China XD Plastics Company Limited enters into a Stipulation and Agreement of Settlement
Harbin, China, Feb. 15, 2023 (GLOBE NEWSWIRE) — China XD Plastics Company Limited (the “Company”) today announced that on January 31, 2023, the Company entered into a Stipulation and Agreement of Settlement (“Stipulation”) with John Sheehy, Walter Aerts, and Larry Allen, on behalf of themselves and derivatively on behalf of the Company (collectively, the “Plaintiffs”), providing for the settlement of the direct and derivative claims brought by Plaintiffs on August 21, 2020 (collectively, the “Action”) in the State of Nevada District Court, Clark County (the “Court”). The Company is named Nominal Defendant in the Action.
The Action stems from a transaction carried out by the Company on January 22, 2020 (“January 2020 Transaction”) in which an unnamed investor acquired nearly 40% of the equity interest of the Company’s two wholly owned subsidiaries. Plaintiffs contend that the Company did not disclose the January 2020 transaction until June 29, 2020, and, in the intervening time, it wrongfully entered into an agreement and plan of merger (“Merger Agreement”) with affiliates of Defendant Han, Chief Executive Officer of the Company, in which Defendant Han would take the Company private (“Proposed Transaction”). On May 8, 2021, the Company terminated the Merger Agreement on the basis of alleged breaches of the Merger Agreement by Defendant Han and his affiliates, which rendered Plaintiffs’ direct claims in connection with the Proposed Transaction moot. However, Plaintiffs continued to assert the derivative claims for breaches of fiduciary duty in connection with the January 2020 Transaction.
Under the terms of the Stipulation, and conditioned upon the Court’s final approval, the Company has agreed within thirty (30) business days after final approval of the Settlement to implement and maintain corporate governance reforms, as set forth in the Stipulation (“Reforms”). The Reforms are designed to enhance and improve the Company’s internal controls and systems, the effectiveness and responsiveness of its Board of Directors, and to ensure that investors will be able to serve the Company’s independent directors with process in the U.S. The Reforms will be maintained for a minimum of five (5) years from the effective date of the Stipulation unless a change is needed in order for the Board of Directors to comply with its fiduciary duties, or in order to comply with significant changes in institutional investor or proxy advisory guidelines, or in the event that the Company becomes a privately held company. The Reforms include:
- expanding the number of the Board of Directors to nine (9) members, consisting of no more than three (3) directors being members of the Company’s management team with members of Audit, Compensation and Nominating committees being entirely independent directors;
- amending appropriate committee charters to ensure adherence to the Reforms;
- independent directors of the Company consenting to accept the service of process in Nevada for legal actions related to their capacity as directors of the Company without any objections and waiving any defenses and objections except as to the sufficiency of service of process;
- establishing a special committee, consisting only of independent directors, for the evaluation of a potential transaction that could materially dilute the holdings/vote of the minority stockholders and identifying if any director or officer has a material interest in or affiliation with that potential transaction or is a “related person” within the meaning of Item 404(a) of Regulation S-K with respect to any proposed transaction; and
- adopting an incentive compensation clawback policy by the Compensation Committee enabling the Company to clawback all or a portion of incentive compensation, if needed.
The Company entered into the Stipulation without acknowledging any fault, liability, or wrongdoing of any kind, and there were no findings of any violations of the federal securities laws.
About China XD Plastics Company Limited
China XD Plastics Company Limited, through its wholly-owned subsidiaries, develops, manufactures, and sells polymer composites materials, primarily for automotive applications. The Company’s products are used in the exterior and interior trim and in the functional components of several automobile brands manufactured in China, including without limitation, Audi, Mercedes Benz, BMW, Toyota, Buick, Chevrolet, Mazda, Volvo, Ford, Citroen, Jinbei, VW Passat, Golf, and Jetta.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company’s growth potential in international markets; the effectiveness and profitability of the Company’s product diversification strategy; the impact of the Company’s product mix shift to more advanced products and related pricing policies; the effectiveness, profitability, and the marketability of the Company’s ongoing mix shift to more advanced products; the prospect of the Company’s facilities in various regions. These forward-looking statements can be identified by terminology such as “will,” “expect,” “project,” “anticipate,” “forecast,” “plan,” “believe,” “estimate” and similar statements. Forward-looking statements involve inherent risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, the global economic uncertainty, the fluctuation in automotive sales and productions, the development of Company’s expansion plans, the slowdown of China’s automotive industry, the concentration of the Company’s distributors, customers and suppliers, and other risks detailed in the Company’s filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
China XD Plastics Co., Ltd.
Ms. Cindy Tang, CFO
Email: [email protected]
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