Exhibit 4.1
Execution Copy
DATED 16 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.)
----------
SUBSCRIPTION AGREEMENT
IN RESPECT OF THE ISSUE OF NOTES
CONVERTIBLE INTO COMMON SHARES
IN THE CAPITAL OF
CANADIAN SOLAR INC.
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XXXXX & XXXXXXXX
TABLE OF CONTENTS
1. Definitions .......................................................... 2
2. Subscription, Consideration and Guarantee ............................ 9
3. Conditions Precedent to First Completion and Second Completion ....... 11
4. Completion ........................................................... 15
5. Representations and warranties ....................................... 18
6. Undertakings before Completion ....................................... 20
7. Remedies ............................................................. 21
8. Payment and Taxes .................................................... 23
9. Announcements and Confidentiality .................................... 23
11. Variation ............................................................ 25
12. Successors and Assigns ............................................... 25
13. Invalidity ........................................................... 26
14. Waiver ............................................................... 26
15. Further assurance .................................................... 26
16. Notices .............................................................. 26
17. Counterparts ......................................................... 28
18. Costs ................................................................ 28
19. Process Agents ....................................................... 28
20. Governing Law ........................................................ 29
21. Dispute Resolution ................................................... 29
22. JAFCO's Rights ....................................................... 30
Schedules
1. Particulars of the Company
2. Particulars of the Company's subsidiaries
3. Warrantors' Warranties
4. Form of Pre-emptive Right Certificate
5. Form of the Certificate for the Convertible Notes and the Conditions
6. Form of Indemnity Deed for an Investor's Director
7. Form of the Accredited Investor Certificate
8. Form of the Investment Agreement
ii
THIS AGREEMENT is made on the 16th 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) (Xxxxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000,
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) (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".
1
WHEREAS:
(A) The Company is a corporation incorporated under the laws of the Province of
Ontario, Canada. Particulars of the Company are set out in Schedule 1.
(B) The Company has agreed to issue, and the Investors have agreed to subscribe
for, Convertible Notes up to an aggregate principal amount of
US$10,500,000, and the Company has agreed to grant to the Investors options
to subscribe for additional Convertible Notes up to an aggregate principal
amount of US$2,500,000, in accordance with and subject to the terms set out
in this Agreement and the Conditions.
(C) In consideration of the Investors agreeing to subscribe for the Convertible
Notes, the Warrantors have agreed to provide to the Investors such
representations and warranties as are set forth herein and the Founder has
agreed to guarantee to the Investors the performance by the Company of its
obligations under this Agreement, the Transaction Documents and the
Conditions.
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;
"AGREED FORM" means, in relation to any document, the form of that document
which has been or will be agreed and initialled by the Investors' Counsel
and the Company's Counsel for the purpose of identification;
"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;
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"ARBITRATORS" has the meaning ascribed to it in Clause 21.2;
"ARTICLES OF INCORPORATION" means the duly adopted articles of
incorporation of the Company in force from time to time;
"ATS" means ATS Automated Tool Systems Inc., a corporation incorporated in
Canada;
"ATS ARRANGEMENT" means the arrangement between the Founder and ATS in
existence as at the date hereof in relation to, among other things, ATS's
acquisition of ownership interest of not exceeding 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;
"BUSINESS PLAN" means the business plan and business strategies of the
Group in the form delivered to the Investors prior to the date hereof and
as referred to in the Disclosure Letter;
"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;
"COMPANY'S COUNSEL" means Mr. Xxxx Xxxxxxx, the legal adviser to the
Company;
"CONDITIONS" means the terms and conditions in respect of the Convertible
Notes which shall form part of the Convertible Notes and which are set out
in Schedule 5;
"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, the form of certificate for and conditions
of which are set out in Schedule 5;
"CONVERTIBLE SECURITIES" means (i) any rights, options or warrants to
acquire Shares, and (ii) any notes, debentures, preference shares
(including, without
3
limitation, the Convertible Notes) or other securities or rights, which are
ultimately convertible or exercisable into, or exchangeable for, Shares;
"DIRECTOR" means a director of the Company;
"DISCLOSURE LETTER" means the letter in the Agreed Form from the Warrantors
to the Investors of even date hereto as accepted and countersigned by the
Investors;
"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;
"ENVIRONMENTAL AND SAFETY LAWS" has the meaning ascribed to it in Paragraph
21 of Schedule 3;
"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;
"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 of
the Board, and (d) any grant of options under the plan shall be subject to
the approval of the Compensation Committee of the Board;
"FINANCING TERMS" has the meaning ascribed to it in Clause 9.1;
"FIRST COMPLETION" means completion of the First Tranche Subscription in
accordance with Clause 4.1;
"FIRST COMPLETION DATE" means the date on which First Completion takes
place;
"FIRST TRANCHE SUBSCRIPTION" means the first tranche subscription of
Convertible Notes as referred to in Clause 2.1;
"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);
4
"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 (including the PRC
Subsidiaries) and affiliates, and a "GROUP COMPANY" means any or a specific
member within the Group as the context may require;
"GROUP INTELLECTUAL PROPERTY" has the meaning ascribed to it in Paragraph
13.1 of Schedule 3;
"HKIAC" has the meaning ascribed to it in Clause 21.2;
"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;
"INTELLECTUAL PROPERTY RIGHTS" means any and patents, patent rights and
applications therefor, inventions, discoveries, improvements, concepts,
innovations, industrial models, registered and unregistered copyrights,
copyright registrations and applications, author's rights, works of
authorship (including artwork of any kind and software of all types in
whatever medium, inclusive of computer programs, source code, object code
and executable code, and related documentation), web sites, web pages,
technical information, know-how, trade secrets, drawings, designs, design
protocols, specifications for parts and devices, research and development
efforts, databases and proprietary data, formulae, operational procedures,
trade names, trademarks, domain names, and service marks, and registrations
and applications therefor, the goodwill of the business symbolized or
represented by the foregoing, customer lists and other proprietary
information and common law rights;
"INVESTMENT AGREEMENT" means an agreement substantially in the form set out
in Schedule 8 to be entered into between the Parties at First Completion
relating to the management of the Company and the PRC Subsidiaries and the
relationship between other Parties;
"INVESTORS' COUNSEL" means Xxxxx & XxXxxxxx of 00/X, Xxxxxxxxx Xxxxx, 00
Xxxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx, the legal advisers to the Investors;
5
"IP CONFIDENTIAL INFORMATION" has the meaning ascribed to it in Paragraph
13.13 of Schedule 3;
"IPO" means the initial public offering of the shares of the Company or
ListCo;
"JAFCO MANAGER" has the meaning ascribed to it in Clause 22;
"JIAP" has the meaning ascribed to it in Clause 22;
"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 an 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;
"MATERIAL CONTRACT" means an agreement, contract, arrangement or
understanding to which any Group Company is a party and (a) which
individually results or will result in any Group Company incurring a
liability, cost or indebtedness or receiving revenue or payment in excess
of (i) Two Hundred Thousand United States Dollars (US$200,000) out of its
ordinary course of business or (ii) Five Hundred Thousand United States
Dollars (US$500,000) in the ordinary course of business or (b) such
agreement, contract, arrangement, understanding or the indebtedness,
liability or obligation arsing therefrom is not terminable upon a notice of
less than thirty (30) days notice without compensation, penalty or
obligation;
"NOTE OPTION" has the meaning ascribed to it in Clause 2.2;
"PARTIES" means the named parties to this Agreement and their respective
successors, and a "PARTY" shall be construed accordingly;
"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;
6
"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 RIGHT CERTIFICATE" means a certificate to be executed by the
Founder substantially in the form set out in Schedule 4;
"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" means a registration rights agreement
relating to the rights of the Investors to cause the Company to register
its Shares to be entered into between the Company and the Investors in the
Agreed Form;
"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;
"RMB" means Renminbi, the lawful currency of the People's Republic of
China;
"SATISFACTORY AUDIT REPORTS" means the consolidated financial statements of
the Group (a) for the twelve (12) months ended 31 December 2004 in which
the audited consolidated net profit after tax (excluding exceptional,
extraordinary gains and prior year adjustments) of the Group for the twelve
(12) months ended 31 December 2004 not being less than One Million United
States Dollars (US$1,000,000) and (b) for the eight (8) months ended 31
August 2005 in which the audited consolidated net assets of the Group as at
31 August 2005 not being less than Four Million and Five Hundred Thousand
United States Dollars (US$4,500,000), as prepared in accordance with IAS
and audited by one of the "Big Four" accounting firms;
"SECOND COMPLETION" means completion of the Second Tranche Subscription in
accordance with Clause 4.2;
"SECOND COMPLETION DATE" means the date on which Second Completion takes
place;
"SECOND TRANCHE SUBSCRIPTION" means the second tranche subscription of
Convertible Notes as referred to in Clause 2.1;
7
"SHARE(S)" means share(s) of any class in the capital of the Company and
including, without limitation, the Common Share(s);
"SHARE PLEDGING AGREEMENT" means the Share Pledging Agreement to be entered
into between the Founder and each of the Investors as referred to in Clause
4.1(A)(iv) in the Agreed Form;
"SHARE PLEDGE RELEASE" means the relevant release of each Share Pledging
Agreement to be entered into between the Founder and each of the Investors
as referred to in Clause 4.2(A)(iii) in the Agreed Form;
"SHAREHOLDER" means a holder of any Share(s);
"SUBSCRIPTION PRICE" means the price payable for the subscription of the
Convertible Notes to be issued by the Company to the Investors pursuant to
this Agreement;
"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;
"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;
"TRANSACTION DOCUMENTS" means all documents (including but without
limitation to the Investment Agreement, the Share Pledging Agreements, the
Share Pledge Releases and the Registration Rights Agreement) referred to or
contemplated in this Agreement;
"UNCITRAL RULES" has the meaning ascribed to it in Clause 21.2;
"UNITED STATES" or "US" means the United States of America;
"US$" means United States dollars, the lawful currency of the United States
of America;
"WARRANTORS" means the Company, the PRC Subsidiaries and the Founder and
each of them shall be referred to as a "WARRANTOR"; and
"WARRANTORS' WARRANTIES" means the representations and warranties given by
the Warrantors under Clause 5.1 and Schedule 3.
1.2 In this Agreement:
8
(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 extend or increase the liability of the
Warrantors under the Warrantors' Warranties or (if applicable)
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;
(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.
1.4 In relation to the Warrantors' Warranties, references to the knowledge,
information, belief or awareness of any Person shall be deemed to include
any knowledge, information, belief or awareness which any such Person would
have if he had made all usual and reasonable enquiries.
2. SUBSCRIPTION, CONSIDERATION AND GUARANTEE
2.1 Subject to the fulfilment of the conditions set out in Clause 3, the
Investors agree to subscribe for, and the Company agrees to issue to the
Investors, the following Convertible Notes free and clear of all
Encumbrances, at a Subscription Price equivalent to the face value of the
relevant Convertible Note, in two tranches in the following manner:
9
Face value / Subscription
Price of the Convertible Notes
----------------------------------------------
First Tranche Second Tranche Total
Investor Subscription Subscription commitment
-------- ------------- -------------- -------------
The Funds US$5,400,000 US$1,600,000 US$ 7,000,000
JAFCO US$2,700,000 US$ 800,000 US$ 3,500,000
Total US$8,100,000 US$2,400,000 US$10,500,000
2.2 The Company shall grant an option (a "NOTE OPTION") to each Investor to
subscribe for additional Convertible Notes of, subject to Clauses 2.3 and
2.6, an aggregate principal amount of Two Million Five Hundred Thousand
Dollars (US$2,500,000) as follows:
Face value / Subscription Price of the Convertible
Notes subject to the Note Option
Investor (subject to adjustment set out in Clause 2.3)
-------- --------------------------------------------------
The Funds US$1,500,000
JAFCO US$1,000,000
Total US$2,500,000
Pursuant to a Note Option, the relevant Investor shall have the right,
which may be exercised in whole but not in part, at any time during the
period from the Second Completion Date to 31 March 2006, to subscribe for
Convertible Notes of the principal amount set opposite its name above.
The Note Option of each Investor is independent from the Note Option of the
other Investor. For the avoidance of doubt, one Investor may exercise its
Note Option even if the other Investor does not exercise its Note Option.
Each Note Option is transferable in whole but not in part provided that
such transfer will not be subject to or will be exempted from the
prospectus and registration requirements under the Ontario Securities Act.
2.3 At any time on or before 31 January 2006, the Company may, by a prior
written notice given to each of the Investors, elect to reduce the
principal amount of the Convertible Notes subject to the Note Option as
follows:
Face value / Subscription Price of the Convertible
Notes subject to the Note Option
Investor (after adjustment set out in this Clause 2.3)
-------- --------------------------------------------------
The Funds US$ 750,000
JAFCO US$ 500,000
Total US$1,250,000
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2.4 Unless otherwise agreed by all of the Investors in writing, the proceeds of
the Subscription Price shall be used for one or more of the following
purposes:
(A) purchase of long-term silicon supplies for the Group;
(B) the Group's working capital;
(C) the Group's capital expenditures; or
(D) such other purposes as the Board may decide.
2.5 In consideration of the Investors agreeing to subscribe for the Convertible
Notes, the Founder agrees to guarantee to the Investors the due and timely
performance by the Company of its obligations under this Agreement, the
Transaction Documents and the Conditions (where applicable). In the event
that the Company fails to comply with any of its obligations under this
Agreement, the Transaction Documents or the Conditions (where applicable),
the Founder undertakes to procure the prompt compliance by the Company 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 to perform its obligations set
out in this Agreement, the relevant Transaction Documents and the
Conditions (where applicable).
2.6 The Investors undertake to extend cooperation to the other Parties to
convert, before Second Completion, the form of their investment in the
Company contemplated under this Agreement from Convertible Notes to
preference shares (which can be converted into Common Shares) to be issued
by the Company on such terms and conditions agreed upon by all Parties,
subject to the necessary documentation (which shall (a) confer to the
Investors in respect of the preference shares substantially the same rights
as those attaching to the Convertible Notes, (b) allow the Investors to
subscribe for preference shares in the proportional amount and on terms
being substantially the same as those for the Second Tranche Subscription
and (c) contain an option for each Investor to subscribe for additional
preference shares and an option for the Company to reduce such subscription
on substantially the same terms set out in Clauses 2.2 and 2.3
respectively) being finalized to the satisfaction of all Parties. Where
such conversion does not occur before Second Completion, all Parties agree
that the Company shall have the right to cancel the Note Options granted to
the Investors under Clause 2.2.
