EXHIBIT 4.5
EXECUTION COPY
SHAREHOLDERS AGREEMENT
AMONG
INSPIRATION PARTNERS LIMITED,
YINGLI POWER HOLDING COMPANY LTD.,
XXXXXXXXX XXXX
AND
YINGLI GREEN ENERGY HOLDING COMPANY LIMITED
DATED AS OF SEPTEMBER 20, 2006
Table of Contents
SECTION 1. Certain Definitions............................................ 1
SECTION 2. Purchase Price Adjustment...................................... 5
2.1 The 2006 Adjustment............................................ 5
2.2 The 2007 Adjustment............................................ 5
2.3 Conversion..................................................... 6
SECTION 3. Financial Statements and Reports; Information and
Inspection Rights; Confidentiality............................. 6
3.1 Financial Statements and Reports to Shareholders............... 6
3.2 Information and Inspection Rights.............................. 6
3.3 Confidentiality................................................ 7
SECTION 4. Corporate Governance........................................... 7
4.1 Board Composition.............................................. 7
4.2 Investor Representation at Subsidiaries........................ 8
4.3 Appointment of Chief Financial Officer......................... 8
4.4 Audit Committee................................................ 8
4.5 Compensation Committee......................................... 8
4.6 Meetings of the Board; Quorum; Telephonic Meetings............. 8
4.7 Action by Written Consent...................................... 8
4.8 Expenses....................................................... 9
4.9 Indemnification................................................ 9
4.10 Items Requiring Unanimous Consent.............................. 9
SECTION 5. Right of Participation......................................... 9
5.1 Right of Participation With Respect to New Securities.......... 9
5.2 Issuance Notice................................................ 9
5.3 Sale of New Securities......................................... 10
SECTION 6. Right of First Refusal; Co-Sale Right.......................... 10
6.1 Right of First Refusal......................................... 10
6.2 Co-Sale Right.................................................. 11
6.3 Sale by the Existing Shareholder............................... 12
6.4 No Adverse Effect.............................................. 12
6.5 Exempt Transfers............................................... 13
6.6 Prohibited Transfer............................................ 13
6.7 Restrictions on the Transfer by Holders of the Series A
Preferred Shares............................................... 13
SECTION 7. Demand Registration............................................ 13
7.1 Request for Registration on Form Other Than Form F-3........... 13
7.2 Request for Registration on Form F-3........................... 14
7.3 Right of Deferral.............................................. 14
7.4 Registration of Other Securities in Demand Registration........ 15
7.5 Underwriting in Demand Registration............................ 16
7.6 Other Securities Laws in Demand Registration................... 17
7.7 Other Registration Rights...................................... 17
SECTION 8. Piggyback Registration......................................... 17
8.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities......................................... 17
8.2 Underwriting in Piggyback Registration......................... 18
SECTION 9. Expenses of Registration....................................... 19
SECTION 10. Termination of Registration Rights............................. 20
SECTION 11. Registration Procedures and Obligations........................ 20
SECTION 12. Information Furnished by Holder................................ 22
SECTION 13. Indemnification................................................ 22
13.1 Company's Indemnification of the Holders....................... 22
13.2 Holder's Indemnification of Company............................ 22
13.3 Condition to Indemnity......................................... 23
13.4 Indemnification Procedure...................................... 23
13.5 Contribution................................................... 24
13.6 Conflicts...................................................... 24
13.7 Survival of Obligations........................................ 24
SECTION 14. Lock-Up........................................................ 24
SECTION 15. No Action Letter or Opinion of Counsel in lieu of
Registration................................................... 25
SECTION 16. Reports Under the Exchange Act................................. 25
SECTION 17. Transfer of Rights............................................. 26
SECTION 18. Legend; Stop Transfer Instructions............................. 26
18.1 Legend......................................................... 26
18.2 Stop Transfer Instructions..................................... 27
SECTION 19. Covenants...................................................... 27
SECTION 20. Conflict with Charter Documents................................ 29
SECTION 21. Miscellaneous.................................................. 29
21.1 Governing Law.................................................. 29
21.2 Dispute Resolution............................................. 29
21.3 Counterparts and Facsimile Execution........................... 30
21.4 Headings....................................................... 30
21.5 Notices........................................................ 30
21.6 Amendment of Agreement......................................... 31
21.7 Severability................................................... 31
21.8 Entire Agreement; Successors and Assigns....................... 31
21.9 Assignability.................................................. 31
21.10 Termination.................................................... 32
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SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT, dated as of September 20, 2006 (the
"AGREEMENT"), is entered into by and among Yingli Green Energy Holding Company
Limited, an exempted company organized under the laws of the Cayman Islands (the
"COMPANY"), Yingli Power Holding Company Ltd., an international business company
incorporated under the laws of the British Virgin Islands (the "HOLDCO") and Xx.
Xxxxxxxxx Xxxx (together with the Holdco, collectively, the "EXISTING
SHAREHOLDER"), and Inspiration Partners Limited, an international business
company incorporated under the laws of the British Virgin Islands (the
"INVESTOR", and together with the Existing Shareholder, the "SHAREHOLDERS", and
together with the Existing Shareholder and the Company, the "PARTIES").
RECITALS
WHEREAS:
(A) The Investor and the Company have entered into a Series A Preferred
Share Purchase Agreement as of even date herewith (the "PURCHASE AGREEMENT");
(B) In order to induce the Company to enter into the Purchase Agreement and
to induce the Investor to invest funds in the Company pursuant to the Purchase
Agreement, the Parties desire to set forth certain rights and obligations of the
Existing Shareholders, the Investor and the Company as hereinafter provided; and
(C) The respective obligation of the Company and the Investor to consummate
the transactions contemplated in the Purchase Agreement is conditioned upon the
execution and delivery by the Parties of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and agreements of the Parties contained herein, the Parties agree as
follows:
SECTION 1. Certain Definitions. As used in this Agreement, the following
terms have the following respective meanings:
"2006 ACTUAL EARNINGS" has the meaning set forth in Section 2.1 of
this Agreement.
"2007 ACTUAL EARNINGS" has the meaning set forth in Section 2.2 of
this Agreement.
"AFFILIATE" means, in respect of a Person, any other Person that
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person, including,
without limitation, any general partner, officer or director of such Person
and any venture capital fund now or hereafter existing which is controlled
by or under common control with one or more general partners or shares the
same management company with such Person.
"AGREEMENT" has the meaning set forth in the preamble to this
Agreement.
"BLUE SKY" means the statutes of any state of the United States of
America regulating the sale of corporate securities within that state.
"BOARD" means the Company's board of directors as constituted from
time to time.
"BUSINESS DAY" means any day other than Saturday, Sunday or any other
day on which banks in Hong Kong or the People's Republic of China (the
"PRC") are authorized or required by law to close.
"COMMISSION" means the United States Securities and Exchange
Commission, as constituted from time to time, or any successor agency
charged with administering the Securities Act and/or the Exchange Act.
"CONTROL" with respect to any third Person means the possession,
directly or indirectly, of the power or the ability to direct or cause the
direction of the management and affairs of such third Person whether,
through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership,
directly or indirectly, of securities having the power to elect a majority
of the board of directors or similar body of such third Person.
"CONVERSION SHARES" has the meaning set forth in Section 3.2 of this
Agreement.
"CO-SALE RIGHT" has the meaning set forth in Section 6.2 of this
Agreement.
"DAMAGES" has the meaning set forth in Section 13.1 of this Agreement.
"EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
promulgated thereunder, all as from time to time in effect.
"FORM F-3" means Form F-3 issued by the Commission or any
substantially similar form then in effect.
"GROUP" means the Company, the Operating Subsidiary and their
respective subsidiaries from time to time, and "GROUP COMPANY" means, as
applicable, each of the Company, the Operating Subsidiary, and their
respective subsidiaries from time to time.
"HOLDER" means any holder of outstanding Registrable Securities.
"INITIATING HOLDERS" means Holders who in the aggregate hold at least
thirty-three percent (33%) of the Registrable Securities.
"ICC" has the meaning set forth in Section 21.2 of this Agreement.
"INVESTOR" has the meaning set forth in the preamble of this
Agreement.
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"INVESTOR NOMINEE" has the meaning set forth in Section 4.1(a) of this
Agreement.
"ISSUANCE NOTICE" has the meaning set forth in Section 5.2 of this
Agreement.
"MAJORITY SERIES A PREFERRED SHAREHOLDERS" has the meaning set forth
in Section 5.1 of this Agreement.
"NEW SECURITIES" means any shares of the Company, whether now
authorized or not, and any rights, options, or warrants to purchase shares
of the Company, and securities of any type whatsoever that are, or may
become, convertible into shares of the Company, provided that "New
Securities" does not include: (a) the Series A Preferred Shares purchased
under the Purchase Agreement; (b) Ordinary Shares issuable upon conversion
of the Series A Preferred Shares; (c) securities offered to the public
pursuant to a Registration Statement; (d) Ordinary Shares issuable pursuant
to the exercise of warrants, rights or options, issued or issuable to
officers, directors, and employees of, and consultants to, any Group
Company pursuant to the Company's employee stock option plans, provided
that the number of such Ordinary Shares shall not exceed that certain
percentage of the Ordinary Shares Equivalent then outstanding (the "PRIMARY
ESOP PERCENTAGE"), which percentage shall be determined prior to the
Closing (as defined in the Purchase Agreement) in accordance with the terms
of the Purchase Agreement; (e) shares issued without consideration pursuant
to a stock dividend, stock split, or similar transaction; and (f) all
Ordinary Shares or other securities hereafter issued in connection with or
as consideration for acquisition or licensing of technology.
"ORDINARY SHARES" means the Company's Ordinary Shares, par value
US$0.01 per share.
"ORDINARY SHARES EQUIVALENT" means, collectively, the issued and
outstanding Ordinary Shares and the Ordinary Shares into which the issued
and outstanding Series A Preferred Shares and other securities are
convertible.
