SHAREHOLDERS AGREEMENT
Exhibit 3
EXECUTION VERSION
This SHAREHOLDERS AGREEMENT (this “Agreement”) is made and entered into as of December 31,
2009 by and among, (a) Xx. Xxxx Senshan (“Xx. Xxxx”), (b) Xx. Xxx Xxxxxx (“Xx. Xxx”), (c) Xx. Xxx
Junhua, (“Xx. Xxx,” together with Xx. Xxxx and Xx. Xxx, the “Executive Shareholders”) and (d) OEP
CHME Holdings, LLC, a Delaware limited liability company (“OEP”).
WITNESSETH
WHEREAS, Xx. Xxxx holds 3,265,000 common shares of China Medicine Corporation, a Nevada
corporation (the “Company”), par value $0.0001 per share (the “Common Shares”) representing 21.1%
of the total issued and outstanding Common Shares;
WHEREAS, Xx. Xxx holds 2,612,000 Common Shares of the Company, representing 16.9% of the total
issued and outstanding Common Shares;
WHEREAS, Xx. Xxx holds 653,000 Common Shares of the Company, representing 4.2% of the total
issued and outstanding Common Shares;
WHEREAS, OEP entered into a Stock Subscription Agreement (the “SSA”) with the Company dated
the date hereof, pursuant to which the Company agreed to issue and sell, and OEP agreed to purchase
4,000,000 Common Shares and 1,920,000 Redeemable Convertible Preferred Shares from the Company
pursuant to the terms and conditions set forth therein; and
WHEREAS, on the Closing Date (as defined in the SSA), OEP and the Executive Shareholders
shall, together, hold 29,730,000 Common Shares on a Fully Diluted Basis, equal to the sum of
6,530,000 Common Shares owned by the Executive Shareholders, 4,000,000 Common Shares initially
purchased by OEP and 19,200,000 Common Shares into which the 1,920,000 Redeemable Convertible
Preferred Shares purchased by it are initially convertible. The 29,730,000 Common Shares on a Fully
Diluted Basis shall account for 76.5% of the total issued and outstanding Common Shares at the
Closing.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties
and covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
DEFINITIONS
Section 1.1 Definitions. The following terms used in this Agreement shall have the
meanings set forth below. Capitalized terms used in this Agreement but not otherwise defined herein
shall have the meanings set forth in the SSA:
“Direct Competitor” means any of the Persons set forth on Annex B.
“Independent Director” means an individual who satisfies the independence requirements of
Nasdaq Global Select Market and the New York Stock Exchange, and is not an Affiliate, partner,
director, officer or employee of a party hereto or an Affiliate of any party hereto or a relative
of any of the foregoing.
“Permitted Transferee” of an Executive Shareholder means (A) such Executive Shareholder’s
spouse, lineal descendants, siblings, ancestors (in each case, natural or adopted), any trust
formed solely for the benefit of any of the foregoing or any corporation, partnership, limited
liability company or other legal entity in which the beneficial owner of all of the equity interest
of such entity consist solely of such Executive Shareholder and/or the foregoing, provided however,
that such transferee shall be subject to the same transfer restrictions applicable to the Executive
Shareholder transferring such Equity Securities and the transfer of such legal entity shall be
subject to the same restrictions applicable to the transfer of Equity Securities, and (B) such
Executive Shareholder’s heirs, executors, administrators or personal representatives upon the
death, incompetency or disability of such Executive Shareholder for purposes of the protection and
management of his or her assets or by operation of law, provided however, that such transferee
shall be subject to the same transfer restrictions applicable to the Executive Shareholder with
respect to the transfer of Equity Securities; “Permitted Transferee” of OEP means any other Person
that directly or indirectly through one or more intermediaries controls or is controlled by, or is
under direct or indirect common control with, OEP. For the purposes of this definition, “control”
means the power to direct the management and policies of OEP, directly or indirectly, whether
through the ownership of voting securities or through representation on the board of directors of
OEP or other management committee or group or otherwise.
“Transfer” means the making of any sale, exchange, assignment, hypothecation, gift, security
interest, pledge or other encumbrance, or any contract therefor, any voting trust or other
agreement or arrangement with respect to the transfer of voting rights or any other beneficial
interest in any Equity Securities, the creation of any other claim thereto or any other transfer or
disposition whatsoever, whether voluntary or involuntary, affecting the right, title, interest or
possession in or to Equity Securities.
“Yang Director” means a member of the Board of Directors nominated by Xx. Xxxx.
Section 1.2 Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms defined. The words
“hereof”, “herein” and “hereunder” and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
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Section 1.3 Terms defined elsewhere in this Agreement. The following terms are
defined in this Agreement as follows:
Term | Location | Page | ||||
Agreement |
Preamble | 1 | ||||
Common Shares |
Preamble | 1 | ||||
Company |
Preamble | 1 | ||||
Company Sale |
Annex A | A-6 | ||||
Co-Sale Right |
Section 2.6(a) | 6 | ||||
Deferral Option |
Section 3.1(b) | 9 | ||||
Drag-Along Notice |
Section 2.7(a) | 7 | ||||
Drag-Along Securities |
Section 2.7(a) | 7 | ||||
Drag-Along Sellers |
Section 2.7(a) | 7 | ||||
Drag-Along Transferee |
Section 2.7(a) | 7 | ||||
Executive Shareholders |
Preamble | 1 | ||||
Indemnified Person |
Annex A | A-6 | ||||
Joinder |
Section 2.3 | 4 | ||||
Migration |
Annex A | A-6 | ||||
Xx. Xxx |
Preamble | 1 | ||||
Xx. Xxxx |
Preamble | 1 | ||||
Xx. Xxx |
Preamble | 1 | ||||
Non-Selling Parties |
Section 2.4(a) | 4 | ||||
Non-Transferor |
Section 2.5(a) | 5 | ||||
OEP |
Preamble | 1 | ||||
OEP Director |
Section 3.1(a) | 8 | ||||
Price Notice |
Section 2.4(b) | 4 | ||||
Proposed Contract |
Section 2.4(d) | 5 | ||||
Proposed Transferee |
Section 2.4(d) | 5 | ||||
Representatives |
Annex A | A-2 | ||||
Right of First Offer Exercise Period |
Section 2.4(a) | 4 | ||||
Right of First Offer Notice |
Section 2.4(a) | 4 | ||||
Right of First Offer Shares |
Section 2.4(a) | 4 | ||||
Right of First Refusal Exercise Notice |
Section 2.5(b) | 6 | ||||
Right of First Refusal Exercise Period |
Section 2.5(b) | 5 | ||||
Right of First Refusal Notice |
Section 2.5(a) | 5 | ||||
Right of First Refusal Shares |
Section 2.5(a) | 5 | ||||
ROFO Price |
Section 2.4(b) | 4 | ||||
ROFR Proposed Transferee |
Section 2.5(a) | 5 | ||||
Selling Party |
Section 2.4(a) | 4 | ||||
Selling Percentage |
Section 2.6(b) | 6 | ||||
SSA |
Preamble | 1 | ||||
Tag-Along Percentage |
Section 2.8(a) | 8 | ||||
Tag-Along Right |
Section 2.8 | 8 | ||||
Termination Notice |
Section 3.1(b) | 9 | ||||
Third Party Negotiation Period |
Section 2.4(d) | 5 | ||||
Transferor |
Section 2.5(a) | 5 |
ARTICLE II.
