Item 1.01 Entry into a Material Definitive Agreement.
On December 22, 2020, Shanghai TCH Energy Technology Co., Ltd., a People's
Republic of China corporation ("Buyer"), which is a wholly-owned subsidiary of
China Resources Energy Corporation, a Nevada corporation (the "Company"),
entered into an Equity Acquisition Agreement with Xi'an Yaiying Energy Saving
Technology Co., Ltd., a People's Republic of China corporation ("Xi'an") and its
three shareholders (the "Shareholders") to purchase all of the issued and
outstanding shares of stock of Xi'an. The purchase price for said shares shall
consist of (i) 619,525 shares of common stock at an issuance price of $4.37 per
share, (ii) 60,000,000 shares of Series A convertible stock and (iii) a cash
payment of RMB 1,617,867,026 (approximately $247 million at a conversion rate of
1:6.55). The shares shall be issued within 15 business days after approval by
the Board of Directors and/or shareholders of the Company and Nasdaq approval
and the cash shall be paid in three tranches - RMB 390 million (approximately
$59.5 million) within 10 days after the agreement is executed, RMB 300 million
(approximately $45.8 million) by March 31, 2021 and RMB 927,867,026
(approximately $141.7 million) within 10 days after the shares of Xi'an are
registered to Buyer.
Xi'an is an enterprise with power battery and energy storage battery packs.
Xi'an vertically integrates the industrial chain and develops and manufactures
core components such as lithium battery modules, battery pack, battery
management system and energy management systems.
The Series A preferred convertible stock shall be convertible on a 1:1 basis
when the closing price of the common stock exceeds $8.00 for five consecutive
trading days. The convertible stock shall have no voting rights prior to
conversion to common stock, and priority upon liquidation or dissolution of the
Company. If the Company declares a dividend on its common stock, the Series A
convertible stock shall receive a 15% premium on such dividend.
The conversion right can only be exercised if after such conversion, the
Shareholders beneficially own less than Mr. Guohua Ku, the Chairman and Chief
Executive Officer of the Company who is the largest shareholder of the Company.
If the pre-conversion of the Series A convertible stock would cause the
Shareholders to hold more common shares than Mr. Ku, then Mr. Ku shall have the
preemptive right to purchase 51% of the excess portion at the conversion price,
after which the preferred stock can then be converted to common stock of the
Company.
Upon execution of the Equity Acquisition Agreement, Buyer shall have the right
to nominate the three directors of the Board of Directors and the three
supervisors of the Board of Supervisors of Xi'an. Buyer shall also have the
right to appoint the principal executive officers of Xi'an.
Until the closing of the acquisition, if Xi'an intends to carry out major asset
disposals or distribute profits, the opinion of Buyer must first be obtained,
and if Buyer does not agree, the Shareholders have the right to object as
shareholders of Xi'an. If a profit distribution is made in cash, the transaction
price shall be adjusted accordingly.
The parties agreed to cooperate to complete the relevant procedures for
consummating the transaction, including without limitation, obtaining Board of
Directors and/or shareholder approval from the Company, Nasdaq approval, the
financial information of Xi'an and [any approval from Chinese authorities
required for closing?]
Xi'an and the Shareholders guaranteed that within three years of the
acquisition, the senior executives of Xi'an will not leave their jobs without
the written consent of Buyer.
The foregoing description of the Equity Acquisition Agreement is qualified in
its entirety by reference to the full text of such document, a copy of which is
attached hereto as Exhibit 10.45. All statements made herein concerning said
agreement is qualified by reference to said Exhibit.
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Item 7.01 Regulation FD Disclosure.
On December 28, 2020, the Company issued a press release announcing the
acquisition. The text of the press release is furnished as Exhibit 99.1 and
incorporated herein by reference.
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K includes information that may constitute
forward-looking statements. These forward-looking statements are based on the
Company's current beliefs, assumptions and expectations regarding future events,
which in turn are based on information currently available to the Company. By
their nature, forward-looking statements address matters that are subject to
risks and uncertainties. Forward looking statements include, without limitation,
statements relating to projected industry growth rates, the Company's current
growth rates and the Company's present and future cash flow position. A variety
of factors could cause actual events and results, as well as the Company's
expectations, to differ materially from those expressed in or contemplated by
the forward-looking statements. Risk factors affecting the Company are discussed
in detail in the Company's filings with the Securities and Exchange Commission.
The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise, except to the extent required by applicable securities laws.
The information in Item 7.01 to this Current Report on Form 8-K, including
Exhibit 99.1 is being furnished and shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended, except
as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(a) The financial statements of Xi'an will be filed by an amendment to this
Current Report on Form 8-K no later than 71 calendar days after December 22,
2020, the due date of this Report.
(d) Exhibits
Exhibit No. Description of Exhibit
Exhibit 10.43 Equity Acquisition Agreement dated December 22, 2020 among Shanghai
TCH Energy Technology Co., Ltd., Zheng Feng, Yinhua Zhang, Weidong Xu
and Xi'an Taiying Energy Saving Technology Co., Ltd.
Exhibit 99.1 Press Release
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