Tanfield : Smith Electric Vehicles Update Announcement

Tanfield Group PLC

Smith Electric Vehicles Update Announcement

Tanfield is pleased to provide an update on its investment in Smith Electric Vehicles US ('Smith')

The Tanfield board has been informed by the Management of Smith of the following:

Strategic Investment Commitment from Sinopoly 

An agreement has been reached between Smith and Sinopoly Battery Limited ('Sinopoly') for a strategic Investment commitment in Smith. The investment will come in 3 tranches.  The first tranche is to be $2 million in its secured debentures. The second tranche is $10 million in preferred stock, as part of a minimum $20m to maximum $30m issuance of preferred stock by Smith, subject to, inter alia, the execution of a Battery supply contract and Component Supply MOU between Smith and Sinopoly. The third tranche is to subscribe for $30m of common stock subject to, inter alia, a US National Exchange Listing. The agreement is subject, inter alia, to Sinopoly shareholder approval.

Sinopoly is listed on the Main Board of the Stock Exchange of Hong Kong Limited(Stock Code: 00729) . Sinopoly is a comprehensive high-tech group that principally engages in the production, distribution, sale and research and development of Lithium-ion battery and related products. Sinopoly's battery products' primary applications include electric vehicles and energy storage.

Public Company Merger

The Board of Smith has executed a Letter of Intent with an OTCBB company and has conducted due diligence for the proposed merger of Smith into the company.  

Proposed subsequent flotation on a US National Exchange

Subsequent to the proposed merger it is intended to apply for a Listing on a US national exchange. The company intends to complete a minimum of a $40 million underwritten offering in order to satisfy the waiver of the one year seasoning requirement relating primarily to applicant companies having been traded on another exchange and the reporting of information. Subject to meeting the other requirements of NYSE or NASDAQ, it is proposed that Smith will apply to list on NYSE or NASDAQ upon completion of the offering.  The Company is in the process of negotiating with an underwriting Bank.

View of the Tanfield Board

The Board of Tanfield believes there is still a very high level of risk that the planned listing process outlined by the Smith management  will not be successful. Part of the process requires the restructuring of the capital structure of Smith and the approval of a number of significant investors. These approvals may not be granted. As indicated in Tanfield's investment update of 14 March 2014 there will be a marked dilution to the ultimate holding by Tanfield in its Smith investment and therefore in the ultimate value to Tanfield shareholders. Should the proposals conclude Tanfield expects the OTCBB merger to take approximately 3 months and the subsequent move to NYSE or NASDAQ to take approximately a further 3 months.

Further details of the agreement with Sinopoly and its conditions are contained below in the announcement made by Sinopoly on the Hong Kong stock exchange reproduced in full.

It is the intention of the Board of Tanfield to distribute the value in its investments as soon as that value is realised.

Final results and date of AGM

The Board  currently expects to e announce  its final results for the year ended 31 December 2013  and publish the date of its AGM before the end of May.

For further information:

Tanfield Group Plc

Roy Stanley - Non-executive Director    0845 155 7755

WH Ireland Limited

James Joyce / Nick Field                0207 220 1666

The full text of the announcement made by Sinopoly is reproduced below :

Hon g Kon g Exchange s an d Clearin g Limite d an d Th e Stoc k Exchang e o f Hon g Kon g Limited tak e n o responsibilit y fo r th e content s o f thi s announcement , mak e n o representatio n a s to it s accurac y o r completenes s an d expressl y disclai m an y liabilit y whatsoeve r fo r an y loss howsoeve r arisin g fro m o r i n relianc eupo n th e whol e o r an y par t o f th e content s o f this announcement.

Sinopoly Battery Limited

(Incorporate d i n Bermud a wit h limite d liability)

DISCLOSEABL E TRANSACTION

O n 1 1 Ma y 2014 , th e Compan y entere d int o th e Agreemen twit h SE V wit h respec t to, amon g othe r things , th e Not e Subscription , th e Preferre d Shar e Subscription , th e Common Shar e Subscription , th e Exclusiv eBatter y Suppl y Contrac t an d th e E V Componen t Supply MOU.

