Item 1.01 Entry into a Material Definitive Agreement.
On December 30, 2019, Fortune Valley Treasures, Inc. ("FVTI"), along with
Qianhai DaXingHuaShang Investment (Shenzhen) Co., Ltd., a subsidiary of FVTI and
a wholly foreign-owned enterprise ("QHDX"), entered into an equity interest
transfer agreement (the "Agreement") with shareholders (the "Original
Shareholders") of Foshan BaiTaFeng Beverage Development Co., Ltd. ("BTF"), who
collectively owned 100% equity interest of BTF, a limited liability company
engaged in the business of bottling and distributing of drinking water in China.
Pursuant to the Agreement, QHDX agreed to purchase 80% of BTF's equity interest
(the "Equity Transfer") from Mr. Chunbin Li, the legal representative and one of
the Original Shareholders of BTF (the "Seller"), in exchange for shares of
FVTI's common stock ("Issuable Shares"). The completion of the registration of
the Equity Transfer with local government authorities (the "Closing") is subject
to satisfaction of all the closing conditions (unless waived), including but not
limited to, the approval of the Equity Transfer by BTF shareholders, completion
of due diligence review of BTF to the satisfaction of QHDX, waiver from the
Original Shareholders to the right of first refusal to purchase the equity
interest subject to the Equity Transfer. It is agreed that the Closing shall be
conducted prior to the completion of an initial draft of the audited financial
statements of BTF.
According to the Agreement, the total number of Issuable Shares will be
determined according to the following formula:
Number of Issuable Shares = A x 80% x 15 ÷ 3.02 ÷ B
For the purpose of the foregoing formula:
A = Net profit of BTF during the period from October 1, 2019 to September 30,
2020.
B = 7:1, which is the exchange rate of U.S. Dollars to Chinese Yuan mutually
agreed by the parties.
Pursuant to the Agreement, FVTI will issue the Issuable Shares to the Seller
within 30 business days after September 30, 2020 pursuant to a separate
subscription agreement to be entered into by FVTI and the Seller or his
designee.
BTF and the Original Shareholders have agreed to achieve certain operation
objectives of BTF, including a net profit of RMB 9 million (approximately $1.29
million) for the period from October 1, 2019 to September 30, 2020 and a net
profit of RMB 3 million (approximately $0.14 million) for the fiscal year ended
December 31, 2019. Pursuant to the Agreement, as long as the Seller continues to
serve as the general manager and legal representative of BTF, the Original
Shareholders and BTF shall ensure BTF achieves an increase in annual net profit
of no less than 10% during each year of the five years after September 30, 2020.
Pursuant to the Agreement, BTF will establish a board of directors consisting of
three individuals, two of which will be designated by QHDX and one by the
Original Shareholders, and appoint a person designated by the Original
Shareholders as general manager. To ensure the continuous operations of BTF, the
parties agreed that BTF will retain its existing employees and all the
management members of BTF shall sign employment agreements and non-compete
agreements with BTF. The parties further agreed that BTF will not make any
profit distribution within three years after the execution of the Agreement. Any
subsequent share transfer or share pledge of QHDX's equity interest in BTF is
subject to the prior written consent of the Original Shareholders. In the event
of a late payment of the consideration by QHDX or any delay in the registration
of the Equity Transfer with local government caused by the Seller, a daily
penalty of 0.05% of the outstanding payment is assessed.
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