Item 1.01Entry Into A Material Definitive Agreement
On September 30, 2019, Ando Holdings Limited, a corporation incorporated in the State of Nevada, United States (the “Company” or “ADHG”) and Ando Capital Investment Limited, a limited liability company incorporated in Hong Kong (“ACIL”) and Mr. Lam Chi Kwong Leo, a permanent Hong Kong resident, a major shareholder of the Company, our director and Chief Executive Officer and the sole shareholder of ACIL, entered into the following agreements, or collectively, the “Variable Interest Entity or VIE Agreements,” pursuant to which the Company has contractual rights to control and operate the business of ACIL (the “VIE”). ACIL currently has insurance business and was established as our VIE for our future business expansion and development in Hong Kong.
The VIE Agreements are as follows:
1)Exclusive Business Cooperation Agreement: Pursuant to the Exclusive Business Cooperation Agreement, ADHG serves as the exclusive provider of financial support, technical support, consulting services and management services to ACIL. In consideration of such services, ACIL has agreed to pay a service fee to ADHG, which is based on the time of services rendered multiplied by the corresponding rate, plus amount of the services fees or ratio decided by the board of directors of ADHG. The Agreement has a term of 10 years but may be extended ADHG in its discretion.
2)Loan Agreement: Pursuant to the Loan Agreement, ADHG granted interest-free loans of Hong Kong Dollars Seventy Eight Thousand (“HK$78,000”), which is equivalent to United States Dollars Ten Thousand (“US$10,000”) to the shareholders of the ACIL for the sole purpose of increasing the registered capital of the ACIL. These loans are eliminated with the capital of ACIL during consolidation.
3)Share Pledge Agreement: Pursuant to the Share Pledge Agreement, the shareholders of ACIL pledged to ADHG a first security interest in all of their equity interests in ACIL to secure ACIL’s timely and complete payment and performance of its obligations under the Exclusive Business Cooperation Agreement. During the term of the Share Pledge Agreement, the pledgors agreed, among other things, not to transfer, place or permit the existence of any security interest or other encumbrance on their interest in ACIL without the prior written consent of ADHG. The pledge shall remain in effect until 10 years after the obligations under the business coopoeation agreement will have been fulfilled. However, upon the full payment of the consulting and service fees under the Exclusive Business Cooperation Agreement and upon the termination of ACIL’s obligations under the Exclusive Business Cooperation Agreement, the Share Pledge Agreement shall be terminated and ADHG shall terminate this agreement as soon as reasonably practicable.
4)Power of Attorney: Pursuant to the Power of Attorney, Messrs. Lam Chi Kwong Leo, as the sole shareholder of ACIL, granted to the ADHG the right to (i) attend shareholders meetings of ACIL (ii) exercise all shareholder rights (including voting rights) with respect to such equity interests in ACIL and (iii) designate and appoint on behalf of such shareholders the legal representative, directors, supervisors, and other senior management members of ACIL. The Power of Attorney is irrevocable and is continuously valid from the date of execution of such Power of Attorney, so long as such persons remain shareholders of ACIL.
5)Exclusive Option Agreement: Pursuant to the Exclusive Option Agreement, the shareholders of ACIL granted to the ADHG an irrevocable and exclusive right and option to purchase all of their equity interests in ACIL. The purchase price shall be equal to the capital paid in by the shareholders, adjusted pro rata for the purchase of less than all of the equity interests. The Agreement is effective for a term of 10 years, and may be renewed at ADHG’s election.
As a result of the above contractual arrangements, the Company has substantial control over ACIL’s daily operations and financial affairs, election of its senior executives and all matters requiring shareholder approval. Furthermore, as the primary beneficiary of ACIL, the Company is entitled to consolidate the financial results of ACIL in its own consolidated financial statements.
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The VIE Agreements are filed as Exhibit 10.1, 10.2, 10.3, 10.4 and 10.5 to this Current Report on Form 8-K. The foregoing summary of the terms of the VIE Agreements is subject to, and qualified in its entirety by, the Exclusive Business Cooperation Agreement, the Loan Agreement, and the Share Pledge Agreement, the Power of Attorney and the Exclusive Option Agreement, which are incorporated herein by reference.