3. CONDITIONS PRECEDENT TO FIRST COMPLETION AND SECOND COMPLETION
3.1 The obligation of the Investors to complete the First Tranche Subscription
is conditional, except as waived in accordance with Clause 3.3, upon the
following conditions being satisfied prior to First Completion:
(A) all of the Investors shall have been satisfied with the results of the
business, technical, legal and financial due diligence on the Group
undertaken by any of the Investors and its professional advisers by
way of means including the following:
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(i) site visits, discussions with the Company's management on matters
relating to the business, marketing, future projections,
prospects, business strategies and development of the Group;
(ii) legal due diligence; and
(iii) the financial due diligence report on the Group prepared by
PricewaterhouseCoopers.
(B) the results of the review referred to in paragraph (A)(iii) above
shall not, in the discretion of the Investors, be significantly
different from the information presented to the Investors by the
Company prior to the date hereof;
(C) the investment committee of each of the Investors shall have approved
the transactions contemplated hereby as well as the execution,
delivery and performance of this Agreement and the Transaction
Documents (where applicable) by the relevant Investor;
(D) the Investors and the Company shall have received a legal opinion
addressed to, among others, the Investors in the Agreed Form from
legal counsel accepted by the Investors on laws of Canada relating to
this Agreement and the Transaction Documents and the transactions
contemplated under such agreements;
(E) the Investors and the Company shall have received a legal opinion
addressed to, among others, the Investors in the Agreed Form from Chen
& Co. Law Firm on laws of the PRC relating to the business of the
Group and the due incorporation of the Group Companies established in
the PRC;
(F) the Investors shall have received a Pre-emptive Right Certificate duly
executed by the Founder;
(G) the Investors shall have received a certified copy of the employment
contract entered into between the Company and the Founder in the
Agreed Form of a term of at least three (3) years;
(H) the Investors shall have received certified copies of the Board
resolutions and shareholders' resolutions of the Company duly passed
in the Agreed Form for (i) approving the execution, delivery and
performance of this Agreement and the Transaction Documents (where
applicable) by the Company and (ii) approving and adopting in the
Agreed Form amendments to the Articles of Incorporation and the
By-Laws incorporating, among other things, the restrictions imposed on
the Shareholders under this Agreement and the Investment Agreement;
(I) the Company shall have filed the amended Articles of Incorporation
duly adopted by the Company as referred to in Clause 3.1(H) with all
relevant Governmental Authorities in Canada and shall have provided to
each Investor a certified copy of the amended Articles of
Incorporation;
12
(J) the arrangement between the Company and Swift Allies Inc. shall have
been terminated and all payments by any Group Company to such company
shall have been ended;
(K) no event or series of events shall have occurred which, in the opinion
of any of the Investors, has had or would reasonably be expected to
have a Material Adverse Effect;
(L) the consummation of the transactions contemplated hereby for the
purpose of the First Tranche Subscription shall have been approved, or
met with consents from, the relevant Governmental Authority where
necessary and shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction,
decree or judgement of any court or other Governmental Authority;
(M) except as disclosed in the Disclosure Letter, all the Warrantors'
Warranties shall be true and accurate in all material respects on the
date hereof and at all times up to and including the First Completion
Date;
(N) none of the Warrantors shall have breached any of their respective
obligations, covenants and undertakings under this Agreement or any of
the Transaction Documents (where applicable); and
(O) the Investors shall have received certified copies of the Board
resolutions of each of the PRC Subsidiaries duly passed in the Agreed
Form for approving the execution, delivery and performance of this
Agreement and the Investment Agreement by that PRC Subsidiary.
3.2 The obligation of the Investors to complete the Second Tranche Subscription
is conditional, except as waived in accordance with Clause 3.3, upon the
following conditions being satisfied prior to Second Completion:
(A) the Company shall have delivered to each of the Investors the
Satisfactory Audit Reports;
(B) no event or series of events shall have occurred which, in the opinion
of any of the Investors, has had or would reasonably be expected to
have a Material Adverse Effect;
(C) the consummation of the transactions contemplated hereby for the
purpose of the Second Tranche Subscription shall have been approved,
or met with consents from, the relevant Governmental Authority where
necessary and shall not have been restrained, enjoined or otherwise
prohibited by any Applicable Law, including any order, injunction,
decree or judgement of any court or other Governmental Authority;
(D) except as disclosed in the Disclosure Letter, all the Warrantors'
Warranties shall be true and accurate in all material respects on the
date hereof and at all times up to and including the Second Completion
Date;
(E) none of the Warrantors shall have breached any of their respective
13
obligations, covenants and undertakings under this Agreement or any of
the Transaction Documents (where applicable); and
(F) the Investors shall have received a certified copy of (i) the
employment contract entered into between the Company and each Person
who holds the office of the chief financial officer, the chief
operating officer or vice president of any Group Company in the Agreed
Form, each of such contract being of a term of at least three (3)
years, and (ii) an undertaking entered into between the Company, the
Investors and each of such employees in the Agreed Form containing
non-solicitation and non-competition covenants and undertakings in
respect of Intellectual Property Rights from the relevant Person.
3.3 The Investors together (but no individually) may waive all or any of the
conditions set out in Clause 3.1 or Clause 3.2 at any time prior to the
relevant completion date by notice in writing to all of the other Parties.
3.4 The Company shall use all reasonable endeavours to procure that the
conditions set out in Clause 3.1 (except the one set out in Clause 3.1(C))
are satisfied on or before 22 November 2005 or such a later date as the
Parties may agree. As soon as the conditions set out in Clause 3.1 have
been fully satisfied, the Company shall give written notice of the
satisfaction of the conditions to all of the Investors. First Completion
shall not be proceeded with unless the First Tranche Subscription by all of
the Investors are completed simultaneously. If any of the conditions set
out in Clause 3.1 shall not have been fulfilled (or waived by the Investors
in accordance with Clause 3.3) on or before such deadline, First Completion
shall be postponed to a later date as may be mutually agreed between the
Parties. If any of the conditions set out in Clause 3.1 shall not have been
fulfilled (or waived by the Investors in accordance with Clause 3.3) on or
before such new deadline, this Agreement shall be terminated automatically
forthwith, and upon such termination, this Agreement (with the exception of
Clauses 1, 8 to 14, 16 to 22 which shall remain in full force and effect)
shall cease to have effect between the Parties. The Parties shall not have
any further right and liability under or pursuant to the provisions of this
Agreement save and except in respect of any antecedent breach occurring
prior to such termination.
3.5 The Company shall use all reasonable endeavours to procure that the
conditions set out in Clause 3.2 are satisfied on or before 31 January
2006. As soon as the conditions set out in Clause 3.2 have been fully
satisfied, the Company shall give written notice of the same to all
Investors. Second Completion shall not be proceeded with unless the Second
Tranche Subscription by all of the Investors are completed simultaneously.
If any of the conditions set out in Clause 3.2 shall not have been
fulfilled (or waived by the Investors in accordance with Clause 3.3) on or
before such deadline, the Investors shall not be obliged to complete the
Second Tranche Subscription. Notwithstanding the above, this Clause 3.5
shall not prejudice any rights of the Investors or any claims that the
Investors may have against any of the other Parties under this Agreement.
14
4. COMPLETION
4.1 Subject to Clause 3, First Completion shall take place on the sixth (6th)
Business Day after the issue and delivery of the notice by the Company to
the Investors referred to in Clause 3.4 (which is intended by all Parties
to be not later than 30 November 2005) or such time and date as may be
mutually agreed by the Parties, at a place as the Company and the Investors
may agree, when all of the following business shall be transacted
simultaneously:
(A) the Company shall:
(i) deliver to the Investors certified copies of the Board
resolutions and shareholders' resolutions of the Company duly
passed in the Agreed Form for (i) approving the issue of the
Convertible Notes to the Investors and the issue of the
certificates for the Convertible Notes in respect of the First
Tranche Subscription to the Investors and (ii) approving the
appointment of each Person nominated by each Investor as a
Director;
(ii) issue to the Investors the Convertible Notes in respect of the
First Tranche Subscription and deliver to the Investors the
relevant certificates of the Company (duly executed under seal)
for such Convertible Notes dated the First Completion Date and
issued substantially in the form set out in Schedule 5;
(iii) where the Registration Rights Agreement has not been signed
before the First Completion Date, deliver to the Investors five
(5) counterparts of the Registration Rights Agreement each duly
executed by the Company;
(iv) deliver to the Investors four (4) counterparts of each set of
Share Pledging Agreements duly executed by the Founder, pursuant
to which the Founder shall mortgage, charge and assign absolutely
by way of first legal mortgage the following number of Shares in
favour of each relevant Investor as a continuing security for the
due and punctual performance and observance by the Company of all
the obligations of the Company under Clause 3.2(A) (individually,
a "SHARE PLEDGING AGREEMENT" and collectively, the "SHARE
PLEDGING AGREEMENTS"):
Investor Number of Common Shares
-------- -----------------------
The Funds 755,789
JAFCO 377,895
Total 1,133,684 which represents twenty per cent. (20%) of the total
Shares in issue as at the date hereof
15
together with (a) a certified copy of the Board resolution and
(b) the stock transfer and power of attorney signed by the
Founder, both in the Agreed Form in relation to each Share
Pledging Agreement.
(v) deliver to the Investors ten (10) counterparts of the Investment
Agreement each duly executed by the Company, the PRC Subsidiaries
and the Founder;
(vi) enter the name of such Person as shall be nominated by each
Investor in the register of directors of the Company as a
Director and make available for collection by the Investors as
soon as practicable after First Completion a certified copy of
such updated register of directors; and
(vii) deliver to each Investor the deed of indemnity executed by the
Company in favour of the Person referred to in Clause 4.1(A)(vi)
substantially in the form set out in Schedule 6;
(viii) a compliance certificate dated as of the First Completion Date
executed by each Warrantor or a duly authorized representative of
each Warrantor, as applicable, certifying that all of the
conditions set forth in Clause 3.1 (other than Clause 3.1(C))
have been fulfilled; and
(B) each of the Investors shall:
(i) make the payment of the relevant amount of Subscription Price in
respect of the First Tranche Subscription to the Company by way
of telegraphic transfer to the Company's designated bank account
together with evidence that the Subscription Price has or will be
credited by telegraphic transfer, for value no later than the
next Business Day, into the Company's said designated bank
account, details of which are to be provided by the Company to
all of the Investors in the same written notice to be given by
the Company as referred to in Clause 3.4;
(ii) subject to the receipt of the counterparts from the Company
referred to in Clause 4.1(A)(iii), deliver to the Company two (2)
counterparts of the Registration Rights Agreement each duly
executed by the Investors;
(iii) subject to the receipt of the counterparts from the Company
referred to in Clause 4.1(A)(iv), deliver to the Company two (2)
counterparts of each set of the Share Pledging Agreements each
duly executed by the relevant Investor;
(iv) subject to the receipt of the counterparts from the Company
referred to in Clause 4.1(A)(v), deliver to the Company seven (7)
counterparts of the Investment Agreement each duly executed by
the Investors;
16
(v) deliver to the Company a letter appointing a Person as a Director
and, subject to the Investor's discretion, a Person (or, where
applicable, the same person) to be a director of a subsidiary of
the Company;
(vi) delivery to the Company an acceptance of appointment as Director
signed by the Person nominated by the Investor to act as a
Director or, where applicable, a director of the relevant
subsidiary of the Company; and
(vii) where applicable, deliver to the Company the duly signed
Accredited Investor Certificate (the form of which being set out
in Schedule 7) necessary for the Company to claim exemption from
the prospectus and registration requirements under the Ontario
Securities Act.
4.2 Subject to Clause 3, Second Completion shall take place on the sixth (6th)
Business Day after the issue and delivery of the notice by the Company to
the Investors referred to in Clause 3.5 or such time and date as may be
mutually agreed by the Parties (which in any event shall not be later than
28 February 2006), at a place as the Company and the Investors may agree,
when all of the following business shall be transacted simultaneously:
(A) the Company shall:
(i) deliver to the Investors certified copies of the Board
resolutions and shareholders' resolutions of the Company duly
passed in the Agreed Form for approving the issue of the
Convertible Notes to the Investors and the issue of the
certificates for the Convertible Notes in respect of the Second
Tranche Subscription to the Investors;
(ii) issue to the Investors the Convertible Notes in respect of the
Second Tranche Subscription and deliver to the Investors the
relevant certificates of the Company (duly executed under seal)
for such Convertible Notes dated the Second Completion Date and
issued substantially in the form set out in Schedule 5; and
(iii) deliver to the Investors four (4) counterparts of each set of
the Share Pledge Releases duly executed by the Founder, pursuant
to which the relevant Investor shall release the mortgage created
under the relevant Share Pledging Agreement (individually, a
"SHARE PLEDGE RELEASE" and collectively, the "SHARE PLEDGE
RELEASES"); and
(B) each of the Investors shall:
(i) make the payment of the relevant amount of Subscription Price in
respect of the Second Tranche Subscription to the Company by way
of telegraphic transfer to the Company's designated bank account
together with evidence that the Subscription Price has or will be
credited by telegraphic transfer, for value no later than the
next Business Day, into the Company's said designated bank
account,
17
details of which are to be provided by the Company to all of the
Investors in the same written notice to be given by the Company
as referred to in Clause 3.5;
(ii) subject to the receipt of the counterparts from the Company
referred to in Clause 4.2(A)(iii), deliver to the Company two (2)
counterparts of each set of the Share Pledge Releases each duly
executed by the relevant Investor; and
(iii) where applicable, deliver to the Company the duly signed
Accredited Investor Certificate (the form of which being set out
in Schedule 7) necessary for the Company to claim exemption from
the prospectus and registration requirements under the Ontario
Securities Act.
4.3 For the avoidance of doubt, each of the First Completion and the Second
Completion of the subscription of Convertible Notes by all (but not only
part) of the Investors shall be conducted simultaneously. Where any
Investor fails to complete the subscription, the other Investors shall not
be obliged to complete the subscription.
4.4 Where applicable, the Company undertakes that it shall file the Accredited
Investor Forms received by the Investors as referred to in Clauses
4.1(B)(vii) and 4.2(B)(iii) with the relevant Governmental Authority in
Canada forthwith after the First Completion Date or the Second Completion
Date (as the case may be).
