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): July 8, 2020 (July 4, 2020)
| SENMIAO TECHNOLOGY LIMITED |
| (Exact name of registrant as specified in its charter) |
| Nevada | 001-38426 | 35-2600898 | ||
|
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
|
16F, Shihao Square, Middle Jiannan Blvd. High-Tech Zone, Chengdu Sichuan, People’s Republic of China |
610000 |
|
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: +86 28 61554399
| 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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 per share | AIHS | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Item 1.01 | Entry into a Material Definitive Agreement. |
On July 4, 2020, Hunan Ruixi Financial Leasing Co., Ltd. (“Hunan Ruixi”), a majority owned subsidiary of Senmiao Technology Limited (the “Company”), Sichuan Jinkailong Automobile Leasing Co., Ltd. (“Jinkailong), a Chinese limited liability company in which Hunan Ruixi owns a 35% equity interest and controls the remaining 65% equity interest through voting agreements with the other shareholders (the “Voting Agreements”), and the other shareholders of Jinkailong entered into an agreement (the “JKL Investment Agreement”) with Hongyi Industrial Group Co., Ltd. (“Hongyi”), a group company focusing on real estate and industrial investment which is an affiliate of the largest shareholder of Chengdu Road & Bridge Engineering Co., Ltd., a construction engineering company publicly listed on the A-Share market in China. Jinkailong is an automobile transaction and related services company in Chengdu City, Sichuan Province, China, which primarily facilitates automobile sales and financing transactions to drivers in the ride-hailing service sector and provides relevant after-transaction services and car rental services.
Pursuant to the JKL Investment Agreement, Jinkailong agreed to issue and Hongyi agreed to subscribe for a 27.66% equity interest in Jinkailong in consideration of RMB50 million (approximately $7.1 million) (the “Investment”). The Investment will be made in two payments: (i) the first payment of RMB10 million (approximately $1.4 million) is due no later than September 30, 2020 and (ii) the remaining RMB40 million (approximately $5.7 million) is due within 30 days after the record-filing of the Investment has been made with the local PRC government and the other shareholders of Jinkailong having made their respective capital contributions in full in cash, but no later than December 31, 2020. As a result, Hunan Ruixi will be required to pay RMB3.5 million (approximately $0.5 million) to Jinkailong as a capital contribution. Upon the full payment of the consideration, the Investment will be deemed to be closed (the “Closing”).
As a result of the Investment, the original shareholders’ ownership percentage will be proportionally diluted but Hunan Ruixi will continue to control Jinkailong pursuant to the Voting Agreements.
The JKL Investment Agreement sets performance targets for Jinkailong during a three-year performance commitment period following the Closing. During the performance commitment period, Jinkailong has agreed, and its original shareholders have agreed to cause Jinkailong, to seek to achieve annual revenue for Jinkailong of no less than RMB52 million (approximately $7.4 million), RMB90 million (approximately $12.7 million) and RMB110 million (approximately $15.6 million), respectively, and annual net profit of no less than RMB10 million (approximately $1.4 million), RMB20 million (approximately $2.8 million) and RMB25 million (approximately $3.5 million), respectively, during the first, second and third year of the performance commitment period.
The JKL Investment Agreement also provides Hongyi certain shareholder rights, including, but not limited to, the right to receive any undistributed dividends, a right of first refusal for any equity transfer from the other shareholders of Jinkailong, a tag-along right during the performance commitment period, anti-dilution rights, redemption rights, subscription rights and priority in liquidation or dissolution of Jinkailong. Specifically, pursuant to the redemption right provision in the JKL Investment Agreement, in the event that Jinkailong (i) fails to become public through an IPO for a valuation of no less than RMB350 million (approximately $49.5 million) or merge with a public company for a valuation of no less than RMB300 million (approximately $42.5 million) within the six months following the performance commitment period, (ii) fails to achieve an accumulated net profit of RMB24 million (approximately $3.4 million) for the first two years of the performance commitment period or a net profit of RMB20 million (approximately $2.9 million) for the third year of the performance commitment period, or (iii) has any material and adverse change to its core business, including but not limited to being included in the list of dishonest persons and loss of over one third of its online ride-hailing taxi operating licenses, as well as bankruptcy, liquidation or cessation of operations, Hongyi shall have the right to require certain shareholders of Jinkailong (including Hunan Ruixi) to repurchase all of its equity interest in Jinkailong. Based on a repurchase formula provided for in the JKL Investment Agreement, the maximum repurchase amount that Hunan Ruixi would be subject to is RMB28,320,000 (approximately $4.0 million).
