Exhibit 4.6
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "AGREEMENT") is entered into as of
November 10, 2006 (the "EFFECTIVE DATE"), by and among ATA Inc., an exempted
company duly incorporated and validly existing under the Laws of the Cayman
Islands (the "COMPANY"), certain individuals listed under the heading "Common
Shareholders" on Schedule A attached hereto (each a "COMMON SHAREHOLDER" and
collectively, the "COMMON SHAREHOLDERS"), SB ASIA INVESTMENT FUND II, L.P., a
limited partnership organized and existing under the Laws of the Cayman Islands
("SAIF"), and Winning King LTD, an international business company organized
under the Laws of the British Virgin Islands ("WKL", and together with SAIF,
each an "INVESTOR" and collectively, the "INVESTORS"). The Company, the Common
Shareholders and the Investors are referred to herein as "PARTIES" collectively
and a "PARTY" individually.
RECITALS
WHEREAS, the Company, the Common Shareholders and the Investors are parties
to a Share Exchange Agreement dated November 10, 2006 (the "SHARE EXCHANGE
AGREEMENT"), under which the Common Shareholders and Investors are to transfer
their shares in ATA Testing Authority (Holdings) Limited, an international
business company organized under the laws of the British Virgin Islands, to the
Company in exchange for equivalent shares in the Company.
WITNESSETH
NOW, THEREFORE, in consideration of the premises set forth above, the
mutual promises and covenants set forth herein and other good and valuable
consideration, the Parties agree as follows:
1. INTERPRETATION.
1.1 DEFINITIONS. The following terms shall have the meanings ascribed to
them below:
"AFFILIATE", with regard to a given Person, means a Person that
Controls, is Controlled by or is under common Control with the given
Person; the term "Affiliated" has the meaning correlative to the foregoing.
"APPLICABLE SECURITIES LAW" means (i) with respect to any offering of
securities in the United States, or any other act or omission within that
jurisdiction, the securities Law of the United States, including the
Exchange Act and the Securities Act, and any applicable securities Law of
any state of the United States, and (ii) with respect to any offering of
securities in any jurisdiction other than the United States, or any related
act or omission in that jurisdiction, the applicable securities Laws of
that jurisdiction.
"BOARD" or "BOARD OF DIRECTORS" means the board of directors of the
Company.
"COMMISSION" means (i) with respect to any offering of securities in
the United States, the Securities and Exchange Commission of the United
States or any other federal agency at the time administering the Securities
Act, and (ii) with respect to any offering of securities in a jurisdiction
other than the United States, the regulatory body of the jurisdiction with
authority to supervise and regulate the sale of securities in that
jurisdiction.
"COMMON SHARES" means the common shares, par value US$0.01, of the
Company.
"COMMON SHARE EQUIVALENTS" means warrants, options and rights
exercisable for Common Shares or securities convertible into or
exchangeable for Common Shares, including, without limitation, the
Preferred Shares.
"CONTROL" of a given Person means the power or authority, whether
exercised or not, to direct the business, management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, which power or authority shall
conclusively be presumed to exist upon possession of beneficial ownership
or power to direct the vote of more than 50% of the votes entitled to be
cast at meetings of the members or shareholders of such Person or power to
control the composition of the board of directors of such Person; the terms
"Controlling" and "Controlled" have meanings correlative to the foregoing.
"EQUITY SECURITIES" means any Common Shares or Common Share
Equivalents of the Company.
"EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
"FORM F-3" means Form F-3 promulgated by the Commission under the
Securities Act or any successor form or substantially similar form then in
effect.
"FORM S-3" means Form S-3 promulgated by the Commission under the
Securities Act or any successor form or substantially similar form then in
effect.
"GOVERNMENTAL AUTHORITY" means a nation or government or any province
or state or any other political subdivision thereof, and any entity,
authority or body exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, including any
government authority, agency, department, board, commission or
instrumentality or any political subdivision thereof, any court, tribunal
or arbitrator, and any self-regulatory organization.
"HOLDERS" means the holders of Registrable Securities who are parties
to this Agreement from time to time.
"INFORMATION" has the meaning ascribed thereto in Section 8.6.
"INITIATING HOLDERS" means, with respect to a request duly made under
Section 2.1 or Section 2.2 to Register any Registrable Securities, the
Holders initiating such request.
"IPO" means the first firmly underwritten registered public offering
by the Company of its Common Shares pursuant to a Registration Statement
that is filed with and declared effective by either the Commission under
the Securities Act or another Governmental Authority (as defined in the
Share Purchase Agreement) for a Registration in a jurisdiction other than
the United States.
"LAW" means any constitutional provision, statute or other law, rule,
regulation, official policy or interpretation of any Governmental Authority
and any injunction, judgment, order, ruling, assessment or writ issued by
any Governmental Authority.
"LIQUIDATION EVENT" means (i) any liquidation, winding-up, or
dissolution of the Company, (ii) any consolidation, amalgamation or merger
of the Company with or into any other Person, or any other corporate
reorganization, in which the members of the Company immediately before such
transaction own less than 50% of the Company's voting power immediately
after such transaction (excluding any transaction effected solely for tax
purposes
2 Shareholders Agreement
or to change the Company's domicile), (iii) sale of all or substantially
all of the assets of the Company, or (iv) the exclusive licensing of all or
substantially all of the Company's intellectual property to a third party.
"NEW SECURITIES" means, subject to the terms of Section 7 hereof, any
newly issued Equity Securities of the Company, except for (i) securities
issued to employees, consultants, officers or directors of the Company
pursuant to any share option, share purchase or share bonus plan, agreement
or arrangement approved by the Board; (ii) securities issued upon
conversion of the Preferred Shares or exercise of any outstanding warrants
or options; (iii) securities issued in connection with a bona fide
acquisition of another business; (iv) securities issued in a Qualified IPO;
(v) securities issued in connection with any share split, share dividend,
combination, recapitalization or similar transaction of the Company; or
(vi) any other equity issuance unanimously approved by the Board, including
the Series A Directors.
"PERSON" means any individual, corporation, partnership, limited
partnership, proprietorship, association, limited liability company, firm,
trust, estate or other enterprise or entity.
"PRC" means the People's Republic of China, but solely for the
purposes of this Agreement, excluding the Hong Kong Special Administrative
Region, Macau Special Administrative Region and the islands of Taiwan.
"PREFERRED SHAREHOLDERS" means the Holders who then hold of record any
Preferred Shares.
"PREFERRED SHARES" means, collectively, the Series A Preferred Shares
and the Series A-1 Preferred Shares.
"QUALIFIED IPO" has the meaning given to such term in the Company's
Memorandum and Articles of Association, as amended and restated from time
to time.
"REGISTRABLE SECURITIES" means (i) the Common Shares issuable or
issued upon conversion of the Preferred Shares, and (ii) any Common Shares
of the Company issued as a dividend or other distribution with respect to,
in exchange for, or in replacement of, the shares referenced in (i),
excluding in all cases, however, any of the foregoing sold by a Person in a
transaction other than an assignment pursuant to Section 10. For purposes
of this Agreement, (i) Registrable Securities shall cease to be Registrable
Securities when a Registration Statement covering such Registrable
Securities has been declared effective under the Securities Act by the
Commission whether or not such Registrable Securities have been disposed of
pursuant to such effective Registration Statement and (ii) the Registrable
Securities of a Holder shall not be deemed to be Registrable Securities at
any time when the entire amount of such Registrable Securities proposed to
be sold by such Holder in a single sale are or, in the opinion of counsel
satisfactory to the Company and such Holder, each in their reasonable
judgment, may be, so distributed to the public pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act in any three
(3) month period or any such Registrable Securities have been sold in a
sale made pursuant to Rule 144 of the Securities Act.