5. REPRESENTATIONS AND WARRANTIES
5.1 Warrantors' Warranties
(A) Subject to disclosure in the Disclosure Letter, (i) each of the
Company and the Founder jointly and severally represents and warrants
to and undertakes with the Investors that each of the Warrantors'
Warranties in both Parts A and B of Schedule 3, and (ii) each of the
PRC Subsidiaries for itself only (but not jointly and/or severally
with other Warrantors) represents and warrants to and undertakes with
the Investors that each of the Warrantors' Warranties in Part B only
of Schedule 3, is true and accurate and not misleading as at the date
of this Agreement and will continue to be true and accurate in all
respects and not misleading on each day after the date hereof up to
and including the First Completion Date and the Second Completion Date
(as the case may be) as if repeated on each such day. For this purpose
only, where in any of the Warrantors' Warranties there is an express
or implied reference to the date of this Agreement, that reference is
to be construed as a reference to each day after the date hereof up to
and including the First Completion Date and the Second Completion Date
(as the case may be).
(B) The Warrantors acknowledge that the Investors have entered into this
Agreement in reliance upon the Warrantors' Warranties, and that they
are given with the intention of inducing the Investors to enter into
this
18
Agreement.
(C) Without prejudice to anything contained in this Clause 5, all
Warrantors' Warranties contained herein shall survive the execution
and delivery of this Agreement, First Completion and Second
Completion.
(D) Each of the Warrantors hereby agrees with the Investors to waive any
right which he/it may have in respect of any misrepresentation,
inaccuracy or omission in or from any information or advice supplied
or given by any Group Company or its officers and employees or
advisers in enabling him/it to give the Warrantors' Warranties.
(E) The rights and remedies of the Investors in respect of the Warrantors'
Warranties shall not be affected by any investigation made by or on
behalf of the Investors into the affairs of any Group Company, save as
disclosed in the Disclosure Letter.
(F) Each of the Warrantors' Warranties shall be construed as a separate
representation and warranty and (save as expressly provided to the
contrary) shall not be limited or restricted by reference to or
inference from the terms of any other representation or warranty or
any other term of this Agreement.
5.2 Except as disclosed to the Company, each the Investors for itself only (but
not jointly and/or severally with other Investors) represents and warrants
to the Company that each of the following representations and warranties is
true and accurate and not misleading as at the date of this Agreement and
will continue to be true and accurate in all respects and not misleading on
each day after the date hereof up to and including the First Completion
Date and the Second Completion Date (as the case may be) as if repeated on
each such day:
(A) the Investor is a duly incorporated corporation or corporate body, 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
or for the appointment of a receiver thereof; and
(B) the Investor has full power and authority to enter into this Agreement
and all of the other documents contemplated under this Agreement, and
this Agreement, when executed and delivered, will constitute the
Investor's valid and legally binding obligation, enforceable in
accordance with its terms except that the transactions contemplated
herein as well as the execution, delivery and performance of this
Agreement and the Transaction Documents (where applicable) by the
Investor will be subject to the approval of its investment committee.
5.3 Each Warrantor shall promptly notify all of the Investors upon its/his
becoming aware at any time prior to and after First Completion or Second
Completion (as the case may be) of any event which could reasonably be
expected to cause any of the Warrantors' Warranties to be incorrect,
misleading or breached in any material respect or which may have any
Material Adverse Effect.
19
6. UNDERTAKINGS BEFORE COMPLETION
6.1 The Warrantors hereby agree and undertake with the Investors:
(A) that they shall not do, allow or procure any act or omission in the
period up to and including the First Completion Date and the Second
Completion Date (as the case may be) which would constitute a breach
of any of the Warrantors' Warranties; and
(B) to disclose promptly to all of the Investors in writing upon becoming
aware of any matter, event or circumstance (including any omission to
act) which may arise or become known to the Warrantors or any of them
after the date of this Agreement and before First Completion or Second
Completion (as the case may be) and:
(i) constitutes a breach of or is inconsistent with any of the
Warrantors' Warranties if given at any time up to and including
the First Completion Date or the Second Completion Date (as the
case may be) or which might make them inaccurate or misleading;
or
(ii) has, or is likely to have a Material Adverse Effect; or
(iii) might otherwise materially and adversely affect the value of the
Convertible Notes.
6.2 Except as otherwise permitted by this Agreement or with the prior written
consent of all Investors (such consent shall not be unreasonably withheld
or delayed), from the date hereof and at all times up to and including the
First Completion Date or the Second Completion Date (as the case may be),
the Company shall, and shall cause each other Group Company in respect of
itself:
(A) to carry on its business in the ordinary course consistent with past
practice in all material respects and to preserve its relationships
with customers, suppliers and others having business dealings with the
Group;
(B) not materially change its nature or business scope or carry on any
type of business not ancillary or deviating from the existing
business;
(C) save for the purpose of facilitating the transactions contemplated
under this Agreement, not to amend, alter or repeal, whether by
merger, reclassification or otherwise any provision of its
constitutional documents;
(D) save for the purpose of facilitating the transactions contemplated
under this Agreement, not to increase, reduce, consolidate, sub-divide
or cancel its authorized and issued share capital;
(E) not to change its name or the name under which it carries on business;
(F) not to change its jurisdiction of incorporation;
(G) not to make any composition or arrangement with its creditors;
20
(H) not to pass any resolution which would result in its winding up,
liquidation or entering into administration or receivership;
(I) not to consolidate or merge with any other business, which is not part
of its existing business as at the date hereof;
(J) not to offer, sell or issue, or enter into any agreement or issue any
instrument providing for the offer, sale or issuance (contingent or
otherwise) of, any Equity Securities, or any equity securities of any
Group Company;
(K) not to increase the number of shares available for grant or issuance
under any share or stock option plan or other share incentive plan or
arrangement or make any amendment to or terminate any such plan or
arrangement (if any);
(L) not to create or allow to arise any fixed or floating charge,
mortgage, Lien (other than a Lien arising by operation of law), pledge
or other Encumbrance over the whole or any part of the undertaking,
property or assets; or create, allow to arise or issue any debenture
constituting any of the foregoing;
(M) not to make any loan or advance in a substantial amount (except to its
wholly-owned subsidiary) or give any credit in a substantial amount
(except trade credit to customers in the ordinary course of business);
(N) not to give any guarantee or indemnity for or otherwise secure the
liabilities or obligations of any Person (except in favour of its
wholly-owned subsidiary in the ordinary course of business);
(O) not to transfer, license or create any Encumbrance over any of its
Intellectual Property Rights;
(P) not to appoint or remove its auditors; and
(Q) not to declare or make any dividend on or with respect to any Equity
Securities, or any equity securities of any Group Company, or
otherwise distribute its shareholders any of its assets or property or
reserve.
6.3 The Founder undertakes to the Investors that he shall exercise all his
powers in relation to each Group Company so as to procure that no action
shall be taken by or on behalf of the Company or any other Group Company to
approve, authorise and/or ratify any of the matters set out in Clause 6.2,
or any agreement or commitment to engage in any such matters, without first
obtaining the prior written consent of all Investors (such consent shall
not be unreasonably withheld or delayed).
7. REMEDIES
7.1 If before First Completion:
(A) any material breach of representations and warranties of a Party set
out in
21
this Agreement or any of the Transaction Documents (where applicable)
comes to the notice of any of the other Parties; or
(B) any of the Warrantors or any Investor is in material breach of any
obligation on its/his part under this Agreement or any of the
Transaction Documents (where applicable);
then, but without prejudice to any other rights or remedies available to
the non-defaulting Parties hereunder, any of the non-defaulting Parties
may, without any liability to the defaulting Party, elect to terminate this
Agreement or the relevant Transaction Document by giving notice in writing
to all other Parties, whereupon this Agreement or such Transaction Document
(as the case may be) shall terminate.
7.2 The Warrantors hereby jointly and severally agree to indemnify, at anytime
after First Completion or Second Completion (as the case may be), each
Investor in respect of all costs and expenses (including, without
limitation, legal expenses) which an Investor may reasonably incur either
before or after the commencement of any action in connection with:
(A) the settlement of any claim for breach of the undertakings given by
any of the Warrantors under this Agreement, the Conditions and the
Transaction Documents (where applicable);
(B) the settlement of any claim that any of the Warrantors' Warranties
made by them are, on or before the First Completion Date or the Second
Completion Date (as the case may be), untrue or misleading or have
been breached;
(C) any proceedings in which an Investor claims that any of the
Warrantors' Warranties made by them are, on or before the First
Completion Date or the Second Completion Date (as the case may be),
untrue or misleading or have been breached and in which judgment is
given for the Investor; or
(D) the enforcement of any such settlement, arbitral award or judgment.
7.3 The Founder hereby covenants with the Investors that he shall indemnify and
at all times keep indemnified the Investors and the Company on demand from
and against all or any depletion or diminution in the value of assets or
increase in the liabilities of any Group Company arising or resulting from
any Taxes or Taxation claims which has been imposed or made or may
hereafter be imposed or made, wholly or partly, in respect of or in
consequence of any event or any income, profits or gains earned, accrued or
received or which are alleged to have, or which should have, been earned or
accrued or received, or any transaction effected on or before the First
Completion Date PROVIDED THAT the Founder shall be under no liability in
respect of any breach of the said indemnity as aforesaid:
(A) to the extent that provision or reserve in respect of such liability
was made in the Satisfactory Audit Reports or the Group's other
financial statements audited by one of the "Big Four" accounting
firms; or
22
(B) to the extent that such liability arises or is increased as a result
only of any increase in rates of Tax made after First Completion with
retrospective effect; or
(C) if such liability arises in respect of Tax for which the Group Company
is primarily liable and which arose in the ordinary course of business
of the Group Company; or
(D) to the extent of the indemnity amount that does not exceed, and has
been fully absorbed by and paid off from, the aggregate audited
retained earnings of the Group for all financial periods ending 28
February 2006.
8. 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.
9. ANNOUNCEMENTS AND CONFIDENTIALITY
9.1 Disclosure of Terms. Each Party acknowledges that the terms and conditions
(collectively, the "FINANCING TERMS") of 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 9. 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.
9.2 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
23
press release does not disclose the amount or other specific terms of the
investment contemplated under 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.
9.3 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
Regulatory Commission of the PRC or the Securities and Exchange
24
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 9.2.
(D) the confidentiality obligations set out in this Clause 9 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 9 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 or Observers to his/her
appointer or any of its Affiliate or otherwise in accordance with
the foregoing provisions of this Clause 9.3.
9.4 The obligations contained in this Clause 9 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.
10. 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.
11. 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.
12. 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.
25
13. 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.
14. WAIVER
14.1 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.
14.2 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.
15. FURTHER ASSURANCE
Each Party shall do or procure to be done all such further acts and things,
and execute or procure the execution of all such other documents, as the
other Parties may from time to time reasonably require, whether on or after
the First Completion Date or the Second Completion Date (as the case may
be), for the purpose of giving to the other Parties the full benefit of all
of the provisions of this Agreement.
16. NOTICES
16.1 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.
26
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: Mr. QU Xxxx Xxx
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
16.2 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 16.
27
17. 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.
18. COSTS
18.1 Subject to First Completion, the Company shall bear all costs and expenses
reasonably incurred by the Investors in relation to the Investors'
investment contemplated under this Agreement including but not limited to
the preparation and negotiation of the documentation for the matters
referred to in this Agreement and the Transaction Documents and the due
diligence undertaken by the Investors, up to a maximum limit of Xxx Xxxxxxx
Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$100,000).
18.2 In the event First Completion does not take place, the Company and the
Investors shall bear their own costs and expenses, provided that if the
Company unilaterally decides not to proceed with First Completion, the
Company shall bear all costs and expenses reasonably incurred by or on
behalf of the Investors in relation to the Investors' intended investment
under this Agreement including but not limited to the preparation and
negotiation of the documentation for the matters referred to in this
Agreement and the Transaction Documents and the due diligence undertaken by
the Investors, up to a maximum limit set out in Clause 18.1.
18.3 This Clause 18 shall survive the termination of this Agreement.
19. PROCESS AGENTS
19.1 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 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 Key Consultant Limited
Founder and 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.
28
AGENT /
PARTY REGISTERED OFFICE ADDRESS
----- -------------------------
Address: 30/F Two International Finance Centre,
0 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxx Xxxx
19.2 If a process agent appointed by any Party pursuant to Clause 19.1 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.
19.3 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.
20. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with the
laws of Hong Kong.
21. DISPUTE RESOLUTION
21.1 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.
21.2 Arbitration under this Clause 21 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 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.
21.3 The arbitration shall be administered by HKIAC in accordance with HKIAC's
procedures for arbitration.
21.4 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.
29
21.5 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.
21.6 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.
21.7 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.
22. 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.
30
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
31
SCHEDULE 2
PARTICULARS OF THE COMPANY'S SUBSIDIARIES
PART I
NAME: (Chinese Characters) (CSI Solartronics Co. Ltd.)
DATE OF INCORPORATION: 23 November 2001
PLACE OF INCORPORATION: (Chinese Characters) (Changshu, Jiangsu Province,
the PRC)
REGISTERED OFFICE: (Chinese Characters) (Xxxxxxxx Xxxxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000, the PRC)
DIRECTORS: QU Xxxx Xxx,
QU Xxxxx Xx,
ZHU Bing,
Xxxxxx XXXX, and
ZHANG Guo Xin
TOTAL INVESTMENT: US$3,000,000
REGISTERED CAPITAL: US$2,100,000
REGISTERED CAPITAL PAID UP US$2,100,000
(AS AT THE DATE HEREOF):
SHAREHOLDERS: SHAREHOLDER EQUITY INTEREST HELD
------------- ------------------- -----------------------------
Canadian Solar Inc. 100% of the registered capital
32
PART II
NAME: (Chinese Characters) (CSI Solar Technologies Inc.)
DATE OF INCORPORATION: 8 August 2003
PLACE OF INCORPORATION: (Chinese Characters) (Suzhou, Jiangsu Province,
the PRC)
REGISTERED OFFICE: (Chinese Characters) 209 (Chinese Characters) C6017
(Chinese Characters) (Suite C6017, China Suzhou
Pioneering Park for Overseas Chinese Scholars, Xx.
000, Xxxxxxx Xxxx, Xxxxxx Xxx & Xx-Xxxx Xxxxxxxx,
Xxxxxxx 000000, the PRC)
DIRECTORS: QU Xxxx Xxx
TOTAL INVESTMENT: US$1,000,000
REGISTERED CAPITAL: US$700,000
REGISTERED CAPITAL PAID UP US$121,460
(AS AT THE DATE HEREOF):
SHAREHOLDERS: SHAREHOLDER EQUITY INTEREST HELD
------------- ------------------- ------------------------------
Canadian Solar Inc. 100% of the registered capital
33
PART III
NAME: (Chinese Characters) (CSI Solar Manufacturing Inc.)