Under the JKL Investment Agreement, the other shareholders of Jinkailong, except one individual shareholder, are prohibited from disposing of their equity interest in Jinkailong until six months after the performance commitment period. In addition, all parties have acknowledged and agreed to comply with relevant U.S. securities regulations on confidentiality of material nonpublic information regarding the Company that they may receive on account of their ownership of Jinkailong.
The principal use of proceeds from the Investment will be to support Jinkailong’s automobile purchase and finance business, provided that Hongyi’s prior consent is required if the proceeds are to be used for any automobile business investment that exceeds RMB1 million (approximately $0.7 million) or for any non-automobile business investment (regardless of the amount). Jinkailong plans to use the proceeds from the Investment to expand its auto business in Chengdu, China. Specifically, Jinkailong plans to purchase more automobiles for its car rental business and open additional retail stores to provide auto financing and transaction facilitation services to ride-hailing drivers in Chengdu.
The foregoing description of the JKL Investment Agreement is only a summary and is qualified in its entirety by reference to the full text of the JKL Investment Agreement which is being filed as Exhibit 10.1 to this Current Report on Form 8-K.
| Item 8.01 | Other Events. |
On July 8, 2020, the Company issued a press release announcing the JKL Investment Agreement. A copy of the press release is filed as Exhibit 99.1 hereto and is incorporated by reference.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
SIGNATURE
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.
| Dated: July 8, 2020 | SENMIAO TECHNOLOGY LIMITED | |
| By: | /s/ Xi Wen | |
| Name: | Xi Wen | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
Investment Agreement
Party A (Investor): Hongyi Industrial Group Co., Ltd.
Address: No.16, building 1, No.9, Gaoshengqiao, Wuhou District, Chengdu
Legal Representative: Zhihong Liu
Tel: [***]
Party B 1 (Shareholder 1 of the Target Company):
Name: Hunan Ruixi Financial Leasing Co., Ltd.
Address: Room 723, Building 3A, Jinke Times Center, Xiangyang Road, Changsha Economic & Technological Development Zone
Legal Representative: Xianglong Li
Tel: [***]
Party B 2 (Shareholder 2 of the Target Company):
| Name: Xiaoliang Chen | ID No.: [***] |
| Address: [***] | Tel: [***] |
Party B 3 (Shareholder 3 of the Target Company):
| Name: Xi Yang | ID No.: [***] |
| Address: [***] | Tel: [***] |
Party B 4 (Shareholder 4 of the Target Company): Chengdu Simushi Technology Co., Ltd.
Address: No.1, Floor 1-3, Unit 1, Building 1, No.8, Section 2 of Lushan Avenue, Wan’an Town, Tianfu New District, Chengdu, Sichuan
| Delegate: Kai Huang | Tel: [***] |
Party C (Dormant Shareholder of the Target Company):
| Name: Yiqiang He | ID No.: [***] |
| Address: [***] | Tel: [***] |
Party D (Target Company): Sichuan Jinkailong Automobile Leasing Co., Ltd.
Address: No. 192, Floor 1, Unit 1, Building 5, No. 192 Yongquan Jinquan Street, Wenjiang District, Chengdu
Legal Representative: Xiaoliang Chen
WHEREAS:
On the principle of voluntariness, equality, fairness and good faith and through friendly consultation, the parties have entered into the Investment Agreement (hereinafter referred to as “this Agreement”) with regards to the following investment on July 4, 2020 in Wuhou District, Chengdu. For the purpose of this Agreement, the shareholders of the above Target Company, including the dormant shareholders but excluding Original Shareholder 4 (hereinafter collectively referred to as the “Original Shareholders”) shall, on a prorated basis, be responsible for upholding the “Representations and Warranties” under Article 2 and “Rights of the Investor” under Article 3. Party B 1 to Party B 4 collectively referred to as the “Party B”.
Article 1 Investment Method, Pricing and Payment
| 1.1 | Prior to the date of entering into this Agreement, Party B hold all the shares of the Target Company, and please refer to the equity structure below (Table 1): |
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The Investor invests in and obtains 27.03% equity of the Target Company by increasing the registered capital and issuance of shares. The Party B Shareholders of Target Company shall dilute their equity proportions to the Investor (The Party B Shareholders shall respectively determine the specific ratio of equity to be diluted through transfer of equity transfer among themselves). Within 60 calendar days after the initial investment fund is in place, the Investor and the Party B Shareholders shall cooperate with each other to complete the governmental registration of the equity changes after the increase in registered capital and shares issued. Upon the completion of the increase in registered capital and share and equity transfer(s) among the Party B Shareholders, the final equity structure of Target Company which shall be filed with competent authorities is shown as (Table 2):
After the capital increase and share issuance, the actual registered capital of the target company shall be the final record kept by the local industrial and commercial bureaus, but the subscribed capital contribution and the actual capital contribution of each shareholder shall be subject to their respective equity ratio above.