Pursuan t t o th e Agreement ,th e Compan y (i ) ha s agree d t o subscrib e (a ) th e Serie s AA Note s i n th e principa l amoun t o f US$2,000,000 ; an d (b ) th e Serie s E Preferre dShares offerin g a t a tota l subscriptio n amoun t o f US$10,000,00 0 subjec t to , amon g othe r things, th e executio n o f th e Exclusiv eBatter y Suppl y Contrac t an d th e E V Componen t Supply MOU ; an d (ii ) wil l ente r int o definitiv eagreement s t o subscrib e fo r commo n share s of Pubc o fo r a tota l subscriptio n amoun t o f US$30,000,00 0 subjec t to , amon g othe r things, th e completio n o f th e Qualifie d Merge r an d th e Listing.

Th e Not e Subscription , th e Preferre d Shar e Subscriptio n an d th e Commo n Share Subscriptio n ar e no t inter-conditiona l fo r th e Company.

SE V i s principall y engage d i n th e manufacturin g an d sal e o f commercia l all-electric vehicle s an d it s primar y bas e o f operatio n i s i n Kansa s City , Missouri , th e US . SEV intend s t o merg e wit h a compan y trade d o n th e OT C Bulleti n Boar d an d see k listin g on NYSE , NYS E MK T o r NASDA Q thereafter.

Th eCommo nShar e Subscriptio ni naggregat e wit hth eNot eSubscriptio n an dthe 
Preferre d Shar e Subscriptio n constitute s a discloseabl e transactio n fo r th e Compan y a s one o f th e applicabl e percentag e ratio s unde r Rul e 14.0 7 o f th e Listin g Rule s i s mor e tha n 5% bu t les s tha n 25 % an d i s subjec t t o th e notificatio n an d announcemen t requirement s under Chapte r 1 4 o f th e Listin g Rules.

DISCLOSEABL E TRANSACTION

Th e Agreement

Date :    1 1 Ma y 2014

(1)   th e Company ; and

(2)   SEV.

T o th e bes t o f th e Directors 'knowledge , informatio n an d belief , havin g mad e al l reasonable enquiries , SE V an d it s ultimat ebeneficia l owner s ar e independen t o f an d no t connecte d with th e Compan y o r an y o f it s connecte d persons.

(1)   Th e Not e Subscription

Th e Compan y ha s agree d t o subscrib e th e Serie s A A Note s i n th e principa l amount o f US$2,000,000 . Th e Serie s A A Note s i s issue d a s par t o f a serie s o f senio r secured convertibl e promissor y note s o f lik e teno r issue d b y SEV.

Th e Serie s A A Note s ha s a ter m o f u p t o 3 0 Jun e 201 4 an d bea r interes t a t th e annual rat e o f 10%.

Th e Serie s A A Note s ha s a firs t priorit y lie n an d i s secure d against , amon g other things , SEV' s inventory ,equipment , investmen t property , cas h an d deposi t accounts, lette r o f credi t right s an d othe r intangibl eassets , sav e fo r an y collatera l whic h is physicall y locate d i n th e Stat e o f Ne w York , th e US.

Th e subscriptio n pric e fo r th e Serie s A A Note s i s US$2,000,000.

Th e subscriptio n pric e wa s determine d afte r arm' s lengt h negotiation s between th e partie s afte r takin g int o consideratio n th e synerg y tha t a n electri c vehicle manufacturin g concer n coul d brin g t o th e Group' s batter y product s an d th e discount an d potentia l valu e tha t ma y b e unlocke db y th e conversio n o f th e Serie s A A Notes. Th e subscriptio n pric e fo r th e Serie s A A Note s wil l b e satisfie db y th e Company throug h it s ow n interna l resources.

Th e outstandin g principa l o f an d accrue d interes t o n th e Serie s A A Note s will automaticall y b e converte d int o fully-pai d share s o f SE V (i ) immediatel y prio r t o the closin g o f a Qualifie d Placement , (ii ) immediatel y prio r t o a Qualifie dListing , or

(iii ) immediatel yprio r t o th e closin g o f a Qualifie dIPO , i n eac h case , a t a conversion pric e tha t i s equa l t o 70 % o f th e pe r shar e pric e a t whic h ne w equit y o r equity-linked securitie s ar e offere d an d sol d b y SEV.