DATE OF INCORPORATION: 7 January 2005
PLACE OF INCORPORATION: (Chinese Characters) (Suzhou, Jiangsu Province,
the PRC)
REGISTERED OFFICE: (Chinese Characters) (Export Processing Xxxx,
Xxxxxx Xxx & Xx-Xxxx Xxxxxxxx, Xxxxxxx 000000, the
PRC)
DIRECTORS: QU Xxxx Xxx
TOTAL INVESTMENT: US$25,000,000
REGISTERED CAPITAL: US$10,000,000
REGISTERED CAPITAL PAID UP US$1,500,000
(AS AT THE DATE HEREOF):
SHAREHOLDERS: SHAREHOLDER EQUITY INTEREST HELD
------------- ------------------- ------------------------------
Canadian Solar Inc. 100% of the registered capital
34
SCHEDULE 3
WARRANTORS' WARRANTIES
PART A
Save as disclosed in the Disclosure Letter and this Agreement, each of the
Company and the Founder jointly and severally represents and warrants to and
undertakes with the Investors as follows:
1. THE COMPANY AND ITS SUBSIDIARIES
1.1 The Company has no and never has had any subsidiary or shares in or stock
of any company other than the companies set out in Schedule 2.
1.2 The Company's interest in its subsidiaries set out in Schedule 2 is held
free from all charges, Liens, Encumbrances and claims.
2. EQUITY SECURITIES
(A) The Common Shares issued to the Investors upon full conversion of all
Convertible Notes (assuming the Second Tranche Subscription will be
completed to the full extent under this Agreement and the Note Options
will be exercised in full by the Investors and the Company does not
exercise its option under Clause 2.3) will, immediately after such
issue, amount to approximately 26.32% of the enlarged issued share
capital of the Company on a Fully-Diluted Basis.
(B) Save as provided in this Agreement, 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
Shares (except the ATS Arrangement) and no claim has been made by any
Person (apart from ATS) to be entitled to any of the foregoing.
(C) Save the Shares to be issued upon conversion of the Convertible Notes
and the ESOP, there are no agreements or arrangement in force which
call for the present or future issue or allotment of, or grant to any
Person (apart from ATS) the right (whether conditional or otherwise)
to call for the issue, allotment or transfer of any Equity Securities.
(D) The allotment and issue of the Convertible Notes and the subsequent
conversion thereof into Common Shares are not and will not be subject
to any Encumbrances.
(E) The Company has not granted any options to any Person to subscribe for
or purchase any Equity Securities (apart from the options which may be
granted under the ESOP).
(F) An accurate and complete list of the Company's shareholders and
holders of Convertible Securities and their respective holdings of the
Equity Securities, together with all unissued options being reserved
for issuance, in
35
each case both immediately prior to and after the First Completion, is
set forth in the Disclosure Letter. Save as disclosed in the
Disclosure Letter, there are no outstanding and in issue any capital
stock, option, warrants or securities convertible into or exchangeable
for common stock of or unissued options or warrants or other Equity
Securities being reserved for issuance of any Group Company both
immediately prior to and after the First Completion.
36
PART B
Save as disclosed in the Disclosure Letter and this Agreement, (i) each of the
Company and the Founder jointly and severally represents and warrants to and
undertakes with the Investors, and (ii) each of the PRC Subsidiaries for itself
only (but not jointly and/or severally with other Warrantors) represents and
warrants to and undertakes with the Investors, as follows:
3. INFORMATION
3.1 To the best of the knowledge of the Warrantors, all information contained
in this Agreement (including the Recitals) is true and accurate in all
material respects and not misleading in any material respect.
3.2 All written information which is set out or referred to in the Disclosure
Letter or is given by or on behalf of the Warrantors to the Investors or
their agents in the course of the negotiations leading to this Agreement is
true and accurate in all material respects and not misleading in any
material respect.
4. CAPACITY OF THE WARRANTORS
4.1 Each of the Warrantors has full power and authority to enter into and
perform this Agreement and the Transaction Documents (where applicable),
and the provisions of this Agreement and the Transaction Documents (where
applicable), when executed, will constitute valid and binding obligations
on him/it, in accordance with its terms.
4.2 The execution and delivery by each of the Warrantors of, and the
performance of him/it of his/its obligations under, this Agreement and the
Transaction Documents (where applicable) will neither:
(A) (where applicable) result in a breach of any provision of its
constitutional documents subject, in the case of the Company, to the
amended Articles of Incorporation referred to in Clause 3.1(H) having
been filed with the relevant Governmental Authorities in Canada;
(B) result in a breach of any order, judgment or decree of any court or
Governmental Authority to which it is a party or by which he/it is
bound; nor
(C) violate any Applicable Law.
4.3 All consents, permissions, approvals and agreements of third parties which
are necessary for each Warrantor to obtain in order to enter into and
perform this Agreement and the Transaction Documents (where applicable) in
accordance with their terms have been unconditionally obtained.
5. CORPORATE MATTERS
5.1 Each of the Group Companies has been duly incorporated and is validly
existing under the Applicable Law, has obtained all necessary Governmental
Approvals to
37
own its assets and to carry on its business as presently conducted and all
Governmental Approvals are valid and subsisting and, to the best of the
knowledge of the Warrantors, there is no reason why any of them should be
suspended, cancelled or revoked.
5.2 No order has been made or petition presented or resolution passed for the
winding up of any Group Company and no distress, execution or other process
has been levied on any of its assets. No Group Company is insolvent nor
unable to pay its debts due for payment, no receiver or receiver and
manager has been appointed by any person of its business or material assets
or any substantial part thereof, and no power to make any such appointment
has arisen. No Group Company has taken steps to enter liquidation and there
are no valid grounds on which a petition or application could be based for
the winding up or appointment of a receiver of any Group Company.
5.3 None of the Group Companies has even been a director or other officer of
any other company.
5.4 None of the Group Companies has at any time:
(A) repaid or redeemed or agreed to repay or redeem any shares of any
class of its share capital or otherwise reduced or agreed to reduce
any class of its issued share capital or purchased any of its own
shares or carried out any transaction having the effect of a reduction
of capital; or
(B) given any financial assistance in contravention of any Applicable Law.
5.5 The copies of the constitutional documents of each of the Group Companies
delivered to the Investors or their agents are accurate and complete in all
respects and have attached to them copies of all resolutions and agreements
which are required to be so attached.
5.6 The register of members and all other statutory books of the Group
Companies are up to date and contain true full and accurate records of all
matters required to be dealt with therein and none of the Group Companies
has received any notice of any application or intended application for
rectification of its register.
5.7 All annual or other corporate returns required to be filed by each of the
Group Companies with the relevant Governmental Authorities have been
properly filed within any applicable time limit and all legal requirements
relating to the issue of shares and other securities by all Group Companies
have been complied with.
6. SUBSIDIARIES
(A) All issued shares in the capital of each of the Company's subsidiaries
incorporated in a jurisdiction not being the PRC have been fully paid
up.
(B) All capital and other contributions due to each PRC Subsidiary have
been paid in full within the respective time limited imposed under the
terms of the constitutional documents or the relevant Governmental
Approvals.
38
(C) There is no agreement or arrangement in force which calls for the
present or future issue or allotment of, or grant to any Person the
right (whether conditional or otherwise) to call for the issue,
allotment or transfer of any share or loan capital of any of the
Company's subsidiaries (including any option, notes, warrants or other
securities or rights convertible or ultimately convertible into shares
or equity interests in any of such subsidiaries).
7. COMPLIANCE
7.1 Each of the Group Companies has complied with its constitutional documents
in all respects, and has full power, authority and legal right to own its
assets and carry on its business.
7.2 Each Group Company has complied in all material respects with all
Applicable Law. To the best of the knowledge of the Warrantors, none of the
Group Companies has received notice of any violation of any Applicable Law
from any Governmental Authority. There is no provision of any outstanding
governmental judgement, decree or Applicable Law applicable to or binding
upon any Group Company which could materially adversely affect the
business, prospects, assets or condition, financial situation of any Group
Company.
7.3 There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which a Group Company is a party or by which it
is bound, which adversely affects its business, prospects, assets or
condition, financial position.
8. ACCOUNTS
8.1 The unaudited financial statements of each Group Company have been prepared
in accordance with the requirements of the Applicable Law and on a
consistent basis in accordance with IAS or other applicable accounting
standards.
8.2 Each unaudited financial statement of each Group Company shows a true and
fair view of the assets, liabilities, capital commitments and the state of
affairs of such Group Company as at the relevant accounts date or of the
profits and losses of such Group Company for the period concerned.
8.3 Since 1 September 2005:
39
(A) no Group Company has disposed of any asset (including trading stock)
or supply of any service or business facility of any kind (including a
loan of money or the letting, hiring or licensing of any property
whether tangible or intangible) in circumstances where the
consideration actually received or receivable for such disposal or
supply was less than the consideration which would be deemed to have
been received for Tax purposes;
(B) no Group Company has assumed or incurred any liabilities (actual or
contingent) or expenditure otherwise than in the ordinary course of
carrying on its business or entered into any transaction which is not
in its ordinary course of business;
(C) no business of any of the Group Companies has been materially and
adversely affected by the loss of any important contract or customer
or source of supply or by any abnormal factor not affecting similar
businesses to a like extent and the Warrantors are not aware of any
facts which are likely to give rise to any such effects;
(D) no dividends, bonuses or distributions have been declared, paid or
made;
(E) no payment has been made by any of the Group Companies which will not
be deductible for Tax purposes either in computing the profits of the
relevant Group Company or in computing the Tax chargeable on the
Group;
(F) no Group Company has changed its financial year end;
(G) save for resolutions copies of which have been delivered to the
Investors prior to the date hereof or which are required to be passed
by any Group Company prior to First Completion and Second Completion
in order to satisfy the conditions set out in Clause 3.1 and Clause
3.3 respectively, no board or shareholders' resolutions of any of the
Group Companies have been or will be passed; and
(H) there has not been any waiver or compromise granted by any Group
Company of a valuable right or of a material debt owing to it; and
(I) there has been no material change to a Material Contract which any
Group Company or any of its assets is bound by or subject to.
9. TAXATION
9.1 Each of the Group Companies has duly and punctually paid all Taxation which
is due and which it has become liable to pay and is under no outstanding
liability to pay any penalty, interest, surcharge or fine in connection
with any Taxation and has complied in all respects with all legislation
relating to Taxation applicable to such company.
9.2 Each of the Group Companies has made all such returns and notifications,
provided all such information, documents and particulars and maintained all
such records in relation to Taxation as are required to be made or provided
or maintained by it
40
punctually and none of such returns, notifications, information, documents
or particulars is disputed by the relevant Governmental Authority
concerned.
9.3 None of the Group Companies is involved in any dispute in relation to
Taxation. To the best of the knowledge of the Warrantors, there is no
relevant Governmental Authority concerned which has investigated or
indicated that it intends to investigate the Tax affairs of any Group
Company.
9.4 All Taxation in connection with the arrangement between the Company and
Swift Allies Inc. which are required to be paid on the part of any Group
Company have been timely paid. None of the Group Companies is involved in
any dispute with any Governmental Authority on Taxation in relation to such
agreements. To the best of the knowledge of the Warrantors, there is no
relevant Governmental Authority concerned which has investigated or
indicated that it intends to investigate such agreements or the arrangement
related thereto.
10. ASSETS
10.1 Title
(A) The assets currently employed in the operation of the businesses of
each Group Company are wholly and beneficially owned assets (other
than trading stock which is intended to be subsequently disposed of in
the ordinary course of business or trading stock acquired subject to
retention or reservation of title by the supplier or manufacturer
thereof) and all material assets (save and except for the trading
stock) used by the Group:
(a) are legally and beneficially owned by the Group free from all
Encumbrances; and
(b) are in the possession or under the control of the Group.
(B) All plant, machinery, vehicles, computers and equipment owned or used
by each Group Company are (subject to normal wear and tear) in
reasonable repair, condition and working order, have been regularly
and properly maintained.
10.2 Stock
(A) All trading stock of each Group Company is of merchantable quality
saleable in the normal course of business.
(B) No goods of any Group Company sold or delivered have incurred any
product liability claimed against any Group Company.
10.3 Book debts
(A) No part of the amount shown in the books of account of any Group
Company in respect of debtors is represented by debts which are more
than twelve (12) months overdue for payment or by debts in respect of
41
arrangements made otherwise than in the ordinary course of any such
Group Company's business.
(B) No debt has been released by any Group Company on terms that the
debtor paid less than the book value of his debt and no debt owing to
any such Group Company has proved to any extent to be irrecoverable,
except for the provision for bad and doubtful debts and discounts made
in the books of account of any Group Company.
11. GENERAL COMMERCIAL MATTERS
11.1 None of the Group Companies has capital commitments which exceed Xxx
Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (US$100,000) in aggregate in respect
of that Group Company.
11.2 There are no loans, guarantees, pledges, mortgages, charges, Liens,
debentures or, Encumbrances given, made or incurred by or on behalf of any
Group Company which may incur material liability to any Group Company,
except for those incurred in its ordinary course of business.
11.3 To the best of the knowledge of the Warrantors, none of the Group companies
is the subject of any official investigation or inquiry by any Governmental
Authority.
12. PROPERTIES
12.1 The Group has exclusive use and undisturbed possession of the land and the
buildings erected thereon owned or leased by the Group.
12.2 The Group has good title to the land use right and the buildings it owns,
free from any mortgage, charge, Encumbrance, right of occupation or third
party right.
12.3 The landlords of the properties leased by the Group have good title to such
properties and have the capacity to lease such properties to the Group.
12.4 The use of land and buildings by the each Group Company for operating its
businesses does not violate any Applicable Law or terms of the leases for
the relevant properties.
12.5 All buildings erected on the land occupied by the Group are in reasonably
good and substantial repair and condition and are in such reasonable
condition and state of repair as to be substantially fit for the purpose
for which they are used at present by the Group for operating its
businesses.
13. INTELLECTUAL PROPERTY RIGHTS
13.1 The Group has independently developed and owns or possesses sufficient
legal rights to all Intellectual Property Rights (including registrations
and applications to register or renew such rights), and licenses of any of
the foregoing necessary for its business as now conducted and as presently
proposed to be conducted (collectively,
42
the "GROUP INTELLECTUAL PROPERTY"), without any infringement of the rights
of others.