"OPERATING SUBSIDIARY" means Baoding Tianwei Yingli New Energy
Resources Co., Ltd., a company with limited liability organized under the
laws of the PRC.
"PERSON" shall mean any individual, sole proprietorship, partnership,
estate, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, governmental or regulatory
authority or other entity of any kind or nature.
"PRIMARY ESOP PERCENTAGE" has the meaning set forth in subclause (d)
of the definition of "New Securities" in this Section 1.
"PRO RATA SHARE" means the ratio of: (a) the total number of Ordinary
Shares Equivalent held by the Majority Series A Preferred Shareholders
immediately before the proposed allotment and issue of New Securities to
(b) the total number of Ordinary Shares Equivalent held by all shareholders
of the Company immediately before the proposed allotment and issue of New
Securities.
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"QUALIFIED IPO" means the closing of the Company's first firm
commitment, underwritten public offering of Ordinary Shares or shares
representing Ordinary Shares in connection with which Ordinary Shares or
shares representing Ordinary Shares are listed and become publicly traded
on an internationally recognized securities exchange or the NASDAQ National
Market, provided, however, that such listing shall result in net proceeds
(after payment of the underwriters' discounts and commissions and the
offering-related expenses) to the Company of at least US$50 million and (b)
a total market capitalization of the Company of at least US$500 million.
"REGISTER", "REGISTERED", and "REGISTRATION" means a registration of
securities effected by preparing and filing a registration statement on
Form X-0, X-0, XX-0, F-3 or S-3 in compliance with the Securities Act, or
on any comparable form in connection with a registration in a jurisdiction
other than the United States (collectively, a "REGISTRATION STATEMENT"),
and the declaration or ordering of the effectiveness of that Registration
Statement by the Commission.
"REGISTRABLE SECURITIES" means (a) the Ordinary Shares issued or
issuable upon conversion or exercise of any of the Series A Preferred
Shares and (b) Ordinary Shares issued or issuable pursuant to stock splits,
stock dividends and similar distributions to the Investor, or in exchange
for or in replacement of the Ordinary Shares referred to clause (a) above,
excluding in all cases, however, any Registrable Securities sold by a
Person in a transaction in which its rights under Sections 7 or 8 hereof
are not assigned or any shares for which registration rights have
terminated pursuant to Section 10.
"REGISTRATION EXPENSES" means all expenses incurred by the Company in
complying with Section 7 or 8 of this Agreement, including, without
limitation, all federal and state Registration, qualification, and filing
fees, printing expenses, any fees, commissions, expenses and disbursements
of underwriters customarily paid by similarly situated companies in
connection with underwritten offerings of equity securities to the public,
fees and disbursements of counsel for the Company and reasonable fees and
disbursements of one special counsel for all Holders (if different from
counsel to the Company), Blue Sky fees and expenses, and the expense of any
special audits incident to or required by any Registration.
"REGISTRATION STATEMENT" has the meaning set forth in the definition
of "Registration," above.
"RELATED PARTY" shall mean, with respect to any Person, (a) any
Affiliate of such Person, (b) each Person that serves as a director,
officer, partner, member, executor, or trustee of such Person (or in any
other similar capacity), (c) any Person with respect to which such Person
serves as a general partner or trustee (or in any other similar capacity),
and (d) any Person that has direct or indirect beneficial ownership of
voting securities or other voting interests representing at least ten
percent (10%) of the outstanding voting power or equity securities or other
equity interests (a "MATERIAL INTEREST") in such Person.
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"RIGHT OF FIRST REFUSAL" has the meaning set forth in Section 6.1 of
this Agreement.
"RIGHT OF PARTICIPATION" has the meaning set forth in Section 5.1 of
this Agreement.
"SECONDARY ESOP PERCENTAGE" has the meaning set forth in Section
6.5(a) of this Agreement.
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder, all as from time to time in effect.
"SELLING EXPENSES" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities pursuant to
this Agreement.
"SERIES A PREFERRED SHARE" means a Series A preferred share in the
capital of the Company, par value of US $0.01 each.
"SHARE" means any Ordinary Share or a Series A Preferred Share, as the
case may be.
"STOCK" has the meaning set forth in Section 6.1 of this Agreement.
"TRANSFER NOTICE" has the meaning set forth in Section 6.1 of this
Agreement.
"EXISTING SHAREHOLDERS" has the meaning set forth in Section 6.1 of
this Agreement.
"UNDERWRITERS' REPRESENTATIVE" has the meaning set forth in Section
7.5(a) of this Agreement.
"US GAAP" means generally accepted accounting principles in the United
States.
SECTION 2. Purchase Price Adjustment.
2.1 The 2006 Adjustment. If the Operating Subsidiary's consolidated
profit after taxes, excluding any non-recurring or extraordinary items, for the
year ended December 31, 2006 (the "2006 ACTUAL EARNINGS"), as determined by the
audited consolidated statements of income of the Operating Subsidiary for such
year as prepared by a "big four" accounting firm in accordance with US GAAP, is
less than US$35 million (or its RMB equivalent), the Existing Shareholder shall
transfer to the Investor, for no consideration, such number of Ordinary Shares
that the value of the Investor's ownership in the Company on a fully-diluted,
as-converted basis, immediately following such transfer, shall be equal to the
Investment Amount (as defined in the Purchase Agreement) divided by 51% of the
product of the 2006 Actual Earnings times eight (8).
2.2 The 2007 Adjustment. If the Operating Subsidiary's consolidated
profit after taxes, excluding any non-recurring or extraordinary items, for the
year ended December 31,
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2007 (the "2007 ACTUAL EARNINGS"), as determined by the audited consolidated
statements of income of the Company for such year as prepared by a "big four"
accounting firm in accordance with US GAAP, is less than 1.5 times the 2006
Actual Earnings, the Existing Shareholder shall transfer to the Investor, for no
consideration, such number of Ordinary Shares that the value of the Investor's
ownership in the Company on a fully-diluted, as-converted basis, immediately
following such transfer, shall be equal to the Investment Amount (as defined in
the Purchase Agreement) divided by 51% of the product of the 2007 Actual
Earnings times 5.3.
2.3 Conversion. Within the fifteen (15) days of a transfer of shares
under Section 2.1 or Section 2.2, the Existing Shareholder and the Company shall
cause, as soon as reasonably practicable, any Ordinary Shares transferred
pursuant to Section 2.1 or Section 2.2 hereof, as the case may be, to be
converted into Series A Preferred Shares at the conversion ratio applicable to
the date of such notice, as provided in the Company's Memorandum of Association.
SECTION 3. Financial Statements and Reports; Information and Inspection
Rights; Confidentiality
3.1 Financial Statements and Reports to Shareholders.
(a) The Company shall keep true and accurate books of account and
records in accordance with US GAAP, and make available to the each holder of
Series A Preferred Shares (each, a "SERIES A SHAREHOLDER") in a form reasonably
acceptable to the Series A Stockholders: (i) within thirty (30) days after the
end of each month, an unaudited unconsolidated monthly income statement, balance
sheet, and cash flow statement of the Operating Subsidiary; (ii) within one
hundred twenty (120) days after the end of each fiscal year of the Company, an
audited consolidated balance sheet of the Company (or, in the case of financial
statements as of and for the year ended December 31, 2006, the Operating
Subsidiary) as of the end of such year and audited consolidated statements of
income and cash flow for such year, which year-end financial statements shall be
prepared in accordance with US GAAP consistently applied and accompanied by an
unqualified opinion of a "big four" firm of independent public accountants;
(iii) at least thirty (30) days prior to the end of each fiscal year of the
Group, the annual budget of the Group for the next fiscal year; and (iv) upon
the written request by the Investor, any other information as the Investor shall
reasonably request.
(b) Notwithstanding anything in this Agreement to the contrary, the
Company may cease providing the information set forth in this Section 3.1(a)
during the period starting from the date sixty (60) days prior to the Company's
good faith estimate of the effective date of, and ending on a date one hundred
eighty (180) days after the effective date of, the Registration effecting the
Company' initial public offering pursuant to a Registration Statement, provided
that such estimated date of the Registration Statement is not postponed by more
than ninety (90) days.
3.2 Information and Inspection Rights. The Company covenants and
agrees that, commencing on the date of this Agreement, for so long as the
Investor, together with its Affiliates, holds any Series A Preferred Shares
and/or Ordinary Shares issued upon the conversion of such Series A Preferred
Shares in an amount not less than thirty-three percent
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(33%) of the outstanding Series A Preferred Shares or Ordinary Shares issued
upon the conversion of such Series A Preferred Shares (as the case may be) (the
"CONVERSION SHARES"),
(a) the Investor shall have standard inspection rights of the
facilities, records and books of the Group, including without limitation,
discussing the business, operations and conditions of the Group with its
directors, officers, employees, accountants, legal counsel and investment
bankers, provided that (i) such rights shall be exercised reasonably and at the
Investor's expense and (ii) the Company shall not be obligated to provide
information which it reasonably considers to be a trade secret or similar
sensitive proprietary information relating to the management and operations of
the Company or would adversely affect the attorney-client privilege between the
Company and its counsel; and
(b) the Company shall, as soon as reasonably practicable, notify the
Investor of all matters which in the Company's reasonable opinion is reasonably
expected to cause a material adverse change to the ability of the Company and
its subsidiaries to conduct their respective businesses as now conducted or own,
use or lease their respective assets and properties as now owned, used or
leased.