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| 1.2 | Investment Consideration and Payment |
The Target Company, its shareholders and the Investor agree that the total capital contribution (including the actual capital contribution) made by the Investor in exchange for newly issued shares is RMB50,000,000 (in words: Fifty Million Chinese Yuan Only). The initial investment of RMB10,000,000 shall be paid to the bank account of the Target Company no later than 90 days after the date of signing this Agreement (prior to September 30, 2020). Meanwhile, all the shareholders and investors of the Target Company should make full capital contributions according to their respective equity ratio. The Investor will be entitled to exercise its rights as a shareholder of the Target Company only after the remaining capital contribution of RMB40,000,000 is made, which shall be no later than 30 days after the completion of registration with the local industrial and commercial bureaus for the equity changes and the making of full capital contributions by all shareholders makes full capital contributions (prior to December 31, 2020) that the Investor shall have the right to receive the accumulated and undistributed profits of the Target Company in proportion to its equity ratio through dividends when approved at the meeting of shareholders of the Target Company.
Article 2 Representations and Warranties
| 2.1 | The Target Company and Original Shareholders make representations and warranties to the Investor that: The Target Company and the Original Shareholders have, prior to the execution date hereof, fully, thoroughly and promptly disclosed or furnished to the investors the required information and materials associated with this transaction, all the information furnished is true and valid, and there is no major omission, misleading or fabrication; the Original Shareholders of the Target Company shall be liable for any undisclosed contingent taxes, liabilities or other debts prior to this investment; the Original Shareholders, not the Investor, shall be solely liable for any penalties or economic losses imposed on the Target Company prior to the completion of the equity transfer due to financial, tax, human resources, outsourcing team management, peer competition, operation without authority, excessive financing or other reasons, by agencies including, without limitation, industry and commerce, tax, regulatory agencies and so on. The Investor does not have to burden of proof for any of the above-mentioned penalties or causes for economic losses, but only needs to determine based on the time when the causal event arises. |
| 2.2 | The Target Company and the Original Shareholders make representations and warranties to the Investor that: From the execution date of this Agreement to the expiration of the performance commitment period, without the prior written consent of the Investor, the Target Company and its Original Shareholders shall: |
| 2.2.1 | Not change the Target Company's registered capital or equity structure except for the purpose of performing this transaction; |
| 2.2.2 | Not make any form of external investment except for the purpose of performing this transaction; |
| 2.2.3 | As far as the Shareholders are concerned, not transfer the shares of the Target Company held by them (except for the transfer to be made by Shareholder 2 to Shareholder 1 and/or Shareholder 3) or create pledges or other encumbrances on the shares; as far as the Target Company is concerned, not create or agree to create any encumbrances on any assets of the Target Company or provide any guarantee or loan irrelevant to the ordinary principal business for any third party; |
| 2.2.4 | Not sign any debt settlement agreement or make other arrangements with creditors, petition for bankruptcy, or take any action that may lead to dissolution, or fail to take reasonable measures to address the legal proceedings related to dissolution (whether voluntary dissolution or forced dissolution); |
| 2.2.5 | Not enter into contracts that do not conform to normal business practices or maintain improper interest relationships with the seller or its relatives or any director or employee of the Target Company or government officials. |
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| 2.3 | The shareholders on behalf of the dormant shareholder of the Target Company - Xiaohui Luo make representations and warranties to the Investor that: Upon signing this Agreement, the former dormant shareholder of the Target Company, Xiaohui Luo, is no longer a shareholder. |
| 2.4 | The Target Company and Original Shareholders make representations and warranties to the Investor that: The investment funds shall be used only for the automobile business of the Target Company (unless otherwise approved by the Investor in writing). Any use of Investor’s capital contribution proceeds for either automobile business investment that exceeds RMB 1 million or any non-automobile business investment (regardless of the amount) shall be approved by the representative of the Investor and overseen by the Investor. |
Article 3 Rights of the Investor
| 3.1 | Right of First Refusal: If the Investor agrees that any shareholder of the Target Company (except for Shareholder 2) proposes to sell all or part of its equity interest in the Target Company to other shareholders or a third party, the Investor shall be entitled to, in priority, purchase all or part of the equity at issue that such shareholder intends to sell or otherwise dispose of pursuant to the same terms as planned, with the specific steps as below: |
