Exhibit 99.1

 

 

Naked Brand Group Limited

(ACN 619 054 938)

 

 

 

Extraordinary General Meeting

 

Notice of Meeting and Explanatory Memorandum

 

 

10:00am (AEDT), Tuesday, 21 December 2021

6:00pm (EST), Monday, 20 December 2021

BDO Sydney, Level 11, 1 Margaret Street, Sydney NSW 2000, Australia

 

Independent Expert’s Report: Shareholders should carefully consider the Independent Expert’s Report, which is attached to this Notice of Meeting as Annexure A. The Independent Expert has concluded that the Proposed Transaction, as set out in the Explanatory Memorandum, is not fair but reasonable to Shareholders in the absence of a superior proposal, for the reasons set out in the Independent Expert’s Report.

 

Important Notes: This document, which includes the Notice of Meeting, Explanatory Memorandum and Independent Expert’s Report, is important and should be read in its entirety.

 

This Notice of Meeting does not take into account the individual investment objectives, financial situation or particular needs of any person. Shareholders should seek professional advice from a licensed financial adviser, accountant, stockbroker, legal adviser or other professional adviser before deciding whether or not to approve the Resolutions set out in this Notice.

 

 

 

 

2 EXECUTIVE CHAIRMAN’S LETTER

 

Executive Chairman’s Letter

 

Dear Shareholder

 

On behalf of the Board, I am pleased to invite you to attend an Extraordinary General Meeting on Tuesday, 21 December 2021 at 10:00am (Australian Eastern Daylight Time) / Monday, 20 December 2021 at 6:00pm (Eastern Standard Time) (Meeting), to consider and vote on resolutions in relation to approving the proposed acquisition of the Cenntro electric commercial vehicles design and manufacturing business (ECV Business), as announced on 8 November 2021.

 

On 5 November 2021, Naked Brand Group Limited (Company) entered into a definitive stock purchase agreement (Stock Purchase Agreement) with Cenntro Automotive Group Limited (CAG), under which it is proposed that the Company will acquire certain wholly owned subsidiaries of CAG which conduct the ECV Business, in exchange for approximately 67.9% of the fully paid ordinary shares in the Company post-Closing (Shares) (on a fully diluted basis, as determined in accordance with the Stock Purchase Agreement) (Proposed Transaction). These Shares will then be distributed by CAG to its shareholders promptly following Closing. In addition, each CAG employee stock option will be converted into an option to purchase an equivalent number of Shares at an equivalent option exercise price. The Proposed Transaction is conditional on the Company and CAG obtaining all necessary regulatory and shareholder approvals.

 

The Non-Executive Directors have carefully considered the advantages, disadvantages and risks associated with the Proposed Transaction and believe that the Proposed Transaction presents Shareholders with a compelling opportunity to acquire a position in an industry leader with strong growth prospects and disruptive technology.

 

The Independent Expert appointed to assess the Proposed Transaction considers that the Proposed Transaction is not fair but reasonable to Shareholders in the absence of a superior proposal. Further details regarding the Proposed Transaction (including the Independent Expert’s Report) and the Resolutions are set out in the Notice of Meeting and Explanatory Memorandum which you are strongly encouraged to read in its entirety.

 

The Non-Executive Directors unanimously believe that the Proposed Transaction is in the best interests of Shareholders. Accordingly:

 

each Non-Executive Director recommends that Shareholders vote in favour of the Transaction Resolutions; and
   
each Non-Executive Director confirms that they intend to vote any Shares that they own in favour of the Transaction Resolutions.

 

The Board strongly encourages you to submit a proxy vote online ahead of the Meeting. Proxy votes can be lodged at www.cstproxyvote.com.

 

On behalf of the Board I would like to thank you for your continued support.

 

Yours sincerely,

Justin Davis-Rice
Executive Chairman

 

 

 

 

3 KEY INFORMATION

 

Key Information in respect of the Proposed Transaction

 

Question Answer Reference
Proposed Transaction
What is the Proposed Transaction?

The Company proposes to acquire the electric commercial vehicles design and manufacturing business (ECV Business) conducted by certain subsidiaries of Cenntro Automotive Group Limited (CAG).

On 5 November 2021, the Company entered into a definitive stock purchase agreement (Stock Purchase Agreement) providing for the Company to complete a combination with Cenntro Automotive Group Limited, a Hong Kong company (CAG HK), Cenntro Automotive Corporation, a Delaware corporation (CAC), and Cenntro Electric Group, Inc., a Delaware corporation (CEG and, collectively with CAG HK and CAC, the CAG Subs), by acquiring all of their issued and outstanding shares (Cenntro Shares), (Proposed Transaction).

In exchange, CAG will receive the number of fully paid ordinary shares in the Company (Shares) equal to seven-thirds (7/3) times (i) the number of fully diluted Shares outstanding immediately prior to consummation of the Proposed Transaction (Closing), less (ii) each CAG employee stock option outstanding immediately prior to the Closing that will be converted into an option to purchase a number of Shares equal to the number of CAG shares for which such stock option was exercisable immediately prior to the Closing multiplied by the Exchange Ratio (as defined below) at an option exercise price equal to the exercise price per share of such stock option immediately prior to the Closing divided by the Exchange Ratio (Converted CAG Option), all as determined in accordance with the Stock Purchase Agreement (Acquisition Shares). The Acquisition Shares will then be distributed by CAG to its shareholders promptly following Closing.

Section 1.1

 

 

 
 

 

4 KEY INFORMATION

 

Question Answer Reference
What are the key aspects of the Proposed Transaction and Stock Purchase Agreement?

Closing of the Proposed Transaction is expected to occur by 31 December 2021, after receipt of the required approval by Shareholders and CAG Shareholders and the satisfaction or waiver of the other closing conditions set forth in the Stock Purchase Agreement, including the condition that the Company has cash of at least US$282 million and liabilities of no more than US$10 million in the aggregate immediately prior to the Closing, FIRB Approval for the Proposed Transaction having been obtained, and that The Nasdaq Stock Market LLC (Nasdaq) has approved the initial listing application in connection with the Proposed Transaction with respect to the Acquisition Shares and the Acquisition Shares have been approved for listing on Nasdaq as of the Closing.

FIRB Approval was obtained for the Proposed Transaction on 12 November 2021. There can be no assurance, however, that the other closing conditions set forth in the Stock Purchase Agreement will be satisfied or waived.

Concurrently with the execution of the Stock Purchase Agreement, the Company also entered into:

(a)   a loan agreement for, and funded, a US$30 million secured loan to the CAG Subs (Loan Agreement);

(b)   lock-up agreements with certain CAG Shareholders who agreed not to transfer Shares beneficially owned or owned of record by them for a period of 180 days after consummation of the Proposed Transaction;

(c)   a relationship agreement with Peter Wang, Cenntro Enterprise Limited (CEL) and Trendway Capital Limited (TCL) (both entities ultimately owned by Mr. Wang) (together the Wang Parties), providing director nomination powers to the Wang Parties in limited circumstances (Relationship Agreement);

in addition:

(d)   the shareholders and holders of secured convertible notes of CAG and certain officers of the Company will enter into a registration rights agreement under which they will be granted certain rights to have registered for resale under the U.S. Securities Act of 1933 (Securities Act) the Shares received by them in the Proposed Transaction or granted as compensation;

(e)  certain CAG Shareholders, who hold sufficient ordinary and preferred shares of CAG to approve the Proposed Transaction, entered into support agreements to execute written consents to approve the Proposed Transaction;

(f)   certain Shareholders have delivered statements of intention to vote in favour of the Proposed Transaction at the Meeting; and

in order to meet the US$282 million minimum cash closing condition for the Proposed Transaction, the Company entered into:

(g)   an equity distribution agreement for an “at-the-market” offering, through Maxim Group, LLC (Maxim), of up to US$300 million of Shares (ATM Offering); and

(h)   a securities purchase agreement for a private placement to certain accredited investors of US$30 million of Shares and warrants to purchase Shares (Private Placement).

Summaries of the above agreements are set out in Section 1.1. Full copies of the agreements are attached as exhibits to the Form 6-K filed by the Company with the SEC on 8 November 2021 which is available on the SEC website at http://www.sec.gov or upon request to the Company.

Section 1.1

 

 

 
 

   

5 KEY INFORMATION

 

Question Answer Reference
Who is Cenntro?

Cenntro is a designer and manufacturer of electric light- and medium-duty commercial vehicles (ECVs). Its purpose-built ECVs are designed to serve a variety of corporate and governmental organizations in support of city services, last-mile delivery and other commercial applications. As of June 30, 2021, Cenntro has sold or put into service more than 3,100 units of its first ECV model, the Metro®, in 16 countries across North America, Europe and Asia.

Cenntro plans to introduce four new ECV models to serve the light- and medium-duty market by the end of 2021. Cenntro’s mission is to leverage its technological and research and development capabilities in areas such as vehicle design, digital component development, vehicle control software, and “smart” driving to become a technology leader in the ECV market.

Prior to the Closing of the Proposed Transaction, the entities that comprise Cenntro (being the CAG Subs) are wholly owned subsidiaries of CAG. As of the date of this Explanatory Memorandum, the Chief Executive Officer of CAG, Peter Wang, indirectly owns approximately 40.318% of CAG, on a fully diluted basis, which ownership he holds through CEL and TCL. Mr. Wang has a significant influence over all corporate matters relating to CAG.

Section 1.2
Why is Shareholder approval being sought for the Proposed Transaction?

The Proposed Transaction is conditional on the Company and CAG obtaining all necessary regulatory and shareholder approvals.

Shareholder approval is being sought pursuant to and in accordance with item 7 of section 611 of the Corporations Act in relation to the issue of the Acquisition Shares by the Company to CAG as consideration for the acquisition by the Company of the Cenntro Shares from CAG, the subsequent Distribution of the Acquisition Shares by CAG to the CAG Shareholders promptly following Closing, and entry into the Lock-up Agreements.

Section 1.3
What will the shareholding in the Company be as a result of the Proposed Transaction being approved? Refer to the table at Section 1.4.1 “Effect of the Proposed Transaction on the capital structure of the Company” showing the anticipated pro-forma ownership of the Company post-Closing. Section 1.4.1
What are the future intentions for the Company?

Following Closing, it is contemplated that CAG will immediately distribute the Acquisition Shares and no longer remain a shareholder of the enlarged group of the Company (that will include the CAG Subs) that will exist after Closing (Enlarged Group). The Wang Parties, as principal shareholders of CAG and the Company following the Closing, currently:

(a)   intend to be supportive of the continued operation of the existing ECV Business and projects and do not intend to make any significant changes to the ECV Business, other than with respect to the proposed expansion of current operations, including, for instance, establishing new assembly facilities in Dusseldorf, Germany and Jacksonville, Florida, as previously disclosed to the Company;

(b)   have no intention of injecting further capital into the Enlarged Group;

(c)   have no intention of making material changes regarding the future employment of substantially all the present employees of the Enlarged Group;

(d)   intend to retain the composition of the Board as it will be constituted at completion of the Proposed Transaction;

(e)   do not intend to redeploy any fixed assets of the Enlarged Group, other than with respect to the proposed expansion of current operations described above;

(f)    do not intend to transfer any property between the Enlarged Group and CAG, the Wang Parties or any of their respective associates; and

(g)   have no intention to change the Enlarged Group's existing policies in relation to financial matters or dividends.

Section 1.4.2

 

 
 

  

6 KEY INFORMATION

 

Question Answer Reference
What is the proposed structure of the Board following Closing?

Under the Stock Purchase Agreement, immediately following the Closing Date, the Board will consist of up to five Directors, which will initially include (subject to the approval of Resolution 3 to amend the Constitution to introduce staggered classes):

(a)   one Director nominee designated by the Company, namely Justin Davis-Rice, an existing Director, as a class II Director;

(b)   four Director nominees designated by the Wang Parties (Wang Parties Nominee Directors), namely:

(i)    Peter Wang, as managing Director and chairman of the Board;

(ii)   Chris Thorne, as a class I Director;

(iii)   Joe Tong, as a class II Director; and

(iv)  Simon Charles Howard Tripp, an existing Director, as a class III Director. Refer to Section 1.1.7 for why Mr. Tripp has been designated a Director nominee by the Wang Parties.

Biographies of Mr. Davis-Rice and Mr. Tripp, who will stay on the Board, are set out at Section 1.4.3.1. Biographies of Mr. Wang, Mr. Thorne and Mr. Tong, who will be appointed to the Board subject to the approval of Resolution 4, are set out at Section 1.4.3.2.

Section 1.4.3.2

Section 4

Why is Shareholder approval being sought for the Company to change its name?

Sections 157(1) and 136(2) of the Corporations Act require that the Company pass a special resolution to change the name of the Company from “Naked Brand Group Limited” to “Cenntro Electric Group Limited” and to amend the Constitution to reflect the Company’s new name.

This change of name is consistent with the Company becoming the holding company for the CAG Subs that will continue to operate the ECV Business following consummation of the Proposed Transaction.

Section 2
Why is Shareholder approval being sought for the Company to amend its Constitution?

Section 136(2) of the Corporations Act requires that the Company pass a special resolution to amend the Constitution.

It is proposed that existing sub-rules 19.1-19.3 of rule 19 “Directors” of the Constitution be deleted in their entirety and replaced with the new sub-rules 19.1-19.3 set out in Section 3 to permit three staggered classes of directors. The Company and CAG believe that having staggered classes of directors will encourage stability in leadership following the Proposed Transaction and will assure desirable continuity in policy following the Proposed Transaction.

Section 3

 

 
 

 

7 KEY INFORMATION

 

Question Answer Reference
Assessment of the Proposed Transaction and Non-Executive Directors’ Recommendations
What are the reasons to vote in favour of, or against the Proposed Transaction?

The Non-Executive Directors are of the view that the following are some of the reasons why Shareholders may decide to vote in favour of the Proposed Transaction:

The Non-Executive Directors unanimously recommend that you vote in favour of the Transaction Resolutions in the absence of a Superior Proposal.

The Non-Executive Directors believe that the Proposed Transaction is in the best interests of Shareholders and are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the Transaction Resolutions:

●    (attractive investment opportunity) the Proposed Transaction represents an attractive investment opportunity for the Company to change its business focus to that of an electric commercial vehicle design and manufacturing business;

●    (existing ECV business) the Company will obtain ownership of the ECV Business through the acquisition of the CAG Subs;

●    (extensive ECV experience) the appointment to the Board of the Wang Parties Nominee Directors provides the Company with extensive experience within the ECV industry; and

●    (strong cash position) the consideration for the Proposed Transaction is Shares, thereby allowing the Company to use its strong cash position to grow the ECV Business and potentially increase Shareholder value.

The Independent Expert has concluded that the Proposed Transaction is not fair but reasonable to Shareholders in the absence of a superior proposal.

FTI Consulting (Australia) Pty Limited was engaged by the Non-Executive Directors to prepare the Independent Expert’s Report for Shareholders in respect of the Proposed Transaction.

The Independent Expert’s Report comments on the fairness and reasonableness of the Proposed Transaction to Shareholders. The Independent Expert has concluded that the Proposed Transaction is not fair but reasonable to Shareholders in the absence of a superior proposal.

The Independent Expert has identified the following advantages of the Proposed Transaction (note this is a summary of the advantages to Shareholders of the Proposed Transaction, Shareholders should read the Independent Expert’s Report in its entirety before deciding how to vote):

●    (Participation in the anticipated high growth, ECV industry) If the Proposed Transaction is approved, Shareholders will have the opportunity to participate in an industry that, overall, is expected by many investors and industry analysts to achieve high growth.

Section 1.5

Section 1.8

 

 
 

  

8 KEY INFORMATION

 

Question Answer Reference
 

●    (Cenntro’s potential competitive advantages in the ECV industry) If the Proposed Transaction is approved, Shareholders will have the opportunity to participate in the potential returns expected to be generated by Cenntro, an early-stage company that, while facing significant uncertainty and risks, also appears to have developed some competitive advantages in the electric light commercial vehicle sector.

●    (Only option currently available) The Directors have advised that the Proposed Transaction is the only option currently available to NBG and that there are no other offers or transactions that the Directors are considering. Whilst proceeding with the Proposed Transaction is likely to preclude NBG from pursuing alternative major opportunities which may arise in the future, there is no guarantee that such opportunities may arise and be superior propositions to the Proposed Transaction.

●   (Impact on NBG’s share price) If the Proposed Transaction is not approved, NBG’s Share price may experience a significant decrease, since the market seems to already be pricing into NBG’s Shares a likelihood of a value-accretive transaction. That premium might disappear if the Proposed Transaction is not approved.

The Non-Executive Directors are of the view that the following are some of the reasons why Shareholders may decide to vote against the Proposed Transaction:

●    (Shareholders may disagree with the Non-Executive Directors’ unanimous recommendation) Notwithstanding the unanimous recommendation of the Non-Executive Directors in the absence of a Superior Proposal, Shareholders may believe the Proposed Transaction is not in their best interests.

●   (Dilution of shareholding and voting power) The aggregate percentage shareholding of existing Shareholders will be diluted by the issue of the Acquisition Shares to CAG (and the subsequent Distribution to the CAG Shareholders) as well as the Additional Financings. Based on the assumptions described in Section 1.1.3, following the Proposed Transaction, the existing Shareholders’ ownership interest will be reduced from 100% to approximately 24.5% on a fully diluted basis and the collective entitlement to any dividends and the voting power of existing Shareholders will also be reduced accordingly. Please refer to Section 1.4.1 for further details on the impact of the Proposed Transaction of the Company’s capital structure.

●   (Change of business) The Company will be changing the nature and scale of its activities which may not be consistent with the objective of all Shareholders. There are additional risk factors associated with the change in nature of the Company’s activities resulting from the Proposed Transaction. Some of the risk factors are summarised in the row below and in Section 1.6, and set out in more detail in Schedule 2.

 

 

 
 

 

9 KEY INFORMATION

 

Question Answer Reference
 

●    (Additional funding) The Company may need additional funding in the future to achieve its long term goals and could result in further dilution at the time.

In addition, the Independent Expert also identified the following disadvantages to the Shareholders of accepting the Proposed Transaction (note this is a summary of the disadvantages, Shareholders should read the Independent Expert’s Report in its entirety before deciding how to vote):

●    (Difficulty in estimating the fair market value of Cenntro) The Independent Expert is of the opinion that there is insufficient information to form an opinion, to the level of certainty required by ASIC guidance, whether the Proposed Transaction is fair. Given that, in their view, the fair market value cannot be reliably estimated as of the date of the Independent Expert’s Report, due to lack of sufficiently reliable and supportable prospective financial information, they cannot opine on the financial benefits of the Proposed Transaction.

●    (The ECV industry is high risk) There is a high degree of risk inherent in an investment in a company in the ECV industry since, while there appears to be significant opportunity for attractive investment returns, it is a new industry with significant challenges and uncertainty. There are numerous competitors in the industry, and it is not possible, at this stage, to determine with reasonable certainty, which companies will be successful.

●    (Cenntro is a high-risk investment) There is a high degree of risk inherent in an investment in Cenntro as it is an early-stage company with significant hurdles to overcome to be a successful player in the ECV industry.

●    (Cenntro has very different investment characteristics to NBG) The investment characteristics (e.g. risks and opportunities) of the ECV industry Cenntro is targeting are very different than the investment characteristics of the fashion and ecommerce industries NBG has historically participated in before the Proposed Transaction. While NBG’s share price has responded positively to NBG’s 24 September 2021 announcement that it was looking at a “disruptive opportunity in the clean technology sector”, there is still a risk some investors may prefer NBG’s historical industry focus over Cenntro’s.

●    (Prospects of a future takeover) The prospects of future takeover offers may be reduced due to the concentration of ownership resulting from the Proposed Transaction. The Wang Parties, having a major shareholding in CAG, will have a significant ownership stake after the Proposed Transaction (beneficial ownership estimated at approximately 27.6% of the outstanding Shares, or 26.2% on a fully diluted basis), which may dissuade potential buyers due to their ability to block potential transactions.

●    (Impact on control) If the Proposed Transaction is approved, there will be an impact on the voting power and ownership of the Enlarged Group. In summary, Shareholders will cede a majority of their voting rights to CAG Shareholders.

The Non-Executive Directors believe that the advantages of the Proposed Transaction outweigh the potential disadvantages. The Non-Executive Directors intend to cause any Shares in which they have a relevant interest to be voted in favour of the Transaction Resolutions in the absence of a Superior Proposal.

 

 

 
 

 

10 KEY INFORMATION

 

Question Answer Reference
What are the potential risks associated with the Proposed Transaction?

Following Closing, the business, assets and operations of the Enlarged Group may be subject to certain risk factors that have the potential to influence its operating and financial performance in the future. These risks can impact the value of an investment in Shares.

The Board (including the future board of the Company post-Closing) intends to manage these risks by careful planning and implementing appropriate risk control measures. Some risks are, however, highly unpredictable and the extent to which the Board can effectively manage them is limited.

Based on the information available, the key risk factors affecting the Enlarged Group include:

Specific risks associated with the business and operations of the Enlarged Group

Risks related to Cenntro’s business and financial results

●    (operations risk) Cenntro has a limited operating history and faces significant challenges (including ramp-up, competitors) in an emerging industry.

●    (financials risk) Cenntro historically incurred losses and may not be profitable in the future.

●    (business development risk) Future success depends on the ability to develop and manufacture ECVs of quality, on schedule and at large scale, and the ability to introduce new models.

●    (channel partner risk) Cenntro relies on relatively few of its channel partners for a large portion of its sales; reliance on channel partners to market, sell and service ECV products subjects Cenntro to substantial risk; channel partners may reduce or cancel orders; and the ECV Business may fail to establish new channel partners to penetrate new markets.

●    (supply chain risk) Cenntro is subject to risk of supply-chain disruption since it relies on suppliers and manufacturers for substantially all of its components and vehicle kits for new models; Cenntro is dependent on single-source suppliers for a number of necessary components of Cenntro’s ECVs; the suppliers and manufacturers may not deliver acceptable quality, volume or prices, or fail to deliver such components, or fail to use ethical business practices or comply with laws, which could harm Cenntro's reputation and operations.

●    (COVID-19 risk) COVID-19 has harmed and may continue to harm Cenntro’s business, financial condition, operating results and prospects.

●    (business model risk) Cenntro’s distributed manufacturing and channel partner network model is different from the predominant automobile manufacturing model. This makes evaluating Cenntro’s business, financial condition, operating results and prospects difficult.

Section 1.6

Schedule 2

 

 
 

 

11 KEY INFORMATION

 

Question Answer Reference
 

●    (capital risk) Cenntro’s business plans require significant amounts of capital, which in the future may not be readily available or available on acceptable terms, or at all.

●    (supply and demand risk) Cenntro may not be able to accurately estimate supply and demand for its vehicles, which may result in inefficiencies in predicting manufacturing requirements, cause Cenntro to incur costs or delays, and hinder revenue generation.

●    (material weakness in reporting) Cenntro has identified a material weakness in its internal control over financial reporting that could materially harm it. If Cenntro fails to remediate the material weakness, or experiences material weaknesses in the future, it may not be able to accurately and timely report its financial condition or results of operations, which may adversely affect investor confidence in it.

Risks related to Cenntro’s industry

●    (government incentives and policies) The unavailability or reduction of government and economic incentives or elimination of regulatory policies favourable for ECVs could adversely affect Cenntro, its financial condition, operating results and prospects.

●    (market adoption of ECVs) Future growth is dependent on end-users’ willingness to adopt ECVs.

●    (supply risk) Cenntro’s ECV production is subject to risk relating to cost increases or disruption in supply of raw materials or components, including for instance shortages of key components such as semiconductors or lithium-ion batteries.

●    (competition risk) Cenntro may not be successful in competing in the highly competitive automotive market, particularly if it is unable to keep up with advances in electric vehicle technology.

Risks related to legal and regulatory matters

●    (regulatory risk) Evolving or unfavourable changes to regulations, or failure by Cenntro or its channel partners to comply with regulatory, political, legal, economic, tax and labour conditions could materially adverse its business, financial condition, operating results and prospects.

●    (intellectual property) Failure to protect intellectual property rights from unauthorised use or infringement by third parties may adversely affect Cenntro’s business. Defending against patent or trademark infringement claims may be time-consuming and cause Cenntro to incur substantial costs.

●    (environmental regulations) Compliance with environmental regulations can be costly, and noncompliance may result in adverse publicity and monetary damages and fines.

●     (cyber security) Breaches and cyber-attacks could disrupt Cenntro’s business and operations, and its operating results and reputation could be harmed.

●    (data collection) Data collection of personal information is governed by restricting regulations.

 

 

 
 

 

12 KEY INFORMATION

 

Question Answer Reference
 

Risks related to doing business in China

●    (government policies) Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on Cenntro’s business, results of operations, financial condition and prospects. The PRC government may intervene or exert more control over foreign investment in China-based entities.

●    (legal risks) Uncertainties with respect to the PRC legal system could adversely affect Cenntro and may restrict the level of legal protections to foreign investors.

●    (compliance risks) Cenntro currently conducts substantially all its operations through its subsidiaries in China, and any adverse regulatory developments in China may subject Cenntro to additional regulatory review or approval, and additional disclosure requirements. Recent tensions between the United States and China may impose additional compliance requirements including an increase in compliance costs and additional disclosure requirements.

●    (labour) Increases in labour costs and enforcement of stricter labour laws in China may adversely affect Cenntro’s business and profitability.

●    (currency) Fluctuations in the value of the Renminbi (RMB) and restrictions on currency exchange may adversely affect Cenntro’s business.

●    (PRC subsidiaries) Cenntro may rely on dividends and other distributions on equity paid by its PRC subsidiaries to fund any cash and financing requirements. Any limitation on the ability of its PRC subsidiaries to make payments to Cenntro could adversely affect its ability to conduct its business.

●    (international policies) Changes in U.S. and international trade policies with regard to China may adversely impact Cenntro’s business and operation.

●    (PRC regulations of offshore loans and investments) PRC regulation of loans to and direct investment in PRC entities may delay or prevent Cenntro from making loans or additional capital contributions to its PRC subsidiaries, which could materially and adversely affect its liquidity and ability to fund and expand its business. PRC regulations relating to offshore investment activities by PRC residents may limit Cenntro’s PRC subsidiaries’ ability to increase their registered capital or distribute profits.

●    (foreign laws) There may be difficulty enforcing foreign judgements or bringing actions in China against Cenntro based on foreign laws.

●    (foreign investigations) It may be difficult for overseas regulators to conduct investigations or collect evidence within China.