3.3 Confidentiality. The Investor agrees that it will keep
confidential and will not disclose, divulge or use for any purpose, other than
to monitor its investment in the Company, any confidential information obtained
from any Group Company pursuant to the terms of this Agreement, unless such
confidential information (i) is known or becomes known to the public in general
(other than as result of a breach of this Section 3.3) by the Investor), (ii) is
or has been independently developed or conceived by the Investor without use of
the Company's confidential information or (iii) is or has been made known or
disclosed to the Investor by a third party without a breach of any obligation of
confidentiality such third party may have to the Company; provided, however,
that the Investor may disclose confidential information (a) to its attorneys,
accountants, consultants and other professionals to the necessary to obtain
their services in connection with monitoring its investment in the Company, (b)
to any prospective investor of any Registrable Securities from the Investor as
long as such prospective investor agrees to be bound by the provisions of this
Section 3.3, (c) to any Affiliate, partner, member, stockholder or wholly owned
subsidiary of the Investor on a "need to know" basis, or (d) as may otherwise be
required by law, provided that the Investor takes reasonable steps to minimize
the extent of any such required disclosure. The Investor shall be liable for any
breach of this Section 3.3 by any person set forth in clauses (a), (b) and (c)
of the preceding sentence in this Section 3.3.
SECTION 4. Corporate Governance.
4.1 Board Composition.
(a) If and for so long as the Investor, together with its Affiliates,
holds at least thirty-three percent (33%) of the Conversion Shares, the Investor
shall be entitled to appoint, and to remove from office and replace one (1)
person as director of the Company. The director of the Company appointed by the
Investor pursuant to the foregoing provisions is herein referred to as the
"INVESTOR NOMINEE." The Investor Nominee shall have the right to appoint
alternates or proxies to attend any meeting of the Board and to vote on matters
before the Board on the behalf
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of the Investors. If the Investor, together with its Affiliates, ceases to hold
at least thirty-three percent (33%) of the Conversion Shares, the Investor shall
remove the Investor Nominee, or cause the Investor Nominee to resign, from the
Board, in each case, immediately following the appointment by the Existing
Shareholder of a replacement director therefor.
(b) The Existing Shareholder agrees that, at each meeting of the
shareholders of the Company called for the purpose of electing the members of
the Board, it shall vote all of its shares in the Company to elect the Series A
Director.
4.2 Investor Representation at Subsidiaries. Of the number of
directors the Company is entitled to nominate, remove and replace in the
Operating Subsidiary, the Investor shall be entitled to nominate, and to remove
from office and replace one director of the Operating Subsidiary.
4.3 Appointment of Chief Financial Officer. Subject to the prior
written consent of the Investor (which consent shall not be unreasonably
withheld), within sixty (60) days following the date of this Agreement, the
Company shall appoint the chief financial officer for employment with the
Company on a full-time basis, which officer shall be knowledgeable with respect
to the capital markets in the United States and shall be proficient in the
English language. The Investor agrees to use its best efforts to identify
qualified candidates for and facilitate the Company's timely appointment of a
chief financial officer pursuant to this Section 4.3.
4.4 Audit Committee. The Company shall establish and maintain an Audit
Committee, which shall include at least the Investor Nominee.
4.5 Compensation Committee. The Company shall establish and maintain a
Compensation Committee. The Compensation Committee shall make recommendations to
the full Board for such matters as management compensation, the Company's
benefit plans, and matters relating to the Company's option plans, if any, which
shall include at least the Investor Nominee.
4.6 Meetings of the Board; Quorum; Telephonic Meetings. The Board
shall meet at least once every three calendar months. A quorum for any meeting
of the Board shall consist of more than fifty percent (50%) of all the
directors, at least one of which shall be the Investor Nominee. The quorum for
any committee meeting of the Board shall consist of at least the Investor
Nominee. The Directors may participate in a meeting of the Board by means of a
conference telephone or other communication equipment through which all persons
participating in such meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
4.7 Action by Written Consent. Any action required or permitted to be
taken by the Board, either at a meeting or otherwise, may be taken without a
meeting if the Directors unanimously consent thereto in writing and the writing
or writings are filed with the minutes of the meeting of the Board.
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4.8 Expenses. The Company shall reimburse the Investor Nominee for all
reasonable expenses incurred by the Investor Nominee relating to Board's
activities, including but not limited to, expenses incurred to attend Board
meetings.
4.9 Indemnification. The Company's Memorandum of Association shall
provide for indemnification for the directors of the Company to the extent
permissible under applicable law. The Company shall also purchase liability
insurance for the Investor Nominee and other directors, on terms and conditions
mutually acceptable to the Investor and the Company.
4.10 Items Requiring Unanimous Consent. The Company and the Existing
Shareholder agree to procure that without the unanimous approval of the members
of the Board, the Company shall not:
(a) allot or issue any New Securities or permit the allotment or
issuance of any equity securities of any Group Company;
(b) declare or pay any dividend or make distribution on any shares of
the Company or permit any Group Company to make any distribution on its
equity;
(c) effect a recapitalization, reclassification or reorganization of
its shares or the shares or register capital of any Group Company; and
(d) amend the Articles of Association or Memorandum of Association of
the Company, or the constitutional documents of the Operating Subsidiary or
any of its subsidiaries.
4.11 Governance of Subsidiaries. Each party hereto will use its
commercially reasonable efforts to procure that the Operating Subsidiary and any
other Group Company take actions only as directed or permitted by the Company's
Board of Directors.
SECTION 5. Right of Participation.
5.1 Right of Participation With Respect to New Securities. Subject to
the provisions of Sections 5.2 and 5.3, the Company grants to each of the
holders of Series A Preferred Shares then outstanding the right of participation
(the "RIGHT OF PARTICIPATION") to purchase its Pro Rata Share of New Securities
which the Company may, from time to time prior to the Qualified IPO, propose to
allot and issue; provided that the Right of Participation, with respect to each
such proposed allotment and issuance, is exercised by holders of Series A
Preferred Shares representing at least 50% of the Series A Preferred Shares in
the aggregate then outstanding (collectively, the "MAJORITY SERIES A PREFERRED
SHAREHOLDERS", and each such shareholder, a "MAJORITY SERIES A PREFERRED
SHAREHOLDER"). The Company shall offer to each of the Majority Series A
Preferred Shareholders for subscription up to its Pro Rata Share of the New
Securities on the same terms and at the same price at which the Company proposes
to allot and issue the New Securities.
5.2 Issuance Notice. In the event the Company proposes to issue New
Securities, it shall give the holders of Series A Preferred Shares then
outstanding a written notice
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(the "ISSUANCE NOTICE") of its intention, describing the type of New Securities,
the price, the terms upon which the Company proposes to issue the same, an offer
for subscription the aggregate number of New Securities that such holders are
entitled to purchase pursuant to Section 5.1 of this Agreement, a statement that
such holders shall have thirty (30) days from the date of receipt of the
Issuance Notice to accept the offer for subscription under the Issuance Notice
(the "ISSUANCE NOTICE PERIOD), and a statement that no such holder shall be
entitled to exercise the Right of Participation unless the Majority Series A
Preferred Shareholders elect to exercise the Right of Participation. If the
Majority Series A Preferred Shareholders elect to exercise the Right of
Participation within the Issuance Notice Period, each of the holders of the
Series A Preferred Shares may elect to purchase up to its Pro Rata Share of the
New Securities for the price and upon the terms specified in the Issuance Notice
by (a) giving written notice to the Company within the Issuance Notice Period
and (b) sending payment for its Pro Rata Share of New Securities to the Company.
5.3 Sale of New Securities. If the Majority Series A Preferred
Shareholders fail to exercise the Right of Participation within the Issuance
Notice Period, the Company shall have sixty (60) days thereafter to sell or
enter into an agreement (pursuant to which the sale of New Securities covered by
the Issuance Notice shall be closed, if at all, within thirty (30) days after
the date of such agreement) to allot and issue the New Securities, at a price
and upon general terms no more favorable to the subscriber of the New Securities
than specified in the Issuance Notice. If the number of New Securities which the
Majority Series A Preferred Shareholders elect to subscribe in the aggregate is
less the aggregate number of New Securities that the Series A Preferred
Shareholders are entitled to purchase as stated in the Issuance Notice, the
Company shall have sixty (60) days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered by the Issuance Notice
shall be closed, if at all, within thirty (30) days after the date of such
agreement) to allot and issue up to such number of the New Securities as equal
to the difference between the number of New Securities which the Majority Series
A Preferred Shareholders elect to subscribe in the aggregate and the aggregate
number of New Securities that the Series A Preferred Shareholders are entitled
to purchase as stated in the Issuance Notice, at a price and upon general terms
no more favorable to the subscriber of the New Securities than specified in the
Issuance Notice. In the event the Company has not allotted and issued the New
Securities within this ninety (90) day period, the Company shall not thereafter
allot or issue any New Securities without first offering the New Securities to
holders of Series A Preferred Shares in the manner provided above.
SECTION 6. Right of First Refusal; Co-Sale Right.
6.1 Right of First Refusal.
(a) Subject to the provisions of this Section 6.1 and Sections 6.5 and
6.7 of this Agreement, if the Existing Shareholder proposes to sell or otherwise
transfer, directly or indirectly ("TRANSFER"), any interest in any Ordinary
Shares or other voting securities of the Company now owned or subsequently
acquired by the Existing Shareholder (the "STOCK"), then each of the holders of
the Series A Preferred Shares shall have a right of first refusal (the "RIGHT OF
FIRST REFUSAL") to purchase the Stock proposed to be Transferred; provided that
the Right of Participation, with respect each such Transfer, is exercised by the
Majority Series A Shareholders.
10
(b) The Existing Shareholder shall give a written notice (the
"TRANSFER NOTICE") to each of the holders of the Series A Preferred Shares
describing fully the proposed Transfer, including the number of shares proposed
to be Transferred, the proposed Transfer price, the name and address of the
proposed Transferee and a statement that no such holder shall be entitled to
exercise the Right of First Refusal unless the Majority Series A Shareholders
elect to exercise the Right of First Refusal. The Transfer Notice shall be
accompanied by a written certification by the Existing Shareholder that the
proposed transferee is a bona fide purchaser and the Transfer Notice constitutes
a binding commitment of the Existing Shareholder and the proposed transferee,
with or without conditions, for the Transfer of that Stock subject to the Right
of First Refusal of the Majority Series A Shareholders.