| 3.1.1 | Unless otherwise agreed upon, in case that the said shareholder intends to transfer, sell, pledge or otherwise dispose of ("transfer") to a third party ("target investor") the Target Company's equity held by them, and the target investor has already given a legally binding offer, or the target investor's offer may be legally binding after the Investor exercises the right of first refusal, the said shareholder shall inform the Investor of (i) the intention to transfer, (ii) the amount of equity intended to transfer, (iii) the terms and conditions of the transfer, and (iv) the basic information of the investor to be transferred in writing ("notice of transfer") fifteen (15) days in advance; |
| 3.1.2 | Within twenty (20) working days upon receipt of the notice of transfer, the Investor shall inform the said shareholder in writing whether it will exercise the right of first refusal as well as the amount for exercising such right. Where the Investor fails to inform the said Shareholder that it will exercise the right of first refusal within twenty (20) working days, the Investor shall be deemed to have agreed to waive the right of first refusal; |
| 3.1.3 | In case that the Investor has exercised the right of first refusal, the said shareholder shall transfer the equity to the Investor according to the conditions specified in the notice of transfer. In the event that the Investor waives the right of first refusal, the said shareholder shall be entitled to transfer the equity that is not affected by the right of first refusal; |
| 3.1.4 | All transfers, whether pursuant to this Article or other provisions hereof, shall be guaranteed by the transferor’s shareholders as beneficial owners, and their rights shall be free from any lien, pledge and burden, accompanied by the transfer of all accompanying rights, including the rights to receive dividends and other distributions; |
| 3.1.5 | Due to historical reasons, if Shareholder 2 of the Target Company proposes to sell all or part of its company equity to other shareholders or a third party, the Shareholders 1 and 3 of the Target Company shall be entitled to, in priority, purchase all or part of the equity that the said shareholder intends to sell or otherwise dispose of pursuant to the same terms; once the Shareholders 1 and 3 of the Target Company waive the right to purchase, the Investor shall have the priority under the same market conditions. If Shareholder 2 of the Target Company sells all or part of his equity, no matter which party receives the equity, it shall undertake all the obligations of Shareholder 2 of the Target Company under this Agreement and other relevant agreements; otherwise such equity transfer shall be deemed as invalid transfer, and Shareholder 2 of the Target Company shall still bear relevant responsibilities. |
| 3.2 | Performance commitments: All Original Shareholders unanimously promise that during the future 3 performance commitment periods, the business performance of the Target Company will be not lower than the business objectives set out in the following table (the performance commitment period shall commence from the next month after the Investor made the full capital contribution of RMB 50,000,000, and a year consists of 12 calendar months); |
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| Performance Commitment Period | Business Objectives |
| First Year | Gain an operating income of RMB 52 million and net profits of RMB 10 million; |
| Second Year | Gain an operating income of RMB 90 million and net profits of RMB 20 million; |
| Third Year | Gain an operating income of RMB 110 million and net profits of RMB 25 million. |
| 3.3 | Co-sale right: Within the 3-year performance commitment period, if any shareholder of the Target Company (excluding Shareholder 2 of the Target Company) transfers equity to a third party, on equal conditions, the Investor shall have the right to choose to either purchase or transfer the equity with the selling shareholders of the Target Company. But due to historical reasons, if Shareholder 2 of the Target Company transfers equity, Shareholders 1 and 3 of the Target Company shall have the right of first refusal in preference to the Investor, and the Investor cannot make a condition to transfer the equity together with Shareholder 2 of the Target Company. |
| 3.3.1 | If the Investor chooses to purchase the equity, the conditions shall be no less strict than those set for shareholders of Target Company to transfer the equity to a third party. That is, the Investor shall have the right of first refusal on equal conditions. |
| 3.3.2 | If the Investor intends to transfer the equity with the Shareholders of the Target Company, the Investor may transfer the equity to a third party on the equal conditions. In the event that any target transferee refuses to purchase equity from the Investor in any way, the Shareholders shall not sell any equity to the target transferee unless the Shareholders simultaneously purchase the equity to be sold from the Investor pursuant to the terms and conditions listed in the notice of transfer prior to the sale or transfer. For the avoidance of doubts, the Investor's transfer of the Target Company's equity held by it shall not be subject to the above-mentioned co-sale rights. But under the same conditions, the remaining Shareholders of the Target Company have the right of first refusal. |
