NOTE SUBSCRIPTION AND AMENDMENT AGREEMENT
Exhibit
10.1
This NOTE
SUBSCRIPTION AND AMENDMENT AGREEMENT is dated as of April 29, 2009 (the “Agreement”), and is entered
into in connection with that certain Stock and Notes Purchase Agreement, dated
as of November 16, 2007, as amended April 29, 2008 (the “Purchase Agreement”), by and
among China Recycling Energy Corporation, a Nevada corporation (the “Company”) and Carlyle Asia
Growth Partners III, L.P., a limited partnership organized under the laws of the
Cayman Islands (“CAGP”),
and CAGP III Co-Investment, L.P., a limited partnership organized under the laws
of the Cayman Islands (together with CAGP, each, an “Investor” and collectively,
the “Investors”). All
capitalized terms used but not defined herein shall have the meaning ascribed to
them in the Purchase Agreement.
RECITALS
WHEREAS,
the Company and the Investors have agreed (A) that Investors shall subscribe for
an 8% secured convertible promissory note in the principal amount of $3,000,000
(the “$3,000,000 Note”),
in the form attached hereto as Attachment 1 and (B)
to amend and restate the 5% secured convertible promissory note in the principal
amount of $5,000,000 issued at the Second Closing under the Purchase Agreement
(the “$5,000,000 Note”)
in the form attached hereto as Attachment 2 (the
“Amended and Restated Second
Note”). The closing of such subscription and amendment is
hereinafter referred to as the “Subscription and Amendment
Closing”;
WHEREAS,
the Company and the Investors have decided to amend the Purchase Agreement to
provide for said transactions; and
WHEREAS,
the parties intend for the Subscription and Amendment Closing to take place
simultaneously with the execution and delivery of this Agreement.
WITNESSETH
NOW
THEREFORE, in consideration of the above recitals and promises made in this
Agreement, the parties hereby agree as follows:
SECTION
1. Subscription
and Amendment Closing. At the Subscription and Amendment
Closing:
1.1 the
Company shall execute and deliver
(A) the
Amended and Restated Second Note;
(B) the
$3,000,000 Note;
1.2 the
Investors shall
(A) advance
the principal amount of the $3,000,000 Note in immediately available funds to
the Company;
(B) deliver
the original $5,000,000 Note to the Company to be replaced with the Amended and
Restated Second Note;
1.3 At
the Subscription and Amendment Closing, the Company shall deliver an officer’s
certificate (“Officer’s
Certificate”), together with such other documentation reasonably
requested by the Investors, certifying (A) that the Company has closed a
subscription for $2,000,000 of common shares with Great Essential Investment,
Ltd.; (B) the draw down of RMB 20M loan from 兴业 Bank; and (C)
the construction/operation of the JinYang 声威 project in
accordance with Attachment A to the Officer's Certificate.
SECTION
2. Status of
Notes and Closing. The parties hereby agree that the
$3,000,000 Note and the Amended and Restated Second Note shall each constitute
one of the “Notes” for all purposes under the Purchase Agreement and the other
Transaction Documents and this Agreement shall constitute a “Transaction
Document” for all purposes under the Purchase Agreement. Furthermore,
the parties hereby agree that Subscription and Amendment Closing shall be deemed
a “Closing” for all purposes under the Purchase Agreement, including, but not
limited to, Section 3 thereof, and any reference to “Closing” under the Purchase
Agreement shall mean any of the Initial Closing, the Second Closing or
Subscription and Amendment Closing, as the context requires.
SECTION
3. Representations
and Warranties.