●    (holding company structure) The Enlarged Group is subject to unique risks due to uncertainty regarding the interpretation and application of PRC laws and regulations, any future actions of the PRC government relating to the foreign listing of companies with significant PRC operations, and the possibility of sanctions imposed by PRC if it fails to comply with their rules and regulations.

 

 

 
 

  

13 KEY INFORMATION

 

Question Answer Reference
 

●    (securities) Cenntro may face heightened scrutiny and negative publicity, which could materially affect the operations of the Enlarged Group or significantly limit the ability of the Enlarged Group to offer or continue to offer securities to investors and cause the value of such securities to significantly decline. The PRC government may intervene or exert more control over securities offerings conducted overseas and/foreign investment in China-based issuers.

●    (regulatory risks) Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations, including increasing enforcement and regulatory oversight over certain activities in the securities market, enhancing supervision over China-based companies listed overseas, extending the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. It is uncertain what the impact such modified or new laws and regulations will have on Cenntro’s business operations or the ability to accept foreign investments and list its securities on a U.S. or other foreign exchange.

●    (dividends) Cenntro currently conducts substantially all its operations in various countries including China, through wholly owned subsidiaries with direct equity ownership, and does not directly own any substantive business operations in China. As a result, Cenntro’s ability to pay dividends to its shareholders and to service any debt it may incur may depend upon dividends paid by its PRC subsidiaries, as well as certain taxes and regulatory approvals. Any debt incurred by its PRC subsidiaries may be governed by instruments restricting the ability of any such subsidiary to pay dividends to Cenntro, which could limit the amount of dividends that Cenntro may make to shareholders in the future.

●    (PRC statutory reserves) Each of Cenntro’s subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside is determined at the discretion of its board of directors. The reserve funds are not distributable as cash dividends except in the event of liquidation.

●    (intercompany transfers) Cenntro can send capital investments to its PRC subsidiaries for working capital to be used at their discretion. To the extent one of its PRC subsidiaries declares and pays a dividend, such subsidiary must pay a transfer tax of 15% to repatriate any profit distributed to the U.S. Cenntro’s PRC subsidiaries, as Wholly Foreign Owned Enterprises (WFOEs) under PRC law, can make dividends up to CAG HK without prior PRC regulatory approval. However, any such subsidiary will only be able to pay dividends during periods in which it has positive net income and no accumulated net losses.

●    (foreign exchange) The Foreign Exchange Control Regulations of the PRC, as amended, is the main regulation of foreign exchange management in the PRC.

 

 

 
 

 

14 KEY INFORMATION

 

Question Answer Reference
 

Transaction-specific risks

●    (failure to complete) Failure to satisfy the Conditions under the Stock Purchase Agreement may mean the Proposed Transaction fails to complete, and the Company would still incur costs relating to the Proposed Transaction, with no guarantee of an alternate transaction proceeding.

●    (dilution of existing Shareholders’ voting power) The Company estimates that it will issue approximately 35.0 million Shares in the ATM Offering, 133.2 million Shares in the Private Placement, 112.7 million Shares upon settlement of the Incentive Award and 2,332.7 million Shares to CAG to be distributed to CAG Shareholders, in addition to options and warrants to purchase 185.4 million Shares outstanding . Based on the assumptions described in Section 1.1.3, the issuance of these Shares will significantly dilute the equity interest of Shareholders from 100% to approximately 24.5% on a fully diluted basis and the collective entitlement to any dividends and the voting power of existing Shareholders will also be reduced accordingly. The dilution may adversely affect prevailing market prices for the Shares.

●    (Wang Parties as significant shareholder) Upon completion of the Proposed Transaction and the distribution of Acquisition Shares by CAG to its shareholders, the Wang Parties are expected to beneficially own approximately 27.6% of the outstanding Shares (or 26.2% on a fully diluted basis). These shareholders will be able to exercise a significant level of influence over all matters requiring shareholder approval, including the election of Directors (including their rights under the Relationship Agreement), amendments to the Company’s constitution and approval of significant corporate transactions, and will be able to block special resolutions of the Company.

●    (reliance on Cenntro business) After the Proposed Transaction, the Company will be solely dependent on the success of Cenntro’s business.

●    (beyond management expertise) Cenntro operates in an industry that is outside of the Company management’s area of expertise. The Company has undertaken financial, commercial and other analyses of Cenntro to determine its attractiveness as an acquisition target, and whether to pursue the Proposed Transaction, but such analyses, and the best-estimate assumptions made by the Company, may not be realized, and the Share price may decline.

●    (limited claims) NBG will likely have no remedy available if the Proposed Transaction is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by CAG and Cenntro at the time of the signing of the Stock Purchase Agreement or the Closing.

●    (management interests) The Company’s management has interests in the Proposed Transaction that are different than Shareholders generally (for example, the Phantom Warrants and Incentive Award), which may influence management’s decision to pursue and structure the Proposed Transaction.

 

 

 
 

 

15 KEY INFORMATION

 

Question Answer Reference
 

General investment risks

●    (share price) Economic, government policy, taxation laws and other factors may affect the market price of Shares despite the Enlarged Group’s performance.

●    (tax risks) Tax consequences may result from the Proposed Transaction and Shareholders should seek their own professional advice.

●    (compliance risks and de-listing) There is no guarantee that the Company will be able to comply with the requirements to maintain a listing on the Nasdaq Capital Market. If the Company receives a notice of de-listing, the Company would take actions to restore compliance, but provides no assurance that any action taken would result in the Shares maintaining listing, or would stabilise the market price or improve the liquidity of shares.

●    (dividends) Future payment of dividends by the Enlarged Group will be at the discretion of the new Board and no assurance in relation to the payment of dividends can be given by the Enlarged Group.

●    (earnings) Changes to accounting policy standards may occasionally affect the reported earnings and financial position of the Enlarged Group.

●    (other factors) Changes in general economic and business conditions nationally and globally, e.g. inflation, interest rates, taxation and regulatory policies, pandemic, natural disasters or Acts of God, have an adverse impact on the Enlarged Group’s operating and financial performance, financial position and market price of Shares.

Risks are set out in summary form in Section 1.6 and in more detail in Schedule 2. These risks are non-exhaustive and do not take into account the investment objectives, financial situation, taxation position or particular needs of any specific Shareholder.

 

 

 
 

 

16 KEY INFORMATION

 

Question Answer Reference
What will happen if Shareholder approval is not obtained or the Proposed Transaction does not otherwise proceed? Resolutions 1 to 4 are interdependent, meaning if any of these resolutions are not passed, then none of these resolutions will be taken to have been passed and the Proposed Transaction cannot proceed. These resolutions are also conditional on the passing of Resolution 5. Section 1.7
What is the opinion of the Independent Expert?

The Independent Expert’s Report concluded that the Proposed Transaction is “not fair but reasonable” to Shareholders in the absence of a superior proposal. This is on the basis that:

Fairness assessment

In forming the Independent Expert’s opinion regarding the fairness of the Proposed Transaction, they are required to compare:

A.    the fair market value of an issued share of NBG before the Proposed Transaction, on a controlling interest basis, (representing the consideration deemed to be paid by the Shareholders if approved)

to

B.    the fair market value of an issued share of NBG after the Proposed Transaction, on a minority interest basis (representing the value of the investment security that will be owned by the Shareholders if approved).

For the Proposed Transaction to be “fair” under ASIC Regulatory Guide 111, the fair market value of A must be equal to, or greater than, B.

While the Independent Expert considered that they have had sufficiently reliable information to form an opinion on A, the fair market value of an NBG share before the Proposed Transaction, they have, for the reasons in the Independent Expert’s Report and summarised below in Section 1.8, had insufficiently reliable information that due to the nature of the ECV industry and the quality of the financial information of Cenntro did not represent “reasonable grounds” to form an opinion on B, the fair market value of an NBG share after the Proposed Transaction.

Reasonableness assessment

The Independent Expert has assessed the reasonableness of the Proposed Transaction, and has concluded that the advantages of the Proposed Transaction outweigh the disadvantages and therefore, in their opinion, the Proposed Transaction is reasonable to Shareholders.

The Independent Expert’s assessment of the potential advantages and disadvantages are set out in detail in the Independent Expert’s Report and summarised above in “What are the reasons to vote in favour of, or against the Proposed Transaction?” and in Section 1.8.

The assessment is set out in summary form in Section 1.8 and Shareholders are strongly encouraged to read the Independent Expert’s Report, a full copy of which is set out in Annexure A.

Section 1.8

Annexure A

 

 
 

 

17 KEY INFORMATION

 

Question Answer Reference
What are the Directors’ recommendations?

Having regard to the opinion of the Independent Expert and the advantages and disadvantages and risks associated with the Proposed Transaction, the Non-Executive Directors believe that the Proposed Transaction is in the best interests of the Company and its Shareholders.

The Non-Executive Directors unanimously recommend that Shareholders vote in favour of the Proposed Transaction.

Section 1.9
How do the Directors intend to vote? Each Non-Executive Director intends to vote in favour of the Proposed Transaction and Resolutions 1, 2, 3 and 4 in respect of all Shares they hold or control and any undirected proxies they receive. Section 1.9
Will the Directors receive any benefits under the Proposed Transaction?

None of the Directors will receive Acquisition Shares, however:

(a)   subject to the passing of Resolution 6.1, and subject to and conditional on the passing of the Transaction Resolutions, each of the Non-Executive Directors will receive a cash payment of US$1,000,000 in connection with the successful Closing; and

(b)   subject to the passing of Resolution 6.2, JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice, will receive approximately US$11.9 million in cash in relation to the acceleration of the third tranche of the Phantom Warrants (based on a Share price of $0.6017), and approximately 112.7 million Shares in relation to the grant of the Incentive Award. This will equate to approximately 3.2% of the Company’s outstanding Shares (refer to the pro forma ownership table at Section 1.4.1). For the avoidance of any doubt, Resolution 6.2 is not subject to and conditional on the passing of the Transaction Resolutions, but the acceleration of the third tranche of Phantom Warrants is conditional on the consummation of the Proposed Transaction. The value of these benefits is directly linked to the Company’s share price. Over the past 6 months, the market price of the Company’s shares has been volatile (see Section 6.6 below). Section 6.6 includes further examples of the value of these benefits based on different Share prices.

More detail is set out below in the rows relating to “Director benefits”.

Section 6

 

 
 

 

18 KEY INFORMATION

 

Question Answer Reference
Share Consolidation
Why is the Company seeking approval to undertake the Share Consolidation?

Section 254H(1) of the Corporations Act requires that the Company pass an ordinary resolution at a general meeting to consolidate its shares.

The Proposed Transaction is subject to a Condition that the Five Day Average Trading Price for the five consecutive trading days ending on (and inclusive of) the Closing Date (after giving effect to the Share Consolidation) is not less than US$5.00 per Share.

On 26 April 2021, the Company received a first notice from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive business days, the closing bid price for Shares had been below the minimum of US$1.00 per share required for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). On 26 October 2021, the Company received a second notice from Nasdaq’s Listing Qualifications Department, stating that Nasdaq’s staff had determined that the Company was eligible for an additional 180 calendar day period (until 25 April 2022) to regain compliance.

In order to regain compliance during the additional compliance period, the bid price for shares of Shares must close at US$1.00 per share or more for a minimum of ten consecutive business days.

The Company intends to cure the deficiency during the second compliance period by effecting the Share Consolidation.

Accordingly, the Share Consolidation seeks to accomplish two goals: enabling the Company to meet one of the Conditions for the Proposed Transaction and enabling the Company to regain compliance with the minimum bid price requirement.

The exact consolidation ratio for the Share Consolidation will be set by the Directors at least 7 days prior to the Meeting and notified in a Form 6-K to be filed by the Company with the SEC. That ratio will be between consolidating every 10 Shares into 1 Share and consolidating every 20 Shares into 1 Share. The exact consolidation ratio will be included in Resolution 5 that is put to the Meeting.

Section 5
What are the Directors’ recommendations? The Board unanimously recommends that Shareholders vote in favour of Resolution 5. Section 5
How do the Directors intend to vote? Each Director intends to vote in favour of Resolution 5 in respect of all Shares they hold or control and any undirected proxies they receive. Section 5

 

 
 

 

19 KEY INFORMATION

 

Question Answer Reference
Director benefits
Why is the Company seeking approval for the Non-Executive Director Benefits? The Directors consider that Shareholder approval by way of ordinary resolution pursuant to Chapter 2E and sections 195(4) and 200B of the Corporations Act is required in respect of the provision of the cash payment by the Company of US$1,000,000 to each of Mr. Andrew Shape, Mr. Kelvin Fitzalan and Mr. Simon Tripp (Non-Executive Directors) (or their related entities), being a total cash payment by the Company of US$3,000,000 in aggregate, in connection with a successful Closing of the Proposed Transaction (Non-Executive Director Benefits). Section 6
Why is the Company seeking approval for the acceleration of the Phantom Warrants and the grant of the Incentive Award?

The Directors consider the acceleration of Phantom Warrants and grant of Incentive Award are on arm’s length terms. As such, neither the acceleration of the Phantom Warrants nor the grant of the Incentive Award was subject to Shareholder approval. However, the Company is seeking Shareholder approval for completeness, due to the impact of the Proposed Transaction on the timing of the exercise of the Phantom Warrants and the calculation of Shares to be issued under the Incentive Award.

The proposed financial benefits in respect of which Shareholder approvals being sought are:

(a)  the acceleration of the third tranche of the Phantom Warrants issued to JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice; and

(b)  the grant of the Incentive Award to JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice.

Section 6
What are the Directors’ recommendations? The Directors all have a material personal interest in the outcome of Resolutions 6.1 and 6.2. Therefore, the Directors do not consider it appropriate to make a recommendation on how to vote on these resolutions. Section 6
How do the Directors intend to vote? The Directors will be abstaining from voting their own shares on Resolutions 6.1 and 6.2. Section 6
Further information
Where can Shareholders find out further information?

Further information about the Proposed Transaction is available through the Form 6-K filed by the Company with the SEC on 8 November 2021 which is available on the SEC website at http://www.sec.gov or upon request to the Company.

The Company files annual and other reports and documents with the SEC under the Securities Exchange Act. The Company’s SEC filings made electronically through the SEC’s EDGAR system are available to the public at the SEC’s website. You may also read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549-1004. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference room.

 

  

 
 

 

20 NOTICE OF MEETING

 

Notice of Meeting

 

Notice is hereby given that the Extraordinary General Meeting of Shareholders (Notice or Notice of Meeting) of Naked Brand Group Limited (ACN 619 054 938) (Company or NBG) will be held at BDO Sydney, Level 11, 1 Margaret Street, Sydney NSW 2000, Australia on Tuesday, 21 December 2021 at 10:00am (Australian Eastern Daylight Time) / Monday, 20 December 2021 at 6:00pm (Eastern Standard Time) (Extraordinary General Meeting or Meeting).

 

The Company strongly encourages all Shareholders to submit a proxy vote online ahead of the Meeting. Proxy votes can be lodged at www.cstproxyvote.com.

 

The Explanatory Memorandum, which accompanies and forms part of this Notice, describes the matters to be considered at the Meeting. Unless specified otherwise, capitalised terms used in this Notice and the Explanatory Memorandum are defined in the Glossary to the Explanatory Memorandum.

 

 

 

Business of the Meeting

 

The business to be considered at the Meeting is to consider, and if thought fit, to pass the following Resolutions.

 

Closing of the Proposed Transaction is conditional on the passing of all Resolutions other than Resolutions 6.1 and 6.2 (Transaction Resolutions). Resolution 5 is however not conditional on the passing of any other Resolution.

 

Resolution 1 – Approval of the Proposed Transaction

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purposes of item 7 of section 611 of the Corporations Act and for all other purposes, approval be given for the Proposed Transaction and each acquisition of relevant interests in Shares in the Company summarised in the Explanatory Memorandum, including each relevant interest arising out of:

 

  (a) CAG’s acquisition of the Acquisition Shares;
     
  (b) the distribution of the Acquisition Shares by CAG to the CAG Shareholders; and
     
  (c) the entry into the Lock-up Agreements (refer to the table at section 1.3.3 of the Explanatory Memorandum),

 

on the terms and conditions set out in the Stock Purchase Agreement.”

 

Independent Expert’s Report

 

Shareholders should carefully consider the Independent Expert’s Report prepared for the purposes of the Shareholder approval required under item 7 of section 611 of the Corporations Act for this Resolution. The Independent Expert’s Report comments on the fairness and reasonableness of the Proposed Transaction to Shareholders. The Independent Expert has concluded that the Proposed Transaction, as set out in the Explanatory Memorandum and in the Independent Expert’s Report attached to this Notice, is not fair but reasonable to Shareholders in the absence of a superior proposal.

 

Non-Executive Directors’ Recommendation

 

The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolution 1.

 

 

 

 

21 NOTICE OF MEETING

 

Voting exclusion statement

 

The Company will disregard any votes cast in favour of this Resolution by or on behalf of:

 

(a) the persons proposing to make the acquisitions and their associates; or
   
(b) the persons from whom the acquisitions are to be made and their associates.

 

However, this does not apply to a vote cast in favour of this Resolution by:

 

(a) a person as proxy for a person who is entitled to vote on this Resolution, in accordance with the directions on the Proxy Form;
   
(b) the person chairing the meeting as proxy for a person who is entitled to vote on this Resolution, in accordance with a direction on the Proxy Form to vote as the proxy decides; or
   
(c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:

 

  (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the Resolution; and
     
  (ii) the holder votes on the Resolution in accordance with directions given by the beneficiary to the holder to vote in that way.

 

Resolution 2 – Approval of change of Company Name

 

To consider and, if thought fit, pass the following Resolution as a special resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purposes of sections 157(1) and 136(2) of the Corporations Act and for all other purposes, the Company change its name from “Naked Brand Group Limited” to “Cenntro Electric Group Limited” and all references in the Company’s Constitution to “Naked Brand Group Limited” be amended to “Cenntro Electric Group Limited” to reflect the Company’s new name.”

 

Non-Executive Directors’ Recommendation

 

The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolution 2.

 

Resolution 3 – Approval to amend Constitution

 

To consider and, if thought fit, pass the following Resolution as a special resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purpose of section 136(2) of the Corporations Act and for all other purposes, approval is given for the Company to amend its existing Constitution in the manner outlined in the Explanatory Memorandum, with effect from Closing of the Proposed Transaction.”

 

Non-Executive Directors’ Recommendation

 

The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolution 3.

 

 

 

 

22 NOTICE OF MEETING

 

Resolutions – Election of Directors

 

Resolution 4.1 – Election of Peter Wang as a Director

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purpose of clause 19 of the Constitution and for all other purposes, Peter Wang, being eligible and having offered himself for election, be elected as a Director of the Company, with effect from Closing of the Proposed Transaction.”

 

Resolution 4.2 – Election of Chris Thorne as a Director

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purpose of clause 19 of the Constitution and for all other purposes, Chris Thorne, being eligible and having offered himself for election, be elected as a Director of the Company, with effect from Closing of the Proposed Transaction.”

 

Resolution 4.3 – Election of Joe Tong as a Director

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, subject to and conditional on all other Transaction Resolutions being passed and Closing of the Proposed Transaction, for the purpose of clause 19 of the Constitution and for all other purposes, Joe Tong, being eligible and having offered himself for election, be elected as a Director of the Company, with effect from Closing of the Proposed Transaction.”

 

Non-Executive Directors’ Recommendation

 

The Non-Executive Directors unanimously recommend Shareholders VOTE IN FAVOUR of Resolutions 4.1 to 4.3.

 

Resolution 5 – Approval of Share Consolidation

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, for the purpose of section 254H of the Corporations Act and for all other purposes, the ordinary shares of the Company be consolidated through the conversion of every [#] ordinary shares in the Company held by a Shareholder into one (1) ordinary share, with fractional entitlements rounded in the manner and on the terms and conditions set out in the Explanatory Memorandum.”

 

The exact consolidation ratio will be set by the Directors at least 7 days prior to the Meeting. The Company shall notify Shareholders of the exact consolidation ratio by a means reasonably calculated to inform Shareholders, including by issuing a press release or filing a Form 6-K with the SEC. The exact consolidation ratio will be between consolidating every 10 Shares into 1 Share and consolidating every 20 Shares into 1 Share and will be included in Resolution 5 that is put to the Meeting.

 

Board Recommendation

 

The Directors unanimously recommend Shareholders VOTE IN FAVOUR of Resolution 5.

 

 

 

 

23 NOTICE OF MEETING

 

Resolutions – Approval of director benefits

 

Resolution 6.1 – Approval of Non-Executive Director Benefits

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That, subject to and conditional on the Transaction Resolutions being passed and Closing of the Proposed Transaction, approval is given for all purposes (including for sections 195(4) and 208 and Division 2 of Part 2D.2 of the Corporations Act) for the giving of cash payment by the Company of US$1,000,000 to each of the Non-Executive Directors (or their related entities) in connection with the Closing of the Proposed Transaction (Non-Executive Director Benefits), on the terms and conditions set out in the Explanatory Memorandum.”

 

Resolution 6.2 – Approval of acceleration of Phantom Warrants and grant of Incentive Award

 

To consider and, if thought fit, pass the following Resolution as an ordinary resolution:

 

“That approval is given for all purposes for the acceleration of Phantom Warrants and grant of Incentive Award by the Company to JADR Consulting Group Pty Limited, an entity associated with Justin Davis-Rice, on the terms and conditions set out in the Explanatory Memorandum.”

 

Board Recommendation

 

The Directors all have a material personal interest in the outcome of Resolutions 6.1 and 6.2. Therefore, the Directors do not consider it appropriate to make a recommendation on how to vote on these resolutions.

 

Voting exclusion statement

 

The Directors will be abstaining from voting their own shares on Resolutions 6.1 and 6.2. The Company will disregard any votes cast in favour of Resolution 6.1 and 6.2 by or on behalf of the Directors, or any of their associates. However, this does not apply to a vote cast in favour of the Resolutions by:

 

(a) a person as a proxy or attorney for a person who is entitled to vote on Resolutions 6.1 and 6.2, in accordance with the directions or attorney to vote on the Resolutions in that way; or
   
(b) the Chair as proxy or attorney for a person who is entitled to vote on Resolutions 6.1 and 6.2, in accordance with a direction given to the Chair to vote on the Resolutions in that way.

 

A person appointed as a proxy must not vote, on the basis of that appointment, on Resolutions 6.1 and 6.2 if:

 

(a) the proxy is either:

 

  (i) a member of the Key Management Personnel of the Company; or
     
  (ii) a Closely Related Party of such a member; and
(b)the appointment does not specify the way the proxy is to vote on Resolutions 6.1 and 6.2.

 

Further information in relation to the Resolutions set out in this Notice of Meeting is set out in the Explanatory Memorandum which accompanies and forms part of this Notice.

 

Other Business

 

To consider any other business that may be brought before the Meeting in accordance with the Constitution of the Company and the Corporations Act.

 

By order of the Board

Mark Ziirsen

Company Secretary

23 November 2021

 

 

 

 

24 NOTICE OF MEETING

 

Voting and other information

This information should be read together with and forms part of the Notice of Meeting.

 

a) Registered ownership and beneficial ownership

 

If your shares are registered in your name with our transfer agent, Continental Stock Transfer & Trust Company, then you are considered the “registered owner” for those shares. If you are the registered holder of your shares, you have the right to vote your shares by proxy or to attend the Meeting and vote in person.

 

If your shares are held through a bank, broker or other nominee, then you are considered to hold your shares in “street name”. While you are the “beneficial owner” of those shares, you are not considered the registered owner. As the beneficial owner of the shares, you have the right to instruct your bank, broker or other nominee how to vote your shares. However, since you are not the registered owner of your shares, you may not attend the Meeting and vote these shares in person unless you obtain a “legal proxy” through your bank, broker or other nominee.

 

If you are a beneficial owner and do not provide your bank, broker or other nominee with voting instructions and do not obtain a “legal proxy” from your bank, broker or other nominee, under the rules of various national and regional securities exchanges, the bank, broker or other nominee may generally vote on routine matters but cannot vote on non-routine matters. If the bank, broker or other nominee that holds your shares votes on one or more matters, but does not receive instructions from you on how to vote your shares on one or more non-routine matters, the bank, broker or other nominee will inform us that it does not have the authority to vote on such non-routine matters with respect to your shares. This is generally referred to as a “broker non-vote”. We do not expect any broker non-votes at the Meeting, because we expect that all the Resolutions will be considered non-routine. In such event, banks, brokers and nominees will not be able to vote on any matters at the Meeting, and accordingly will not vote at all, unless they receive voting instructions from the beneficial owners. If any of the Resolutions are considered routine, however, broker non-votes may occur with respect to the non-routine matters.

 

b) Determination of entitlement to attend and vote

 

The Board has determined that a person’s entitlement to vote at the Meeting will be the entitlement of that person set out in the register of Shareholders as at 10:00am (AEDT) on Tuesday, 21 December 2021 (6:00pm (EST) on Monday, 20 December 2021). Accordingly, transactions registered after that time will be disregarded in determining Shareholders entitled to vote at the Meeting.

 

Eligible Shareholders or their proxies and attorneys wishing to vote in person should attend the Meeting and are asked to arrive at least 30 minutes prior to commencement of the Meeting so that their shareholding may be checked against the register and their attendance recorded.

 

If you hold your shares in street name and you wish to vote in person at the Meeting, please contact your bank, broker or other nominee for the procedures necessary to allow you to do so.

 

c)

Voting by proxy

   

(a)

A Shareholder entitled to attend and vote at the Meeting may appoint one proxy or, if the Shareholder is entitled to cast 2 or more votes at the Meeting, 2 proxies, to attend and vote instead of the Shareholder.
   
(b) Where 2 proxies are appointed to attend and vote at the Meeting, each proxy may be appointed to represent a specified proportion or number of the Shareholder’s voting rights at the Meeting.

 

 

 

 

25 NOTICE OF MEETING

 

(c) A proxy need not be a shareholder of the Company.
   
(d) A proxy may be an individual or a body corporate. If a body corporate is appointed, the proxy form must indicate the full name of the body corporate and the full name or title of the individual representative of the body corporate for the Meeting.
   
(e) A proxy vote may be submitted by Internet at www.cstproxyvote.com and following the instructions on the Proxy Form. To be valid, a proxy submitted by Internet must be submitted by the date and time stipulated on the Proxy Form.
   
