Exhibit 10.1

 

SIDE AGREEMENT

This side agreement (this “Agreement”) is entered into as of August 4, 2016
between Keyuan Petrochemicals, Inc., a Nevada corporation (the “Company”), and
Delight Reward Limited, a British Virgin Islands company and a majority
shareholder of the Company (“Delight Reward”), as a side agreement to that
certain share purchase and settlement agreement that the Company, Delight
Reward, and other affiliated parties of the Company entered into with Dragon
State Limited (“Dragon State”) and others on July 11, 2016 (the “Settlement
Agreement”).

WHEREAS, immediately prior to the execution of the Settlement Agreement, Dragon
State was the holder of (1) 5,333,340 shares of Series B preferred stock of the
Company, par value $0.001 per share (the “Shares”), convertible a certain number
of shares of common stock, par value $0.001 per share (the “Common Stock”) (the
Common Stock that are convertible from the Shares, the “Convertible Shares”);
(2) 800,001 series C warrants to purchase 800,001 shares of the Company’s common
stock at a price of $4.50 per share (subject to adjustments); and (3) 800,001
series D warrants to purchase 800,001 shares of the Company’s Common Stock at a
price of $5.25 per share (subject to adjustments, together with series C
warrants, the “Warrants”);

WHEREAS, on October 28, 2014, Dragon State filed a complaint against, among
others, the Company and Mr. Chunfeng Tao, seeking rescission of the securities
purchase agreement dated September 28, 2010 pursuant to which Dragon State
purchased the Shares and Warrants (together, the “Purchased Securities”), and
the return of $20 million, and in the alternative, seeking monetary damages to
be determined at a trial but not less than $20 million (the “Complaint”);

WHEREAS, Delight Reward and the Company acknowledge, agree, and confirm that the
Warrants are not exercisable under their respective terms, and therefore have no
value;

WHEREAS, in consideration of the Company’s entry into the Settlement Agreement
and the payment made under the Settlement Agreement, Delight Reward and the
Company agreed that the Shares and the Warrants would be delivered to Delight
Reward, and in return Delight Reward would pay to the Company a fair market
value for such securities;

WHEREAS, pursuant to the Settlement Agreement, the Company and Delight Reward,
as applicable, agreed to cause Dragon State to be paid RMB 18 million to
purchase the Purchased Securities from Dragon State and to settle all other
claims made in the Complaint, such payments to be made within 10 business days
of the execution of the Settlement Agreement;

WHEREAS, the Company, together with Keyuan Group Limited, its wholly owned
subsidiary, paid an aggregate amount of RMB 18 million to Dragon State under the
Settlement Agreement and Dragon State delivered the Shares and Warrants at the
direction of the Company to Delight Reward;

WHEREAS, the parties hereto have deemed that it is fair and reasonable to
determine the purchase price per Convertible Share based upon the highest sale
price of the Company’s Common Stock, as reported on the Over-the-Counter (“OTC”)
Pink Marketplace during the period commencing on the date when the Settlement
Agreement was executed; and

 

WHEREAS, Delight Reward has agreed not to claim, or attempt to claim for any
reason and in any circumstance, that the Warrants are exercisable.

Now, therefore, in consideration of the mutual agreements contained in this
Agreement, and for other good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:

 

 

ARTICLE I.

PURCHASE

 

The Company has paid all necessary amounts under the Settlement Agreement, and
Delight Reward has received the Purchased Securities pursuant to the Settlement
Agreement, and Delight Reward shall pay to the Company for each Convertible
Share the highest sale price of the Company’s Common Stock per share as reported
on the OTC Pink Marketplace during a period commencing on the date of the
Settlement Agreement (the aggregate amount for all Convertible Shares, the
“Purchase Price”).

 

ARTICLE II.

PAYMENT

 

Delight Reward shall pay the Purchase Price within 10 days of the date hereof in
US dollars or its equivalent in RMB (based on the interbank USD/RMB exchange
rate published by the People’s Bank of China at the date when the Settlement
Agreement was executed).