(c) The holders of Series A Preferred Shares shall then have the right
to purchase up to all of the Stock subject to the Transfer Notice at a price per
share equal to the proposed per share transfer price, by delivery of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to such holders; provided that the Majority
Series A Preferred Shareholders exercise such right.
6.2 Co-Sale Right.
(a) General. If the Existing Shareholder proposes to Transfer any
Stock or any interest therein to any person or entity, each of the holders of
Series A Preferred Shares shall have the right, exercisable upon written notice
to the Existing Shareholder within thirty (30) days after the date the Transfer
Notice is delivered to such holder, to participate in such sale of Stock on
substantially the same terms and conditions applicable to the Existing
Shareholder (the "CO-SALE RIGHT"); provided, however, that (i) the Co-Sale
Right, with respect to each such Transfer, is exercised by the Majority Series A
Shareholders, and (ii) the Co-Sale Right shall not apply to any Transfer of
Stock to the Majority Series A Shareholders pursuant to the exercise of the
Right of First Refusal under Section 6.1. Notice of exercise of the Co-Sale
Right shall indicate the number of shares of Stock each holder of Series A
Preferred Shares wishes to Transfer under the Co-Sale Right and include an
acknowledgment that the Co-Sale Right may not be exercised by such holder unless
the Majority Series A Shareholders elect to exercise the Co-Sale Right. If the
Majority Series A Preferred Shareholders elect to exercise the Co-Sale Right,
the holders of Series A Preferred Shares may Transfer in the aggregate up to the
number of shares of Stock equal to the product obtained by multiplying the
aggregate number of shares of the Stock proposed to be Transferred as set out in
the Transfer Notice by a fraction, the numerator of which is the number of Stock
held in the aggregate by such Majority Series A Preferred Shareholders
immediately before the Transfer and the denominator of which is the total number
of shares of Stock held, in the aggregate, by the Existing Shareholder and such
Majority Series A Preferred Shareholders immediately before the Transfer. If the
Majority Series A Preferred Shareholders exercise their Co-Sale Right in
accordance with the terms and conditions set forth in this Section 6.2, the
Existing Shareholder may only Transfer its shares of Stock if the proposed
transferee completes the purchase of the shares which such Majority Series A
Preferred Shareholders seek to sell pursuant to the exercise of the Co-Sale
Right.
(b) Delivery of Certificates. The Majority Series A Preferred
Shareholders shall effect their participation in the Transfer under this Section
6.2 by, promptly or no later than fifteen (15) days after the exercise of such
Majority Series A Preferred Shareholders of the Co-
11
Sale Right, delivering to the Existing Shareholder for Transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent the type and number of shares of Stock which such Majority
Series A Preferred Shareholders elect to Transfer; provided, however, that if
the prospective purchaser objects to the delivery of Series A Preferred Shares
in lieu of Ordinary Shares, such Majority Series A Preferred Shareholders shall
first convert the Series A Preferred Shares into Ordinary Shares and deliver
Ordinary Shares as provided in this Section 6.2. The Company agrees to make any
such conversion concurrent with and contingent upon the actual Transfer of such
shares to the prospective purchaser.
(c) Sales Proceeds. The stock certificate or certificates that the
Majority Series A Preferred Shareholders deliver to the Existing Shareholder
pursuant to Section 6.2(a) shall be transferred to the prospective purchaser in
consummation of the sale of the Stock pursuant to substantially the same terms
and conditions as specified in the Transfer Notice, and the Existing Shareholder
shall upon receiving the same from the prospective purchaser concurrently remit
to each of such Majority Series A Preferred Shareholders on a prorated basis
that portion of the sale proceeds to which such Majority Series A Preferred
Shareholder is entitled by reason of its participation in the Transfer. To the
extent that any prospective purchaser or purchasers prohibits assignment or
otherwise refuses to purchase shares or other securities from such Majority
Series A Preferred Shareholders, the Existing Shareholder shall not Transfer to
the prospective purchaser or purchasers any Stock unless and until,
simultaneously with the sale, the Existing Shareholder purchases those shares or
other securities from such Majority Series A Preferred Shareholders.
(d) Purchase and Sales Agreement. The terms and conditions of any sale
pursuant to this Section 6.2 shall be memorialized in, and governed by, a
written purchase and sales agreement with customary terms and provisions for
such a transaction; provided that no Majority Series A Preferred Shareholder
shall be required to give any representations or warranties other than those
reasonably requested relating to its title in and ownership of the shares and
information relating to such Majority Series A Preferred Shareholder in
connection with complying with the relevant exemptions of the Securities Act.
6.3 Sale by the Existing Shareholder. Subject to Section 6.6, if and
to the extent that the Majority Series A Preferred Shareholders do not exercise
its Right of First Refusal or Co-Sale Right with respect to the sale of the
Stock subject to the Transfer Notice within the relevant prescribed period, the
Existing Shareholder may, not later than ninety (90) days following delivery to
such Majority Series A Preferred Shareholders of the Transfer Notice, conclude a
bona fide Transfer of all of the Stock covered by the Transfer Notice on terms
and conditions not more favorable to the transferee or transferor than those
described in the Transfer Notice. Any proposed Transfer on terms and conditions
more favorable than those described in the Transfer Notice, as well as any
subsequent proposed transfer of any Stock by the Existing Shareholder, shall
again be subject to the Majority Series A Preferred Shareholders' Right of First
Refusal and Co-Sale Right and shall require compliance by the Existing
Shareholder with the procedures described in this Section 6.
6.4 No Adverse Effect. The exercise or non-exercise by the Majority
Series A Preferred Shareholders of the Right of First Refusal or the Co-Sale
Right shall not adversely
12
affect their rights to participate in subsequent transfers of Stock by the
Existing Shareholder subject to the provisions of this Section 6.
6.5 Exempt Transfers.
(a) Notwithstanding the foregoing, the Right of Refusal and the
Co-Sale Right shall not apply to (i) any transfer or transfers of Stock by the
Existing Shareholder to its Affiliates and (ii) the grant or sale by the
Existing Shareholder of up to a certain percentage of the Ordinary Shares (the
"SECONDARY ESOP PERCENTAGE") (which percentage shall be determined prior to the
Closing (as defined in the Purchase Agreement) in accordance with the terms of
the Purchase Agreement) to the Company's employees, provided that such employee
transferee shall agree to the same transfer restrictions set out in this Section
6.
(b) Notwithstanding the foregoing, the Right of First Refusal or the
Co-Sale Right shall not apply to the sale of any Stock to the public pursuant to
a Registration Statement filed with, and declared effective by, the Commission
under the Securities Act (or with respect to a Registration in a jurisdiction
other than the United States, with or by an equivalent agency under applicable
law in such jurisdiction).
6.6 Prohibited Transfer. No sale of the Stock to a transferee under
Section 6.5 shall be effective if a purpose or effect of such transfer shall
have been to circumvent the provisions in Sections 6.1 and 6.2. Each Shareholder
shall remain responsible for the performance of this Agreement by each
transferee of such Shareholder to whom the Stock is transferred. If any
Affiliate of any Shareholder to whom the Stock is transferred pursuant to
Section 6.5 ceases to be an Affiliate of such Shareholder from whom it acquired
such Stock pursuant to such provision, such Person shall re-convey such Stock to
such transferring Shareholder as soon as reasonably practicable after such
Person knows of its upcoming change of status immediately prior thereto. If such
change of status is not known until after its occurrence, the former Affiliate
shall make such transfer to such transferring Shareholder as soon as practicable
after the former Affiliate receives notice thereof.
6.7 Restrictions on the Transfer by Holders of the Series A Preferred
Shares. Any Series A Preferred Shares, or any classes of shares of the Company,
held by the Investor are freely transferable, subject to restrictions under
applicable laws, provided, however, that (i) the Investor shall give advance
written notice to the Company with respect to a proposed transfer of such
shares; (ii) the Investor shall not transfer such shares to any Person whose
principal business is in direct competition with the principal business of the
Company at the time of such transfer, and (iii) for a period of one year (1)
following the date of this Agreement, the Investor (or its Affiliates) shall not
transfer shares of the Company representing, on an aggregated basis, more than
50% of the Series A Preferred Shares (as determined on a fully-converted basis)
to a Person other than Affiliates of the Investor without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
SECTION 7. Demand Registration.
7.1 Request for Registration on Form Other Than Form F-3. Subject to
the terms of this Agreement, in the event that the Company receives from the
Initiating Holders at
13
any time six (6) months after the closing of the Company's initial public
offering of Ordinary Shares under a Registration Statement (other than a
Registration of securities in a Rule 145 transaction or of securities being
offered to the employees of the Group Companies pursuant to a stock option,
stock purchase or similar plan, a Registration on any form that does not include
substantially the same information as would be required to be included in a
Registration Statement covering the sale of the Registrable Securities, or a
Registration in which the only Ordinary Shares issuable upon conversion of debt
securities that are also being Registered), a written request that the Company
effect any Registration with respect to Registrable Securities on a form other
than Form F-3 for an offering of the then outstanding Registrable Securities,
the Company shall (i) within ten (10) days of the receipt thereof, give written
notice of the proposed Registration to all other Holders, and (ii) as soon as
practicable, use commercially reasonable efforts to effect the Registration of
the Registrable Securities specified in the request, together with any
Registrable Securities of any Holder as are specified in a written request from
such Holder given within twenty (20) days after written notice from the Company.
The Company shall not be obligated to take any action to effect any Registration
pursuant to this Section 7.1 after the Company has effected three (3)
Registrations pursuant to this Section 7.1 and each Registration has been
declared effective. The substantive provisions of Section 7.5 shall be
applicable to the Registration initiated under this Section 7.1.