13.2 The Disclosure Letter contains true, complete and accurate lists of all
trademarks, servicemarks, trademarks applications, servicemarks
application, patents, patent applications, trade names, copyright
registration, domain names, software products or applications presently
used by the Group or necessary for the conduct of the Group's business as
currently being conducted or proposed to be conducted, and the Group owns,
or has the right to use under the agreements, all the Intellectual Property
Rights set out in the Disclosure Letter.
13.3 There are no outstanding options, licenses or agreements of any kind
relating to the Group Intellectual Property, nor is any Group Company bound
by or are parties to any options, licenses or agreements of any kind with
respect to the Group Intellectual Property of any other person or entity
except, in either case, for standard end-user agreement with respect to
commercially readily available intellectual property such as
"off-the-shelf" computer software.
13.4 Each Group Company is in compliance with all material terms of any licenses
by which it uses any Group Intellectual Property, and each such license is
in full force and effect. Each licensor thereof is in compliance with all
material terms of the respective license. No Group Company is aware of the
existence of any fact or circumstance that would give the licensor thereof
grounds under the terms of such license to cancel, terminate or suspend
such license. All such licenses material to the operation of the Group will
be renewed in the ordinary course of business on terms commercially
reasonable.
13.5 No Group Company has received any communications alleging that it has
violated or, by conducting its businesses as presently proposed, would
violate any of the Intellectual Property Rights of any other person or
entity.
13.6 The Company is not aware after due and careful enquiry that any of the
Group's employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to
any judgement, decree or order of any court or administrative agency, that
would interfere with their duties to the Group, or that would conflict with
the Group's business as presently proposed to be conducted.
13.7 Neither the execution nor delivery of this Agreement or the Transaction
Documents, nor the carrying on of the Group's business, nor the conduct of
the Group's business as presently proposed, will conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any Group Company
or any employee is now obligated. It is not nor will it become necessary
for any Group Company to utilize any Intellectual Property Rights of its
employees made prior to their employment by the Group, except for the
Intellectual Property Rights that has been assigned to a Group Company.
13.8 None of the Group Companies and the Founder have entered into any agreement
to indemnify any other person against any charge of infringement or
misappropriation of any Group Intellectual Property.
43
13.9 Each Group Company has taken all reasonably necessary action to protect and
preserve (i) the validity and enforceability of trade and service marks and
associated goodwill included in the Group Intellectual Property; (ii) the
enforceability of copyrights and the confidentiality, validity and
enforceability of pending patent applications included in the Group
Intellectual Property; (iii) the validity and enforceability of patents
included in the Group Intellectual Property; and (iv) the confidentiality
and enforceability of trade secrets and the confidentiality of other
proprietary information included in the Group Intellectual Property. All
current employees and consultants of the Group have executed non-disclosure
agreements to protect the confidentiality, and to vest in the relevant
Group Company exclusive ownership, of the Group Intellectual Property.
13.10 To the best knowledge of the Warrantors, no material trade secret or
confidential information constituting Group Intellectual Property has been
used, divulged or appropriated for the benefit of any person other than the
Company or the other Group Companies or otherwise to the detriment of the
Group, except pursuant to appropriate non-disclosure agreements. To the
best knowledge of the Warrantors, none of the Founder and current employee
or consultant of the Group or their respective Affiliates have used any
trade secrets or other confidential information (except with the consent of
the owner of such information) of any other person in the course of their
work for the Group.
13.11 No Group Company has any written or oral agreements with current or former
employees or consultants with respect to the ownership of Group
Intellectual Property, including inventions, trade secrets or other works
created by them as a result of which any such employee or consultant may
have exclusive or non-exclusive rights to the portions of the Group
Intellectual Property so created by such individual.
13.12 None of the Founder and current or former officer, employee or consultant
of the Group are in violation of any term of any written employment
contract, patent disclosure agreement, proprietary information agreement,
non-competition agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or agreement or any restrictive
covenants relating to the right of any such officer, employee, consultant
or person to be employed or engaged by the Group or relating to the use of
trade secrets or proprietary information of others, and no former employer
of any such person has any rights in respect of the Group Intellectual
Property.
13.13 The Group does not use any processes nor is it engaged in any activities
which involve the misuse of any know-how, lists of customers or suppliers,
trade secrets, technical processes or other confidential information ("IP
CONFIDENTIAL INFORMATION") belonging to any third party. To the best
knowledge of the Warrantors, there has been no actual or alleged misuse by
any person of any IP Confidential Information. To the best knowledge of the
Warrantors, none of the Founder and current or former officers, employees
or consultants of the Group have disclosed to any person any IP
Confidential Information except where such disclosure was properly made in
the normal course of the Group's business and was made subject to an
agreement under which the recipient is obliged to maintain the
confidentiality of such IP Confidential Information and is restrained from
further
44
discussing it or using it other than for the purposes for which it was
disclosed by the Group.
13.14 No royalty, honorarium, fees or other payments are payable by a Group
Company to any third party by reason of the ownership, possession, sale,
marketing, use or other exploitations of any Group Intellectual Property.
13.15 No government funding, facilities of any university, college or other
educational institution or research centre of funding from third parties
(other than funds received in consideration of capital stock of any Group
Company or issuance of debt) was used in the development of any Group
Intellectual Property.
13.16 No Group Company uses or otherwise carries on its business under any name
other than its corporate name.
14. INSURANCE
All the assets (including stock-in-trade) of the Group of an insurable
nature have at all material times been and are insured in amounts to the
full replacement value thereof against fire and other risks normally
insured against by Persons carrying on substantially the same classes of
business as those carried on by the Group, and as required by Applicable
Law.
15. CONTRACTS
15.1 No Group Company is in breach of or has knowledge of the invalidity of or
grounds for rescission, avoidance or repudiation of any Material Contract
or has received no notice of any intention to terminate any Material
Contract.
15.2 Unless otherwise disclosed to the Investors, none of the Group Companies
has entered into any Material Contract.
16. EMPLOYEES
16.1 Each Group Company has complied with all obligations in all respects
imposed on it by, and all orders and awards made under, all Applicable Law
relevant to the relations between it and its employees and the terms of
service of its employees.
16.2 No Group Company has any agreement or other arrangement (binding or
otherwise) with any trade union or other body representing its employees or
any of them or recognizes any trade union or other body representing its
employees or any of them for negotiating purposes.
16.3 No Group Company is involved in any industrial or trade disputes or any
dispute or negotiation regarding a claim of material importance with any
employees, trade union or body of employees.
16.4 Apart from the ESOP and the intended transfers of Shares to certain senior
executives of the Group as may be contemplated in the Investment Agreement,
no Group Company has in existence or is proposing to introduce any share
incentive
45
scheme, share or stock option scheme or profit sharing bonus or other such
incentive scheme for all or any of its employees.
17. LITIGATION
17.1 There are no actions, suits or proceedings (including arbitration
proceedings) pending or threatened against or brought by any Group Company.
17.2 None of the Group Companies is subject to, or in default with respect to,
any order, writ, injunction or decrees of any court, tribunal or
Governmental Authority, domestic or foreign.
17.3 There is no unsatisfied judgment, court order or tribunal or arbitral award
outstanding against any Group Company and no distress, execution or process
has been levied on any part of their respective business or assets.
18. RELATED PARTY TRANSACTIONS
18.1 Unless otherwise disclosed to the Investors, there are no Related Party
Transactions except those in relation to the remuneration of Related
Parties and reimbursement or advance payment to any Related Party not
exceeding Five Hundred Thousand United States Dollars (US$500,000) on each
occasion for each Related Party.
18.2 There is no breach on the part of the Related Party in respect of the terms
of the agreements, contracts, arrangements or understanding underlying the
Related Party Transactions.
19. BROKERAGE OR COMMISSIONS
No Person is entitled to receive from any Group Company any finder's fee
brokerage or commission in connection with this Agreement or anything
contained in it.
20. REGISTRATION RIGHTS AGREEMENT
Except as required pursuant to the Registration Rights Agreement, no Group
Company is presently under any obligation, or has granted any rights to any
Person to register any Shares or Convertible Securities under or pursuant
to the Securities Act of the United States.
21. ENVIRONMENTAL AND SAFETY LAWS
No Group Company is in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety
("ENVIRONMENTAL AND SAFETY LAWS"), and to the Warrantors' knowledge, no
material expenditures are or will be required in order for any Group
Company to comply with any such existing Environmental and Safety Laws.
Each of the Group Companies has obtained all material permits, material
licenses and other material authorizations that are required under
applicable Environmental and Safety Laws to conduct its business and has
filed all material reports, material notices, material assessments,
46
material plans, material inventories, and material applications required by
Environmental and Safety Laws.
22. BUSINESS PLAN
With respect to the Business Plan:
(A) it was prepared in good faith and on a professional workmanlike manner
and on a realistic basis after careful examination and due
consideration of all relevant factors;
(B) the technology referred to or described therein is proven reliable and
capable of being applied in the successful economic production of
premium products;
(C) none of the statements therein are untrue or misleading in any way and
it does not omit to state any material fact necessary to make the
statements therein not misleading; and
(D) the financial and other projections contained therein were prepared in
good faith and that there is reasonable basis for such projection.
47
SCHEDULE 4
FORM OF PRE-EMPTIVE RIGHT CERTIFICATE
To: (1) Canadian Solar Inc. (the "COMPANY"); and
(2) HSBC HAV2 (III) Limited and (3) JAFCO Asia Technology Fund II (together,
the "INVESTORS")
Dear Sirs,
I, the undersigned, the sole shareholder of the Company being the registered
holder of 5,668,421 common shares, without nominal or par value, in the share
capital of the Company, hereby certify to the Company and the Investors that I
have no pre-emptive right or any right capable of becoming a pre-emptive right
to acquire any further shares in the share capital of the Company either by
contract, agreement, arrangement or understanding with any third party or the
Company or under the Articles of Incorporation or By-laws of the Company or
otherwise in respect of the Convertible Notes of an aggregate principal amount
up to Thirteen Million United States Dollars (US$13,000,000) as may be
subscribed for by the Investors.
This undertaking shall be governed by and be construed in accordance with the
laws of Hong Kong and is intended to take effect as a deed.
Dated this ___ day of _____________ 2005.
SIGNED, SEALED and DELIVERED by )
QU XXXX XXX )
in the presence of: )
48
SCHEDULE 5
FORM OF THE CERTIFICATE FOR THE CONVERTIBLE NOTES AND THE CONDITIONS
Certificate No.: [______]
Issue Date: [___________]
CANADIAN SOLAR INC.
(Incorporated under the provisions of the Business Corporations Act (Ontario))
as the Company
and
[_________________]
as Noteholder
----------
US$[_____]
CONVERTIBLE NOTE DUE [three years from First Completion Date]
----------
The issue of this Convertible Note (the "CONVERTIBLE NOTE") was authorised by
resolution of the Board of Directors of Canadian Solar Inc. (the "COMPANY")
passed on [___________] pursuant to the agreement dated [___________] between,
among others, the Company and the Noteholder (the "SUBSCRIPTION AGREEMENT").
The issue of this Convertible Note is subject to, in accordance with and with
the benefit of the terms set out in the Subscription Agreement, and the
conditions attached hereto which form part of this Convertible Note (the
"CONDITIONS").
THIS IS TO CERTIFY that the Company will pay to the Noteholder the principal
amount of [_____] United State Dollars (US$_____) together with such interests
and other additional amounts (if any) as may be payable under the Conditions on
the Maturity Date (as defined in the Conditions) or on such earlier date as such
sum may become payable in accordance with the Conditions.
The performance of the Company's obligations under this Convertible Note is
guaranteed by Mr. QU Xxxx Xxx (the "FOUNDER").
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 THE COMPANY AND THE NOTEHOLDER
(THE "INVESTMENT AGREEMENT"). THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES
49
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 NOTEHOLDER 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.
This Convertible Note and the Conditions are governed by and shall be construed
in accordance with the laws of Hong Kong.
IN WITNESS WHEREOF this Convertible Note has been executed under seal by the
Company on [__________].
THE COMMON SEAL of )
CANADIAN SOLAR INC. )
was affixed hereto )
in the presence of: )
SIGNED, SEALED and DELIVERED by )
QU XXXX XXX )
in the presence of: )
50
CONDITIONS OF CONVERTIBLE NOTE
(A) In these Conditions:
1. the expressions "Company" and "Noteholder" shall, where the context
permits, include their respective successors and permitted assigns and any
persons deriving title under them;
2. terms defined in the Subscription Agreement shall have the same meanings
herein unless otherwise defined; and
3. the following expressions shall, unless the context otherwise requires,
have the following meanings:
"2005 XXX" means the consolidated net profit after tax (excluding
exceptional, extraordinary gains and prior year adjustments) of the Group
in the financial statements for the twelve (12) months ending 28 February
2006 as prepared in accordance with IAS and audited by one of the "Big
Four" accounting firms;
"ADDITIONAL EQUITY SECURITIES" has the meaning ascribed to it in Condition
(B)4(c)(ii);
"AUTOMATIC CONVERSION" means the conversion of a Convertible Note into
Common Shares referred to in Condition (B)3(b);
"CONVERSION PRICE" means the conversion price for the Convertible Note as
determined in accordance with Conditions (B)3(c) and (B)4;
"EVENT OF DEFAULT" has the meaning ascribed to it in Condition (B)7;
"GUARANTEED 2005 XXX" means Six Million Five Hundred Thousand United States
Dollars (US$6,500,000);
"ISSUE DATE" means the date of issue of this Convertible Note;
"MATURITY DATE" means a date which is three (3) years after the Issue Date;
and
"OPTIONAL CONVERSION" means the conversion of a Convertible Note into
Common Shares referred to in Condition (B)3(a).
51
(B) The Convertible Note shall carry the following rights, benefits and
privileges and be subject to the following restrictions:
1. Status
The Convertible Note constitutes, or will after issue constitute, direct,
unconditional, unsecured and unsubordinated obligations of the Company and
rank pari passu (save for certain creditors required to be preferred by law
in Canada) equally with all other present and future unsecured and
unsubordinated obligations of the Company.