"REGISTRATION" means a registration effected by preparing and filing a
Registration Statement and the declaration or ordering of the effectiveness
of that Registration Statement; and the terms "Register" and "Registered"
have meanings concomitant with the foregoing.
"REGISTRATION STATEMENT" means a registration statement prepared on
Form X-0, X-0, X-0, X-0, X-0 or S-3 under the Securities Act (including,
without limitation, Rule 415 under
3 Shareholders Agreement
the Securities Act), or on any comparable form in connection with
registration in a jurisdiction other than the United States.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
"SELLING EXPENSES" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
"SERIES A DIRECTORS" has the meaning assigned to it in the Memorandum
and Articles of Association of the Company, as amended and restated from
time to time.
"SERIES A PREFERRED SHARES" means the Company's issued and outstanding
Series A Preferred Shares, par value US$0.01 per share.
"SERIES A-1 PREFERRED SHARES" means the Company's Series A-1 Preferred
Shares, par value US$0.01 per share.
"SHARE EXCHANGE AGREEMENT" has the meaning set forth in the Recitals
hereof.
"SHARE PURCHASE AGREEMENT" means the Securities Purchase and Share
Subscription Agreement, dated as March 31, 2005, by and among ATA Testing
Authority (Holdings) Limited, certain Investors (as defined therein) and
certain Founders (as defined therein), under which such Investors purchased
Series A Preferred Shares of ATA Testing Authority (Holdings) Limited.
"SUBSIDIARY" means, with respect to any specified Person, any Person
of which the specified Person, directly or indirectly, owns more than fifty
percent (50%) of the issued and outstanding authorized capital, share
capital, voting interests or registered capital.
"U.S. GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis.
1.2 INTERPRETATION. For all purposes of this Agreement, except as otherwise
expressly provided, (i) the terms defined in this Section 1 shall have the
meanings assigned to them in this Section 1 and include the plural as well as
the singular, (ii) all accounting terms not otherwise defined herein have the
meanings assigned under U.S. GAAP, (iii) all references in this Agreement to
designated "Sections" and other subdivisions are to the designated Sections and
other subdivisions of the body of this Agreement, (iv) pronouns of either gender
or neuter shall include, as appropriate, the other pronoun forms, (v) the words
"herein," "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other subdivision
(vi) all references in this Agreement to designated Schedules, Exhibits and
Annexes are to the Schedules, Exhibits and Annexes attached to this Agreement,
(vii) "or" is not exclusive, (viii) the term "including" will be deemed to be
followed by ", but not limited to,"; (ix) the terms "shall," "will," and
"agrees" are mandatory, and the term "may" is permissive; (x) the term "day"
means "calendar day", and (xi) all references to dollars are to currency of the
United States of America.
1.3 JURISDICTION. The terms of this Agreement are drafted primarily in
contemplation of an offering of securities in the United States of America. The
parties recognize, however, the possibility that securities may be qualified or
registered in a jurisdiction other than the United States of America for
offering to the public or that the Company might effect an offering in the
United States of America in the form of American Depositary Receipts or American
Depositary Shares. Accordingly:
(a) It is their intention that, whenever this Agreement refers to a Law,
form, process or institution of the United States of America but the parties
wish to effectuate qualification or
4 Shareholders Agreement
registration in a different jurisdiction, reference in this Agreement to the
Laws or institutions of the United States shall be read as referring, mutatis
mutandis, to the comparable Laws or institutions of the jurisdiction in
question; and
(b) It is agreed that the Company will not undertake any listing of
American Depositary Receipts, American Depositary Shares or any other security
derivative of the Company's Common Shares unless arrangements have been made
reasonably satisfactory to a majority in interest of the Holders of then
outstanding Registrable Securities to ensure that the spirit and intent of this
Agreement will be realized and that the Company is committed to take such
actions as are necessary such that the Holders will enjoy rights corresponding
to the rights hereunder to sell their Registrable Securities in a public
offering in the United States of America as if the Company had listed Common
Shares in lieu of such derivative securities.
2. DEMAND REGISTRATION.
2.1 REGISTRATION OTHER THAN ON FORM F-3 OR FORM S-3. Subject to the terms
of this Agreement, at any time or from time to time after the earlier of (i)
March 31, 2008 and (ii) the date that is six (6) months after the closing of a
Qualified IPO, Holders holding twenty-five percent (25%) or more of the then
outstanding Registrable Securities may request in writing that the Company
effect a Registration in any jurisdiction in which the Company has had a
registered underwritten public offering (or, if the Company has not yet had a
registered underwritten public offering, then such request may be to effect such
Registration on the New York Stock Exchange, the NASDAQ National Market, the
Hong Kong Stock Exchange Main Board, the Hong Kong Stock Exchange GEM, or any
other internationally recognized exchange that is approved by Company) of all or
part of the Registrable Securities. Upon receipt of such a request, the Company
shall (a) promptly give written notice of the proposed Registration to all other
Holders and (b) as soon as practicable, use its reasonable best efforts to cause
the Registrable Securities specified in the request, together with any
Registrable Securities of any Holder who requests in writing to join such
Registration within fifteen (15) days after the Company's delivery of written
notice, to be Registered and/or qualified for sale and distribution in such
jurisdiction. The Company shall be obligated to effect no more than three (3)
Registrations pursuant to this Section 2.1.
2.2 REGISTRATION ON FORM F-3 OR FORM S-3. Subject to the terms of this
Agreement, at any time after a Qualified IPO, if the Company qualifies for
registration on Form F-3 or Form S-3 (or any comparable form for Registration in
a jurisdiction other than the United States), Holders may request the Company to
file, in any jurisdiction in which the Company has had a registered underwritten
public offering, a Registration Statement on Form F-3 or Form S-3 (or any
comparable form for Registration in a jurisdiction other than the United
States), for a public offering of Registrable Securities for which the
reasonably anticipated aggregate price to the public, net of Selling Expenses,
would exceed US$1,000,000. Upon receipt of such a request, the Company shall (i)
promptly give written notice of the proposed Registration to all other Holders
and (ii) as soon as practicable, use its reasonable best efforts to cause the
Registrable Securities specified in the request, together with any Registrable
Securities of any Holder who requests in writing to join such Registration
within fifteen (15) days after the Company's delivery of written notice, to be
Registered and qualified for sale and distribution in such jurisdiction. The
Holders may at any time, and from time to time, require the Company to effect
the Registration of Registrable Securities under this Section 2.2. However, the
Company shall not be required to effect more than four (4) Registrations
pursuant to this Section 2.2 in any twelve (12) month period.