ARTICLE III.

REPRESENTATION AND WARRANTIES OF DELIGHT REWARD

Delight Reward hereby represents and warrants to the Company that:

Section 3. 1                 Existence.

Delight Reward is duly organized and validly existing and in good standing under
the laws of its jurisdiction of organization, with all requisite power and
authority to own, lease, use and operate its properties and to conduct its
business as currently conducted.

Section 3. 2                 Authorization, Enforceability.

Delight Reward has all necessary corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery and performance by
Delight Reward of this Agreement has been duly authorized by all necessary
action on the part of Delight Reward; and this Agreement constitutes the legal,
valid and binding obligations of Delight Reward, enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer and similar laws affecting creditors’ rights
generally or by general principles of equity, including principles of commercial
reasonableness, fair dealing and good faith.

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Section 3.3                  No Breach.

The execution, delivery and performance of this Agreement by Delight Reward and
the consummation by Delight Reward of the transactions contemplated hereby does
not and will not (a) conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any material
agreement to which Delight Reward is a party or by which Delight Reward is bound
or to which any of property or assets of Delight Reward is subject, (b) conflict
with or result in any violation of the provisions of the organizational
documents of Delight Reward, or (c) violate any statute, order, rule or
regulation of any court or governmental agency or body having jurisdiction over
Delight Reward or the property or assets of Delight Reward, except in the cases
of clauses (a) and (c), for such conflicts, breaches, violations or defaults as
would not prevent the consummation of the transactions contemplated by this
Agreement.

Section 3.4                  Certain Fees.

No fees or commissions are or will be payable by Delight Reward to brokers,
finders, or investment bankers with respect to the purchase of the Purchased
Securities, or the consummation of the transaction contemplated by this
Agreement. Delight Reward agrees that it will indemnify and hold harmless the
Company from and against any and all claims, demands, or liabilities for
broker’s, finder’s, placement, or other similar fees or commissions incurred by
Delight Reward in connection with the purchase of the Purchased Securities or
the consummation of the transactions contemplated by this Agreement.

Section 3.5                  Investment.

The Shares and Warrants are being acquired for Delight Reward’s own account, not
as a nominee or agent, and with no present intention of distributing the
Purchased Securities or the Convertible Shares or any part thereof, and Delight
Reward has no present intention of selling or granting any participation in or
otherwise distributing the same in any transaction in violation of the
securities laws of the United States or other jurisdiction, without prejudice,
however, to Delight Reward’s right at all times to sell or otherwise dispose of
all or any part of the Purchased Securities or the Convertible Shares under a
registration statement under the Securities Act of 1933, as amended (the
“Securities Act”), and applicable state securities laws or under an exemption
from such registration available thereunder (including, if available, the rules
and regulations of the U.S. Securities and Exchange Commission promulgated under
the Securities Act by which securities may be sold without filing a registration
statement which are referred herein as the “Registration Exemptions”). Delight
Reward was not formed for the purpose of acquiring any of the Shares, the
Warrants or the Convertible Shares. If Delight Reward should in the future
decide to dispose of any of the Shares, Warrants or Convertible Shares, Delight
Reward understands and agrees (a) that it may do so only in compliance with the
Securities Act and applicable state or other securities laws, as then in effect,
including a sale contemplated by any registration statement pursuant to which
such securities are being offered, or pursuant to an exemption from the
Securities Act, and (b) that stop-transfer instructions to that effect may be in
effect with respect to such securities.

Section 3.6                  Nature of Purchaser.

Delight Reward represents and warrants to, and covenants and agrees with, the
Company that, (i) it is an “accredited investor” within the meaning of Rule 501
of Regulation D promulgated by the United States Securities and Exchange
Commission pursuant to the Securities Act (the “Regulation D”), (ii) by reason
of its business and financial experience it has such knowledge, sophistication
and experience in making similar investments and in business and financial
matters generally so as to be capable of evaluating the merits and risks of the
prospective investment in the Purchased Securities and Convertible Shares, (iii)
was advised by the Company to obtain United States counsel, either obtained
United States counsel or had a full and fair opportunity and the means to obtain
United States counsel, and (iv) is able to bear the economic risk of such
investment and, at the present time, would be able to afford a complete loss of
such investment.