Th e Compan y ha s conditionall y agree d t o subscrib e th e Serie s E Preferre dShare s a t a tota l subscriptio n amoun t o f US$10,000,000 . Th e Preferre d Shar e Subscriptio n i s par t of th e Serie s E Preferre d Share s offerin g b y SE V o f approximatel y US$30,000,000.

Th e subscriptio n o f th e Serie s E Preferre d Share s wa s determine dafte r arm' s length negotiation s betwee n th e partie s afte r takin g int o consideratio n th e benefi t derive d from th e Exclusiv e Batter y Suppl y Contrac t an d th e E V Componen t Suppl y MO U an d the potentia l valu e tha t ma y b e unlocke d b y th e exchang e o f th e Serie s E Preferre d Share s for commo n share s o f Pubco . Th e subscriptio n pric e fo r th e Serie s E Preferre d Share s wil l be satisfie d b y th e Compan y throug h it s ow n interna l resources.

Th e Serie s E Preferre d Share s ar e no t entitle d t o dividends.

SE V intend s t o acquir e a t leas t a 80 % interes t i n a compan y publicl y trade d o n the OT C Bulleti n Board . Suc h compan y an d SE V wil l the n execut e suc h agreement s a s are necessar y o r advisabl e wit h (i ) al l shareholder s o f SE V (includin g th e Compan y fo r its share s i n SE V tha t wil l b e converte d fro m it s Serie s A A Notes) ; an d (ii ) al l holder s of an y outstandin g derivativ e securitie s o f SE V (includin g th e Compan y fo r it s Serie s E Preferre d Share s a t a consideratio n o f no t les s tha n US$14,285,715) , pursuan t t o which SE V wil l becom e a wholly-owne d subsidiar y o f suc h compan y (th e " Qualifie d Merge r "). Suc h compan y pos t th e Qualifie d Merge r ( " Pubc o " ) intend s t o see k Listin g thereafter.

Th e Compan y agree d tha t upo n regulator yclearanc e o f th e disclosur e filing s relatin g to th e Qualifie d Merger , i t wil l ente r int o definitiv e agreement s t o subscrib e fo r common share s o f Pubc o fo r a tota l subscriptio n amoun t o f US$30,000,000 , an d SE V agree s to caus e Pubc o t o ente r int o suc h agreement s an d issu e t o th e Compan y suc h numbe r of Pubc o
commo n shares.

Th e subscriptio n pric e pe r shar e o f Pubc o o f th e Commo n Shar e Subscriptio n wil l be th e lowe r o f (i ) 65 % o f th e pric e pe r shar e o f Pubc o use d t o acquir e th e commo n shares o f SE V i n th e Qualifie d Merge r (adjuste d a s appropriat ei n th e even t o f an y share consolidatio n
o r sub-divisio n afte r closin g o f th e Qualifie d Merger) , (ii ) 20 % discoun t to th e initia l tradin g pric e pe r shar e o f Pubc o o n NYSE , NYS E MK T o r NASDAQ , o r (iii) 15 % discoun t t o th e five-da y averag e closin g pric e pe r shar e o f Pubc o immediatel yprior t o th e closin g o f th e Commo n Shar e Subscription.

Completio n o f th e Not e Subscriptio n i s no t subjec t t o an y condition. Completio n o f th e Preferre d Shar e Subscriptio n i s conditiona l upon:

(i)    SE V havin g obtaine d al l necessar y shareholders ' (includin g bu t no t limite d t o all preferre dshareholders ) an d noteholders ' irrevocabl e approvals , consent s an d waiver s in connectio n wit h th e Preferre d Shar e Subscriptio n an d th e Commo n Shar e Subscription;

(ii)    SE V havin g obtaine d a n execute d writte n resolutio nfro m it s curren t boar d o f directors t o approv e th e Preferre dShar e Subscriptio n an d th e Commo n Shar e Subscriptio n an d in addition , a n irrevocabl ewritte n undertake n fro m eac h individua l boar d membe r o f SEV (includin g an y propose d futur e boar d membe r o f Pubco ) t o suppor t th e Commo n Share 
Subscription;