2.3 RIGHT OF DEFERRAL.
(a) The Company shall not be obligated to Register or qualify Registrable
Securities pursuant to this Section 2:
5 Shareholders Agreement
(i) if, within ten (10) days of the receipt of any request of the
Holders to Register any Registrable Securities under Section 2.1 or Section 2.2,
the Company gives notice to the Initiating Holders of its bona fide intention to
effect the filing for its own account of a Registration Statement of Common
Shares within sixty (60) days of receipt of that request; provided that the
Company is actively employing in good faith its reasonable best efforts to cause
that Registration Statement to become effective within sixty (60) days of the
initial filing; provided further that the Holders are entitled to join such
Registration subject to Section 3;
(ii) during the period starting with the date of filing by the Company
of, and ending six (6) months following the effective date of any Registration
Statement pertaining to Common Shares of the Company; provided that the Holders
are entitled to join such Registration subject to Section 3; or
(iii) in any jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such Registration
or qualification, unless the Company is already subject to service of process in
such jurisdiction;
(b) If, after receiving a request from Holders pursuant to Section 2.1 or
Section 2.2 hereof, the Company furnishes to the Holders a certificate signed by
the chief executive officer of the Company stating that, in the good faith
judgment of the Board, there is a reasonable likelihood that it would be
materially detrimental to the Company or its members for a Registration
Statement to be filed in the near future, then the Company shall have the right
to defer such filing for a period during which such filing would be materially
detrimental, provided that such deferral by the Company shall not exceed ninety
(90) days from the receipt of any request duly submitted by Holders under
Section 2.1 or Section 2.2 to Register Registrable Securities; provided further,
that the Company may not Register any other of its Securities during such ninety
(90) day period (except for Registrations contemplated by Section 3.4);
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period.
2.4 UNDERWRITTEN OFFERINGS. (a) If, in connection with a request to
Register Registrable Securities under Section 2.1 or Section 2.2, the Initiating
Holders seek to distribute such Registrable Securities in an underwriting, they
shall so advise the Company as a part of the request, and the Company shall
include such information in the written notice to the other Holders described in
Sections 2.1 and 2.2. In such event, the right of any Holder to include its
Registrable Securities in such Registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters of internationally recognized standing
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the managing underwriter advises the Company
that marketing factors (including without limitation the aggregate number of
securities requested to be Registered, the general condition of the market, and
the status of the Persons proposing to sell securities pursuant to the
Registration) require a limitation of the number of Registrable Securities to be
underwritten in a Registration pursuant to Section 2.1 or 2.2, the underwriters
may (i) in the event the offering is the Company's IPO, exclude from the
underwriting all of the Registrable Securities (so long as the only securities
included in such offering are those of the Company), or (ii) otherwise exclude
up to seventy percent (70%) of the Registrable Securities requested to be
Registered but only after excluding all other Equity Securities from the
Registration and underwriting and so long as the number of shares to be included
in the Registration on behalf of Holders is allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities requested by such Holders to be included, provided that if, as a
result of such underwriter cutback, the Holders cannot include in the initial
public offering all of the Registrable Securities that they have requested to be
included therein, then such Registration shall not be deemed to constitute one
of the three demand Registrations to
6 Shareholders Agreement
which the Holders are entitled pursuant to Section 2.1. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the Registration.
3. PIGGYBACK REGISTRATIONS.
3.1 REGISTRATION OF THE COMPANY'S SECURITIES. Subject to the terms of this
Agreement, if the Company proposes to Register for its own account any of its
Equity Securities, or for the account of any holder (other than a Holder) of
Equity Securities any of such holder's Equity Securities, in connection with the
public offering of such securities solely for cash (except as set forth in
Section 3.4), the Company shall promptly give each Holder written notice of such
Registration and, upon the written request of any Holder given within fifteen
(15) days after delivery of such notice, the Company shall use its reasonable
best efforts to include in such Registration any Registrable Securities thereby
requested to be Registered by such Holder. If a Holder decides not to include
all or any of its Registrable Securities in such Registration by the Company,
such Holder shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent Registration Statement or Registration
Statements as may be filed by the Company, all upon the terms and conditions set
forth herein.
3.2 RIGHT TO TERMINATE REGISTRATION. The Company shall have the right to
terminate or withdraw any Registration initiated by it under Section 3.1 prior
to the effectiveness of such Registration, whether or not any Holder has elected
to participate therein. The expenses of such withdrawn Registration shall be
borne by the Company in accordance with Section 4.3.
3.3 UNDERWRITING REQUIREMENTS.
(a) In connection with any offering involving an underwriting of the
Company's Equity Securities solely for cash, the Company shall not be required
to Register the Registrable Securities of a Holder under this Section 3 unless
such Holder's Registrable Securities are included in the underwriting and such
Holder enters into an underwriting agreement in customary form with the
underwriters selected by the Company and setting forth such terms for the
underwriting as have been agreed upon between the Company and the underwriters.
In the event the underwriters advise Holders seeking Registration of Registrable
Securities pursuant to this Section 3 in writing that market factors (including
the aggregate number of Registrable Securities requested to be Registered, the
general condition of the market, and the status of the Persons proposing to sell
securities pursuant to the Registration) require a limitation of the number of
Registrable Securities to be underwritten, the underwriters may (i) in the event
the offering is the Company's IPO, exclude all of the Registrable Securities (so
long as the only securities included in such offering are those of the Company
and no securities of other selling shareholders are included), or (ii) otherwise
exclude up to seventy percent (70%) of the Registrable Securities requested to
be Registered but only after excluding all other Equity Securities (except for
securities to be offered by the Company) from the Registration and underwriting
and so long as the Registrable Securities to be included in such Registration on
behalf of Holders are allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities requested by
such Holders to be included.
(b) If any Holder disapproves the terms of any underwriting, the
Holder may elect to withdraw therefrom by written notice to the Company and the
underwriters delivered at least ten (10) days prior to the effective date of the
Registration Statement. Any Registrable Securities excluded or withdrawn from
the underwriting shall be withdrawn from the Registration.
3.4 EXEMPT TRANSACTIONS. The Company shall have no obligation to Register
any Registrable Securities under this Section 3 in connection with a
Registration by the Company (i) relating solely to the sale of securities to
participants in a Company share plan, or (ii) relating to a corporate
reorganization or other transaction under Rule 145 of the Securities Act (or
comparable provision under the Laws of another jurisdiction, as applicable).
4. PROCEDURES.
7 Shareholders Agreement
4.1 REGISTRATION PROCEDURES AND OBLIGATIONS. Whenever required under this
Agreement to effect the Registration of any Registrable Securities held by the
Holders, the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission a Registration Statement with
respect to those Registrable Securities and use its reasonable best efforts to
cause that Registration Statement to become effective, and, upon the request of
the Holders holding a majority of the Registrable Securities Registered
thereunder, keep the Registration Statement effective for up to one hundred and
eighty (180) days or, if earlier, until the distribution thereunder has been
completed; provided, however, that such one hundred and eighty (180) day period
shall be extended for a period of time equal to the period any Holder refrains
from selling any Registrable Securities included in such Registration at the
written request of the underwriter(s) for such Registration.
(b) Prepare and file with the Commission amendments and supplements to
that Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of
Applicable Securities Law with respect to the disposition of all securities
covered by the Registration Statement;
(c) Furnish to the Holders the number of copies of a prospectus,
including a preliminary prospectus, required by Applicable Securities Law, and
any other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them;
(d) Use its reasonable best efforts to Register and qualify the
securities covered by the Registration Statement under the securities Laws of
any jurisdiction, as reasonably requested by the Holders, provided that the
Company shall not be required to qualify to do business or file a general
consent to service of process in any such jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in customary form, with
the managing underwriter(s) of the offering. Each shareholder participating in
the underwriting shall also enter into and perform its obligations under such an
agreement;
(f) Notify each Holder of Registrable Securities covered by the
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under Applicable Securities Law of (i) the issuance of
any stop order by the commission, or (ii) the happening of any event as a result
of which any prospectus included in the Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(g) Provide a transfer agent and registrar for all Registrable
Securities Registered pursuant to the Registration Statement and, where
applicable, a number assigned by the Committee on Uniform Securities
Identification Procedures for all those Registrable Securities, in each case not
later than the effective date of the Registration;
(h) Furnish, at the request of any Holder requesting Registration of
Registrable Securities pursuant to this Agreement, on the date that such
Registrable Securities are delivered for sale in connection with a Registration
pursuant to this Agreement, (i) an opinion, dated the closing date of the sale,
of the counsel representing the Company for the purposes of the Registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering; (ii) (A) a comfort letter dated the signing date of the
underwriting agreement; and (B) a bring down comfort letter dated the closing of
the sale, each from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters; and
8 Shareholders Agreement
(i) Take all reasonable action necessary to list the Registrable
Securities on the primary exchange on which the Company's securities are then
traded or in connection with a Qualified IPO, the primary exchange on which the
Company's securities will be traded.