RESTRICTIONS ON TRANSFERS OF EQUITY SECURITIES
RESTRICTIONS ON TRANSFERS OF EQUITY SECURITIES
Section 2.1 Restriction on Transfer. For so long as OEP owns at least 10% of the
issued and outstanding Common Shares on a Fully Diluted Basis at the time of determination, no
Executive Shareholder shall effect a Transfer of any Equity Securities other than (A) with the
prior written consent of OEP or (B) to a Permitted Transferee of such Executive Shareholder. Any
purported Transfer in violation of this Section 2.1 or any federal or state securities 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.
Section 2.2 Restrictive Legend. Any physical certificates or other instrument
representing any Equity Security held by an Executive Shareholder shall bear the following legend
in addition to any other legend required under applicable law:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF DECEMBER 31, 2009, AS AMENDED
FROM TIME TO TIME BY AND AMONG THE SHAREHOLDERS SPECIFIED THEREIN. THE SALE,
TRANSFER OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF SUCH AGREEMENT AND THE SECURITIES ARE
TRANSFERABLE ONLY UPON PROOF OF COMPLIANCE THEREWITH.
A copy of this Agreement shall be filed with the corporate secretary of the Company, kept with
the records of the Company and shall be made available for inspection by Permitted Transferees at
the principal executive offices of the Company.
Section 2.3 Execution of Joinder. Notwithstanding anything to the contrary herein, no
Transfer of Equity Securities (including Transfers to Permitted Transferees) by any Executive
Shareholder shall be effective unless and until the transferee (including any Permitted Transferee)
executes a joinder to this Agreement in form and substance satisfactory to OEP (the “Joinder”).
Each such transferee (including any Permitted Transferee) shall agree to transfer its Equity
Securities to the Executive Shareholder (for the same consideration for which such transferee
received such Equity Securities) from whom such Permitted Transferee received such Equity
Securities immediately prior to the occurrence of any event which would result in such Person no
longer being a Permitted Transferee of such Executive Shareholder. No Transfer shall be effected
except in compliance with the registration requirements of the Securities Act or pursuant to an
available exemption therefrom.
Section 2.4 Right of First Offer.
(a) If OEP (in such capacity and as used in Section 2.4, Section 2.7 and Section 2.8 only, a
“Selling Party”) proposes to Transfer all or some of its Common Shares (the “Right of First Offer
Shares”) other than to a Permitted Transferee, the Selling Party shall first deliver to the
Executive Shareholders (as used in Section 2.4, Section 2.7 and Section 2.8 only, collectively, the
“Non-Selling Parties”) a written notice (the “Right of First Offer Notice”) of such intention. The
Right of First Offer Notice shall set forth the number of Right of First Offer Shares being offered
to the Non-Selling Parties. The Right of First Offer Notice shall constitute, for a period of
thirty (30) days (the “Right of First Offer Exercise Period”) from the date on which it shall have
been deemed given, an irrevocable and exclusive offer to sell to the Non-Selling Parties the Right
of First Offer Shares.
(b) The Non-Selling Parties may accept the offer to purchase all, but not less than all, of
the Right of First Offer Shares being offered in a Right of First Offer Notice by giving notice (an
“Price Notice”) to the Selling Party of its offer to purchase all (but not less than all) of the
Right of First Offer Shares. Such Price Notice shall specify the maximum price per Right of First
Offer Share (“ROFO Price”) at which the Non-Selling Parties are willing to purchase the Right of
First Offer Shares. The Price Notice and the ROFO Price set forth therein shall constitute an
irrevocable and exclusive offer to purchase from the Selling Party all of the Right of First Offer
Shares.
(c) If the Non-Selling Parties shall have delivered a Price Notice to the Selling Party, the
Selling Party may (but shall not be required to) accept the offer set forth in the Price Notice.
If accepted, the Non-Selling Parties shall pay in cash or immediately available funds for and the
Selling Party shall deliver valid title to the Right of First Offer Shares, subject to receipt of
any Governmental Requirement.
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(d) If the Non-Selling Parties shall have delivered a Price Notice to the Selling Party prior
to the end of the Right of First Offer Exercise Period but the Selling Party does not immediately
accept the ROFO Price set forth in such Price Notice, the Selling Party may, for a period of ninety
(90) days following the expiration of the Right of First Offer Exercise Period (the “Third Party
Negotiation Period”), enter into negotiations with a third party purchaser (as used in this Section
2.4 only, a “Proposed Transferee”) for the Transfer of the Right of First Offer Shares; provided
the Selling Party shall not enter into any agreement (a “Proposed Contract”) with the Proposed
Transferee, unless the price per Right of First Offer Share at which the Selling Party will sell
the Right of First Offer Shares is higher than the ROFO Price.
(e) If the Non-Selling Parties shall have failed to deliver a Price Notice to the Selling
Party prior to the end of the Right of First Offer Exercise Period, the Selling Party may Transfer
the Right of First Offer Shares without any restriction or obligation to the Non-Selling Parties
other than the Non-Selling Parties’ rights under Section 2.8 to the extent the Non-Selling Parties
shall have exercised their rights thereunder on a timely basis.
(f) At the end of the Third Party Negotiation Period, the Selling Party may (but shall not be
required to) accept the offer set forth in the Price Notice, in which event the Non-Selling Parties
shall pay in cash or immediately available funds for and the Selling Party shall deliver valid
title to the Right of First Offer Shares, subject to any Governmental Requirement.
(g) If the Selling Party does not enter into a Proposed Contract or accept the offer set forth
in the Price Notice at the end of the Third Party Negotiation Period, the Selling Party shall not
transfer any Common Shares until first complying with the requirements set forth in this Section
2.4(a) through (e).
(h) The foregoing provisions of this Section 2.4 shall not apply to any proposed Transfer of
less than 5% of the then total issued and outstanding Common Shares, provided however that a series
of related transaction that individually may Transfer less than 5% but in aggregate Transfer more
than 5% shall be subject to the foregoing provisions of this Section 2.4.
Section 2.5 Right of First Refusal.
(a) Prior to the Transfer by an Executive Shareholder (in such capacity and as used in
Sections 2.5 and 2.6 only, a “Transferor”) of any Equity Securities, (the “Right of First Refusal
Shares”) to a purchaser other than a Permitted Transferee (as used in Sections 2.5 and 2.6 only,
the “ROFR Proposed Transferee”), the Transferor shall deliver a written notice (a “Right of First
Refusal Notice”) to OEP (“Non-Transferor”). The Right of First Refusal Notice shall include the
material terms and conditions of such proposed Transfer, including, but not limited to: (1) the
name and address of the ROFR Proposed Transferee, (2) the number of Right of First Refusal Shares,
(2) the aggregate purchase price, (3) a copy of any written instrument or document from the ROFR
Proposed Transferee setting forth the terms and conditions of such proposed Transfer and (4)
irrevocably offering to sell the Right of First Refusal Shares to the Non-Transferor on such terms
and conditions.