(iii)   SE V havin g obtaine d al l necessar y shareholders ' (includin g bu t no t limite d t o all preferre d shareholders ) an d noteholders ' irrevocabl e approvals , consent s an d waivers i n connectio n wit h th e conversio no f al l form s o f derivative s o f SE V (excep t Serie s E Preferre d Shares) , int o th e commo n share s o f SEV , eac h wit h a pa r valu e o f US$0.001;

(iv)   Investor s (othe r tha n th e Company ) havin g agree d t o subscrib eth e Serie s E Preferred Share s fo r a n aggregat e amoun t o f no t mor e tha n US$20,000,00 0 bu t n o les s than 
US$10,000,000;

(v)   th e Exclusiv eBatter y Suppl y Contrac t an d th e E V Componen t Suppl y MO U havin g been execute d betwee n th e Compan y an d SEV;

(vi)   th eagreement s fo r completio n o f th e Qualifie d Merge r havin g bee n entere d into, provide d tha t th e enterpris evalu e o f Pubc o wil l no t excee d US$1,000,00 0 an d th e total consideratio n o f SE V (excep t th e Serie s E Preferre d Shares ) i n th e Qualifie d Merge r will no t excee d US$175,000,000 ; and

(vii)  CFIU S havin g notifie d SE V an d th e Compan y i n writin g i n relatio n t o th e transactions contemplate d unde r th e Agreemen t tha t (i ) ther e ar e n o unresolve d nationa l security concerns ; an d (ii ) i t ha s conclude dal l actio n (i f suc h filin g ha s bee n mad e with , o r an investigatio n deeme d require d by , CFIUS).

Completio n o f th e Commo n Shar e Subscriptio n i s conditiona l upon , amon g othe r things:

(i)    th e Compan y havin g obtaine d al l necessar yshareholders ' approva l i n connectio n wit h the Commo n Shar e Subscription , i f required , unde r th e Listin g Rules;

(ii)    Pubc o havin g complete d th e Listing ; and

(iii)   CFIU S havin g notifie d SE V an d th e Compan y i n writin g i n relatio n t o th e transactions contemplate d unde r th e Agreemen t tha t (i ) ther e ar e n o unresolve d nationa l security concerns ; an d (ii ) i t ha s conclude dal l actio n (i f suc h filin g ha s bee n mad e with , o r an investigatio n deeme d require d by , CFIUS).

Th e Not e Subscription , th e Preferre d Shar e Subscriptio n an d th e Commo n Shar e Subscription 
ar e no t inter-conditiona l fo r th e Company.

Assumin g tha t (i ) al l th e outstandin g convertibl e securitie s o f SE V hav e bee n converted int o it s commo n shares ; (ii ) SE V ha s place d ou t US$30,000,00 0 wort h o f Serie s E Preferred Shares ; (iii ) th e tota l valuatio n o f Pubc o prio r t o th e Qualifie d Merge r i s US$1,000,000 ; and

(iv)   th e tota l valuatio n o f SE V fo r th e Qualifie d Merge r i s US$175,000,000 , th e Company woul d hol d a t leas t approximatel y a 7.85 % interes t o f Pubc o pos t th e Qualifie d Merger.

SE V ha s agree d no t t o conduc t an y simila r transaction s contemplate d unde r th e Agreement an d an y equit y o r deb t financing ,unles s approve d b y th e Compan y i n writing , fro m th e date o f th e Agreemen t unti l th e conclusio n o f a CFIU S revie w (i f any ) an d (i ) on e yea r o r (ii ) the dat eo f approval s o f SEV' s shareholder s o f th e Preferre d Shar e Subscription , th e Qualified Merge r an d th e Commo n Shar e Subscription , whicheve r i s earlier . However , i t i s unclea r at thi s stag e whethe r Pubc o wil l conduc t an y furthe r capita l raisin g pos t th e Qualifie d Merger an d u p t o th e Listing . T o protec t th e Company' s interest , th e Compan y wil l hav e th e optio n to participat e i n an y potentia l fun d raisin g o f Pubc o u p t o a 19 % interes t i n it.