4.2 INFORMATION FROM HOLDER. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the Registration of such Holder's Registrable
Securities.
4.3 EXPENSES OF REGISTRATION. All expenses, other than the Selling Expenses
(which shall be borne by the Holders requesting Registration on a pro rata basis
in proportion to their respective numbers of Registrable Securities sold in such
Registration), incurred in connection with Registrations, filings or
qualifications pursuant to this Agreement, including (without limitation) all
Registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursement of one counsel for all selling Holders, shall be borne by the
Company. The Company shall not, however, be required to pay for any expenses of
any Registration proceeding begun pursuant to this Agreement if the Registration
request is subsequently withdrawn at the request of a majority in interest of
the Holders requesting such Registration (in which case all participating
Holders shall bear such expenses pro rata based upon the number of Registrable
Securities that were to be thereby Registered in the withdrawn Registration).
4.4 DELAY OF REGISTRATION. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any Registration as the result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement.
5. INDEMNIFICATION.
5.1 COMPANY INDEMNITY.
(a) To the maximum extent permitted by Law, the Company will indemnify
and hold harmless each Holder, such Holder's officers, directors, shareholders,
legal counsel and accountants, any underwriter (as defined in the Securities
Act) for such Holder and each Person, if any, who controls (as defined in the
Securities Act) such Holder or underwriter, against any losses, claims, damages
or liabilities (joint or several) to which they may become subject under Laws
which are applicable to the Company and relate to action or inaction required of
the Company in connection with any Registration, qualification, or compliance,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (each a "VIOLATION"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement, on the effective date thereof (including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto),
(ii) the omission or alleged omission to state in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of Applicable Securities Laws, or
any rule or regulation promulgated under Applicable Securities Laws. The Company
will reimburse each such Holder, underwriter or controlling person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action.
(b) The indemnity agreement contained in this Section 5.1 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld or delayed), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation that
occurs in reliance upon and
9 Shareholders Agreement
in conformity with written information furnished for use in connection with such
Registration by any such Holder, underwriter or controlling person.
5.2 HOLDER INDEMNITY.
(a) To the maximum extent permitted by Law, each selling Holder will
indemnify and hold harmless the Company, its directors, officers, legal counsel
and accountants, any underwriter, any other Holder selling securities in
connection with such Registration and each Person, if any, who controls (within
the meaning of the Securities Act) the Company, such underwriter or other
Holder, against any losses, claims, damages or liabilities (joint or several) to
which any of the foregoing persons may become subject, under Applicable
Securities Laws, or any rule or regulation promulgated under Applicable
Securities Laws, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder for use in connection with such Registration; and each such Holder will
reimburse any Person intended to be indemnified pursuant to this Section 5.2,
for any legal or other expenses reasonably incurred by such Person in connection
with investigating or defending any such loss, claim, damage, liability or
action. No Holder's liability under this Section 5.2 shall exceed the net
proceeds (less underwriting discounts and selling commissions) received by such
Holder from the offering of securities made in connection with that
Registration; provided, however, such limitation shall not apply in the case of
willful fraud by such Holder.
(b) The indemnity contained in this Section 5.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent
shall not be unreasonably withheld or delayed).
5.3 NOTICE OF INDEMNIFICATION CLAIM. Promptly after receipt by an
indemnified party under Section 5.1 or Section 5.2 of notice of the commencement
of any action (including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
Section 5.1 or Section 5.2, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the indemnifying parties. An
indemnified party (together with all other indemnified parties that may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the reasonably incurred fees and expenses to be paid by
the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party, to the extent so prejudiced, of
any liability to the indemnified party under this Section 5, but the omission to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 5.
5.4 CONTRIBUTION. If any indemnification provided for in Section 5.1 or
Section 5.2 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party, on the one hand, and of the indemnified party, on the
other, in connection with the statements or omissions that resulted in such
loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
10 Shareholders Agreement
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
5.5 UNDERWRITING AGREEMENT. To the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
5.6 SURVIVAL. The obligations of the Company and Holders under this Section
5 shall survive the completion of any offering of Registrable Securities in a
Registration Statement under this Agreement.
6. ADDITIONAL UNDERTAKINGS.
6.1 REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities Act and any
comparable provision of any Applicable Securities Law that may at any time
permit a Holder to sell securities of the Company to the public without
Registration or pursuant to a Registration on Form F-3 or Form S-3 (or any
comparable form in a jurisdiction other than the United States), the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 (or comparable provision, if any, under
Applicable Securities Laws in any jurisdiction where the Company's securities
are listed), at all times following ninety (90) days after the effective date of
the first Registration under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under all Applicable Securities Laws; and
(c) at any time following ninety (90) days after the effective date of
the first Registration under the Securities Act filed by the Company for an
offering of its securities to the general public by the Company, promptly
furnish to any Holder holding Registrable Securities, upon request (i) a written
statement by the Company that it has complied with the reporting requirements of
all Applicable Securities Laws at any time after it has become subject to such
reporting requirements or, at any time after so qualified, that it qualifies as
a registrant whose securities may be resold pursuant to Form F-3 or Form S-3 (or
any form comparable thereto under Applicable Securities Laws of any jurisdiction
where the Company's securities are listed), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
as may be filed by the Company with the Commission, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the Commission, that permits the selling of any such securities
without Registration or pursuant to Form F-3 or Form S-3 (or any form comparable
thereto under Applicable Securities Laws of any jurisdiction where the Company's
Securities are listed).
6.2 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the Registrable Securities then outstanding, enter
into any agreement with any holder or prospective holder of any Equity
Securities of the Company that would allow such holder or prospective holder (a)
to include such Equity Securities in any Registration filed under Section 2 or
3, unless under the terms of such agreement such holder or prospective holder
may include such Equity Securities in any such Registration only to the extent
that the inclusion of such Equity Securities will not reduce the amount of the
Registrable Securities of the Holders that are included, (b) to demand
Registration of their securities, or (c) cause the Company to include such
Equity Securities in any Registration filed under Section 2.2 or Section 3
hereof on a basis more favorable to such holder or prospective holder than is
provided to the Holders thereunder.