(f) A Proxy Form accompanies this Notice. A return envelope, which requires no postage if mailed in the United States, is enclosed for your convenience. The Proxy Form also may be returned by email. For the Proxy Form to be valid it must be signed, dated and received, together with the power of attorney or other authority (if any) under which the form is signed, or a (notarially) certified copy of that power of attorney, by 10:00am (AEDT) on Sunday, 19 December 2021 (6:00pm (EST) on Saturday, 18 December 2021):
   
  Post to: Continental Stock Transfer & Trust Co., 1 State Street - Floor 30, New York, NY 10275-0741
   
  Email to: proxy@continentalstock.com

 

If you hold your shares in street name and you wish to vote by proxy, please follow the directions provided to you by your bank, broker or other nominee in order to instruct your bank, broker or other nominee how to vote your shares.

Any proxy given pursuant to solicitation under paragraph (e) or (f) and received in time for the Meeting will be voted in accordance with your specific instructions. If you provide a proxy, but you do not provide specific instructions on how to vote on each proposal, the proxy holders will vote in their own discretion according to their best judgment, to the extent permitted by applicable laws and regulations.

 

WHETHER OR NOT YOU EXPECT TO ATTEND, YOU ARE REQUESTED BY THE BOARD TO PROMPTLY RETURN THE ENCLOSED PROXY FORM OR TO SUBMIT YOUR PROXY BY INTERNET. SHAREHOLDERS WHO EXECUTE PROXIES RETAIN THE RIGHT TO REVOKE THEM AT ANY TIME PRIOR TO THE VOTING THEREOF.

 

PLEASE NOTE: IF YOUR SHARES ARE HELD IN STREET NAME, YOUR BROKER, BANK OR OTHER NOMINEE CANNOT VOTE YOUR SHARES ON NON-ROUTINE ITEMS OF BUSINESS, SUCH AS THE ELECTION OF DIRECTORS, UNLESS YOU INSTRUCT YOUR NOMINEE HOW TO VOTE IN ACCORDANCE WITH THE DIRECTIONS YOU RECEIVE FROM YOUR NOMINEE.

 

d) Proxy voting by the Directors

 

If you appoint a Director as a proxy and do not direct the proxy how to vote on Resolution 6.1 or 6.2, the Director will abstain from voting your Shares on those Resolutions. The Directors intend to vote all undirected proxies in favour of all other Resolutions.

 

If you appoint the Chairman as a proxy and do not direct the proxy how to vote on any of the Transaction Resolutions, Resolution 6.1 or 6.2, the Chairman will abstain from voting your Shares on those Resolutions. The Chairman intends to vote all undirected proxies in favour of Resolution 5.

 

With respect to any other proposal that properly comes before the Meeting, the Chairman will vote in his own discretion according to his best judgment, to the extent permitted by applicable laws and regulations.

 

 

 

 

26 NOTICE OF MEETING

 

e) Revoking a Proxy

 

You may revoke any proxy by notifying the Company in writing by mail at Attention: Continental Stock Transfer & Trust Co., 1 State Street - Floor 30, New York, NY 10275-0741, or by email at proxy@continentalstock.com. You also may revoke any proxy by submitting a later-dated proxy or by voting in person at the Meeting. Attendance at the Meeting does not alone serve to revoke a proxy. For a written revocation or later-dated proxy to be valid, it must be received by 10:00am (AEDT) on 21 December 2021 (6:00pm (EST) on 20 December 2021).

 

If you hold your shares in street name, please follow the directions provided to you by your bank or broker in order to revoke your voting instructions.

 

f) Voting by Corporate Representatives

 

A body corporate may elect to appoint an individual to act as its representative in accordance with section 250D of the Corporations Act, in which case the Company will require a certificate of appointment of the corporate representative executed in accordance with the Corporations Act. The certificate of appointment must be lodged with the Company before the Meeting.

 

g) Quorum and voting rights

 

Two or more Shareholders present at the Meeting and entitled to vote on a resolution at the Meeting shall constitute a quorum.

 

Each share is entitled to one vote upon all items of business to be acted upon at the Meeting.

 

h) Required votes

 

Other than Resolutions 2 and 3, all Resolutions are ordinary resolutions, which require a simple majority of votes cast by Shareholders present and entitled to vote on the resolution to be in favour of the resolution.

 

Resolutions 2 and 3 are special resolutions, which require at least 75% of the votes cast by Shareholders present and entitled to vote on the resolution to be in favour of the resolution.

 

Any shares that are not voted (whether by abstention, broker non-vote or otherwise) will have no effect on an ordinary resolution or a special resolution. A “broker non-vote” occurs when your ordinary shares are held in street name and the bank, broker or other nominee does not have authority to vote on an item of business on your behalf (but does have authority to vote on other items of business). This may occur if the item of business is non-routine, and you do not provide voting instructions to your bank, broker or other nominee. See “Registered ownership and beneficial ownership” above.

 

i) Shareholder questions

 

In order to provide an equal opportunity for all Shareholders to ask questions of the Board, we ask you to submit in writing any questions to the Company. Please send your questions via email or mail to:

 

Company Secretary

Naked Brand Group Limited

Level 61, MLC Centre

25 Martin Place

Sydney NSW 2000, Australia

cosec@nakedbrands.com

 

Written questions must be received by no later than 10:00am (AEDT) on Sunday, 19 December 2021 (6:00pm (EST) on Saturday, 18 December 2021). Your questions should relate to matters that are relevant to the business of the Meeting, as outlined in this Notice and Explanatory Memorandum.

 

 

 

 

27 NOTICE OF MEETING

 

During the course of the Meeting, the Chairman will seek to address as many Shareholder questions as reasonably practicable, and where appropriate, will give a representative of the auditor the opportunity to answer written questions addressed to it. However, there may not be sufficient time available to answer all questions at the Meeting. Please note that individual responses may not be sent to Shareholders.

 

j) Availability of meeting materials

 

The Meeting materials, including the Notice and Explanatory Memorandum, are available at our corporate website, ir.nakedbrands.com. You may also obtain a copy of these materials and the Proxy Form, free of charge, by contacting us by mail c/- Continental Proxy Services, 1 State Street, New York NY 10004, by email at proxy@continentalstock.com or by logging on to https://www.cstproxy.com/nakedbrands/egm2021 including the Company name and your control number in the subject line.

 

If you hold your shares in “street name” through a bank, broker or other nominee, you must use the voter instruction form provided to you by your bank, broker or other nominee to vote your shares. If you hold your shares in “street name,” do not use a proxy card provided by our transfer agent, Continental Stock Transfer & Trust Company. Only if your shares are registered in your name with our transfer agent may you use a proxy card provided by our transfer agent. If you hold your shares in “street name” and you wish to attend the meeting and vote in person, you must first obtain a “legal proxy” from your bank, broker or other nominee.

 

k) Costs

 

The Company will bear the cost of preparing, printing, assembling and mailing these materials, the Proxy Form, and any other material which may be sent to Shareholders in connection with the Meeting. It is contemplated that brokerage houses will forward these materials and the Proxy Form to beneficial owners at the Company’s request. In addition to the solicitation of proxies by mail, our officers and regular employees may solicit proxies without additional compensation, by telephone or other electronic means. We may reimburse brokers or other persons holding shares in their names or the names of their nominees for the expenses of forwarding soliciting material to their principals and obtaining their proxies.

 

l) Where you can find more information

 

The Company files annual and other reports and documents with the SEC under the Securities Exchange Act of 1934, as amended. The Company’s SEC filings made electronically through the SEC’s EDGAR system are available to the public at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549-1004. Please call the SEC at (800) SEC-0330 for further information on the operation of the public reference room.

 

 

 

 

28 EXPLANATORY MEMORANDUM

 

Explanatory Memorandum to the Notice of Extraordinary General Meeting

 

Purpose of this Explanatory Memorandum

 

This document is an important document. This Explanatory Memorandum explains the items of business to be considered at the Extraordinary General Meeting and should be read in conjunction with the Notice of Meeting. This Explanatory Memorandum provides Shareholders with the necessary information to assist them in deciding how to vote on the items of business to be considered at the Extraordinary General Meeting.

 

This Explanatory Memorandum does not take into account the individual investment objectives, financial situation and particular needs of Shareholders or any other person. Accordingly, it should not be relied upon as the sole basis for any decision in relation to the items of business to be considered at the Extraordinary General Meeting. You should read this Explanatory Memorandum in its entirety before making a decision as to how to vote at the Extraordinary General Meeting. If you have any doubt as to what you should do once you have read this Explanatory Memorandum, you should consult your financial or legal adviser as soon as possible.

 

Forward looking statements

 

Certain statements in this Explanatory Memorandum relate to the future. Those statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by those statements. These statements reflect views only as of the date of this Explanatory Memorandum.

 

While the Company believes that the expectations reflected in the forward-looking statements of the Company in this document are reasonable, neither the Company nor any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking statements in this Explanatory Memorandum will actually occur and you are cautioned not to place undue reliance on those forward looking statements.

 

Notice to persons outside Australia

 

This Explanatory Memorandum has been prepared in accordance with Australian laws, disclosure requirements and accounting standards. These laws, disclosure requirements and accounting standards may be different to those in other countries.

 

Disclaimer

 

No person is authorised to give any information or make any representation in connection with the items of business to be considered at the Extraordinary General Meeting which is not contained in this Explanatory Memorandum.

 

Any information or representation not contained in this Explanatory Memorandum may not be relied on as having been authorised by the Company or the Directors in connection with the items of business to be considered at the Extraordinary General Meeting.

 

 

 

 

29 EXPLANATORY MEMORANDUM

 

Privacy

 

To assist the Company to conduct the Extraordinary General Meeting, the Company may collect personal information including names, contact details and shareholding of Shareholders and the names of persons appointed by Shareholders to act as proxies at the Meeting. Personal information of this nature may be disclosed by the Company to its share registry and print and mail service providers. Shareholders have certain rights to access their personal information that has been collected and should contact the Company Secretary if they wish to access their personal information.

 

Responsibility statement

 

The information contained in this Explanatory Memorandum other than the CAG Information and Independent Expert’s Report, including information as to the views and recommendations of the Directors, (Company Information) has been prepared by the Company and is the responsibility of the Company. None of CAG, the Wang Parties, their respective associates or advisers assume any responsibility for the accuracy or completeness of the Company Information.

 

The CAG Information, which includes information as to the intentions of CAG and the Wang Parties and their proposed nominee directors, has been provided by CAG and is its responsibility. None of the Company, its Directors or advisers assume any responsibility for the accuracy or completeness of the CAG Information.

 

CAG has given and has not withdrawn, before the date of this Explanatory Memorandum, its written consent to the inclusion of the CAG Information in the form and context in which it is included and to all references in this Explanatory Memorandum to the CAG Information in the form and context in which they appear.

 

The Independent Expert has prepared the Independent Expert’s Report pertaining to the Proposed Transaction and takes responsibility for the Independent Expert’s Report contained in Annexure A. It has consented to the inclusion of the Independent Expert’s Report in this Explanatory Memorandum. The Independent Expert is not responsible for any other information contained within this Explanatory Memorandum. Shareholders are urged to read the Independent Expert’s Report carefully and, in its entirety, to understand the scope of that report, the methodology of the assessment, the sources of information and the assumptions made.

 

To the extent that the Independent Expert’s Report contains financial projections, forecasts, valuations or other content prepared by the Independent Expert, none of the Directors, the Company or its advisers represent, adopt or otherwise assume any responsibility for that content. Projections, forecasts, valuations and other forward looking statements are by their nature uncertain and dependent on a number of future events. Any such statements should not be regarded as guidance and the Company does not propose to report or make disclosures relative to those statements.

 

The Independent Expert has given and has not withdrawn, before the date of this Explanatory Memorandum, its written consent to the inclusion in this Explanatory Memorandum of the information prepared by it in the form and context in which it is included and to all references in this Explanatory Memorandum to that information in the form and context in which they appear.

 

 

 

 

30 EXPLANATORY MEMORANDUM

 

ASIC and SEC

 

A copy of this Notice of Meeting has been lodged on 10 November 2021 with ASIC pursuant to ASIC Regulatory Guides 74 and 76. ASIC nor any of its officers take any responsibility for the contents of this Notice of Meeting and Explanatory Memorandum.

 

This Notice and Explanatory Memorandum will be filed with the SEC. Neither the SEC nor any state securities commission has approved or disapproved of the securities described herein or passed upon the adequacy or accuracy of this Notice of Meeting or any filing made with the SEC in connection with the proposed transactions discussed herein. Any representation to the contrary is a criminal offense.

 

The Shares issuable in the Proposed Transaction are being offered and sold pursuant to the exemption provided by Section 4(a)(2) and Rule 506(b) of Regulation D of the U.S. Securities Act of 1933 (Securities Act), for transactions not involving any public offering, and pursuant to the exemption provided by Regulation S for offers and sales outside the U.S.

 

Glossary

 

Terms and abbreviations used in the Notice of Meeting and this Explanatory Memorandum have the same meaning and are defined in the Explanatory Memorandum’s Glossary in Schedule 1, other than in the Independent Expert’s Report which contains its own glossary.

 

Indicative timetable

 

Event Date
Date of this Notice of Meeting and Explanatory Memorandum Tuesday, 23 November 2021
Latest time for receipt of Proxy Forms 10:00am on Sunday, 19 December 2021 (AEDT) / 6:00pm on Saturday, 18 December 2021 (EST)
Determination of voting entitlements for Meeting 10:00am on Tuesday, 21 December 2021 (AEDT) / 6:00pm on Monday, 20 December 2021 (EST)
Extraordinary General Meeting 10:00am on Tuesday, 21 December 2021 (AEDT) / 6:00pm on Monday, 20 December 2021 (EST)
Share Consolidation Thursday, 23 December 2021 (AEDT) / Wednesday, 22 December 2021 (EST)
Target Closing Date for the Proposed Transaction* by 31 December 2021
Target date for Distribution by 31 December 2021

 

*Assuming the Transaction Resolutions are passed and all other Conditions to the Proposed Transaction are satisfied or waived.

 

All dates and times in the above timetable are indicative only and subject to change. The Company will provide reasonable notice of any such variation on their website at ir.nakedbrands.com.

 

 

 

 

 

31 EXPLANATORY MEMORANDUM

 

1 Resolution 1 – Approval of Proposed Transaction

 

1.1 Overview of the Proposed Transaction

 

On 5 November 2021, NBG entered into a definitive stock purchase agreement providing for NBG to complete a combination with Cenntro Automotive Group Limited, a Hong Kong company (CAG HK), Cenntro Automotive Corporation, a Delaware corporation (CAC), and Cenntro Electric Group, Inc., a Delaware corporation (CEG and, collectively with CAG HK and CAC, the CAG Subs). Concurrently with the execution of the definitive stock purchase agreement for the combination, NBG entered into a definitive loan agreement for, and funded, a US$30 million secured loan to the CAG Subs (NBG Loan).

 

In addition, NBG has entered into definitive agreements for (i) an “at-the-market” offering, through Maxim Group, LLC (Maxim), of up to US$300 million of Shares (ATM Offering) and (ii) a private placement to certain accredited investors of US$30 million of Shares and warrants to purchase Shares (Private Placement).

 

Summaries of the definitive agreements are set out below; copies of the full agreements are available as exhibits to the Form 6-K filed by NBG with the SEC on 8 November 2021 which is available on the SEC website or upon request to the Company, as referenced below.

 

1.1.1 Stock Purchase Agreement

 

On 5 November 2021, NBG entered into a stock purchase agreement (Stock Purchase Agreement) with CAG and the CAG Subs.

 

Pursuant to the Stock Purchase Agreement, NBG will purchase from CAG, and CAG will sell to NBG (Proposed Transaction), (i) all of the issued and outstanding ordinary shares of CAG HK, (ii) all of the issued and outstanding shares of common stock, par value $0.001 per share, of CAC, and (iii) all of the issued and outstanding shares of common stock, par value $0.01 per share, of CEG, (together, the Cenntro Shares).

 

The consummation of the Proposed Transaction (Closing) is expected to occur by 31 December 2021, after the required approval by the NBG Shareholders and CAG Shareholders and the satisfaction or waiver of the other closing conditions set forth in the Stock Purchase Agreement, including the condition that NBG have cash of at least US$282 million and liabilities of no more than US$10 million in the aggregate immediately prior to the Closing, and that The Nasdaq Stock Market LLC (Nasdaq) has approved the initial listing application in connection with the Proposed Transaction with respect to the Acquisition Shares (defined below) and the Acquisition Shares have been approved for listing on Nasdaq as of the Closing.

 

There can be no assurance, however, that the closing conditions set forth in the Stock Purchase Agreement will be satisfied or waived. For instance, NBG may be unsuccessful in completing Additional Financings (defined below) in order to satisfy the US$282 million minimum cash condition, Nasdaq may not approve the initial listing application, or the NBG Shareholders or the CAG Shareholders may not approve the Proposed Transaction. Accordingly, there can be no assurance that the Proposed Transaction will be consummated on the terms described in this Explanatory Memorandum, or at all.

 

The Stock Purchase Agreement is attached as Exhibit 10.1 to the Form 6-K. The following summary of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.1 to the Form 6-K which is available on the SEC website or upon request to NBG.

 

 

 

 

32 EXPLANATORY MEMORANDUM

 

Consideration

 

The aggregate purchase price for the Cenntro Shares will be a number of Shares equal to seven-thirds (7/3) times (i) the number of fully diluted Shares outstanding immediately prior to the Closing (as determined in accordance with the Stock Purchase Agreement and described below), less (ii) the number of Shares underlying the Converted CAG Options (defined below) (Acquisition Shares). Promptly following the Closing, CAG will distribute the Acquisition Shares to the holders of capital stock of CAG in accordance with the distribution described in the Stock Purchase Agreement (Distribution). Each CAG employee stock option outstanding immediately prior to the Closing will be converted into an option to purchase a number of Shares equal to the number of CAG shares for which such stock option was exercisable immediately prior to the Closing multiplied by the Exchange Ratio (as defined below) at an option exercise price equal to the exercise price per share of such stock option immediately prior to the Closing divided by the Exchange Ratio, as determined in accordance with the Stock Purchase Agreement (Converted CAG Option). Following the Closing, the Acquisition Shares will be registered for resale with the SEC by NBG.

 

The number of fully diluted Shares outstanding, as determined in accordance with the Stock Purchase Agreement, will be equal to the sum of (i) the number of issued and outstanding Shares (including restricted stock) immediately prior to the Closing, plus (ii) the number of Shares underlying restricted stock units and performance units and issuable upon the exercise, conversion, or other exchange of options, warrants, preferred shares, convertible debt securities, or similar rights issued outstanding immediately prior to the Closing or that a third party otherwise has the right to acquire. However, the number of fully diluted Shares outstanding will exclude (i) a number of Shares issued in up to $100 million of Additional Financings that corresponds to the amount of cash in excess of US$282 million held by NBG immediately prior to the Closing, divided by the volume weighted average price, based on the greater of (A) the additional financing price per share and (B) the additional financing floor price per share, of the Shares issued in such Additional Financings, as determined in accordance with the Stock Purchase Agreement, and (ii) the Shares issuable under the Incentive Award (as defined below) granted to JADR Consulting Group Pty Limited, an entity associated with Justin Davis-Rice, NBG’s Executive Chairman and Chief Executive Officer.

 

The exchange ratio, as determined in accordance with the Stock Purchase Agreement, will be equal to (i) (a) the Acquisition Shares, less the number of Acquisition Shares distributable by CAG to the holders of its preferred shares in satisfaction of their liquidation preference, as determined in accordance with the Stock Purchase Agreement, multiplied by (b) the ratio of (I) the aggregate number of shares of CAG capital stock underlying the CAG employee stock options that are outstanding immediately prior to the Closing over (II) the fully diluted shares of CAG capital stock outstanding, divided by (ii) the aggregate number of shares of CAG capital stock underlying the CAG employee stock options that are outstanding immediately prior to the Closing (Exchange Ratio).

 

U.S. Tax Treatment

 

The parties intend that the Proposed Transaction will qualify as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (Code), and the Stock Purchase Agreement was adopted as a “plan of reorganization” within the meaning of Section 368 of the Code.

 

 

 

 

33 EXPLANATORY MEMORANDUM

 

Representations and Warranties

 

The Stock Purchase Agreement contains representations and warranties of CAG relating to, among other things, organization and qualification; authority relative to the Stock Purchase Agreement; no conflicts; required filings and consents; capitalization; ownership of the Cenntro Shares; and board, shareholder, and other necessary approvals.

 

The Stock Purchase Agreement also contains representations and warranties of the CAG Subs, relating to, among other things, organization and qualification; subsidiaries; capitalization; authority relative to the Stock Purchase Agreement; no conflicts; required filings and consents; compliance with laws; CAG Subs financial statements; no undisclosed liabilities; absence of certain changes or events; absence of litigation; employee benefit plans; labor and employment matters; restrictions on business activities; title to property; intellectual property; taxes; environmental matters; agreements; insurance; governmental actions and filings; customers and suppliers; inventory; anti-corruption laws; interested party transactions; board, shareholder, and other necessary approvals; and brokers.

 

The Stock Purchase Agreement contains representations and warranties of NBG relating to, among other things, organization and qualification; subsidiaries; capitalization; authority to enter into and consummate the Stock Purchase Agreement; absence of conflicts, required filings and consents; compliance with laws; financial statements; absence of undisclosed liabilities; absence of certain changes or events; absence of litigation; employee benefit plans; labor matters; restrictions on business activities; title to property; intellectual property; taxes; environmental matters; agreements; insurance; governmental actions and filings; anti-corruption laws; interested party transactions; listing of securities; board, shareholder, and other necessary approvals; and brokers.

 

Covenants

 

The Stock Purchase Agreement includes customary covenants of the parties with respect to business operations prior to consummation of the Proposed Transaction and efforts to satisfy conditions to the consummation of the Proposed Transaction. The Stock Purchase Agreement also contains additional customary covenants of the parties, as well as the following:

 

  As promptly as practicable, NBG will prepare and file with ASIC this Notice of Meeting for the purpose of convening the Extraordinary General Meeting to consider and, if thought fit, vote in favour of the Transaction Resolutions.
     
  NBG will take all action within its power as may be necessary and appropriate such that, immediately following the Closing, the Board of Directors of NBG will consist of up to five directors, which will initially include one director nominee to be designated by NBG, in its sole discretion, prior to the Closing, and four director nominees to be designated by the Wang Parties (as defined below), in their sole discretion, prior to the Closing. In addition, NBG will take all action within its power as may be necessary or appropriate such that, immediately following the Closing, the current executive officers of Cenntro will be the initial executive officers of NBG after the Proposed Transaction, as follows: Peter Wang, Chief Executive Officer; Edmond Cheng, Chief Financial Officer; Wei Zhong, Chief Technology Officer; and Marianne McInerney, Chief Marketing Officer.

 

 

 

 

34 EXPLANATORY MEMORANDUM

 

  NBG will completely divest itself of the business operated through FOH Online Corp., a wholly owned subsidiary of NBG.
     
  NBG, CAG and CAG Subs will cooperate to establish an equity incentive plan and an employee stock purchase plan.
     
  At any time on or prior to the Closing Date, NBG may consummate the sale of newly issued Shares or Share equivalents, for cash, in one or more public or private additional financings, provided that the additional financings will not exceed gross proceeds of US$100 million in the aggregate, on such terms as NBG, after consultation with CAG, will determine, in its reasonable discretion (Additional Financing), and provided further that all such Additional Financings meet certain other conditions as set forth in the Stock Purchase Agreement.

 

Conditions to Closing

 

The Closing of the Proposed Transaction is estimated to occur on 31 December 2021 and is subject to a number of conditions precedent (Conditions) under the Stock Purchase Agreement. FIRB Approval was obtained for the Proposed Transaction on 12 November 2021.The parties are still working towards satisfying the other Conditions as at the date of this Explanatory Memorandum, including the Company seeking the approval of Shareholders for the Transaction Resolutions at the Extraordinary General Meeting in accordance with this Explanatory Memorandum, NBG having cash of at least US$282 million and no more than $10 million in liabilities immediately prior to the Closing and Nasdaq having approved the initial listing application for the Shares in connection with the Proposed Transaction.

 

General Conditions

 

Consummation of the Proposed Transaction is conditioned on approval by NBG’s Shareholders. In addition, the consummation of the Proposed Transaction contemplated by the Stock Purchase Agreement is conditioned upon, among other things:

 

  Either (i) CAG will have received a written no objection notification under the FATA from the Australian Commonwealth Treasurer (or its delegate) in respect of CAG and certain holders of the capital stock of CAG acquiring the Acquisition Shares in accordance with the Stock Purchase Agreement, either on an unconditional basis or subject to such conditions acceptable to CAG (acting reasonably and in good faith), or (ii) the Australian Commonwealth Treasurer, by reason of lapse of time, will no longer be empowered to make an order under the FATA in respect of the acquisition of the Acquisition Shares by CAG and certain holders of the capital stock of CAG in the manner contemplated by the Stock Purchase Agreement on grounds that the Australian Commonwealth Treasurer was otherwise empowered to make under the FATA.
     
  The Proposed Transaction will have been approved by (i) the prior written consent of China Logistic Investment Holding (5) Limited and (ii) approved and authorized by holders of issued and outstanding shares of CAG capital stock, which carry, in the aggregate, not less than two-thirds of the total voting power of all the issued and outstanding shares of CAG.
     
  The Transaction Resolutions will have been approved by the required affirmative vote of the Shareholders of NBG.

 

 

 

 

35 EXPLANATORY MEMORANDUM

 

  No governmental authority will have enacted, issued, promulgated, enforced or entered any law, rule, regulation, award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling which is then in effect and has the effect of making the Proposed Transaction illegal or otherwise prohibiting consummation of the Proposed Transaction.
     
  All specified waiting periods (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act) will have expired or been terminated.
     
  The initial listing application filed with Nasdaq in connection with the transactions contemplated by the Stock Purchase Agreement with respect to the Acquisition Shares will have been approved and the Acquisition Shares will have been approved for listing on Nasdaq, as at the date of the Closing.
     
  NBG will have entered into the registration rights agreement as described below.

 

NBG’s Conditions to Closing

 

The obligations of NBG to consummate the Proposed Transaction are also conditioned upon, among other things:

 

  The representations and warranties of CAG and the CAG Subs will be true and correct as of the Closing (subject to certain bring-down standards).
     
  CAG and CAG Subs will have performed or complied in all material respects with all agreements and covenants required by the Stock Purchase Agreement to be performed or complied with by them on or prior to the date of the Closing.
     
  No material adverse effect with respect to CAG Subs, taken as a whole, will have occurred between the date of the Stock Purchase Agreement and the Closing.
     
  No litigation, suit, claim, action, proceeding or investigation shall be pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Stock Purchase Agreement, cause any of the transactions contemplated by the Stock Purchase Agreement to be rescinded following consummation, or affect materially and adversely the right of CAG Subs to own, operate, or control the CAG Subs or any of their assets and operations following the Proposed Transaction and no award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling issued by a governmental authority to any such effect will be in effect.
     