7.2 Request for Registration on Form F-3. If the Initiating Holders
request that the Company file a Registration Statement on Form F-3 (or any
successor form to Form F-3, or any comparable form for a Registration in a
jurisdiction other than the United States) for a public offering, of shares of
Registrable Securities, the reasonably anticipated aggregate price to the public
of which, net of Selling Expenses, would not be less than US$5,000,000, and the
Company is a registrant entitled to use Form F-3 or comparable form to Register
the Registrable Securities for an offering, the Company shall use commercially
reasonable efforts to cause those Registrable Securities to be Registered for
the offering on that form and to cause those Registrable Securities to be
qualified in jurisdictions as the Holder or Holders may reasonably request. The
Company shall not be required to effect more than one Registration pursuant to
this Section 7.2 in any twelve (12) month period. The substantive provisions of
Section 7.5 shall be applicable to each Registration initiated under this
Section 7.2.
7.3 Right of Deferral. Notwithstanding anything in this Section 7 to
the contrary, the Company shall not be obligated to file a Registration
Statement pursuant to this Section 7:
(a) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
that Registration, qualification, or compliance, unless the Company is
already subject to service in that jurisdiction and except as may be
required by the Securities Act or other applicable law in a jurisdiction
other than the United States in which the Registration is being effected;
(b) if the Company, within fifteen (15) days of the receipt of the
request of any Initiating Holder(s), gives notice of its bona fide
intention to effect the filing of a Registration Statement with the
Commission or comparable regulatory agency for a Registration in a
jurisdiction other than the United States (other than a Registration of
securities in a Rule 145 transaction or of securities being offered to the
employees of the
14
Group Companies pursuant to a stock option, stock purchase or similar plan,
a registration relating to a corporate reorganization, a registration on
any form that does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
the Registrable Securities, or a registration in which the only Ordinary
Shares being registered is Ordinary Shares issuable upon conversion of debt
securities that are also being registered), then the Company shall have the
right to defer such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Holders requesting
Registration pursuant to Section 7.1 or Section 7.2, provided that the
Company may not utilize this right more than once in every twelve (12)
month period and that the Company shall not Register any other shares
during such twelve (12) month period. Any Registration of Registrable
Securities as a result of such efforts shall be deemed to have been
initiated by the Company, not by the Initiating Holders under Section 7.1,
and the original request by the Initiating Holders to Register Registrable
Securities shall instead be deemed a request to include the Registrable
Securities specified in the request in such Registration under Section 8;
(c) within one hundred eighty (180) days immediately following the
effective date of any Registration Statement pertaining to the securities
of the Company (other than a Registration of securities in a Rule 145
transaction or of securities being offered to the employees of the Group
Companies pursuant to a stock option, stock purchase or similar plan, a
Registration relating to a corporate reorganization, a Registration on any
form that does not include substantially the same information as would be
required to be included in a Registration Statement covering the sale of
the Registrable Securities, or a Registration in which the only Ordinary
Shares being Registered is Ordinary Shares issuable upon conversion of debt
securities that are also being Registered); or
(d) if the Company furnishes to those Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board it would be materially detrimental to the Company and its
shareholders for a Registration Statement to be filed in the near future.
Then the Company's obligation to use its commercially reasonable efforts to
file a Registration Statement shall be deferred for a period not to exceed
one hundred twenty (120) days from the receipt of the request to file the
Registration by that Holder provided that the Company shall not exercise
the right contained in this Section 7.3(d) more than once in any twelve
(12) month period and provided further, that during such one hundred twenty
(120) day period the Company shall not file a Registration Statement with
respect to the public offering of securities of the Company (other than a
Registration of securities in a Rule 145 transaction or of securities being
offered to the employees of the Group Companies pursuant to a stock option,
stock purchase or similar plan, a Registration on any form that does not
include substantially the same information as would be required to be
included in a Registration Statement covering the sale of the Registrable
Securities, or a Registration in which the only Ordinary Shares issuable
upon conversion of debt securities that are also being Registered).
7.4 Registration of Other Securities in Demand Registration. Any
Registration Statement filed pursuant to the request of any Holder under this
Section 7 may,
15
subject to the provisions of Section 7.5, include Ordinary Shares of the Company
other than Registrable Securities.
7.5 Underwriting in Demand Registration.
(a) Notice of Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 7, and the Company shall include that information in
the written notice referred to in Section 7.1 or 7.2 of this Agreement. In such
event, the right of any Holder to Registration pursuant to this Section 7 shall
be conditioned upon such Holder's agreement to participate in the underwriting
arrangement required by this Section 7.5, and the inclusion of that Holder's
Registrable Securities in the underwriting to the extent provided herein. The
Company shall (together with all Holders proposing to distribute their
securities through the underwriting) enter into an underwriting agreement with
the representative (the "UNDERWRITERS' REPRESENTATIVE") of the underwriter or
underwriters selected for the underwriting by the Company and reasonably
acceptable to Holders of a majority of the Registrable Securities that are being
proposed to be distributed through such underwriting.
(b) Inclusion of Other Holders in Demand Registration. If the Company,
officers or directors of the Company holding Ordinary Shares other than
Registrable Securities, or holders of securities other than Registrable
Securities, request inclusion of such Ordinary Shares or other securities in the
Registration, the Initiating Holders, to the extent they deem advisable and
consistent with the goals of that Registration, may, in their reasonable
discretion, on behalf of all Holders, offer to any or all of the Company, those
officers or directors, and the holders of securities other than Registrable
Securities that such Ordinary Shares or other securities be included in the
underwriting and may condition that offer on the acceptance by those persons of
the terms of this Section 7. If, however, the number of shares so included
exceeds the number of shares of Registrable Securities included by all Holders,
the Registration shall be treated as governed by Section 8 of this Agreement
rather than this Section 7, and it shall not count as a Registration for
purposes of this Section 7.
(c) Marketing Limitation in Demand Registration. Notwithstanding
anything in this Section 7 to the contrary, if the Underwriters' Representative
advises the Initiating Holders in writing that marketing factors (including,
without limitation, the aggregate number of Ordinary Shares 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 shares to be underwritten, then the Initiating Holders shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the Registration and underwriting shall be allocated
among all Holders thereof in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities entitled to inclusion in that
Registration held by such Holders at the time of filing the Registration
Statement; provided that securities described in Section 7.5(b) shall first be
excluded from such Registration, and that at least twenty-five percent (25%) of
the Registrable Securities requested by the Initiating Holders to be included in
such Registration and underwriting shall be so included. No Registrable
Securities or other securities excluded from the underwriting by reason of this
Section 7.5(d) shall be included in
16
such Registration Statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company and the Underwriters'
Representative may round the number of shares allocated to any Holder to the
nearest one hundred (100) shares.
(d) Right of Withdrawal in Demand Registration. If any Holder of
Registrable Securities, or a holder of other securities entitled (upon request)
to be included in such Registration, disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the Underwriter's Representative, and the Initiating Holders
delivered at least seven (7) Business Days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn from
the Registration Statement, and such securities shall not be transferred in a
public distribution prior to one hundred eighty (180) days after the effective
date of such Registration, or such other period of time as the underwriters may
require.
7.6 Other Securities Laws in Demand Registration. In the event of any
Registration pursuant to this Section 7, the Company shall exercise its
commercially reasonable endeavors to Register and qualify the securities covered
by the Registration Statement under the securities laws of any other
jurisdictions in the United States as shall be reasonably appropriate for the
distribution of the securities; provided, however, that: (a) the Company shall
not be required to do business or to file a general consent to service of
process in any such state or jurisdiction; and (b) notwithstanding anything in
this Agreement to the contrary, in the event any jurisdiction in which the
securities shall be qualified imposes a non-waivable requirement that expenses
incurred in connection with the qualification of the securities be borne by
selling shareholders, the expenses shall be payable pro rata by the selling
shareholders.
7.7 Other Registration Rights. The Company and the Existing
Shareholder hereby jointly and severally (i) represent and warrant to the Series
A Preferred Shareholders that the Company has not granted any rights to any
shareholder or other person with respect to the Registration of securities of
the Company and (ii) covenant that the Company will not, and the Existing
Shareholder will not permit the Company to, grant any such rights to any Person
without the prior written consent of Holders holding at least a majority of the
Registrable Securities.
SECTION 8. Piggyback Registration.
8.1 Notice of Piggyback Registration and Inclusion of Registrable
Securities. Subject to the terms of this Agreement, if the Company decides to
Register any of its Ordinary Shares (either for its own account or the account
of a security holder or holders exercising their respective demand registration
rights (other than Holders exercising their demand rights pursuant to Section 7
of this Agreement)) (other than a Registration relating solely to the sale of
securities to participants in a Company stock plan, a Registration relating to a
corporate reorganization or other transaction under Rule 145 of the Securities
Act, a Registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, or a Registration in which the
only Ordinary Shares being registered is Ordinary Shares issuable upon
conversion of debt securities that are also being Registered), the Company
shall: (a) promptly give each Holder written notice thereof (which shall include
a list of the jurisdictions in which the Company intends to attempt to
17
qualify those securities under the applicable Blue Sky or other securities
laws); and (b) include in that Registration (and any related qualification under
Blue Sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request delivered to the
Company by any Holder within twenty (20) days after delivery of the written
notice from the Company. The Company shall have the right to terminate or
withdraw any Registration initiated by it under this Section 8 prior to the
effectiveness of such Registration whether or not any Holder has elected to
include securities in such Registration.
8.2 Underwriting in Piggyback Registration.
(a) Notice of Underwriting in Piggyback Registration. If the
Registration of which the Company gives notice is for a Registered public
offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 8.1. In such event, the
right of any Holder to Registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in such underwriting to the extent provided in this
Section 8. All Holders proposing to distribute their securities through the
underwriting shall (together with the Company and any other holders distributing
their securities through the underwriting) enter into an underwriting agreement
with the Underwriter's Representative for such offering. The Holders shall have
no right to participate in the selection of the underwriters for an offering
pursuant to this Section 8.
