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Xugong Technology sells Jianlu Machinery Factory to Xugong Machinery
Xuzhou Construction Machinery Technology Co., Ltd. has announced the sale of the overall assets of Xuzhou Zhulu Machinery Factory (unincorporated) to Xuzhou Construction Machinery Group Import and Export Co., Ltd., along with related daily transactions. The company and its board of directors have guaranteed the accuracy, completeness, and truthfulness of the announcement's content, and they assume joint and several liability for any false information, misleading statements, or omissions.
**Overview of Related Party Transactions**
On November 28, 2005, the company signed an "Asset Transfer Agreement" with Xuzhou Construction Machinery Group Import and Export Co., Ltd. (referred to as the import and export company) in Xuzhou City. The agreement involved the transfer of all assets, liabilities, and corresponding rights and obligations of the unincorporated Xuzhou Road Construction Machinery Factory to the import and export company. Additionally, certain businesses such as horizontal directional drilling, graders, road mixers, stabilized soil mixing stations, hydraulic accessories (hose assemblies, hard tube assemblies), milling machines, and slurry sealers were transferred to the counterparty.
As of the valuation date, the net asset value of Xuzhou Zhulu Machinery Plant was determined to be 60 million yuan, with an estimated value of 5,993,100 yuan. After negotiations, the net asset value was used as the pricing basis. However, due to the company’s decision to abandon internal accounting claims of 93.768 million yuan related to the unincorporated factory, the net asset value increased by 93.976 million yuan. As a result, the transaction price was set at 153.098 million yuan. In case of any changes in net assets between the valuation base date and the delivery date, the transfer price would be adjusted accordingly, though no evaluation of such adjustments was agreed upon.
On the same day, the company, the import and export company, and Xugong Group Construction Machinery Co., Ltd. (referred to as Xugong Machinery) signed a "Guarantee Agreement," under which Xugong Machinery provided joint and several liability to ensure the import and export company’s payment of the transfer price.
As Xugong Machinery holds 80% of the equity in the import and export company, it is considered the controlling shareholder. Therefore, this transaction qualifies as a related party transaction.
Previously, the unincorporated Xuzhou Zhulu Machinery Factory supplied most of the company’s hydraulic accessories, including hose assemblies and hard tube assemblies. Following the transaction, the counterparty will now handle these operations, and the company plans to purchase matching hydraulic accessories from them, resulting in future daily related transactions.
The fifteenth meeting of the fourth board of directors on November 28, 2005, reviewed the proposal to sell the entire assets of Xuzhou Road Construction Machinery Factory (unincorporated) to the import and export company. Directors Wang Min, Fu Jian, Yang Yong, and Huang Jian, who had related interests, abstained from voting. With less than half of the non-associated directors present, the board voted to submit the proposals to the third extraordinary general meeting of 2005, with a unanimous vote of 8 in favor.
Independent directors expressed their approval, stating that the transaction supports the company’s focus on core business development. They confirmed that the voting process followed relevant regulations and the company’s articles of association. The pricing was based on independent evaluations, and there was no indication of harm to the company or its shareholders, especially minority shareholders. The subsequent daily related transactions are deemed necessary for normal operations, and the prices will be determined according to market principles, ensuring no adverse impact on the company or its shareholders, particularly small and medium-sized investors.