  CAG will have obtained certain consents and approvals described in the Stock Purchase Agreement.

 

CAG’s and CAG Subs’ Conditions to Closing

 

The obligations of CAG and the CAG Subs to consummate the Proposed Transaction are also conditioned upon, among other things:

 

  The representations and warranties of NBG will be true and correct as of the Closing (subject to certain bring-down standards).

 

 

 

 

36 EXPLANATORY MEMORANDUM

 

  NBG will have performed or complied with in all material respects with all agreements and covenants required by the Stock Purchase Agreement to be performed or complied with by it on or prior to the date of the Closing.
     
  No material adverse effect with respect to NBG and its subsidiaries, taken as a whole, will have occurred between the date of the Stock Purchase Agreement and the Closing.
     
  No litigation, suit, claim, action, proceeding or investigation will be pending or threatened by any governmental entity which is reasonably likely to prevent consummation of the transactions contemplated by the Stock Purchase Agreement, cause any of the transactions contemplated by the Stock Purchase Agreement to be rescinded following consummation, or affect materially and adversely or otherwise encumber the title of the Acquisition Shares to be issued to CAG by NBG in connection with the Proposed Transaction and no award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling issued by a governmental authority to any such effect will be in effect.
     
  NBG will have obtained certain consents and approvals described in the Stock Purchase Agreement.
     
  NBG will have been in compliance in all material respects with the reporting requirements under the Securities Act and the U.S. Securities Exchange Act of 1934, as amended (Exchange Act) between the date of the Stock Purchase Agreement and the Closing.
     
  NBG’s chief executive officer and chief financial officer will have resigned from all of their positions and offices with NBG.
     
  NBG will have completed the divestiture of the business operated through FOH Online Corp., in compliance with the terms and conditions of the Stock Purchase Agreement.
     
  NBG will have cash of at least US$282 million immediately prior to the Closing.
     
  The five-day average trading price for the five consecutive trading days ending on (and inclusive of) the date of the Closing (after giving effect to the consolidation of share capital of NBG under Resolution 5) will not be less than US$5.00 per NBG ordinary share.
     
  NBG and its subsidiaries will not have any liabilities in excess of US$10 million in the aggregate, other than certain non-monetary or contingent liabilities described in the Stock Purchase Agreement.

 

Waivers

 

At any time prior to the Closing, any party may (a) extend the time for the performance of any obligation or other act of any other party, (b) waive any inaccuracy in the representations and warranties of any other party contained in the Stock Purchase Agreement or in any document delivered pursuant thereto, or (c) waive compliance with any agreement of any other party or any condition to its own obligations contained herein. Any such extension or waiver will be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. Delay in exercising or failure to assert any right under the Stock Purchase Agreement will not constitute a waiver of such right. Any waiver of any term or condition will not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of the Stock Purchase Agreement.

 

 

 

 

37 EXPLANATORY MEMORANDUM

 

Termination

 

The Stock Purchase Agreement may be terminated at any time prior to the Closing:

 

  by mutual written consent of NBG and CAG at any time;
     
  by either NBG or CAG if the Proposed Transaction is not consummated on or before 5 May 2022 (Outside Date), provided that the right to terminate the Stock Purchase Agreement will not be available to any party whose action or failure to act has been a principal cause of or primarily resulted in the failure of the Closing to occur on or before such date and such action or failure to act constitutes a breach of the Stock Purchase Agreement;
     
  by either NBG or CAG if a governmental entity shall have enacted, issued, promulgated, enforced or entered any award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling which has become final and non-appealable and has the effect of permanently making consummation of the Proposed Transaction illegal or otherwise preventing or prohibiting consummation of the Proposed Transaction;
     
  by either NBG or CAG upon a material breach of any covenant or agreement set forth in the Stock Purchase Agreement on the part of CAG or CAG Subs or NBG, as applicable, or if any representation or warranty of CAG or CAG Subs or NBG, as applicable, has become inaccurate or untrue such that the conditions to Closing would not be satisfied as of the time of such breach or as of the time such representation or warranty having become untrue, and if curable, has not cured by the earlier of 30 days after notice of such breach and the Outside Date, provided that the terminating party is itself not in material breach of the Stock Purchase Agreement that has not been cured;
     
  by NBG, if CAG fails to obtain requisite approval of the Proposed Transaction by CAG’s shareholders within 20 business days following the date of the Stock Purchase Agreement; or
     
  by CAG or NBG, if the Transaction Resolutions fail to receive the requisite vote for approval at the Extraordinary General Meeting called for the purpose of voting in favor of such matters.

 

1.1.2 Interests of Management

 

Certain of NBG’s executive officers have interests in the Proposed Transaction that are different from, or in addition to, those of other shareholders generally. NBG’s Directors were aware of and considered these interests, among other matters, in evaluating the Proposed Transaction and in recommending it to Shareholders. These interests include, among other things, the fact that:

 

 

 

 

38 EXPLANATORY MEMORANDUM

 

Phantom Warrants

 

In January 2021, NBG’s Board granted to JADR Consulting Group Pty Limited, an entity associated with Justin Davis-Rice, NBG’s Executive Chairman and Chief Executive Officer, phantom warrants with a strike price equal to US$0.37 (the 20-day volume-weighted average price of the Shares) (Phantom Warrants). The Phantom Warrants vest in three tranches, with the first tranche having vested immediately, the second tranche having vested on 21 July 2021 and the third tranche vesting on 21 January 2022. Each tranche will cover 1.5% of the outstanding Shares as of the date of vesting and will expire three years after its vesting date. Upon exercise, NBG will net cash settle the Phantom Warrants. The first and second tranches have both been exercised and settled. CAG required that the Phantom Warrants be exercised and paid out on or prior to consummation of the Proposed Transaction. The Phantom Warrants did not contain any right for the Company to accelerate vesting or require their early exercise. As such, agreement was reached with the holder for the vesting to be accelerated on the basis that the Phantom Warrants would retain the right to participate in the Shares to be issued as part of the Proposed Transaction and for the holder to relinquish the right to exercise the Phantom Warrants during the three years following vesting. This will enable the Phantom Warrants to be paid out at or prior to consummation of the Proposed Transaction. Based on the assumptions described in Section 1.1.3 “Pro Forma Ownership” below, NBG estimates that Mr. Davis-Rice’s associated entity will receive approximately US$11.9 million in cash in settlement of the Phantom Warrants. The actual amount may be substantially more or less than this estimate, depending on the future market price of the Shares and the number of Shares issued in the ATM Offering and the Private Placement.

 

The Non-Executive Directors consider that the acceleration of Phantom Warrants is on arms’ length terms. As such, the acceleration of the Phantom Warrants was not subject to Shareholder approval. However, the Company is seeking Shareholder approval at Resolution 6.2 for completeness, due to the impact of the Proposed Transaction on the timing of the exercise of the Phantom Warrants. See further detail at Section 6.2.

 

Incentive Award

 

In September 2021, NBG’s Board granted to JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice an incentive award (Incentive Award), as follows: on the first, second and third anniversary of the grant of the award, JADR Consulting Group Pty Limited will be granted Shares with a market value equal to 1.5% of the increase in NBG’s total market capitalization since the grant of the award. The market value of the Shares to be issued and the total market capitalization will be determined based on the daily VWAP for NBG’s Shares for the five trading days immediately prior to the applicable anniversary. The payment of the Incentive Award will be accelerated in the event of a change in control of NBG (including the combination with CAG Subs), and the Shares issued in the change in control generally will be included in determining the total market capitalization (and will be so included in the case of the combination with CAG Subs). Based on the assumptions described in Section 1.1.3 “Pro Forma Ownership” below, NBG estimates that it will issue approximately 112.7 million Shares upon settlement of the Incentive Award in connection with the Proposed Transaction. The actual amount may be substantially more or less than this estimate, depending on the future market price of the Shares and the number of Shares issued in the Proposed Transaction, the ATM Offering and the Private Placement.

 

The Non-Executive Directors consider that the grant of the Incentive Award is on arms’ length terms. The grant of the Incentive Award was not subject to Shareholder approval. However, the Company is seeking Shareholder approval at Resolution 6.2 for completeness, due to the impact of the Proposed Transaction on the calculation of Shares to be issued under the Incentive Award. See further detail at Section 6.2.

 

 

 

 

39 EXPLANATORY MEMORANDUM

 

1.1.3 Pro Forma Ownership

 

NBG estimates that Additional Financings in an aggregate amount of approximately US$50 million will be necessary in order to satisfy the US$282 million minimum cash condition. NBG intends to consummate the Private Placement and sell shares in the ATM Offering (each of which may qualify as an Additional Financing) in order to raise such amount. Assuming that NBG raises approximately $20 million in the ATM Offering and $30 million in the Private Placement, such that it has exactly US$282 million of cash immediately prior the Closing and that the Warrants (as defined below) are exercised through a Black-Scholes cashless exercise, and using (i) an assumed price of US$0.6017 per Share (the closing price as of 29 October 2021) for determining the number of Shares to be issued upon Black-Scholes cashless exercise of the Warrants and upon acceleration of the Incentive Award, and (ii) an assumed sales price per Share of US$0.5716 (95% of the closing price as of October 29, 2021) for sales in the ATM Offering, NBG estimates that it will issue approximately 35.0 million Shares in the ATM Offering, 133.2 million Shares in the Private Placement, 112.7 million Shares upon settlement of the Incentive Award, and 2,332.7 million Shares to CAG to be distributed to CAG Shareholders. In addition, there would be options and warrants to purchase 185.4 million Shares outstanding (including the Converted CAG Options).

 

Immediately after the Closing, based on the assumptions set forth above, the shares issued to CAG to be distributed to CAG Shareholders would represent 62.9% of the fully diluted Shares, the Shares of existing NBG Shareholders as of the date of this Explanatory Memorandum would represent 24.5% of the fully diluted Shares, the Shares issued in the Private Placement would represent 3.6% of the fully diluted Shares, the Shares issued in the ATM Offering would represent 0.9% of the fully diluted Shares, the Shares issued to JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice under the Incentive Award would represent 3.0% of the fully diluted Shares, and the aggregate number of Shares underlying options and warrants (including the Converted CAG Options) would represent 5.0% of the fully diluted Shares.

 

The foregoing amounts are estimates only and depend to a high degree on assumptions about the future market price of Shares, which is inherently unpredictable. The number of Shares issued in the transactions is likely to be different to, and may be substantially more or less than, the amounts set forth above, depending on the future market price of the Shares. However, because the number of Shares issuable to the shareholders of CAG generally is based on the number of fully diluted Shares outstanding immediately prior to the Closing, issuances of additional Shares in the ATM Offering or the Private Placement will dilute the existing shareholders of NBG, but not the shareholders of CAG, except to the extent NBG has in excess of US$282 million in cash at the Closing that was raised in Additional Financings, subject to certain requirements detailed in the Stock Purchase Agreement. The Shares issued to JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice under his Incentive Award will dilute both the existing shareholders of NBG and the shareholders of CAG.

 

1.1.4 Loan Agreement

 

In connection with the execution of the Stock Purchase Agreement, NBG and the CAG Subs entered into a loan agreement (Loan Agreement) pursuant to which NBG made a loan to the CAG Subs in an aggregate principal amount of US$30 million (NBG Loan). The aggregate principal amount of the NBG Loan and accrued and unpaid interest will mature on the date that is 90 calendar days after the termination of the Stock Purchase Agreement (Maturity Date), or 90 days after written demand for payment, if the Proposed Transaction is consummated. Interest on the outstanding principal amount of the NBG Loan will accrue at the rate of 10% per annum, payable on the Maturity Date. The NBG Loan is secured by substantially all of the assets of the CAG Subs and, upon the reasonable request of NBG, the subsidiaries of CAG Subs.

 

The Loan Agreement is attached as Exhibit 10.2 to the Form 6-K. The foregoing description of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.2 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

 

 

 

40 EXPLANATORY MEMORANDUM

 

1.1.5 Support Agreements and Statements of Intention

 

In connection with the execution of the Stock Purchase Agreement, certain CAG Shareholders, who hold sufficient ordinary and preferred shares of CAG to approve the Proposed Transaction, have entered into support agreements pursuant to which they have agreed, among other things, to execute written consents to approve the Proposed Transaction. In connection with the execution of the Stock Purchase Agreement, certain Shareholders have delivered statements of intention to vote in favor of the Proposed Transaction at the Meeting called to approve the Proposed Transaction by the Shareholders.

 

The form of support agreement is attached as Exhibit 10.3 to the Form 6-K. The foregoing description of the form of support agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.3 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

1.1.6 Lock-up Agreements

 

In connection with the execution of the Stock Purchase Agreement, certain CAG Shareholders entered into lock-up agreements with NBG, pursuant to which they agreed not to transfer the Shares beneficially owned or owned of record by them for a period of 180 days after consummation of the Proposed Transaction. The book-entry positions evidencing the Acquisition Shares issued under the Stock Purchase Agreement will each include prominent disclosure or bear a prominent legend evidencing the fact that such shares are subject to such lock-up provisions.

 

The form of lock-up agreement is attached as Exhibit 10.4 to the Form 6-K. The foregoing description of the form of lock-up agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.4 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

1.1.7 Relationship Agreement

 

In accordance with clause 6.13 of the Stock Purchase Agreement, on Closing, the Board will consist of up to five Directors, which will initially include Mr. Davis-Rice as the Director nominee designated by NBG, and Peter Wang, Chris Thorne, Joe Tong and Simon Charles Howard Tripp (together, the Wang Parties Nominee Directors). The Wang Parties and the Company have entered into a relationship agreement (Relationship Agreement) which provides that Mr. Tripp, who is one of the existing Directors, will be a Wang Parties Nominee Director to satisfy the legal requirement of having at least two Directors resident in Australia. Further, in the event that any of the Wang Parties Nominee Directors are removed as a Director by members pursuant to section 203D of the Corporations Act, Peter Wang may give notice in writing to NBG of the person that Peter Wang, Cenntro Enterprise Limited and Trendway Capital Limited (each a company ultimately owned by Peter Wang) (together, the Wang Parties) and any other party controlled by Peter Wang which holds Shares, wishes to nominate in place of that previous Wang Parties Nominee Director, together with their signed consent to act, and NBG must ensure such individual is appointed as a Wang Parties Nominee Director of the same class of Director as the previous nominee within two business days of receipt of such notice and signed consent to act, for so long as the Wang Parties collectively beneficially own at least 10% of the issued and outstanding Shares.

 

The Relationship Agreement is attached as Exhibit 10.5 to the Form 6-K. The foregoing description of the Relationship Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.5 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

 

 

 

41 EXPLANATORY MEMORANDUM

 

1.1.8 Registration Rights Agreement

 

The shareholders of CAG, holders of secured convertible notes of CAG and certain of the directors and officers of NBG will enter into a registration rights agreement pursuant to which they will be granted certain rights to have registered for resale under the Securities Act the Shares received by them in the Proposed Transaction (in the case of the shareholders of CAG and holders of secured convertible notes of CAG) or granted to them as compensation (in the case of the directors and officers of NBG), subject to certain conditions set forth therein. Pursuant to the registration rights agreement, NBG will be required to file a registration statement registering the resale of the securities within five business days following the completion of the Proposed Transaction.

 

The form of registration rights agreement is attached as Exhibit 10.6 to the Form 6-K. The foregoing description of the registration rights agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.6 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

1.1.9 ATM Offering

 

On 8 November 2021, NBG and Maxim entered into an equity distribution agreement (Equity Distribution Agreement) for the ATM Offering, pursuant to which NBG may sell, from time to time, through Maxim, Shares having an aggregate offering price of up to US$300 million.

 

Sales of the Shares, if any, will be made by any method permitted that is deemed an “at the market offering” as defined in Rule 415 under the Securities Act. Maxim is not required to sell any specific amount but will act as NBG’s exclusive sales agent using commercially reasonable efforts consistent with its normal trading and sales practices, on mutually agreed terms between Maxim and NBG. NBG has no obligation to sell any of Shares under the Equity Distribution Agreement and may at any time suspend solicitation and offers under the Equity Distribution Agreement.

 

As compensation for its services, NBG agreed to pay to Maxim a commission of 3% of the gross proceeds received by NBG from the sales of Shares under the Equity Distribution Agreement. NBG also agreed to reimburse Maxim up to US$30,000 for its costs and expenses relating to the Equity Distribution Agreement, including legal expenses.

 

The Equity Distribution Agreement contains customary representations, warranties and covenants of NBG and is subject to customary closing conditions. In addition, NBG and Maxim have agreed to indemnify each other against certain liabilities, including indemnification of Maxim by NBG for liabilities arising from breaches of the representations, warranties, or obligations contained in the Equity Distribution Agreement.

 

NBG is party to an existing equity distribution agreement (February EDA) with Maxim, dated as of 24 February 2021, pursuant to which NBG may sell from time to time, through Maxim, Shares having an aggregate offering price of up to US$99.5 million. Pursuant to the February EDA, through the date of this Notice, NBG has sold an aggregate of approximately 72.1 million Shares for gross proceeds of approximately US$70.8 million and net proceeds of approximately US$68.6 million, after payment to Maxim of an aggregate of approximately US$2.1 million in commissions. In connection with the execution of the Equity Distribution Agreement, NBG terminated the offering under the February EDA.

 

The Equity Distribution Agreement is attached as Exhibit 10.7 to the Form 6-K. The foregoing description of the Equity Distribution Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.7 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

The Shares are being offered pursuant to a registration statement on Form F-3 (File No. 333-256258), filed by the Company on 18 May 2021, which became effective automatically upon filing, and a prospectus supplement for the offer and sale of Shares in the ATM Offering filed on 8 November 2021.

 

 

 

 

42 EXPLANATORY MEMORANDUM

 

1.1.10 Private Placement

 

On 5 November 2021, NBG entered into a securities purchase agreement (Securities Purchase Agreement) for the Private Placement with certain accredited investors (Investors), pursuant to which NBG will sell to the Investors an aggregate of 49,900,200 Shares, at a purchase price of US$0.6012 per share, for an aggregate purchase price of US$30 million. In addition, each Investor will receive (i) a five-year warrant (Five-Year Warrant) to purchase a number of Shares equal to the number of shares for which such Investor subscribed, or 49,900,200 Shares (Five-Year Warrant Shares) and (ii) a one-year warrant (One-Year Warrant, and each of the Five-Year Warrant and One-Year Warrant, a Warrant) to purchase a number of Shares equal to 0.65 multiplied by the number of shares for which such Investor subscribed, or 32,435,130 Shares (the One-Year Warrant Shares, and together with the Five-Year Warrant Shares, the Warrant Shares). The Warrants have an exercise price of US$0.7348 per Share (Exercise Price).

 

The sale of Shares and Warrants pursuant to the Securities Purchase Agreement is expected to close by 12 November 2021, subject to customary closing conditions, including the review and non-objection by Nasdaq. If NBG does not receive the non-objection from Nasdaq by 20 November 2021, the market price of Shares closes below US$0.401, or the closing under the Securities Purchase Agreement does not occur on or prior to 29 November 2021, the Investors have the right to terminate the Securities Purchase Agreement.

 

The Securities Purchase Agreement

 

The Securities Purchase Agreement includes certain customary representations and warranties and covenants of NBG and the Investors. In addition, NBG has certain customary indemnification obligations under the Securities Purchase Agreement. In addition, the Securities Purchase Agreement provides:

 

  Beneficial Ownership Limit: Notwithstanding the Investors’ agreement to purchase Shares, the Securities Purchase Agreement provides that no Investor will purchase securities to the extent that such purchase will result in the Investor beneficially owning in excess of 9.9% of the then issued and outstanding Shares on the date of the closing under the Securities Purchase Agreement (Beneficial Ownership Limit).
     
  Ownership Requirement: The Investors are required to own at least the number of Shares purchased on the date of the closing under the Securities Purchase Agreement through the date of the Extraordinary General Meeting called for the purpose of voting in favor of the Transaction Resolutions.
     
  Prospectus Supplement: NBG agreed to file a prospectus supplement to the automatic shelf registration statement on Form F-3 (File No. 333-256258) which will offer for resale the Shares sold to the Investors (including the Warrant Shares, in an amount equal to 150% of the number of Warrant Shares initially issuable upon cash exercise of the Warrants).

 

The Securities Purchase Agreement is attached as Exhibit 10.8 to the Form 6-K The foregoing description of the Securities Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to Exhibit 10.8 to the Form 6-Kwhich is available on the SEC website or upon request to the Company.

 

 

 

 

43 EXPLANATORY MEMORANDUM

 

The Warrants

 

The Warrants expire on the date that is the earlier of: (i) one year (for the One-Year Warrants) or five years (for the Five-Year Warrants) from the issuance date or (ii) the date that the Proposed Transaction is completed. In addition, the Warrants provide:

 

  Net Share Cashless Exercise: The Warrants can be exercised on a cashless, net share exercise basis at any time and from time to time commencing six months after the date of issuance.
     
  Black-Scholes Cashless Exercise: At any time, the Warrants may be exercised on a cashless basis for a number of Warrant Shares equal to the Black-Scholes value per Warrant Share, multiplied by the number of Shares as to which the Warrant is being exercised, divided by the Closing Bid Price (defined below) as of two trading days prior to the exercise date (but not less than the floor price specified in the Warrants). For this purpose, the Black-Scholes value per Warrant Share is calculated using an underlying price of US$0.701; a risk-free interest rate corresponding to the U.S. Treasury rate; a strike price equal to the Exercise Price; an expected volatility equal to 135%; and a deemed remaining term of five years (regardless of the actual remaining term of the Warrant). Accordingly, the Black-Scholes value calculation will not change as a result of future changes in the stock price, risk-free interest rate, volatility or remaining life of the Warrants. As a result of the Black-Scholes cashless exercise provision, the number of Shares issued upon exercise of the Warrants may substantially exceed 82,335,329 Shares. In no event, however, will the number of Shares issued upon exercise of the Warrants exceed 247,005,988 Shares.
     
  Automatic Exercise. Immediately prior to the consummation of the Proposed Transaction, the Warrants will automatically be exercised pursuant to a Black-Scholes cashless exercise.
     
  Beneficial Ownership Limit: Except for an automatic exercise of the Warrants as described above, the Warrants may not be exercised to the extent the holder or any of its affiliates would beneficially own more than the Beneficial Ownership Limit after giving effect to such exercise.
     
  Structural Anti-Dilution: The Exercise Price and number of Warrant Shares covered by the Warrants are subject to adjustment for stock splits, stock combinations and certain other transactions affecting NBG’s share capital as a whole.

 

The form of Warrant is as Exhibit 4.1 to the Form 6-K. The foregoing description of the Warrants does not purport to be complete and is qualified in its entirety by reference to Exhibit 4.1 to the Form 6-K which is available on the SEC website or upon request to the Company.

 

Use of Proceeds

 

NBG intends to use the net proceeds from the sale of the securities in the Private Placement and from the sale of shares in the ATM Offering to meet the US$282 million minimum cash closing condition for the Proposed Transaction, after payment of transaction fees and expenses incurred by NBG. NBG believes that its available cash after the Proposed Transaction, including a portion of the proceeds from the Private Placement and the ATM Offering, will be used as working capital for Cenntro’s business and for other general corporate purposes. If the Proposed Transaction is not consummated, NBG intends to use the net proceeds from the Private Placement and ATM Offering for other strategic acquisitions of businesses or technologies, as well as for working capital and other general corporate purposes.

 

 

 

 

44 EXPLANATORY MEMORANDUM

 

1.1.11 Key elements for Shareholder approval

 

The Proposed Transaction involves the following key elements that are subject to Shareholder approval:

 

the issue of the Acquisition Shares to CAG on Closing, the Distribution of the Acquisition Shares by CAG to the CAG Shareholders promptly following Closing, and each other acquisition of a relevant interest in Shares under the Proposed Transaction for the purposes of item 7 of section 611 of the Corporations Act (see Resolution 1);
   
the change of the name of the Company to Cenntro Electric Group Limited from Closing (see Resolution 2);
   
the amendment of the Constitution to permit three staggered classes of Directors from Closing (see Resolution 3) (Amended Constitution);
   
the appointment of Peter Wang, Chris Thorne, and Joe Tong as Directors from Closing (see Resolution 4); and
   
the consolidation of the Shares in the Company (see Resolution 5). The exact consolidation ratio will be set by the Directors at least 7 days prior to the Meeting. The Company shall notify Shareholders of the exact consolidation ratio by a means reasonably calculated to inform Shareholders, including by issuing a press release or filing a Form 6-K with the SEC. The exact consolidation ratio will be between consolidating every 10 Shares into 1 Share and consolidating every 20 Shares into 1 Share and will be included in Resolution 5 that is put to the Meeting.

 

1.2 About Cenntro

 

1.2.1 ECV Business

 

Cenntro is a designer and manufacturer of electric light- and medium-duty commercial vehicles (ECVs). Its purpose-built ECVs are designed to serve a variety of corporate and governmental organizations in support of city services, last-mile delivery and other commercial applications. As of June 30, 2021, Cenntro has sold or put into service more than 3,100 units of its first ECV model, the Metro®, in 16 countries across North America, Europe and Asia. The Metro® has been driven over seven million miles by commercial end-users in China alone. Cenntro plans to introduce four new ECV models to serve the light- and medium-duty market by the end of 2021. Cenntro’s mission is to leverage its technological and research and development capabilities in areas such as vehicle design, digital component development, vehicle control software, and “smart” driving to become a technology leader in the ECV market.

 

Cenntro has established an asset-light, distributed manufacturing business model through which it can distribute its unique modular vehicles in unassembled semi-knockdown vehicle kits (“vehicle kits”) for local assembly in addition to fully assembled vehicles. Cenntro’s business model allows it to both (i) design, manufacture, assemble, homologate and sell ECVs to third parties for distribution and service to end-users and (ii) distribute manufactured vehicle kits, which are then assembled, homologated, sold and serviced by third parties in their respective markets. Cenntro refers to these third parties as its “channel partners.” Each of Cenntro’s vehicle models has a modular design that allows for local assembly in small factory facilities that require less capital investment. It currently manufactures its own vehicle kits for the Metro® in its facilities in China. Cenntro plans to leverage the economies of scale of its manufacturing partners in China to manufacture vehicle kits for each of its new models for local assembly at its facilities in the United States and Europe to further reduce overhead costs compared to its competitors. Cenntro believes its distributed manufacturing methodology allows it to execute its business plan with less capital than would be required by the traditional, vertically integrated automotive model and, in the long-term, drive higher profit margins.