2. Interest and dividend
(a) The Convertible Note shall bear interest from the Issue Date at the
rate of two per cent (2%) per annum on the principal amount of the
Convertible Note outstanding, such interest shall, subject to
sub-paragraphs (b) and (c) below, accrue from day to day, be
calculated on the basis of the actual number of days that elapsed in a
year of 365 days and be payable in cash by four equal quarterly
instalments in arrears (the first payment being on the date falling
three (3) months after the Issue Date). In the event that the
Convertible Note has been wholly converted into Common Shares in
accordance with these Conditions, the Noteholder shall be entitled to
interest in respect of the whole of the principal amount being
converted for the period from the date immediately preceding the last
interest payment date (or the Issue Date, as the case may be) up to
and including the date of conversion, and such interest (which has not
been paid before the conversion) shall be payable by the Company on
the date of conversion.
(b) Interest shall cease to accrue with effect from the date of conversion
of the Convertible Note.
(c) On redemption of the Convertible Note, interest shall cease to accrue
with effect from the date the redemption monies have been paid in
full.
(d) The Noteholder agrees and acknowledges that the Shareholders as of the
Issue Date are entitled to all audited retained earnings as of 28
February 2006. The Company shall not declare or pay any dividend
before the completion of a Qualified IPO or redemption of all
Convertible Notes, except with the prior written consent of all
holders of all outstanding Convertible Notes.
In the event that the Board declares a dividend or distribution on the
Common Shares before the completion of a Qualified IPO or redemption
of all Convertible Notes with the prior written consent of all holders
of all outstanding Convertible Notes, the Company shall at the same
time as such dividend or distribution is paid to the holders of Common
Shares pay a special interest payment to the Noteholder where the
Convertible Note remains outstanding, such that the Noteholder shall
be entitled to its pro-rata share of the dividends on earnings
accumulated after 28 February 2006. The special interest shall be
calculated on an "as converted" basis as if the issued share capital
of the Company had been enlarged (for the purpose of
52
special interest payment) by the maximum number of Common Shares that
could be converted upon the conversion of the outstanding Convertible
Note at the then Conversion Price after adjustment (if any) in
accordance with Condition (B)4, such that the special interest payment
that the Noteholder receives is equal to the dividend it would have
received had the outstanding Convertible Notes been wholly converted
into Common Shares immediately prior to the record date for
calculation of dividend or distribution entitlements.
(e) If payment of any principal or interest or other payment in respect of
the Convertible Note is not made in full when due or if the
Convertible Note is not converted in full into Common Shares on the
date fixed for conversion, the Convertible Note shall bear an
extraordinary interest, at a compounded rate of twelve per cent (12%)
per annum, accruing from day to day on the basis of the actual number
of days that elapsed in a year of 365 days, of:
(i) in the case of interest accrued pursuant to Condition (B)2(a),
any outstanding amount of interest, until such payment (together
with further interest accrued thereon by virtue of this Condition
(B)2(e)) is made in full;
(ii) in the case of special interest accrued pursuant to Condition
(B)2(d), any outstanding amount of interest, until such payment
(together with further interest accrued thereon by virtue of this
Condition (B)2(e)) is made in full;
(iii) in the case of redemption, any outstanding amount of principal,
premium or interest, until such payment (together with further
interest accrued thereon by virtue of this Condition (B)2(e)) is
made in full; or
(iv) in the case of conversion, any outstanding amount of principal
not so converted, until conversion of the Convertible Note in
full into Common Shares in accordance with these Conditions.
53
3. Conversion
(a) Optional Conversion. The whole or any part of the outstanding
principal of the Convertible Note shall be convertible at the option
of the Noteholder, at any time after the Issue Date but prior to the
full redemption of the Convertible Note, and without the payment of
any additional consideration therefore, into such number of fully paid
Common Shares as determined in accordance with the then effective
Conversion Price (such event being referred to herein as "OPTIONAL
CONVERSION").
Before the Noteholder shall be entitled to convert the Convertible
Note into Common Shares and to receive any certificate therefor, such
holder shall give written notice to the Company of not less than seven
(7) Business Days (such notice shall not be withdrawn unless with the
prior consent of the Board) at the Company's notice address specified
in Clause 16.1(D) of the Subscription Agreement and surrender the
certificate or certificates for the Convertible Note at the same
address. Subject to the above, on the date of conversion the Company
shall promptly issue and deliver to the Noteholder a certificate(s)
for the number of Common Shares into which such Convertible Note is
converted in the name of the Noteholder, together with cash in lieu of
any fraction of an Common Share in accordance with Condition (B)3(g).
(b) Automatic Conversion. The outstanding principal of the Convertible
Note shall automatically be converted (i) immediately before the
completion of a Qualified IPO or (ii) upon Majority CN Approval, into
such number of fully paid Common Shares as determined in accordance
with the then effective Conversion Price (such event being referred to
herein as "AUTOMATIC CONVERSION").
54
The Company shall give to each holder of Convertible Notes a notice in
writing of the Automatic Conversion within three (3) Business Days
before the anticipated Automatic Conversion. In the event of an
Automatic Conversion, the outstanding Convertible Note shall be
converted automatically without any further action by the Noteholder
and whether or not the certificate representing such Convertible Note
is surrendered to the Company. The Company shall not be obligated to
issue any certificate evidencing the Common Shares issuable upon such
Automatic Conversion unless the certificate evidencing such
Convertible Note is either delivered to the Company, or the holder
notifies the Company that such certificate has been lost, stolen, or
destroyed and provides such indemnity as may be reasonably required by
the Board. The Company shall, as soon as practicable (any in any event
within ten (10) Business Days) after such delivery of certificate
evidencing the Convertible Note or such notification in the case of a
lost, stolen, or destroyed certificate, issue and deliver to such
Noteholder a certificate or certificates for the number of Common
Shares to which such holder shall be entitled as aforesaid, together
with cash in lieu of any fraction of an Common Share in accordance
with Condition (B)3(g). Within two (2) Business Days from the
occurrence of Automatic Conversion, the Company shall notify the
Noteholder in writing that Automatic Conversion has occurred.
(c) Conversion Price. The Conversion Price per Common Share shall
initially be US$4.94, subject to adjustment in accordance with
Condition (B)4. The number of Common Shares to which a Noteholder
shall be entitled upon conversion will be the number obtained by
dividing the principal amount of the Convertible Note to be converted
by the Conversion Price then in effect. The initial Conversion Price
is calculated on the basis that (i) a total of Five Million Six
Hundred and Sixty-Eight Thousand Four Hundred and Twenty (5,668,421)
Common Shares have been issued on the Issue Date, (ii) the maximum
number of Common Shares that may be issued pursuant to the ESOP shall
not exceed One Million (1,000,000); (iii) Seven Hundred Thousand
(700,000) Common Shares are expected to be issued by the Company to
ATS; (iv) an aggregate of Two Million Six Hundred and Thirty-One
Thousand Five Hundred and Eighty (2,631,579) Common Shares are
expected to be issued to all Investors upon the full conversion of all
Convertible Notes of an aggregate principle amount of Thirteen Million
United States Dollars (US$13,000,000); and (v) the valuation of the
Company after receiving all Convertible Notes proceeds of Thirteen
Million United States Dollars (US$13,000,000) shall be Forty-Nine
Million Four Hundred Thousand United States Dollars (US$49,400,000).
For the purpose of clarity, the total expected number of Common Shares
to be in issue on a Fully-Diluted Basis as set forth above shall be
Ten Million (10,000,000). The Conversion Price shall be subject to
adjustments where any event set out in Condition (B)4 occurs or where
the actual number of Common Shares in respect of paragraphs (ii) or
(iii) above shall be different from the numbers set forth in the
relevant paragraphs.
55
(d) Conversion. Conversion of the Convertible Note may be effected in such
manner as may be permitted by law and as the Board shall from time to
time determine (subject to the provisions of the Applicable Law and
the constitutional documents of the Company).
Conversion shall be deemed to (in the case of Optional Conversion)
have been made immediately prior to the close of business on the date
of such surrender of the certificate(s) evidencing the Convertible
Note to be converted, or (in the case of Automatic Conversion) on the
date referred to in Condition (B)3(b). Nevertheless, with respect to
any principal amount of the Convertible Note to be converted, such
principal amount shall remain outstanding for all purposes until the
date of conversion.
For the avoidance of doubt, no conversion shall prejudice the right of
a Noteholder to receive dividends and other distributions declared but
not paid as at the date of conversion pursuant to the Subscription
Agreement.
The Common Shares issued upon Optional Conversion or Automatic
Conversion shall rank pari passu in all respects with the Common
Shares then in issue and be allotted and issued free from Encumbrances
save that they shall not entitle the holder to any dividend declared
or paid upon Common Shares in respect of the audited retained earnings
as of 28 February 2006 as referred to Condition (B)2(d).
(e) Sufficient authorised share capital. The Company shall ensure that at
all times there is a sufficient number of authorized but unissued
Common Shares in its authorised share capital to be issued in
satisfaction of the conversion of the Convertible Note, whether the
conversion is Optional Conversion or Automatic Conversion. The Company
shall not do any act or thing if as a result the enforcement of the
conversion of the Convertible Note would involve the issue of Common
Shares at a discount.
(f) Entry into register of members. Upon the issue of the Common Shares
into which the Convertible Note is converted, the Company shall enter
the Noteholder in its register of members in respect of the relevant
number of Common Shares arising from such conversion. The Noteholder
shall be treated for all purposes as the record holder or holders of
such Common Shares at such time.
(g) Fractional shares. No fraction of an Common Share shall be issued upon
conversion of the Convertible Note. In lieu of any fraction of an
Common Share to which the Noteholder would otherwise be entitled upon
conversion, the Company shall pay to such holder cash equal to the
product of such fraction multiplied by the fair market value of one
Common Share on the date of conversion, as determined reasonably and
in good faith by the Board.
56
4. Adjustments to Conversion Price
(a) Adjustments for Splits, Subdivisions, Combinations, or Consolidation
of Common Shares. In the event the outstanding Common Shares shall be
increased by share split, subdivision, or other similar transaction
(apart from issuance of new Shares approved in writing by all holders
of all outstanding Convertible Notes) into a greater number of Common
Shares, the Conversion Price then in effect shall, concurrently with
the effectiveness of such event, be decreased in proportion to the
percentage increase in the outstanding number of Common Shares. In the
event the outstanding Common Shares shall be decreased by a reverse
share split, combination, consolidation, or other similar transaction
into a smaller number of Common Shares, the Conversion Price then in
effect shall, concurrently with the effectiveness of such event, be
increased in proportion to the percentage decrease in the outstanding
number of Common Shares.
(b) Adjustments for Reclassification, Exchange and Substitution. If the
Common Shares issuable upon conversion of the Convertible Note shall
be changed into the same or a different number of shares of any other
class or classes of shares, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or
combination or consolidation of shares provided for above), the
Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the Convertible Note shall be
convertible into, in lieu of the number of Common Shares which the
holders would otherwise have been entitled to receive, a number of
shares of such other class or classes of shares equivalent to the
number of shares of such other class or classes of shares in the
capital of the Company into which the Common Shares that would have
been subject to receipt by the Noteholder upon conversion of such
Convertible Note immediately before that change would have been
effected.
(c) Adjustments on Lower Price Issuance.
(i) If and whenever the Company shall issue any "Additional Equity
Securities" (as defined below) at any time after the Issue Date
for a consideration per share less than the Conversion Price in
effect on the date and immediately prior to such issue or on
terms more favourable to the Person receiving the Additional
Equity Securities than the Conditions, then and in each such
event, the Conversion Price then in effect shall be reduced,
concurrently with such issue, to the price per share received by
the Company pursuant to the issue of such Additional Equity
Securities.
(ii) For the purposes of Condition (B)4(c)(i), "ADDITIONAL EQUITY
SECURITIES" shall mean all Equity Securities issued after the
Issue Date other than:
57
(I) Common Shares issued or issuable at any time upon conversion
of any Convertible Securities in issue as at the Issue Date;
(II) Equity Securities issued or issuable out of the surplus of
the Company as a dividend or distribution generally to
members of the Company in proportion to their holdings of
Common Shares (but subject to Condition (B)2(d));
(III) Equity Securities issued at anytime upon exercise of any
rights or options to subscribe for Equity Securities where
the Conversion Price in effect immediately prior to the
issuance of such Equity Securities has already been adjusted
as a result of and in accordance with this Condition
(B)4(c);
(IV) Common Shares issued or issuable pursuant to an offer for
subscription made by the Company upon a Qualified IPO;
(V) Equity Securities issued or issuable pursuant to the consent
in writing of all the members of the Company including all
holders of all outstanding Convertible Notes;
(VI) Equities Securities issued or issuable as a result of any
share split or share consolidation or the like which does
not affect the total amount of issued share capital in the
Company provided that the Conversion Price in effect prior
to the issuance of such Equity Securities has already been
adjusted as a result of and in accordance with this
Condition (B)4;
(VII) any subsequent Convertible Notes issued pursuant to the
Subscription Agreement;
(VIII) the number of Common Shares issued or issuable pursuant to
the ESOP provided that such number of Common Shares shall
not be more One Million (1,000,000) on the calculation basis
set out in Condition (B)3(c); and
(IX) Common Shares to be issued to ATS, provided that the number
of Common Shares shall not exceed Seven Hundred Thousand
(700,000) on the calculation basis set out in Condition
(B)3(c).
(iii) For the purpose of making any adjustment to the Conversion Price
as provided in paragraph (i) above, the consideration received by
the Company for any issue of Additional Equity Securities shall
be computed:
(I) to the extent it consists of cash, as to the amount of cash
received by the Company (before deduction of any offering
expenses payable by the Company and any underwriting or
similar commissions, compensation, or concessions paid or
58
allowed by the Company negotiated on an arm's length basis
by the Company with such underwriting agent) in connection
with such issue;
(II) to the extent it consists of property other than cash, at
the fair market value of that property as reasonably
determined in good faith by an independent valuer appointed
by the Board;
(III) if Additional Equity Securities are issued together with
other stock or securities or other assets of the Company for
a consideration which covers both, as the portion of the
consideration so received that may be reasonably determined
in good faith by the Board to be allocable to such
Additional Equity Securities; and
(IV) if Additional Equity Securities are issued in connection
with any merger in which the Company is the surviving
company, the amount of consideration therefor will be deemed
to be the fair market value (as reasonably determined in
good faith by the Board) of such portion of the net assets
and business of the non-surviving company as is attributable
to such Additional Equity Securities.