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Section 3.7                  Restricted Securities; Affiliate Status.

Delight Reward understands that the Purchased Securities and the Convertible
Shares may be characterized as “restricted securities” under the Securities Act
inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act only in certain limited
circumstances. In this connection, Delight Reward represents that it is a
sophisticated party knowledgeable with respect to Registration Exemptions.
Delight Reward (i) acknowledges that Delight Reward is deemed an “affiliate” of
the Company under the Securities Act, (ii) acknowledges that it understands the
additional restrictions under the Securities Act applicable to affiliates of the
Company, and (iii) either (a) confirms having discussed such restrictions with
United States securities counsel or (b) acknowledges that it had both the means
and a full and fair opportunity to obtain United States securities counsel and
discuss such restrictions prior to entering into this Agreement.

Section 3.8                  Legend.

Delight Reward understands that any certificates or statements evidencing any
Purchased Securities or the Convertible Shares may bear a legend in
substantially the following form (or a legend that provides a similar type
disclaimer): “These securities have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”). These securities may not be sold or
offered for sale except pursuant to an effective registration statement under
the Securities Act or pursuant to an exemption from registration thereunder, in
each case in accordance with all applicable securities laws of the states or
other jurisdictions, and in the case of a transaction exempt from registration,
such securities may only be transferred if the Company and transfer agent for
such securities has received documentation satisfactory to it that such
transaction does not require registration under the Securities Act.”

Section 3.9                  Short Selling.

Delight Reward has not entered into or effected any short sales of the Common
Stock owned by it between the time it first began discussion with the Company
about the transactions contemplated by this Agreement and the date hereof.

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Section 3.10                No General Solicitation or General Advertising.

Delight Reward is not aware of any form of general solicitation or general
advertising (within the meaning of Regulation D) in respect of the Purchased
Securities, including (1) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television, radio, or the internet; and (2) any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising).

Section 3.11                Broker-Dealer Status.

Delight Reward is not a broker dealer registered under Section 15(a) of the
Exchange Act, or a member of Financial Industry Regulatory Authority, Inc. or an
entity engaged in the business of being a broker-dealer.

Section 3.12               Offering Materials.

Delight Reward did not receive from the Company or its agent any offering
materials or other documents in connection with offers and sales of the
Purchased Securities.

Section 3.13                Bad Actor.

Delight Reward and its beneficial owners of 20% or more of the Company’s
outstanding voting equity securities, calculated on the basis of voting power
(each, a “Covered Person”) is not subject to any of the “Bad Actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a “Disqualification Event”), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3) under the Securities Act. Delight Reward has exercised
reasonable care to determine whether any Covered Person is subject to a
Disqualification Event. The purchase of the Purchased Securities or the
conversion of the Shares by Delight Reward will not subject the Company to any
Disqualification Event. Delight Reward acknowledges that it is aware of the
settlement between the Company and the U.S. Securities and Exchange Commission,
which was approved by the United District Court for the District of Columbia on
July 2, 2013, which may have triggered disqualification under Rule 506(d)(1)
under the Securities Act but occurred before September 23, 2013.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser as follows:

Section 4.1                  Due Authorization.

This Agreement has been duly and validly authorized, and constitutes the legal,
valid and binding obligations of the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and by general principles of equity, including principles of
commercial reasonableness, fair dealing and good faith.

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Section 4.2                 Valid Issuance; No Preemptive Rights.

Each of (i) the Shares have been, and, (ii) upon the due conversion of Shares,
the Convertible Shares shall be, duly authorized in accordance with the articles
of incorporation of the Company and, when issued and delivered upon conversion
into shares of Common Stock, such Common Stock, will be validly issued, fully
paid and non-assessable.

Section 4.3                  No Integration.

