EXHIBIT 4.2
DATED 30 NOVEMBER 2005
(1) CANADIAN SOLAR INC.
(2) HSBC HAV2 (III) LIMITED
(3) JAFCO ASIA TECHNOLOGY FUND II
(4) MR. QU XXXX XXX
(5) [chinese characters] (CSI SOLARTRONICS CO., LTD.)
(6) [chinese characters] (CSI SOLAR TECHNOLOGIES INC.)
and
(7) [chinese characters] (CSI SOLAR MANUFACTURING INC.)
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INVESTMENT AGREEMENT
relating to
CANADIAN SOLAR INC.
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XXXXX & XXXXXXXX
TABLE OF CONTENTS
1. Definitions............................................................ 2
2. Guarantee.............................................................. 9
3. Ownership of Equity Securities......................................... 9
4. Transfers of Equity Securities......................................... 10
5. Pre-emptive Rights..................................................... 17
6. Undertakings after First Completion.................................... 19
7. Directors and Management............................................... 23
8. Meetings of Shareholders............................................... 25
9. Reserved Matters....................................................... 26
10. Information Rights..................................................... 28
11. Payment and Taxes...................................................... 29
12. Announcements and Confidentiality...................................... 29
13. Termination of this Agreement.......................................... 31
14. Entire Agreement....................................................... 32
15. Variation.............................................................. 32
16. Successors and Assigns................................................. 32
17. Invalidity............................................................. 32
18. Waiver................................................................. 32
19. Unanimous Shareholder Agreement........................................ 33
20. Notices................................................................ 33
21. Counterparts........................................................... 34
22. Process Agents......................................................... 34
23. Governing Law.......................................................... 35
24. Dispute Resolution..................................................... 35
25. JAFCO's Rights......................................................... 36
Schedule
1. Particulars of the Company
2. Representations and warranties referred to in Clause 4.7(C)(i)
ii
THIS AGREEMENT is made on the 30th day of November 2005
BETWEEN:
(1) CANADIAN SOLAR INC., a corporation incorporated under the laws of the
Province of Ontario, Canada with its registered office at 0000 Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (the "COMPANY");
(2) HSBC HAV 2 (III) LIMITED, a company incorporated in the Cayman Islands with
its registered office at 0xx Xxxxx, Xxxxxxxxxx Xxxxx, Xxxxx Church Street,
Xxxxxx Town, Grand Cayman, Cayman Islands (the "FUNDS");
(3) JAFCO ASIA TECHNOLOGY FUND II, a Cayman Islands exempted company with its
registered office at XX Xxx 000XX, Xxxxxx Xxxxx, Xxxxx Church Street,
Xxxxxx Town, Grand Cayman, Cayman Islands ("JAFCO");
(4) MR. QU XXXX XXX, holder of Canadian Passport Number XX000000 and whose
residential address being at 0000 Xxxxxx Xxxxxxxx, Xxxxxxxxxxx, Xxxxxxx,
Xxxxxx X0X 0X0 (the "FOUNDER");
(5) [chinese characters] (CSI SOLARTRONICS CO., LTD.), a company established in
the People's Republic of China with its registered office at [chinese
characters] (Yangyuan Industrial Park, Changshu, Jiangsu Province 215562,
the People's Republic of China) ("SOLARTRONICS");
(6) [chinese characters] (CSI SOLAR TECHNOLOGIES INC.), a company established
in the People's Republic of China with its registered office at [chinese
characters]209[chinese characters]C6017[chinese characters] (Xxxxx X0000,
Xxxxx Suzhou Pioneering Park for Overseas Chinese Xxxxxxxx, Xx. 000,
Xxxxxxx Xxxx, Suzhou New & Hi-Tech District, Jiangsu Province 215011, the
People's Republic of China) ("SOLAR TECHNOLOGIES"); and
(7) [chinese characters] (CSI SOLAR MANUFACTURING INC.), a company established
in the People's Republic of China with its registered office at [chinese
characters] (Building A6, Export Processing Xxxx, Xxxxxx Xxx & Xx-Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000, the People's Republic of China) ("SOLAR
MANUFACTURING").
The Funds and JAFCO shall be referred to collectively as the "INVESTORS" and
individually as an "INVESTOR".
Solartronics, Solar Technologies and Solar Manufacturing shall be referred to
collectively as the "PRC SUBSIDIARIES" and individually as a "PRC SUBSIDIARY".
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WHEREAS:
(A) The Company is a corporation incorporated under the laws of the Province of
Ontario, Canada.
(B) The Investors has subscribed for Convertible Notes pursuant to the
Subscription Agreement.
(C) The Founder, the PRC Subsidiaries and the Investors wish to enter into this
Agreement with each other to govern certain aspects of the affairs of the
Company.
(D) Founder has agreed to guarantee to the Investors the performance by the
Company of its obligations under this Agreement.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 In this Agreement (including the Recitals), unless the context requires
otherwise, the following expressions shall have the following meanings:
"AFFILIATE" of a specified Person means any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by,
or is under common Control with, such specified Person, and (a) in the case
of a natural Person, such Person's spouse, parents and descendants (whether
by blood or adoption and including stepchildren), and (b) in the case of an
Investor, shall include (i) any Person who holds the Convertible Notes as a
nominee for such Investor, (ii) any shareholder of such Investor and (iii)
any entity or individual which has a direct or indirect interest in such
Investor (including, if applicable, any general partner or limited partner,
any fund manager or any fund managed by the same fund manager thereof), and
each Group Company shall be deemed to be an Affiliate of the Founder;
"APPLICABLE LAW" means, with respect to any Person, any and all provisions
of any constitution, treaty, statute, law, regulation, ordinance, code,
rule, judgement, rule of common law, order, decree, award, injunction,
Governmental Approval, concession, grant, franchise, license, agreement,
directive, guideline, policy, requirement, or other governmental
restriction or any similar form of decision of, or determination by, or any
interpretation or administration of any of the foregoing by, any
Governmental Authority, whether in effect as of the date hereof or
thereafter applicable to such Person;
"ARBITRATORS" has the meaning ascribed to it in Clause 24.2;
"ARTICLES OF INCORPORATION" means the duly adopted articles of
incorporation of the Company in force from time to time;
"ATS" means ATS Automation Tooling Systems Inc., a corporation incorporated
in Canada;
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"ATS ARRANGEMENT" means the arrangement between the Founder and ATS in
existence as at the date of the Subscription Agreement in relation to,
among other things, ATS's acquisition of ownership interest of not
exceeding nineteen point five per cent. (19.5%) in the Company;
"BOARD" means the board of directors of the Company;
"BUSINESS DAY" means any day (excluding Saturdays, Sundays and public
holidays) on which banks generally are open for business in Hong Kong and
Singapore;
"BY-LAWS" means the duly adopted by-laws of the Company in force from time
to time;
"COMMON SHARES" means common shares in the capital of the Company and all
other (if any) stock or shares from time to time and for the time being
ranking pari passu therewith and all other (if any) shares or stock in the
authorised share capital of the Company resulting from any sub-division,
consolidation or re-classification of Common Shares;
"COMMON SHARES EQUIVALENTS" means, with respect to any Investor, the
aggregate number of Common Shares owned by such Investor together with the
number of Common Shares into or for which any Convertible Notes owned by
such Investor shall be convertible;
"COMPENSATION COMMITTEE" means the compensation committee of the Board as
referred to in Clause 7.2(B);
"CONTROL", "CONTROLLED" (or any correlative term) means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management policies of a Person, whether through the ownership of
voting securities, by contract, credit arrangement or proxy, as trustee,
executor, agent or otherwise; and for the purpose of this definition, a
Person shall be deemed to Control another Person if such first Person,
directly or indirectly, owns or holds more than 50% of the voting equity
interests in such another Person;
"CONVERTIBLE NOTES" the convertible loan notes up to an aggregate principal
amount of Thirteen Million United States Dollars (US$13,000,000)
convertible into Common Shares issued or to be issued to the Investors
under the Subscription Agreement;
"CONVERTIBLE SECURITIES" means (i) any rights, options or warrants to
acquire Shares, and (ii) any notes, debentures, preference shares
(including, without limitation, the Convertible Notes) or other securities
or rights, which are ultimately convertible or exercisable into, or
exchangeable for, Shares;
"CO-SALE EXERCISE AMOUNT" has the meaning ascribed to it in Clause 4.4(A);
"CO-SALE NOTICE" has the meaning ascribed to it in Clause 4.4(A);
"CO-SALE PROPORTIONATE AMOUNT" has the meaning ascribed to it in Clause
4.4(E);
"CO-SALE SECURITIES" has the meaning ascribed to it in Clause 4.4(A);
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"DIRECTLY OWNED SUBSIDIARY" has the meaning ascribed to it in Clause 9.2;
"DIRECTOR" means a director of the Company;
"ENCUMBRANCE" means any lien, encumbrance, hypothecation, right of others,
proxy, voting trust or similar arrangement, pledge, security interest,
collateral security agreement, limitations on voting rights, limitations on
rights of ownership filed with any Governmental Authority, claim, charge,
equities, mortgage, pledge, objection, title defect, title retention
agreement, option, restrictive covenant, restriction on transfer, right of
first refusal, right of first offer, or any comparable interest or right
created by or arising under Applicable Law, of any nature whatsoever;
"ESOP" means an employee stock option plan to be adopted by the Company,
pursuant to which (a) options may be granted to key employees and members
of the management team of any Group Company to subscribe for Common Shares,
(b) the number of Common Shares that may be subject to such options shall
not exceed One Million (1,000,000) on the basis that the total expected
number of Common Shares to be in issue on a Fully-Diluted Basis after issue
of all Common Shares to ATS, pursuant to the ESOP and upon conversion of
all Convertible Notes will be Ten Million (10,000,000), (c) the terms of
the plan (including but not limited to the exercise price for each Common
Share under the plan, the vesting date and the lock-up period of the
options) shall be subject to the approval of the Compensation Committee,
and (d) any grant of options under the plan shall be subject to the
approval of the Compensation Committee;
"EXECUTIVE" means a director, the chief executive officer, the chief
operation officer, the chief financial officer, the general manager or a
vice-president of any Group Company, or such other Person as the
Compensation Committee may nominate from time to time;
"EQUITY SECURITIES" means (a) Convertible Securities and (b) shares of any
class in the capital of the Company and including, without limitation, the
Common Shares;
"EXCESS OFFERED SECURITIES" has the meaning ascribed to it in Clause
4.3(B)(b);
"EXCESS NEW SECURITIES" has the meaning ascribed to it in Clause 5.2(B);
"EXCESS PRO-RATA AMOUNT" has the meaning ascribed to it in Clause 5.2(D);
"EXCESS PROPORTIONATE AMOUNT" has the meaning ascribed to it in Clause
4.3(B)(d);
"EXERCISE AMOUNT" has the meaning ascribed to it in Clause 4.3(B)(a);
"EXERCISE NOTICE" has the meaning ascribed to it in Clause 5.2(A);
"EXERCISING PARTY" has the meaning ascribed to it in Clause 4.3(B)(a);
"FINANCING TERMS" has the meaning ascribed to it in Clause 12.1;
"FIRST COMPLETION" has the meaning ascribed to it in the Subscription
Agreement;
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"FULLY-DILUTED BASIS" means, when used with respect to issued and
outstanding share capital of the Company, the total number of all Common
Shares which are or would be issued and outstanding assuming the full
conversion of all Convertible Notes in issue at the then applicable
Conversion Price (as defined in the conditions of the Convertible Notes);
"GOVERNMENTAL APPROVAL" means any action, order, authorization, consent,
approval, license, authorisation, qualification, lease, waiver, franchise,
concession, agreement, ruling, permit, tariff, rate, certification,
exemption of, filing or registration by or with, or report or notice to,
any Governmental Authority;
