware
corporation (the “Company”),
according to the conditions hereof, as of the date written below. If shares are
to be issued in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the Holder for any conversion, except for
such transfer taxes, if any.
Conversion
calculations:
|
Date
to Effect Conversion:
________________________________________
|
|
|
Number
of shares of Common Stock owned prior to Conversion:
_______________
|
|
|
Number
of shares of Series C Preferred Stock to be Converted:
________________
|
|
|
Value
of shares of Series C Preferred Stock to be Converted:
____________________
|
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
|
Certificate
Number of Series C Preferred Stock attached
hereto:_________________
|
|
|
Number
of Shares of Series C Preferred Stock represented by attached
certificate:_________
|
|
|
Number
of shares of Series C Preferred Stock subsequent to Conversion:
________________
|
|
[HOLDER]
|
|||
|
By:
|
|
||
|
Name:
|
|||
|
Title:
|
|||
13