| 3.4 | Anti-dilution: After this investment, when the Target Company launches a new round of financing, in case that Target Company’s valuation prior to the new round of financing is decreased, the Investor's equity in the Target Company shall be adjusted on a fully diluted basis, so that the average capital contribution the Investor made for all equity interests in the Target Company after the adjustment is equivalent to the new low price for the new round of capital increase, except for the issuance of equity pursuant to the employee stock ownership plan (ESOP) or other incentive equity arrangements approved by the directors of the Investor. All shareholders of the Target Company shall take all necessary actions to prevent the Investor's equity in the Target Company from being diluted. Such actions shall include, without limitation, that the shareholders transfer part of the equity not held by the Investor at zero consideration to the Investor, so that the Target Company's equity held by the Investor upon completion of the transfer is consistent with the adjustment results agreed in the preceding paragraph. The Original Shareholders of the Target Company shall undertake the afore-mentioned liability on a prorated basis. |
| 3.5 | Redemption right |
Equity Buy-back Conditions: During the term of this Agreement, if the Target Company meets any of the following situations, the Investor shall have the right to notify the shareholders of the Target Company to repurchase the equity, and the Original Shareholders of Target Company shall perform the afore-mentioned obligations according to their respective equity ratios at that time:
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| a. | If the Target Company fails to be listed or merged within six months after the expiration of the three-year performance commitment period; or if the Target Company is acquired by a listed company or the industry, while its estimated value shall be less than RMB 300 million; or if it goes public through initial public offering (on either A-share or overseas markets such as Hong Kong stock market), while its market value in the public market shall be less than RMB 350 million. |
| b. | If the accumulated net profit after tax is less than 80% of RMB 30 million during the first two performance commitment periods after investment, or less than 80% of RMB 25 million in the third performance commitment period, the Investor shall have the right to request the buyback. Or if the Target Company fails to be listed or merged within six months after the expiration of the three-year performance commitment period, the Investor shall have the right to ask the Original Shareholders of the Target Company to repurchase the equity. The annual repo rate shall be 9%. The time of capital shall be calculated from the date when the Investor makes the capital contribution to the date when the equity is repurchased. Namely, the repurchase price = total investment amount + total investment amount * annual repo rate at 9% * actual occupancy time of capital (year) - accumulative amount of dividends received by the Investor during the performance commitment period. |
| c. | There are any material and adverse effects to Target Company's core business (which material and adverse effect to the Target Company’s financial/business/credit record, its ability to perform its substantial contractual obligations or the failure to achieve the investment purpose, which effect may be caused by any events, including but not limited to that the Target Company becomes listed on the list of dishonest persons/entities subject to judicial enforcement or that more than a third of the Target Company’s ride-hailing automobile certificate are revoked by the regulatory authorities) or liquidation, dissolution or cessation of business. |
| 3.5.1 | To request the Original Shareholders of the Target Company to repurchase the equity, the Investor shall issue a written notice to the Original Shareholders. The notice shall take effect from the date of service and shall not be changed or revoked. The Original Shareholders of the Target Company shall repurchase the equity at the repurchase price agreed herein within three months upon receipt of the Investor's notice. In addition, within three months upon receipt of the Investor's notice, the Original Shareholders of the Target Company shall cooperate to handle the administrative procedures for change of equity. |
| 3.5.2 | For this purpose of the Article and this Agreement, the liability on a prorated basis refers to that the Original Shareholders should be held liable to the Investor according to their respective equity ratio for any compensation, damage or liabilities. The equity ratio only represents the proportion of responsibilities. For the calculation method and amount of the civil liability, please refer to the relevant provisions of this Agreement. |
| 3.5.3 | When the Target Company meets the above-mentioned buy-back conditions and the Investor waives the redemption rights, the Investor shall make a written statement to all shareholders of the Target Company within 60 days after six months anniversary of the fulfillment date of the three-year performance commitment period. Otherwise, the Investor shall be deemed to have automatically waived the redemption right. |
| 3.6 | Priority subscription right for the newly increased registered capital: When the Target Company issues the newly increased registered capital to all shareholders at certain time including the Investor at that time or a third party, the Investor shall be entitled to preferentially subscribe such newly increased registered capital ("priority subscription right") based on the proportion of equity it holds in the Target Company. In case that the Investor elects to exercise the priority subscription right and the amount of capital increase cannot meet the needs of all shareholders intended in subscribing for increased capital, the Investor may have priority over other shareholders of the Target Company in subscribing for additional capital. |