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (including, without limitation, any government
authority, agency, department, board, commission or instrumentality of
Canada, the PRC, Hong Kong or any other applicable jurisdiction in the
world or any political subdivision of any of the foregoing), or any
tribunal or arbitrator(s) of competent jurisdiction, or any self-regulatory
organization;
"GROUP" means the Company and its subsidiaries and affiliates, and a "GROUP
COMPANY" means any or a specific member within the Group as the context may
require;
"HKIAC" has the meaning ascribed to it in Clause 24.2;
"HONG KONG" means the Hong Kong Special Administrative Region of the
People's Republic of China;
"IAS" means International Accounting Standards as published by the
International Accounting Standards Committee from time to time;
"INDIRECTLY OWNED SUBSIDIARY" has the meaning ascribed to it in Clause 9.3;
"INVESTOR'S DIRECTOR" means the Person nominated by each Investor pursuant
to Clause 7.3 and duly appointed as a Director or a director of a
subsidiary of the Company;
"IPO" means the initial public offering of the shares of the Company or
ListCo;
"ISSUANCE NOTICE" has the meaning ascribed to it in Clause 5.1;
"JAFCO MANAGER" has the meaning ascribed to it in Clause 25;
"JOINDER AGREEMENT" means, an agreement, the terms and conditions of which
shall be satisfactory to the Investors, which a Person is required to enter
into with or in favour of all the Parties as a condition of the Company
approving any Transfer or issuance and allotment of Equity Securities to
such Person to which such Person undertakes to be bound by certain
provisions of this Agreement, as if it were a party to this Agreement;
"JIAP" has the meaning ascribed to it in Clause 25;
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"LIEN" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, transfer restriction,
hypothecation, Encumbrance or other security interest of any kind or nature
whatsoever, or any agreement to give or make any of the foregoing;
"LISTCO" means a new holding company of the Group to be incorporated in a
jurisdiction acceptable for the purpose of the IPO and the shares of which
will be offered in the IPO;
"MAJORITY CN APPROVAL" means the written approval given by holders in
respect of more than seventy-five per cent. (75%) of the aggregate
principal amount of Convertible Notes subscribed for by the Investors;
"MATERIAL ADVERSE EFFECT" means any event, circumstance, occurrence, fact,
condition, change or effect that is materially adverse to (i) the business,
operations, results of operations, financial condition, management,
prospects, properties, assets or liabilities of the Group, taken as a whole
or otherwise; or (ii) the ability of any of the Company, the PRC
Subsidiaries or the Founder to perform fully its/his obligations hereunder
and to consummate the transactions contemplated hereby;
"NEW SECURITIES" has the meaning ascribed to it in Clause 5.1(B);
"OBSERVER" has the meaning ascribed to it in Clause 7.3(D);
"OFFER PRICE" has the meaning ascribed to it in Clause 4.3(A);
"OFFERED SECURITIES" has the meaning ascribed to it in Clause 4.3(A);
"PARTIES" means the named parties to this Agreement and their respective
successors, and a "PARTY" shall be construed accordingly;
"PERMITTED TRANSFER" has the meaning ascribed to it in Clause 4.7(B);
"PERMITTED TRANSFEREE" has the meaning ascribed to it in Clause 4.7(B);
"PERSON" or "PERSONS" means any natural person, company, corporation,
association, partnership, organization, firm, joint venture, trust,
unincorporated organization or any other entity or organization, and shall
include any Governmental Authority;
"PRC" means the People's Republic of China, but shall not include Hong
Kong, the Macau Special Administrative Region and Taiwan for the purpose of
this Agreement;
"PRE-EMPTIVE AMOUNT" has the meaning ascribed to it in Clause 5.2(A);
"PRE-EMPTIVE PARTY" has the meaning ascribed to it in Clause 5.2(A);
"PRO-RATA AMOUNT" has the meaning ascribed to it in Clause 5.2(C);
"PROPORTIONATE AMOUNT" has the meaning ascribed to it in Clause 4.3(B)(c);
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"QUALIFIED IPO" means a fully underwritten IPO on the main board of The
Stock Exchange of Hong Kong Limited, the NASDAQ National Market or another
international stock exchange (including without limiting the generality of
the forgoing, the Toronto Stock Exchange) approved with Majority CN
Approval, where (a) the offering size (net of all related expenses and
underwriting discounts and commissions) being not less than Thirty Million
United States Dollars (US$30,000,000), (b) the total market capitalization
of the Company or ListCo (as the case may be) immediately following the
offering being not less than Xxx Xxxxxxx xxx Xxxxxx Xxxxxxx Xxxxxx Xxxxxx
Dollars (US$120,000,000) and (c) the public float immediately following the
offering being not less than twenty-five per cent. (25%) of the enlarged
share capital of the Company or ListCo (as the case may be);
"REGISTRATION RIGHTS AGREEMENT" has the meaning ascribed to it in the
Subscription Agreement;
"REORGANISATION" has the meaning ascribed to it in Clause 6.1(A);
"RELATED PARTIES" means Affiliates of the Founder and a "RELATED PARTY"
shall mean any or a specific one of the Related Parties;
"RELATED PARTY TRANSACTION" means a transaction entered into by any Group
Company with the Founder or any Related Party;
"REMAINING EQUITIES HOLDER" has the meaning ascribed to it in Clause
4.3(A);
"REPLY NOTICE" has the meaning ascribed to it in Clause 4.3(B)(a);
"RESERVED MATTERS" has the meaning ascribed to it in Clause 9.1;
"SECOND COMPLETION" has the meaning ascribed to it in the Subscription
Agreement;
"SHARE(S)" means share(s) of any class in the capital of the Company and
including, without limitation, the Common Share(s);
"SHARE SWAP" has the meaning ascribed to it in Clause 6.1(A);
"SHAREHOLDER" means a holder of any Share(s);
"SUBSCRIPTION AGREEMENT" means a subscription agreement dated 16 November
2005 relating to, among other things, the subscription of Convertible Notes
by the Investors, and entered into between the Parties;
"SUBSIDIARY" has the meaning that a company is a subsidiary of another
company if that other company (i) Controls the composition of the board of
directors of the first-mentioned company; (ii) Controls more than half of
the voting power of the first-mentioned company; or (iii) holds more than
half of the issued share capital of the first-mentioned company; and, for
these purposes, a company shall be treated as being Controlled by another
if that other company is able to direct its affairs and/or to Control the
composition of its majority board of directors or equivalent management
body;
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"TAXES" or "TAXATION" means and includes all forms of tax, levy, duty,
charge, impost, fee, deduction or withholding of any nature imposed,
levied, collected withheld or assessed by any Governmental Authority or
other taxing or similar authority in any part of the world and includes any
interest, additional tax, penalty or other charge payable or claimed in
respect thereof;
"TERRITORY" has the meaning ascribed to it in Clause 6.6(A)(i);
"TRANSACTION DOCUMENTS" means all documents (including but without
limitation to the Share Pledging Agreements (as defined in the Subscription
Agreement), the Share Pledge Releases (as defined in the Subscription
Agreement) and the Registration Rights Agreement) referred to or
contemplated in this Agreement;
"TRANSFER", "TRANSFERRING" (or any correlative term) means a sale,
assignment, pledge, charge, mortgage, hypothecation, gift, placement in
trust (voting or otherwise) or transfer by operation of law of, creation of
a security interest in, or Lien on, or any other encumbering or disposal
(directly or indirectly and whether or not voluntary), and shall include
any transfer by will or intestate succession;
"TRANSFER NOTICE" has the meaning ascribed to it in Clause 4.3(A);
"TRANSFEROR" has the meaning ascribed to it in Clause 4.3(A);
"UNCITRAL RULES" has the meaning ascribed to it in Clause 23.2;
"UNITED STATES" or "US" means the United States of America;
"US$" means United States dollars, the lawful currency of the United States
of America; and
"VALUER" has the meaning ascribed to it in Clause 4.3(E).
1.2 In this Agreement:
(A) the headings are inserted for convenience only and shall not affect
the construction and interpretation of this Agreement;
(B) references to statutory provisions shall be construed as references to
those provisions as amended or re-enacted or as their application is
modified by other statutory provisions (whether before or after the
date hereof) from time to time and shall include any provisions of
which they are re-enactments (whether with or without modification)
except to the extent that any amendment or modification enacted after
the date hereof would materially affect the rights or obligations of
any Party under this Agreement;
(C) all time and dates in this Agreement shall be Hong Kong time and dates
except where otherwise stated;
(D) unless the context requires otherwise, words incorporating the
singular shall include the plural and vice versa and words importing a
gender shall include every gender;
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(E) references herein to Clauses, Recitals and Schedules are to clauses
and recitals of and schedules to this Agreement; and
(F) all Recitals and Schedules form part of this Agreement and shall have
the same force and effect as if expressly set out in the body of this
Agreement and any reference to this Agreement shall include such
Recitals and Schedules.
1.3 Where any obligation in this Agreement is expressed to be undertaken or
assumed by any Party, that obligation is to be construed as requiring the
Party concerned to exercise all reasonable rights and powers of Control
over the affairs of any other Person which that Party is able to reasonably
exercise (whether directly or indirectly) in order to secure performance of
that obligation.
2. GUARANTEE
The Founder guarantees to the Investors the due and timely performance by
the Company and the PRC Subsidiaries of their respective obligations under
this Agreement. In the event that the Company or any of the PRC
Subsidiaries fails to comply with any of its obligations under this
Agreement, the Founder undertakes to procure the prompt compliance by the
Company or the relevant PRC Subsidiary (as the case may be) of such
obligations and indemnify each of the Investors on demand from and against
all or any losses, costs, expenses damages, claims and liabilities borne,
suffered or incurred by the Investor arising or resulting from or in
connection with such failure of the Company or the PRC Subsidiary (as the
case may be) to perform its obligations set out in this Agreement.
3. OWNERSHIP OF EQUITY SECURITIES
3.1 The Founder represents and warrants to the Investors that each of the
following statements is true:
(A) the Founder owns beneficially the number and types of Equity
Securities set out opposite his name in Schedule 1, and that he has
not pledged, hypothecated or granted any security interest in such
Equity Securities to any Person (except as disclosed in the Disclosure
Letter referred to in the Subscription Agreement);
(B) he has not granted to any Person any right to purchase or otherwise
acquire any interest in such Equity Securities save as contemplated by
this Agreement, the Subscription Agreement and the Articles of
Incorporation and By-Laws and except the ATS Arrangement;
(C) he owns such Equity Securities free and clear of all Encumbrance save
as contemplated by this Agreement and the Articles of Incorporation
and By-Laws and except the ATS Arrangement;
(D) he has all requisite right, power and authority and full legal
capacity to enter into this Agreement, to carry out his obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by him and the consummation
of the transactions contemplated hereby has been duly authorized by
all necessary
9
action on his part (where applicable), and no other consent or
approval (corporate or otherwise) on his part or the part of any other
Person are necessary for him to enter into this Agreement or to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by him and constitutes a legal, valid
and binding obligation of his enforceable against him in accordance
with its terms; and
(E) the execution, delivery and performance of this Agreement by him and
the consummation of the transactions contemplated hereby, do not and
will not (a) conflict with or violate any Applicable Law in any
material respect; (b) result in the creation of any Encumbrance over
any Equity Securities owned by him save as contemplated by this
Agreement or the Subscription Agreement; or (c) result in any material
breach of, or constitute a material default (or event which with the
giving of notice or lapse of time, or both, would become a material
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument to which he is a party or by which any
Equity Securities owned by him or any of his other assets may be
bound.