(b) Marketing Limitation in Piggyback Registration. Notwithstanding
anything in this Section 8 to the contrary, if the Underwriter's Representative
advises the Holders seeking Registration of Registrable Securities pursuant to
this Section 8 in writing that marketing factors (including, without limitation,
the aggregate number of Ordinary Shares 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
shares to be underwritten, the Underwriters' Representative (subject to the
allocation priority set forth in Section 8.2(c)) may:
(i) in the case of the Company's initial public offering pursuant
to a Registration Statement, exclude some or all Registrable
Securities from the Registration and underwriting; and
(ii) in the case of any Registered public offering subsequent to
the initial public offering, limit the number of shares of Registrable
Securities to be included in the Registration and underwriting, to not
less than thirty-five percent (35%) of the Registrable Securities
requested to be included in the Registration.
(c) Allocation of Shares in Piggyback Registration. If the
Underwriter's Representative limits the number of shares to be included in a
Registration pursuant to Section 8.2(b), the number of shares to be included in
the Registration shall be allocated among all other Holders and other holders of
securities (other than Registrable Securities) requesting and legally entitled
to include securities in that Registration, in the following order of priority:
(i) first, to the Company, to the extent it is offering shares
for its own account; and
18
(ii) next, to Holders requesting inclusion of Registrable
Securities in the offering, in proportion, as nearly as practicable,
to the respective amounts of securities (including Registrable
Securities), which such Holders would otherwise be entitled to include
in the Registration; and
(iii) next, to the other holders requesting inclusion of such
securities (other than Registrable Securities) in the offering, in
proportion, as nearly as practicable to the respective amounts of
securities which such other holders would otherwise be entitled to
include in the Registration.
For any Registration subsequent to an initial public offering, the
number of Registrable Securities that may be included in the Registration and
underwriting under Section 8.2(b)(ii) shall not be reduced to less than
thirty-five percent (35%) of the aggregate Registrable Securities requested to
be included in the Registration without the prior consent of at least a majority
of the Holders who have requested their Registrable Securities be included in
the Registration and underwriting. No Registrable Securities or other securities
excluded from the underwriting by reason of this Section 8.2(c) shall be
included in the Registration Statement. To facilitate the allocation of shares
in accordance with the above provisions, the Company and the Underwriters'
Representative may round the number of shares allocated to any Holder to the
nearest 100 shares.
(d) Withdrawal in Piggyback Registration. If any Holder disapproves of
the terms of any underwriting, the Holder may elect to withdraw therefrom by
written notice to the Company and the Underwriter's Representative delivered at
least seven days prior to the effective date of the Registration Statement. Any
Registrable Securities or other securities excluded or withdrawn from the
underwriting shall be withdrawn from the Registration.
SECTION 9. Expenses of Registration. All Registration Expenses reasonably
incurred in connection with up to three (3) Registrations pursuant to Section
7.1 and unlimited Registrations pursuant to Sections 8.2 and 9 shall be borne by
the Company. All Registration Expenses incurred in connection with any other
Registration, qualification or compliance shall be apportioned among the
Holders, and other holders, including the Company, of the securities so
Registered on the basis of the number of shares Registered. Notwithstanding the
above, the Company shall not be required to pay for any expenses of any
Registration proceeding commenced pursuant to Section 7 if the Registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be Registered (which Holders shall bear those
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one (1) corresponding Registration pursuant to Section
7; provided, however, that if at the time of such withdrawal, such Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company not known to such Holders at the time of their request for such
Registration, and have withdrawn their request for Registration with reasonable
promptness after learning of such material adverse change, then the Holders
shall not be required to pay any such expenses and such Registration shall not
constitute the use of a Registration under Section 7. All Selling Expenses shall
be borne by the holders of the securities Registered pro rata on the basis of
the number of shares Registered.
19
SECTION 10. Termination of Registration Rights. The rights of any Holder to
cause the Company to Register securities granted under Sections 7 and 8 and to
receive notices pursuant to Section 8 of this Agreement shall terminate on the
earlier of: (a) the date five (5) years a Qualified IPO; (b) with respect to
such Holder, after a Qualified IPO or the Company's initial public offering of
securities pursuant to a Registration Statement, if following such Qualified IPO
or initial public offering, such Holder, together with its Affiliates, holds
less than one percent (1%) of the outstanding Ordinary Shares, (c) with respect
to such Holder, when such Holder is eligible to sell all of the Registrable
Securities held by it (together with any Affiliate of such Holder with whom such
Holder must aggregate its sales under Rule 144) either (i) under Rule 144 within
any ninety (90) day period without volume limitations or (ii) under Rule 144(k),
or (d) with respect to such Holder's right with respect to Registration of
Registrable Securities in any jurisdiction other than the United States, when
that Holder is eligible to sell all of its Registrable Securities under a
provision of that jurisdiction's securities laws comparable to Rule 144 or
144(k).
SECTION 11. Registration Procedures and Obligations. Whenever required
under this Agreement to effect the Registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Commission (or comparable regulatory
agency with respect to a Registration in a jurisdiction other than the
United States) a Registration Statement with respect to such Registrable
Securities and use its commercially reasonable efforts to cause that
Registration Statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities Registered thereunder,
keep the Registration Statement effective for up to ninety (90) days, or if
earlier, until the distribution contemplated by the Registration has been
completed.
(b) Prepare and file with the Commission (or comparable regulatory
agency for a Registration in a jurisdiction other than the United States),
such amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Securities Act (or, with
respect to a Registration in a jurisdiction other than the United States,
other applicable law in a jurisdiction other than the United States) with
respect to the disposition of all securities covered by such Registration
Statement;
(c) Furnish to the Holders the number of copies of a prospectus,
including a preliminary prospectus, required by the Securities Act (or,
with respect to a Registration in a jurisdiction other than the United
States, other applicable law in a jurisdiction other than the United
States), and such other documents as the underwriters may reasonably
request in order to facilitate the disposition of such Registrable
Securities;
(d) Otherwise use its commercially reasonable efforts to comply with
the Securities Act, the Exchange Act and any other applicable rules and
regulations of the Commission, and make available to the securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve (12) months after the effective date of such
Registration Statement, which earnings statement shall satisfy
20
Section 11(a) of the Securities Act and any applicable regulations
thereunder, including Rule 158;
(e) Use its commercially reasonable efforts to Register and qualify
the securities covered by the Registration Statement under the securities
or Blue Sky laws of any other jurisdictions as shall be 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 states or jurisdictions, and provided further that if any
jurisdiction in which the securities shall be qualified imposes a
non-waivable requirement that expenses incurred in connection with the
qualification of the securities be borne by selling shareholders, such
expenses shall be payable pro rata by selling shareholders;
(f) Appoint a qualified independent underwriter, if necessary under
the circumstances or if reasonably requested by the Holders of more than
fifty percent (50%) of the Registrable Securities in any Registration made
pursuant to the terms hereof;
(g) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, provided
that each Holder participating in the underwriting shall also enter into
and perform its obligations under such an agreement;
(h) 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 the Securities Act of the happening of any
event as a result of which the 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;
(i) Provide a transfer agent and registrar for all Registrable
Securities Registered pursuant to the Registration Statement and a CUSIP
number for all such Registrable Securities, in each case not later than the
effective date of such Registration;
(j) Use its commercially reasonable efforts to furnish, at the request
of any Holder requesting Registration of Registrable Securities pursuant to
this Agreement, on the date that Registrable Securities are delivered to
the underwriters for sale in connection with a Registration pursuant to
this Agreement, (i) an opinion, dated the date of the sale, of the counsel
representing the Company for the purposes of such Registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, and (ii) a "comfort" letter dated the date of the sale, 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, if any; and
(k) Use its commercially reasonable efforts to list the Registrable
Securities on the primary exchange upon which similar securities issued by
the Company are then traded.
21
SECTION 12. Information Furnished by Holder. It shall be a condition
precedent of the Company's obligations under this Agreement that each Holder of
Registrable Securities included in any Registration furnish to the Company
information regarding such Holder, the Registrable Securities held by it and the
distribution of such Registrable Securities proposed by such Holder as the
Company may reasonably request.
SECTION 13. Indemnification.
13.1 Company's Indemnification of the Holders. In the event any
Registrable Securities are included in a Registration Statement under this
Agreement, to the extent permitted by law, the Company shall indemnify each
Holder, each of its officers, directors, partners and legal counsel, and each
person controlling such Holder, with respect to which Registration,
qualification, or compliance of Registrable Securities has been effected
pursuant to this Agreement, and each underwriter, if any, and each person who
controls such underwriter within the meaning of Section 15 of the Securities Act
against all claims, losses, damages, liabilities, or actions in respect thereof
(collectively, "DAMAGES") arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus or
other document (including any related Registration Statement) incident to any
Registration, qualification, or compliance, or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act,
Exchange Act, applicable Blue Sky laws, or other applicable laws in the
jurisdiction other than the United States in which the Registration occurred,
applicable to the Company and relating to action or inaction required of the
Company in connection with any Registration, qualification, or compliance, and
the Company shall reimburse each such Holder, its directors, partners, legal
counsel and independent accountant, each such underwriter, and each such person
who controls such Holder or any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability, or action; provided, however, that the
indemnity contained in this Section 13.1 shall not apply to amounts paid in
settlement of any Damages if settlement is effected without the consent of the
Company (which consent shall not unreasonably be withheld); and provided,
further, that the Company will not be liable in any case to the extent that any
Damages arise out of or are based upon any untrue statement or omission based
upon written information furnished to the Company by a Holder, underwriter, or
controlling person and stated to be for use in connection with the offering of
securities of the Company.