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(b) The Non-Transferor shall have the right, for a period of thirty (30) days following the
receipt of a Right of First Refusal Notice (the “Right of First Refusal Exercise Period”), to
purchase all or some of the Right of First Refusal Shares by delivering written acceptance of the
offer set forth in the Right of First Refusal Notice (a “Right of First Refusal Exercise Notice”)
to the Transferor during the Right of First Refusal Exercise Period. If the Non-Transferor shall
have delivered a Right of First Refusal Exercise Notice to the Transferor, the Non-Transferor shall
pay in cash or immediately available funds for and the Transferor shall deliver valid title to the
number of Right of First Refusal Shares elected to be purchased in such Right of First Refusal
Exercise Notice, subject to any Governmental Requirement.
(c) If the Non-Transferor shall not have delivered a Right of First Refusal Exercise Notice to
the Transferor during the Right of First Refusal Exercise Period, the Transferor may, within ninety
(90) days after the expiration of the Right of First Refusal Exercise Period, Transfer all, but not
less than all, of the Right of First Refusal Shares to the ROFR Proposed Transferee, provided
however, that the terms and conditions (including price) of any such sale shall not be on terms
more favorable to the ROFR Proposed Transferee than those set forth in the Right of First Refusal
Notice. The number of Right of First Refusal Shares to be sold by the Transferor to the ROFR
Proposed Transferee shall be subject to adjustment pursuant to Section 2.6 if the Non-Transferor
shall have exercised its rights under Section 2.6.
(d) If the Transferor does not Transfer the Right of First Refusal Shares to the ROFR Proposed
Transferee within the ninety (90) day period set forth in Section 2.5(c) above, the Transferor
shall not transfer any Equity Securities until first complying with the requirements set forth in
this Section 2.5(a) through (c).
Section 2.6 Co-Sale Right.
(a) If the Non-Transferor shall not have fully exercised its right under a Right of First
Refusal Exercise Notice, the Non-Transferor shall have the right (the “Co-Sale Right”), exercisable
upon written notice to the Transferor within fifteen (15) days after the expiration of the Right of
First Refusal Exercise Period to participate in a sale of Right of First Refusal Shares by the
Transferor. The Co-Sale Right of the Non-Transferor shall be subject to the following terms and
conditions:
(b) The Non-Transferor be entitled to participate in a sale of Right of First Refusal Shares
by selling or transferring to the ROFR Proposed Transferee up to that number of Common Shares equal
to the product of the Selling Percentage (as defined below) and aggregate number of Right of First
Refusal Shares set forth in the Right of First Refusal Notice. The “Selling Percentage” shall be
determined by dividing (i) the number of Common Shares on a Fully Diluted Basis then owned by the
Non-Transferor (directly or indirectly) by (ii) the total number of Common Shares on a Fully
Diluted Basis owned (directly or indirectly) by the Transferor and the Non-Transferor.
(c) The Non-Transferor shall effect its participation in the sale as provided for under
Section 2.6(b) by promptly delivering to the Transferor for Transfer to the ROFR Proposed
Transferee one or more share certificates, properly endorsed for Transfer, which represent the
number of Common Shares determined pursuant to Section 2.6(b) against payment in cash or
immediately available funds for the purchase price of such Common Shares, subject to any
Governmental Requirement.
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(d) If any ROFR Proposed Transferee shall object to the Transfer by the Non-Transferor of its
Common Shares pursuant to this Section 2.6, the Transferor shall not Transfer to such ROFR Proposed
Transferee any Right of First Refusal Shares unless and until, simultaneously with such Transfer,
the Transferor shall have purchased from the Non-Transferor for the same consideration and on the
same terms and conditions as the proposed Transfer set forth in the Right of First Refusal Notice
such number of Common Shares that the Non-Transferor would have been able to Transfer to the ROFR
Proposed Transferee in accordance with Section 2.6(b) but for such ROFR Proposed Transferee’s
objection.
Section 2.7 Drag-Along Right.
(a) If a Non-Selling Party shall not have fully exercised its right to purchase the Right of
Offer Shares pursuant to Section 2.4, the Selling Party shall have the right (but not the
obligation) to require all or any of the Non-Selling Parties (the “Drag-Along Sellers”) to Transfer
the number of Drag-Along Securities held by such Drag-Along Seller to a purchaser (the “Drag Along
Transferee”) contemporaneously with the Transfer of Equity Securities by the Selling Party by
delivery of a written notice (a “Drag-Along Notice”) to the Drag-Along Sellers no later than thirty
(30) days prior to the closing thereof. The Drag-Along Notice shall set forth: (1) the material
terms and conditions of such offer, including the name and address of and the per Drag-Along
Security purchase price offered by the Drag-Along Transferee and (2) the anticipated time, date and
place of the closing of such Transfer to the Drag-Along Transferee. The number of “Drag-Along
Securities” for each Drag-Along Seller shall equal that number determined by multiplying the number
of Equity Securities then held by such Drag-Along Seller by the quotient equal to the number of
Equity Securities to be Transferred to the Drag-Along Transferee by the Selling Party divided by
the number of Equity Securities then held by the Selling Party. At the closing each Drag-Along
Seller shall Transfer its Drag-Along Securities on the same terms and conditions applicable to the
Equity Securities proposed to be sold by the Selling Party.
(b) Each Drag-Along Seller shall, if requested by the Selling Party, execute and deliver a
custody agreement and power of attorney in form and substance satisfactory to the Selling Party
with respect to the Equity Securities that are to be included in the Drag-Along Transfer. The
custody agreement and power of attorney will provide, among other things, that such Drag-Along
Seller shall deliver to and deposit in custody with the custodian and attorney-in-fact, named
therein, a certificate or certificates representing such Equity Securities (duly endorsed in blank
by the registered owner or owners thereof or accompanied by duly endorsed stock powers in blank)
and irrevocably appoint the custodian and attorney-in-fact as such Drag-Along Seller’s agent and
attorney-in-fact with full power to act under a custody agreement and power of attorney on behalf
of such Drag-Along Seller with respect to the matters specified therein. Each Drag-Along Seller
agrees that it will execute such other agreements as the Selling Party may reasonably request in
connection with the consummation of a Drag-Along Transfer and Drag-Along Notice and the
transactions contemplated thereby, including, without limitation, any purchase agreement, proxies,
written consents in lieu of meetings or waiver of appraisal rights.
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Section 2.8 Tag-Along Rights. If the Non-Selling Parties shall not have delivered a
Price Notice or the Selling Party shall have not accepted the offer set forth in a Price Notice and
Selling Party proposes to sell the Right of First Offer Shares to a Direct Competitor, Selling
Party shall furnish to Non-Selling Parties by written notice a summary of the material terms and
conditions upon which Selling Party proposes to sell the Right of First Offer Shares to such
Director Competitor. The Non-Selling Parties shall have the right (the “Tag-Along Right”),
exercisable upon written notice to the Selling Party within fifteen (15) days after the Non-Selling
Parties shall have received such summary to participate in a sale of Right of First Offer Shares by
the Selling Party. The Tag-Along Right of the Non-Selling Parties shall be subject to the
following terms and conditions:
(a) The Non-Selling Parties shall be entitled to participate in a sale of Right of First Offer
Shares to a Direct Competitor by selling or transferring to such Direct Competitor up to that
number of Common Shares equal to the product of the Tag-Along Percentage (as defined below) and
aggregate number of Right of First Offer Shares set forth in the Right of First Offer Notice. The
“Tag-Along Percentage” shall be determined by dividing (i) the number of Common Shares then owned
by the Non-Selling Party (directly or indirectly) by (ii) the total number of Common Shares on a
Fully Diluted Basis owned (directly or indirectly) by the Selling Party and the Non-Selling
Parties.