4. TRANSFERS OF EQUITY SECURITIES
4.1 Upon First Completion:
(A) the Founder shall not, directly or indirectly, effect or facilitate a
Transfer of all or any portion of his Equity Securities or other
interests in the Company before the completion of a Qualified IPO
unless (i) the prior written consent of all Investors is obtained and
(ii) the Founder has complied with the provisions of Clauses 4.3 to
4.5; and
(B) each of the Investors shall not, directly or indirectly, effect or
facilitate a Transfer of all or any portion of its Equity Securities
unless it has complied with the provisions of Clause 4.6.
4.2 Any purported Transfer by any Shareholder in violation of this Clause 4 or
the Articles of Incorporation and By-Laws shall be null and void and of no
force and effect and the purported transferee shall have no rights or
privileges in or with respect to the Company. The Company shall refuse to
recognize any such Transfer and shall not reflect on its records any change
in ownership of such Equity Securities purported to have been transferred.
4.3 Right of First Refusal
(A) Subject to the provisions in Clause 4.1(A), if the Founder (the
"TRANSFEROR") wishes to Transfer all or part of his Equity Securities
to any Person, then such Transferor shall, prior to consummating any
such desired Transfer, give to each Investor (each, the "REMAINING
EQUITIES HOLDER") a written notice of his intention to make such
Transfer (the "TRANSFER NOTICE"), which shall include (i) a
description (including the class and the total number) of the Equity
Securities to be transferred (the "OFFERED SECURITIES"); (ii) the
identity of the prospective transferee(s); and (iii) the proposed
offer price per Offered Security (the "OFFER PRICE") and the
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material terms and conditions upon which the proposed Transfer is to
be made. The Transfer Notice shall certify that the Transferor has
received a firm offer from the prospective bona fide transferee(s) and
in good faith believes a binding agreement for the Transfer is
obtainable on the terms set forth in the Transfer Notice. The Transfer
Notice shall also include a copy of any written proposal, term sheet
or letter of intent or other agreement relating to the proposed
Transfer. Once given, the Transfer Notice shall not be revoked save
with the prior written consent of all Remaining Equities Holders.
(B) (a) The Remaining Equities Holder(s) (an "EXERCISING PARTY") who
wish(es) to purchase any Offered Securities shall provide the
Transferor and the Company with a written notice (a "REPLY
NOTICE") specifying the maximum number of any Offered Securities
which it irrevocably commits to purchase (the "EXERCISE AMOUNT")
within thirty (30) days of the receipt by an Exercising Party of
the Transfer Notice. For the avoidance of doubt, such Exercising
Party may specify in its Reply Notice an Exercise Amount higher
or lower than its Proportionate Amount (as defined below). The
Offered Securities shall be allocated among each Exercising Party
in proportion to its respective Proportionate Amount (with
rounding to avoid fractional shares), at the Offer Price and on
the same material terms and conditions as specified in the
Transfer Notice PROVIDED THAT in no event shall an amount greater
than such Exercising Party's Exercise Amount be allocated to such
Exercising Party.
(b) Any Offered Securities not yet allocated to the Exercising
Parties after employing the procedures set out in Clause
4.3(B)(a) (the "EXCESS OFFERED SECURITIES") shall be allocated,
among all such Exercising Parties whose Exercise Amounts have not
yet been satisfied, in proportion to each such Exercising Party's
respective Excess Proportionate Amount (as defined below) (with
rounding to avoid fractional shares), at the Offer Price and on
the same material terms and conditions as specified in the
Transfer Notice PROVIDED THAT in no event shall an Exercising
Party be required to purchase more Equity Securities pursuant to
this Clause 4.3(B)(b) than the Exercise Amount specified by such
Exercising Party in its Reply Notice. The procedures set out in
this Clause 4.3(B)(b) shall be repeatedly employed until the
Exercise Amounts of all such Exercising Parties shall have been
satisfied or until the total number of the Offered Securities
shall have been fully allocated to the Exercising Parties after
employing the procedures set out herein, whichever to occur
first. The Remaining Equities Holder(s)'(s) right to purchase any
Offered Securities pursuant to this Clause 4.3(B) shall be
subject to Clause 4.3(C).
(c) An Exercising Party's "PROPORTIONATE AMOUNT" is equal to the
product obtainable by multiplying (x) the total number of Offered
Securities, by (y) a fraction, the numerator of which shall be
the number of Common Shares Equivalents owned by such Exercising
11
Party on the date of the Transfer Notice and the denominator of
which shall be the aggregate number of all Common Shares
Equivalents owned by all the Exercising Parties on the date of
the Transfer Notice.
(d) An Exercising Party's "EXCESS PROPORTIONATE AMOUNT" is equal to
the product obtainable by multiplying (x) the total number of
Excess Offered Securities, by (y) a fraction, the numerator of
which shall be the number of Common Shares Equivalents owned by
such Exercising Party on the date of the Transfer Notice and the
denominator of which shall be the aggregate number of Common
Shares Equivalents owned by all the Exercising Parties on the
date of the Transfer Notice whose Exercise Amount has not yet
been satisfied after employing the procedures set out herein.
(C) If and only if not all of the Offered Securities being offered by the
Transferor are allocated to the Remaining Equities Holder(s) after
employing the procedures set out in Clause 4.3(B), the Transferor
shall still be obliged to sell the Offered Securities to the
Exercising Party(s) but may sell the remaining Offered Securities to
the prospective transferee(s) as specified in the Transfer Notice on
terms not more favourable to the proposed transferee than as specified
in the Transfer Notice in accordance with and subject to the terms set
out in Clauses 4.4 and 4.5.
(D) The completion of the purchase by the Exercising Parties of the
Offered Securities pursuant to this Clause 4.3 shall occur at such a
place and time as the parties to the transaction may agree, which
shall not be later than forty-five (45) days after the receipt of the
Transfer Notice by the Exercising Parties. At such closing, the
Transferor shall deliver certificates representing the Offered
Securities and share transfer form(s) for such Offered Securities duly
executed by the Transferor and accompanied by all requisite transfer
documents. The Transferor shall represent and warrant that the Offered
Securities shall be free and clear of all Encumbrances and Liens
(other than those imposed by this Agreement, the Registration Rights
Agreement and the Articles of Incorporation and By-Laws) but subject
to any registration requirements imposed by any Applicable Law and
that he is the beneficial owner of the Offered Securities or otherwise
has full authority to Transfer the Offered Securities. Each Exercising
Party shall deliver at such completion to the Transferor by bank
cheque the appropriate amount in respect of the Offered Securities to
be purchased.
(E) Should the Offer Price specified in the Transfer Notice be payable in
securities or property other than cash or evidences of indebtedness,
the Exercising Parties shall have the right to pay for the Offer Price
in such securities or property or in the form of cash equal in amount
to the fair market value of such securities or property, and the
Transferor shall liaise with the Company before the dispatch of the
Transfer Notice to appoint an independent third party valuer (the
"VALUER") approved by the Company to determine such fair market value
as at the latest practicable date reasonably selected by the Valuer.
The determination of such fair market value by the Valuer shall, in
the absence of manifest error, be final and binding for all parties
concerned and shall be included in the Transfer Notice together with
12
a copy of the report from the Valuer stating therein the basis for
calculating such fair market value. The costs for appointing the
Valuer for determination of such fair market value shall be borne
solely by the Transferor. The Valuer shall act as expert and not as an
arbitrator.
4.4 Right of Co-Sale
(A) In respect of any Offered Securities proposed to be Transferred by the
Transferor, an Investor, if it does not exercise its right of first
refusal pursuant to Clause 4.3 shall, upon notifying the Transferor
and the Company in writing (a "CO-SALE NOTICE") within thirty (30)
days after the receipt by the Investor of the Transfer Notice, have
the right to participate in the sale of such Offered Securities
including, for the avoidance of doubt, sales effected to any
Exercising Party pursuant to Clause 4.3, on the same terms and
conditions as specified in the Transfer Notice. The Co-Sale Notice
shall indicate the class and number (the "CO-SALE EXERCISE AMOUNT"),
which shall be up to the Investor's Co-Sale Proportionate Amount (as
defined below), of the Equity Securities (the "CO-SALE SECURITIES")
which the Investor wishes to co-sell under its right to participate
hereunder. To the extent that the Investor exercises its right of
participation in accordance with the terms and conditions set forth in
this Clause 4.4, the number of Offered Securities that the Transferor
may sell shall be correspondingly reduced. In no event shall the
Investor be allowed or required to sell more Equity Securities
pursuant to this Clause 4.4 than the Co-Sale Exercise Amount as
specified in its Co-Sale Notice.
(B) Notwithstanding any contrary provision in this Clause 4.4, where the
Offered Securities consist of Common Shares and the Investor has no
Common Shares or insufficient Common Shares to participate in the sale
of the Offered Securities, the Investor shall be entitled to exercise
its right of co-sale by first converting any Convertible Securities it
then holds into Common Shares, and to sell such converted Common
Shares in the exercise of its rights under this Clause 4.4. The
Company agrees to make any such conversion contingent upon the
completion of the actual sale of such converted Common Shares by the
Investor to any prospective purchaser pursuant to this Clause 4.4.
(C) The Investor shall effect its participation in the co-sale by promptly
delivering to the Company for transfer to the prospective purchaser or
purchasers one or more certificates, share transfer form(s) for duly
executed by the Investor (and accompanied by all requisite transfer
documents), which represent the number of Co-Sale Securities which the
Investor elects to sell pursuant to this Clause 4.4.
(D) The share certificate or certificates and all requisite transfer
documents that the Investor delivers to the Company pursuant to Clause
4.4(C) shall be transferred to the prospective purchaser or purchasers
in consummation of the sale of the Equity Securities pursuant to the
terms and conditions specified in the Transfer Notice, and the Company
shall concurrently therewith remit to the Investor that portion of the
sale proceeds to which the Investor is entitled by reason of its
participation in the co-sale. To the extent that any prospective
purchaser or purchasers refuses to purchase Common
13
Shares or Convertible Notes (as the case may be) from the Investor
exercising its rights of co-sale hereunder, the Transferor shall not
sell to such prospective purchaser or purchasers any Equity Securities
unless and until, simultaneously with such sale, such prospective
purchaser or purchasers shall purchase such Common Shares or
Convertible Notes (as the case may be) from the Investor for the same
consideration and on terms and conditions no less favourable to the
Investor than as described in the Transfer Notice, provided that the
Remaining Equities Holder(s) shall not be required to make any
representations and warranties other than those on Encumbrance-free
title of the Co-Sale Securities.
(E) An Investor's "CO-SALE PROPORTIONATE AMOUNT" is equal to the product
obtainable by multiplying (x) the total number of Offered Securities,
by (y) a fraction, the numerator of which shall be the number of
Common Shares Equivalents owned by such Investor on the date of the
Transfer Notice and the denominator of which shall be the aggregate
number of Common Shares Equivalents owned by the Transferor and all of
the Investors who exercise the right of co-sale under this Clause 4.4,
calculated as on the date of the Transfer Notice.