13.2 Holder's Indemnification of Company. In the event any Registrable
Securities are included in a Registration Statement under this Agreement, to the
extent permitted by law, each Holder shall, if Registrable Securities held by
that Holder are included in the securities as to which Registration,
qualification or, compliance is being effected pursuant to this Agreement,
indemnify the Company, each of its directors and officers, each legal counsel
and independent accountant of the Company, each underwriter, if any, of the
Company's securities covered by the Registration Statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other Holder, each of its officers, directors, and
constituent partners, and each person controlling such other Holder, against all
Damages arising out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any Registration Statement,
prospectus, offering
22
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Holder of any rule or
regulation promulgated under the Securities Act, Exchange Act, applicable Blue
Sky laws, or other applicable laws in the jurisdiction other than the United
States in which the Registration occurred, applicable to such Holder and
relating to action or inaction required of such Holder in connection with any
Registration, qualification, or compliance, and shall reimburse the Company,
such other Holders, directors, officers, partners, persons, law firms and
accounting firms, underwriters or control persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that the untrue statement (or alleged untrue statement) or
omission (or alleged omission) or violation is made in that Registration
Statement, prospectus, offering circular, or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use in connection with the offering of
securities of the Company, provided, however, that the indemnity contained in
this Section 13.2 shall not apply to amounts paid in settlement of any Damages
if settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld) and provided, further, that such Holder's
liability under this Section 13.2 shall not exceed the Holder's proceeds (less
underwriting discounts and selling commissions) from the offering of securities
made in connection with such Registration, except in the case of fraud or
willful misconduct by such Holder.
The obligations of the Holders under this Section 13.2 shall be
several, and not joint and several, among the Holders whose Registrable
Securities are included in the Registration.
13.3 Condition to Indemnity. The foregoing indemnity agreements of the
Company and the Holders are subject to the condition that, insofar as they
relate to any violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time the
Registration Statement in question becomes effective or the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
13.4 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 13 of notice of the commencement of any
action, the indemnified party shall, if a claim is to be made against an
indemnifying party under this Section 13, notify the indemnifying party in
writing of the commencement thereof and generally summarize the action. The
indemnifying party shall have the right to participate in and to assume the
defense of that claim; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of the claim with the approval of any
parties entitled to indemnification, which approval shall not be unreasonably
withheld; provided further, however, that if either party reasonably determines
that there may be a conflict between the position of the Company and the Holders
in conducting the defense of the action, suit, or proceeding by reason of
recognized claims for indemnity under this Section 13, then counsel for such
party shall be entitled to conduct the defense to the extent reasonably
determined by counsel to be necessary to protect the interests of
23
such party. The failure to notify an indemnifying party promptly of the
commencement of any action, if prejudicial to the ability of the indemnifying
party to defend the action, shall relieve the indemnifying party, to the extent
so prejudiced, of any liability to the indemnified party under this Section 13,
but the omission to notify the indemnifying party shall not relieve the party of
any liability that the party may otherwise have to any indemnified party
otherwise under this Section 13.
13.5 Contribution. If the indemnification provided for in this Section
13 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any Damages, then the indemnifying party, in
lieu of indemnifying the indemnified party hereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of those Damages 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
hand, in connection with the statements or omissions that resulted in Damages 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 omission to state a material fact relates to information
supplied by the indemnifying or the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
the statement or omission. No Holder will be required to contribute any amount
in excess of the net proceeds received from the sale of all such Registrable
Securities offered and sold by such Holder pursuant to such Registration
Statement, except in the case of fraud or willful misconduct by such Holder; and
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
13.6 Conflicts. Notwithstanding the foregoing, to the extent that
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; provided however, that the provision in any such
underwriting agreement pertaining to indemnification and contribution will be
(i) substantially similar to those contained herein, or (ii) typical of such
provisions found in underwriting agreements of companies similarly situated to
the Company.
13.7 Survival of Obligations. The obligations of the Company and
Holders under this Section 13 shall survive the completion of any offering of
Registrable Securities in a Registration Statement under this Agreement or
otherwise. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement which admits fault on behalf
of the indemnified party or which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability with respect to such claim or litigation.
SECTION 14. Lock-Up. Each Holder hereby agrees that, if requested by the
Company or the Underwriter's Representative (if any) in connection with the
Company's initial public offering, such Holder shall not sell, contract to sell,
make any short sale of, loan, grant any option for the purchase of, pledge,
charge or otherwise transfer or dispose of any Registrable
24
Securities or other securities of the Company without the prior written consent
of the Company or the Underwriter's Representative, as the case may be, for such
period of time (not to exceed one hundred eighty (180) days) following the
effective date of a Registration Statement of the Company filed under the
Securities Act (or other applicable law in a jurisdiction other than the United
States in which a Registration occurred) as may be requested by the
Underwriter's Representative or pursuant to any regulations or rules of the
stock exchange on which shares of the Company are listed. The obligations of
Holders under this Section 14 shall be conditioned upon similar agreements being
in effect with each other shareholder who is an officer, director, or five
percent (5%) shareholder of the Company. The Company shall not release any of
the shareholders who is an officer, director, or five percent (5%) shareholder
of the Company from the lock-up without first releasing the Holders.
SECTION 15. No Action Letter. Notwithstanding anything else in this
Agreement, if: (a) the Company obtains from the Commission (or comparable
regulatory agency in case of Registration in a jurisdiction other than the
United States) a "no-action" letter in which the Commission or such comparable
regulatory agency has indicated that it will take no action if, without
Registration under the Securities Act or comparable law, any Holder disposes of
Registrable Securities covered by any request for Registration made under
Section 7 of this Agreement in the specific manner in which the Holder proposes
to dispose of Registrable Securities included in that request (such as
including, without limitation, inclusion of the Registrable Securities in an
underwriting initiated by either the Company or the Holders) and that the
Registrable Securities may be sold to the public without Registration in
accordance with an established procedure or Rule-based "safe harbor" without
unreasonable legal risk or uncertainty, then the Registrable Securities included
in the request shall not be eligible for Registration under this Agreement. Any
Registrable Securities not so disposed of shall be eligible for Registration in
accordance with the terms of this Agreement with respect to other proposed
dispositions to which this Section 15 does not apply. The Registration rights of
the Holders of Registrable Securities set forth in this Agreement are
conditioned upon the conversion of the Registrable Securities with respect to
which Registration is sought into Ordinary Shares prior to the effective date of
the Registration Statement.
SECTION 16. Reports Under the Exchange Act. With a view to making available
to Holders the benefits of Rule 144 promulgated under the Securities Act and any
other rule or regulation of the Commission 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, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after ninety (90) days after
the effective date of the first Registration Statement filed by the Company for
the offering of its securities to the public so long as the Company is subject
to the periodic reporting requirements under Section 13 or 15(d) of the Exchange
Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
25
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, promptly upon written request (i) a written statement by the Company
that it has complied with the reporting requirements of Rule 144 (at any time
after ninety (90) days after the effective date of the first Registration
Statement filed by the Company), the Securities Act, and the Exchange Act (at
any time after it has become subject to reporting requirements thereunder), or
that it qualifies as a registrant whose securities may be resold pursuant to
Form F-3 (at any time after it so qualifies); (ii) a copy of the most recent
annual or quarterly report of the Company and any other reports and documents
filed by the Company; and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the Commission
which permits the selling of any such securities without Registration or
pursuant to that form; and
(d) with respect to a Registration in a jurisdiction other than the
United States, take actions similar to those set forth in paragraphs (a), (b),
(c) and (d) of this Section 16 with a view to making available to Holders the
benefits of the corresponding provision or provisions of that jurisdiction's
securities laws.
(e) at the request of a Holder, use its best efforts to enable such
Holder to sell the maximum number of Registrable Securities permitted under Rule
144, including without limitation promptly issuing appropriate instructions to
the Company's share transfer agent to remove legends from such Holder's share
certificates, causing the Company's counsel to issue legal opinions to support
such instructions, and if applicable promptly issuing appropriate instructions
to the Company's share registrar and depository agent to convert such Holder's
shares into depository receipts or similar instruments to be deposited into such
Holder's brokerage account(s). The Company acknowledges that time is of the
essence with respect to its obligations under this Section 16(e), and that any
unreasonable delay will cause the Holders irreparable harm and constitutes a
material breach of its obligations hereunder.
SECTION 17. Transfer of Rights. The rights to cause the Company to Register
Registrable Securities under this Agreement may be assigned (but only with all
related obligations) by a Holder to (i) another Holder of Registrable Securities
who already possesses registration rights granted under this Agreement, (ii) a
transferee or assignee acquiring five percent (5%) or more of the Ordinary
Shares Equivalent, (iii) an affiliated limited partnership, a limited partner,
or general partner or other Affiliates of a Holder, provided that (x) the
Company is, within reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned, (y) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and (z) such Holder shall procure that the
transferee or assignee of such Holder's Registrable Securities execute a deed of
adherence to this Agreement.
SECTION 18. Legend; Stop Transfer Instructions.
18.1 Legend. Each certificate representing shares or securities of the
Company now or hereafter owned by the Existing Shareholder, the Investor and any
transferee of such shares and securities shall be endorsed with the following
legend:
26
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
SHAREHOLDERS AGREEMENT BY AND BETWEEN THE HOLDER HEREOF, THE COMPANY AND
CERTAIN OTHER SHAREHOLDERS OF THE COMPANY. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES TO
BE ISSUED UPON THEIR CONVERSION (IF APPLICABLE) HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT
BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS BY OR ON BEHALF
OF ANY U.S. PERSON, UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN ORDER TO TRANSFER OR
EXERCISE ANY INTEREST IN THESE SECURITIES, THE BENEFICIAL HOLDER MUST
FURNISH TO THE COMPANY EITHER (A) A WRITTEN CERTIFICATION THAT IT IS NOT A
U.S. PERSON AND THE PREFERRED SHARES ARE NOT BEING CONVERTED ON BEHALF OF A
U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE EFFECT THAT THE
SECURITIES DELIVERED UPON CONVERSION OF THESE SECURITIES HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH SECURITIES
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. EACH
BENEFICIAL HOLDER BY ACCEPTING AN INTEREST IN THESE SECURITIES AGREES THAT
ANY HEDGING TRANSACTION INVOLVING SUCH SECURITIES OR THE SECURITIES TO BE
ISSUED UPON CONVERSION OF SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT. TERMS IN THIS LEGEND HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
18.2 Stop Transfer Instructions. The Parties hereto agree that the
Company may instruct its transfer agent to impose transfer restrictions on the
shares represented by certificates bearing the legend referred to in Section
18.1 to enforce the provisions of this Agreement, and the Company agrees
promptly to do so. The legend shall be removed upon termination of this
Agreement.