(b) The Non-Selling Parties shall effect their participation in the sale as provided for under
Section 2.8(a) by promptly delivering to the Selling Party for Transfer to the Direct Competitor
one or more share certificates, properly endorsed for Transfer, which represent the number of
Common Shares determined pursuant to Section 2.8(a) against payment in cash or immediately
available funds for the purchase price of such Common Shares, subject to any Governmental
Requirement. The aggregate number of Common Shares being sold by the Selling Party and the
Non-Selling Party shall equal the number of Right of First Offer Shares to be sold to the Direct
Competitor.
(c) If any Direct Competitor shall object to the Transfer by the Non-Selling Parties of their
Common Shares pursuant to this Section 2.8, the Selling Party shall not Transfer to such Direct
Competitor any Right of First Offer Shares unless and until, simultaneously with such Transfer, the
Selling Party shall have purchased from the Non-Selling Parties for the same consideration and on
the same terms and conditions as the proposed Transfer set forth in the summary of the terms of the
sale to such Direct Competitor such number of Common Shares that the Non-Selling Parties would have
been able to Transfer to such Direct Competitor in accordance with Section 2.8(b) but for such
Direct Competitor’s objection.
ARTICLE III.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
Section 3.1 Directors.
(a) For so long as OEP owns at least 10% of the issued and outstanding Common Shares on a
Fully Diluted Basis at the time of determination, each of OEP and the Executive Shareholders shall
cause the Board of Directors to be comprised of seven (7) persons as follows: (A) Xx. Xxxx as the
chairman of the Board of Directors, (B) one (1) person nominated by Xx. Xxxx who shall be
reasonably acceptable to OEP, (C) one (1) person nominated by OEP who shall be reasonably
acceptable to Xx. Xxxx (the “OEP Director”) , and (D) four (4) Independent Directors nominated by
OEP and reasonably acceptable to Xx. Xxxx.
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(b) Notwithstanding Section 3.1(a), at the option of OEP (“Deferral Option”) and until
otherwise notified (“Termination Notice”) by OEP to the Executive Shareholders, the Board of
Directors may be comprised of less than seven (7) directors, but in all cases shall include at
least one OEP Director. Upon delivery by OEP of the Termination Notice to the Executive
Shareholders, each of OEP and the Executive Shareholders shall cause the Board of Directors to be
constituted in accordance with Section 3.1(a). Upon exercise of the Deferral Option and for so
long as OEP owns at least 10% of the issued and outstanding Common Shares on a Fully Diluted Basis
at the time of dermination, the provisions set forth in Annex A shall apply.
Section 3.2 Right to Remove Directors.
(a) OEP may request that any OEP Director or Independent Director be removed (with or without
cause) by written notice to the Executive Shareholders, and, in any such event, each of OEP and the
Executive Shareholders shall cause the removal of such person as a director.
(b) Xx. Xxxx may request that any Yang Director nominated by him be removed (with or without
cause) by written notice to OEP and the other Executive Shareholders, and, in any such event, each
of OEP and the Executive Shareholders shall cause the removal of such person as a director.
(c) In the event any person ceases to be a director, such person shall also cease to be a
member of any committee of the Board of Directors.
Section 3.3 Right to Fill Certain Vacancies in the Company’s Board of Directors. In
the event any member of the Board of Directors resigns or is removed in accordance with Section
3.2, the shareholder that appointed such member shall have the right to appoint such member’s
successor or replacement, and such successor or replacement member shall be nominated and elected
on or as soon as practicable after the date of such resignation or removal. If the directorship of
the OEP Director terminates for any reason, the Board of Directors shall not transact any business
that requires the affirmative vote of an OEP Director until and unless (a) OEP shall have nominated
a successor or replacement OEP Director and each of the Executive Shareholders has caused such
successor or replacement OEP Director to be appointed as a member of the Board of Directors, or (b)
if OEP shall have failed to nominate a successor or replacement OEP Director within thirty (30)
days after such termination, a successor or replacement OEP Director shall have been nominated by
the Executive Shareholders and shall have been accepted by OEP.
Section 3.4 Directors of Subsidiaries. Each of OEP and the Executive Shareholders
shall cause the Company to ensure that the board of directors of any Subsidiary of the Company is
constituted with members (which may include an OEP Director) who have been approved by OEP.
Section 3.5 Committees.
(a) The Board of Directors may, at its sole and absolute discretion, establish the
Remuneration Committee. The Remuneration Committee shall be comprised of three (3) members of the
Board of Directors, one of which shall be an OEP Director, one of which shall be a Yang Director,
and one of which shall be an Independent Director agreed to by the Yang Director and the OEP
Director. Each of OEP and the Executive Shareholders shall cause the Board of Directors to
establish such other committees of the Board of Directors as OEP may reasonably request and
constituted with members (which may include an OEP Director) who have been approved by OEP.
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(b) Each of OEP and the Executive Shareholders shall cause the Company to ensure that a board
of directors of any Subsidiary of the Company establishes such committees of such board of
directors as OEP may reasonably request and is constituted with members (which may include an OEP
Director) who have been approved by OEP.
Section 3.6 Amendment of Articles of Incorporation and By-laws. Each Executive
Shareholder agrees that it, he or she shall not consent in writing or vote or cause to be voted any
Equity Securities entitled to vote at any meeting of shareholders of the Company now or hereafter
owned or controlled by it, him or her, or take any other action, in favor of any amendment, repeal,
modification, alteration or rescission of, or the adoption of any provision in the Company’s
Articles of Incorporation or By-laws inconsistent with this Agreement.
ARTICLE IV.
STANDSTILL AND NON-DISCLOSURE
STANDSTILL AND NON-DISCLOSURE
Until the Latest Closing Date, without the prior written consent of OEP, each of the Executive
Shareholders agrees that it shall not, nor shall such Executive Shareholder permit any of its
Affiliates to, nor shall such Executive Shareholder agree, or advise, assist, encourage, provide
information or provide financing to others, or permit its Affiliates to agree, or to advise,
assist, encourage, provide information or provide financing to others, to, individually or
collectively, directly or indirectly:
(a) acquire or offer to acquire or agree to acquire from any Person, directly or indirectly,
by purchase or merger, through the acquisition of control of another Person, by joining a
partnership, limited partnership or other “group” (within the meaning of Section 13(d)(3) of the
Exchange Act) or otherwise, beneficial ownership of any Equity Securities;
(b) make, or in any way participate in, directly or indirectly, any “solicitation” of
“proxies” to vote (as such terms are used in the Regulation 14A promulgated under the Exchange
Act), become a “participant” in any “election contest” (as such terms are defined in Rule 14a-11
promulgated under the Exchange Act) or initiate, propose or otherwise solicit shareholders of the
Company for the approval of any shareholder proposals, in each case with respect to the Company;
(c) form, join, in any way participate in, or encourage the formation of, a group (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of the
Company (other than pursuant to this Agreement); or
(d) deposit any securities of the Company into a voting trust, or subject any securities of
the Company to any agreement or arrangement with respect to the voting of such securities, or other
agreement or arrangement having similar effect.