 

 

 

 

45 EXPLANATORY MEMORANDUM

 

Cenntro began pilot production of its first-generation, U.S. Class 1 (0–6,000 lbs.), electric light-duty commercial vehicle, the Metro®, in 2018, and, as of June 30, 2021, it has sold approximately 1,800 units in over 16 countries across Europe, North America and Asia, and put into service approximately 1,300 additional units in China through affiliated parties. The Metro® is a customizable ECV used in commercial applications such as city services (i.e., street cleaners, fire trucks, food trucks and garbage trucks) and last-mile delivery. The Metro® was “born electric,” meaning that, unlike many other ECVs that are converted from existing internal combustion engine vehicle (ICE) designs, the Metro® was purpose-built from inception to be highly cost-effective and energy efficient, implementing a number of proprietary design elements including a lightweight structure and efficient power system. With Cenntro’s developed supply chain and relationships with component vendors and its growing channel partner network, it believes it is in position for larger scale production and distribution of the Metro®. For the year ended December 31, 2020 and the six months ended June 30, 2021, Cenntro generated US$4.8 million and US$2.0 million in revenue, respectively, from sales of its Metro®.

 

Since its inception, Cenntro has invested resources in the research and development not only of ECV design and manufacturing processes, but also in digitally enabled components, intra-vehicle communication, vehicle control and vehicle automation, or what it collectively refers to as “vehicle digitization.” Cenntro has developed a prototype system-on-chip (which it sometimes refer to as an SOC) for vehicle control and an open-platform, programmable chassis, with potential for both programmable and autonomous driving capabilities. Cenntro has also designed and developed in-house a proprietary telematics box, sometimes referred to as a T-Box, which allows its ECVs to send and receive data relating to location, speed, acceleration, braking and battery consumption, among others, to end-users. Additionally, Cenntro’s engineers have worked closely with certain of its qualified suppliers to co-design digitally enabled components in areas such as steering, braking, acceleration and signalling.

 

Cenntro plans to introduce four new ECV models in 2021, which are designed for specific geographic markets and to address additional commercial applications. The CityPorter™ is a U.S. Class 4 (over 14,000 lbs.) medium-duty electric commercial truck designed to meet U.S. city delivery and service needs. Cenntro completed homologation of the CityPorter™ in the United States in the third quarter of 2021. The CityPorter™ is expected to be commercially available in the United States during the fourth quarter of 2021. The CityPorter™ will be offered in four configurations: cargo-box, van, flatbed truck, and basic chassis for upfitters. The Neibor® 200 is a European Union and UK L7e (heavy quadricycle) Class compact electric commercial vehicle designed to meet European neighborhood delivery and neighborhood service needs. The Neibor® 200 is expected to be homologated and commercially available in the European market in the fourth quarter of 2021. The Logistar™ is a European Union N1 Class electric commercial vehicle designed to meet the European Union’s city delivery and city service requirements and complement Cenntro’s smaller Neibor® 200 model. It is expected to be homologated and commercially available in the European market in the fourth quarter of 2021. Cenntro is also developing the Terramak™, an off-road electric commercial vehicle for U.S. off-road use with essentially no homologation requirements and limited certification requirements. The Terramak™ is currently in preparation for production and is expected to be commercially available in the United States during the fourth quarter of 2021. See “Risk Factors—Risks related to Cenntro’s business and financial results—Cenntro’s future success depends on its ability to introduce new models and it may experience delays in launching and ramping up production of its new ECV models”.

 

 

 

 

46 EXPLANATORY MEMORANDUM

 

Cenntro has also developed the e-Portee, an open-platform and programmable chassis product. The e-Portee is designed to be a basic modular building block for use by auto makers and special vehicle upfitters in the design of automated or autonomous driving vehicles. Through its advancements in vehicle digitization and smart components, Cenntro has equipped the e-Portee with digital control capabilities. The e-Portee allows third-party developers to integrate detection devices (i.e., lidar, radar, ultra-sound, infrared and other sensory devices) and third-party or proprietary decision-making software to allow for vehicles based on the programmable chassis to be driven autonomously.

 

The electrification of the global automotive industry has been a major policy focus of governments worldwide. Certain countries, such as the United States, China, Canada, Germany, and various other European countries, have announced aggressive electric vehicle (EV) initiatives designed to reduce carbon emissions, through the replacement of fossil fuels, and have begun incentivizing the development and sale of ECVs through government subsidy programs. According to a June 2020 market study on sales of light-duty ECVs and urban logistics by Frost & Sullivan, a global growth strategy consulting and research firm, total sales volume of light-duty ECVs in the European Union are expected to increase from approximately 21,000 units in 2019 to approximately 204,900 units in 2024, representing a CAGR of 57.7%, and total sales volume of light ECVs in the United States will increase from less than a thousand units in 2019 to approximately 52,600 units in 2024.

 

1.2.2 CAG and the Wang Parties

 

Prior to the Closing of the Proposed Transaction, the entities that comprise Cenntro are wholly owned subsidiaries of CAG. As of the date hereof, the Chief Executive Officer of CAG, Peter Z. Wang, indirectly owns approximately 40.318% of CAG, on a fully diluted basis, which ownership Mr. Wang holds through CEL and TCL. Mr. Wang has a significant influence over all corporate matters relating to CAG.

 

For further information on CAG and the Wang Parties’ voting power in the Company following the Proposed Transaction and their intentions for the Company, please see Sections 1.3.3, 1.4.2 and 1.4.3.2.

 

1.3 Why is Shareholder approval required?

 

1.3.1 General

 

Resolution 1 seeks Shareholder approval pursuant to and in accordance with item 7 of section 611 of the Corporations Act for the Proposed Transaction, including in relation to the issue of the Acquisition Shares by the Company to CAG as consideration for the acquisition by the Company of the Cenntro Shares from CAG, the subsequent Distribution of the Acquisition Shares by CAG to the CAG Shareholders promptly following Closing and entry into the Lock-up Agreements.

 

Please refer to section 1.3.3 for a table summarising each proposed acquisition of a relevant interest in Shares under the Proposed Transaction that Shareholder approval is being sought for under Resolution 1.

 

 

 

 

47 EXPLANATORY MEMORANDUM

 

1.3.2 Section 611 item 7 of the Corporations Act

 

(a) Takeover prohibitions under section 606 of the Corporations Act

 

Section 606(1) of the Corporations Act prohibits the acquisition of a relevant interest in the issued voting shares of a public company if, as a result of that transaction, that person’s (or another person’s) voting power in the company increases:

 

  from 20% or below to more than 20%; or
     
  from a starting point that is above 20% and below 90%.

 

(b) Voting power

 

The voting power of a person in a company is determined in accordance with section 610 of the Corporations Act. The calculation of a person’s voting power in a company involves determining the votes attached to the voting shares in the company in which the person and that person’s associates have a relevant interest.

 

(c) Relevant Interest

 

Under section 608(1) of the Corporations Act, a person has a “relevant interest” in securities if they are the holder of the securities, have the power to exercise, or control the exercise of, a right to vote attached to the securities, or have power to dispose of, or control the exercise of a power to dispose of, the securities.

 

Under section 608(3) of the Corporations Act, a person has the relevant interest in any securities that a company has, in which the person’s voting power is above 20% or that the person controls.

 

(d) Section 611 item 7 exception

 

Item 7 of section 611 of the Corporations Act provides an exception to the prohibition in section 606 of the Corporations Act. The exception provides that a person may acquire a relevant interest in a company’s voting shares that would otherwise be a breach of section 606 of the Corporations Act if shareholders of the company approve the acquisition, provided that:

 

  no votes are cast in favour of the resolution by the person proposing to make the acquisition and their associates, or the persons (if any) from whom the acquisition is to be made and their associates; and
     
  shareholders of the company are required to be given all information known to the person proposing to make the acquisition or their associates, or known to the company, that is material to the decision on how to vote on the resolution.

 

Please refer to sections 1.3.3 and 1.4 below for the information required to be provided to Shareholders under item 7 of section 611 of the Corporations Act. Shareholders are also referred to the Independent Expert’s Report attached as Annexure A.

 

 

 

 

48 EXPLANATORY MEMORANDUM

 

1.3.3 Acquisitions requiring Shareholder approval under Resolution 1

 

The following table summarises each proposed acquisition of a relevant interest in Shares under the Proposed Transaction that Shareholder approval is being sought for under Resolution 1:

 

Required information Explanation
A.    CAG’s acquisition of the Acquisition Shares
Identity of the acquirer and its associates

On Closing, it is proposed that CAG will be issued the Acquisition Shares, which will be equal to seven-thirds (7/3) times (i) the number of fully diluted Shares outstanding immediately prior to Closing, less (ii) the number of Shares underlying the Converted CAG Options in accordance with the terms of the Stock Purchase Agreement, as summarised in Section 1.1.

 

Mr. Peter Wang controls both CEL and TCL who are shareholders in CAG.

 

CEL holds approximately 36.852% and TCL holds approximately 3.466% of the fully diluted share capital in CAG.

 

Please see Section 1.2.2 for further information on CAG, CEL, TCL and Mr. Peter Wang.

The voting power that the acquirer and its associates would have as a result of the acquisition

 

 

As at the date of this Explanatory Memorandum, neither CAG, Peter Wang, CEL nor TCL nor any of their respective associates has any voting power in the Company.

 

As a result of the issue of the Acquisition Shares to CAG under the Proposed Transaction, on Closing each of CAG, Peter Wang and CEL will have a relevant interest in up to 2,332,679,328 Shares (pre-Share Consolidation) or approximately 66.20% of the voting shares in the Company (non-diluted).

 

Promptly following Closing, CAG will Distribute all of the Acquisition Shares to the CAG Shareholders. The impact on the Distribution is detailed in Section B below.

Details of the terms of any other relevant agreement between the acquirers and the Company (or any of their associates) that is conditional on (or directly or indirectly depends on) Shareholders’ approval of the acquisition

Please see Section C below on ‘Lock-up Agreements’.

 

 

B.    Distribution of Acquisition Shares by CAG to the CAG Shareholders
Identity of the acquirer and its associates

Promptly following the Closing, CAG will Distribute the Acquisition Shares to the CAG Shareholders in accordance with the terms of the Stock Purchase Agreement, as summarised in Section 1.1.1.

 

Following this Distribution:

 

●     CAG will no longer have a relevant interest in any Shares;

 

     CEL will have a relevant interest in up to 1,257,321,456 Shares (pre-Share Consolidation) or approximately 35.7% of the Shares (which includes a deemed relevant interest as a result of the Lock-up Agreements referred to below);

 

     TCL will have a relevant interest in up to 1,257,321,456 Shares (pre-Share Consolidation) or approximately 35.7% of the Shares (which includes a deemed relevant interest as a result of the Lock-up Agreements referred to below); and

 

    Mr. Peter Wang, as the controller of both CEL and TCL will have a relevant interest in up to 1,257,321,456 Shares (pre-Share Consolidation) or approximately 35.7% of the Shares (which includes a deemed relevant interest as a result of the Lock-up Agreements referred to below).

 

The Company will also be deemed to have a relevant interest in up to 35.7% of its voting shares as a result of the Lock-up Agreements referred to in Section C below.

 

Please see Section 1.2.2 for further information on CAG, CEL, TCL and Mr. Peter Wang.

The voting power that the acquirer and its associates would have as a result of the acquisition

CEL, TCL, Mr. Peter Wang and the Company will each have voting power in up to 35.7% of the Shares.

 

 

Details of the terms of any other relevant agreement between the acquirers and the Company (or any of their associates) that is conditional on (or directly or indirectly depends on) Shareholders’ approval of the acquisition

Please see Section C below on ‘Lock-up Agreements’.

 

 

 

 

C.    Lock-up Agreements
Identity of the acquirer and its associates

Prior to Closing, it is proposed that CEL, TCL and China Leader Group Limited (Restricted Shareholders) will enter into the Lock-up Agreements to agree in favour of the Company not to transfer the Restricted Shares beneficially owned or owned of record by them during the Restricted Period, subject to certain exceptions.

 

Please see Section 1.1.6 for further information on the Lock-up Agreements.

The voting power that the acquirer and its associates would have as a result of the acquisition

The agreement by the Restricted Shareholders not to transfer the Restricted Shares gives the Company a relevant interest in all of the Restricted Shares. In addition, as CEL, TCL and Mr. Wang will have voting power in excess of 20% of the Shares post-Distribution, they will also be deemed to have the Company’s relevant interest in all of the Restricted Shares.

 

As a result, CEL, TCL, Mr. Wang and the Company’s voting power in the Company for the Restricted Period will be 35.7% of the Shares (which includes China Leader Group Limited’s 8.1% voting power in the Shares). Please see Section B above.

Details of the terms of any other relevant agreement between the acquirers and the Company (or any of their associates) that is conditional on (or directly or indirectly depends on) Shareholders’ approval of the acquisition

Please see Sections A and B above.

 

 

 

 

 

 

49 EXPLANATORY MEMORANDUM

 

1.4 Other material information required by section 611 item 7 of the Corporations Act

 

1.4.1 Effect of the Proposed Transaction on the capital structure of the Company

 

The following table provides an estimate of the Company’s Shares that are anticipated to be outstanding, and fully diluted, immediately subsequent to consummation of the Proposed Transaction:

 

Pro-forma ownership of the Company immediately after Closing:

 

   Number of Shares   % (Issued)   % (Fully diluted) 
NBG   909,986,504    25.8%   24.5%
Cenntro -ex option holders   2,332,679,328    66.2%   62.9%
Private Placement   133,214,741    3.8%   3.6%
ATM   34,988,585    1.0%   0.9%
Justin Davis-Rice and Associates   112,729,597    3.2%   3.0%
Total outstanding Shares   3,523,598,755    100.0%     
Options/warrants   185,385,637         5.0%
Total fully diluted after Closing   3,708,984,393         100.0%
                
Cenntro fully diluted after Closing  (Cenntro -ex option holders + Converted CAG Options)   2,517,378,356         67.9%
                
Cenntro preference shares - NBG share entitlement   105,986,809           
Converted CAG Options %   7.6594%          
Converted CAG Options   184,699,028           
                
NBG   503,423         0.0136%
NBG Non-Executive Directors   183,186         0.0049%
Converted CAG Options   184,699,028         4.9798%
Total options/warrants   185,385,637         5.0%

 

 

 

 

50 EXPLANATORY MEMORANDUM 

 

1.4.2 Future intentions for the Company

 

Other than as disclosed elsewhere in this Explanatory Memorandum, following the Closing of the Proposed Transaction, it is contemplated that CAG will immediately distribute the Acquisition Shares and no longer remain a shareholder of the Enlarged Group. Assuming consummation of the Proposed Transaction occurs, the Wang Parties, as principal shareholders of CAG and the Company following the Closing, currently:

 

a. intend to be supportive of the continued operation of Cenntro’s existing business and projects and do not intend to make any significant changes to the business of Cenntro other than with respect to the proposed expansion of current operations, including, for instance, establishing new assembly facilities in Dusseldorf, Germany and Jacksonville, Florida, as previously disclosed to the Company;
   
b. have no intention of injecting further capital into substantially all of the Enlarged Group;
   
c. have no intention of making material changes regarding the future employment of substantially all the present employees of the Enlarged Group;
   
d. intend to retain the composition of the Board as it will be constituted at completion of the Proposed Transaction;
   
e. do not intend to redeploy any fixed assets of the Enlarged Group, other than with respect to the proposed expansion of current operations described above;
   
f. do not intend to transfer any property between the Enlarged Group and CAG, the Wang Parties or any of their respective associates; and
   
g. have no intention to change the Enlarged Group’s existing policies in relation to financial matters or dividends.

 

These intentions are based on information concerning the Company, its business and the business environment which is known to the Wang Parties at the date of this Explanatory Memorandum.

 

These present intentions may change as new information becomes available, as circumstances change or in the light of all material information, facts and circumstances necessary to assess the operational, commercial, taxation and financial implications of those decisions at the relevant time. The Company did not cause its preparation and neither the Company nor its advisers assume any responsibility for the accuracy or completeness of that statement of intention.

 

1.4.3 Board of Directors and Officers of the Company

 

1.4.3.1 Current Board

 

As at the date of this Explanatory Memorandum, the current Directors of the Company are as follows.

 

If the Proposed Transaction does not proceed, the current Directors will remain.

 

(a) Justin Ashley Davis-Rice – Executive Chairman and CEO

 

Mr. Davis-Rice is currently Chairman and Chief Executive Officer Naked Brand Group. Prior to becoming Executive Chairman, Mr. Davis-Rice served as Chief Executive Officer of Bendon Limited from 2010 to 2017. As CEO, he transformed the company through an operational restructuring and a re-engineering of key functional and operational aspects of the business including, supply chain, human resources, design and development, sourcing, wholesale and retail sales bringing the group to operating profits from being loss making. Prior to joining Bendon Limited, in 2004 Mr. Davis-Rice co-founded Pleasure State, an intimate apparel company which he merged with Bendon Limited in May 2010. In 2007, Mr. Davis-Rice licensed Pleasure State’s BIOFIT technology and trademark for what became a US$25m unit royalty agreement generating in excess of US$45m in free cashflow over 3 years and Victoria’s Secret’s biggest bra launch in its history.

 

 

 

 

51 EXPLANATORY MEMORANDUM

 

In April 2021, Mr. Davis-Rice completed an MBO from NBG of the Bendon business, decoupling the Australia and New Zealand company from the public company.

 

Mr. Davis-Rice has wide knowledge and experience in all facets of business operations within the apparel sector, as well as extensive legal, financial and US capital markets expertise.

 

Mr. Davis-Rice has served as a member of the Company’s Board of Directors since January 2017.

 

(b) Andrew Shape – Independent Non-Executive Director

 

Mr. Shape has over 25 years of merchandising, marketing, branding, licensing, and management experience. He is the co-founder and current President of Stran & Company, Inc. — a top 50 promotional merchandise and marketing agency that provides leading consumer brands with promotional merchandise and marketing support. Mr. Shape has also provided consulting and management services to early stage brands on how to launch the brand, create a marketing plan, establish distribution models, earn market share, and formulate an exit strategy.

 

Prior to forming Stran & Company in 1994, Mr. Shape worked at Copithorne & Bellows Public Relations (a Porter Novelli company) as an Account Executive covering the technology industry.

 

(c) Kelvin Dean Fitzalan – Independent Non-Executive Director  

 

Mr. Fitzalan is a tax professional with approximately 33 years of experience and he continues to work with closely held active businesses and their owners across a wide range of industries. He is also currently non-executive Chairman for Sumo Australia Limited.

 

He also is a Chartered Accountant with the Chartered Accountants of Australia and New Zealand and a chartered tax advisor with The Tax Institute (Australia).

 

(d) Simon Charles Howard Tripp – Independent Non-Executive Director  

 

Mr. Tripp has an honours degree in Chemical Engineering from Cape Town University and an MBA from Massey University in New Zealand. Simon has an extensive background in investment banking and capital markets. He was previously a director of Ord Minnett (subsequently acquired by JP Morgan) in Sydney where he was involved in many significant transactions involving IPO’s, capital raisings, M&A and divestments across many sectors including aviation, media, tourism, property and financial services. Mr. Tripp then established a fund with two other partners that raised the funding for and developed the Citibank Centre, a major commercial and retail centre in the Sydney CBD. The development was listed on the Australian ASX. During this time, the fund also managed the Sydney Olympic Stadium and Mr. Tripp was on the board of the stadium during the Sydney 2000 Olympics. Since divesting his interests in the fund, Mr. Tripp has been involved in a number of venture capital deals across many sectors including financial services, mining, retail and property.

 

 

 

 

52 EXPLANATORY MEMORANDUM

 

1.4.3.2 Proposed changes to the Board and Officers

 

Under the Stock Purchase Agreement, the Company is required to take all such action within its power as may be necessary or appropriate such that, immediately following the Closing Date:

 

(a) the Board will consist of up to five Directors, which will initially include:

 

  (i) one (1) director nominee to be designated by the Company, in its sole discretion, prior to the Closing (who shall serve as a class II Director in accordance with the Amended Constitution of the Company following the Closing Date) (Company Nominee Director); and
     
  (ii) four (4) director nominees to be designated by the Wang Parties, in their sole discretion, prior to the Closing (one of whom shall serve as the managing Director, one of whom shall serve as a class I Director, one of whom shall serve as a class II Director, and one of whom shall serve as a class III Director, in accordance with the Amended Constitution of the Company following the Closing Date and the Relationship Agreement) (Wang Parties Nominee Directors);

 

(b) the Board will have a majority of independent Directors for the purposes of Nasdaq and each of whom will serve in such capacity in accordance with the terms of the Amended Constitution of the Company following the Closing Date;
   
(c) to the extent and so long as required by applicable law, the Board will have two (2) Directors who are ordinarily resident in Australia; and
   
(d) the initial officers of the Company will be as follows (as may be updated by CAG prior to Closing following written notice to the Company), who will serve in such capacity in accordance with the terms of the Amended Constitution following the Closing Date:

 

  (i) Peter Wang - CEO;
     
  (ii) Edmond Cheng - CFO;
     
  (iii) Marianne McInerney – CMO;
     
  (iv) Wei Zhong – CTO; and
     
  (v) Tony Tsai - VP and Corporate Secretary.

 

 

 

 

53 EXPLANATORY MEMORANDUM

 

If the Proposed Transaction is approved and subject to Closing, it is proposed that the Company’s Board members will be as follows:

 

Company Nominee Director: Justin Davis-Rice – Director (class II Director);
   
Wang Parties Nominee Directors:

 

Peter Wang  
Proposed role and class Director and Chairman of the Board (Managing Director)
Qualifications and experience Peter Wang is the founder of CAG and Cenntro and has served as Chairman and Chief Executive Officer of CAG, Cenntro’s parent corporation, since 2013. Mr. Wang is an entrepreneur and investor in the electric vehicle and technology industries, and has founded or co-founded a number of companies in his career, including UTStarcom (a global telecom infrastructure provider), which went public in 2000, World Communication Group, an international telecommunication company, and Sinomachinery Group, a diesel power system (engine and transmission) manufacturer. Mr. Wang was named one of the Outstanding 50 Asian Americans in Business by Asian American Business Development Center in 2004, one of China’s 100 Most Innovative Businessmen by Fast Company Magazine in 2017, and one of the Most Intriguing Entrepreneurs by Goldman Sachs in 2019. Mr. Wang is also the chairman of the board of directors of Cenntro Enterprise Limited, a principal stockholder of the Cenntro, and Greenland Technologies Holding Corp. (NASDAQ: GTEC), a transmission products manufacturing company. Mr. Wang holds Bachelor of Science degrees in Computer Science and Math, as well as a Master of Science degree in Electrical Engineering, from the University of Illinois at Chicago. Mr. Wang also holds a Master of Business Administration from Nova Southeastern University.
Associations N/A
Interests As of the date hereof, Mr. Wang owns 40.318% of CAG, on a fully diluted basis, through CEL and TCL, and will receive a significant portion of the Acquisition Shares following the Distribution.

 

Chris Thorne  
Proposed role and class Director (class I Director)
Qualifications and experience Chris Thorne has served as Chairman of the Board of Broadline Capital, a global private equity firm focused on growth capital and impact investments primarily in Asia and North America, since 2005. Mr. Thorne has been the Chairman of the Board for Cytonus Therapeutics since November 2019, Endosphere, Inc. since December 2010 and has been the Chairman of the Board of Powermers, Inc. since January 2010. Mr. Thorne received his Juris Doctor from Harvard Law School with honors, Master of Business Administration from Harvard Business School with final year honors, and a Bachelor’s degree from Harvard University, magna cum laude, where he founded the Harvard Negotiation Law Review and served as president of the university-wide student government. Mr. Thorne is qualified to serve on the Board post-Closing due to his substantial private equity and board of directors experience.
Associations N/A
Interests N/A

 

 

 

 

54 EXPLANATORY MEMORANDUM

 

Joe Tong  
Proposed role and class Director (class II Director)
Qualifications and experience Joe Tong co-founded MeetChina, a leading B2B e-commerce website for China in 1998 and served as its Chief Executive Officer and Director from 1998 to 2003. In 2007, Mr. Tong joined Testra Sensis as its President of China, and helped build Fang.com (NASDAQ: SFUN), a leading real-estate company website in China, and Autohome Inc. (NYSE: ATHM), a leading automotive company website. In 2016, Mr. Tong joined Ford Motor Company as its Head of Smart Mobility, China. Mr. Tong holds a Bachelor’s degree in Computational Mathematics from Nanjing University, and a Master of Business Administration in Finance and Strategic Marketing from the University of Pennsylvania’s Wharton School of Business. Mr. Tong is qualified to serve on the Board post-Closing due to his past experience with business-to-business enterprises and in the automotive industry.
Associations N/A
Interests N/A

 

Simon Charles Howard Tripp
Proposed role and class Director (class III Director)
Qualifications and experience

Refer to Section 1.4.3.1 above.

 

As mentioned in Section 1.1.7, Mr. Tripp, who is one of the existing Directors, will be a Wang Parties Nominee Director to satisfy the legal requirement of having at least two Directors resident in Australia.

Associations Refer to Section 1.4.3.1 above.
Interests Refer to Section 1.4.3.1 above.

 

Resolutions 4.1 to 4.3 are ordinary resolutions that seek approval from Shareholders, subject to and conditional on the Transaction Resolutions being passed and Closing, for the election of the Wang Parties Nominee Directors (who are not already Directors) as Directors of the Company, with effect from Closing.

 

Please refer to Section 4 for further information on Resolution 4.1 to 4.3 and the proposed election of the Wang Parties Nominee Directors as Directors and Section 3 for information on the proposed amendments to the Constitution to permit three staggered classes of Directors.

 

1.5 Reasons to vote on the Proposed Transaction

 

1.5.1 Reasons to vote in favour of the Proposed Transaction

 

Based on its due diligence investigations of the CAG Subs and the industry in which they operate, including the financial and other information provided by CAG in the course of the negotiations, the Company believes that the Proposed Transaction will provide Shareholders with an opportunity to participate in a company with significant growth potential.

 

 

 

 

55 EXPLANATORY MEMORANDUM

 

The Non-Executive Directors consider that the reasons why Shareholders may consider voting in favour of the Transaction Resolutions include:

 

The Non-Executive Directors unanimously recommend that you vote in favour of the Transaction Resolutions in the absence of a Superior Proposal

 

The Non-Executive Directors believe that the Proposed Transaction is in the best interests of Shareholders and are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the Transaction Resolutions:

 

  the Proposed Transaction represents an attractive investment opportunity for the Company to change its business focus to that of an electric commercial vehicle design and manufacturing business;
     
  the Company will obtain ownership of the ECV Business through the acquisition of the Cenntro Group;
     
  the appointment to the Board of the Wang Parties Nominee Directors provides the Company with extensive experience within the ECV industry; and
     
  the consideration for the Proposed Transaction is Shares, thereby allowing the Company to use its strong cash position to grow the ECV Business and potentially increase Shareholder value.