SECTION 19. Covenants.
(a) In addition to any other rights provided by law and the provisions
of the Articles of Association or Memorandum of Association of the Company, the
Company and the Existing Shareholder shall not, and shall procure that the
Company and the Operating Subsidiary shall not, without first obtaining the
affirmative vote or written consent of the holders of a majority of the Series A
Preferred Shares then outstanding, voting as a single class, effect or otherwise
consummate any of the following:
27
(i) Issue or sell any equity, equity-related or debt securities
of any Group Company, other than Ordinary Shares to be issued upon
conversion of the Shares purchased by the Investor or upon the
exercise of options granted under a stock option plan approved by the
Board;
(ii) Redeem, acquire or otherwise purchase any Ordinary Shares or
any preferred stock or any other securities of the Company, or any
equity or securities of other Group Companies, other than any such
securities from an employee or consultant of the Company upon
termination of such person's employment or consulting arrangement, as
the case may be, with the Company or in connection with a corporate
reorganization within the Group (as approved by the holders of a
majority of the Series A Preferred Shares);
(iii) Make any acquisitions, merger or consolidation, enter into
a joint venture arrangement, incorporate any subsidiary unless such
action is incurred pursuant to a budget or business plan approved by
the Board and the Investor;
(iv) Acquire any shares, securities or interests in any Person
other than any of the Company's Affiliates, including any joint
venture entities in which the Company or its Affiliates hold an equity
interest, unless pursuant to a budget or business plan approved by the
Board and the Investor;
(v) Sell, lease, dispose of or otherwise transfer all or
substantially all of the assets of any Group Company;
(vi) Incur any indebtedness or assume any financial obligation or
issue, assume, guarantee or create any liability for borrowed money in
excess of US$3 million in aggregate at any time outstanding unless
such liability is incurred pursuant to a budget or business plan
approved by the Board and the Investor and in the ordinary course of
business;
(vii) Extend any loan to, or guarantee any indebtedness or
financial obligations of, any Person other than any of the Company's
Affiliates, including any joint venture entities in which the Company
or its Affiliates hold an equity interest, unless pursuant to a
business plan approved by the Board and the Investor;
(viii) Approve or make any capital expenditure in excess of US$3
million unless such capital expenditure is approved or made pursuant
to a budget or business plan approved by the Board and the Investor;
(ix) Enter into any transaction with the Existing Shareholder or
any of its Affiliates, unless in connection with an employment or
consulting arrangement with a Group Company approved by the
Compensation Committee of the Board;
(x) Approve annual budgets and business plans;
28
(xi) Appoint, terminate or change the terms of employment
(including an increase in compensation in a twelve-month period by
more than ten percent (10%) in the aggregate compared to the
immediately preceding twelve-month period) with respect to the ten
(10) most highly compensated employees of the Company;
(xii) Amend, repeal or modify the Memorandum or Articles of
Association of the Company, any equivalent articles of association or
any by-laws, or other constitutional documents of any Group Company;
(xiii) Declare or pay any dividends or any other distributions to
any of the Shareholders;
(xiv) Make any material change in the accounting methods or
policies or appoint, remove or change the independent public
accountants other than as required by applicable law, regulations or
accounting standards;
(xv) Dissolve, liquidate, wind up, recapitalize, reorganize or
commence any bankruptcy proceedings with respect to any Group Company;
or
(xvi) Change the principal business activities of the Company or
the Operating Subsidiary's registered capital other than through a
Transfer to an Affiliate of the Company or the Operating Subsidiary.
(b) Restrictions on Transfer. The Existing Shareholder undertakes to
the Investor that it will not transfer, alienate or dispose of any share capital
of the Operating Subsidiary held by it or otherwise create any Encumbrance on
any share capital of the Operating Subsidiary held by it without the written
consent of the Investor.
SECTION 20. Conflict with Charter Documents. In the event of any conflict
or inconsistency between the provisions of this Agreement and the provisions of
the Company's Articles or Memorandum of Association or other constitutional
documents, the parties shall, notwithstanding the conflict or inconsistency, act
so as to effect the intent of this Agreement to the extent possible under the
circumstances and shall promptly take all reasonable steps to amend the
conflicting constitutional documents to conform to this Agreement to the extent
possible.
SECTION 21. Miscellaneous.
21.1 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of New York, without regard to principles of
conflicts of law.
21.2 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or any breach of this Agreement, shall be initiated,
maintained and finally determined by binding arbitration under the rules of
conciliation and arbitration of the International Chamber of Commerce (the
"ICC"); and the site of the arbitration, unless the parties agree otherwise,
shall be in Hong Kong. The arbitral tribunal shall be appointed within thirty
(30) days of the notice of dispute, and shall consist of three arbitrators, one
of which shall be appointed by the Investor and one by the Company and the third
by the Investor and the
29
Company jointly; provided, however, that if the Investor and the Company shall
be unable to select the third arbitrator within such thirty (30)-day period,
such third arbitrator shall be chosen by the International Court of Arbitration
of the ICC. Judgment upon any award rendered may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may be. Any
award pursuant to such proceeding shall be granted in U.S. Dollars. The fees and
costs of the arbitration shall be shared equally by all disputing parties. The
arbitrators shall award legal fees, disbursements and other expenses to the
prevailing party for such amounts as determined by the arbitrators to be
appropriate.
21.3 Counterparts and Facsimile Execution. 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. Any
counterpart or other signature delivered by facsimile shall be deemed for all
purposes as being a good and valid execution and delivery of this Agreement by
that party.
21.4 Headings. The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
21.5 Notices. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (i) when
hand delivered to the other party; (ii) when received when sent by facsimile at
the number set forth below (or hereafter amended by subsequent notice to the
parties hereto), with printed confirmation sheet verifying successful
transmission of the facsimile; (iii) ten (10) Business Days after deposit in the
mail as certified mail, postage prepaid and addressed to the other party as set
forth below; or (iv) five (5) Business Days after deposit with an overnight
delivery service, postage prepaid, addressed to the parties as set forth below,
provided that the sending party receives a confirmation of delivery from the
delivery service provider.
(a) If to the Investor, to:
Inspiration Partners Limited
AZIA Center, Unit 2701B
1233 Lujiazui Xxxx Xxxx
Xxxxxxxx X.X.Xxxxx 000000
Facsimile No.: x00 00 00000000
Attn: Xxxxxx Xx and Xxxxxxx Xxxx
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx
22/Fl Bank of China Tower
0 Xxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Facsimile No.: 852 3192 9731
Attn: Xxxxxxx Xxx, Esq.
30
(b) If to the Existing Shareholder or the Company, to:
Yingli Power Holding Company Ltd.
No. 3055 Middle Fuxing Road
Baoding, People's Republic of China
Facsimile No.: x00 000 0000 000
Attn: Conghui Liu
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
7/F ICBC Tower
0 Xxxxxx Xxxx
Xxxxxxx, Xxxx Xxxx
Facsimile No.: x000-0000-0000
Attn: Xxxxxxx Xxxx, Esq.
Each person making a communication hereunder by facsimile shall
promptly confirm by telephone to the person to whom such communication was
addressed each communication made by it by facsimile pursuant hereto but the
absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above, or
designate additional addresses, for purposes of this Section 21.5 by giving the
other parties written notice of the new address in the manner set forth above.
21.6 Amendment of Agreement. This Agreement may be amended at any time
by a written instrument signed by the Parties. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
21.7 Severability. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
21.8 Entire Agreement; Successors and Assigns. Except as specifically
referenced in this Agreement, this Agreement, together with any Exhibits to this
Agreement, constitute the entire contract among the Parties with respect to the
subject matter of this Agreement. Any prior or contemporaneous agreement,
discussion, understanding, or correspondence among the parties (including any
prior representations or warranties given by the Parties) regarding the purchase
of shares of the Company is superseded by this Agreement. Subject to the
exceptions specifically set forth in this Agreement, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors, and assigns of the Parties to this
Agreement.
21.9 Assignability. Subject to Section 18, the rights and obligation
under this Agreement shall not be assignable by any party without the prior
written consent of all the other Parties, except that the assignment by the
Investor of its rights and obligations hereunder to its
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Affiliates provided that any such Affiliate agrees in writing to be bound by all
of the terms, conditions and provisions contained herein.
21.10 Termination. The provisions of this Agreement, except for
Sections 1, 2, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20 and 21 and other
provisions that by their express terms survive termination, shall cease to have
effect immediately upon a Qualified IPO and no parties shall have any rights or
obligations under these provisions (save as excepted above) save for any
obligations arising in connection prior to the Qualified IPO.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the Parties hereto has caused this
Agreement to be duly executed by its respective authorized officers:
INSPIRATION PARTNERS LIMITED
By: /s/ Xxxxxx Xx
------------------------------------
Name: Xxxxxx Xx
Title: Director
YINGLI POWER HOLDING COMPANY LTD.
By: /s/ Xxxxxxxxx Xxxx
------------------------------------
Name: Xxxxxxxxx Xxxx
Title: Director
YINGLI GREEN ENERGY HOLDING COMPANY
LIMITED
By: /s/ Xxxxxxxxx Xxxx
------------------------------------
Name: Xxxxxxxxx Xxxx
Title: Chairman and Chief Executive
Officer
/s/ Xxxxxxxxx Xxxx
----------------------------------------
Xxxxxxxxx Xxxx