SE V i s on e o f th e larges t manufacturer s o f zero-emissio n all-electri c medium-duty commercia l vehicle s i n th e world . Sinc e 2009 , SE V ha s bee n producin g electri c vehicle s for globa l customer s including ,amongs t others , PepsiCo/Frito-Lay , Federa l Express , Staple s and Coca-Cola . SE V currentl yproduce s an d sell s th e Smit h Newton , designe d t o b e a superior- performin g alternativ e t o traditiona l diese l truck s an d whic h ca n b e configure d fo r multiple applications . I t i s headquartere d i n Kansa s City , Missouri , th e US , an d ha s a manufacturing facilit y i n Kansa s City , Missouri , th e U S an d a researc h an d developmen tcente r i n Newcastle, th e
Unite d Kingdom.

SE V partner s wit h globa l leader s acros s multipl e industries : foo d an d beverage , utility, telecommunications , retail , grocery , parce l an d posta l delivery , schoo l transportation , military an d government . It s customer s includ e man y o f th e world' s larges t flee t operators.

Th e followin ginformatio n i s extracte d fro m th e unaudite d financia l statement s o f SE V fo r the tw o financia l year s ende d 3 1 Decembe r 201 2 an d 2011.

Fo r th e yea r ended 3 1 December

201 2                              2013

US $                               US$

Profit/(loss ) befor e taxatio n                                                                              (50,494,000 )               (50,742,000)

Profit/(loss ) afte r taxatio n                                                                                (50,494,000 )               (50,742,000)

A s a t 3 1 Decembe r 2013 , SE V ha d ne t liabilitie s o f approximatel y US$117,058,000

(equivalen t t o approximatel y HK$907,711,000).

Th e Compan y ha s als o agree d t o cooperat eo n th e suppl y o f batterie s an d electri c vehicle component s t o SE V an d th e partie s wil l ente r int o th e followin g arrangements:

Withi n 1 5 busines sday s fro m th e executio n o f th e Agreement , th e Compan y an d SEV (o r it s nominee ) wil l prepar e a draf t o f a n exclusiv ebatter y suppl y agreemen t an d the partie s agree d t o wor k i n goo d fait h t o finalis e an d execut e th e agreemen t n o late r tha n 45 day s fro m th e executio no f th e Agreement , pursuan t t o whic h SE V wil l agre e t o fulfil l all o f it s procuremen t need s fo r batterie s fro m th e Grou p i n vehicl e application s whic h are compatibl e wit h SEV' s vehicl e platforms ,sav e fo r customer s tha t i s wholl y owne d b y the U S Government . Th e Grou p agree s t o suppl y suc h batterie s tha t mee t SEV' s reasonable specification s t o SE V an d th e partie s wil l wor k i n goo d fait h t o integrat eth e Group's batterie s int o SEV' s vehicl e platforms.

Withi n 1 5 busines sday s fro m th e executio n o f th e Agreement , th e Compan y an d SEV (o r it s nominee ) wil l ente r int o a memorandu mo f understandin g t o establis h a strategic cooperatio n relationshi p pursuan t t o whic h th e partie s wil l cooperat e an d us e th e Group's electri c vehicl e manufacturin g plan t i n Hangzho u a s a n OE M supplie r fo r electri c vehicle 
component s t o SEV.

Th e Grou p i s principall y engage d i n th e researc h an d development , production , distribution an d
sal e o f Lithium-io n batterie s an d relate d products . I n 2013 , th e Grou p expande d into electri c vehicl e leasin g busines s a s par t o f th e Group' s vertica l expansio n plan.

Th e Grou p recentl yha s complete d th e acquisitio n o f a 58.5 % interes ti n a n electri c vehicle compan y locate d i n Hangzho u an d th e acquisitio no f a 50 % interes t i n a n electri c vehicle compan y locate d i n Kunming . Th e acquisition s represen t a merge r o f th e batter y production, electri c vehicl e manufacturin g an d electri c vehicl e leasin g businesse s an d ar e a significant furtheranc e o f th e Group' s vertica l expansio n plan.

Th e Not e Subscription , th e Preferre d Shar e Subscriptio n an d th e Commo n Shar e Subscription wil l enabl e th e Compan y t o secur e a meaningfu l interes t i n SEV , a leadin g commercia lall- electri c vehicl e manufacturer , an d provid e a valuabl e opportunit yt o foste r long-ter m strategic an d busines s cooperation s wit h SEV . Th e Exclusiv e Batter y Suppl y Contrac t an d th e EV Componen t Suppl y MO U ar e expecte dt o generat e sale s fo r th e Group' s batter y busines s and th e electri c vehicl e business.

