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Item 1.01
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Entry into a Material Definitive Agreement.
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Share
Transfer Agreement
Technovative
Group, Inc. (the “Company”) has entered into a Share Transfer Agreement (the “Agreement”) on
December 27, 2017 (the “Execution Date”), with Wu Ji Sun, Tan Hong Liang, Su Mao Ling and Liang Song Hai (each a
“Shareholder” and together, “Shareholders”), the Shareholders holding in the aggregate 100% of the
equity interest in Guangzhou City Hedu Information Technology Co., Ltd (or,
广州市合度信息技术有限责任公司), a
PRC incorporate company (the “Target Company”). The Target Company is a company specialized in financial
technology, blockchain and big data analytics technologies. The Company intended to enter into a series of contractual
arrangements (the “VIE Agreements”), through its wholly owned foreign entity, Zhike (Shenzhen) Marketing
Technology Co., Ltd (“Zhike”), with the Target Company, and the Shareholders, which would provide Zhike with
control over the Target Company’s business affair and economic interest. The Company, via Zhike, also intended to enter
into a Loan Agreement with Wu Ji Sun (the “Loan Agreement”). Pursuant to the Agreement, the Company has agreed to
issue to the Shareholders in the aggregate, up to 41,815,880 shares of the Company’s common stock, par value $0.001
(the “Common Stock”) (the “Shares”) subject to customary adjustments, representing up to 40% of the
Company’s issued and outstanding Common Stock, valued at $4,185,880 in an aggregate (the “Share Issuance”),
as an inducement for the Shareholders to enter into the VIE Agreements and the Loan Agreement. All capitalized
terms used but not defined herein shall have the meaning ascribed to such term in the
Agreement.
Four
Installments
The
Shares will be issued in four installments (each, the “Each Installment Shares”) pro rata to the holding positions
of the Shareholders as of the Execution Date and subject to the terms and conditions of the Agreement.
The
Company will issue the First Installment Shares of 26,134,925 shares to the Shareholders provided that Zhike, the Target Company,
and the Shareholders shall enter into the VIE Agreements within 15 days after the Execution Date. The Shareholders and the Company
shall complete the VIE Agreement registration as soon as practicable no later than 30 days after the issuance of the First Installment
Shares.
If
the Target Company achieves gross revenue of not less than RMB 2.36 million in the fiscal year ending December 31, 2017 as reflected
on the consolidated (audited) financial statements for the same period, the Company will issue a Second Installment Shares to
the Shareholders in the amount of 5,226,985 shares of Common Stock within 120 days after the completion of such annual audit.
If
the Target Company achieves gross revenue of not less than RMB13.2 million in the fiscal year ending December 31, 2018 as reflected
on the consolidated (audited) financial statements for the same period, the Company shall issue a Third Installment to the Shareholders
in the aggregate of 5,226,985 shares of Common Stock within 120 days after the completion of such annual audit.
If
the Target Company achieves gross revenue of not less than RMB36.2 million in the fiscal year ending December 31, 2019 as reflected
on the consolidated (audited) financial statements for the same period, the Company shall issue a Fourth Installment to the Shareholders
in the aggregate of 5,226,985 shares of Common Stock within 120 days after the completion of such annual audit.
Claw
Backs
In
the event the Target Company fails to achieve RMB13.2 million of revenue for the fiscal year ending December 31, 2018 as reflected
on the consolidated (audited) financial statements dating December 31, 2018, the Shareholders shall, within 120 days after the
completion of such annual audit, return an aggregate of 16,800,00 shares (and each Shareholder shall return such numbers of shares
pro rata to the holding positions of the Shareholders as of the Execution Date) of the Company’s Common Stock to the Company
for cancellation.
Piggyback
Registration Rights
The
Shareholders shall have the right for a period of not more than two years after the issuance of Each Installment Shares, to include
no more than 25% of the Shares in the aggregate that the Shareholders shall have received from the Company as part of any other
registration of securities filed by the Company subject to certain limitations pursuant to the Agreement.
The
foregoing is a summary of the terms of the Agreement and is qualified in its entirety by the Agreement which is attached hereto
and incorporated herein as Exhibit 10.1.