3.1 Purchase
Agreement Representations. The Company represents and warrants
to the Investors that the representations and warranties set forth in the
Purchase Agreement (after giving effect to the amendments to the representations
and warranties set forth in Section 3.2, Section 3.3(b), Section 3.10(a) and
Section 3.15 of the Purchase Agreement pursuant to Section 3.2, Section 3.3, Section 3.4 and Section 3.5 hereof,
and to the Updated Disclosure Schedules in the form attached hereto as Attachment 3) are
true, complete and not misleading as of the date of the Subscription and
Amendment Closing. For the avoidable of doubt, the representations
and warranties set forth in Section 3.4 and 3.5 of the Purchase Agreement with
respect to the Notes and the Conversion Shares shall apply to the $3,000,000
Note and the Amended and Restated Second Note (which instruments shall
constitute “Notes” for all purposes under the Purchase Agreement in accordance
with Section 2
above).
3.2 Amendment
to Section 3.2. The parties hereby agree that Section 3.2(a) and Section
3.2(b) of the Purchase Agreement is deleted in its entirety and replaced with
the following:
“3.2 Capitalization and Voting
Rights.
(a) As
of the date of this Agreement, the authorized capital of the Company
consists of 100,000,000 shares of Common Stock, of which (i) 38,778,035 shares
of Common Stock are currently issued and outstanding, (ii) 3,000,000 shares of
Common Stock are subject to Management Stock Options under the Management
Incentive Plan, and (iii) there are no other capital stock issued or
authorized.”
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Sections
3.2(c), (d) and (e) of the Purchase Agreement shall be renumbered
accordingly.
3.3 Amendment
to Section 3.3. The parties hereby agree that Section 3.3(b) is deleted
in its entirety and replaced with “Intentionally Omitted”.
3.4 Amendment
to Section 3.10(a). The parties hereby agree that the first
sentence of Section 3.10(a) of the Purchase Agreement is deleted in its entirety
and replaced with the following:
“(a) The
Company has delivered to the Investors and/or filed with the SEC, the audited
consolidated balance sheet, and consolidated statements of operations and cash
flows of the Company Group for (i) the year ended December 31, 2006, December
31, 2007, and December 31, 2008 (ii) the unaudited monthly financial statements
of TCH for the nine (9)-month period ended September 30, 2007, and (iii)
quarterly financial statements of the remaining members of the Company Group for
the nine (9)-month period ended September 30, 2007 (collectively, the financial
statements referred to in clauses (i), (ii) and (iii), the “Financial
Statements”).”
3.5 Amendment
to Section 3.15. The parties
hereby agree that Section 3.15 of the Purchase Agreement is deleted in its
entirety and replaced with the following:
“Indebtedness. All
Indebtedness represented by the Notes is being incurred for proper purposes and
in good faith. Based on the financial condition of the Company as of
the date of this Agreement, and after giving effect to the transactions
contemplated by this Agreement and the Transaction Documents, (a) the fair
saleable value of the Company Group’s assets taken as a whole exceeds the amount
that will be required to be paid on or in respect of the Company Group’s
existing debts and other liabilities (including contingent liabilities) as they
mature; (b) the present fair saleable value of the assets of the Company Group
taken as a whole is greater than the amount that will be required to pay the
probable liabilities of the Company Group on their respective debt as they
become absolute and mature, and (c) the Company Group taken as a whole are able
to realize upon their assets and pay their debt and other liabilities
(including contingent obligations) as they mature; (d) the Company Group’s
assets taken as a whole do not constitute unreasonably small capital to carry on
their respective businesses as now conducted and as proposed to be conducted
including their respective capital needs taking into account the particular
capital requirements of the business conducted by the Company Group, and
projected capital requirements and capital availability thereof; and (e) the
current cash flow of each of member of the Company Group, together with the
proceeds the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its liabilities when such amounts are
required to be paid. No member of the Company Group intends to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its
debt). No member of the Company Group is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
such member of the Company Group, or any other agreement (including, but not
limited to, its Charter Documents) which limits the amount of, or otherwise
imposes restrictions on the incurring of, Indebtedness by such member of the
Company Group. The SEC Reports sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. None of
the Company Group is, or has reason to believe it is likely to be, in default
with respect to such Indebtedness and no waiver of default is currently in
effect. The Company Group has no Knowledge of any facts or
circumstances which lead it to believe that any member of the Company Group will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing.”
