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
13, 2007
Puda
Coal, Inc.
(Exact
name of registrant as specified in its charter)
333-85306
(Commission
File Number)
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Florida
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65-1129912
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(State
or other jurisdiction of
incorporation)
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(I.R.S.
Employer Identification No.)
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426
Xuefu Street, Taiyuan, Shanxi Province,
The
People’s Republic of China
(Address
of principal executive offices, with zip code)
011
86 351 228 1302
(Registrant's
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
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 (see
General
Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement
On
September 13, 2007, Shanxi Putai Resources Limited (“Putai”), a wholly owned
subsidiary of Puda Coal, Inc. (the “Company”), exercised an option to acquire
90% of the total registered capital of Shanxi Puda Coal Group Co., Ltd. (“Shanxi
Coal”) at an acquisition price of RMB 20,250,000 (approximately $2,691,566),
pursuant to an Exclusive Option Agreement among Putai, Shanxi Coal and the
owners of Shanxi Coal, Zhao Ming and Zhao Yao, dated June 24, 2005. Upon the
option exercise, Putai entered into a Share Transfer Agreement with the owners
of Shanxi Coal, Zhao Ming and Zhao Yao, respectively. Pursuant to the Share
Transfer Agreements, Putai agrees to acquire (1) 72% of the total registered
capital of Shanxi Coal from Zhao Ming at a purchase price of RMB 16,200,000
and
(2) 18% of the total registered capital of Shanxi Coal from Zhao Yao at a
purchase price of RMB 4,050,000. Putai will pay the purchase price within three
months of the execution of the agreements. After the acquisition, Putai will
become a 90% owner of Shanxi Coal and Shanxi Coal will remain a fully
consolidated subsidiary of the Company. The closing of the acquisition will
occur on the date a Chinese government approval or confirmation with respect
to
the acquisition is received. A copy of each Share Transfer Agreement is filed
as
Exhibits 10.1 and 10.2 hereto and the description of the terms and conditions
of
the Share Transfer Agreements herein is modified and supplemented by such
reference.
Insofar
as Zhao Ming and Zhao Yao are principal stockholders of the Company, the audit
committee of the Company, being constituted solely of independent directors,
reviewed and approved the above transaction. The audit committee of the Company
determined that it was in the best interest of the Company and its stockholders
to have Putai exercise the option and acquire 90% of the registered capital
of
Shanxi Coal.
Zhao
Ming, a director, Chief Executive Officer, and 53% owner of the Company, together
with his brother, Zhao Yao, a 13% owner of the Company, are the only owners
of
Shanxi Coal and have an interest in the above transaction. Neither Zhao Ming
nor
Zhao Yao was present at the audit committee meeting or participated in the
board
of directors’ review or approval of the transaction in any manner.
Item
1.02 Termination of a Material Definitive Agreement.
In
connection with the exercise of the option, Putai agreed to terminate the
Exclusive Option Agreement as well as the Exclusive Consulting Agreement,
Operating Agreement, Technology License Agreement and Authorization
(collectively, the “Agreements”), each entered into on June 24, 2005 among
Putai, Shanxi Coal, and Zhao Ming and Zhao Yao, upon the receipt of the
government approval or confirmation with respect to Putai’s acquisition of 90%
of the total registered capital of Shanxi Coal. A copy of the termination
agreement is filed as Exhibits 10.3 hereto and the description of the terms
and
conditions of the agreement herein is modified and supplemented by such
reference.
Prior
to
the acquisition of Shanxi Coal, the Company’s operations were conducted
exclusively through Shanxi Coal, which was wholly owned by the Company’s Chief
Executive Officer, Zhao Ming (80%) and his brother Zhao Yao (20%), who is a
manager of the coal washing plants of Shanxi Coal, both of whom are PRC
citizens. The Company did not have a direct equity interest in Shanxi Coal,
however, through the Agreements, its wholly owned subsidiary Putai managed
and
controlled the operations of Shanxi Coal and received the economic benefits
of
Shanxi Coal and bore the risks derived from Shanxi Coal’s operations. Through
the Agreements, Putai was entitled to receive 100% of the net income of Shanxi
Coal, and Putai guaranteed the performance of all contracts, agreements and
transactions executed by Shanxi Coal and related to Shanxi Coal’s business. The
material terms of the Agreements are as following:
(i)
Exclusive Option Agreement.
Under
the
Exclusive Option Agreement, each of the holders of the registered capital of
Shanxi Coal granted Putai an irrevocable, exclusive right and option to acquire
all of the registered capital of Shanxi Coal at Putai’s sole and absolute
discretion for a purchase price equal to the actual capital contributions paid
in by the owners of Shanxi Coal. The amount of the registered capital of Shanxi
Coal as of the date of the Exclusive Option Agreement totaled RMB22,500,000
($2,717,000). This agreement had a term of 10 years and can be automatically
renewed at Putai’s election for an additional 10 years or any renewal term.