 

In giving their unanimous recommendation for the Proposed Transaction, the Non-Executive Directors have, among other things:

 

  assessed the Proposed Transaction having regard to the Company’s alternatives if the Proposed Transaction does not proceed;
     
  obtained advice from the Company’s advisers; and
     
  considered the Independent Expert’s Report.

 

The Non-Executive Directors intend to cause any Shares in which they have a relevant interest to be voted in favour of the Transaction Resolutions in the absence of a Superior Proposal.

 

The Independent Expert has concluded that the Proposed Transaction is not fair but reasonable to Shareholders in the absence of a superior proposal

 

FTI Consulting (Australia) Pty Limited was engaged by the Non-Executive Directors to prepare the Independent Expert’s Report for Shareholders in respect of the Proposed Transaction. The explanation of why the Independent Expert has concluded the Proposed Transaction is not fair but reasonable to Shareholders in the absence of a superior proposal is set out in Section 1.8.

 

The Independent Expert has identified the following advantages of the Proposed Transaction (note this is a summary of the advantages to Shareholders of the Proposed Transaction, Shareholders should read the Independent Expert’s Report in its entirety before deciding how to vote):

 

  (Participation in the anticipated high growth, ECV industry) If the Proposed Transaction is approved, Shareholders will have the opportunity to participate in an industry that, overall, is expected by many investors and industry analysts to achieve high growth.

 

 

 

 

56 EXPLANATORY MEMORANDUM

 

  (Cenntro’s potential competitive advantages in the ECV industry) If the Proposed Transaction is approved, Shareholders will have the opportunity to participate in the potential returns expected to be generated by Cenntro, an early-stage company that, while facing significant uncertainty and risks, also appears to have developed some competitive advantages in the electric light commercial vehicle sector.
     
  (Only option currently available) The Directors have advised that the Proposed Transaction is the only option currently available to NBG and that there are no other offers or transactions that the Directors are considering. Whilst proceeding with the Proposed Transaction is likely to preclude NBG from pursuing alternative major opportunities which may arise in the future, there is no guarantee that such opportunities may arise and be superior propositions to the Proposed Transaction.
     
  (Impact on NBG’s share price) If the Proposed Transaction is not approved, NBG’s share price may experience a significant decrease, since the market seems to already be pricing into NBG’s shares a likelihood of a value-accretive transaction. That premium might disappear if the Proposed Transaction is not approved.

 

The Independent Expert’s Report is set out in full at Annexure A of the Explanatory Memorandum. Shareholders should read the Independent Expert’s Report in its entirety as part of their assessment of the Proposed Transaction and before casting their vote in relation to the Transaction Resolutions.

 

1.5.2 Reasons to vote against the Proposed Transaction

 

The Non-Executive Directors consider that the reasons why Shareholders may consider voting against the Transaction Resolutions include:

 

Shareholders may disagree with the Non-Executive Directors’ unanimous recommendation

 

Notwithstanding the unanimous recommendation of the Non-Executive Directors in the absence of a Superior Proposal, Shareholders may believe the Proposed Transaction is not in their best interests.

 

Shareholders are not obliged to follow the unanimous recommendation of the Non-Executive Directors.

 

Dilution of shareholding and voting power

 

The aggregate percentage shareholding of an existing Shareholder will be diluted by the issue of the Acquisition Shares to CAG (and the subsequent Distribution to the CAG Shareholders). Based on the assumptions described in Section 1.1.3, following the Proposed Transaction, the existing Shareholders’ ownership interest will be reduced from 100% to approximately 24.5% on a fully diluted basis and the collective entitlement to any dividends and the voting power of existing Shareholders will also be reduced accordingly. Please refer to Section 1.4.1 for further details on the impact of the Proposed Transaction of the Company’s capital structure.

 

 

 

 

57 EXPLANATORY MEMORANDUM

 

Change of business

 

The Company will be changing the nature and scale of its activities which may not be consistent with the objective of all Shareholders. There are additional risk factors associated with the change in nature of the Company’s activities resulting from the Proposed Transaction. Some of the risk factors are summarised in Section 1.6.

 

Additional funding

 

The Company may need additional funding in the future to achieve its long term goals and could result in further dilution at the time.

 

Additional disadvantages

 

In addition, the Independent Expert identified the following disadvantages to the Shareholders of accepting the Proposed Transaction:

 

  (Difficulty in estimating the fair market value of Cenntro) The Independent Expert is of the opinion that there is insufficient information to form an opinion, to the level of certainty required by ASIC guidance, whether the Proposed Transaction is fair. Given that, in their view, the fair market value cannot be reliably estimated as of the date of the Independent Expert’s Report, due to lack of sufficiently reliable and supportable prospective financial information, they cannot opine on the financial benefits of the Proposed Transaction.
     
  (The ECV industry is high risk) There is a high degree of risk inherent in an investment in a company in the ECV industry since, while there appears to be significant opportunity for attractive investment returns, it is a new industry with significant challenges and uncertainty. There are numerous competitors in the industry, and it is not possible, at this stage, to determine with reasonable certainty, which companies will be successful.
     
  (Cenntro is a high-risk investment) There is a high degree of risk inherent in an investment in Cenntro as it is an early-stage company with significant hurdles to overcome to be a successful player in the ECV industry.
     
  (Cenntro has very different investment characteristics to NBG) The investment characteristics (e.g. risks and opportunities) of the ECV industry Cenntro is targeting are very different than the investment characteristics of the fashion and ecommerce industries NBG has historically participated in before the Proposed Transaction. While NBG’s share price has responded positively to NBG’s 24 September 2021 announcement that it was looking at a “disruptive opportunity in the clean technology sector”, there is still a risk some investors may prefer NBG’s historical industry focus over Cenntro’s.
     
  (Prospects of a future takeover) The prospects of future takeover offers may be reduced due to the concentration of ownership resulting from the Proposed Transaction. The Wang Parties, having a major shareholding in CAG, will have a significant ownership stake after the Proposed Transaction (beneficial ownership estimated at approximately 27.6% of the outstanding Shares, or 26.2% on a fully diluted basis), which may dissuade potential buyers due to their ability to block potential transactions.
     
  (Impact on control) If the Proposed Transaction is approved, there will be an impact on the voting power and ownership of the Enlarged Group. In summary, Shareholders will cede a majority of their voting rights to CAG Shareholders.

 

 

 

 

58 EXPLANATORY MEMORANDUM

 

1.6 Key risk factors – Summary

 

1.6.1 Overview

 

In considering the Proposed Transaction, you should be aware that there are a number of risk factors, general and specific, which could materially adversely affect the value of the Shares, the Company’s options and future dividends, the future operating and financial performance of the Enlarged Group, its products and systems, the industry in which it operates and the outcome of an investment in the Enlarged Group. These risks will only be relevant to you if the Proposed Transaction is approved and implemented and you remain a Shareholder on Closing.

 

Before voting at the Meeting, Shareholders should carefully consider the risks summarised in this Section and set out in more detail in Schedule 2, as well as your personal circumstances. These risk factors do not take into account the investment objectives, financial situation, taxation position or particular needs of any specific Shareholder. The information below and in Schedule 2 does not purport to be, nor should it be construed as representing, an exhaustive description of all possible risks.

 

1.6.2 Specific risks associated with the business and operations of the Enlarged Group

 

Risks related to Cenntro’s business and financial results

 

Cenntro has a limited operating history and face significant challenges in an emerging industry.
   
Cenntro has historically incurred losses from its operations and may not be profitable in the future.
   
Cenntro’s ability to develop and manufacture ECVs of sufficient quality, on schedule and on a large scale is still evolving.
   
Cenntro’s future success depends on its ability to introduce new models and it may experience delays in launching and ramping up production of its new ECV models.
   
Cenntro’s operating results may be more volatile due to a high concentration of sales in relatively few channel partners.
   
Cenntro’s reliance on its channel partners to market, sell and service (and in certain limited cases, assemble and/or homologate) its vehicles is subject to substantial risks.
   
Cenntro’s channel partners may reduce or cancel their orders at any time, which could adversely affect its business.
   
Cenntro’s channel partner network may not grow or develop as it currently expects, and if it fails to establish new channel partners in current markets in which it sells ECVs or fails to penetrate new markets, its revenue and financial condition would be adversely affected.
   

Cenntro’s business is subject to the risk of disruption in its supply chain.

   
 

 

 

59 EXPLANATORY MEMORANDUM

 

Cenntro is dependent on its suppliers, certain of which are single-source suppliers, and the inability of these suppliers to continue to deliver, or their refusal to deliver, necessary components of Cenntro’s ECVs at prices and volumes acceptable to it would have a material adverse effect on its business, prospects and operating results.
   
As Cenntro shifts component manufacturing to qualified suppliers and vehicle kit manufacturing to manufacturing partners, it will be relying on third parties to deliver substantially all of its components and vehicle kits for each of its new models. Cenntro’s qualified suppliers and manufacturing partners may fail to deliver components and vehicles kits, respectively, according to schedules, prices, quality and volumes that are acceptable to it.
   
If Cenntro’s suppliers, channel partners or assembly partners fail to use ethical business practices and comply with applicable laws and regulations, Cenntro’s brand image and business could be harmed due to negative publicity.
   
The COVID-19 pandemic has harmed and may continue to harm Cenntro’s business, financial condition, operating results and prospects.
   
Cenntro’s distributed manufacturing methodology and channel partner network model is different from the predominant current distribution model for automobile manufacturers, which makes evaluating its business, financial condition, operating results and prospects difficult.
   
Cenntro’s business plans require a significant amount of capital, which may not be available to it on acceptable terms or at all.
   
Cenntro may not be able to accurately estimate the supply and demand for its vehicles, which could result in a variety of inefficiencies in its business and hinder its ability to generate revenue. If Cenntro fails to accurately predict its manufacturing requirements, it could incur additional costs or experience delays.
   
Cenntro has identified a material weakness in its internal control over financial reporting that could materially harm it. If Cenntro fails to remediate the material weakness, or if it experiences material weaknesses in the future, it may not be able to accurately and timely report its financial condition or results of operations, which may adversely affect investor confidence in it.

 

Risks related to Cenntro’s industry

 

The unavailability or reduction of government and economic incentives or the elimination of regulatory policies which are favourable for ECVs could materially and adversely affect Cenntro’s business, financial condition, operating results and prospects.
   
Cenntro’s future growth is dependent upon end-users’ willingness to adopt ECVs.
   
Cenntro could experience cost increases or disruptions in the supply of raw materials or components used in its vehicles, and a shortage of key components, such as semiconductors, can disrupt its production of ECVs.
   
Increases in the cost, disruptions of supply or shortages of lithium-ion batteries could harm Cenntro’s business.

 

 

 

 

60 EXPLANATORY MEMORANDUM

 

Developments in alternative technologies or improvements in the internal combustion engine may materially and adversely affect the demand for Cenntro’s ECVs.
   
The automotive market is highly competitive, and Cenntro may not be successful in competing in this industry.
   
If Cenntro is unable to keep up with advances in electric vehicle technology, it may suffer a decline in its competitive position.

 

Risks related to legal and regulatory matters

 

Cenntro’s business is subject to substantial regulations, which are evolving, and unfavorable changes or the failure by Cenntro or its channel partners to comply with these regulations could materially and adversely affect its business, financial condition, operating results and prospects. Cenntro faces risks associated with its global operations and expansion, including unfavorable regulatory, political, legal, economic, tax and labor conditions, and with establishing itself in new markets, all of which could harm its business. Cenntro’s business will be adversely affected if it is unable to protect its intellectual property rights from unauthorized use or infringement by third parties.
   
Cenntro may need to defend itself against patent or trademark infringement claims, which may be time-consuming and could cause it to incur substantial costs.
   
Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.
   
Cenntro seeks to continuously expand and improve its information technology systems and use security measures designed to protect its systems against breaches and cyber-attacks. If these efforts are not successful, Cenntro’s business and operations could be disrupted, and its operating results and reputation could be harmed.
   
Data collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.

 

Risks related to doing business in China

 

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on Cenntro’s business, results of operations, financial condition and prospects.
   
The PRC government may intervene or otherwise adversely affect Cenntro’s operations at any time, or may exert more control over securities offerings conducted overseas and/or foreign investment in China-based issuers, which could materially affect its operations.
   
Uncertainties with respect to the PRC legal system could materially and adversely affect Cenntro and may restrict the level of legal protections to foreign investors.
   
Cenntro currently conducts substantially all of its operations through its subsidiaries established in China. Adverse regulatory developments in China may subject Cenntro to additional regulatory review or regulatory approval, and additional disclosure requirements. Also, regulatory scrutiny in response to recent tensions between the United States and China may impose additional compliance requirements for companies like Cenntro with significant China-based operations. These developments could increase Cenntro’s compliance costs, subject it to additional disclosure requirements, and/or adversely affect its ability to remain listed on Nasdaq.

 

 

 

 

61 EXPLANATORY MEMORANDUM

 

Increases in labour costs and enforcement of stricter labour laws and regulations in China may adversely affect Cenntro’s business and profitability.
   
Fluctuations in the value of the Renminbi, or RMB, and restrictions on currency exchange may adversely affect Cenntro’s business.
   
Cenntro may rely on dividends and other distributions on equity paid by its PRC subsidiaries to fund any cash and financing requirements it may have, and any limitation on the ability of its PRC subsidiaries to make payments to Cenntro could have a material and adverse effect on its ability to conduct its business.
   
Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact Cenntro’s business and operating results.
   
It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
   
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent Cenntro from making loans to or make additional capital contributions to its PRC subsidiaries, which could materially and adversely affect its liquidity and its ability to fund and expand its business.
   
PRC regulations relating to offshore investment activities by PRC residents may limit Cenntro’s PRC subsidiaries’ ability to increase their registered capital or distribute profits to Cenntro or otherwise expose Cenntro or its PRC resident beneficial owners to liability and penalties under PRC law.
   
You may experience difficulties in enforcing foreign judgments or bringing actions in China against Cenntro based on foreign laws.
   
Cenntro currently conducts substantially all of its operations through its subsidiaries established in the People’s Republic of China. The Enlarged Group is subject to unique risks due to uncertainty regarding the interpretation and application of currently enacted PRC laws and regulations, any future actions of the PRC government relating to the foreign listing of companies with significant PRC operations, and the possibility of sanctions imposed by PRC regulatory agencies, including the China Securities Regulatory Commission, if it fails to comply with their rules and regulations.
   
There may be a substantial degree of risk associated with Cenntro’s operations conducted in China. Cenntro may face heightened scrutiny and negative publicity, which could materially affect the operations of the Enlarged Group or significantly limit the ability of the Enlarged Group to offer or continue to offer securities to investors and cause the value of such securities to significantly decline. Additionally, recent statements by PRC authorities and changes in PRC internal regulatory mandates may target Cenntro’s corporate structure and impact its ability to conduct business, accept foreign investments, or list on a U.S. or other foreign exchange. For a description of some of the China-related risks, see ‘‘Risk Factors—Risks Relating to Doing Business in China”.

 

 

 

 

62 EXPLANATORY MEMORANDUM

 

The PRC government may intervene or otherwise adversely affect Cenntro’s operations at any time, or may exert more control over securities offerings conducted overseas and/or foreign investment in China-based issuers, which could materially affect Cenntro’s operations. For example, the PRC government has recently published new policies that significantly affected certain industries such as the education and Internet industries, and Cenntro cannot rule out the possibility that the PRC government will in the future release regulations or policies regarding the electric commercial vehicle or any other related industry that could adversely affect its the business, financial condition and results of operations. Furthermore, the PRC government has also recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted overseas, as well as foreign investment in China-based companies. Rules and regulations in China can change with little advance notice. Any such action, once taken by the PRC government, could significantly limit or completely hinder Cenntro’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline.
   
Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in China with little advance notice, including increasing enforcement and regulatory oversight over certain activities in the securities market, enhancing supervision over China-based companies listed overseas (particularly those using variable interest entity structures), adopting new measures to extend the scope of cybersecurity reviews (particularly for companies that process large amounts of sensitive consumer data), and expanding efforts in anti-monopoly enforcement. Since these statements and regulatory actions are new, it is highly uncertain how soon legislative or administrative bodies will respond, what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on Cenntro’s business operations or the ability to accept foreign investments and list its securities on a U.S. or other foreign exchange.
   
Cenntro currently conducts substantially all of its operations in various countries, including China, through wholly owned subsidiaries with direct equity ownership, and does not directly own any substantive business operations in China. Cenntro’s ability to pay dividends to its shareholders and to service any debt it may incur may depend upon dividends paid by its PRC subsidiaries. To the extent any of its operating subsidiaries incur debt, the instruments governing such debt may restrict the ability of any such subsidiary to pay dividends to Cenntro, which could limit the amount of dividends that Cenntro may make to shareholders in the future. Furthermore, distributions from PRC subsidiaries to Cenntro will be subject to certain transfer taxes and regulatory approvals, as described below.
   
Current PRC regulations permit Cenntro’s PRC subsidiaries to pay dividends to it through CAG HK only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of Cenntro’s subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation.

 

 

 

 

63 EXPLANATORY MEMORANDUM

 

Under applicable PRC accounting standards and regulations, intercompany transfers are accounted for under either a general account, for cash transfers in the ordinary course of business, or a capital account, for cash transfers on investments (i.e. dividends and loan repayments). Cenntro can send capital investments to its PRC subsidiaries for working capital and its PRC subsidiaries can use such capital at their discretion. To the extent one of its PRC subsidiaries declares and pays a dividend, such subsidiary must pay a transfer tax of 15% to repatriate any profit distributed to the U.S. Cenntro’s PRC subsidiaries, as Wholly Foreign Owned Enterprises (WFOEs) under PRC law, can make dividends up to CAG HK without prior PRC regulatory approval. However, any such subsidiary is limited in its ability to make dividends while that subsidiary has either net losses in the current period or accumulated net losses from prior periods and will only be able to pay dividends during periods in which it has positive net income and no accumulated net losses. To date, there have been no net profits recognized at any of Cenntro’s PRC subsidiaries and thus there have not been any dividends or distributions made by any such subsidiary. With respect to Cenntro’s general account, Cenntro’s subsidiaries purchase and pay for materials and parts, and receive funds for the sale of vehicle kits and vehicles. There is no PRC government approval required for transactions in the general account, where funds can be sentand received in the ordinary course of business freely without government approvals.

 

1.6.3 Transaction specific risks

 

There can be no assurance that the Conditions (such as approval of the Transaction Resolutions, that NBG has cash of at least $282 million and liabilities of no more than US$10 million in the aggregate immediately prior to Closing, and that Nasdaq has approved the listing of the Acquisition Shares) under the Stock Purchase Agreement as summarised in Section 1.1 will be satisfied or waived. In such circumstances, the Company may be compelled to either restructure the Proposed Transaction or abandon it, and accordingly there can be no assurance that the Proposed Transaction will be consummated on the terms described in this Explanatory Memorandum, or at all.
   
Based on the assumptions in Section 1.1.3, the Company estimates that it will issue approximately 35.0 million Shares in the ATM Offering, 133.2 million Shares in the Private Placement, 112.7 million Shares upon settlement of the Incentive Award, and 2,332.7 million Shares to CAG to be distributed to CAG Shareholders. In addition, there would be options and warrants to purchase 185.4 million Shares outstanding (including the Converted CAG Options). This will significantly dilute the equity interest of Shareholders from 100% to approximately 24.5% on a fully diluted basis and the collective entitlement to any dividends and the voting power of existing Shareholders will also be reduced accordingly, which may also adversely affect prevailing market prices for the Shares.
   
Based on the assumptions in Section 1.1.3, upon completion of the Proposed Transaction and the distribution of Acquisition Shares by CAG to its shareholders, the Wang Parties are expected to beneficially own approximately 27.6% of the outstanding Shares (or 26.2% on a fully diluted basis) and will be able to exercise a significant level of influence over all matters requiring Shareholder approval, and can block special resolutions. This may delay or prevent a change of control of the Company or changes in management and make approval of certain transactions difficult without their support. Further, in accordance with the Relationship Agreement, the Wang Parties may nominate a Wang Parties Nominee Director in the event that an existing Wang Parties Nominee Director is removed as a Director by Shareholders pursuant to section 203D of the Corporations Act.

 

 

 

 

64 EXPLANATORY MEMORANDUM

 

The Company will be solely dependent on the success of Cenntro’s business after the Proposed Transaction.
   
Although the Company’s management has endeavoured to evaluate the risks inherent in Cenntro’s business, it operates in an industry that is outside of management’s area of expertise. It is possible that such analyses, and the best-estimate assumptions made by the Company, may not be realized, and the Share price may decline.
   
Resources expended in pursuit of the Proposed Transaction, including substantial costs for accountants, lawyers and consultants, would be wasted if the Proposed Transaction is not completed.
   
The Stock Purchase Agreement provides that all of the representations, warranties and covenants of the parties shall not survive the Closing, except for those covenants that apply or are to be performed in whole or in part after the Closing, and then only with respect to breaches occurring after Closing, and any claims for actual fraud. As a result, NBG likely will have no remedy available to it if the Proposed Transaction is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by CAG and Cenntro at the time of the signing of the Stock Purchase Agreement or the Closing.
   
The Company’s management has interests in the Proposed Transaction that are different than Shareholders generally, for example, the Phantom Warrants and Incentive Award and the Non-Executive Director Benefits. These financial interests may have influenced the decision of management to pursue the Proposed Transaction, and may influence decisions to amend the Stock Purchase Agreement, consent to certain Cenntro actions or waive certain rights of the Company under the Stock Purchase Agreement.

 

1.6.4 General investment risks

 

Economic, government policy, taxation laws and other factors may affect the market price of Shares despite the Enlarged Group’s performance. Past performance of the Company or the Cenntro Group is not necessarily an indication as to the future performance of the Enlarged Group. If a significant number of Shareholders sell Shares post-Proposed Transaction, this may adversely impact Share price. There is no guarantee that there will continue to be an active market for Shares or that the price of Shares will increase.
   
There may be tax consequences (e.g. exposure to higher capital gains liability) resulting from the Proposed Transaction. Shareholders should seek their own professional advice regarding the individual tax consequences applicable to them.
   
The Company cannot provide assurance that it will be able to continue to comply with the standards required to maintain a listing on the Nasdaq Capital Market. In the event that the Company receives a notice of de-listing, the Company would plan to take actions to restore compliance with the Nasdaq Capital Market’s listing requirements, but can provide no assurance that any action taken would result in the Shares maintaining listing, or that any such action would stabilise the market price or improve the liquidity of Shares.
   
Future determination as to payment of dividends by the Enlarged Group will be at the discretion of the new Board. No assurance in relation to the payment of dividends can be given by the Enlarged Group.
   
Changes to accounting policy standards may affect the reported earnings of the Enlarged Group and its financial position from time to time.
   
Changes in general economic and business conditions nationally and globally, for example due to consumer spending, commodity prices, inflation, interest rates and exchange rates, supply and demand, industrial disruption, access to debt and capital markets and government fiscal, monetary, taxation and regulatory policies, significant acts of terrorism, hostilities, war, civil commotion, epidemic, pandemic, quarantine, natural disasters or Acts of God, have an adverse impact on the Enlarged Group’s operating and financial performance, financial position and market price of Shares.

 

 

 

 

65 EXPLANATORY MEMORANDUM

 

1.7 What will happen if the Transaction Resolutions are not passed?

 

Resolution 1 is conditional on all other Transaction Resolutions being approved.

 

If the Transaction Resolutions are not approved by Shareholders, the Proposed Transaction cannot proceed.

 

1.8 Opinion of the Independent Expert’s Report

 

The Independent Expert was commissioned by the Non-Executive Directors of the Company to provide an Independent Expert’s Report to assess whether the Proposed Transaction is fair and reasonable to Shareholders.

 

The Independent Expert’s Report concluded that the Proposed Transaction is “not fair but reasonable” to Shareholders in the absence of a superior proposal. This is on the basis that the Independent Expert concluded that:

 

Fairness assessment

 

In undertaking the Independent Expert’s fairness assessment, the Independent Expert had regard to ASIC Regulatory Guide 111 Content of expert reports (RG 111).

 

RG 111 states that the Proposed Transaction should be assessed on the basis that NBG is subject to a change of control transaction. This reflects the possibility that Shareholders, in approving the Proposed Transaction, may give up the opportunity to realise the benefits of control (control premium).

 

Shareholders will continue to hold their shares if the Proposed Transaction is approved. However, the Shareholders’ interests will be diluted from a combined 100.0% interest in the total issued shares of NBG, on a standalone basis, to a combined 24.5% interest in the total issued shares of after the Proposed Transaction comprising the combined entity of NBG and Cenntro on a fully diluted basis.

 

In forming the Independent Expert’s opinion regarding the fairness of the Proposed Transaction, they are required to compare:

 

  A. the fair market value of an issued share of NBG before the Proposed Transaction, on a controlling interest basis, (representing the consideration deemed to be paid by the Shareholders if approved)

 

to

 

  B. the fair market value of an issued share of NBG after the Proposed Transaction, on a minority interest basis (representing the value of the investment security that will be owned by the Shareholders if approved).

 

 

 

 

66 EXPLANATORY MEMORANDUM

 

For the Proposed Transaction to be “fair” under ASIC Regulatory Guide 111, the fair market value of A must be equal to, or greater than, B.

 

While the Independent Expert considered that they have had sufficiently reliable information to form an opinion on A, the fair market value of an NBG share before the Proposed Transaction, they have, for the reasons in the Independent Expert’s Report and summarised below, had insufficiently reliable information that due to the nature of the ECV industry and the quality of the financial information of Cenntro did not represent “reasonable grounds” to form an opinion on B, the fair market value of an NBG share after the Proposed Transaction.

 

A. Valuation of an issued share in NBG before the Proposed Transaction

 

The Independent Expert has assessed the fair market value of an issued share in NBG before the Proposed Transaction, based on its net asset value and, in the Independent Expert’s opinion, the fair market value per share of approximately $0.254.

 

The Independent Expert’s fair market value per NBG share, before the Proposed Transaction, effectively represents the value of a “cash shell”, a business that has no material operations, assets or liabilities other than cash. This valuation range is lower than the historical trading prices of a NBG share over the last ten months for reasons discussed in detail in Section 9 of the Independent Expert’s Report.