11 Shareholders Agreement
6.3 "MARKET STAND-OFF" AGREEMENT. Each Holder agrees, if so required by the
managing underwriter(s), that it will not during the period commencing on the
date of the final prospectus relating to the Company's IPO and ending on the
date specified by the Company and the managing underwriter (such period not to
exceed one hundred eighty (180) days from the date of such final prospectus) (i)
lend, offer, pledge, hypothecate, hedge, sell, make any short sale of, loan,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any Equity Securities
(other than those included in such offering) or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Equity Securities, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Equity Securities or such other securities, in cash or otherwise; provided,
that (x) all directors, officers and holders of more than the lower of (a) 0.03%
of the fully diluted, as converted share capital of the Company and (b) 5,000
Common Shares (as adjusted for share splits, share combinations,
recapitalizations, reclassifications and similar transactions) must be bound by
restrictions substantially identical to those applicable to any Holder pursuant
to this Section 6.3, (y) all Holders will be released from any restrictions set
forth in this Section 6.3 to the extent that any other members subject to
substantially similar restrictions are released, and (z) the lockup agreements
shall permit Holders to transfer their Registrable Securities to their
respective Affiliates so long as the transferees enters into the same lockup
agreement. The underwriters in connection with the Company's IPO are intended
third party beneficiaries of this Section 6.3 and shall have the right, power
and authority to enforce the provisions hereof as though they were a party
hereto. In order to enforce the foregoing covenant, the Company may place
restrictive legends on the certificates and impose stop-transfer instructions
with respect to the Registrable Securities of each shareholder (and the shares
or securities of every other person subject to the foregoing restriction) until
the end of such period.
6.4 TERMINATION OF REGISTRATION RIGHTS. The registration rights set forth
in Section 2 and Section 3 of this Agreement shall terminate on the later of (a)
the date that is four (4) years from the date of closing of a Qualified IPO and
(b) March 31, 2013.
6.5 EXERCISE OF PREFERRED SHARES. Notwithstanding anything to the contrary
provided in this Agreement, the Company shall have no obligation to Register
Registrable Securities which, if constituting Common Share Equivalents, have not
been exercised, converted or exchanged, as applicable, for Common Shares.
6.6 APPROVAL OF BUSINESS PLAN. The Company and the Investors shall use
their reasonable best efforts to cause each quarterly or annual budget, business
plan or operating plan (including any capital expenditure budget, operating
budget and financing plan) to be approved before the beginning of each quarter
or year, as the case may be.
6.7 PROSPECTIVE SHAREHOLDERS.
(a) The Company shall perform all of its obligations, and shall use
its reasonable best efforts to cause each of the Option Holders to perform all
such Option Holder's obligations, under the agreements by and between the
Company and the Option Holders entered into pursuant to Section 5.14 of the
Share Purchase Agreement as of March 31, 2005.
(b) Unless an Option Holder, simultaneously with his or her exercise
of his or her warrant(s) or option(s) to purchase Equity Securities of the
Company, accedes to this Agreement and the Right of First Refusal and Co-Sale
Agreement and agrees to be bound by the transfer restrictions hereunder and
thereunder as if she or he were a Common Shareholder, the Company shall not,
with respect to the shares issuable upon exercise of such warrant(s) or
option(s), (i) issue any share certificates to such Option Holder, (ii) enter
such Option Holder in the Company's register of members as a shareholder of the
Company, (iii) grant any shareholder rights or benefits to such Option Holder or
(iv) treat such Option Holder as a shareholder of the Company in any other way.
12 Shareholders Agreement
7. PREEMPTIVE RIGHT
7.1 GENERAL. The Company hereby grants to all Preferred Shareholders a
right to purchase up to their pro rata shares of any New Securities that the
Company may, from time to time, propose to sell or issue. A Preferred
Shareholder's "pro rata share" for purposes of this purchase right shall be
determined according to the number of Common Shares owned by such Preferred
Shareholder immediately prior to the issuance of the New Securities (assuming
the exercise, conversion or exchange of all then outstanding Common Share
Equivalents) in relation to the total number of Common Shares of the Company
outstanding immediately prior to the issuance of the New Securities (assuming
the exercise, conversion or exchange of all then outstanding Common Share
Equivalents). Each Preferred Shareholder shall have a right of over-allotment
such that, if any other Preferred Shareholder fails to exercise in full its
right hereunder to purchase its pro rata share of the New Securities, such
Preferred Shareholders may purchase the non-purchasing Preferred Shareholder's
portion on a pro rata basis.
7.2 ISSUANCE NOTICE. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Preferred Shareholder written
notice (an "ISSUANCE NOTICE") of such intention, describing the type of New
Securities, and their price and the general terms upon which the Company
proposes to issue the same. Each Preferred Shareholder shall have ten (10) days
after the receipt of such notice to agree to purchase up to such Preferred
Shareholder's pro rata share of such New Securities (as determined in Section
7.1 above) for the price and upon the terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. If any Preferred Shareholder elects not to purchase its pro
rata share of such New Securities in full, the Company shall, after its receipt
of written notices from all of the Preferred Shareholders pursuant to the
immediately preceding sentence, send a second written notice to all of the
Preferred Shareholders that have elected to purchase in full their respective
pro rata shares of such New Securities, setting forth the total number of shares
of New Securities that have not been subscribed for and each such Preferred
Shareholder's pro rata share of such remaining New Securities. Each such
Preferred Shareholder shall then have ten (10) days after the receipt of the
second written notice to elect to purchase up to such Preferred Shareholder's
pro rata share of the remaining New Securities.
7.3 SALES BY THE COMPANY. For a period of sixty (60) days following the
expiration of the second ten (10) day period as described in Section 7.2 above,
the Company may sell any New Securities with respect to which the Preferred
Shareholders' preemptive rights under this Section 7 was not exercised, at a
price and upon terms not more favorable to the purchasers thereof than specified
in the Issuance Notice. In the event the Company has not sold such New
Securities within such sixty (60) day period, the Company shall not thereafter
issue or sell any New Securities, without first again offering such securities
to the Preferred Shareholders in the manner provided in Section 7.1 above.
7.4 TERMINATION OF PREEMPTIVE RIGHTS. The preemptive rights in this Section
7 shall terminate on the earlier of (i) the closing of the Qualified IPO, or
(ii) a Liquidation Event.
8. INFORMATION AND INSPECTION RIGHTS.
8.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to each
Preferred Shareholder the following documents or reports:
(a) within ninety (90) days after the end of each fiscal year of the
Company beginning 2005, a consolidated income statement and statement of cash
flows for the Company for such fiscal year and a consolidated balance sheet for
the Company as of the end of the fiscal year, audited and certified by a "big
four" firm of independent certified public accountants selected by the Company,
and a management report including a comparison of the financial results of such
fiscal year with the corresponding annual budget, all prepared in English and in
accordance with U.S. GAAP;
13 Shareholders Agreement
(b) within forty-five (45) days after the end of each fiscal quarter
of the Company, a consolidated unaudited income statement and statement of cash
flows for such fiscal quarter and a consolidated unaudited balance sheet for the
Company as of the end of such fiscal quarter, and a management report including
a comparison of the financial results of such fiscal year with the corresponding
quarterly budget, all prepared in English and in accordance with U.S. GAAP
(except for year-end adjustments and except for the absence of notes);
(c) within fifteen (15) days of the end of each month, a consolidated
unaudited income statement and statement of cash flows for such month and a
consolidated balance sheet for the Company as of the end of such month, and a
management report all prepared in English and in accordance with U.S. GAAP
(except for year-end adjustments and except for the absence of notes);
(d) no later than fifteen (15) days prior to the end of each fiscal
quarter, a quarterly budget for the succeeding fiscal quarter;
(e) no later than thirty (30) days prior to the end of each fiscal
year, an annual budget for the succeeding fiscal year;
(f) copies of any reports filed by the Company with any relevant
securities exchange, regulatory authority or governmental agency; and
(g) copies of all other documents or other information sent to any
Person in such Person's capacity as a shareholder of the Company.