During the original or renewal term, Shanxi Coal and the Zhaos in their
individual capacities as parties to the agreement could not terminate the
agreement, but Putai had the right to terminate the agreement at any time with
30 days’ notice.
(ii)
Exclusive Consulting Agreement.
Under
the
Exclusive Consulting Agreement, Putai agreed to provide business consulting
services to Shanxi Coal as its exclusive business consulting services provider
and in turn, receive 30% of Shanxi Coal’s net income for each fiscal year. Any
intellectual property developed under this arrangement would become the property
of Putai. This agreement had a term of 10 years and can be automatically renewed
for an additional 10 years or any renewal term unless terminated. During the
initial or renewal term, this agreement may not be terminated by Shanxi Coal.
It
may be terminated by Putai at any time with 30 days notice.
(iii)
Operating Agreement.
Under
the
Operating Agreement, Putai agreed to guarantee the performance of contracts,
agreements and transactions executed by Shanxi Coal and in return, receive
50%
of Shanxi Coal’s net income for each fiscal year. Net income is calculated in
accordance with U.S. GAAP based on Shanxi Coal’s financial statements as
reviewed or audited by the auditors. This
agreement had a term of 10 years and should be automatically renewed for an
additional 10 years or any renewal term unless terminated. During the initial
or
renewal term of the agreement, the agreement could not be terminated by Shanxi
Coal or by Zhao Ming or Zhao Yao in their individual capacities as parties
to
the agreement. It may be terminated by Putai at any time with 30 days’ notice.
(iv)
Technology License Agreement.
Under
the
Technology License Agreement, Putai granted to Shanxi Coal a non-exclusive,
world-wide, revocable license to the water supported jig washing methods for
the
purpose of using, designing, developing and manufacturing derivative products,
providing services by applying derivative products, or selling or otherwise
distributing derivative products in designated markets. Shanxi Coal was
authorized to sub-license to any third party, provided that a prior written
approval from Putai has been obtained and a royalty sharing agreement has been
reached between Shanxi Coal and Putai for such sub-license. As royalty payment,
Shanxi Coal agreed to pay Putai $50,000 within 30 days after the execution
of
this agreement and 20% of Shanxi Coal’s net income for each fiscal year. Net
income was calculated in accordance with U.S. GAAP based on Shanxi Coal’s
financial statements as reviewed or audited by the auditors. This agreement
did
not have a fixed term. Shanxi Coal may not termiante this agreement, and Putai
had the right to termiante the agreement at any time with 30 days’ notice.
(v)
Authorization.
Putai
was
further authorized to exercise the voting rights of the holders of the
registered capital of Shanxi Coal and to act as the representative for such
holders in all matters with respect to Shanxi Coal’s registered capital,
including but not limited to, (i) appointment of Putai as the duly authorized
representative of such holders, (ii) participation in the meeting of the holders
and voting of the registered capital of Shanxi Coal, (iii) appointment of Shanxi
Coal’s directors, and (iv) audit the financial information of Shanxi Coal. This
authorization had a term of twenty years, and within three months prior to
the
expiration of the original term, Putai may elect to renew the authorization
for
an additional twenty years or any other renewal term.
The
Agreements were filed with the SEC on July 18, 2005 as exhibits to a Form 8-K
and the description of the terms and conditions of the Agreements herein is
modified and supplemented by such reference.
The
purpose of the Agreements was to establish the Company’s control over Shanxi
Coal, through Putai, via a contractual structure as opposed to direct equity
ownership. Once Putai’s acquisition of 90% of the total registered capital of
Shanxi Coal becomes effective upon the government approval and Putai gains
the
control of Shanxi Coal via direct equity ownership, the Agreements,
which will no longer be necessary for the control of Shanxi Coal, will
terminate.
Item
9.01 Financial
Statements and Exhibits.
(d)
Exhibits
The
exhibit listed in the following Exhibit Index is filed as part of this
report.
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Exhibit
No.
10.1
10.2
10.3
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Description
Share
Transfer Agreement, between Putai and Zhao Ming, dated September
13,
2007
Share
Transfer Agreement, between Putai and Zhao Yao, dated September 13,
2007
Agreement,
among Putai, Shanxi Coal, Zhao Ming and Zhao Yao, dated September
13,
2007
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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PUDA
COAL, INC.
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Date: September
18, 2007
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By:
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/s/ Ming
Zhao
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Ming
Zhao
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Chief
Executive Officer, President and Chairman of the
Board
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