10
ARTICLE V.
MANAGEMENT INCENTIVE PLAN
MANAGEMENT INCENTIVE PLAN
The Remuneration Committee shall establish the Incentive Plan which shall provide for the
award of Common Shares to management upon the Performance Milestones for each of the 2010, 2011,
2012 and 2013 fiscal years. Satisfaction of the Performance Milestones for 2010 shall permit the
issuance of 429,514 Common Shares, which is equal to 1% of the Common Shares of the Company on a
Fully Diluted Basis as of the date of this Agreement. Satisfaction of the Performance Milestones
for 2011 shall permit the issuance of 859,027 Common Shares, which is equal to 2% of the Common
Shares of the Company on a Fully Diluted Basis as of the date of this Agreement. Satisfaction of
the Performance Milestones for 2012 shall permit the issuance of 859,027 Common Shares, which is
equal to 2% of the Common Shares of the Company on a Fully Diluted Basis as of the date of this
Agreement. Satisfaction of the Performance Milestones for 2013 shall permit the issuance of
1,288,542 Common Shares, which is equal to 3% of the Common Shares of the Company on a Fully
Diluted Basis as of the date of this Agreement. The Remuneration Committee shall grant Xx. Xxxx the
power to reallocate the Common Shares awarded pursuant to this Article V among the management, to
the extent such reallocation is reasonable. The issuance of any Common Shares pursuant to this
Article V shall be subject to the requirements of Section 4.9(d) of the SSA. The Board of Directors
may accelerate the issuance of the management incentive shares set forth above once OEP holds less
than 10% of the issued and outstanding Common Stock on a Fully Diluted Basis at the time of
determination.
ARTICLE VI.
NON-COMPETITION
NON-COMPETITION
Section 6.1 Non-competition. For so long as OEP owns at least 10% of the issued and
outstanding Common Shares on a Fully Diluted Basis at the time of determination, each Executive
Shareholder undertakes to OEP that he or she will not, and will ensure that any other Person that
he directly or indirectly controls or holds equity interests in (other than a member of the CMC
Group) shall not, without the prior written consent of OEP:
(a) enter, directly or indirectly, into any business that competes directly or indirectly with
the business of the Company or any other member of the CMC Group (except for passive ownership of
securities representing two percent (2%) or less of any entity that competes directly or indirectly
with the Company or any member of the CMC Group);
(b) solicit for himself or any entity other than a member of the CMC Group the business or a
customer or client of a member of the CMC Group, or
(c) persuade, solicit or encourage any employee or consultant of a member of the CMC Group to
leave the employ of such entity or terminate any consulting arrangement with such entity.
Section 6.2 Each and every obligation under Section 6.1 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 deemed not to form part of Section 6.1 and the enforceability of the
remainder parts of Section 6.1 shall not be affected.
11
Section 6.3 The Parties agree that the restrictive covenants contained in Section 6.1 are
reasonable and necessary for the protection of the Company, the other members of the CMC Group and
OEP, and further agree that the said covenants are not excessive or unduly onerous upon the
Executive Shareholders. 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 Company, the other members of the CMC Group or OEP,
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.
ARTICLE VII.
COMPLIANCE
COMPLIANCE
Section 7.1 Compliance.
(a) The Executive Shareholders shall not, and shall cause none of the members of the CMC Group
(including any director, officer, agent, employee or other person acting on behalf of any member of
the CMC Group) to make any unlawful contribution, gift, entertainment or other unlawful payment
relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee, or (iii) violate any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or similar law, or make any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic government official or
employee.
(b) The Executive Shareholders shall cause the Company to conduct its business strictly in
accordance with: (i) all applicable laws, including without limitation laws governing the import,
distribution, promotion, marketing and manufacturing of vaccines and pharmaceutical products in the
PRC, (ii) pharmaceutical industry standards, including the International Federation of
Pharmaceutical Manufacturers Code of Pharmaceutical Marketing Practices, and (iii) pharmaceutical
company operating standards to which the Company is contractually bound.
(c) Compliance Programs. On or prior to the date that is six (6) months after the Closing,
the Executive Shareholders shall cause each member of the CMC Group to have, to the satisfaction of
the OEP and at the sole expense of the Company, established and implemented oversight and
compliance programs acceptable to OEP and in accordance with all applicable laws with respect to:
(i) compliance with anti-corruption and anti-bribery laws (including without limitation FCPA
compliance);
(ii) transfer-pricing arrangements related to transactions among the CMC Group;
(iii) the adoption of accounting controls and procedures sufficient to comply with applicable
law (including the Securities Act, the Exchange Act and applicable NASD and Nasdaq rules);
(iv) an xxxxxxx xxxxxxx policy and document retention policy
12
(v) the adoption of charters for all committees of the Board of Directors; and
(vi) the adoption of any other policy or procedure reasonably requested by OEP.
ARTICLE VIII.
MISCELLANEOUS
MISCELLANEOUS
Section 8.1 Termination.
(a) This Agreement may be terminated in whole or in part by OEP or any Executive Shareholders
by written notice to the other parties hereto as follows:
(i) By OEP, as to its obligations hereunder, if the Closing has not been consummated on or
before Latest Closing Date, provided however, no breach by OEP of any of its obligations under the
Transaction Documents shall have caused the failure of the Closing to be consummated by the Latest
Closing Date.
(ii) By an Executive Shareholder, as to its obligations hereunder, if the Closing has not been
consummated on or before Latest Closing Date, provided however, no breach by an Executive
Shareholder or the Company of any of their obligations under the Transaction Documents shall have
caused the failure of the Closing to be consummated by the Latest Closing Date.
(iii) By OEP, as to its obligations hereunder, if any Executive Shareholder or the Company
shall have breached any of its obligations under any of the Transaction Documents.
(iv) By the Executive Shareholders, as to its obligations hereunder, if OEP shall have
breached any of its obligations under any of the Transaction Documents.
(b) Notwithstanding any other provision in this Agreement to the contrary, upon termination of
this Agreement, the breaching party shall remain liable to the non-breaching parties for any breach
of this Agreement prior to the time of such termination, and the non-breaching parties may seek
such remedies, including damages and fees of attorneys, against the breaching parties with respect
to any such breach as are provided in this Agreement or the other Transaction Documents or as are
otherwise available at law or in equity.
(c) A party’s rights under this Agreement shall terminate in the event such party breaches
this Agreement or any of the other Transaction Documents and fails to cure such breach (if capable
of being cured) within thirty (30) days of notice of such breach.
