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Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On June 28, 2019, Highpower International,
Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
with HPJ Parent Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
HPJ Merger Sub Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for
the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned
subsidiary of Parent. Parent is owned by Mr. Dang Yu Pan, Chairman of the Board of Directors (the “Board”) and Chief
Executive Officer and stockholder of the Company, Mr. Wen Liang Li, a director and stockholder of the Company, Mr. Wen Wei Ma,
a stockholder of the Company, and Essence International Capital Limited, a company incorporated in Hong Kong (“Essence”).
A special committee consisting solely of independent and disinterested
members of the Board (the “Special Committee”) unanimously determined that the terms and conditions of the
Merger and the transactions contemplated by the Merger Agreement (the “Transactions”) are fair to, and in the best
interests of, the Company’s stockholders. Based on the Special Committee’s unanimous recommendation, the Board unanimously
(other than Messrs. Pan and Li, who recused themselves from the vote) (1) determined that the terms and conditions of the Merger
and the other Transactions are fair to, and in the best interests of, the stockholders of the Corporation, (2) approved the
Merger Agreement and the consummation of the transactions contemplated thereby and by the other documents contemplated therein
and (3) resolved to recommend that the Company’s stockholders vote for the adoption of the Merger Agreement. The Special
Committee received a fairness opinion from the Special Committee’s financial advisor, ROTH Capital Partners.
Subject to the terms and conditions of the Merger Agreement,
at the effective time of the Merger (“Effective Time”), each share of the Company’s common stock, par value $0.0001
per share, issued and outstanding immediately prior to the Effective Time, other than shares of the Company’s common stock
held by (a) Messrs. Pan, Li or Ma or their respective affiliates (collectively, the “Rollover Stockholders”) or Parent
or, the Company or any of their respective subsidiaries or (b) stockholders who have validly exercised their appraisal rights under
the General Corporation Law of the State of Delaware, will be converted into the right to receive $4.80 in cash without interest
(the “Merger Consideration”).
Pursuant to the Merger Agreement, at the Effective Time, each
stock option to purchase shares of the Company’s common stock (each, an “Option”) that is outstanding and unexercised
immediately prior to the Effective Time (whether vested or unvested) will canceled and converted into the right to receive, on
the next regularly scheduled employee payroll date in the jurisdiction of the holder of such Option, an amount in cash equal to
the product of the excess, if any, of the Merger Consideration over the exercise price per share of the Option. Each outstanding
Option that has an exercise price equal to or greater than the Merger Consideration will be cancelled without the right to receive
any consideration. At the Effective Time and following the contribution of the Rollover Shares (as hereinafter defined) to Parent,
each unvested restricted share of Company common stock granted pursuant to an incentive award that is outstanding immediately prior
to the Effective Time will be treated in the same manner as outstanding shares of Company common stock at the Effective Time, as
previously described herein.
Consummation of the Merger is subject to various closing conditions,
including (1) the adoption of the Merger Agreement by the affirmative vote of the holders of (a) at least a majority of all outstanding
shares of Company common stock and (b) at least a majority of all outstanding shares of Company common stock held by stockholders
(the “Public Stockholders”) other than Essence, the Rollover Stockholders, or any of their respective affiliates, officers
and directors, and in each case, other than Parent and Merger Sub (together, the “Company Stockholder Approval”), (2)
the absence of any law or order that enjoins, restrains, prohibits or otherwise makes illegal the consummation of the Transactions,
including the Merger, and (3) obtaining any material consents, approvals or other authorizations of any governmental authority
required to consummate the Transactions (the “Governmental Approvals”). Each party’s obligation to consummate
the Merger also is subject to certain additional conditions that include the accuracy of the other party’s representations
and warranties contained in the Merger Agreement (subject to certain materiality qualifiers) and the other party’s compliance
with its covenants and agreements contained in the Merger Agreement in all material respects.
The Company, Parent and Merger Sub have made customary representations
and warranties in the Merger Agreement. Many of the representations made by the Company are subject to, and qualified by, a “Company
Material Adverse Effect” standard. The Company has agreed to various customary covenants and agreements, including, among
others, (1) agreements to conduct its business in the ordinary course during the period between the execution of the Merger Agreement
and the Effective Time, (2) not to engage in certain kinds of transactions during this period, (3) to convene and hold a meeting
of its stockholders for the purpose of obtaining the Company Stockholder Approval and (4) subject to certain exceptions, not to
withhold, withdraw, amend or modify in a manner adverse to Parent, or publicly propose to withhold, withdraw, amend or modify in
a manner adverse to Parent the recommendation of the Board that the Company’s stockholders approve the Merger Agreement.