Th e Director s (includin gth e independen t non-executiv e Directors ) conside r tha t the Agreemen tha s bee n entere d int o unde r norma l commercia l term s an d tha t suc h term s are fai r an d reasonabl e s o fa r a s th e Compan y an d th e Shareholder s ar e concerne d an d tha t the transaction s contemplate d unde r th e Agreemen t i s i n th e interest s o f th e Compan y an d the 
Shareholder s a s a whole.

Th e Commo n Shar e Subscriptio n i n aggregat e wit h th e Not e Subscriptio n an d th e Preferred Shar e Subscriptio n constitut ea discloseabl e transactio nfo r th e Compan y an d ar e subjec t to th e notificatio n an d announcemen t requirement s unde r Chapte r 1 4 o f th e Listin g Rules.

I n thi s announcement , th e followin g expression s shal l hav e th e meaning s se t ou t belo w unless th e contex t require s otherwise:

"Agreement "                                     th e agreemen t date d 1 1 Ma y 201 4 betwee n th e Compan y and SEV;

"Board "                                         th e boar d o f director s o f th e Company;

"CFIUS "                                        th e Committe e o n Foreig n Investmen t i n th e US;

"Commo n Shar e Subscription "   t h e conditiona l subscriptio n b y th e Compan y o f th e

commo n share s i n Pubc o fo r a tota l subscriptio n amoun t of US$30,000,000;

"Company "                                       Sinopol y Batter y Limited , a compan y incorporate d in Bermuda , th e share s o f whic h ar e liste d o n th e mai n boar d of th e Stoc k Exchange;

"connecte d person "                      ha s th e meanin g ascribe d t o i t i n Chapte r 14 A o f th e Listing

Rules;

"Director(s) "                                 th e director(s ) o f th e Company;

"Exclusiv e Batter y Suppl y                 th e exclusiv e batter y suppl y contrac t t o b e entere d between 
Contract "                                                  th e Compan y an d SE V a s describe d i n th e paragraph
heade d "(1 ) Th e Exclusiv e Batter y Suppl y Contract " i n this  announcement;

"E V Componen t Supply th e memorandu m o f understandin g i n relatio n t o the 
MOU "                                   suppl y o f electri cvehicl e component s t o b e entere d between         
                                              th e Compan y an d SE V a s described in th e paragrap h headed  "(2 ) E V
Componen t Suppl y MOU " i n thi s announcement;

"Group "                                            th e Compan y an d it s subsidiaries;

"HK$ "                                              Hon g Kon g dollar , th e lawfu l currenc y o f Hon g Kong;

"Hon g Kong "                                    th e Hon g Kon g Specia l Administrativ e Regio n o f th e PRC;

"Listing "                                            th e listin g o f Pubc o o n NYSE , NYS E MK T o r NASDAQ;

"Listin g Rules "                                  th e Rule s Governin g th e Listin g o f Securitie s o n th e Stock

Exchange;

"NASDAQ "                                     th e NASDA Q Stoc k Market;

"Not e Subscription "                          th e subscriptio n b y th e Compan y o f th e Serie s A A Note s for

a tota l subscriptio n pric e o f US$2,000,000;

"NYSE "                                           th e Ne w Yor k Stoc k Exchange;

"NYS E MKT "                                 NYS E MK T LLC;

"OEM "                                             origina l equipmen t manufacturer;

"OT C Bulleti n Board "                       a quotatio n mediu m o f th e U S fo r subscribin g member s to

trad e over-the-counte r equit y securitie s tha t ar e no t liste d on NASDA Q o r a nationa l stoc k exchang e i n th e US;

"PRC "                                              th e People' s Republi c o f Chin a an d fo r th e purpos e o f this announcement , exclude s Hon g Kong , Taiwa n an d th e Macau Specia l Administrativ e Regio n o f th e PRC;

"Preferre d Shar e Subscription "         th e conditiona lsubscriptio n b y th e Compan y o f th e Series

E Preferre d Share s fo r a tota l subscriptio n amoun t of US$10,000,000;