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| 3.7 | Liquidation priority: In compliance with Chinese laws, in the event that the Target Company is liquidated, dissolved or ceased its business for any reason, the liquidation team shall pay the liquidation expenses and repay the Target Company's debts (including relevant remuneration to employees and tax liabilities) with the Target Company's assets in the priority order prescribed by applicable laws. After that, the Investor shall be entitled to receive a liquidation amount over other shareholders, and the remaining property shall be distributed among all shareholders except the Investor according to the equity ratio at that time ("liquidation priority"). In the event that the Target Company is subject to asset acquisition, all or majority of the assets of the Target Company are sold, or the Target Company is determined to be liquidated, dissolved or terminated, then the aforesaid liquidation priority shall also apply. |
| 3.8 | The aforesaid rights shall be valid from the date of signing this Agreement to the end of six months after the expiration of the three-year performance commitment period. During such period, if the Original Shareholders of the Target Company complete the repurchase of equity, this Agreement shall automatically terminate in advance. |
| 3.9 | Lockup right: From the date of signing this Agreement to the end of six months after the expiration of the three-year performance commitment period, no shareholder of the Target company (excluding Shareholder 2 of the Target Company) may directly or indirectly sell any company equity or change its shareholder status and de facto controlling person. |
Article 4 Confidentiality
| 4.1 | Unless otherwise provided herein, the Parties hereto shall keep confidential any and all written or oral information obtained from the other party in connection with this Agreement or the transactions contemplated herein and shall not use such information for any purpose unfavorable to the other party, except that (i) any such information is known to the public by means other than the disclosure of the disclosing party; (ii) any such information is disclosed in accordance with the requirements of law, the orders of courts or governments, or other rules of regulatory authorities; (iii) the recipient obtains such information from other parties not subject to the confidentiality obligation; or (iv) each party discloses such information to its attorney, accountant or financial advisor involved in the transaction herein. |
| 4.2 | The Parties agree that, from the date of execution of this Agreement, any party in violation of this article shall be held liable for the breach of contract in accordance with Article 5 hereof. |
| 4.3 | The Parties acknowledge that Shareholder 1 of the Target Company is affiliated with a U.S. publicly-listed and reporting company (“Senmiao”) and is thus be subject to the U.S. securities laws and other laws, which prohibit any person who has material, non-public information concerning a publicly-listed company from purchasing or selling any of its securities, and from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. The Parties acknowledge that the confidentiality provisions of this Agreement shall be deemed to be an agreement to keep the confidential information disclosed to each other hereunder in confidence as contemplated by Regulation FD promulgated by the U.S. Securities and Exchange Commission. In addition, the Parities acknowledge and agree that some of the confidential information of the Target Company and the transactions contemplated herein may be considered “material non-public information” of Senmiao for purposes of the U.S. federal securities laws, and that the Parities will abide by all securities laws relating to the handling of and acting upon such material non-public information (including that they shall not trade or otherwise transact in Senmiao’s public-listed securities while in possession of such material non-public information). |
Article 5 Liability for Breach
| 5.1 | One party (indemnitor) shall compensate and indemnify the other party (indemnitee) from any and all losses in connection with or as a result of incorrect statement provided by the indemnitor as per this Agreement or false representation and warranty made by the indemnitor, the violation or nonperformance of the duty of such representation and warranty by the indemnitor, or the violation or nonperformance of any obligations hereunder. |
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| 5.2 | Where the Investor suffers or incurs any actual losses or damages (including reasonable attorney’s fees) directly or indirectly from the violation of the Target Company and any shareholder of the Target Company in any of their representations, warranties, guarantees, agreements or obligations under this Agreement or any other agreement or undertaking to which it is a signatory, or due to third party claims, claims between the parties herein or other claims as a result of the foregoing, the Target Company and the Original shareholders agree to make compensations, jointly and severally, for the Investor on a prorated basis. The parties confirm that all liabilities for compensation undertaken by Shareholder 4 of the Target Company towards the Investor, including but not limited to indemnity obligation, liability for breach of contract and redemption of consideration, shall be assumed by the Original Shareholders of the Target Company according to their respective equity ratio on prorate basis. In addition, if the Original Shareholders transfer the equity before the Investor exercises redemption rights, the Original Shareholders and the new Transferee shall bear unlimited joint and several liability for compensation. |
Article 6 Termination
During the three-year performance commitment period, in case of the occurrence of any of the following events, this Agreement may be terminated immediately by the non-fault party by delivering a written notice of termination to the other party:
| 6.1 | The Target Company or the shareholders has materially violated the provisions hereof; |