 

B. Valuation of an issued share in NBG after the Proposed Transaction

 

The Independent Expert has been unable to form an opinion regarding the fair market value of a share in NBG after the Proposed Transaction for the following reasons:

 

Similar to its competitors in the ECV industry, Cenntro is in an early stage of development and has not generated significant revenue and has also incurred significant losses to date as a result of the investments and operating costs incurred to build its business. Therefore, in the Independent Expert’s opinion, the measurement and application of valuation multiples based on historical revenue or earnings is unsuitable as a valuation technique.
   
In the Independent Expert’s view, due to the lack of historical revenue and earnings of companies in the ECV industry, the most appropriate valuation methodologies for the valuation of Cenntro include those based on prospective financial information.
   
While the market is placing value on Cenntro’s competitors in the ECV industry based on their disclosed forecasts with minimal definitive support, the Independent Expert’s Report is subject to regulatory guidance that, based on their interpretation, does not permit them to rely on prospective financial information of a quality that does not clearly represent ‘reasonable grounds’ as per RG 111 and RG 170 Prospective financial information.

 

 

 

 

67 EXPLANATORY MEMORANDUM

 

In the Independent Expert’s view, Cenntro’s prospective financial information provided to the Independent Expert does not represent reasonable grounds to use as a basis for their valuation for reasons including:

 

  Stemming from the early stage of development of Cenntro’s operations and hence the uncertainty of the future revenue, costs, and earnings of Cenntro, as well as the early stage of development of the wider ECV industry, Cenntro’s projected revenue and profitability are very difficult to forecast since many assumptions are not capable of independent and objective substantiation.
     
  While not atypical compared to other companies in the ECV industry, there is limited evidence of forward sales contracts that would allow testing of the reasonableness of Cenntro’s prospective financial information.
     
  It is the Independent Expert’s view that Cenntro has not yet developed a strong finance function with the ability to produce reliable financial projections. However, as at the date of the Independent Expert’s Report, the Independent Expert understands that Cenntro has engaged an external advisor to assist with improving the robustness and reliability of Cenntro’s financial projections. These financial projections were not available as at the date of the Independent Expert’s Report.

 

Therefore, because the Independent Expert was unable to value Cenntro, they have been unable to estimate the fair market value of a NBG share after the Proposed Transaction.

 

As the Independent Expert has been unable, in their view, to estimate B, the fair market value of a share in NBG after the Proposed Transaction while at the same time conforming to ASIC guidance, the Independent Expert is unable to conclude whether or not the Proposed Transaction is fair or not fair. However, their interpretation of ASIC’s guidance set out in RG 111 is that, as a result, the Independent Expert must conclude that the Proposed Transaction is “not fair” to Shareholders.

 

Reasonableness assessment

 

The Independent Expert has assessed the reasonableness of the Proposed Transaction. In this assessment, they have considered the potential advantages and disadvantages of the Proposed Transaction to Shareholders and evaluated whether the advantages outweigh the disadvantages.

 

The Independent Expert’s assessment of the potential advantages and disadvantages to Shareholders of the Proposed Transaction are summarised in Sections 1.5.1 and 1.5.2 and discussed in detail in Section 11 of the Independent Expert’s Report.

 

The Independent Expert has concluded that the advantages of the Proposed Transaction outweigh the disadvantages and therefore, in their opinion, the Proposed Transaction is reasonable to Shareholders.

 

The Independent Expert’s Report is attached in full at Annexure A. Shareholders are strongly urged to carefully read the Independent Expert’s Report to understand the scope of that report, the methodology of the assessment and sources of information and assumptions made.

 

1.9 Recommendation of the Non-Executive Directors in relation to the Proposed Transaction

 

The Non-Executive Directors have carefully considered the Independent Expert’s Report and the potential advantages, disadvantages and risks associated with the Proposed Transaction.

 

The Non-Executive Directors unanimously believe that the benefits of proceeding with the Proposed Transaction outweigh potential disadvantages and that the Proposed Transaction is in the best interests of Shareholders, and accordingly, each Non-Executive Director:

 

recommends that Shareholders vote in favour of the Transaction Resolutions;
   
confirms that they intend to vote any Shares that they own in favour of the Transaction Resolutions; and
   
who receives undirected proxies, intends to vote any such undirected proxies in favour of the Transaction Resolutions,

 

in the absence of a Superior Proposal emerging between the date of this Notice and the time of the Meeting.

 

2 Resolution 2 – Approval of change of Company Name

 

Pursuant to sections 157(1) and 136(2) of the Corporations Act, Resolution 2 is a special resolution that seeks the approval of Shareholders to change the name of the Company from “Naked Brand Group Limited” to “Cenntro Electric Group Limited” and to amend the Constitution to reflect the Company’s new name.

 

This change of name is consistent with the Company becoming the holding company for the Cenntro Group that will continue to operate the ECV Business following consummation of the Proposed Transaction.

 

The proposed new name has been reserved by the Company with ASIC. If Resolution 2 is passed and subject to Closing of the Proposed Transaction, the Company will lodge a copy of the special resolution with ASIC promptly following Closing of the Proposed Transaction in order to effect the change of name. The change of name will take effect when ASIC alters the details of the Company’s registration.

 

Resolution 2 is conditional on all other Transaction Resolutions being approved. If the Transaction Resolutions are not approved by Shareholders, the Proposed Transaction cannot proceed.

 

Non-Executive Directors’ recommendation: The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolution 2.

 

3 Resolution 3 – Approval to amend Constitution

 

Section 136(2) of the Corporations Act requires that the Company pass a special resolution at a general meeting to amend the Constitution.

 

 
 

 

68 EXPLANATORY MEMORANDUM

 

It is proposed that existing sub-rules 19.1-19.3 of rule 19 “Directors” of the Constitution be deleted in their entirety and replaced with the following new sub-rules 19.1-19.3 to permit three staggered classes of directors. NBG and CAG believe that having staggered classes of directors will encourage stability in leadership following the Proposed Transaction. NBG and CAG also believe that having staggered classes of directors will assure desirable continuity in policy following the Proposed Transaction:

 

 

19 Directors

 

19.1 Number of directors

 

The minimum number of directors is three. The maximum number of directors is 12 unless the company in general meeting resolves otherwise. The directors may set a maximum number of directors less than current maximum in accordance with the Relevant Law. The directors must not determine a maximum which is less than the number of directors in office at the time the determination takes effect.

 

19.1A Staggered Board

 

For the purposes of determining when directors must stand for election at an AGM, all directors, other than one managing director, must be either a class I, II or III director. Once appointed or elected, a director cannot change classes.

 

19.2 Power to appoint directors

 

  (a) The directors may appoint any individual to be a director, either as an addition to the existing directors or to fill a casual vacancy, but so that the total number of directors does not exceed the maximum number fixed under this constitution.
     
  (b) A director appointed under rule 19.2(a), who is not the managing director referred to in clause 19.1A, must be appointed as a class I, II or III director.

 

19.3 Retirement of directors

 

  (a) The company must hold an election of directors at each AGM.
     
  (b) At the AGM held in 2022 and at every third AGM thereafter, if a person eligible for election to the office of a class III director has been validly nominated by the members for election as a director in their place, each class III director must retire and, unless he or she gives notice to the contrary, will be submitted for re-election.
     
  (c) At the AGM held in 2023 and at every third AGM thereafter, if a person eligible for election to the office of a class II director has been validly nominated by the members for election as a director in their place, each class II director must retire and, unless he or she gives notice to the contrary, will be submitted for re-election.
     
  (d) At the AGM held in 2024 and at every third AGM thereafter, if a person eligible for election to the office of a class I director has been validly nominated by the members for election as a director in their place, each class I director must retire and, unless he or she gives notice to the contrary, will be submitted for re-election.
     
  (e) The company, may by resolution at an AGM, fill an office vacated by a director under rules 19.3(b), (c) or (d) by electing or re-electing an eligible person to the same class of directors who were required to retire at that AGM under clause 19.3(b), (c) or (d).
     
  (f) If the company, by resolution at that AGM, elects or appoints a director, other than under clause 19.3(e), then such director will be appointed to the same class as the directors who were required to retire at that AGM under clause 19.3(b), (c) or (d).
     
  (g) If the company in general meeting elects or appoints a director other than at an AGM, the director must be elected or appointed as either a class I, II or III director.
     
  (h) The retirement of a director from office under this constitution and the re-election of a director or the election of another person to that office (as the case may be) takes effect at the conclusion of the meeting at which the retirement and re-election or election occurs.
     
  (i) A person is eligible for election to the office of a director at a general meeting only if:

 

  (i) the person is in office as a director immediately before that meeting;
     
  (ii) the person has been nominated by the directors for election at that meeting; or
     
  (iii) where a person, or some member intending to nominate the person, has given written notice signed by the nominee giving consent to the nomination and signifying either candidature for the office or the intention of the member to nominate the nominee.

 

  (j) To be a valid notice under rule 19.3(i)(iii), the notice is required to be left at the company’s registered office not less than the period permitted by the Relevant Law, before the meeting.
     
  (k) A partner, employer or employee of an auditor of the company may not be appointed or elected as a director.

 

 

 

 

 

69 EXPLANATORY MEMORANDUM

 

Resolution 3 is conditional on all other Transaction Resolutions being approved. If the Transaction Resolutions are not approved by Shareholders, the Proposed Transaction cannot proceed.

 

Non-Executive Directors’ recommendation: The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolution 3.

 

4 Resolution 4 – Election of Directors

 

In accordance with the Stock Purchase Agreement, CAG is entitled to nominate four directors to the Board of the Company on and from Closing. Simon Charles Howard Tripp, who is one of the existing Directors, will be a Wang Parties Nominee Director to satisfy the legal requirement of having at least two Directors resident in Australia

 

Resolutions 4.1 to 4.3 seek Shareholder approval for the appointment of the Wang Parties Nominee Directors who are not already Directors, being Peter Wang, Chris Thorne and Joe Tong.

 

Please see Section 1.4.3.2 for a profile of each of the Wang Parties Nominee Directors as well as further information on the proposed election of the Wang Parties Nominee Directors as Directors and the retirement of certain current Directors under the Proposed Transaction.

 

Resolutions 4.1 to 4.3 are conditional on all other Transaction Resolutions being approved. If the Transaction Resolutions are not approved by Shareholders, the Proposed Transaction cannot proceed.

 

Non-Executive Directors’ recommendation: The Non-Executive Directors unanimously recommend that Shareholders VOTE IN FAVOUR of Resolutions 4.1 to 4.3.

 

 

 

 

70 EXPLANATORY MEMORANDUM

 

5 Resolution 5 – Approval of Share Consolidation

 

The Company proposes to consolidate its share capital in accordance with section 254H(1) of the Corporations Act. The exact consolidation ratio will be between consolidating every 10 Shares into 1 Share and consolidating every 20 Shares into 1 Share. The exact consolidation ratio will be set by the Directors at least 7 days prior to the Meeting and the Company shall notify Shareholders of the exact consolidation ratio by a means reasonably calculated to inform Shareholders, including by issuing a press release or filing a Form 6-K with the SEC (Share Consolidation). Other Company securities whose value is derived in part from the value of the Shares, including without limitation warrants, options, performance rights, convertible notes or other securities, will be proportionately adjusted to account for the Share Consolidation, in accordance with their respective terms.

 

Fractional entitlements

 

Not all Shareholders in the Company will hold a number of Shares which can be evenly divided by the consolidation ratio for the Share Consolidation. Where a fractional entitlement occurs, the Company will round that fraction up to the nearest whole Share.

 

Reasons for the Share Consolidation

 

The Proposed Transaction is subject to a Condition that the Five Day Average Trading Price for the five consecutive trading days ending on (and inclusive of) the Closing Date (after giving effect to the Share Consolidation) is not less than US$5.00 per Share.

 

On 26 April 2021, the Company received a notice from the Listing Qualifications Department of Nasdaq stating that, for the prior 30 consecutive business days, the closing bid price for Shares had been below the minimum of US$1.00 per Share required for continued inclusion on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). The notification letter stated that the Company would be afforded an initial period of 180 calendar days (or until 25 October 2021) to regain compliance with the minimum bid price requirement. The notification letter also stated that in the event the Company did not regain compliance within the initial 180 day period, the Company could be eligible for additional time.

 

The Company did not regain compliance with the minimum bid price requirement during the initial 180 calendar day compliance period. However, on 26 October 2021, the Company received a second notice from Nasdaq’s Listing Qualifications Department, stating that Nasdaq’s staff had determined that the Company was eligible for an additional 180 calendar day period (until 25 April 2022) to regain compliance. In order to regain compliance during the additional compliance period, the bid price for Shares must close at US$1.00 per Share or more for a minimum of ten consecutive business days. The Company intends to cure the deficiency during the second compliance period by effecting the Share Consolidation contemplated hereby.

 

Accordingly, the Share Consolidation seeks to accomplish two goals: enabling the Company to meet one of the closing conditions for the Proposed Transaction and enabling the Company to regain compliance with the minimum bid price requirement.

 

Failure to approve the Share Consolidation may potentially have serious, adverse effects on the Company and its Shareholders. The Shares could be delisted from Nasdaq because the Shares may continue to trade below the requisite US$1.00 per share price needed to maintain the Company’s listing in accordance with Nasdaq Listing Rule 5550(a)(2). The Shares may then trade on the OTC Bulletin Board or other small trading markets, such as the pink sheets. In that event, the Shares could trade thinly as a microcap or penny stock, and may be avoided by retail and institutional investors, resulting in the impaired liquidity of the Shares. In addition, if the Share Consolidation is not approved, the Proposed Transaction may not be consummated.

 

 

 

 

71 EXPLANATORY MEMORANDUM

 

On 22 November 2021 (EST), the Shares closed at US$0.6875 per share on Nasdaq. The Share Consolidation, if effected, will have the immediate effect of increasing the price of the Shares as reported on Nasdaq, therefore reducing the risk that the Shares could be delisted from Nasdaq.

 

The Board strongly believes that the Share Consolidation is necessary to maintain the Company’s listing on Nasdaq and to complete the Proposed Transaction. Accordingly, the Board has approved the Share Consolidation and directed that it be submitted to Shareholders for approval at the Meeting.

 

Management and the Board have considered the potential harm to the Company and its Shareholders should Nasdaq delist the Shares from trading on Nasdaq. Delisting could adversely affect the liquidity of the Shares since alternatives, such as the OTC Bulletin Board and the pink sheets, are generally considered to be less efficient markets. An investor likely would find it less convenient to sell, or to obtain accurate quotations in seeking to buy, the Shares on an over-the-counter market. Many investors likely would not buy or sell the Shares due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange, or other reasons.

 

Management and the Board have also considered the risk that the Proposed Transaction would not be completed. As discussed elsewhere in this Explanatory Memorandum, the Board has determined that the Proposed Transaction is in the best interests of the Company’s shareholders.

 

In addition, the proposed Share Consolidation will rationalise the share capital of the Company by reducing the number of Shares issued and outstanding and result in the Company having a more appropriate number of Shares on issue. The Board believes that this may help to make investing in the Company’s shares more attractive to a broader range of institutional and professional investors and other members of the investing public. In addition, low-priced shares may be more prone to speculation, and therefore are generally more volatile as compared to higher-priced shares. Accordingly, the Board believes that the proposed Share Consolidation will help reduce short-term share price volatility and offset the effects of share-term share price speculation and reduce fluctuations in the Company’s market capitalisation.

 

Taxation

 

The summary in this section is general in nature. In addition, particular taxation implications will depend upon the circumstances of each Shareholder. Accordingly, Shareholders are encouraged to seek and rely only on their own professional advice in relation to their tax position. Neither the Company nor any of its officers, employees or advisers assumes any liability or responsibility for advising Shareholders about the tax consequences for them from the proposed Share Consolidation.

 

The Share Consolidation will be undertaken in accordance with section 254H of the Corporations Act. Subject only to rounding, there will be no change to the proportionate interests held by each Shareholder in the Company as a result of the Share Consolidation.

 

No capital gains tax (CGT) event should occur as a result of the Share Consolidation and therefore there should be no taxation implications arising for the Shareholders.

 

 

 

 

72 EXPLANATORY MEMORANDUM

 

Timetable

 

If Resolution 5 is passed, the Company authorises management to implement the Share Consolidation on Wednesday, 22 December 2021 (EST). The completion of the Share Consolidation will be announced by press release and by filing with the SEC a Report of Foreign Private Issuer on Form 6-K.

 

If Resolution 5 and the other Transaction Resolutions are not approved by Shareholders, the Proposed Transaction cannot proceed.

 

Board recommendation: The Board unanimously recommends that Shareholders VOTE IN FAVOUR of Resolution 5.

 

6 Resolution 6 – Approval of director benefits

 

6.1 Non-Executive Director Benefits

 

Resolution 6.1 seeks Shareholder approval for the cash payment by the Company of US$1,000,000 to each of the Non-Executive Directors, Mr. Andrew Shape, Mr. Kelvin Fitzalan and Mr. Simon Tripp (Non-Executive Directors) (or a related entity of the Non-Executive Directors), being a total cash payment by the Company of US$3,000,000 in aggregate, in connection with a successful Closing of the Proposed Transaction (Non-Executive Director Benefits).

 

The Directors consider that Shareholder approval pursuant to Chapter 2E and sections 195(4) and 200B of the Corporations Act is required in respect of the provision of the Non-Executive Director Benefits to the Non-Executive Directors.

 

Resolution 6.1 is an ordinary resolution and is subject to and conditional on the passing of the Transaction Resolutions. However, the Transaction Resolutions are not subject to and conditional on Resolution 6.1 being passed. The payment of the Non-Executive Director Benefits to the Non-Executive Directors is also subject to and conditional on Closing of the Proposed Transaction.

 

6.2 Acceleration of Phantom Warrants and grant of Incentive Award

 

Resolution 6.2 seeks Shareholder approval of the acceleration of the Phantom Warrants held by JADR Consulting Group Pty Limited, an entity associated with Justin Davis-Rice, NBG’s Executive Chairman and Chief Executive Officer, such that the Phantom Warrants will be exercised and paid out at or prior to consummation of the Proposed Transaction rather than 21 January 2022, and of the grant of the Incentive Award to JADR Consulting Group Pty Limited. For more detail, refer to Section 1.1.2, and the pro forma ownership table in Section 1.4.1 which shows the potential dilution to Shareholders.

 

Resolution 6.2 is an ordinary resolution and is not subject to and conditional on the passing of the Transaction Resolutions, but the acceleration of the third tranche of Phantom Warrants is conditional on the consummation of the Proposed Transaction.

 

 
 

 

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6.3 Chapter 2E of the Corporations Act

 

In accordance with section 208 of the Corporations Act, for a public company to give a financial benefit to a related party of the public company, the public company must:

 

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
   
(b) give the financial benefit within 15 months following such approval,

 

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

 

The Non-Executive Directors consider the acceleration of Phantom Warrants and grant of Incentive Award are on arms’ length terms, in accordance with section 210 of the Corporations Act. As such, neither the acceleration of the Phantom Warrants nor the grant of the Incentive Award was subject to Shareholder approval, including under Chapter 2E and section 200B of the Corporations Act. However, the Company is seeking Shareholder approval for completeness, due to the impact of the Proposed Transaction on the timing of the exercise of the Phantom Warrants and the calculation of Shares to be issued under the Incentive Award.

 

6.4 Division 2 of Part 2D.2 of the Corporations Act

 

Section 200B of the Corporations Act prevents a company from giving a benefit to a director in connection with the director’s retirement or removal from office unless the company’s shareholders approve that benefit under section 200E of the Corporations Act or the benefit falls within certain exceptions set out in the Corporations Act. A “benefit” includes a payment or other valuable consideration.

 

6.5 Division 2 of Part 2D.1 of the Corporations Act

 

Section 195(1) of the Corporations Act requires that a director of a public company who has a material personal interest in a matter that is being considered at a directors’ meeting must not be present while the matter is being considered at the meeting or vote on the matter. Due to section 195(1), there are not enough directors to form a quorum for a directors’ meeting to consider and vote on the Non-Executive Director Benefits.

 

However, section 195(4) of the Corporations Act provides that if there are not enough directors to form a quorum for a directors’ meeting because of section 195(1), one or more of the directors (including those who have a material personal interest in that matter) may call a general meeting and the general meeting may pass a resolution to deal with the matter. Accordingly, Shareholder approval of the Non-Executive Director Benefits under Resolutions 6.1 is also sought pursuant to section 195(4) of the Corporations Act.

 

 

 

 

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6.6 Information required by section 219 of the Corporations Act

 

Pursuant to and in accordance with the requirements of section 219 of the Corporations Act and ASIC Regulatory Guide 76, the following information is provided in relation the giving of the Non-Executive Director Benefits to the Non-Executive Directors and the acceleration of Phantom Warrants and grant of Incentive Award.

 

Identity of the related parties Mr. Andrew Shape, Mr. Kelvin Fitzalan, Mr. Simon Tripp and Mr. Justin Davis-Rice are each a related party of the Company by reason of being a current Director.

 

Nature of the financial benefit

In respect of Resolution 6.1, the proposed financial benefit is the cash payment by the Company of US$1,000,000 to each Non-Executive Director (or a related entity of the Non-Executive Director), being a total cash payment by the Company of US$3,000,000 in aggregate, for their service in connection with the Closing of the Proposed Transaction.

In respect of Resolution 6.2, the proposed financial benefits are:

(a)   the acceleration of the third tranche of the Phantom Warrants held by JADR Consulting Group Pty Limited, an entity associated with Mr. Davis-Rice, covering 1.5% of the outstanding Shares at the date of vesting, so that they vest and are paid out at or prior to consummation of the Proposed Transaction at net cash value; and

(b)   the grant of the Incentive Award to JADR Consulting Group Pty Limited, such that Shares with a market value equal to 1.5% of the increase in NBG’s total market capitalization since the grant of the award will be issued to such entity at or prior to consummation of the Proposed Transaction (due to acceleration upon change of control).

Directors’ recommendations The Directors all have a material personal interest in the outcome of Resolutions 6.1 and 6.2. Therefore, the Directors do not consider it appropriate to make a recommendation on how to vote on these resolutions.
Directors’ interest in the outcome As noted above, the Directors all have a material personal interest in the outcome of Resolutions 6.1 and 6.2. As a result, the Directors will be abstaining from voting their own shares on Resolutions 6.1 and 6.2. The Company will disregard any votes cast in favour of Resolution 6.1 and 6.2 by or on behalf of the Directors, or any of their associates. However, this does not apply to a vote cast in favour of the Resolutions by a Director as a proxy or attorney for a person who is entitled to vote on Resolutions 6.1 and 6.2, in accordance with the directions or attorney to vote on the Resolutions in that way (but otherwise must not vote if no voting instructions are specified on those Resolutions).

 

 

 

 

75 EXPLANATORY MEMORANDUM

 

Valuation of the financial benefit

In respect of Resolution 6.1, the valuation of the proposed financial benefit is the cash payment by the Company of US$1,000,000 to each Non-Executive Director (or a related entity of the Non-Executive Director), being a total cash payment by the Company of US$3,000,000 in aggregate.

 

In respect of Resolution 6.2, the valuation of the proposed financial benefits varies in accordance with the Share price.

 

The closing price of Shares on the Nasdaq as at the date prior to the date of the public announcement of the Proposed Transaction (i.e. Friday 5 November 2021) was $0.668 per Share.

 

 

The current price of Shares on the Nasdaq can be obtained from the Nasdaq website (www.nasdaq.com) or the NBG website (www.ir.nakedbrands.com).

 

Phantom Warrants

 

Indicative values based on range of prices proposed above:

 

 

The actual value may be substantially more or less than the above estimates, depending on the future market price of Shares and number of Shares issued in the ATM Offering and Private Placement.

 

Incentive Awards

 

Indicative values based on range of prices proposed above:

 

 

The actual value may be substantially more or less than the above estimates, depending on the future market price of Shares and number of Shares issued in the Proposed Transaction, ATM Offering and Private Placement.

 

 
 

 

76 EXPLANATORY MEMORANDUM

 

Directors’ total remuneration package

 

The current total annual remuneration package of each of the Non-Executive Directors for the financial year ending 31 January 2022, each before the proposed payment of the Non-Executive Director Benefits the subject of Resolution 6.1, is as follows:

 

(a) Andrew Shape

 

 

(b) Kelvin Fitzalan

 

 

(c) Simon Tripp

 

 

The share and option plans are payable quarterly in arrears with the number of shares and options calculated on the basis of the volume weighted average price of Shares over the 20 trading days immediately preceding the end of the relevant quarter.

 

The current total annual remuneration package of Mr. Davis-Rice for the financial year ending 31 January 2022, before the proposed acceleration of Phantom Warrants and grant of Incentive Award the subject of Resolution 6.2 is as follows:

 

 

Apart from the Phantom Warrants and Incentive Award, JADR Consulting Group Pty Limited does not hold any other existing interests in the Company

 

Related party’s existing interest

As at the date of this Explanatory Memorandum, the Directors’ relevant interests in securities of the Company are set out below:

 

 

 

 

 

 

 

 

77 EXPLANATORY MEMORANDUM

 

Schedule 1 Glossary

 

The following terms and abbreviations used in the Notice and Explanatory Memorandum have the meaning given to them below, unless the context otherwise requires:

 

Acquisition Share Pool   means a number of Shares equal to the Consideration Ratio, multiplied by the number of Fully Diluted Company Shares Outstanding immediately prior to the Closing (rounded down to the nearest whole number of shares).
     
Acquisition Shares   means an aggregate number of Shares equal to:

 

    (a) the Acquisition Share Pool; less
       
    (b) the Converted CAG Option Acquisition Shares.

 

Additional Financing  

means, not withstanding anything to the contrary in the Stock Purchase Agreement, at any time on or prior to the Closing Date, the Company may consummate the sale of newly issued Shares or Share Equivalents, for cash, in one or more public or private offerings, provided that all such financings shall not exceed gross proceeds of US$100 million in the aggregate, on such terms as the Company, after consultation with CAG, shall determine, in its reasonable discretion;

 

provided, further that:

 

    (a) any such Share Equivalent issued in any Additional Financing shall be exercised or exchanged for, or converted into, Shares prior to the Closing;
       
    (b) except as disclosed in a specified schedule to the Stock Purchase Agreement, no registration rights shall be granted by the Company to any person that will obligate the Company to file a registration statement with the SEC prior to one hundred eighty (180) days following the Closing Date;
       
    (c) no such Shares or Share Equivalents issued in any Additional Financing shall be senior to or have voting rights different than the Shares; and
       
    (d) no Additional Financing shall impose any liabilities (including tax liabilities) on the Company or any Company subsidiary following the Closing or have any materially adverse effect on the Company or any Company subsidiary following the Closing.