Section 8.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if: (a) delivered
personally, (b) sent by registered or certified mail in the United States, return receipt
requested, (c) sent by reputable overnight air courier (such as DHL or Federal Express) or (d) sent
by fax, as follows:
13
if to the Executive Shareholders, at: |
if to OEP, at: | |
x/x Xxxxx Medicine Corporation |
OEP CHME Holdings, LLP |
|
Guangri Tower, Suite 702 |
c/o One Equity Partners |
|
Xx. 0 Xxxxx Xxxxx 0xx Xxxxxx |
Xxxxxx Xxxxx, 00X, 8 Connaught Road Central |
|
Yuexiu District |
Fax: x000 0000 0000 |
|
Guangzhou, China 510600 |
Attention: Xxxx Xxxx |
|
Fax: x00 00 0000 0000 |
Email: xxxx.xx.xxxx@xxxxxxxxx.xxx | |
with a copy to: |
with a copy to: | |
Xxxxx Xxxxxxx LLP |
One Equity Partners |
|
7 Times Square |
000 Xxxx Xxxxxx |
|
Xxx Xxxx, XX 00000-0000 |
18th Floor |
|
Fax: (000) 000-0000 |
Xxx Xxxx, XX 00000 |
|
Attention: Xxxxxxxxx Xxx Xxxx, Esq. |
Fax: (000) 000-0000 |
|
Email: xxxxx@xxxxxxxxxxxx.xxx |
Attention: Xxxxxxx X. Xxxxxxx |
|
Email: xxxxxxx.x.xxxxxxx@xxxxxxxxx.xxx | ||
and to: | ||
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx |
||
43rd Floor Gloucester Tower |
||
The Landmark |
||
00 Xxxxx’x Xxxx Xxxxxxx |
||
Xxxx Xxxx |
||
Fax: x000 0000 0000 |
||
Attention: Xxxx X. Xxx, Esq. |
||
Email: xxxxx@xxxxxx.xxx |
or to such other address or to such other Person as either party hereto shall have last designated
by notice to the other party.
All such notices, requests, demands and other communications shall be deemed to have been
received (w) if by personal delivery, on the next Business Day after such delivery,
(x) if by registered or certified mail in the United States return receipt requested, on
the seventh Business Day after the mailing thereof, (y) if by reputable overnight air
courier, on the next Business Day after the mailing thereof or (z) if by fax, on the next
Business Day following the day on which such fax was sent, provided that a copy is also sent by
registered or certified mail, return receipt requested.
Section 8.3 Consent to Appointment. For the purposes of this Agreement, Xx. Xxx and
Xx. Xxx, without any further action on the part of such Executive Shareholder, shall be deemed to
have consented to the appointment of Xx. Xxxx as the representative and attorney-in-fact for and on
behalf of such Executive Shareholder for all matters arising out of or relating to this Agreement
and the transactions contemplated hereby. Xx. Xxxx shall have the exclusive power and authority to
take any and all actions and make any decisions after the date hereof pursuant to, arising out of
or related to this Agreement or any other agreement relating to this Agreement on behalf of Xx. Xxx
and Xx. Xxx. Xx. Xxxx has unlimited authority and power to act on behalf of Xx. Xxx and Xx. Xxx
with respect to this Agreement and any other agreement relating to this Agreement and the
disposition, settlement or other handling of all claims, rights or obligations arising from and
taken pursuant to this Agreement or any other agreement relating to this Agreement, including the
receipt of any payments to be paid to any or all of the Executive Shareholders. Xx. Xxx and Xx.
Xxx shall be bound by all actions taken by Xx. Xxxx representing such Executive Shareholder in
connection with this Agreement or any other agreement relating to this Agreement, and OEP shall be
entitled to rely on any action or decision of Xx. Xxxx with respect to Xx. Xxx and Xx. Xxx.
14
Section 8.4 Amendments; Waivers. This Agreement may be amended or modified only by a
written instrument executed by each of the parties hereto. Any of the terms and conditions of this
Agreement may be waived in writing at any time by the party entitled to the benefits thereof. This
Agreement is the entire agreement of the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, oral or written, express or implied,
between the parties hereto and their respective Affiliates, representatives and agents in respect
of the subject matter hereof.
Section 8.5 Certain Limitations. It is the explicit intent and understanding of each
of the parties hereto that neither party nor any of its Affiliates, representatives or agents is
making any representation or warranty whatsoever, oral or written, express or implied, other than
those expressly set forth in this Agreement and in the certificates delivered pursuant to this
Agreement and neither party is relying on any statement, representation or warranty, oral or
written, express or implied, made by the other party or such other party’s Affiliates,
representatives or agents, except for the representations and warranties set forth in this
Agreement. The parties agree that this is an arm’s length transaction in which the parties’
undertakings and obligations are limited to the performance of their obligations under this
Agreement. The parties have participated jointly in the negotiating and drafting of this Agreement
Section 8.6 Headings. The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
Section 8.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. OEP may assign any or all
of its rights under this Agreement to any Person to whom OEP assigns or transfers any of its direct
or indirect interest in any Equity Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred direct or indirect interest in such Equity Securities, by
the provisions hereof that apply to OEP or the Executive Shareholders.
Section 8.8 Joint and Several Liability. Each of the Executive Shareholders shall be
jointly and severally liable for the obligations of the Executive Shareholders under this
Agreement.
Section 8.9 No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
15
Section 8.10 Governing Law. This Agreement shall be construed, performed and enforced
in accordance with the laws of the State of New York without giving effect to its principles or
rules of conflict of laws to the extent such principles or rules would require or permit the
application of the laws of another jurisdiction.
Section 8.11 Consent to Jurisdiction
(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the transactions contemplated
hereby or for recognition or enforcement of any judgment relating thereto, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action
or proceeding may be heard and determined in such New York State court or, to the extent permitted
by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or hereafter have to
the laying of venue of any action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby in any New York State or Federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 8.2. Nothing in this Agreement will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
Section 8.12 Waiver of Punitive and Other Damages and Jury Trial.
(a) THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER PUNITIVE,
EXEMPLARY OR SIMILAR DAMAGES IN ANY ARBITRATION, LAWSUIT, LITIGATION OR PROCEEDING ARISING OUT OF
OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR CLAIM WHICH MAY ARISE OUT OF OR
RELATE TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
16
(c) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.12.
Section 8.13 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile signature page were an original thereof.
Section 8.14 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the remaining terms and
provisions of this Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
Section 8.15 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the Transaction Documents,
whenever OEP exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
OEP may rescind or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
Section 8.16 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each party hereof will be entitled to
specific performance under the Transaction Documents. The parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of obligations described
in the foregoing sentence and hereby agrees to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
Section 8.17 Further Actions. Each party shall execute and deliver such certificates
and other documents and take such other actions as may reasonably be requested by the other party
in order to consummate or implement the transactions contemplated by any of the Transaction
Documents.
Section 8.18 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of the Transaction Documents
or any amendments hereto.
17
[Signature Pages Follow]
18
IN WITNESS WHEREOF, the undersigned has duly executed this Shareholders Agreement as of the
date first indicated above.
Xx. Xxxx Senshan
/s/ Yang Senshan |
IN WITNESS WHEREOF, the undersigned has duly executed this Shareholders Agreement as of the
date first indicated above.
Xx. Xxx Xxxxxx
/s/ Xxx Xxxxxx |
IN WITNESS WHEREOF, the undersigned has duly executed this Shareholders Agreement as of the
date first indicated above.