4.5 Non-Exercise of Rights
(A) To the extent that all of the Remaining Equities Holder(s) has
not/have not exercised its or their rights to purchase the Offered
Securities under Clause 4.3 or if not all of the Offered Securities
are allocated to the Remaining Equities Holder(s) after employing the
procedures set out in Clause 4.3(B) but, subject to compliance with
Clause 4.4 where applicable, then upon expiration of the forty-five
(45) days from the date of receipt of the Transfer Notice by the
Remaining Equities Holder(s), the Transferor shall have a period of
twenty-eight (28) days from the expiration of such forty-five (45)
days' period in which to sell any remaining portion of the Offered
Securities upon terms and conditions no more favourable to the
transferee than those specified in the Transfer Notice to the
third-party transferee(s) identified in the Transfer Notice PROVIDED
THAT no Shareholder and no Investor may sell or Transfer its Equity
Securities unless and until (i) such transferee(s) have delivered to
the Company and each of the Investors a duly executed Joinder
Agreement, (ii) such Transfer will not be subject to or will be
exempted from the prospectus and registration requirements under the
Ontario Securities Act and (iii) where necessary, the transferee(s)
shall sign and deliver to the Company an Accredited Investor
Certificate in the form set out in schedule 8 to the Subscription
Agreement.
(B) In the event the Transferor does not consummate the sale or
disposition of the Offered Securities within the twenty-eight (28)
days' period as referred to in Clause 4.5(A), the Transferor shall not
thereafter sell or Transfer any such Offered Securities without again
first offering them in accordance with this Clause 4.
4.6 First Right of Negotiation
Without prejudice to each Investor's right under Clauses 4.4 and 4.7(A), if
an Investor wishes to Transfer all or part of its Equity Securities to any
Person, it shall first
14
negotiate with the Founder on terms of the intended Transfer before
entering into agreement on the Transfer with any other Person. For the
avoidance of doubt, the Investor may proceed with the Transfer to any
Person apart from the Founder where no agreement has been reached between
the Investor and the Founder on the intended Transfer within reasonable
time.
4.7 Permitted Transfers
(A) None of the restrictions and/or requirements contained in Clauses 4.1
to 4.6 with respect to Transfers of Equity Securities shall, subject
to any Applicable Law, the Articles and By-Laws, apply to:
(i) any Transfer of Equity Securities to achieve the Share Swap or
the Reorganisation;
(ii) any re-purchase or redemption of Equity Securities by the Company
as one of the Reserved Matters;
(iii) any Transfer as part of an IPO;
(iv) any Transfer by an Investor to any of its Affiliates;
(v) any Transfer by the Founder to a company or corporation which is
wholly Controlled by the Founder; and
(vi) any Transfer to the Executives by the Founder of Common Shares,
Provided that such Transfer (save under paragraph (iii) above) will
not be subject to or will be exempted from the prospectus and
registration requirements under the Ontario Securities Act. Where
necessary, the transferee(s) shall sign and deliver to the Company an
Accredited Investor Certificate in the form set out in schedule 8 to
the Subscription Agreement
(B) In the case of any Transfer described in Clause 4.7(A)(i), (iv) to
(vi) (any such Transfer shall be referred to hereinafter as a
"PERMITTED TRANSFER" and any such transferee being referred to as a
"PERMITTED TRANSFEREE"):
(i) each Permitted Transferee shall have executed and delivered to
the Company and each of the Investors, as a condition precedent
to any such Transfer or acquisition of the Equity Securities, a
Joinder Agreement; and
(ii) the Permitted Transfer shall not, in the Company's reasonable
opinion formed after consulting the relevant stock exchange,
regulatory body and professionals, adversely affect the IPO.
(C) In the case of any Permitted Transfer described in Clause 4.7(A)(v),
the Founder undertakes that:
(i) he shall give such representations and warranties as set out in
Schedule 2, as a condition precedent to such Permitted Transfer;
15
(ii) if the Share Pledging Agreements have not yet released at the
material time, he shall ensure that he and the Permitted
Transferee shall enter into share pledging agreements as pledgors
with all the Investors as pledges in place of and on
substantially the same terms as the Share Pledging Agreements, as
a condition precedent to such Permitted Transfer;
(iii) where the Permitted Transferee ceases to be wholly Controlled by
the Founder at any time, the Founder shall ensure that the
Permitted Transferee shall Transfer all Equity Securities then
held by the Permitted Transfer to the Founder or another company
or corporation wholly Controlled by the Founder; and
(iv) he shall remain liable under the Subscription Agreement, this
Agreement and the Transaction Documents even though the Permitted
Transferee is to enter into a Joinder Agreement pursuant to
Clause 4.7(B)(i), and such continuation of his liabilities shall
be set out in that Joinder Agreement.
4.8 Legend
Each certificate representing issued Equity Securities held as at First
Completion or hereinafter acquired by any Person shall, subject to any
Applicable Law, the Articles and the By-Laws and for as long as this
Agreement remains effective, be stamped or otherwise imprinted with a
legend in substantially the following form in the English language:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE DONE IN COMPLIANCE WITH AND PURSUANT TO THE TERMS OF THE
INVESTMENT AGREEMENT DATED [DATE] (AS THE SAME MAY BE FURTHER AMENDED,
MODIFIED OR SUPPLEMENTED FROM TIME TO TIME) AND ENTERED INTO, AMONG
OTHERS, BETWEEN CANADIAN SOLAR INC. (THE "COMPANY") AND CERTAIN OTHER
PERSONS (THE "INVESTMENT AGREEMENT"). THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED OR THE SECURITIES LAWS OF ANY OTHER COUNTRY. THE
INVESTMENT AGREEMENT (AS THE SAME MAY BE FURTHER AMENDED, MODIFIED OR
SUPPLEMENTED FROM TIME TO TIME) SHALL, TO THE EXTENT APPLICABLE, BE
DEEMED TO BE AN AGREEMENT PURSUANT TO SECTION 108(2) OF THE BUSINESS
CORPORATIONS ACT (ONTARIO). UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS CERTIFICATE MUST NOT TRADE THE
SECURITIES PRESENTED BY THIS CERTIFICATE BEFORE THE DATE THAT IS FOUR
(4) MONTHS AND A DAY AFTER THE LATER OF (I) THE DATE OF THIS
CERTIFICATE AND (II) THE DATE THE COMPANY BECAME A REPORTING ISSUER IN
ANY PROVINCE OR TERRITORY."
16
5. PRE-EMPTIVE RIGHTS
5.1 If at anytime after First Completion, the Company proposes to issue any
Equity Securities (after obtaining any requisite approval required as one
of the Reserved Matters), the Company shall first offer such Equity
Securities to each Investor in a written notice (an "ISSUANCE NOTICE")
setting forth:
(A) a description of the Equity Securities to be issued, including the
rights and powers associated therewith;
(B) the number of such Equity Securities to be offered (the "NEW
SECURITIES"); and
(C) the price and terms upon which it proposes to offer the New
Securities.
5.2 (A) Each Investor who wishes to purchase any New Securities (an
"PRE-EMPTIVE PARTY") shall provide the Company with a written notice
(the "EXERCISE NOTICE") specifying the maximum number of New
Securities which it irrevocably commits to purchase (the "PRE-EMPTIVE
AMOUNT") within thirty (30) days of the receipt by such Pre-emptive
Party of the Issuance Notice. For the avoidance of doubt, each
Pre-emptive Party may specify in its Exercise Notice a Pre-emptive
Amount higher or lower than its Pro-rata Amount (as defined below).
The New Securities shall be allocated among each Pre-emptive Party
(with rounding to avoid fractional shares) in proportion to its
respective Pro-rata Amount PROVIDED THAT in no event shall an amount
greater than such Pre-emptive Party's Pre-emptive Amount be allocated
to such Pre-emptive Party.
(B) Any excess New Securities (the "EXCESS NEW SECURITIES") not yet
allocated after employing the procedures set out in Clause 5.2(A)
shall be allocated among all the Pre-emptive Parties whose Pre-emptive
Amounts have not yet been satisfied in proportion to each such
Pre-emptive Party's respective Excess Pro-rata Amount (as defined
below) (with rounding to avoid fractional shares) PROVIDED THAT in no
event shall a Pre-emptive Party be required to purchase more New
Securities pursuant to this Clause 5.2(B) than as specified in the
Exercise Notice of such Pre-emptive Party, and the procedures set out
in this Clause 5.2(B) shall be repeatedly employed until the
Pre-emptive Amounts of all Pre-emptive Parties shall have been
satisfied or until the total number of the New Securities have been
fully allocated to all the Pre-emptive Parties after employing the
procedures set out in this Clause 5.2(B), whichever is to occur first.
(C) For the purpose of this Clause 5.2, a Pre-emptive Party's "PRO-RATA
AMOUNT" is equal to the product obtainable by multiplying (x) the
total number of New Securities, by (y) a fraction, the numerator of
which shall be the number of Common Shares Equivalents owned by such
Pre-emptive Party on the date of the Issuance Notice and the
denominator of which shall be the aggregate number of all Common
Shares Equivalents owned by all the Pre-emptive Parties on the date of
the Issuance Notice.
(D) For the purpose of this Clause 5.2, a Pre-emptive Party's "EXCESS
PRO-RATA AMOUNT" is equal to the product obtainable by multiplying (x)
the total
17
number of Excess New Securities, by (y) a fraction, the numerator of
which shall be the number of Common Shares Equivalents owned by such
Pre-emptive Party on the date of the Issuance Notice and the
denominator of which shall be the aggregate number of all Common
Shares Equivalents owned by all the Pre-emptive Parties on the date of
the Issuance Notice whose Pre-emptive Amounts have not yet been
satisfied after employing the procedures set out in this Clause 5.2.
5.3 If there remain excess New Securities after employing the procedures set
out in Clauses 5.2(A) and 5.2(B) or if no Investor exercises its right
under this Clause 5 to purchase New Securities within thirty (30) days
following the receipt by all Investors of the Issuance Notice, the
unsubscribed New Securities may be offered by the Company within sixty (60)
days thereafter to any Person at a price not less, and upon terms no more
favourable to such Person than specified in the Issuance Notice, PROVIDED
THAT no New Securities shall be allotted or issued to any Person who is not
a Party unless and until (i) such Person has delivered to the Company and
each of the Investors a duly executed Joinder Agreement, (ii) such issuance
will not be subject to or will be exempted from the prospectus and
registration requirements under the Ontario Securities Act and (iii) where
necessary, such Person shall sign and deliver to the Company an Accredited
Investor Certificate in the form set out in schedule 8 to the Subscription
Agreement. If the Company does not enter into an agreement for the sale of
the unsubscribed New Securities within such sixty (60) days' period or, if
such agreement is not completed within thirty (30) days after the execution
thereof, the Company shall not thereafter issue or sell any such
unsubscribed New Securities without again first offering such unsubscribed
securities in the manner provided in Clauses 5.1 and 5.2.