8.2 INSPECTION. The Company shall permit each Preferred Shareholder, at its
own expense, to visit and inspect, during normal business hours following
reasonable notice by such Preferred Shareholder to the Company and only in a
manner so as not to interfere with the normal business operations of the Company
and its Subsidiaries, any of the properties of the Company and its Subsidiaries,
and examine the books of account and records of the Company and its
Subsidiaries, and discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the directors, officers, management employees,
accountants, legal counsel and investment bankers of such companies, all at such
reasonable times as may be requested in writing by such Preferred Shareholder;
provided that such Preferred Shareholder agrees to keep confidential any
information so obtained; provided further that such Preferred Shareholder may be
excluded from access to any material, records or other information if the
Company is restricted from making such disclosure pursuant to a bona fide
agreement with a third party or if such disclosure will jeopardize the
attorney-client privilege.
8.3 TERMINATION OF INFORMATION AND INSPECTION RIGHTS. The rights and
covenants set forth in Sections 8.1 and 8.2 shall terminate and be of no further
force or effect upon the earlier occurrence of (i) the closing of a Qualified
IPO and (ii) a Liquidation Event.
8.4 GOVERNMENTAL/SECURITIES FILINGS. For three (3) years after the time
when the Company becomes subject to the filing requirements of the Exchange Act
or any other organized securities exchange, the Company shall deliver to each
Preferred Shareholder copies of any quarterly, annual, extraordinary, or other
reports filed by the Company with the Commission or any other relevant
securities exchange, regulatory authority or government agency, and copies of
any annual reports to the members or other materials delivered to any other
shareholder.
8.5 UNITED STATES TAX MATTERS.
(a) The Company shall comply and shall cause its Subsidiaries to
comply with all record-keeping, reporting, and other requests necessary for the
Company and its Subsidiaries to allow any Holder (on its own behalf if it is a
U.S. person or on behalf of any of its owners that are U.S. persons) to comply
with any applicable U.S. federal income tax Law. The Company will also provide
14 Shareholders Agreement
any Holder with any information reasonably requested by such Holder to allow
such Holder (on its own behalf if it is a U.S. person or on behalf of any of its
owners that are U.S. persons) to comply with any applicable U.S. federal income
tax Law.
(b) Within forty-five (45) days from the end of each taxable year of
the Company, the Company shall determine whether the Company was a passive
foreign investment company ("PFIC") within the meaning of Section 1297 of the
Internal Revenue Code of 1986, as amended (the "CODE") in such taxable year
(including whether any exception to PFIC status may apply) or is or may be
classified as a partnership or branch for U.S. federal income tax purposes for
such taxable year. If the Company determines it is a PFIC in such taxable year,
it shall promptly inform the Holders of such status and shall provide or cause
to be provided such information as a Holder may reasonably request in writing
(on its own behalf if it is a U.S. person or on behalf of any of its owners that
are U.S. persons) so as to enable such Holder (or such owner of such Holder, as
the case may be) to elect to treat the Company (as well as any entity treated as
a corporation for U.S. tax purposes in which the Company owns or proposes to
acquire a direct or indirect equity interest) as a "qualified electing fund"
(within the meaning of Section 1295 of the Code); provided, however, that the
Company shall be deemed to have discharged its obligation under this sentence
with respect to any such entity that it does not Control if it has used its
reasonable best efforts to cause such non-Controlled entity to provide such
reasonably requested information. For the avoidance of doubt, if the Company
determines that it was a PFIC in a taxable year, the Company shall be deemed to
have discharged its obligations under this paragraph if it provides or causes to
be provided to the Investors or any requesting Holder, within sixty (60) days of
the end of such taxable year, a complete and accurate "PFIC Annual Information
Statement", in the form of Exhibit A attached to this Agreement, as applicable
for the Company and for each entity, in which the Company owns an equity
interest at any time during such year, that is a PFIC; provided, however, that
the Company shall be deemed to have discharged its obligation under this
sentence with respect to any such entity that it does not Control if it has used
its reasonable best efforts to cause such non-Controlled entity to provide such
statement.
(c) The Company shall also obtain and provide reasonably promptly upon
reasonable request from a Holder any and all other information necessary for
such Holder to comply with the provisions of this agreement. English
translations of such information will be provided upon request, provided that
any Holder requesting such translation shall bear the cost thereof.
(d) The Company shall, if requested by the Investors or any Holder
holding ten percent (10%) or more of the Company's shares on a fully-diluted
basis that is a U.S. person or that has owners that themselves are U.S. persons
and beneficially own at least ten percent (10%) of the Company's shares on a
fully-diluted basis, cooperate in determining whether it would be desirable,
reasonable and appropriate for the Company and/or any Subsidiary to elect to be
classified as a partnership or branch for U.S. federal income tax purposes and,
if so, to take all reasonable steps to cause any such elections to be made.
9. VOTING AGREEMENT
9.1 ELECTION OF DIRECTORS.
(a) Designation and Election of Series A Directors. For so long as
SAIF holds any Preferred Shares, at each election of the Series A Directors,
each holder of Series A Preferred Shares and each holder of Series A-1 Preferred
Shares shall vote at any regular or special meeting of members, such number of
Series A Preferred Shares and Series A-1 Preferred Shares as may be necessary,
or in lieu of any such meeting, shall give such holder's written consent with
respect to such number of Series A Preferred Shares and Series A-1 Preferred
Shares (1) as may be necessary to elect as the Series A Directors two (2)
individuals designated by SAIF and (2) against any other Series A Director
nominee that was not designated by SAIF. The Series A Directors shall initially
be Xxxxxx Xxx and Xxx Xxxx.
15 Shareholders Agreement
(b) Designation and Election of Common Directors. At each election of
Common Directors (as such term is defined in the Memorandum and Articles of
Association, as amended and restated from time to time), each holder of
outstanding Common Shares shall vote at any regular or special meeting of
members such number of Common Shares as may be necessary, or in lieu of any such
meeting, shall give such holder's written consent, as the case may be, with
respect to such number of Common Shares (1) as may be necessary to elect as the
Common Directors three (3) individuals designated by the holders of a majority
of the then outstanding Common Shares and (2) against any other Common Director
nominee not so designated. The Common Directors shall initially be Ma Xiaofeng,
Xxxx Xxxxxxx and Xxxx Xxx.
(c) Designation and Election of Independent Directors. At each
election of Independent Directors (as such term is defined in the Memorandum and
Articles of Association, as amended and restated from time to time), each holder
of Preferred Shares and each holder of Common Shares shall vote at any meeting
of members, such number of Common Shares and Preferred Shares as may be
necessary, or in lieu of any such meeting, shall give such holder's written
consent, as the case may be, with respect to such number of Common Shares and
Preferred Shares (1) as may be necessary to elect as the Independent Directors
two (2) individuals designated by unanimous consent of the Company's Board of
Directors and (2) against any other Independent Director nominee that has not
received such unanimous consent of the Company's Board of Directors. The
Independent Directors seats shall initially be vacant.
9.2 BOARD OBSERVERS. For so long as SAIF holds any Preferred Shares, SAIF
shall have the right, from time to time, and at any time, to designate one
individual that is an employee or officer of SAIF (the "OBSERVER") to attend all
meetings of the Board and all committees thereof (whether in person, by
telephone or other) in a non-voting observer capacity. The Company shall provide
to the Observer, concurrently with the members of the Board, and in the same
manner, notice of such meeting and a copy of all materials provided to such
members.
9.3 ALTERNATE. Subject to applicable Law, the Series A Directors shall be
entitled to appoint alternates to serve at any Board meeting, and such
alternates shall be permitted to attend all Board meetings and vote on behalf of
the Series A Directors.
