Item 1.01. Entry into a Material Definitive Agreement.
On June 11, 2014, Cleantech Innovations, Inc. (the "Registrant") entered into a
Divesture and Exchange Agreement (the "Exchange Agreement") with certain
controlling shareholders of the Registrant, including Ping Chen, Shengfen Lin,
Wenge Chen, Bei Lu and Dianfu Lu (collectively, the "Controlling Shareholders").
Bei Lu and Dianfu Lu were also officers and directors of the Registrant. The
Controlling Shareholders collectively own 15,229,403 shares of the Registrant's
common stock (the "Controlling Shares"), or 61.0% of the total number of the
Registrant's outstanding shares.
Pursuant to the Exchange Agreement, the Controlling Shareholders agree to
transfer all of the Controlling Shares to the Registrant in exchange for the
transfer by the Registrant of its wholly owned Chinese subsidiary, Liaoning
Creative Bellows Co., Ltd. ("Creative Bellows"), to the Controlling Shareholders
or their designees. Creative Bellows wholly owns Lianoning Creative Wind Power
Equipment Co., Ltd., a Chinese corporation which, together with Creative Bellows
(the "China Subsidiaries"), represents all of the Registrant's China-based
The Exchange Agreement is subject to various conditions, including that the
Controlling Shares and the Registrant's ownership interests in Creative Bellows
(the "Subsidiary Interests") be deposited into and held in escrow pursuant to
the terms of a separately-executed Escrow Agreement (the "Escrow Agreement").
The release of the Controlling Shares and the Subsidiary Interests and
consummation of the Exchange Agreement is further subject to the requirement
that the Registrant promptly form a wholly owned British Virgin Islands
corporation (the "BVI Subsidiary"). Upon formation of the BVI Subsidiary, the
Registrant is required to effectuate the transfer of the Subsidiary Interests to
the BVI Subsidiary followed by its transfer of all of the Registrant's ownership
interest in the BVI Subsidiary to the Controlling Shareholders. With respect to
the contemplated transfer of the Controlling Shares to the Registrant, each
Controlling Shareholder has executed and delivered an irrevocable proxy to
Mr. Terry McEwen, formerly the Chairman of the Registrant's Audit Committee and
now the Registrant's interim Chairman of the Board and Chief Executive Officer.
As such, Mr. McEwen now has the authority to vote the Controlling Shares in his
discretion. The Exchange Agreement is also subject to customary representations
and warranties of the parties and provides for cross-indemnification in the case
of certain liabilities to either party.
The foregoing descriptions of the Exchange Agreement and the Escrow Agreement do
not purport to be complete, and are qualified in their entirety by reference to
the full text of the Exchange Agreement and the Escrow Agreement, which are
filed herewith as Exhibits 10.1 and 10.2 and are incorporated herein by
On June 11, 2014, in consideration of the Exchange Agreement and the related
transactions, the Registrant's largest creditor, NYGG (Asia) Ltd., a British
Virgin Islands corporation ("NYGG"), entered into a Forbearance and Waiver
Agreement with the Registrant (the "Forbearance Agreement"). Pursuant to the
Forbearance Agreement, NYGG and its affiliates agree to forbear from exercising
certain of their respective rights and remedies related to the Registrant's debt
obligations to them and certain events of default thereunder. The forbearance
period extends from June 11, 2014 until the first to occur of (i) September 10,
2014, (ii) the transfer of the Controlling Shares to the Registrant in exchange
for the transfer of the Subsidiary Interests to the Controlling Shareholders and
(iii) the termination of the Exchange Agreement. Upon the earlier to occur of
(i) the occurrence of a forbearance default (which includes any failure by the
Registrant to comply with and/or diligently pursue the Exchange Agreement) or
(ii) the expiration of the forbearance period, NYGG's agreement to forbear shall
immediately terminate and it shall thereafter be entitled to exercise all of its
rights and remediates with respect to the Registrant's debt obligations to it.
Further to the Forbearance Agreement, NYGG also agrees to unconditionally
release each of the China Subsidiaries from all of their debt obligations to it.
The terms of NYGG's release and waiver are set forth in a separately-executed
Release and Waiver Agreement between NYGG and each of the China Subsidiaries
(the "Waiver Agreement").
The foregoing descriptions of the Forbearance Agreement and the Waiver Agreement
do not purport to be complete, and are qualified in their entirety by reference
to the full text of the Forbearance Agreement and the Waiver Agreement, which
are filed herewith as Exhibits 10.3 and 10.4 and are incorporated herein by
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
(a), (b), (c), (e)
Further to the transactions described in Item 1.01 to this Current Report on
Form 8-K, the Registrant's Board of Directors (the "Board") determined to
reconstitute the Board and replace Bei Lu
as Chief Executive Officer of the
Effective June 11, 2014
, the Board accepted Bei Lu's
resignation as a director
and officer of the Registrant and Terry McEwen
was appointed as the Registrant's
interim Chairman of the Board and Chief Executive Officer. Ms. Liu's resignation
was made in furtherance of the agreements and transactions described in
Item 1.01 to this Current Report on Form 8-K and was not the result of any
disagreements between her and the Registrant.
Under the direction of Mr. McEwen
, the Registrant intends to explore a strategic
reorganization and/or other business opportunities, including a possible merger
or similar corporate restructuring. Mr. McEwen's
compensation to serve as the
Registrant's Chairman and Chief Executive Officer has not yet been established.
Effective June 11, 2014
, the Board accepted the director resignations from each
of Dianfu Lu
, Shuyan Liu
and Zili Zhao
. These resignations were made in
furtherance of the agreements and transactions described in Item 1.01 to this
Current Report on Form 8-K and were not the result of any disagreements between
the resigning directors and the Registrant.
Item 9.01. Financial Statements and Exhibits.
10.1 Divesture and Exchange Agreement
10.2 Escrow Agreement
10.3 Forbearance and Waiver Agreement
10.4 Release and Waiver Agreement