 

Additional Financing Floor Price Per Share   means, for each Share issued in an Additional Financing (including any Shares issued upon exercise, conversion, or exchange of a Share Equivalent issued in such Additional Financing), eighty percent (80%) of the most recent closing sale price of one Share on Nasdaq on the trading day that immediately precedes the time of sale of such Share in such Additional Financing (or the time of sale of the Share Equivalent pursuant to which such Share was issued). The time of sale shall be (i) if sold on an exchange or similar market, the time of the trade, (ii) if sold pursuant to a contract providing for a fixed purchase price, the time of formation of such contract, or (iii) if sold pursuant to a contract providing for the purchase price to be fixed in the future, the time such purchase price becomes fixed. For the avoidance of doubt, in the event of an Additional Financing that involves the sale of a unit or similar security comprised of one Share and a warrant to purchase one Share, for both the Shares issued at the closing of such Additional Financing and the Shares issued upon the exercise of such warrants, the Additional Financing Floor Price Per Share shall be eighty percent (80%) of the last closing sale price of one Share on Nasdaq on the Trading Day immediately preceding the date of the sale of such unit or similar security.

 

 

 

 

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Additional Financing Price   means, for each Additional Financing, the greater of the Additional Financing Price Per Share and the Additional Financing Floor Price Per Share.
     
Additional Financing Price Per Share   means, for each Additional Financing, (i) the aggregate cash purchase price of the Shares and Share Equivalents, if any, issued by the Company in such Additional Financing (including any exercise price actually paid in cash in connection with the exercise, prior to the Closing, of any Share Equivalents issued in such Additional Financing), divided by (ii) the sum of (A) the number of Shares issued in such Additional Financing, and (B) the number of Shares issued upon any exercise, exchange or conversion, prior to the Closing, of any Share Equivalents issued in such Additional Financing (it being understood that such Share Equivalents shall be exercised, exchanged or converted in full prior to the Closing).
     
Additional Financing Surplus Shares   means a number of Shares equal to:

 

    (a) the amount of Cash held by the Company in excess of US$282 million immediately prior to the Closing; divided by
       
    (b) the Additional Financing Volume Weighted Average Price Per Share (rounded down to the nearest whole number of shares).

 

Additional Financing Volume Weighted Average Price Per Share   means the volume weighted average Additional Financing Price of the Shares issued in the Additional Financings (including any Shares issued upon exercise, conversion or exchange of Share Equivalents issued in the Additional Financings).
     
Amended Constitution   has the meaning given to that term in Section 1.1.11.
     
Annexure   means an Annexure to this Explanatory Memorandum.
     
ASIC   means the Australian Securities and Investments Commission.
     
ASIC Regulatory Guide   means a regulatory guide published by ASIC.
     
ATM Offering   has the meaning given to that term in Section 1.1.
     
Beneficial Ownership Limit   has the meaning given to that term in Section 1.1.10.
     
Board   means the board of Directors of the Company.
     
CAC   means Cenntro Automotive Corporation, a Delaware corporation and a wholly owned subsidiary of CAG.
     
CAG   means Cenntro Automotive Group Limited, a Cayman Islands company limited by shares.

 

 

 

 

79 EXPLANATORY MEMORANDUM

 

CAG 2016 Incentive Stock Option Plan   means the incentive stock option plan in respect of CAG dated 2016.
     
CAG HK   means Cenntro Automotive Group Limited, a Hong Kong private company limited by shares and a wholly owned subsidiary of CAG.
     
CAG Information   means the information prepared by CAG expressly for inclusion in this Explanatory Memorandum and for which CAG is responsible, concerning CAG, the Wang Parties and the Cenntro Group, as contained in Sections 1.2, 1.4.2, 1.4.3.2(d) (but not including the Director biography for Mr. Tripp) and the questions and answers contained in “Key Information in respect of the Proposed Transaction”, being “Who is Cenntro?”, “What are the future intentions for the Company?”, and the risks under “Specific risks associated with the business and operations of the Enlarged Group” in “What are the potential risks associated with the Proposed Transaction?”, Section 1.6.2 and Schedule 2, but in each case, solely to the extent such information relates to CAG, the Wang Parties or the Cenntro Group.
     
CAG Options   means options to purchase CAG Shares granted under the CAG 2016 Incentive Stock Option Plan.
     
CAG Preferred Shares   means the Series A-1 Preferred Shares of par value US$0.000001 each and the Series A-2 Preferred Shares of par value US$0.000001 each of CAG.
     
CAG Shareholders   means the holders of issued and outstanding shares of CAG.
     
CAG Shares   means the ordinary shares of par value US$0.000001 each of CAG.
     
CAG Subs   means CAC, CAG HK and CEG.
     
Cash   means, without duplication:

 

    (a) the cash and cash equivalents held by the Company and the Company Subsidiaries, after giving effect to the receipt of any cash consideration received by the Company at the closing of the Divestiture; plus
       
    (b) the outstanding principal amount plus the accrued interest of the NBG Loan; plus
       
    (c) the outstanding principal amount and accrued interest of loans and advances made to Bendon Limited in an amount not to exceed US$5 million.

 

CEG   means Cenntro Electric Group, Inc., a Delaware corporation and a wholly owned subsidiary of CAG.
     
CEL   means Cenntro Enterprise Limited, a Hong Kong private company limited by shares and ultimately owned by Peter Wang.
     
Cenntro Group or Cenntro   means the CAG Subs and their wholly owned subsidiaries.
     
Cenntro Shares   has the meaning given to that term in Section 1.1.1.

 

 

 

 

80 EXPLANATORY MEMORANDUM

 

Chair or Chairman   means the person appointed to chair the Meeting convened by the Notice.
     
Charter Documents   means complete and correct copies of the certificate of incorporation and by-laws (or other comparable governing instruments with different names, including, any shareholders agreement or similar agreement).
     

Closely Related Party

 

has the meaning given to that term in section 9 of the Corporations Act.

     
Closing   means the consummation of the Proposed Transaction under the Stock Purchase Agreement.
     
Closing Date   means the date of the Closing.
     
Code   means the U.S. Internal Revenue Code of 1986.
     
Company or NBG   means Naked Brand Group Limited (ACN 619 054 938).
     
Company Information   means the information regarding the Company, the Company’s subsidiaries and the Proposed Transaction, other than the CAG Information and the Independent Expert’s Report, contained in this Explanatory Memorandum.
     
Competing Proposal   means any proposal, agreement, arrangement, or transaction that, if entered into or completed, would mean a person (other than CAG or the holders of capital stock in CAG) (either alone or together with any affiliate) may (i) directly or indirectly acquire a Relevant Interest in, or have the right to acquire, a legal, beneficial, or economic interest in, or control of, 30% or more of the Shares, (ii) acquire control of, or otherwise merge with, the Company or any of its controlled entities or a substantial portion of their assets, or (iii) enter into any agreement, arrangement, or understanding requiring the Company to abandon, cease to recommend, or otherwise fail to proceed with the Proposed Transaction.
     
Conditions   means the conditions to Closing set out in the Stock Purchase Agreement and summarised in Section 1.1.
     
Consideration Ratio   means seven-thirds (7/3).
     
Constitution   means the constitution of the Company as at the commencement of the Meeting.
     
Converted CAG Option   means each CAG Option outstanding immediately prior to the Closing, whether vested or unvested, to be converted into an option exercisable for that number of Shares equal to the product of:

 

    (a) the aggregate number of CAG Shares for which such CAG Option was exercisable immediately prior to the closing; multiplied by
       
    (b) the Exchange Ratio (rounded down to the nearest whole number of Shares).

 

Converted CAG Option Acquisition Shares   means the aggregate number of Shares issuable upon exercise of the Converted CAG Options immediately after the Closing (rounded down to the nearest whole number of shares).
     
Corporations Act   means the Corporations Act 2001 (Cth).

 

 

 

 

81 EXPLANATORY MEMORANDUM

 

Daily VWAP   means, for any trading day, the per share volume-weighted average price of the Shares as reported by Bloomberg, L.P. through its VWAP function (or its equivalent successor if such service is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such trading day on Nasdaq. The Daily VWAP will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.
     
Director   means a director of the Company.
     
Distribution   has the meaning given to that term in Section 1.1.1 and Distribute or Distributed has a corresponding meaning.
     
Dollars, USD, US$ or $   is a reference to United States Dollars.
     
ECV Business   has the meaning given to that term in the Executive Chairman’s letter.
     
Enlarged Group   means the enlarged group of the Company (that will include Cenntro) that will exist after Closing.
     
Equity Distribution Agreement   has the meaning given to that term in Section 1.1.9.
     
Exchange Act   means the U.S. Securities Exchange Act of 1934, as amended.
     
Exchange Ratio   means:

 

    (a) the number of shares constituting the Acquisition Share Pool; less the number of Liquidation Preference Acquisition Shares (but in any event, not less than zero); multiplied by
       
    (b) the ratio of the aggregate number of CAG Shares underlying the CAG Options that are outstanding immediately prior to the Closing over the number of Fully Diluted CAG Shares Outstanding; divided by
       
    (c) the aggregate number of CAG Shares underlying the CAG Options that are outstanding immediately prior to the Closing.

 

Exercise Price   has the meaning given to that term in Section 1.1.10.
     
Explanatory Memorandum   means the explanatory memorandum contained in and forming part of the Notice of Meeting.
     
Extraordinary General Meeting or Meeting   means the extraordinary general meeting of the holders of Shares convened by the Notice of Meeting.
     
FATA   means the Foreign Acquisitions and Takeovers Act 1975 (Cth) of the Commonwealth of Australia, and any regulations made under it.
     
February EDA   has the meaning given to that term in Section 1.1.9.
     
FIRB   means the Foreign Investment Review Board.
     
FIRB Approval   means either:

 

    (a) CAG has received a written no objection notification under FATA from the Australian Commonwealth Treasurer (or its delegate) in respect of CAG and certain holders of the capital stock of CAG acquiring the Shares in accordance with the Stock Purchase Agreement, either on an unconditional basis or subject to such conditions acceptable to CAG (acting reasonably and in good faith); or

 

 

 

 

82 EXPLANATORY MEMORANDUM

 

    (b) the Australian Commonwealth Treasurer is, by reason of lapse of time, no longer empowered to make an order under the FATA in respect of the acquisition of the Shares by CAG and certain holders of the capital stock of CAG in the manner contemplated by the Stock Purchase Agreement on grounds that the Australian Commonwealth Treasurer was otherwise empowered to make under the FATA.

 

Five Day Average Trading Price   means the average of the Daily VWAP for the five (5) trading days ending on (and inclusive of) the trading day immediately preceding the Closing Date (as adjusted as appropriate to reflect any stock splits, stock dividends, combinations, reorganisations, reclassifications or similar events).
     
Five-Year Warrant   has the meaning given to that term in Section 1.1.10.
     
Five-Year Warrant Shares   has the meaning given to that term in Section 1.1.10.
     
Form 6-K   means the Report of Foreign Private Issuer on Form 6-K filed by NBG with the SEC on 8 November 2021.
     
Fully Diluted CAG Shares Outstanding   means, without duplication:

 

    (a) the number of issued and outstanding CAG Shares (including restricted stock) immediately prior to the Closing; plus
       
    (b) the number of CAG Shares underlying restricted stock units and performance units and issuable upon the exercise, conversion or other exchange of options, warrants, preferred shares, convertible debt securities, or similar rights issued and outstanding immediately prior to the Closing or that a third party otherwise has the right to acquire.

 

Fully Diluted Company Shares Outstanding  

means, without duplication:

 

    (a) the number of issued and outstanding Shares (including restricted stock) immediately prior to the Closing; plus
       
    (b) the number of Shares underlying restricted stock units and performance units and issuable upon the exercise, conversion or other exchange of options, warrants, preferred shares, convertible debt securities, or similar rights issued and outstanding immediately prior to the Closing or that a third party otherwise has the right to acquire, including, for the avoidance of doubt, shares issuable in connection with the Company’s director compensation plan, incentive equity compensation awarded to the Company’s executive officers, employees, consultants, and independent contractors, and the Warrants;
       
      provided, that the Fully Diluted Company Shares Outstanding shall exclude any Additional Financing Surplus Shares and shares identified in a specified schedule to the Stock Purchase Agreement.

 

 

 

 

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Governmental Authority   means any federal, state, provincial, municipal, local or foreign government or political subdivision thereof, any regulatory, tax, administrative or other agency, authority, commission, department, board, bureau, or instrumentality of any such government or political subdivision, any court, arbitral body (public or private) or tribunal, or any self-regulatory organization or quasi-governmental authority (including Nasdaq).
     
Independent Expert   FTI Consulting (Australia) Pty Limited (ACN 160 397 811).
     
Independent Expert’s Report   means the report on the Proposed Transaction prepared by the Independent Expert which is included as Annexure A.
     
Investors   has the meaning given to that term in Section 1.1.10.
     
JADR Consulting Group Pty Limited   means JADR Consulting Group Pty Limited (ACN 629 649 369).
     
Key Management Personnel   has the meaning given to that term in section 9 of the Corporations Act.
     
Legal Requirements   means any material federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, rule, regulation, Order or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
     
Liquidation Preference Acquisition Shares   means the number of Shares issuable to CAG, and distributable by CAG to the holders of the CAG Preferred Shares in satisfaction of their liquidation preference in connection with the Distribution, in accordance with the CAG Charter Documents, and contracts binding on CAG and applicable Legal Requirements (rounded down to the nearest whole number of shares), but in any event not more than the number of shares constituting the Acquisition Share Pool.
     
Loan Agreement   has the meaning given to that term in Section 1.1.4.
     
Lock-up Agreement   has the meaning given to that term in Section 1.1.6.
     
Maxim   means Maxim Group, LLC.
     
Nasdaq   means the Nasdaq Capital Market or The Nasdaq Stock Market LLC (as appropriate).
     
NBG Loan   has the meaning given to that term in Section 1.1.4.
     
Non-Executive Director   has the meaning given to that term in Section 6.1.
     
Non-Executive Director Benefits   has the meaning given to that term in Section 6.1.
     
Notice of Meeting or Notice   means the notice of meeting for the Meeting which accompanies this Explanatory Memorandum.

 

 

 

 

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One-Year Warrant   has the meaning given to that term in Section 1.1.10.
     
One-Year Warrant Shares   has the meaning given to that term in Section 1.1.10.
     
Order   means any award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling entered, issued, made, or rendered by any Governmental Authority that possesses competent jurisdiction.
     
Phantom Warrant   has the meaning given to that term in Section 1.1.2.
     
PRC   means the People’s Republic of China.
     
Proposed Transaction   has the meaning given to that term in Section 1.1.1.
     
Proxy Form   means the proxy form attached to this Notice.
     
Relationship Agreement   has the meaning given to that term in Section 1.1.7.
     
Relevant Interest   has the meaning given to that term in Chapter 6 of the Corporations Act.
     
Resolutions   means each of the resolutions to be voted on at the Meeting as set out in the Notice of Meeting.
     
Restricted Period   means a period of one hundred eighty (180) days from the Closing Date.
     
Restricted Shareholder   means Cenntro Enterprise Limited, China Leader Group Limited, and Trendway Capital Limited.
     
Restricted Shares   means the Shares beneficially owned by the Restricted Shareholders as of immediately after the Closing Date.
     
RMB   means Renminbi.
     
Schedule   means a schedule to this Explanatory Memorandum.
     
SEC   means the U.S. Securities and Exchange Commission.
     
Section   means a section in this Explanatory Memorandum.
     
Securities Act   means U.S. Securities Act of 1933, as amended.
     
Securities Purchase Agreement   has the meaning given to that term in Section 1.1.10.
     
Share Consolidation   has the meaning given to that term in Section 5.
     
Share Equivalents   means any security exercisable or exchangeable for, or convertible into, newly issued Shares.
     
Shares   means a fully paid ordinary share in the Company.
     
Shareholder   means a holder of Shares.
     
Stock Purchase Agreement   has the meaning given to that term in Section 1.1.1.

 

 

 

 

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Superior Proposal   means a publicly announced, bona fide Competing Proposal of the kind referred to in any of clause (ii) of the definition of Competing Proposal (and not resulting from a breach by the Company of any of its ‘no solicitation’ obligations under the Stock Purchase Agreement, that a majority of the Directors of Company, acting in good faith, and after receiving written legal advice from its legal advisor and written advice from its financial advisor, determines (1) is reasonably capable of being valued and completed in a timely fashion taking into account all aspects of the Competing Proposal, including any timing considerations, any conditions precedent, and the identity of the proponent; and (2) would, if completed substantially in accordance with its terms, be more favourable to the holders of the Shares (as a whole) than the Proposed Transaction, taking into account all terms and conditions of the Competing Proposal.
     
TCL   means Trendway Capital Limited, a Hong Kong private company limited by shares and ultimately owned by Peter Wang.
     
Transaction Resolutions   means Resolutions 1, 2, 3, 4 and 5.
     
Wang Parties   has the meaning given to that term in Section 1.1.7.
     
Wang Parties Nominee Directors   has the meaning given to that term in Section 1.4.3.2.
     
Warrant   has the meaning given to that term in Section 1.1.10.
     
Warrant Shares   has the meaning given to that term in Section 1.1.10.

 

 

 

 

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Schedule 2 Risks relating to the Proposed Transaction

 

The following is a list of, but not all, risks associated with the Proposed Transaction. Each of the risks set out below could, if it eventuates, have a material adverse impact on the Company’s Shares, options and future dividends, the Enlarged Group’s operating performance, profits, products, the industry in which it operates and the outcome of an investment in the Enlarged Group. No assurances or guarantees are given in relation to the future performance of, or profitability of, the Enlarged Group.

 

The value of Shares will depend on the future performance of the Enlarged Group and the market price of Shares from time to time. The future performance of the Enlarged Group and the market price of Shares may be influenced by factors associated with investing in both the ECV industry and listed securities generally which are beyond the control of the Company.

 

This Schedule outlines:

 

specific risks relating to the ECV Business, to which the Enlarged Group will be exposed (see paragraph A);
   
specific risks that arise from the Proposed Transaction (see paragraph B); and
   
general investment risks (see paragraph C).

 

Many of these risks are outside the control of the Company and Cenntro. Although the Company will have in place a number of strategies to minimise exposure to, and mitigate the effects of, some of the risks outlined in this section, there can be no guarantee that such arrangements will protect the Enlarged Group from these risks.

 

A.Specific risks associated with the business and operations of the Enlarged Group

 

Cenntro, which will form part of the Enlarged Group post-Proposed Transaction, operates in the ECV design and manufacturing industry which is exposed to a number of risk factors. In addition, due to the presence of channel partners and parts of the supply chain in China, Cenntro is exposed to risks of doing business in China. Accordingly, any investment in the Enlarged Group will be subject to the following risks.

 

Risks related to Cenntro’s business and financial results

 

Cenntro has a limited operating history and face significant challenges in an emerging industry.

 

Cenntro began pilot production of its first-generation, U.S. Class 1 (0 – 6,000 lbs.), electric light-duty commercial vehicle, the Metro®, in 2018, and, as of June 30, 2021, it has sold approximately 1,800 units throughout Europe, North America and Asia and deployed approximately 1,300 additional units in China through affiliated parties. Cenntro’s revenues were approximately US$5.5 million for the year ended December 31, 2020 and approximately US$2.5 million for the six months ended June 30, 2021. To date, it has derived its revenues principally from sales of the Metro®. Cenntro intends to launch four new ECVs by the end of 2021, the CityPorter™ (a U.S. Class 4 medium-duty commercial truck), the Neibor® 200 (a small truck designed to meet the European Union and the UK’s L7e (heavy quadricycle) qualification), the Logistar™ (a small delivery truck designed to meet the European Union’s N1 requirements) and the Terramak™ (an off-road ECV). Cenntro has finalized the design, engineering and manufacturing plans for each of these ECV models; however, the expected dates of commercial availability for each of these new ECV models may be delayed. See “—Cenntro’s future success depends on its ability to introduce new models and it may experience delays in launching and ramping up production of its new ECV models.”

 

Cenntro has a limited operating history on which you can base an evaluation of its business and prospects. You should consider its business and prospects in light of the risks and challenges it faces in an emerging industry with limited experience to date in high volume manufacturing of ECVs, including challenges related to its ability to:

 

design and manufacture safe, reliable and quality ECVs on an ongoing basis;
   
establish additional assembly facilities in the United States and European Union;

 

 

 

 

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maintain and expand its network of local assembly facilities, channel partners, assembly partners and suppliers;
   
execute on its growth plan to regionalize supply chains, manufacturing and assembly of its ECVs;
   
maintain and improve its operational efficiency;
   
maintain a reliable, high quality, high-performance and scalable manufacturing infrastructure;
   
attract, retain and motivate talented employees including its production workforce in existing and planned facilities, including the challenges it faces with COVID-19 and the impact on its workforce stability;
   
anticipate and adapt to changing market conditions, including technological developments and changes in the competitive landscape;
   
protect its intellectual property; and
   
navigate an evolving and complex regulatory environment.

 

If Cenntro fails to address any or all of these risks and challenges, its business, financial condition, operating results and prospects may be materially and adversely affected. As it continues to grow its business, Cenntro cannot assure you that it will be able to develop effective and cost-efficient manufacturing capabilities and processes, and maintain reliable sources of component supplies, that will enable it to meet the production demands required to successfully sell its ECVs.

 

Cenntro has historically incurred losses from its operations and may not be profitable in the future.

 

Cenntro incurred losses from operations of approximately US$10.6 million and US$17.8 million in 2020 and 2019, respectively. Cenntro has made significant up-front investments in research and development, supply chain establishment, establishment of local assembly facilities and capacity, and channel partner development to develop and expand its business. Cenntro has spent approximately US$74.0 million in research and development activities related to its operations from inception through June 30, 2021. It expects to continue to invest significantly in research and development, manufacturing and supply chain operations to expand its business, and these investments may not result in profitability within its expected timeframe or at all.

 

Cenntro may not generate sufficient revenues to be profitable in the future and it may incur substantial losses for a number of reasons, including lack of demand for its ECVs and increasing competition. In addition, Cenntro may incur unforeseen expenses, or encounter difficulties, complications and delays in market penetration for its products, generating revenue or achieving profitability. If it is unable to achieve profitability and raise additional financing, it may have to reduce the scale of its operations, which may impact its planned growth and adversely affect its business, financial condition, operating results and prospects.

 

Cenntro’s ability to develop and manufacture ECVs of sufficient quality, on schedule and on a large scale is still evolving.

 

Cenntro’s business depends in large part on its ability to execute on its plans to develop, manufacture and sell its ECVs to its channel partners. Cenntro began pilot production of the Metro® in 2018 and, as of June 30, 2021, it has sold approximately 1,800 units in North America, Europe, Asia and other markets and put into service approximately 1,300 units. It plans to manufacture ECVs in higher volumes than it has historically and its production capabilities, including its facilities and those of its manufacturing partners, may not be able to handle the anticipated volumes in its business plan. Development and manufacturing of its current and future ECVs, such as the Metro®, CityPorter™, Terramak™, Neibor® 200 and the Logistar™, are and will be subject to risks, including:

 

accurately manufacturing components within appropriate design tolerances;
   
securing additional manufacturing and local assembly facilities in its various target markets;
   
compliance with environmental, workplace safety and similar regulations;

 

 

 

 

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securing necessary high-quality components and materials from its supply chain on acceptable terms and in a timely manner;
   
its ability to execute on its growth plan to regionalize its supply chain and manufacturing;
   
quality controls;
   
delays or disruptions in the supply chain, including as a result of pandemics such as COVID-19;
   
delays or disruptions in ocean transit or transportation from its suppliers to its manufacturing or local assembly facilities and/or from its manufacturing facilities (or manufacturing partners’ facilities) to its local assembly facilities and assembly partners;
   
its ability to establish, maintain and rely upon relationships with its suppliers, channel partners, assembly partners and manufacturing partners; and
   
other delays, backlog in manufacturing and research and development of new models, and cost overruns.

 

Any of the foregoing could materially and adversely affect its business, financial condition, operating results and prospects.

 

Cenntro’s future success depends on its ability to introduce new models and it may experience delays in launching and ramping up production of its new ECV models.

 

Cenntro’s future success depends on its ability to introduce four new ECV models in 2021, each of which are designed for specific geographic markets and to address additional commercial applications. In order to introduce new ECV models, it has to coordinate with its suppliers, assembly partners, manufacturing partners, channel partners and other third parties in order to ensure timely execution of the manufacturing and assembly processes. If it fails to coordinate these efforts and achieve market introduction and acceptance of its new ECV model in a timely manner, its business, financial condition, operating results and prospects could be adversely affected. In addition, Cenntro has limited experience to date in manufacturing each of the CityPorter™, the Terramak™, the Neibor® 200 and the Logistar™ as well as limited experience building and ramping up multiple vehicle production lines across multiple factories in different geographies. In order to be successful, it will need to implement, maintain and ramp-up efficient and cost-effective manufacturing capabilities between manufacturing partners, assembly partners, its own facilities in Changxing and its local assembly facilities. Manufacturing bottlenecks and other unexpected challenges may arise during its production ramp-up, and Cenntro must address them promptly. Cenntro may face delays in establishing and/or sustaining production of its new ECV models. Any delay or other complication in ramping up the production of its current or future ECV models may harm its business, financial condition, operating results and prospects.

 

Cenntro’s operating results may be more volatile due to a high concentration of sales in relatively few channel partners.

 

For the year ended December 31, 2020 and six months ended June 30, 2021, Cenntro’s three largest channel partners accounted for approximately 82% and 88% of its sales, respectively. Due to the concentration of sales in relatively few channel partners, the loss of one or more of these channel partners will have a significant and adverse effect on its operating results. In the event that any relationship with a channel partner changes negatively, its operating results could be materially adversely affected. During the year ended December 31, 2020, Cenntro ceased doing business with one of its channel partners that had previously accounted for a significant portion of its revenues in prior periods.

 

Cenntro’s reliance on its channel partners to market, sell and service (and in certain cases, assemble and/or homologate) its vehicles is subject to substantial risks.

 

Cenntro’s channel partners are responsible for the sale, marketing and servicing (and in certain cases, assembly and/or homologation) of the ECV products it sells to them in the countries in which they operate. Cenntro does not control the actions of its channel partners. For example, it does not control how its channel partners market or sell assembled ECVs or the quality of their service to its ECVs and, with respect to the private label channel partners, it does not oversee their assembly of its ECVs.

 

 

 

 

89 EXPLANATORY MEMORANDUM