9.4 MEETINGS AND EXPENSES. The Company shall reimburse all reasonable,
documented expenses of the Series A Directors related to all Board activities,
including but not limited to attending the Board meetings.
9.5 ASSIGNMENT. Regardless of anything else contained herein, the rights of
SAIF under this Section 9 are non-transferable and non-assignable (including
without limitation by operation of law).
9.6 AMENDMENT. So long as SAIF holds any Preferred Shares, no right of SAIF
under this Section 9 may be amended or waived (either generally or in a
particular instance and either retroactively or prospectively) without the
written consent of SAIF.
9.7 DIRECTORS' INSURANCE AND INDEMNIFICATION. After the Company's IPO, the
Company shall provide customary insurance coverage for members of its Board of
Directors. The Memorandum and Articles of Association of the Company shall at
all times provide that the Company shall indemnify the members of the Company's
Board of Directors to the maximum extent permitted by the Law of the
jurisdiction in which the Company is organized.
9.8 BOARD MEETINGS. The Company shall use its reasonable best efforts to
hold no less than one Board meeting during each calendar quarter.
9.9 ESOP. Without the consent of SAIF or its designees on the Board of
Directors of the Company, no issuances under plans, agreements, or arrangements
providing for the issuance of
16 Shareholders Agreement
shares or options or other securities to employees, consultants, officers or
directors of the Company or its Subsidiaries ("ESOP") may be made. Upon any
adjustment to the Series A Conversion Price (as defined in the Memorandum and
Articles) pursuant to Clause 10(iv)(d)(6) of the Memorandum and Articles, the
Company shall adjust the number of shares authorized for issuance under the ESOP
so that the aggregate number of shares then issued, or reserved for issuance,
under the ESOP then represents 11.69% of the total share capitalization of the
Company on a fully diluted, as converted basis, and the Investors and the Common
Shareholders shall take such actions as the Company may reasonably request in
connection therewith. One sixth (1/6) of the initial shares reserved under the
ESOP shall be issued to the directors of the Company designated by SAIF (subject
to such upward adjustment) pursuant and subject to the terms and conditions of
the ESOP. Unless the Board of Directors of the Company unanimously agrees
otherwise, all shares or options or other securities issued after the date
hereof under an ESOP shall be subject to the following vesting schedule:
twenty-five percent (25%) to vest on the first anniversary of such issuance,
with the remaining seventy-five percent (75%) to vest monthly thereafter in
thirty-six (36) equal monthly installments.
9.10 QUALIFIED IPO. Subject to applicable Laws, each of the Company and
holders of the Common Shares shall use their reasonable best efforts to
effectuate the closing of a Qualified IPO prior to March 31, 2008. In the event
of the closing of a Qualified IPO, the Company and holders of Common Shares
agree to use their respective reasonable best efforts, subject to applicable
Laws, to minimize restrictions on the transfer of any Series A Preferred Shares
or Series A-1 Preferred Shares held by the Investors (or Common Shares that have
been converted from such Series A Preferred Shares and such Series A-1 Preferred
Shares).
9.11 USE OF PROCEEDS. The Company shall use the proceeds that it receives
pursuant to the Share Purchase Agreement for business expansion, working
capital, mergers and acquisition and for other purposes in accordance with the
business plan and budget of the Company.
10. ASSIGNMENTS AND TRANSFERS; NO THIRD PARTY BENEFICIARIES. Except as otherwise
provided herein, this Agreement and the rights and obligations of the parties
hereunder shall inure to the benefit of, and be binding upon, their respective
successors, assigns and legal representatives, but shall not otherwise be for
the benefit of any third party. The rights of any Holder hereunder (including,
without limitation, registration rights) are assignable in connection with the
transfer (subject to applicable securities and other Laws) of Equity Securities
held by such Holder but only to the extent of such transfer; provided, however,
that (1) the transferor shall, prior to the effectiveness of such transfer,
furnish to the Company written notice of the name and address of such transferee
and the Equity Securities that are being assigned to such transferee, and (2)
such transferee shall, concurrently with the effectiveness of such transfer,
become a party to this Agreement as a Holder and be subject to all applicable
restrictions set forth in this Agreement. This Agreement and the rights and
obligations of any party hereunder shall not otherwise be assigned without the
mutual written consent of the other parties.
11. MISCELLANEOUS.
11.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the Laws of the State of New York, without regard to principles of conflicts of
law thereunder.
11.2 DISPUTE RESOLUTION.
(a) Any dispute, controversy or claim arising out of or relating to
this Agreement, or the interpretation, breach, termination or validity hereof,
shall first be subject to resolution through consultation of the parties to such
dispute, controversy or claim. Such consultation shall begin within seven (7)
days after one party hereto has delivered to the other party hereto a written
request for such consultation. If within thirty (30) days following the
commencement of such consultation the dispute cannot be resolved, the dispute
shall be submitted to arbitration upon the request of either party with notice
to the other.
17 Shareholders Agreement
(b) The arbitration shall be conducted in Hong Kong under the auspices
of the Hong Kong International Arbitration Centre (the "CENTRE"). There shall be
three arbitrators. The complainant or complainants, on the one hand, and the
respondent or respondents, on the other hand, shall each select one arbitrator
within thirty (30) days after giving or receiving the demand for arbitration.
Such arbitrators shall be freely selected, and the parties shall not be limited
in their selection to any prescribed list. The Chairman of the Centre shall
select the third arbitrator, who shall be qualified to practice law in New York.
If either party does not appoint an arbitrator who has consented to participate
within thirty (30) days after selection of the first arbitrator, the relevant
appointment shall be made by the Chairman of the Centre.
(c) The arbitration proceedings shall be conducted in English. The
arbitration tribunal shall apply the Arbitration Rules of the Centre in effect
at the time of the arbitration. However, if such rules are in conflict with the
provisions of this Section 11.2, including the provisions concerning the
appointment of arbitrators, the provisions of this Section 11.2 shall prevail.
(d) The arbitrators shall decide any dispute submitted by the parties
to the arbitration strictly in accordance with the substantive Law of New York
and shall not apply any other substantive Law.
(e) Each party hereto shall cooperate with the other in making full
disclosure of and providing complete access to all information and documents
requested by the other in connection with such arbitration proceedings, subject
only to any confidentiality obligations binding on such party.
(f) The award of the arbitration tribunal shall be final and binding
upon the disputing parties, and either party may apply to a court of competent
jurisdiction for enforcement of such award.
(g) Either party shall be entitled to seek preliminary injunctive
relief, if possible, from any court of competent jurisdiction pending the
constitution of the arbitral tribunal.
11.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile and e-mailed
copies of signatures shall be deemed to be originals for purposes of the
effectiveness of this Agreement.
11.4 NOTICES. Any notice required or permitted pursuant to this Agreement
shall be given in writing and shall be given either personally or by sending it
by next-day or second-day courier service, fax, electronic mail or similar means
to the address as shown below the signature of such party on the signature page
of this Agreement (or at such other address as such party may designate by 15
days' advance written notice to the other parties to this Agreement given in
accordance with this Section). Where a notice is sent by next-day or second-day
courier service, service of the notice shall be deemed to be effected by
properly addressing, pre-paying and sending by next-day or second-day service
through an internationally-recognized courier a letter containing the notice,
with a confirmation of delivery, and to have been effected at the expiration of
two days after the letter containing the same is sent as aforesaid. Where a
notice is sent by fax or electronic mail, service of the notice shall be deemed
to be effected by properly addressing, and sending such notice through a
transmitting organization, with a written confirmation of delivery, and to have
been effected on the day the same is sent as aforesaid.