Xx. Xxx Junhua
/s/ Xxx Xxxxxx |
IN WITNESS WHEREOF, the undersigned has caused this Shareholders
Agreement to be duly executed by their respective authorized signatories as of the date
first indicated above.
OEP CHME HOLDINGS, LLC |
||||
By: | One Equity Partners III, L.P., its Manager |
|||
By: | OEP General Partner III, L.P., its General Partner |
|||
By: | OEP Holding Corporation, its General Partner |
|||
By: | /s/ Xxxxxxx X. Xxxxxxx | |||
Name: | Xxxxxxx X Xxxxxxx | |||
Title: | Vice President | |||
Annex A
INFORMATION RIGHTS
For so long as OEP owns at least 10% of the issued and outstanding Common Shares on a Fully
Diluted Basis, each of the Executive Shareholders shall cause the Company to deliver to OEP the
information set forth below in English and in form and substance acceptable to OEP:
(a) within ninety (90) days after the end of each fiscal year of the Company, a consolidated
income statement and statement of cash flows for such fiscal year and a consolidated balance sheet
as of the end of such fiscal year, each audited and certified by an accounting firm acceptable to
OEP, all prepared in accordance with GAAP, and a management report with respect to such fiscal
year;
(b) within forty-five (45) days after the end of each fiscal quarter of the Company, a
consolidated unaudited income statement and statement cash flows for such fiscal quarter and a
consolidated unaudited balance sheet as of the end of such fiscal quarter all prepared in
accordance with GAAP, and a management report with respect to such fiscal quarter;
(c) within thirty (30) days after the end of each calendar month, a consolidated unaudited
income statement and statement of cash flows for such month and a consolidated balance sheet as of
the end of such month all prepared in accordance with GAAP, and a management report with respect to
such month, and within twenty (20) days after the end of each calendar month, bank statements of
all bank accounts as of the end of such month;
(d) no later than 30 days prior to the end of each fiscal year of the Company, an annual
updated consolidated long-range business and strategic budget and plan, which shall include capital
expenditures, cash flow and other financial projections (setting forth in detail the assumptions
therefor) for the Company and its Subsidiaries for the immediately following fiscal year of the
Company, in each case approved by the Company’s Board of Directors;
(e) promptly upon becoming available, copies of all reports (including drafts) prepared for or
delivered to the management of the Company by its outside accountants in connection with each
annual, interim or special audit of the Company’s financial statements;
(f) promptly following their filing, copies of any periodic reports, current reports on Form
8-K (or any successor form), registration statements and prospectuses filed by the Company or any
of its Subsidiaries with the Commission;
(g) contemporaneous with the delivery of any information to any Governmental Authority, such
information;
(h) contemporaneous with the delivery of any information to any lenders or sources of
financing, such information; and
(i) as promptly as practicable, such other information (including information regarding the
assets and properties and operations, business affairs and financial condition of the Company) as
OEP may reasonably request.
ACCESS
For so long as OEP owns at least 10% of the issued and outstanding Common Shares on a Fully
Diluted Basis, the Executive Shareholders shall cause the Company and its Subsidiaries to afford to
OEP and its employees and other authorized representatives of OEP (the “Representatives”), during
normal business hours, access, upon reasonable advance notice, to all of the books, records and
properties of the Company or its Subsidiaries, as applicable, and to make copies of such records.
Each of the Executive Shareholders shall also cause the Company and its Subsidiaries to cause
employees, members of management and advisors to the Company and its Subsidiaries to provide, as
requested by OEP or its Representatives, any and all information relating to the Company, its
Subsidiaries and their respective operations. Each of the Executive Shareholders shall cause the
Company and its Subsidiaries to instruct its accounting firm and auditor to discuss such aspects of
the financial condition of the Company or its Subsidiaries, as applicable, with OEP and the
Representatives as they may reasonably request, and to consent to OEP and the Representatives
inspecting, copying and making extracts from such financial statements, analyses, work papers and
other documents and information (including electronically stored documents and information)
prepared with respect to the Company or its Subsidiaries, as applicable, as OEP or its
Representatives may reasonably request, subject only to OEP executing access in form and substance
satisfactory to such accounting firm or auditor (in their sole discretion). All cost and expenses
incurred by OEP and the Representatives in connection with exercising the right of access set forth
in this paragraph shall be borne by OEP, and all out-of-pocket costs and expenses incurred by the
Company or its Subsidiaries, or their employees, members of management or advisors (including
accounting firms and auditors), as applicable, in complying with any requests by OEP and the
Representatives in connection with exercising such access rights shall be borne by the Company.
CONSENT OF OEP
For so long as OEP owns at least 10% of the issued and outstanding Common Shares on a Fully
Diluted Basis, in addition to any vote required by the Articles of Incorporation or By-laws of the
Company, or by applicable law, so long as the Board of Directors includes at least one OEP
Director, each of the Executive Shareholders agrees to cause the matters set forth below to be
carried out only after the approval of the Board of Directors, which approval must include the
affirmative vote of at least one OEP Director:
(a) the merger, amalgamation or consolidation of the Company or any Subsidiary with any Person
or any transaction in which the members of the CMC Group immediately before such transaction
together with their Affiliates do not own or control at least a majority of the voting power of the
surviving entity immediately after such transaction or the sale, lease, exchange, transfer,
contribution, mortgage, pledge, encumbrance or other disposition of all or substantially all of the
assets of the Company or any other member of the CMC Group (whether in an individual transaction or
a series of related transactions);
(b) the purchase or other acquisition by any member of the CMC Group (whether individually or
in combination with the Company or any other member of the CMC Group) of all or substantially all
of the assets of another Person, or the making of any joint
venture or partnership arrangement, or the formation of any subsidiary, or any voluntary
dissolution, winding-up, liquidation of the Company or any other member of the CMC Group, or any
increase, reduction, alteration or re-classification of the authorized share capital of the Company
or any other member of the CMC Group;
A-2
(c) any sale, mortgage, pledge, lease, transfer or other disposition of any assets of the
Company or any other member of the CMC Group (i) if such sale, mortgage, pledge, lease, transfer or
other disposition is outside the ordinary course of business of the Company or any other member of
the CMC Group, or (ii) if the total value of such assets, when combined with the total value of
assets otherwise sold, mortgaged, pledged, leased, transferred or otherwise disposed of during the
immediately preceding 12 months exceeds US$500,000;
(d) the authorization, creation, sale or issuance of any Equity Securities by the Company or
any other Group Company;
(e) the repurchase or redemption of any Equity Securities;
(f) the declaration or payment of any dividends;
(g) the adoption or termination of, or material amendment to the terms (including the number
of options reserved for issuance, the vesting period and exercise price of options) of any stock
option, share purchase, share bonus or other equity incentive plans, agreements or arrangements of
any member of the CMC Group, and the approval of grants of any options thereunder;
(h) the engaging in, entrance into or amendment of any of the material terms of any agreement
or transaction between any member of the CMC Group, on the one hand, and any shareholder, member,
director or employee of any member of the CMC Group, or any immediate family member of any
Executive Shareholder, or any Affiliate of the foregoing, on the other hand, including the
incurrence of any indebtedness for borrowed money, other than (a) transactions between members of
the CMC Group that are made in the ordinary course of business on arms-length terms and do not
otherwise adversely affect the rights or interests of OEP and (b) payments made to employees or