| 6.2 | Any representations and warranties applicable to the Target Company contained herein are false, misleading or deceptive in any material aspect; |
| 6.3 | The transaction hereunder becomes illegal due to a change in the law. |
Article 7 Force Majeure
| 7.1 | "Force Majeure" means any event that (i) is beyond the control of the affected party, (ii) is unforeseeable or unavoidable even if anticipated, (iii) occurs after the execution date of this Agreement and (iv) prevents the party from performing this Agreement in whole or in part. Such events include but are not limited to floods, fires, droughts, typhoons, earthquakes or other natural disasters, pandemics, strikes, turmoil, riots and wars (whether declared or not), acts of government, sudden changes to the national policies and so on. |
| 7.2 | If the occurrence of the above-mentioned force majeure affects either party’s performance of obligations hereunder, the party shall be entitled to suspend the performance within the period of delay caused by the force majeure. |
| 7.3 | If either party fails to perform this Agreement due to force majeure, it may be exempted from the liability in part or in whole according to the impact of the force majeure, except as otherwise required by laws. |
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Article 8 Notifications
| 8.1 | The correspondence addresses of the Parties are set forth on the first page of this Agreement. Written notices or other documents sent by one party to other parties in accordance with the requirements hereof shall be written in Chinese and may be delivered by hand or sent by recognized courier service or e-mail to the correspondence addresses of other parties. A written notice or document sent by e-mail shall be deemed to have been duly served on the date of successful transmission. |
| 8.2 | Either party shall be obliged to sign the receipt and return the receipt to the process server if served with materials and legal instruments (sent by means including but not limited to mail, fax, telegram, telex, and e-mail) from the relevant judicial authorities or arbitration institutions of that party. The relevant judicial authorities and arbitration institutions may send documents to the above-mentioned address. In such case, the documents shall be deemed to have been duly served regardless of whether the party has actually received the documents or not, which shall have legal consequences for service of process. In the event of change in the contact information of either party, it shall notify the other parties of such change in writing without delay. |
Article 9 Governing Law and Dispute Resolution
| 9.1 | This Agreement shall be governed by and construed in accordance with the laws of the People's Republic of China. Any and all disputes arising out of or in connection with the performance of this Agreement shall be first settled via the amicable negotiation among the parties first. If no agreement can be reached, the parties agree to submit the dispute to the People's Court at the place where this Agreement is executed. |
Article 10 Miscellaneous
| 10.1 | This Agreement shall take effect as of the date of the affixing of signature and fingerprint of all individuals parties hereto or signature and official seal by the legal representatives or authorized representatives of all entity parties hereto. |
| 10.2 | This Agreement shall not be modified or amended except by a separate written agreement entered into by the Parties. |
| 10.3 | This Agreement is made in Chinese and in octuplicates, with two copies for the Investor, one copy for the Target Company, one copy for the other parties respectively, each copy having the same legal effects. |
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Page 9 of 10
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Party A (Investor): Hongyi Industrial Group Co., Ltd.
Legal Representative or Authorized Representative (Signature): [CORPORATE SEAL AFFIXED HEREIN]
Party B 1 (Shareholder 1 of the Target Company): Hunan Ruixi Financial Leasing Co., Ltd. (Corporate Seal)
Legal Representative or Authorized Representative (Signature): [CORPORATE SEAL AFFIXED HEREIN]
Party B 2 (Shareholder 2 of the Target Company): Xiaoliang Chen
Signature and Fingerprint: /s/ Xiaoliang Chen
Party B 3 (Shareholder 3 of the Target Company): Xi Yang
Signature and Fingerprint: /s/ Xi Yang
Party B 4 (Shareholder 4 of the Target Company): Chengdu Simushi Technology Co., Ltd. (Corporate Seal)
Legal Representative or Authorized Representative (Signature): [CORPORATE SEAL AFFIXED HEREIN]
Party C (Dormant Shareholder of the Target Company): Yiqiang He
Signature and Fingerprint: /s/ Yiqiang He
Party D (Target Company): Sichuan Jinkailong Automobile Leasing Co., Ltd. (Corporate Seal)
Legal Representative or Authorized Representative (Signature): [CORPORATE SEAL AFFIXED HEREIN]
Signed in Chengdu on July 4, 2020
Page 10 of 10
Exhibit 99.1
Senmiao Technology Signs an Investment
Agreement with
Hongyi Industrial Group to Invest RMB50 Million in
Senmiao’s Auto Business
Investment of approximately US$7 million is expected to accelerate expansion of Senmiao’s automobile transaction and related services business in Sichuan Province
CHENGDU, China, July 8, 2020 / PRNewswire/ -- Senmiao Technology Limited (“Senmiao”) (NASDAQ: AIHS), a provider of automobile transaction and related services targeting the online ride-hailing industry in China, today announced that its Chinese variable interest entity has secured a RMB50 million (approximately US$7 million) investment from Hongyi Industrial Group Co., Ltd. ("Hongyi”), an affiliate of the largest shareholder of Chengdu Road & Bridge Engineering Co., Ltd., a construction engineering company publicly listed on the A-Share market in China.