If the Additional Equity Securities comprise any rights or
options to subscribe for, purchase, or otherwise acquire Common
Shares, or any security convertible or exchangeable into Common
Shares, then, in each case, the price per share received by the
Company upon new issue of such Additional Equity Securities will
be determined by dividing the total amount, if any, received or
receivable by the Company as consideration for the granting of
the rights or options or the issue of the convertible securities,
plus the minimum aggregate amount of additional consideration
payable to the Company on exercise or conversion of the
securities, by the maximum number of Common Shares issuable on
such exercise or conversion. Such granting or issue will be
considered to be an issue for cash of the maximum number of
Common Shares issuable on exercise or conversion at the price per
share determined hereunder, and the Conversion Price will be
adjusted as above provided to reflect (on the basis of that
determination) the issue. No further adjustment of such
Conversion Price will be made as a result of the actual issuance
of Common Shares on the exercise of any such rights or options or
the conversion of any such convertible securities.
Upon the redemption or repurchase of any such securities or the
expiration or termination of the right to convert into, exchange
for, or exercise with respect to, Common Shares, the Conversion
Price will be readjusted to such price as would have been
obtained had the adjustment made upon their issuance been made
upon the basis of the issuance of only the number of such
securities as were actually
59
converted into, exchanged for, or exercised with respect to,
Common Shares. If the purchase price or conversion or exchange
rate provided for in any such security changes at any time, then,
upon such change becoming effective, the Conversion Price then in
effect will be readjusted forthwith to such price as would have
been obtained had the adjustment made upon the issuance of such
securities been made upon the basis of (I) the issuance of only
the number of Common Shares theretofor actually delivered upon
the conversion, exchange or exercise of such securities, and the
total consideration received therefor, and (II) the granting or
issuance, at the time of such change, of any such securities then
still outstanding for the consideration, if any, received by the
Company therefor and to be received on the basis of such changed
price or rate.
(d) Adjustments for Other Distributions. Subject to Condition (B)2(d), in
the event the Company at any time or from time to time makes, or fixes
a record date for the determination of holders of Common Shares
entitled to receive, any distribution payable in securities of the
Company other than Common Shares and other than as adjusted elsewhere
in this Condition (B)4, then and in each such event provision shall be
made so that the Noteholder shall receive upon conversion thereof, in
addition to the number of Common Shares receivable thereupon, the
amount of securities of the Company which it would have received had
its Convertible Note been converted into Common Shares immediately
prior to such record date or on the date of such event and had it
thereafter, during the period from the date of such event to and
including the date of conversion, retained such securities receivable
by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Condition (B)4
with respect to the rights of the Noteholder. Subject again to
Condition (B)2(d), if the Company shall declare a distribution payable
in securities of other Persons, evidence of indebtedness of the
Company or other Persons, assets (excluding cash dividends) or options
or rights not referred to in this Condition (B)4(d), the Noteholder
shall be entitled to a proportionate share of any such distribution as
though it were the holders of the number of Common Shares into which
its Convertible Note is convertible as of the record date fixed for
determination of the holders of Common Shares entitled to receive such
distribution.
(e) Guaranteed 2005 XXX. If the 2005 XXX is less than Six Million United
States Dollars (US$6,000,000), the Conversion Price shall be adjusted
in the following manner:
Conversion Price Initial Conversion 2005 XXX
immediately after = Price set out in X -------------------
the adjustment Condition (B)3(c) Guaranteed 2005 XXX
For the avoidance of doubt, no adjustment to the Conversion Price
shall be required where the 2005 XXX equals to or is more than Six
Million United States Dollars (US$6,000,000).
60
(f) ESOP. In the event that the total number of Common Shares issuable
under the ESOP shall be less than One Million (1,000,000) on the
calculation basis set out in Condition (B)3(c), the Conversion Price
then in effect shall be increased in proportion to the percentage
decrease in the number of enlarged share capital after taking into
account of all Common Shares issuable under the ESOP.
(g) Save as expressly provided in this Condition (B)4, there shall be no
other adjustment in the Conversion Price. Exhibit (A) sets out
examples of adjustments to the Conversion Price for illustration
purpose only.
(h) Extension of General Offer. So long as any Convertible Notes are
outstanding and the Company becomes aware that an offer is made or an
invitation is extended to all holders of Common Shares generally to
acquire all or some of the Common Shares or any scheme of arrangement
is proposed for that acquisition, the Company shall forthwith give
notice to all holders of outstanding Convertible Notes and the Company
shall use its best endeavours to ensure that there is made or extended
at the same time a similar offer or invitation, or that the scheme of
arrangement is extended, to each holder of Convertible Note, as if its
conversion rights had been fully exercised on a date which is
immediately before the record date for the offer or invitation or the
scheme of arrangement at the Conversion Price applicable at that time.
(i) No Impairment. The Company shall not, by amendment of its
constitutional documents of the Company or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Company but shall at all times in good
faith assist in the carrying out of all the provisions of this
Condition (B)4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of
the Noteholder against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Condition
(B)4, the Company, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof, and
furnish to the Noteholder a certificate setting forth: (I) such
adjustment or readjustment, (II) the facts upon which such adjustment
or readjustment is based, (III) the applicable Conversion Price then
in effect, and (IV) the number of Common Shares and the amount, if
any, of other property which the Noteholder would receive upon the
conversion of the Convertible Note.
(j) Notices of Record Date. In the event that the Company shall propose at
any time to:
(i) declare any dividend or distribution upon the Common Shares or
other class or series of shares, whether in cash, property,
share, or other securities, and whether or not a regular cash
dividend;
61
(ii) offer for subscription pro rata to the holders of any class or
series of its capital any additional shares of any class or
series or other rights;
(iii) effect any reclassification or recapitalisation of the Common
Shares outstanding involving a change in the Common Shares; or
(iv) merge or consolidate with or into any other corporation, or sell,
lease, or convey all or substantially all its property, assets or
business, or a majority of the capital of the Company, or to
liquidate, dissolve, or wind up,
then, in connection with each such event, the Company shall send to
the Noteholder:
(1) at least fourteen (14) Business Days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution, or subscription rights (and specifying the date on
which the holders of Common Shares shall be entitled thereto) or
for determining rights to vote in respect of the matters referred
to in subparagraphs (i) to (iv) of this Condition (B)4(j); and
(2) in the case of the matters referred to in subparagraphs (i) to
(iv) of this Condition (B)4(j), at least fourteen (14) Business
Days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Common
Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon the occurrence of
such event or the record date for the determination of such
holders if such record date is earlier).
Each such written notice shall be delivered personally or given by
first class mail, postage prepaid, addressed to the Noteholder.
5. Redemption
(a) Unless previously redeemed or converted as provided in these
Conditions, the Noteholder has the right to require the Company to
forthwith redeem all or part of the Convertible Note:
(i) if the Company has not completed a Qualified IPO before the
Maturity Date, provided that the Noteholder shall give a written
notice of not less than three (3) months to the Company at the
Company's notice address specified in Clause 16.1(D) of the
Subscription Agreement and surrender of the certificate(s) for
the Convertible Note. If the Noteholder fails or refuses to
deliver to the Company the certificate(s) for the Convertible
Note, the Company may retain the redemption monies until delivery
of such certificate or of an indemnity in respect thereof as the
Board may reasonably require and shall within three (3) Business
Days thereafter pay the redemption monies to such holder. No
holder of a Convertible Note
62
shall have any claim against the Company for interest on any
redemption monies so retained; or
(ii) at any time after the occurrence of an Event of Default upon
written demand from the Noteholder. The Company shall redeem the
Convertible Note (or such relevant part) to which such demand
relates forthwith upon receipt of such demand. Redemption of the
Convertible Note upon occurrence of an Event of Default will not
require the Noteholder to surrender to the Company the
certificate(s) for the Convertible Note.
(b) Upon written consent of all holders of all outstanding Convertible
Notes, the Company may redeem all or any portion of the then
outstanding principal, interest or other payment due under this
Convertible Note, before the Maturity Date.
(c) The redemption monies in respect of the Convertible Note (or the
relevant part thereof) comprise of:
(i) the principal amount so redeemed;
(ii) arrears of interest, special interest and extraordinary interest
accrued in accordance with Condition (B)2;
(iii) any outstanding amount payable in respect of the Convertible
Note (or the relevant part thereof); and
(iii) a premium:
(I) in the case of a redemption under Condition (B)5(a)(i) or
(B)5(b), of such amount that would give the Noteholder an
internal rate of return of ten per cent. (10%) per annum in
respect of the principal amount, all paid and unpaid
interest, special interest and extraordinary interest
accrued under Condition (B)2 in respect of the Convertible
Note (or the relevant part thereof) to be redeemed for the
period from the Issue Date up to and including the date of
full repayment of redemption monies; and
(II) in the case of a redemption under Condition (B)5(a)(ii), of
such higher amount of:
(1) such amount that would give the Noteholder an internal
rate of return of twelve per cent. (12%) per annum in
respect of the principal amount, all paid and unpaid
interest, special interest and extraordinary interest
accrued under Condition (B)2 in respect of the
Convertible Note (or the relevant part thereof) to be
redeemed for the period from the Issue Date up to and
including the date of full repayment of redemption
monies; and
63
(2) assuming full conversion of all Convertible Notes held
by all holders thereof, the proportional share of the
Group's total market value as represented by the Shares
into which the principal so redeemed might convert. For
such purpose, the Group's total market value shall be
determined as a going concern by an independent
professional valuer that has experience determining
value of businesses similar to those of the Group. The
independent valuer shall be appointed upon the approval
of both the Company and the Noteholder, and whose costs
and expenses relating to the valuation of the Group
shall be borne solely by the Company.
(d) The Convertible Note (or such portion thereof) so redeemed shall be
cancelled and may not be re-issued.
6. Transferability
(a) The Noteholder may transfer the whole or part of the rights in respect
of this Convertible Note, provided that (without prejudice to any
right of co-sale of the Noteholder):
(I) the Noteholder shall first negotiate with the Founder on terms of
the intended transfer before entering into agreement on the
transfer if the transfer is intended to be made any other Person
not being an Affiliate of the Noteholder;
(II) the transfer will not be subject to or will be exempted from the
prospectus and registration requirements under the Ontario
Securities Act; and
(III) the transferee shall have executed and delivered to the Company,
as a condition precedent to any such transfer, a joinder
agreement in form and substance satisfactory to the Company and
all holders of Convertible Notes under which the transferee
undertakes to be bound by certain provisions of the Subscription
Agreement and the Investment Agreement, including without
limiting the generality of the forgoing the obligation to first
negotiation with the Founder on terms of any subsequent intended
transfer by such transferee.
For the avoidance of doubt, the Noteholder may transfer the
Convertible Note to (i) any Person apart from the Founder where no
agreement has been reached between the Noteholder and the Founder on
the intended transfer within reasonable time or (ii) any of its
Affiliates.
(b) Title to this Convertible Note passes only upon the cancellation of
the existing certificate and the issue of a new certificate (or new
certificates in the case of a transfer of part of this Convertible
Note) in accordance with Condition (B)6(c).
64
(c) In relation to any transfer of this Convertible Note permitted under
or otherwise pursuant to this Condition (B)6:
(i) this Convertible Note may be transferred by execution of a form
of transfer as specified by the Board under the hands of the
transferor and the transferee (or their duly authorised
representatives) or, where either the transferor or transferee is
a corporation, executed by a duly authorised officer or director
thereof. In this Condition, a "transferor" shall, where the
context permits or requires, includes joint transferors and shall
be construed accordingly; and
(ii) save for loss destruction, the certificate(s) for this
Convertible Note must be delivered for cancellation to the
Company accompanied by (a) a duly executed transfer form; (b) in
the case of the execution of the transfer form on behalf of a
corporation by its officers or directors, the authority of that
person or those persons to do so. The Company shall, within three
(3) Business Days of receipt of such documents from the
Noteholder, cancel the existing certificate for this Convertible
Note and issue a new certificate for this Convertible Note (or
new certificates in the case of a transfer of part of this
Convertible Note) under the seal of the Company and the Founder,
in favour of the transferee.
7. Events of Default
Any of the following shall constitute an "Event of Default":
(a) if the Company fails to pay any amount principal or interest on the
due date under these Conditions, the Subscription Agreement or the
Transaction Documents and such default is not remedied within seven
(7) Business Days of the due date;
(b) if any Group Company or the Founder is in material default in the due
performance of any other of its/his covenants or obligations to the
Noteholder under these Conditions, the Subscription Agreement or the
Transaction Documents and such default remains not remedied for seven
(7) Business Days after written notice thereof has been given to the
Company or such other defaulting party by the Noteholder;
(c) save as stated or referred to in the Disclosure Letter, if any
representation or warranty made by the Company or the Founder in the
Subscription Agreement or the Transaction Documents is or would be
materially incorrect, misleading or untrue;
(d) if any Group Company (or, to the extent applicable, the Founder) takes
any corporate action or other steps are taken or legal proceedings are
started or threatened to start for its winding-up, dissolution,
administration or re-organisation (apart from the Re-organisation)
(whether by way of voluntary arrangement, creditors' actions or
otherwise) or for the appointment of a liquidator, receiver,
administrator, administrative receiver, conservator, custodian,
security trustee or similar officer of it or of any or all
65
of its revenues and assets, without the prior written consent of all
shareholders of the Company and all holders of all the outstanding
Convertible Notes;
(e) if any Group Company (or, to the extent applicable, the Founder) is
dissolved and/or wound-up in any way or ceases or attempts to cease
its activities or a major part thereof, or if any Group Company has
discontinued or materially changed the nature of its business, or if
any Group Company merges or consolidates with any other company or
legal entity without the prior written consent of all shareholders of
the Company and all holders of all outstanding Convertible Notes;
(f) if there is, or is proposed or agreed to be, a change in Control in
any of the Group Company without the prior written consent of all
shareholders of the Company and all holders of all outstanding
Convertible Notes;
(g) if the Founder is in material default of any of his/its covenants or
obligations under the Investment Agreement;
(h) if the Company fails to deliver to each Investor on or before 31
January 2006 the Satisfactory Audited Reports in accordance with
Clause 3.2(A) of the Subscription Agreement;
(i) if all or a material part of the properties or rights or interests of
any Group Company or the Founder are nationalised or expropriated;
(j) if there is, or is proposed or agreed to be, any transfer of all or
substantially all of the assets of any Group Company or the Founder
without the prior written consent of all shareholders of the Company
and all holders of all outstanding Convertible Notes;
(k) if any Group Company or the Founder is unable to pay its/his debts as
they fall due, commences negotiations with any one or more of its/his
creditors with a view to the general readjustment or rescheduling of
its/his indebtedness or makes a general assignment for the benefit of
or a composition with its/his creditors;
(l) if at any time it is or becomes unlawful for any Group Company or the
Founder to perform or comply with any or all of its obligations under
these Conditions, the Subscription Agreement or the Transaction
Documents, or any of the obligations of any Group Company or the
Founder under these Conditions, the Subscription Agreement or the
Transaction Documents cease to be legal, valid, binding and
enforceable;
(m) if any Group Company or the Founder repudiates the Subscription
Agreement or any of the Transaction Documents or does or causes to be
done any act or thing evidencing an intention to repudiate the
Subscription Agreement or any of the Transaction Documents;
66
(n) if any execution or distress is levied against, or an encumbrancer
takes possession of, the whole or any material part of, the property,
undertaking or assets of any Group Company;
(o) if any of the Group Company fails to obtain all necessary Governmental
Approvals to own its assets and to carry on its businesses, or any of
such Governmental Approvals is not valid or is subject to any
suspension, cancellation or revocation;
(p) if the Founder or a company or corporation wholly Controlled by the
Founder is no longer the largest Shareholder of the Company without
the prior written consent from all holders of all outstanding
Convertible Notes and holders of Shares issued upon conversion of
Convertible Notes; or
(q) if the proceeds of the Subscription Price is not used for the purpose
stated in Clause 2.4 of the Subscription Agreement;
(r) if any event occurs which under the laws of any relevant jurisdiction
has an analogous effect to any of the events referred to in the
foregoing paragraphs; or
(s) if any Group Company fails to comply with any Applicable Law.