5.4 Notwithstanding anything stated to the contrary herein, the pre-emptive
rights described in this Clause 5 shall not apply to:
(A) Common Shares issued or offered in a Qualified IPO;
(B) Convertible Notes issued pursuant to the Subscription Agreement;
(C) Common Shares issued upon exercise of the conversion right attached to
the Convertible Notes;
(D) Equity Securities issued in connection with a share split, scrip
dividend or other similar event in which all Pre-emptive Parties are
entitled to participate on a pro rata basis;
(E) options granted under the ESOP for issuance of in aggregate up to One
Million (1,000,000) Common Shares (on the basis that the total
expected number of Common Shares to be in issue on a Fully-Diluted
Basis after issue of all Common Shares to ATS, pursuant to the ESOP
and upon conversion of all Convertible Notes will be Ten Million
(10,000,000));
(F) in aggregate not more than One Million (1,000,000) Common Shares
issued under the ESOP (on the basis that the total expected number of
Common Shares to be in issue on a Fully-Diluted Basis after issue of
all Common Shares to ATS, pursuant to the ESOP and upon conversion of
all Convertible Notes will be Ten Million (10,000,000)), provided that
the
18
Person to whom the Common Shares are issued shall have delivered to
the Company and each of the Investors a duly executed Joinder
Agreement as a condition precedent to the issuance; and
(G) Common Shares to be issued to ATS pursuant to the ATS Arrangement or
otherwise, provided that ATS shall have delivered to the Company and
each of the Investors a duly executed Joinder Agreement as a condition
precedent to the issuance,
Provided further that such issuance (save under paragraph (A) above) will
not be subject to or will be exempted from the prospectus and registration
requirements under the Ontario Securities Act. Where necessary, the Person
to which the issuance is made shall sign and deliver to the Company an
Accredited Investor Certificate in the form set out in schedule 8 to the
Subscription Agreement
6. UNDERTAKINGS AFTER FIRST COMPLETION
6.1 In respect of an IPO, all Parties agree that:
(A) the Group may effect a reorganisation for the purpose of achieving an
IPO (the "REORGANISATION"), including the formation of ListCo, the
sale of all Equity Securities to ListCo and the issue of securities by
ListCo to the then holder of Equity Securities (the "SHARE SWAP");
(B) where a Reorganisation is required, the timing and the terms of the
Reorganisation shall be subject to the approval of the Board and the
Investors and shall provide the Investors with the rights and benefits
which are the same in all material respects to those existing under
this Agreement, the Subscription Agreement and the Transaction
Documents;
(C) the Company and the Founder shall, jointly and severally, indemnify
and keep indemnified the Investors against all Taxes which may be
charged or chargeable on the Investors in respect of the share
transfers contemplated in the Reorganisation;
(D) at an IPO (whether or not a Qualified IPO) each Investor shall have
the right to sell its pro-rata number of shares (based on the
aggregate number of shares that will be in issue in the capital of the
Company or ListCo (as the case may be) immediately after full
conversion of all Convertible Notes) in the IPO at the price and on
other terms not less favourable to such Investor than to other selling
Shareholder in the IPO or, where there is no other selling
Shareholder, to the Company or ListCo (as the case may be);
(E) to the extent permitted by the relevant stock exchange and regulatory
body, all costs and expenses (excluding underwriting discounts and
commissions but including fees of counsel to selling shareholders and
all other expenses related to the IPO or the registration in relation
to the IPO) in connection with the shares of the Investor being sold
in the IPO as referred to in Clause 6.1(D) shall be borne by the
Company; and
(F) the right of the Investor referred to in Clause 6.1(D) shall be freely
assigned together with the Transfer of any Equity Securities owned or
held by the
19
Investor.
6.2 The Company undertakes with the Investors that at any time after First
Completion:
(A) the Group's consolidated debt (excluding the debt underlying the
Convertible Notes) shall not exceed one and a half (1.5) times of the
Group's consolidated tangible net worth; and
(B) the ratio of the Group's earnings before interest and tax to the
Group's interest shall always exceed three and a half (3.5) times.
6.3 The Company shall (A) take out key person life and liability insurance
policies for the Founder and director's liability insurance for each
Investor's Director for such an insured amount, on such other terms and
conditions and at such time agreed upon by the Company and the Investors
and (B) deliver to each Investor certified copies of such policies
forthwith after the policies have been taken out. The Company shall deliver
to each Investor all such necessary documents in relation to any liability
incurred by any of the persons referred to above in the course of
discharging their duties as Directors or officers of the Company which has
arisen or will arise a claim under such insurance policies.
6.4 The Company shall permit any representative designated by each Investor, at
such Investor's expense, to visit and inspect any of the properties of any
Group Company, including its books of account and records (and to make
copies thereof and to take extracts therefrom) and facilities, and to
discuss that Group Company's affairs, finances and accounts with its
officers or employees, the Group's Company's auditors and legal advisers,
or representatives of that Group Company's lenders, at such reasonable
times with reasonable prior notice by the Investor.
6.5 Where any banking facilities made available to an Group Company by its
bankers have been withdrawn, the Company shall, and shall procure the
relevant Group Company to, use its best efforts to restore adequate banking
facilities for its normal operation of business.
6.6 (A) The Founder undertakes to the Company and the Investors that for so
long as he has any beneficial interest in any Equity Securities either
directly or indirectly or he remains to be a Director or an officer of
any Group Company, and for a period of twelve (12) months after he
ceases to be so interested or ceases to be a Director or officer of
any Group Company (as the case may be), he will not, without the prior
written consent of all the Investors:
(i) in the PRC and such other territories where the Group carries on
its business or part thereof (the "TERRITORY") either on his own
account or through any of his Affiliates, or in conjunction with
or on behalf of any other person, carry on or be engaged,
concerned or interested directly or indirectly whether as
shareholder, director, employee, partner, adviser, agent or
otherwise carry on any business in direct competition with the
business or proposed business of the Group;
(ii) either on his own account or through any of his Affiliates or in
conjunction with or on behalf of any other person solicit or
entice away or attempt to solicit or entice
20
away from any Group Company, the custom of any person, firm,
company or organization who is or shall at any time within twelve
(12) months prior to such cessation have been a customer, client,
representative, agent or correspondent of such Group Company;
(iii) either on his own account or through any of his Affiliates or in
conjunction with or on behalf of any other person, employ,
solicit or entice away or attempt to employ, solicit or entice
away from any Group Company any person who is or shall have been
at the date of or within twelve (12) months prior to such
cessation an officer, manager, consultant or employee of any such
Group Company, whether or not such person would commit a breach
of contract by reason of leaving such employment; and
(iv) neither he nor any of his Affiliates will at any time hereafter,
in relation to any trade, business or company use a name
including any word used by any Group Company in its name or in
the name of any of its products, services or their derivative
terms, or the Chinese or English equivalent or any similar word
in such a way as to be capable of or likely to be confused with
the name of any Group Company or the product or services or any
other products or services of any Group Company, and shall use
all reasonable endeavours to procure that no such name shall be
used by any of his/her Affiliates or otherwise by any person with
which he/she is connected.
(B) Each and every obligation under Clause 6.6(A) shall be treated as a
separate obligation and shall be severally enforceable as such and in
the event of any obligation or obligations being or becoming
unenforceable in whole or in part, such part or parts which are
unenforceable shall be deleted from such clause and any such deletion
shall not affect the enforceability of the remainder parts of such
clause.
(C) The Founder, the Company and the Investors agree that having regard to
all the circumstances, the restrictive covenants contained in Clause
6.6(A) are reasonable and necessary for the protection of the Group
and the Investors, and further agree that having regard to those
circumstances the said covenants are not excessive or unduly onerous
upon the Founder. However, it is recognized that restrictions of the
nature in question may fail for technical reasons currently unforeseen
and accordingly it is hereby agreed and declared that if any of such
restrictions shall be adjudged to be void as going beyond what is
reasonable in all the circumstances for the protection of the Group or
the Investors, but would be valid if part of the wording thereof were
deleted or the periods thereof reduced or the range of activities or
area dealt with thereby reduced in scope, the said restriction shall
apply with such modification as may be necessary to make it valid and
effective.
(D) The Founder, the Company and the Investors further agree that if the
Founder breaches any undertaking herein, damages may not be an
adequate remedy in which case such undertaking may be enforced by
injunction, order for specific performance or such other equitable
release as a court of competent jurisdiction may see fit to award.
21
6.7 (A) The Parties foresee that the Founder has created and may create
Intellectual Property Rights in the course of his duties as a
director, employee, consultant or agent of any Group Company and agree
and acknowledge that the Founder has a special responsibility in such
respect to further the interests of the Group.
(B) Any invention, production, improvement or design made or process or
information discovered or copyright work or trade xxxx or trade name
or get-up source code or any other Intellectual Property Rights
created by the Founder during the continuance of his office of
directorship or employment with any Group Company (whether before or
after the date hereof or whether capable of being patented or
registered or not and whether or not made or discovered in the course
of his office of directorship or employment with any Group Company) in
conjunction with or in any way affecting or relating to the business
of any Group Company or capable of being used or adapted for use by
any Group Company shall forthwith be disclosed to the Company and
shall belong to and be the absolute property of such Group Company as
the Company may direct.
(C) The Founder, if and whenever required to do by the Company or any of
the Investors, shall at the expense of the Group apply or join with
the relevant Group Company in applying for patent or other protection
or registration for any such Intellectual Property Rights referred to
in Clause 6.7(B) which belongs to such Group Company, and shall at the
expense of such Group Company execute and do all instruments and
things necessary for vesting the said patent or other protection or
registration when obtained and all right title and interest to and in
the same in such Group Company absolutely as the sole beneficial
owner.
(D) The Founder hereby irrevocably appoints the Company to be his Attorney
in his name and on his behalf to execute and do any such instrument or
thing and generally to use his name for the purpose of giving to the
Company the full benefit of this Clause 6.7.
6.8 The Founder undertakes to assume whatever liabilities or obligations
(whether or not contingent in nature) arising from the ATS Arrangement and
agrees to indemnify each of the Group Companies and the Investors on demand
from and against all or any losses, costs, expenses damages, claims and
liabilities borne, suffered or incurred by it arising or resulting from or
in connection with the ATS Arrangement.
6.9 Where any PRC legal counsel to the Company or to any Investor are of the
view that the Notice on Foreign Exchange Control Issues Relating to
Financing and Reverse Investment by Domestic Residents Through Offshore
Special Purpose Vehicles issued by the State Administration of Foreign
Exchange of the PRC ([chinese characters]) on 21 October 2005 is applicable
to the Founder or any other Person, the Founder shall, and shall ensure
that the relevant Person(s) shall, complete all foreign exchange
registration procedures in accordance with, and within the time limit set
out in, such notice.
6.10 The Founder and the Company undertake that the summation of (i) the number
of
22
Common Shares issued or to be issued in relation to options already granted
under the ESOP and (ii) the number of Common Shares Transferred to the
Executives under Clause 4.7(A)(vi) shall, at any time after 31 March 2006,
not be less than ten per cent. (10%) of the total Common Shares in the
enlarged share capital of the Company calculated on a Fully-Diluted Basis.
7. DIRECTORS AND MANAGEMENT
7.1 The Board shall be responsible for the overall direction, supervision and
management of the Company and shall ensure that all Group Companies shall
conduct their businesses in accordance with instructions of the Board. The
Board shall not, however, take any decision which may contravene with the
provisions set out in Clause 9 in relation to any of the Reserved Matters
unless approval shall have been obtained in accordance with Clause 9.