Essence has committed to, and/or to cause one or more of its
affiliates to, capitalize Parent, at or immediately prior to the Effective Time, with an aggregate equity contribution in an amount
up to $51,136,733 subject to the terms and conditions set forth in an equity financing commitment letter, dated as of June 28,
2019, the proceeds of which will be sufficient for Parent to pay the aggregate Merger Consideration and all related fees and expenses.
In addition, Essence has provided to the Company a limited guarantee of certain payment obligations of Parent and Merger Sub pursuant
to the Merger Agreement, including the payment of any reverse termination fee that may become payable by Parent.
Concurrently with the execution and delivery of the Merger Agreement,
the Rollover Stockholders entered into an Equity Contribution and Voting Agreement with Parent (the “Rollover Agreement”).
As of June 28, 2019, the Rollover Stockholders hold shares of the Company’s common stock representing approximately 32% of
the Company’s total issued and outstanding shares of the Company’s common stock (the “Rollover Shares”).
Pursuant to the Rollover Agreement, the Rollover Stockholders have agreed, until the Effective Time or the termination of the Merger
Agreement, to vote all shares of the Company’s common stock owned by them (1) in favor of the adoption of the Merger Agreement
and any related action reasonably required in furtherance thereof, (2) against any other Acquisition Proposal (as defined in the
Merger Agreement), (3) against any other action, agreement or transaction that is intended, that could reasonably be expected,
or the effect of which could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect
the Merger or any of the other Transactions or the performance by such Rollover Stockholder of its obligations under the Rollover
Agreement and (4) against any action proposal, transaction or agreement that would result in a breach of any covenant, representation
or warranty or any other obligation or agreement of the Company under the Merger Agreement, or of such Rollover Stockholder contained
in the Rollover Agreement.
Pursuant to the Merger Agreement, until the Effective Time or,
if earlier, the termination of the Merger Agreement, the Company is subject to customary “no-shop” restrictions on
its ability to solicit and engage in discussions and negotiations with respect to alternative Acquisition Proposals. Notwithstanding
this limitation, the Company may under certain circumstances provide information to and participate in discussions or negotiations
with third parties with respect to any unsolicited alternative Acquisition Proposal, subject to the limitations and requirements
set forth in the Merger Agreement, including that, the Board has determined that (1) the Acquisition Proposal constitutes or could
reasonably be expected to result in a Superior Proposal (as defined in the Merger Agreement), and (2) in light of such Superior
Proposal, the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable
Law.
The Merger Agreement contains certain termination rights for
the Company and Parent, including to enter into an agreement with respect to a Superior Proposal. Upon termination of the Merger
Agreement under specified circumstances, including in connection with entry into an agreement with respect to a Superior Proposal,
the Company will be required to pay Parent (or its designee) a termination fee of $2,365,000. The Merger Agreement also provides
that Parent will be required to pay the Company (or its designee) a termination fee of $4,730,000 in certain other circumstances,
including in connection with a termination by the Company as a result of a breach by Parent or Merger Sub of its representations,
warranties, covenants and agreements set forth in the Merger Agreement or the failure of Parent to fund the Exchange Fund (as defined
in the Merger Agreement) when all other conditions to closing the Transactions have been satisfied.
Subject to certain limitations, either party may terminate the
Merger Agreement if the Merger is not consummated by December 31, 2019, as may be extended automatically for three months in order
to obtain the Governmental Approvals.
The Merger Agreement has been included with this Current Report
on Form 8-K to provide investors with information regarding its terms. It is not intended to provide any other factual information
about the Company. In particular, the representations and warranties contained in the Merger Agreement were negotiated and made
only for the purposes of the Merger Agreement as of the specific dates therein, and were solely for the benefit of the parties
to the Merger Agreement. In many cases, the representations, warranties and covenants contained in the Merger Agreement are subject
to limitations agreed upon by the parties to the Merger Agreement and are qualified by information in confidential disclosure schedules
provided in connection with the signing of the Merger Agreement. These confidential disclosure schedules contain information that
modifies, qualifies and creates exceptions to the representations and warranties set forth in the Merger Agreement. Moreover, certain
representations and warranties in the Merger Agreement may be subject to a standard of materiality provided for in the Merger Agreement
and have been used for the purpose of allocating risk among the parties, rather than establishing matters of fact. Investors should
not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state
of facts or condition of the Company or any of its subsidiaries or affiliates. Accordingly, investors should read the Merger Agreement
in conjunction with the other information about the Company that it includes in reports, statements and other filings it makes
with U.S. Securities and Exchange Commission (the “SEC”). Moreover, information concerning the subject matter of the
representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be
fully reflected in the Company’s public disclosures.
The foregoing description of the Merger Agreement and the Transactions,
including the Merger, does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the
Merger Agreement, which is attached hereto as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by this reference.
Indemnification Agreements
The information set forth in Item 5.02 of this Current Report
on Form 8-K is incorporated in this Item 1.01 by reference.