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HF FOODS GROUP INC. : Entry into a Material Definitive Agreement, Financial Statements and Exhibits (form 8-K)

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06/25/2019 | 05:06pm EDT

Item 1.01. Entry Into a Material Definitive Agreement

On June 21, 2019, HF Foods Group Inc. ("HF") entered into a merger agreement (the "Merger Agreement") with B&R Group Merger Sub Inc., a wholly-owned subsidiary of HF (the "Merger Sub"), and B&R Global Holdings, Inc. ("B&R"), a leading Chinese food wholesaler and distributor operated by Chinese American serving approximately 6,800 restaurant customers in more than ten western states.

Acquisition of B&R; Acquisition Consideration

Upon the closing of the transactions contemplated in the Merger Agreement, Merger Sub will merge with and into B&R, resulting in B&R becoming a wholly owned subsidiary of HF. The former shareholders of B&R will receive 30,700,000 shares of HF common stock as consideration for the merger.

The parties agreed that immediately following the closing of the Acquisition, HF's board of directors will consist of no more than five directors. The parties will enter into a five (5) year voting agreement in the form attached as Exhibit D to the Merger Agreement, providing that, immediately after the Closing, (i) Zhou Min Ni, the current Chief Executive Officer of HF shall serve as a director and the chairman of the board; (ii) Xiao Mou Zhang, the current Chief Executive Officer of B&R shall serve as one director; (iii) Zhou Min Ni shall select one person to serve as an independent director, (iv) Xiao Mou Zhang shall select one person to serve as an independent director, (v) Zhou Min Ni and Xiao Mou Zhang shall jointly select one person to serve as an independent director.

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Stockholder Approval


Prior to the consummation of the merger, the holders of a majority of HF's common stock attending a stockholder's meeting (at which there is a quorum) must approve the transactions contemplated by the Merger Agreement (the "Stockholder Approval"). In connection with obtaining the Stockholder Approval, HF must call a special meeting of its common stockholders and must prepare and file with the SEC a Proxy Statement on Schedule 14A, which will be mailed to all stockholders entitled to vote at the meeting.

Representations and Warranties

In the Merger Agreement, B&R makes certain representations and warranties (with certain exceptions set forth in the disclosure schedule to the Merger Agreement) relating to, among other things: (a) proper corporate organization of B&R and its subsidiaries and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) absence of conflicts; (d) capital structure; (e) accuracy of charter and governing documents; (f) affiliate transactions; (g) required consents and approvals; (h) financial information; (i) absence of certain changes or events; (j) title to assets and properties; (k) material contracts; (l) insurance; (m) licenses and permits; (n) compliance with laws, including those relating to foreign corrupt practices and money laundering; (o) ownership of intellectual property; (p) employment and labor matters; (q) taxes and audits; (r) environmental matters; (s) brokers and finders; and (t) other customary representations and warranties.

In the Merger Agreement, HF makes certain representations and warranties relating to, among other things: (a) proper corporate organization and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) brokers and finders; (d) capital structure; (e) validity of share issuance; (f) SEC documents and financial statements; (g) certain business practices; (h) litigation; (i) money laundering laws and OFAC; and (h) corporate records.

Conduct Prior to Closing; Covenants

B&R has agreed to operate its business in the ordinary course prior to the closing of the Acquisition (with certain exceptions) and not to take certain specified actions without the prior written consent of HF.

HF has agreed to operate its business in the ordinary course prior to the closing of the Acquisition (with certain exceptions) and not to take certain specified actions without the prior written consent of B&R.

The Merger Agreement also contains certain customary covenants, including covenants relating to:



  ? Each party providing access to their books and records;




  ? Each party providing their best efforts to complete the transactions
    contemplated by the Merger Agreement; and




  ? B&R being required to deliver the financial statements required by HF to make
    applicable filings with the SEC.




Conditions to Closing



General Conditions



Consummation of the merger is conditioned on, among other things, (a) the absence of any order, stay, judgment or decree by any government agency; (b) the absence of any action brought by third-party non-affiliate to enjoin, modify, amend or prohibit the merger; and (c) the execution and delivery of the Additional Agreements as defined in the Merger Agreement.

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B&R's Conditions to Closing


The obligations of B&R to consummate the transactions contemplated by the Merger Agreement, in addition to the conditions described above, are conditioned upon, among other things, each of the following:



  ? HF complying with all of its obligations required to be performed pursuant to
    the covenants in the Merger Agreement;




  ? the representations and warranties of HF being true on and as of the closing
    date of the merger;




  ? absence of material adverse effect; and




  ? delivery of a closing certificate signed by the Chief Executive Officer and
    Chief Financial Officer of HF.




HF's Conditions to Closing



The obligations of HF to consummate the transactions contemplated by the Merger Agreement, in addition to the conditions described above in the first paragraph of this section, are conditioned upon, among other things, each of the following:



  ? B&R complying with all of its obligations required to be performed pursuant to
    the covenants in the Merger Agreement;




  ? the representations and warranties of HF being true on and as of the closing
    date of the merger;




  ? absence of material adverse effect;




  ? delivery of a closing certificate signed by the Chief Executive Officer and
    Chief Financial Officer of B&R, all required third party consents,
    governmental approvals, and updated disclosure schedules;




  ? B&R's completion of the Restructuring as defined in the Merger Agreement;




  ? HF completing its due diligence review of the B&R; and




  ? Approval by the majority of HF's stockholders.




Indemnification



B&R and its shareholders will jointly and severally indemnify HF for (a) any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties and covenants of B&R, (b) any actions by any third parties with respect to the business (including breach of contract claims, violations of warranties, trademark infringement, privacy violations, torts or consumer complaints) for any period on or prior to the closing date (c) the violation of any laws in connection with or with respect to the operation of the business on prior to the closing date, (d) any claims by any employee of B&R with respect to any period or event occurring on or prior to the closing date, (e) the failure of B&R to pay any taxes or to file any tax return with respect to any pre-closing period, or (f) any sales, use, transfer or similar tax imposed on HF as a result of any transaction contemplated by the Merger Agreement. The indemnification shall survive for a period of 12 months following the closing. 5% of the consideration shares will be held in escrow for purposes of satisfying the indemnification obligations of the stockholders, with such shares being valued at the time of such indemnification payment at the volume weighted average closing price of HF common stock on NASDAQ for the 20 trading days prior to such indemnification payment date.

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Termination


The Merger Agreement may be terminated and/or abandoned at any time prior to the closing by:



  ? the mutual written agreement of HF and B&R;




  ? HF, if the closing has not occurred on or prior to December 31, 2019, provided
    that HF is not in breach of any of its obligations under the Merger Agreement,
    or on 30 days notice if B&R is in material breach of the Merger Agreement; or




  ? B&R, if the closing has not occurred on or prior to December 31, 2019,
    provided that B&R is not in breach of any of their obligations under the
    Merger Agreement, or on 30 days notice if HF is in material breach of the
    Merger Agreement.



The foregoing summary of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the actual Merger Agreement which is filed as Exhibit 2.1 hereto, and which is incorporated by reference in this report. Terms used herein as defined terms and not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement.

Item 9.01. Financial Statements and Exhibits



(c)          Exhibits:



Exhibit No.   Description

2.1*           Merger Agreement dated as of June 21, 2019
99.1           Presentation dated June 2019
99.2           Press Release



*Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.

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© Edgar Online, source Glimpses

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