directors of the CMC Group in connection with their employment with, or service as a director of,
such member of the CMC Group;
(i) make, or permit any Subsidiary to make, any loan or advance to, or own any share or other
securities of, any subsidiary or other corporation, partnership, or other entity unless it is
wholly owned by the Company;
(j) make, or permit any Subsidiary to make, any loan or advance to any Person, including,
without limitation, any employee or director of the Company or any Subsidiary, except advances and
similar expenditures in the ordinary course of business or under the terms of an employee stock or
option plan approved by the Board of Directors, which approval must include the affirmative vote of
at least one OEP Director;
(k) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or
indirectly, any indebtedness except for trade accounts of the Company or any Subsidiary arising in
the ordinary course of business;
(l) incur any aggregate indebtedness in excess of $500,000 that is not already included in a
budget approved by the Board of Directors, which approval must include the affirmative vote of at
least one OEP Director, other than trade credit incurred in the ordinary course of business;
A-3
(m) incur any capital expenditure in excess of US$500,000 in aggregate over any twelve-month
period unless such expenditure or other purchase is made pursuant to a capital expenditure plan
approved by the Board of Directors, which approval must include the affirmative vote of at least
one OEP Director;
(n) any increase or decrease in the authorized size of the Board of Directors or the board of
directors of any member of the CMC Group or any committee thereof;
(o) any material change in accounting principles of the Company or any member of the CMC
Group, except as required by applicable law, or the appointment or change of the auditors of the
Company or any member of the CMC Group;
(p) the entry, termination or material amendment of distribution agreement that could
reasonably be expected to generate more than US$1 million in gross profits during any annual period
or any promotion or marketing agreement that could reasonably be expected to generate more than
US$1 million in gross profits during any annual period;
(q) enter into or be a party to any transaction with any director or employee of the Company
or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such
Person, except for transactions contemplated by this Agreement or the SSA, transactions resulting
in payments to or by the Company in an aggregate amount less than $100,000 per year, or
transactions made in the ordinary course of business and pursuant to reasonable requirements of the
Company’s business and upon fair and reasonable terms that are approved by a majority of the Board
of Directors, which approval must include the affirmative vote of at least one OEP Director;
(r) hire, terminate, or change the compensation of the executive officers, including approving
any option grants or stock awards to executive officers;
(s) change the principal business of the Company, enter new lines of business, or exit the
current line of business;
(t) sell, assign, license, pledge, or encumber material technology or Intellectual Property,
other than licenses granted in the ordinary course of business;
(u) enter into any corporate strategic relationship involving the payment, contribution, or
assignment by the Company or to the Company of money or assets greater than $100,000;
(v) authorize the payment of fees or reimbursement of expenses to any agent, consultant or
advisor in excess of US$50,000 (whether in a single occurrence or a series of related occurrences)
or enter into any agreement with an agent, consultant or advisor for the provision of services; or
(w) authorize the release or disbursement of funds held by the Escrow Agent.
A-4
MEETINGS OF THE BOARD OF DIRECTORS
For so long as OEP owns at least 10% of the issued and outstanding Common Shares on a Fully
Diluted Basis, each of the Executive Shareholders shall cause meetings of the Board of Directors
and the board of directors of each other member of the CMC Group (i) to take place at least once
every three (3) months, (ii) to be held at a location approved by an OEP Director or
telephonically, and (iii) to be presided over by the chairman of the board of directors. OEP shall
have the right to request that all meetings of the board of directors of each member of the CMC
Group take place contemporaneously in one location.
(a) Each of the Executive Shareholders shall cause the presence of a simple majority of all
members of the board of directors then in office to constitute a quorum of such board of directors,
provided that if a OEP Director is a member of such board of directors, then the attendance by such
OEP Director shall be required to constitute a quorum of such board of directors.
(b) Each of the Executive Shareholders shall cause any action required or permitted to be
taken by a board of directors to be to be permitted to be taken without a meeting if all members of
the board of directors consent in writing to the adoption of a resolution authorizing the action.
Each of the Executive Shareholders shall cause the resolution and the written consents thereto by
the members of the board of directors to be filed with the minutes of proceedings of such board of
directors.
(c) Each of the Executive Shareholders shall cause the Company and each other member of the
CMC Group to provide for the meetings and actions of its board of directors, and shall take other
actions with respect thereto, as follows:
(i) Written notice of each meeting of its board of directors, together with (i) a written
agenda for such meeting and (ii) such information and materials (including the text of proposed
resolutions) as are reasonably necessary to allow each member of the its board of directors to
prepare adequately for such meeting shall be delivered to each member of its board of directors not
less than one (1) week before each regularly scheduled meeting and not less than three (3) Business
Days before any special meeting of its board of directors convened to consider urgent matters
requiring resolution before the next regularly scheduled meeting of its board of directors. Any
notice in respect of any such special meeting shall be issued only after reasonable consultation
with all members of its board of directors in order to accommodate their schedules as far as
possible. A member of its board of directors may waive in writing his or her right to any notice
of meeting.
(ii) In the case of any meeting of its board of directors, matters addressed at such meetings
shall consist only of those matters provided for in the written agenda therefor unless all members
of its board of directors are present at such meeting and vote in favor of such resolution.
(iii) All notices, agenda, materials (including materials submitted or otherwise circulated at
meetings of its board of directors) and minutes of meetings of its board of directors shall be in
English.
(iv) The CMC Group shall reimburse members of the board of directors for their reasonable
costs of attendance at meetings of its board of directors.
A-5
INSURANCE
Each of the Executive Shareholders shall cause the Company and each member of the CMC Group to
(a) maintain adequate directors’ and officers’ liability insurance covering any person who is or
becomes a director or officer (an “Indemnified Person”) of such member of the CMC Group and (b)
indemnify any Indemnified Person against all losses, claims, damages, liabilities, costs and
expenses (including reasonable fees and expenses of legal counsel selected by the Indemnified
Person) in connection with any actual or threatened proceeding or investigation arising from such
Indemnified Person’s service as a director or officer of any member of the CMC Group.
MIGRATION
Each of the Executive Shareholders shall use their best efforts to cause the Company to
qualify for and list the Common Shares on a national exchange such as Nasdaq Global Select Market
or the New York Stock Exchange within twelve (12) months of the Closing (“Migration”).
SALE RIGHT
If Migration has not occurred on a timely basis or prior to the second (2nd) anniversary of
the Closing, and if OEP receive bona fide offer to acquire at least fifty percent (50%) of any
Subsidiary’s issued and outstanding equity securities or assets or at least fifty percent (50%) of
the Company’s assets, in either case, whether structured as a merger, consolidation, share
exchange, asset purchase or otherwise (a “Company Sale”), if a notice of intent to effect the
Company Sale is delivered to each Executive Shareholders by OEP then the Executive Shareholders
hereby agree to promptly vote their Equity Securities and take all other requisite or desirable
actions to approve, participate in and cooperate to effect, and shall promptly cause the Company
and the Board of Directors to approve and effect, the Company Sale.
A-6
Annex B
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