11.5 HEADINGS AND TITLES. Headings and titles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
18 Shareholders Agreement
11.6 EXPENSES. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
11.7 ENTIRE AGREEMENT: AMENDMENTS AND WAIVERS. This Agreement (including
the Schedules and Exhibits hereto) constitutes the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof.
Any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of (i) the
Company, (ii) Common Shareholders holding a majority of the then-outstanding
Equity Securities then held by all Common Shareholders assuming the exercise,
conversion and exchange of any Common Share Equivalents (provided that any
amendment that disproportionately and adversely affects any Common Shareholder
shall also require the consent of such affected Common Shareholder) and (iii)
Holders of at least a majority of the then outstanding Registrable Securities.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Registrable Securities, each future holder of
all such Registrable Securities, and the Company.
11.8 SEVERABILITY. If a provision of this Agreement is held to be
unenforceable under applicable Laws, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
11.9 FURTHER ASSURANCES. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the intent of this Agreement.
11.10 RIGHTS CUMULATIVE. Each and all of the various rights, powers and
remedies of a party hereto will be considered to be cumulative with and in
addition to any other rights, powers and remedies which such party may have at
law or in equity in the event of the breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy will
neither constitute the exclusive election thereof nor the waiver of any other
right, power or remedy available to such party.
11.11 NO WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants, or conditions hereof will not be deemed a waiver of such term,
covenant, or condition, nor will any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right, power or remedy power hereunder
at any one or more times be deemed a waiver or relinquishment of such right,
power or remedy at any other time or times.
11.12 NO PRESUMPTION. The parties acknowledge that any applicable Law that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived. If
any claim is made by a party relating to any conflict, omission or ambiguity in
the provisions of this Agreement, no presumption or burden of proof or
persuasion will be implied because this Agreement was prepared by or at the
request of any party or its counsel.
[The remainder of this page is intentionally left blank.]
19 Shareholders Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMPANY: ATA INC.
By:
---------------------------------------------
Name: Ma Xiaofeng
Capacity: Authorized Signatory
Address:
0xx Xxxxx Xxxx Xxxxxxxx
Xx. 0 Xxxx Xxx Men Nei Gong Yuan Xi Jie
Xxxxxxx 000000, Xxxxxx'x Xxxxxxxx of China
Fax: x00(00) 0000-0000
Signature Page Shareholders Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INVESTORS: SB ASIA INVESTMENT FUND II, L.P.
By:
---------------------------------------------
Name: Xxxxxx X. Xxx
Capacity: Authorized Signatory
Address:
c/o M&C Corporate Services Limited
PO Box 309GT
Xxxxxx House, South Church Street
Xxxxxx Town, Grand Cayman
Cayman Islands
With a copy to:
x/x XXXX Xxxxxxxx
0000 Xxxxx Resources Xxxxxxxx
Xx. 0 Xxxxxxxxxxxxx Xxxxxx
Xxxxxxx 000000, Xxxxxx'x Xxxxxxxx of China
Attention: Xxx Xxxx
Fax x00 (00) 0000-0000
And a copy to:
x/x XXXX Xxxxxxxx
Xxxxxx 0000-0000, Two Xxxxxxx Xxxxx
00 Xxxxxxxxx, Xxxx Xxxx
Xxxxxxxxx: Xxxxxxx Xxx
Fax: x(000) 0000-0000
WINNING KING LTD
By:
---------------------------------------------
Name: Xxx Xxxxxxx
Capacity: Authorized Signatory
Address:
Xxxx 00X, Xx. 0, Xxxxxxxx Xxxxxxxxx Xxxxx Palace
Madian
Haidian District
Beijing, People's Republic of China
Signature Page Shareholders Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMMON SHAREHOLDERS: (CHINESE CHARACTERS) (MA XIAOFENG)
-------------------------------------------------
ID Number: G02709604
Address: 0xx Xxxxx Xxxx Xxxxxxxx
Xx. 0 Xxxx Xxx Men Nei Gong Yuan Xi Jie
Beijing 100005, PRC
Fax: x00(00) 0000-0000
(CHINESE CHARACTERS) (XXXX XXX)
-------------------------------------------------
ID Number: G02736884
Address: 0xx Xxxxx Xxxx Xxxxxxxx
Xx. 0 Xxxx Xxx Men Nei Gong Yuan Xi Jie
Beijing 100005, PRC
Fax: x00(00) 0000-0000
(CHINESE CHARACTERS) (ZHENG ZHENXIU)
-------------------------------------------------
ID Number: X00000000
Address: 0xx Xxxxx Xxxx Xxxxxxxx
Xx. 0 Xxxx Xxx Men Nei Gong Yuan Xi Jie
Beijing 100005, PRC
Fax: x00(00) 0000-0000
(CHINESE CHARACTERS) (XXX XXXXX)
-------------------------------------------------
ID Number: 41030519580503402X
Address: Rm 1210, Kunlun Dushi, No.1, Guomao Yiheng Road,
Haikou, Hainan Province 570105, PRC
PRO-WINNER LIMITED
By:
---------------------------------------------
Name: Xxxx Xxxxxxx
Capacity: Authorized Signatory
Address: 0xx Xxxxx Xxxx Xxxxxxxx
Xx. 0 Xxxx Xxx Men Nei Gong Yuan Xi Jie
Beijing 100005, PRC
Fax: x00(00) 0000-0000
Signature Page Shareholders Agreement
SCHEDULE A
COMMON SHAREHOLDERS
(CHINESE CHARACTERS) (MA XIAOFENG)
(CHINESE CHARACTERS) (XXXX XXX)
(CHINESE CHARACTERS) (ZHENG ZHENXIU)
(CHINESE CHARACTERS) (XXX XXXXX)
PRO-WINNER LIMITED
Schedule A Shareholders Agreement
EXHIBIT A
[Must be signed by an authorized representative of the Company]
PFIC ANNUAL INFORMATION STATEMENT
PFIC Annual Information Statement pursuant to U.S. Treasury Regulation Section
1.1295-1(g).
_________________________ (the "COMPANY") hereby represents that:
1. This PFIC Annual Information Statement applies to the Company's taxable
year beginning on ________ and ending on _________.
2. The pro rata shares of the Company's ordinary earnings and net capital gain
attributable to the U.S. Shareholder (directly or indirectly through any
other entity that holds the investment in the Company) for the taxable year
specified in paragraph (1) are:
Ordinary Earnings: $_____________
Net Capital Gain: $______________
3. The amount of cash and the fair market value of other property distributed
or deemed distributed by the Company to the U.S. Shareholder during the
taxable year specified in paragraph (1) are as follows:
Cash: $_____________________________
Fair Market Value of Property: $___________________
4. The Company will permit the U.S. Shareholder to inspect the Company's
permanent books of account, records, and such other documents as may be
maintained by the Company that are necessary to establish that the
Company's ordinary earnings and net capital gain are computed in accordance
with U.S. Federal income tax principles, and to verify these amounts and
the U.S. Shareholders direct or indirect pro rata shares thereof; provided,
that (i) a Company representative shall, at the Company's option, accompany
the Investors on any such inspection, and (ii) the Company shall not be
required to permit such inspection if such inspection would violate
applicable Laws, regulations or policies of the PRC.
By: ________________________
Title:
Date:
Exhibit A Shareholders Agreement