7.2 Following the First Completion:
(A) the Board shall consist of up to seven (7) Directors including an
Investor's Director nominated by each Investor; and
(B) the Board shall establish a compensation committee (the "COMPENSATION
COMMITTEE"), the duties of which shall include, among other things,
consider and approve the remuneration of members of the senior
management of each Group Company and the terms of the ESOP and grant
options under the ESOP.
7.3 At all times whilst an Investor (or any Affiliates thereof) holds any
Equity Securities:
(A) it shall have the right to nominate one Person to the Board as a
Director and as a member of any committee of the Board (including but
not limited to the Compensation Committee) and one Person to the board
of director of each subsidiary of the Company (each Person nominated
by each Investor being referred in this Agreement as the "INVESTOR'S
DIRECTOR") and, for the avoidance of doubt, each Investor's Director
shall have the voting rights of, where applicable, any Director in any
Board meeting, any committee of the Board in accordance with the
By-Laws and any director in any board meeting of the relevant
subsidiary of the Company in accordance with the constitutional
documents of that subsidiary;
(B) upon the death, resignation or incapacity of an Investor's Director
appointed in accordance with Clause 7.3(A), the Investor shall be
entitled to appoint such Investor's Director's replacement to the
Board, the relevant committee of the Board and the board of the
relevant subsidiary of the Company;
(C) an Investor's Director may be removed from office by notice to the
Company of the Investor and the Investor shall be entitled to appoint
a successor to fill the resulting vacancy. The Founder hereby agrees
to procure that an Investor's Director appointed pursuant to Clause
7.3(A) or 10.3(B) shall not be removed from such position unless the
relevant Investor expressly consents in writing to such removal; and
23
(D) where an Investor does not exercise its rights under Clause 7.3(A) or
(B), it shall have be entitled to nominate a representative (each, an
"OBSERVER") to attend, at its own expense, all meetings of the Board,
all committees of the Board and the boards of all subsidiaries of the
Company. An Observer is entitled to receive all notices of meetings of
the Board, all committees of the Board and the boards of all
subsidiaries of the Company as well as copies of all minutes, consents
and other materials, financial or otherwise, in the same manner as
such notices, minutes, consents and other materials are provided to,
where applicable, any Director or any director of any subsidiary of
the Company. An Observer shall have full rights of audience and may
speak at all relevant meetings, but shall not be entitled to vote or
be counted towards the quorum at any such meetings.
7.4 At least seven (7) Business Days written notice shall be given to each
Director (and each Observer, where applicable) of any meeting of the Board,
any committee of the Board and the board of any subsidiary of the Company.
Any notice shall include an agenda identifying in reasonable detail the
matters to be discussed at the meeting together with copies of any relevant
papers to be discussed at the meeting and shall be copied to each Investor
at the same time as it is sent to the Directors (and the Observers, where
applicable). No amendments or additions shall be made to such agenda
following such delivery without the unanimous consent of all the Directors.
The Company shall procure that draft minutes of all meetings of the Board,
all committees of the Board and the boards of all subsidiaries of the
Company are sent to each of the Directors (and the Observers, where
applicable) and the Investors within Fourteen (14) Business Days after the
holding of such meetings.
7.5 Any Director (and any Observer, where applicable) may participate in any
meeting of the Board, any committee of the Board and the board of any
subsidiary of the Company by telephone, video conferencing or other means
by which all participants may speak and hear each other, and any Director
so participating shall be deemed to be present in person at such meeting.
7.6 Meetings of the Board shall be held at least once every three (3) calendar
months and, subject to Clause 9, matters arising at any meeting of the
Board or any committee of the Board shall be decided by a simple majority
of votes, provided that in the case of a meeting of the Compensation
Committee, the majority of votes shall include the favourable votes of the
Investor's Director appointed by each Investor. The quorum necessary for
the transaction of business at a meeting of the Board or any committee of
the Board shall be at least three (3) Directors present in person or by
telephone or video conference including the Investor's Director nominated
by each Investor where the membership of the Board or the relevant
committee comprises of such Investor's Director. If, within one hour from
the time of the meeting specified in the notice given pursuant to Clause
7.4, such a quorum is not present, the meeting shall stand adjourned to the
same day in the following week at the same time and place and, if at such
adjourned meeting, such a quorum is still not present, those Directors
present, provided that there are at least two (2) Directors present (and,
in the case of a meeting of the Compensation Committee only, the Investor's
Director nominated by each Investor) shall be deemed a quorum and may,
subject to Clause 9, transact the business for which the adjourned meeting
was originally convened.
24
7.7 A resolution signed in writing by all the Directors (which resolution may
consist of several counterparts) shall be as valid and effective as if
passed at a duly convened meeting of the Board. A resolution signed in
writing by all members of a committee of the Board (which resolution may
consist of several counterparts) shall be as valid and effective as if
passed at a duly convened meeting of that committee.
7.8 The Company, the PRC Subsidiaries and the Founder shall procure that all
directors of all Group Companies and all members of Group's senior
management, but excluding any Investor's Director and any non-executive
director or any Group Company:
(B) shall devote substantially all their time to the Group's business; and
(C) shall not engage directly or indirectly in a business which competes
with the Group's business or proposed business.
7.9 The Parties agree and acknowledge that the number of directors of each PRC
Subsidiary shall be increased from three (3) to five (5) and the Company
undertakes to take the appropriate actions to achieve such increase as soon
as practical after the date hereof.
8. MEETINGS OF SHAREHOLDERS
8.1 Meetings of Shareholder shall be held at least once every twelve (12)
calendar months and, subject to Clause 9.
8.2 At least fourteen (14) Business Days written notice of any meeting of
Shareholders shall be given to each Shareholder by the Board (or such
longer period as may be required by law for any specific matters) unless
all Shareholders agree in writing to a shorter notice period. Any notice
shall include an agenda identifying in reasonable detail the matters to be
discussed at the meeting together with copies of any relevant papers to be
discussed at the meeting.
8.3 Any Shareholder may participate in any meeting of Shareholders by
telephone, video conferencing or other means by which all participants may
speak and hear each other, and any Shareholder so participating shall be
deemed to be present in person at such meeting.
8.4 If, within one hour from the time of the meeting specified in the notice
given pursuant to Clause 8.2, a quorum is still not present, the meeting
shall stand adjourned to the same day in the following week at the same
time and place and, if at such adjourned meeting, such a quorum is still
not present, the Shareholder(s) present, provided that the Shareholder(s)
present in person or by proxy together holding not less than fifty per
cent. (50%) of all the issued and outstanding Common Shares shall be deemed
a quorum.
8.5 A resolution in writing (in one or more counterparts) signed by all
Shareholders for the time being entitled to receive notice of and to attend
and vote at meetings of Shareholders shall be as valid and effective as if
the same had been passed at a meeting of Shareholders duly convened and
held.
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9. RESERVED MATTERS
9.1 The Company, the PRC Subsidiaries and the Founder undertake to the
Investors, and each of the Shareholders (other than an Investor who holds
any Common Shares) undertakes to the other Shareholders that, following the
First Completion it/he shall exercise all its/his powers in relation to the
Company and/or other Group Companies (including the PRC Subsidiaries) so as
to procure that, subject to any Applicable Law, the following matters (the
"RESERVED MATTERS") shall not be effected, and no agreement or commitment
to engage in any such matters shall be entered into by the Company or any
other Group Companies (with references herein to the "Company" deemed to be
read also as a reference to all of the other Group Companies under this
Clause 9.1), except as contemplated in this Agreement, the Subscription
Agreement and the Transaction Documents:
9.1.1 without the prior written consent of all Investors:
(A) make any loans or investments or acquire any securities (listed
or unlisted) or grant any loans or give any credit (other than
normal trade credit or to other Group Companies) or give any
guarantee or indemnity (save to the Company's bankers to secure
borrowings by the Company within the agreed limit) with an
aggregate accumulative value at any time being in excess of Five
Hundred Thousand United States Dollars (US$500,000);
(B) acquire, grant an operating right in relation to or otherwise
dispose of any shares or securities or material part of its
business or assets (excluding current assets) with an aggregate
accumulative value for any financial year being in excess of One
Million United States Dollars (US$1,000,000),
(C) make any material change in the nature of its business;
(D) enter into transactions not on a bona fide arm's length basis or
not in the ordinary course of business;
(E) enter into any arrangement with any of its directors or
shareholders or any Related Party Transactions (except pursuant
to the ESOP);
(F) change its auditors or accounting reference date or accounting
policies and bases;
(G) adopt or approve any business plan or annual budget;
(H) pass any resolution for or which would result in the winding up,
liquidation or entering into administration or receivership of
any Group Company; or undertake any amalgamation or merger (other
for the purpose of a Reorganisation or a Share Swap),
reconstruction or liquidation exercise concerning any Group
Company; or apply for the appointment of a receiver, manager or
judicial manager or like officer of any Group Company or any
material assets thereof;
(I) create or issue any new class of shares having preference over
the Common Shares or equity interests in issue as at the date
hereof, or
26
do any act which has the effect of diluting or reducing the
effective shareholding of any Investor in the Company on a
Fully-Diluted Basis, save for the purpose of implementing the
ESOP and issue of up to 700,000 Common Shares to ATS (on the
basis of the shareholding structure set out in Schedule 1);
(J) select the listing exchange or the underwriters for an IPO or
approve the valuation and terms and conditions for the IPO,
whether or not the IPO is a Qualified IPO;
(K) change its authorized or issued share capital, constitutional
documents, or capitalize any debenture (except conversion of the
Convertible Notes and issue of Common Shares upon exercise of
options granted under the ESOP), or re-purchase, redeem or
acquire any securities (except as provided in the conditions of
the Convertible Notes);
(L) issue any new shares or options or other securities (including
warrants, options or other rights to acquire shares) for
acquisitions or otherwise (except pursuant to the ESOP);
(M) enter into any joint venture, partnership or consortium
arrangement;
(N) enter into any contract or arrangement which involves a
consideration or payment or receipt exceeding Five Million United
States Dollars (US$5,000,000) to be made within any one year; or
(O) make any capital commitment of an amount exceeding Two Million
United States Dollars (US$2,000,000);
9.1.2 without the favourable votes from the Investor's Director nominated
by each Investor in a duly convened meeting of the Board or the
relevant committee of the Board:
(A) hire any Person as the chief financial officer, the chief
operation officer and any position with vice-president titles;
(B) approve the terms of the ESOP, or any new employee share or stock
option plan apart from the ESOP;
(C) change the terms of employment of any employee whose base salary
is in excess of Fifty Thousand United States Dollars (US$50,000)
per annum; or
(D) declare, make or pay any dividend or distribution to its
shareholders.
9.1 Each of the Company and the PRC Subsidiaries agrees that it will exercise
or refrain from exercising any voting rights or other powers of Control
which it may have in or over any of its directly owned subsidiaries (each a
"DIRECTLY OWNED SUBSIDIARY") so as to ensure that none of the actions set
out in Clause 9.1 will be taken by any such Directly Owned Subsidiary
without the same prior approval as required under Clause 9.1, insofar as it
is not inconsistent with or contrary to the
27
Applicable Law of the jurisdiction in which such Directly Owned Subsidiary
is organised or the constitutional document of such Directly Owned
Subsidiary.