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SECTION
4. Miscellaneous.
4.1 Further
Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby, including, without limitation, amending the other
Transaction Documents, and to carry into effect the intents and purposes of this
Agreement.
4.2 Rights
Cumulative. Each and all of the various rights, powers and
remedies of the parties hereto shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or
remedy shall neither constitute the exclusive election thereof nor the waiver of
any other right, power or remedy available to such party.
4.3 Number
and Gender. All words and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require or as otherwise
appropriate in view of their context.
4.4 Captions. Captions
are provided herein for convenience only and they are not to serve as a basis
for interpretation or construction of this Agreement, nor as evidence of the
intention of the parties hereto.
4.5 Severability. The
provisions of this Agreement are severable. The invalidity, in whole
or in part, of any provision of this Agreement shall not affect the validity or
enforceability of any other of its provisions. If one or more
provisions hereof shall be declared invalid or unenforceable, the remaining
provisions shall remain in full force and effect and shall be construed in the
broadest possible manner to effectuate the purposes hereof. The
parties further agree to replace such void or unenforceable provisions of this
Agreement with valid and enforceable provisions that will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provisions.
4.6 Attorneys’
Fees. In any action at law or in equity to enforce any of the
provisions or rights under this Agreement, the unsuccessful party to such
litigation, as determined by the court in a final judgment or decree, shall pay
the successful party all costs, expenses and reasonable attorney’s fees, as set
by the court and not by a jury, incurred by the successful party (including,
without limitation, costs, expenses and fees on any appeal).
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4.7 Counterparts. This
Agreement may be executed in separate counterparts, each of which shall be
deemed as an original; when executed, separately or together, all of such
counterparts shall constitute a single original instrument, effective in the
same manner as if all parties hereto had executed one and the same
instrument.
4.8 Entire
Agreement. This Agreement together with the Purchase Agreement
and the other Transaction Documents are intended by the parties hereto to be the
final expression of their agreement and constitutes and embodies the entire
agreement and understanding between the parties hereto with regard to the
subject matter hereof and is a complete and exclusive statement of the terms and
conditions thereof, and shall supersede any and all prior oral and written
correspondences, conversations, negotiations, agreements and understandings
relating to the same subject matter.
4.9 Amendment. Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each of the parties
hereto.
4.10 Delays or
Omissions. No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such
writing. All remedies under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.
4.11 Waiver
and Extension of Time. Any party hereto may by a writing
signed by an authorized representative of such party: (i) extend the time for
the performance of any of the obligations of another party; (ii) waive any
inaccuracies in representations and warranties made by another party contained
in this Agreement or in any documents delivered pursuant hereto; (iii) waive
compliance by another party with any of the covenants contained in this
Agreement or the performance of any obligations of such other party; or (iv)
waive the fulfillment of any condition that is precedent to the performance by
such party of any of its obligations under this Agreement. No waiver
of any term, provision or condition of this Agreement, in any one or more
instances, shall be deemed to be, or be construed as, a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.
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4.12 Governing
Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.
4.13 United
States Dollars. All references to “$” or dollars in this
Agreement shall refer to the currency of the United States.
4.14 Successors
and Assigns. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties hereto whose rights or
obligations hereunder are affected by such terms and conditions. This
Agreement, and the rights and obligations hereunder, shall not be assigned
without the mutual written consent of the parties hereto, provided that each
Investor may assign its rights and obligations to an Affiliate of such Investor
without consent of the other parties under this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
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IN WITNESS WHEREOF, the
parties hereto have executed this Agreement with the intent and agreement that
the same shall be effective as of the day and year first above
written.
THE
COMPANY:
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Name:
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Title:
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THE
INVESTORS:
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For
and on behalf of:
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CARLYLE
ASIA GROWTH PARTNERS III, L.P.
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By:
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Name:
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Title:
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For
and on behalf of:
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CAGP
III CO-INVESTMENT, L.P.
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By:
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Name:
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Title:
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