Neither the Company nor any person, or any other person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with, the Company, has, directly or indirectly through any
agent, sold, offered for sale, solicited offers to buy or otherwise negotiated
in respect of, any “security” (as defined in the Securities Act) that is or will
be integrated with the sale of the Purchased Securities in a manner that would
require registration under the Securities Act.

Section 4.4                  No General Solicitation or General Advertising.

Neither the Company nor any Person acting on behalf of the Company has offered
or sold any of the Purchased Securities by any form of general solicitation or
general advertising (within the meaning of Regulation D, and including (1) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television, radio, or
the internet; and (2) any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising).

Section 4.5                  Certain Fees.

There are no fees or commissions are or will be payable by the Company to
brokers, finders, or investment bankers with respect to the sale and purchase of
any of the Purchased Securities or the issuance of the Convertible Shares or the
consummation of the transaction contemplated by this Agreement.

Section 4.6                  Offering Materials.

Neither the Company nor any agents of the Company provided Delight Reward with
any offering materials or any other documents in connection with offer and sale
of the Purchased Securities.

Section 4.7                  Bad Actor.

The Company and its officers and directors are not subject to any
Disqualification Event except for a Disqualification Event covered by Rule
506(d)(2) or (d)(3) under the Securities Act. Delight Reward has exercised
reasonable care to determine whether any Covered Person is subject to a
Disqualification Event. The Company is a party of a settlement, which would
potentially have triggered disqualification under Rule 506(d)(1) under the
Securities Act but occurred before September 23, 2013.

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ARTICLE V.

COVENANTS

Section 5.1                  No Exercise of Warrants.

Delight Reward agrees, confirms and acknowledges that the Warrants are not
exercisable, and it will not claim or demand, or attempt to claim or demand for
any reason and in any circumstance that the Warrants are exercisable.

Section 5.2                  Taking of Necessary Action.

Each of the parties hereto shall use its commercially reasonable efforts
promptly to take or cause to be taken all action and promptly to do or cause to
be done all things necessary, proper or advisable under law to consummate and
make effective the transactions contemplated by this Agreement.

ARTICLE VI.

MISCELLANEOUS

Section 6.1                  Communications.

All notices and demands provided for hereunder shall be in writing and shall be
given by mail, facsimile, air courier guaranteeing overnight delivery or
personal delivery to the following addresses:

(i)                If to Delight Reward

Delight Reward Limited

Uni8te 06, 21/F Beautiful Group Tower

77 Connaught Road Central, Hong Kong

Attn: Chunfeng Tao

Facsimile: +86 0574 86232618

 

(ii)               If to the Company:

Keyuan Petrochemicals, Inc.
c/o Ningbo Keyuan Plastics Co., Ltd. 

No. 98 Gangkou Road,

Qijiashan, Beilun District, Ningbo City,

Zhejiang Province, China 315803

Attention: Feng Chen

Facsimile: +86 0574 86232616

 

or to such other address as the Company or the Delight Reward may designate in
writing. All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; upon actual receipt if
sent by registered or certified mail, return receipt requested, or regular mail,
if mailed; when receipt acknowledged, if sent via facsimile; and upon actual
receipt when delivered to an air courier guaranteeing overnight delivery.

Section 6.3                  Governing Law.

This Agreement will be construed in accordance with and governed by the laws of
the State of New York without regard to conflicts of laws principles. Any
controversy, dispute or claim arising out of or in connection with this
Agreement (including, without limitation, the existence, validity,
interpretation or breach hereof and any claim based on contract, tort of
statute) may be brought in any New York State or federal court.

Section 6.4                  Execution in Counterparts.

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same agreement.
Facsimile or electronic (i.e., PDF) signatures shall be as effective as original
signatures.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Company and Delight Reward have caused this Agreement to
be executed by duly authorized persons as of the date first written above.

  Keyuan Petrochemicals, Inc.       By: /s/ Feng Chen   Name:
Title: Feng Chen
Chief Executive Officer         Delight Reward Limited       By: /s/ Chunfeng
Tao   Name:
Title: Chunfeng Tao
Director

 

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