9.2 Each of the Company and the PRC Subsidiaries also agrees that it will
procure each of its Directly Owned Subsidiaries to exercise or refrain from
exercising any voting rights or other powers of Control (whether direct or
indirect) which it may have in or over any company which is an indirectly
owned subsidiary of the Company (an "INDIRECTLY OWNED SUBSIDIARY") so as to
ensure that none of the actions set out in Clause 9.1 will be taken by such
Indirectly Owned Subsidiary without the same prior approval as required
under Clause 9.1, insofar as it is not inconsistent with or contrary to the
Applicable Law of the jurisdiction in which such Indirectly Owned
Subsidiary is organised or the constitutional document of such Indirectly
Owned Subsidiary.
10. INFORMATION RIGHTS
10.1 Following the First Completion, the Company shall supply each of the
Investors with:
(A) audited consolidated profit and loss accounts, balance sheets and
statements of cash flow of the Group within three (3) months after the
end of each financial year;
(B) monthly consolidated management accounts of the Company and individual
company standard accounts for each other Group Company within fifteen
(15) Business Days after each month end;
(C) quarterly consolidated management accounts of the Group within thirty
(30) days after each quarter end;
(D) annual budgets and trading forecasts of the Group not less than thirty
(30) days prior to the commencement of each financial year;
(E) all other information which an Investor may reasonably require within
seven (7) days of the Company's receipt of a notice requesting such
information or, where the Company provides a clear demonstration of
best efforts if more than seven (7) days are required, within the
deadline indicated by the Company;
(F) full details of any progress in relation to any IPO as soon as
practicable;
(G) prompt notification of any withdrawal of banking facilities made
available to any Group Company;
(H) prompt notification of any material dispute, litigation or arbitration
and of any circumstances that would likely give rise to material
dispute, litigation or arbitration;
(I) prior notification of any change in the equity holding percentages of
the Company in any of its subsidiaries or affiliates or any joint
venture to which the Company is a party; and
28
(J) promptly upon written request from an Investor the then current
versions of (i) this Agreement, other related investment documents
(including the Subscription Agreement and the Transaction Documents)
and all documents relating to any subsequent financings by the
Company, the management of the Company or otherwise affecting the
Convertible Notes or Shares issued upon conversion of the Convertible
Notes, each bearing the signatures of all parties and (ii) of the
Articles of Incorporation and By-Laws, bearing the file stamp of the
relevant Governmental Authority, in each case with all amendments and
restatements.
10.2 All financial statements referred to in Clause 10.1 shall be prepared in
accordance with IAS and presented to the Investors in English language. The
documents to be provided under Clause 10.1 may be delivered in either hard
copies or in Portable Document Format (PDF).
11. PAYMENT AND TAXES
All payments to be made to the Investors by any of the other Parties under
this Agreement shall be made:
(A) in full without any Person being able to set-off any amounts due to it
or claimed by it; and
(B) without withholding or deduction of or on account of any present or
future Taxes, duties, assessments or governmental charges of whatever
nature imposed or levied by or on behalf of the government of Hong
Kong, Canada or any authority therein or thereof having power to tax
unless the withholding or deduction of such Taxes, duties, assessments
or governmental charges is required by law. In that event, the paying
Party shall pay such additional amounts as may be necessary in order
that the net amounts received by the relevant Investor after such
withholding or deduction shall equal the respective amounts receivable
by the Investor in the absence of such withholding or deduction.
12. ANNOUNCEMENTS AND CONFIDENTIALITY
12.1 Disclosure of Terms. Each Party acknowledges that the terms and conditions
(collectively, the "FINANCING TERMS") of the Subscription Agreement, this
Agreement, the Transaction Documents, and all exhibits, restatements and
amendments hereto and thereto, including their existence, shall be
considered confidential information and shall not be disclosed by it to any
third party except in accordance with the provisions set forth in this
Clause 12. Each Investor agrees severally with the Company that such
Investor will keep confidential and will not disclose or divulge, any
information which such Investor obtains from the Company, pursuant to
financial statements, reports, presentations, correspondence, and any other
materials provided by the Company or its advisers to, or communications
between the Company and such Investor, or pursuant to information rights
granted under this Agreement or any other related documents, unless the
information is known, or until the information becomes known, to the public
through no fault of such Investor, or unless the Company gives its written
consent to such Investor's release of the information.
29
12.2 Press Releases. Within sixty (60) days from First Completion, the Company
may issue a press release disclosing that the Investors have invested in
the Company provided that (a) the release does not disclose any of the
Financing Terms, (b) the press release does not disclose the amount or
other specific terms of the investment contemplated under the Subscription
Agreement, this Agreement and the Transaction Documents, and (c) the final
form of the press release is approved in advance in writing by each
Investor mentioned therein. Investors' names and the fact that Investors
have made an investment in the Company can be included in a reusable press
release boilerplate statement, so long as each Investor has given the
Company its initial approval of such boilerplate statement and the
boilerplate statement is reproduced in exactly the form in which it was
approved. No other announcement regarding any Investor in a press release,
conference, advertisement, announcement, professional or trade publication,
mass marketing materials or otherwise to the general public may be made
without such Investor's prior written consent, which consent may be
withheld at such Investor's sole discretion.
12.3 Permitted Disclosures. Notwithstanding anything in the foregoing to the
contrary,
(A) the Company may disclose any of the Financing Terms to its current or
bona fide prospective investors, directors, officers, employees,
shareholders, investment bankers, lenders, accountants, auditors,
insurers, business or financial advisors, and attorneys, in each case
only where such persons or entities are under appropriate
non-disclosure obligations imposed by professional ethics, law or
otherwise;
(B) each Investor may, without disclosing the identities of the other
Investors or the Financing Terms of their respective investments in
the Company without their consent, disclose such Investor's investment
in the Company to third parties or to the public at its sole
discretion and, if it does so, the other Parties shall have the right
to disclose to third parties any such information disclosed in a press
release or other public announcement by such Investor;
(C) each Investor shall have the right to disclose:
(i) any information to such Investor's and/or its fund manager's
and/or its Affiliate's legal counsel, fund manager auditor,
insurer, accountant, consultant or to an officer, director,
general partner, limited partner, its fund manager, shareholder,
investment counsel or advisor, or employee of such Investor
and/or its Affiliate; provided, however, that any counsel,
auditor, insurer, accountant, consultant, officer, director,
general partner, limited partner, fund manager, shareholder,
investment counsel or advisor, or employee shall be advised of
the confidential nature of the information or are under
appropriate non-disclosure obligation imposed by professional
ethics, law or otherwise;
(ii) any information for fund and inter-fund reporting purposes;
(iii) any information as required by law, government authorities,
exchanges and/or regulatory bodies, including by the Securities
and Futures Commission of Hong Kong, the China Securities and
30
Regulatory Commission of the PRC or the Securities and Exchange
Commission of the United States (or equivalent for other venues);
and/or
(iv) any information to bona fide prospective purchasers/investors of
any share, security or other interests in the Company, and
(v) any information contained in press releases or public
announcements of the Company pursuant to Clause 12.2.
(D) the confidentiality obligations set out in this Clause 12 do not apply
to:
(i) information which was in the public domain or otherwise known to
the relevant Party before it was furnished to it by another Party
hereto or, after it was furnished to that Party, entered the
public domain otherwise than as a result of (i) a breach by that
Party of this Clause 12 or (ii) a breach of a confidentiality
obligation by the discloser, where the breach was known to that
Party;
(ii) information the disclosure of which is necessary in order to
comply with any Applicable Law, the order of any court, the
requirements of a stock exchange or to obtain Tax clearance or
other clearances or consents from any relevant authority; or
(iii) information disclosed by any Director (and any Observer, where
applicable) to his/her appointer or any of its Affiliate or
otherwise in accordance with the foregoing provisions of this
Clause 12.3.
12.4 Each Party agrees that an Investor's Director (and an Observer, where
applicable) shall be entitled to report all matters concerning the Group,
including but not limited to matters discussed at any meeting of the Board
and of any committee of the Board, to his/her respective appointer, and
that each the Investor's Directors (and each Observer, where applicable)
may take advice and obtain instructions from his/her respective appointer,
but without prejudice to the Investor's Director's obligation to act at all
times in the best interests of the Company or the relevant subsidiary of
the Company (where applicable).
12.5 The obligations contained in this Clause 12 shall endure, even after the
termination of this Agreement, without limit in point of time except to the
extent that and until any confidential information enters the public domain
as set out above.
13. TERMINATION OF THIS AGREEMENT
13.1 This Agreement (save for any provisions which shall come into or continue
to be in force and effect on or after the termination of this Agreement as
expressly stated herein, in the Subscription Agreement or the Transaction
Documents and those provisions which are necessary for the purposes of
interpretation of this Agreement in respect thereof) shall terminate and
cease to have effect on the earliest of the date on which:
(A) a Qualified IPO is completed; or
31
(B) this Agreement is terminated by operations of law or by mutual
agreement of all the Shareholders from time to time,
PROVIDED THAT upon the Transfer by any Person of all Equity Securities
owned by it in accordance with the provisions hereof, such Person shall
automatically cease to be a Party and shall have no further rights or
obligations hereunder
13.2 The termination of this Agreement or rights and obligations hereunder shall
not apply to (a) the public offering or registration rights of the
Investors under the Registration Rights Agreement, (b) the rights and
obligations under the undertakings referred to in clause 3.1(G) of the
Subscription Agreement and (c) the rights and obligations under Clause 12
(where applicable).
13.3 Any termination pursuant to Clause 13.1 shall be without prejudice to any
accrued rights and liabilities of the Parties.
14. ENTIRE AGREEMENT
This Agreement sets out the entire agreement and understanding between the
Parties in respect of the transactions and matters contemplated under this
Agreement.
15. VARIATION
No variation of this Agreement (or any document entered into pursuant to
this Agreement) shall be valid unless it is in writing and signed by or on
behalf of each of the Parties.
16. SUCCESSORS AND ASSIGNS
All rights, covenants and agreements of the Parties contained in this
Agreement shall, except as otherwise provided herein, be binding upon and
inure for the benefit of their respective successors or permitted assigns.
17. INVALIDITY
If any provision of this Agreement is held to be invalid or unenforceable,
then such provision shall (so far as it is invalid or unenforceable) be
given no effect and shall be deemed not to be included in this Agreement
but without invalidating any of the remaining provisions of this Agreement.
18. WAIVER
18.1 No failure on the part of any Party to exercise, and no delay on its part
in exercising, any right or remedy under this Agreement will operate as a
waiver thereof nor will any single or partial exercise of any right or
remedy preclude any other or further exercise thereof or the exercise of
any other right or remedy. The rights and remedies provided in this
Agreement are cumulative and not exclusive of any rights or remedies
provided by law.
18.2 Any waiver of any provision of this Agreement, and any consent by a Party
under any provision of this Agreement, must be in writing. Any waiver or
consent shall be effective only for that instance and for the purpose for
which it is given.
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19. THIS AGREEMENT
The Parties acknowledge and agree that: (a) to the extent applicable, this
Agreement shall be deemed to be an agreement pursuant to section 108(2) of
the Business Corporations Act (Ontario) and (b) where there is any conflict
between the provisions of this Agreement and the Subscription Agreement on
one hand and the Articles and By-Laws on the other hand, the provisions of
this Agreement and the Subscription Agreement shall prevail.
