OFILM signs 1 billion yuan advance payment agreement with Nanchang government

Shortly after officially announcing the introduction of funds from the Nanchang Municipal Government, OFILM issued an announcement on the evening of June 28 regarding the verification of the "Advance Payment Agreement" with the Nanchang Government.

This agreement is only an advance payment agreement. After the signing of the agreement, Nanchang Chanmeng Investment will immediately initiate comprehensive due diligence, audit and evaluation work. The final equity transaction or capital increase and stock expansion agreement should be signed separately by the parties after the corresponding procedures required by all parties are fulfilled and Nanchang Chanmeng Investment obtains the relevant documents approved by the relevant departments for this equity transaction or capital increase and stock expansion. 

It is understood that OFILM Group Co., Ltd., and its wholly-owned subsidiary Shenzhen OFILM Innovation Technology Co., Ltd. (hereinafter referred to as "OFILM Innovation") and OFILM Biometrics signed an "Advance Payment Agreement" with Nanchang Chanmeng Investment on June 28, 2019. Nanchang Chanmeng Investment agreed to pay an advance payment of RMB 100,000 million to hold the corresponding equity of OFILM Biometrics by capital increase or equity transfer. The specific equity ratio will be determined based on the assessed value of the final audit evaluation.

Looking back at the entire incident, Nanchang Chanmeng Investment Management Co., Ltd. (hereinafter referred to as "Nanchang Chanmeng Investment") agreed to pay an advance payment of RMB 100,000 million to hold the corresponding equity of Nanchang O-Film Biometrics Technology Co., Ltd. (hereinafter referred to as "O-Film Biometrics") by way of capital increase or equity transfer. The parties agreed to determine the specific equity ratio based on the assessed value of the final audit evaluation. 

The main contents of this agreement include that Nanchang Chanmeng Investment agrees to pay an advance payment of RMB 100,000 million to the agreed account and hold the corresponding equity of OFI Biometrics by way of capital increase or equity transfer. The specific equity ratio will be determined based on the assessed value of the final audit evaluation. 

Within six months from the date of entry into force of this Agreement, if Nanchang Chanmeng Investment has not obtained the relevant documents from the relevant departments agreeing to the shareholding or capital increase and expansion matters or if the shareholding matters have not been completed, Nanchang Chanmeng Investment has the right to terminate this Agreement and no longer implement the shareholding or capital increase and expansion matters under this Agreement. Nanchang Chanmeng Investment does not need to pay any liquidated damages to the parties, and the Company and OFI Biometrics must return the advance payment in full to Nanchang Chanmeng Investment within the next five working days and pay interest at an annualized rate of 5%. The Company and OFI Biometrics and OFI Innovation jointly perform the above repayment obligations and the litigation fees, attorney fees, appraisal fees, auction fees, loss compensation, etc. that may arise therefrom, and bear joint and several guarantee liability to Nanchang Chanmeng Investment for a period of three years. The Company, OFI Biometrics and OFI Innovation promise to perform the relevant approval procedures such as the board of directors and shareholders' meeting resolutions for external guarantees. If the above guarantee is invalid due to the reasons of the Company, OFI Biometrics and OFI Innovation, the Company, OFI Biometrics and OFI Innovation shall jointly bear the responsibility for returning the advance payment and paying interest. 

In addition, if the parties formally sign the relevant equity transaction or capital increase and share expansion agreement, Nanchang Chanmeng Investment has the right to unilaterally decide the equity ratio to be acquired or increased and offset the advance payment agreed in this agreement as equity payment or capital increase payment and refund the excess and supplement the shortfall.

OFILM and OFILM Innovation agree to pledge all their respective shares in OFILM Biometrics to Nanchang Chanmeng Investment within two months after the signing of this contract, and complete the pledge registration procedures at the industrial and commercial department; Before the pledge registration procedures are completed, the guarantor, Mr. Cai Rongjun, as the chairman and legal representative of the company, promises to provide joint and several guarantee liability for the obligation to return the equity advance payment, etc., and the guarantee liability will terminate on the date when all the pledge registration procedures are completed. Nanchang Chanmeng Investment will transfer the funds to the company's designated account before (inclusive) June 28, 2019. The company will issue a "Confirmation Letter of Receipt of Advance Payment Funds" to Nanchang Chanmeng Investment on the same day as it receives the advance payment.  

OFILM said: "This matter is conducive to optimizing the company's asset-liability structure, improving the company's operating efficiency, enhancing profitability, and is in line with the company's future strategic development direction."