Contractual
Arrangements via Zhike
On
December 27, 2017, the Company, via Zhike, has executed the VIE Agreements with the Target Company and the Shareholders, and the
Loan Agreement with Wu Ji Sun. As such, the Target Company has become
a variable interest
entity of the Company
via Zhike as of December 27, 2017. The VIE Agreements include the following agreements, as well as
an additional Loan Agreement.
Power
of Attorney
. Through a series of power of attorney, each Shareholder of our VIE Agreements irrevocably authorizes the Company,
or any person(s) designated by the Company, to act as its attorney-in-fact to exercise all of such Shareholder’s voting
and other rights associated with the Shareholder’s equity interest in our variable interest entity, including but not limited
to, the right to attend shareholder meetings on behalf such Shareholder, the right to appoint legal representatives, directors,
supervisors and chief executive officers and other senior management, and the right to sell, transfer, pledge and dispose of all
or a portion of the shares held by such Shareholder. The power of attorney is irrevocable and remains in force continuously upon
execution.
Equity
Pledge Agreement.
Zhike and the Shareholders of the Target Company have entered into an equity pledge agreement (the “Equity
Pledge Agreement”). Pursuant to these equity pledge agreements, each Shareholder of our variable interest equities has pledged
all of his, her or its respective equity interest in our variable interest entity to Zhike to guarantee the performance by such
Shareholder and our variable interest entity of its respective obligation under the exclusive business cooperation agreement,
the power of attorney, the Loan Agreement, the exclusive option agreement, and any amendment, supplement or restatement to such
agreements. If our variable interest entity or any of its Shareholders breach any obligations under these agreements, Zhike, as
pledgee, will be entitled to dispose of the pledged equity and have priority to be compensated by the proceeds from the disposal
of the pledged equity. Each of the Shareholders of variable interest entity agrees that before his, her or its obligations under
the contractual arrangements are discharged, he, she or it will not dispose of the pledged equity interests, create or allow any
encumbrance on the pledged equity interests, which may result in the change of the pledged equity that may have adverse effects
on the pledgee's rights under these agreements without the prior written consent of Zhike. These equity pledge agreements will
remain effective until our variable interest entity and the Shareholders discharge all their respective obligations under the
contractual arrangements.
Exclusive
Option Agreements.
Zhike, the Shareholders of the Target Company, have entered into an exclusive option agreement (“Exclusive
Option Agreement”) with our variable interest entity, the Target Company. Pursuant to the Exclusive Option Agreement, the
Shareholders of our variable interest entity have irrevocably granted Zhike or any third party designated by Zhike an exclusive
option to purchase all or part of their respective equity interests in our variable interest entity. The purchase price shall
be RMB 10. Without Zhike’s prior written consent, our variable interest entity shall not, among other things, amend their
articles of association, increase or decrease the registered capital, sell, dispose of or set any encumbrance on their assets,
business or revenue, enter into any material contract outside the ordinary course of business, merge with any other persons or
make any investments, distribute dividends, or enter into any transactions which have material adverse effects on their business.
The Shareholders of our variable interest entity also jointly and severally undertake that they will not transfer, gift or otherwise
dispose of their respective equity interests in our variable interest entity to any third party or create or allow any encumbrance
on their equity interests within the term of these agreements. These agreements will remain effective until Zhike and/or any third
party designated by Zhike has acquired all equity interests of our variable interest entity from the Shareholders.
Loan
Agreement
. Pursuant to the Loan Agreement between Zhike, and Wu Ji Sun, entered into on December 27, 2017, Zhike made an interest-free
loan in the amount of RMB10,000 to Wu Ji Sun. The term of this loan is ten (10) years from the date of the Loan Agreement. Zhike
and Wu Ji Sun agree and acknowledge that repayment is at the sole discretion of Zhike and may at Zhike’s option take the
form of Wu Ji Sun’s transferring the borrower equity Interest in whole to Lender or Lender's designated persons (legal or
natural persons) pursuant to Zhike’s exercise of its right to acquire the borrower equity interest under the Exclusive Option
Agreement.
The
foregoing is a summary of the terms of the VIE Agreements and is qualified in its entirety by the VIE Agreements which are attached
hereto and incorporated herein as Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6.
