Item 1.01 Entry into a Material Definitive Agreement
On January 3, 2020, TMSR Holding Company Limited ("TMSR" or the "Company")
entered into a Share Purchase Agreement ("SPA") with Sichuan Wuge Network Games
Co., Ltd. ("Wuge") and all the shareholders of Wuge ("Wuge Shareholders"). Wuge
Shareholders are Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co.,
Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co.,
Ltd., which is controlled by Wei Xu.
Wuge is a game developing company incorporated in China. Wuge Manor, the game
Wuge is developing, is the world's first game that combines Internet of Things
(IoT) and e-commerce that is based on CodeChain interface, a blockchain
platform. It is based on real cities and uses the IoT Grid as the access point
to access e-commerce by CodeChain. Through the game, players can have access to
hundreds of vendors and business owners in over 100 cities in China, participate
in activities those businesses set up and collect points, which can be redeemed
as equipment in the game or coupons usable when making purchase at that
business. CodeChain access to e-commerce includes Online to Offline (O2O)
"scanning QR Code" and social media that seamlessly link offline and online and
connect real and virtual directly, so that each IoT Grid becomes an e-commerce
access to realize the decentralization of e-commerce access and complete the
basic layout for blockchain e-commerce.
Pursuant to the SPA, TMSR shall issue an aggregate of 4,000,000 shares of TMSR's
common stock ("TMSR Shares") to the Wuge Shareholders, in exchange for Wuge
Shareholders' agreement to enter into, and their agreement to cause Wuge to
enter into, certain VIE agreements ("VIE Agreements") with Tongrong Technology
(Jiangsu) Co., Ltd. ("WFOE"), the Company's indirectly owned subsidiary, through
which WFOE shall have the right to control, manage and operate Wuge in return
for a service fee equal to 100% of Wuge's net income ("Acquisition"). The
Company has notified Nasdaq Stock Market regarding the Acquisition. The closing
of the Acquisition is conditioned upon Nasdaq Stock Market's approval.
The foregoing description of the SPA does not purport to be complete and is
qualified in its entirety by reference to the complete text of the SPA, which is
filed as Exhibit 10.1
On January 3, 2020, WFOE entered into a series of VIE Agreements with Wuge and
the Wuge Shareholders. The VIE Agreements are designed to provide WFOE with the
power, rights and obligations equivalent in all material respects to those it
would possess as the sole equity holder of Wuge, including absolute rights to
control the management, operations, assets, property and revenue of Wuge. Wuge
has all necessary license to carry out its business in China.
Material terms of each of the VIE Agreements are described below:
Technical Consultation and Services Agreement. Pursuant to the technical
consultation and services agreement between Wuge and WFOE dated January 3, 2020,
WFOE has the exclusive right to provide consultation services to Wuge relating
to Wuge's business, including but not limited to business consultation services,
human resources development, and business development. WFOE exclusively owns any
intellectual property rights arising from the performance of this agreement.
WFOE has the right to determine the service fees based on Wuge's actual
operation on a quarterly basis. This agreement will be effective as long as Wuge
exists. WFOE may terminate this agreement at any time by giving a 30 days' prior
written notice to Wuge.
The foregoing description of the technical consultation and services agreement
does not purport to be complete and is qualified in its entirety by reference to
the complete text of the technical consultation and services agreement, which is
filed as Exhibit 10.2.
Equity Pledge Agreement. Under the equity pledge agreement among WFOE, Wuge and
Wuge Shareholders dated January 3, 2020, Wuge Shareholders pledged all of their
equity interests in Wuge to WFOE to guarantee Wuge's performance of relevant
obligations and indebtedness under the technical consultation and services
agreement. In addition, Wuge Shareholders will complete the registration of the
equity pledge under the agreement with the competent local authority. If Wuge
breaches its obligation under the technical consultation and services agreement,
WFOE, as pledgee, will be entitled to certain rights, including the right to
sell the pledged equity interests. This pledge will remain effective until all
the guaranteed obligations are performed or the Wuge Shareholders cease to be
shareholders of Wuge.
The foregoing description of the equity pledge agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the equity pledge agreement, which is filed as Exhibit 10.3.
Equity Option Agreement. Under the equity option agreement among WFOE, Wuge
and Wuge Shareholders dated January 3, 2020, each of Wuge Shareholders
irrevocably granted to WFOE or its designee an option to purchase at any time,
to the extent permitted under PRC law, all or a portion of his equity interests
in Wuge. Also, WFOE or its designee has the right to acquire any and all of its
assets of Wuge. Without WFOE's prior written consent, Wuge's shareholders cannot
transfer their equity interests in Wuge and Wuge cannot transfer its assets. The
acquisition price for the shares or assets will be the minimum amount of
consideration permitted under the PRC law at the time of the exercise of the
option. This pledge will remain effective until all options have been exercised.
The foregoing description of the equity option agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the equity option agreement, which is filed as Exhibit 10.4.
Voting Rights Proxy and Financial Support Agreement. Under the voting rights
proxy and financial support agreement among WFOE, Wuge and Wuge Shareholders
dated January 3, 2020, each Wuge Shareholder irrevocably appointed WFOE as its
attorney-in-fact to exercise on such shareholder's behalf any and all rights
that such shareholder has in respect of his equity interests in Wuge, including
but not limited to the power to vote on its behalf on all matters of Wuge
requiring shareholder approval in accordance with the articles of association of
Wuge. The proxy agreement is for a term of 20 years and can be extended by WFOE
unilaterally by prior written notice to the other parties.
The foregoing description of the voting rights proxy and financial support
agreement does not purport to be complete and is qualified in its entirety by
reference to the complete text of the voting rights proxy and financial support
agreement, which is filed as Exhibit 10.5.
The effectiveness of the VIE Agreements are conditioned upon the closing of the
Acquisition.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On January 3, 2020, the Company's board of directors (the "Board") of the
Company appointed Mr. Wei Xu as a director of the Board, effective upon the
closing of the Acquisition.
The biographical information of Mr. Xu is set forth below:
Mr. Wei Xu, age 51, is the inventor of QR code patent and the creator of Code
Chain interface. He founded and has served as the chairman of the board of
director at Lingkong Group, a Chinese company that engages in systems
applications and products in data processing, since August 2006. In July 2019,
Mr. Xu founded Sichuan Wuge Network Games Co., Ltd., a game developing company
that combines IoT and e-commerce that is based on ChainCode interface. From July
1994 to July 2006, Mr. Xu was the COO of NEC IT Management Co., Ltd., the
Chinese subsidiary of NEC Japan, a company that provides information technology
solutions including but not limited to SAP, SCM and Matrixlink. Mr. Xu received
his bachelor's degree in business administration in China from Fudan University
in 1992.
Mr. Xu does not have a family relationship with any director or executive
officer of the Company. Other than disclosed in item 1.01, Mr. Xu has not been
involved in any transaction with the Company during the past two years that
would require disclosure under Item 404(a) of Regulation S-K.
Mr. Xu accepted an offer letter from the Company and agreed to receive an annual
compensation of $10,000, effective upon the closing of the Acquisition. The
offer letter is qualified in its entirety by reference to the complete text of
the agreement, which is filed hereto as Exhibits 10.6.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Share Purchase Agreement dated January 3, 2020
10.2 Technical Consultation and Services Agreement dated January 3, 2020
10.3 Equity Pledge Agreement dated January 3, 2020
10.4 Equity Option Agreement dated January 3, 2020
10.5 Voting Rights Proxy and Financial Support Agreement dated January 3,
2020
10.6 Director Offer Letter between the Company and Wei Xu, dated January 3,
2020
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