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.