This investment was not made in Senmiao directly, but rather into Jinkailong Automobile Leasing Co., Ltd. ("Jinkailong"), which Senmiao controls through its majority owned subsidiary, Hunan Ruixi Financial Leasing Co., Ltd. (“Hunan Ruixi”). Jinkailong is the entity through which Senmiao operates its automobile transaction and related services business (“Auto Business”), primarily in the city of Chengdu. Senmiao intends to use the capital investment for the expansion of Jinkailong's Auto Business in Chengdu, specifically to purchase more automobiles for its vehicle rental business to short lease ride-hailing drivers and open additional retail stores to provide auto financing and transaction facilitation services to ride-hailing drivers.
Pursuant to the agreement governing this investment (the “JKL Investment Agreement”), Hongyi has agreed to make a capital contribution to Jinkailong of RMB50 million (approximately US$7.0 million) over the coming months in consideration of a 27.03% equity interest in Jinkailong. As a result of the investment by Hongyi, the ownership of the current shareholders of Jinkailong (including Hunan Ruixi and certain other unaffiliated parties) will be proportionally diluted, although Senmiao will continue to control Jinkailong via existing voting agreements with certain shareholders of Jinkailong.
Mr. Xi Wen, Chief Executive Officer of Senmiao, commented, “We are delighted to sign this landmark deal with Hongyi as we believe it will increase our ability to further expand our market share in the rapidly developing online ride-hailing industry in China. Hongyi, a corporate enterprise in the business of real estate and industrial investment in Sichuan, has a strong track record of successful business ventures and is an affiliate of the largest shareholder of an A-share listed company in China. This agreement marks a significant vote of confidence by Hongyi in our long-term strategy to monetize and generate profits in our streamlined automobile transaction and related services business. With the additional capital, we believe we are in an even stronger position to weather the adverse impact that COVID-19 has had on our business and focus squarely on expanding our auto business while driving long-term sustainable growth for our shareholders.”
The JKL Investment Agreement provides performance targets for Jinkailong during a three-year performance commitment period following the closing of the transaction. Failure to meet certain performance targets will trigger the redemption right of Hongyi, which would require certain shareholders of Jinkailong (including Hunan Ruixi) to repurchase Hongyi’s equity interest in Jinkailong. One of these performance targets is that Jinkailong become public though an IPO or be merged with a public company within three and a half years following the closing. The JKL Investment Agreement also provides Hongyi certain other shareholder rights, including, but not limited to, dividend rights, a right of first refusal for any equity transfer from the other shareholders of Jinkailong, a tag-along right, anti-dilution rights, subscription rights and priority in liquidation or dissolution of Jinkailong.
For additional information regarding this transaction, please review the Current Report on Form 8-K that Senmiao has filed with the U.S. Securities and Exchange Commission.
About Senmiao
Headquartered in Chengdu, Sichuan Province, Senmiao provides automobile transaction and related services including sales of automobiles, facilitation and services for automobile purchase and financing, management, operating lease, guarantee and other automobile transaction services aimed principally at the growing ride-sharing market in Senmiao’s areas of operation in China. For more information about Senmiao, please visit: http://www.senmiaotech.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the investment in Jinkailong described herein, the development of Senmiao’s auto business, the Chinese ride-sharing and automobile financial leasing markets, and Senmiao’s plans, objectives, goals, strategies, and performance, as well as the assumptions such statements and other statements that are not statements of historical facts. When Senmiao uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause actual results to differ materially from Senmiao’s expectations, including, but not limited to, risks and uncertainties relating to the following: the risk that the investment by Hongyi may not be consummated timely or at all; the risk that Jinkailong may not effectively utilize the investment proceeds to grow its auto business; the risk that the anticipated growth of Senmiao’s auto business may not be realized; the risks associated with the discontinuance of Senmiao’s online lending business; Senmiao’s future business development; product and service demand and acceptance; the risks and impact of the ongoing coronavirus outbreak in China; changes in technology; economic conditions; reputation and brand; the impact of competition and pricing; the impact of government regulations; fluctuations in general economic and business conditions in China and other risks expressed in reports filed by Senmiao with the U.S. Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance on any forward-looking statements. Senmiao’s filings with the U.S. Securities and Exchange Commission are available for review at www.sec.gov. Senmiao undertakes no obligation to publicly revise any forward-looking statements to reflect changes in events or circumstances.
For more information, please contact:
At the Company:
Yiye Zhou
Email: edom333@ihongsen.com
Phone: +86 28 6155 4399
Investor Relations:
Rene Vanguestaine
Christensen
Email: rvanguestaine@ChristensenIR.com
Phone: +86 178 1749 0483
Linda Bergkamp
Christensen
Email: lbergkamp@ChristensenIR.com
Phone: +1 480 614 3004