20. NOTICES
20.1 Notices or other communications required to be given by any Party pursuant
to this Agreement shall be written in English and may be delivered
personally or sent by registered airmail or postage prepaid, by a
recognized courier service or by facsimile transmission to the address of
the other Parties set forth below. The dates on which such notices shall be
deemed to have been effectively given shall be determined as follows:
(A) notices given by personal delivery shall be deemed effectively given
on the date of personal delivery;
(B) notices given by registered airmail or postage prepaid shall be deemed
effectively given on the fifth (5th) Business Day after the date on
which they were mailed (as indicated by the postmark);
(C) notices given by courier shall be deemed effectively given on the
second (2nd) Business Day after they were sent by recognized courier
service; and
(D) notices given by facsimile transmission shall be deemed effectively
given immediately following confirmation of its transmission as
recorded by the sender's facsimile machine.
TO THE COMPANY OR ANY OF THE PRC SUBSIDIARIES:
Address: [chinese characters]
(Building A6, Export Processing Xxxx
Xxxxxx Xxx & Xx-Xxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx 000000
The People's Republic of China)
Fax Number: 00-000-00000000
Attention: The President
33
TO THE FUNDS:
c/o HSBC Private Equity
(Asia) Ltd.
Address: Xxxxx 00, 0 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
Fax Number: x000 0000-0000
Attention: The Managing Director
TO JAFCO:
c/o JAFCO Investment
(Asia Pacific) Ltd
Address: 0 Xxxxxxx Xxxx
#00-00 Xxxxxxxxx 000000
Fax Number: x00 0000-0000
Attention: The President
With a copy to:
JAFCO Investment
(Hong Kong) Ltd.
Address: 30/F Two International Finance Centre
0 Xxxxxxx Xxxxxx
Xxxxxxx
Xxxx Xxxx
Fax Number: x000 0000-0000
Attention: General Manager
Email: All E-mail correspondence to
xxxxxxx.xxxx@xxxxxxxxx.xxx and
xxx.xxx@xxxxxxxxx.xxx
TO THE FOUNDER:
Address: [chinese characters]
(Building A6, Export Processing Xxxx
Xxxxxx Xxx & Xx-Xxxx Xxxxxxxx
Xxxxxxx Xxxxxxxx 000000
The People's Republic of China)
Fax Number: 00-000-00000000
20.2 Any Party may at any time change its address or fax number for service of
notices in writing delivered to the other Parties in accordance with this
Clause 20.
21. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
Parties hereto on separate counterparts, each of which when so executed
shall be an original, but all of which shall together constitute one and
the same instrument.
22. PROCESS AGENTS
22.1 Each Party hereby irrevocably appoints the Person set out opposite its name
below as its respective agent to accept service of process in Hong Kong in
any legal action or proceedings arising out of this Agreement, service upon
whom shall be deemed completed whether or not such service of process is
forwarded to such Party by its
34
agent or received by it, and each Party warrants and undertakes to the
other Parties that the agent appointed by it hereunder is a company
incorporated in Hong Kong and the address of such agent set out below is
its registered office address in Hong Kong:
AGENT /
PARTY REGISTERED OFFICE ADDRESS
----- -------------------------
For the Company, the Founder and Key Consultant Limited
the PRC Subsidiaries:
Address: Xxxx 000, 0xx Xxxxx, Xxxx xx Xxxxxxx
Tower, 00 Xxxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx
The Funds HSBC Private Equity (Asia) Ltd.
Address: Xxxxx 00, 0 Xxxxx'x Xxxx Xxxxxxx,
Xxxx Xxxx
JAFCO JAFCO Investment (Hong Kong) Ltd.
Address: 30/F Two International Finance
Centre, 0 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxx Xxxx
22.2 If a process agent appointed by any Party pursuant to Clause 22.1 ceases to
be able to act as such or to have a registered office address in Hong Kong,
the Party which appoints such process agent shall appoint a new process
agent, which shall be a company incorporated in Hong Kong, and to deliver
to the other Parties, before the expiry of fourteen (14) days from the date
on which such process agent ceases to be able to act as such or to have a
registered office address in Hong Kong, a copy of the written acceptance of
appointment by that new process agent.
22.3 Nothing in this Agreement shall affect the right to serve process in any
other manner permitted by law or the right to bring proceedings in any
other jurisdiction for the purposes of the enforcement or execution of any
judgement or other settlement in any other courts.
23. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with the
laws of Hong Kong.
24. DISPUTE RESOLUTION
24.1 Any dispute, controversy or claim arising out of or connected with this
Agreement or the interpretation, breach, termination or validity hereof,
including a dispute as to the validity or existence of this Agreement,
shall be resolved by way of arbitration upon the request of any of the
Parties in dispute with notice to the other Parties.
24.2 Arbitration under this Clause 24 shall be conducted in Hong Kong, under the
auspices of the Hong Kong International Arbitration Centre (the "HKIAC") by
three arbitrators (the "ARBITRATORS") pursuant to the rules of the United
Nations
35
Commission on International Trade Law (the "UNCITRAL RULES"), save that,
unless the parties in dispute agree otherwise:
(A) The three Arbitrators shall be appointed by the HKIAC; and
(B) the Parties agree to waive any right of appeal against the arbitration
award.
24.3 The arbitration shall be administered by HKIAC in accordance with HKIAC's
procedures for arbitration.
24.4 Each Party shall cooperate with the others in making full disclosure of and
providing complete access to all information and documents requested by
another Party in connection with such arbitration proceedings, subject only
to any confidentiality obligations binding on the disclosing Party.
24.5 The award of the arbitral tribunal shall be final and binding upon the
disputing parties, and a prevailing party may apply to any court of
competent jurisdiction for enforcement of such award.
24.6 The cost of the arbitration (including the reasonable and properly incurred
fees and expenses of the lawyers appointed by each party to the
arbitration) shall be borne by the Party or Parties against whom the
arbitration award is made or otherwise in accordance with the ruling of the
arbitration tribunal.
24.7 Any Party shall be entitled to seek preliminary injunctive relief, if
possible, from any court of competent jurisdiction pending the constitution
of the arbitral tribunal.
25. JAFCO'S RIGHTS
All Parties acknowledge and agree that any rights of JAFCO under this
Agreement may, without prejudice to the rights of JAFCO to exercise any
such rights, be exercised by JAFCO Investment (Asia Pacific) Ltd. ("JIAP")
or any other fund manager of JAFCO or their nominees (each, a "JAFCO
MANAGER"), unless JAFCO has (a) given notice to the other Parties that any
such rights cannot be exercised by JIAP or a JAFCO Manager; and (b) not
given notice to the other Parties that such notice given under paragraph
(a) above has been revoked.
IN WITNESS WHEREOF this Agreement has been executed by the Parties the day and
year first before written.
36
SCHEDULE 1
PARTICULARS OF THE COMPANY
NAME: Canadian Solar Inc.
DATE OF INCORPORATION: 22 October 0000
XXXXX XX XXXXXXXXXXXXX: Xxxxxxxx xx Xxxxxxx, Xxxxxx
REGISTERED OFFICE: 0000 Xxxxxx Xxxxxxxx. Xxxxxxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
DIRECTORS: QU Xxxx Xxx
ISSUED CAPITAL (AS OF THE 5,668,421 Common Shares with no nominal or par
DATE HEREOF): value (subdivided from 1,000,000 Common Shares;
subject to filing of the Articles with the
relevant Governmental Authority in Canada)
SHAREHOLDERS AS AT THE DATE
HEREOF: SHAREHOLDER NO. OF EQUITY SECURITIES HELD
--------------------------- ----------- -----------------------------
QU Xxxx Xxx 5,668,421 Common Shares
37
SCHEDULE 2
REPRESENTATIONS AND WARRANTIES REFERRED TO IN CLAUSE 4.7(C)(I)
The Founder warrants to the Investors as follows in relation to the company /
corporation referred to in Clause 4.7(A)(v) (the "VEHICLE"):
1. DUE INCORPORATION
The Vehicle which is a corporation or corporate body has been duly
incorporated and is validly existing under the laws of its place of
incorporation and is not in receivership or liquidation, has not taken any
steps to enter into liquidation and no petition has been presented for its
winding up and there are no valid and justifiable grounds on which a
petition or application could be based for the winding up or appointment of
a receiver thereof.
2. COMPLIANCE
2.1 The Vehicle has duly obtained all necessary corporate authorisations (where
applicable) and all other applicable governmental, statutory, regulatory or
other consents, licences, waivers or exemptions required to empower it to
enter into and to perform its obligations under the Joinder Agreement, the
Investment Agreement and the Transaction Documents (as defined in the
Investment Agreement) (where applicable). The Joinder Agreement will, upon
execution be, duly executed and delivered by the Vehicle and the Founder,
and constitute valid and binding obligations of the Vehicle and the Founder
enforceable in accordance with their respective terms.
2.2 The execution and performance of the transactions contemplated by the
Joinder Agreement, the Investment Agreement and the Transaction Documents
and compliance with their provisions by the Vehicle will not violate any
provision of law or conflict with or result in a breach of any of the
terms, conditions or provisions of, or if applicable, constitute a default
under the Vehicle's constitutional documents, or any indenture, lease,
agreement or other instrument to which the Vehicle or the Founder is a
party or by which he/it or any of his/its properties are bound or any
judgement, decree, order, statute, rule or regulation applicable to the
Vehicle or the Founder.
3. SHAREHOLDING AND SUBSIDIARIES
3.1 Shareholding
(A) All shares in the capital of the Vehicle issued have been fully paid
up and held and owned by the Founder.
(B) There is no, nor is there any legally valid agreement or arrangement
to create any, pledge, lien, charge, encumbrance, rights of
pre-emption or other equities or third party rights of any nature
whatsoever on, over or affecting any of the shares in the capital of
the Vehicle and no claim has been made by any Person to be entitled to
any of the foregoing.
(C) There are no legally valid agreements or arrangement in force which
call for the present or future issue or allotment of, or grant to any
Person the right
38
(whether conditional or otherwise) to call for the issue, allotment or
transfer of any shares of the Vehicle.
3.2 Subsidiaries
The Vehicle does not have and has never had any subsidiary other than the
Group Companies. Save for the Group Companies, the Vehicle is not the legal
or beneficial owner of any share or equity interests in any Person.
39
The Common Seal of )
CANADIAN SOLAR INC. )
was affixed hereto ) /s/
-----------------------------
in the presence of:- ) /s/
-----------------------------
SIGNED by )
for and on behalf of )
HSBC HAV2 (III) LIMITED ) /s/
-----------------------------
in the presence of:- )
SIGNED by )
for and on behalf of )
JAFCO ASIA TECHNOLOGY FUND II ) /s/
-----------------------------
in the presence of:- )
SIGNED, SEALED and DELIVERED )
as a Deed by )
QU XXXX XXX ) /s/
-----------------------------
in the presence of:- ) /s/
-----------------------------
The Seal of )
[chinese characters] )
(CSI SOLARTRONICS CO., LTD.) )
was affixed hereto ) /s/
-----------------------------
in the presence of:- ) /s/
-----------------------------
[Company seal of CSI Solartronics Co., Ltd.]
The Seal of )
[chinese characters] )
(CSI SOLAR TECHNOLOGIES INC.) )
was affixed hereto ) /s/
-----------------------------
in the presence of:- ) /s/
-----------------------------
[Company seal of CSI Solar Technologies Inc.]
40
The Seal of )
[chinese characters] )
(CSI SOLAR MANUFACTURING INC.) )
was affixed hereto ) /s/
-----------------------------
in the presence of:- ) /s/
-----------------------------
[Company seal of CSI Solar Manufacturing Inc.]
41