8. Guarantee
(a) The Founder irrevocably and unconditionally:
(i) guarantees to the Noteholder punctual and due performance by the
Company of all its obligations under the Convertible Note from
time to time and the due payment and discharge of all such sums
of money and liabilities expressed to be due, owing or incurred
or payable and unpaid by the Company to the Noteholder pursuant
to the Subscription Agreement and these Conditions from time to
time or as a result of any breach thereof (including all
reasonable expenses, including legal fees and Taxes incurred by
the Noteholder in connection with any of the above);
(ii) undertakes with the Noteholder that whenever the Company does not
pay any amount when due under or in connection with the
Convertible Note, he shall immediately on demand pay that amount
as if he was the principal obligor; and
(iii) indemnifies the Noteholder immediately on demand against any
cost, loss or liability suffered by the Noteholder if any
obligation guaranteed by him (or anything which would have been
an obligation if not unenforceable, invalid or illegal) is or
becomes unenforceable, invalid or illegal. The amount of the
cost, loss or liability shall be equal to the amount which the
Noteholder would otherwise have been entitled to recover.
67
(b) This guarantee is a continuing guarantee and will extend to the
ultimate balance of sums payable by the Company under the Convertible
Note, regardless of any intermediate payment or discharge in whole or
in part.
(c) If any payment to the Noteholder (whether in respect of the
obligations of the Company or any security for those obligations or
otherwise) is avoided or reduced for any reason including, without
limitation, as a result of insolvency, breach of fiduciary or
statutory duties or any similar event:
(i) the liability of the Company shall continue as if the payment,
discharge, avoidance or reduction had not occurred; and
(ii) the Noteholder shall be entitled to recover the value or amount
of that security or payment from the Founder, as if the payment,
discharge, avoidance or reduction had not occurred.
(d) The obligations of the Founder under this Condition (B)8 will not be
affected by an act, omission, matter or thing which, but for this
Condition, would reduce, release or prejudice any of its obligations
under this Condition (without limitation and whether or not known to
the Noteholder) including:
(i) any time, waiver or consent granted by the Noteholder or other
Person;
(ii) the release of the Company or any other Person under the terms of
any composition or arrangement with any creditor of any member of
the Group;
(iii) any lack of power, authority or legal personality of or
dissolution or change in the members or status of the Company;
(iv) any amendment (however fundamental) or replacement of the
Convertible Note;
(v) any unenforceability, illegality or invalidity of any obligation
of any Person under the Convertible Note; and
(vi) any bankruptcy, insolvency or similar proceedings.
(e) The Founder hereby subordinates to the Noteholder any right he may
have of first requiring the Noteholder (or any trustee or agent on its
behalf) to proceed against or enforce any other rights or security or
claim payment from any Person before claiming from the Founder under
this Condition (B)8 except to preserve any such claim. This waiver
applies irrespective of any law or any provision of the Convertible
Note to the contrary.
(f) This guarantee is in addition to and is not in any way prejudiced by
any other guarantee or security now or subsequently held by the
Noteholder.
68
(g) Without prejudice to the Noteholder's rights against the Company, the
Founder shall be deemed a principal obligor in respect of his
obligations under this guarantee and not merely a surety and,
accordingly, the Founder shall not be discharged nor shall his
liability hereunder be affected by any act or thing or means
whatsoever by which such liability would have been discharged or
affected if the Founder had not been a principal obligor.
(h) Until all moneys, obligations and liabilities (including contingent
obligations and liabilities) due, owing or incurred by the Company
under the Convertible Note have been paid or discharged in full, the
Founder waives all rights of subrogation and indemnity against the
Company and agrees not to claim any set-off or counterclaim against
the Company or to claim to prove in competition with the Noteholder in
the event of the bankruptcy, insolvency or liquidation of the Company.
(i) All sums payable under this guarantee shall be paid in full without
set-off or counterclaim and free and clear of and without deduction of
or withholding for or on account of any present or future Taxes,
duties and/or other charges.
9. Payment and Taxation
(a) All payments in respect of the Convertible Note will be made 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 Company or
the Founder (as the case may be) will pay such additional amounts as
may be necessary in order that the net amounts received by the
Noteholder after such withholding or deduction shall equal the
respective amounts receivable in respect of the Convertible Note in
the absence of such withholding or deduction.
(b) All payments to the Noteholder shall be made in United States Dollars
(or another currency as the Noteholder may otherwise specify in
writing), not later than 4:00 p.m. (Hong Kong time) on the due date,
by remittance to such bank account as the Noteholder may notify from
time to time.
(c) If the due date for payment of any amount in respect of the
Convertible Note is not a Business Day, the Noteholder shall be
entitled to payment on the next following Business Day in the same
manner but shall not be entitled to be paid any interest in respect of
any such delay.
(d) The Company shall pay any and all issue and other Taxes (other than
income taxes) that may be payable in respect of any issue or delivery
of Common Shares on conversion of the Convertible Note, provided,
however, that the Company shall not be obligated to pay any transfer
taxes resulting from any transfer of the Convertible Note (or rights
attached thereto) requested by the Noteholder.
10. Replacement certificate
69
If the certificate for this Convertible Note is lost or mutilated, the
Noteholder shall forthwith notify the Company and a replacement certificate
for this Convertible Note shall be issued if the Noteholder provides the
Company with (i) a declaration by the Noteholder or its officer or director
that this Convertible Note had been lost or mutilated (as the case may be)
or other evidence that the certificate for this Convertible Note had been
lost or mutilated; and (ii) an appropriate indemnity in such form and
content as the Board may reasonably require. The certificate for this
Convertible Note which has been replaced in accordance with this Condition
(B)10 shall forthwith be cancelled.
* * *
70
Exhibit (A) to the Conditions of Convertible Note
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
------------------- ------------------- ------------------- ------------------- -------------------
If the Note If Common Shares
Options are subject to the
Original Plan exercised but are If more Common ESOP are less than
as per If no Note Options reduced by the Shares are issued 10% of the issued
Condition (B)3(c) are exercised Company to ATS share capital
------------------- ------------------- ------------------- ------------------- -------------------
Founder and
Executives (Note 1).. 5,668,421 56.68% 5,668,421 56.68% 5,668,421 56.68% 5,668,421 53.68% 5,668,421 58.68%
New Commons Shares
issued to the
Founder and
Executive (Note 2)... 506,073 5.06% 253,036 2.53%
ATS..................... 700,000 7.00% 700,000 7.00% 700,000 7.00% 1,055,882 10.00% 676,143 7.00%
ESOP.................... 1,000,000 10.00% 1,000,000 10.00% 1,000,000 10.00% 1,055,882 10.00% 772,735 8.00%
Investors............... 2,631,579 26.32% 2,125,506 21.26% 2,378,543 23.79% 2,778,638 26.32% 2,541,893 26.32%
----------- ------ ----------- ------ ----------- ------ ----------- ------ ----------- ------
Total................... 10,000,000 100.00% 10,000,000 100.00% 10,000,000 100.00% 10,558,823 100.00% 9,659,193 100.00%
Valuation............... $49,400,000 $49,400,000 $49,400,000 $49,400,000 $49,400,000
Investment.............. $13,000,000 26.32% $10,500,000 21.26% $11,750,000 23.79% $13,000,000 26.32% $13,000,000 26.32%
Conversion Price........ $ 4.9400 $ 4.9400 $ 4.9400 $ 4.6786 $ 5.1143
Adjustment upwards
if Common Shares
Adjustment subject to the ESOP
downwards if more are less than 10%
ADJUSTMENT TO No adjustment No adjustment Common Shares are of the issued share
CONVERSION PRICE..... N/A required required issued to ATS capital (Note 3)
Notes:
(1) Such number of Common Shares held by the Founder and/or a corporation
wholly Controlled by him and Common Shares which will be transferred to the
Executives contemplated in the Investment Agreement.
(2) New Commons Shares may be issued to the Founder and/or the Executives upon
consent of all members of the Company and holder of Convertible Notes as
per Condition (B)4(c)(ii)(V) in order to keep the total number of Common
Shares at 10,000,000 (on a Full-Dilute Basis). Alternatively, the number of
Common Shares to be issued to ATS and under ESOP may be reduced to keep the
shareholding percentages amongst the Parties the same.
(3) Although the Conversion Price is adjusted upwards, the Founder and the
Company are still to ensure that the total number of (i) Common Shares
subject to options granted under the ESOP and (ii) Common Shares
Transferred to the Executives contemplated in the Investment Agreement
shall, at any time, not be less than 10% of the total Common Shares in the
enlarged share capital of the Company calculated on a Fully-Diluted Basis
at 31 March 2006.
71
SCHEDULE 6
FORM OF INDEMNITY DEED FOR AN INVESTOR'S DIRECTOR
THIS DEED is made on the ___________ day of _______ by Canadian Solar Inc. (the
"COMPANY") in favour of [name of the director] (the "DIRECTOR").
Terms used herein shall have the same meanings as defined in the Subscription
Agreement dated [date] between, among others, the Company and HSBC HAV2 (III)
Limited, unless the context otherwise requires.
NOW THIS DEED WITNESSES as follows:
1. In consideration of the Director agreeing to act as a director of [the
Company] / [name of the subsidiary, a subsidiary of the Company], subject
to the Applicable Law and the Company's Articles of Incorporation, By-Laws,
and any unanimous shareholder agreement, the Company hereby agrees to
indemnify the Director, to the fullest extent permitted by laws, from and
against all liabilities, damages, actions, suits, proceedings, claims,
costs, charges and expenses suffered or incurred by or brought or made
against such Director as a result of any act, matter or thing done or
omitted to be done by him/her in good faith in the course of his/her acting
as a director of [the Company] / [name of the subsidiary] unless:-
(A) such liability is a result of the gross negligence or wilful default
of the Director; or
(B) such Director have already been fully indemnified in respect of such
liabilities, damages, actions, suits, proceedings, claims, costs,
charges and expenses by a separate insurance policy taken out by the
Company.
2. The Director hereby accepts the appointment as a director of [the Company]
/ [name of the subsidiary] and so long as he continues to be a director of
[the Company] / [name of the subsidiary], the Director shall, within the
limits imposed by law and ethics, exercise all functions required by the
Company's Articles of Incorporation, By-Laws and any unanimous shareholder
agreement in relation to the Company, honestly and in good faith with a
view to the best interests of [the Company] / [name of the subsidiary] and
in connection therewith, and the Director shall exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
3. The Company hereby represents and warrants that it has all requisite power
and authority to enter into and to perform this Deed and this Deed
constitutes a valid, binding and enforceable obligation of the Company in
accordance with its terms.
4. Each reference herein to any party shall be deemed to include his or her or
its (as the case may be) heirs, executors, administrators, legal
representatives, successors and assigns.
5. The provisions of this Deed may be enlarged, modified, altered, waived,
discharged or terminated only by an instrument in writing executed by all
of the parties hereto.
72
6. This Deed shall terminate on the date on which the Director ceases to be a
director of any of the Company and its subsidiaries; provided however that
the rights and obligations of each party shall survive and continue in full
force and effect with respect to any matter arising up to the date of
termination of this Deed, whether or not any demand, claim, proceeding or
action is asserted, made or instituted after such date.
7. This Deed shall be governed by the laws of the Hong Kong Special
Administrative Region of the People's Republic of China.
IN WITNESS WHEREOF the parties hereto have executed this Deed as of the date
hereinabove mentioned.
The Common Seal of )
CANADIAN SOLAR INC. )
was affixed hereto )
in the presence of:- )
SIGNED, SEALED and DELIVERED by )
[THE DIRECTOR] )
in the presence of:- )
73
SCHEDULE 7
FORM OF THE ACCREDITED INVESTOR CERTIFICATE
ACCREDITED INVESTOR CERTIFICATE
1. The Subscriber represents, warrants and certifies to the Corporation and the
Agent as at the date of this Certificate and as at the Closing Time that:
[Initial or check only one of boxes I (a) (b) or (c)];
[ ] (a) The Subscriber is an "accredited investor" and is purchasing the
securities as principal for its own account and not for the
benefit of any other person, and it is purchasing for investment
only and not with a view to resale or distribution and no other
person, corporation, firm or other organization has a beneficial
interest in the securities; or
[ ] (b) The Subscriber is purchasing the securities as agent for a
"Disclosed Principal", and the Disclosed Principal is an
"accredited investor" purchasing as principal for its own
account, and not for the benefit of any other person, and is
purchasing for investment only and not for a view to resale or
distribution; or
[ ] (c) The Subscriber is a person described in paragraph (p) or (q) of
section 2 below and is purchasing the securities on behalf of one
or more fully managed accounts.
2. IF YOU OR THE DISCLOSED PRINCIPAL ARE AN "ACCREDITED INVESTOR "PURCHASING
PURSUANT TO (A) OR (B) ABOVE , CHECK OR INITIAL THE BOXES THAT APPLY TO YOU OR
SUCH DISCLOSED PRINCIPAL SITUATION:
[ ] (a) a Canadian financial institution, or a Schedule III bank;
[ ] (b) the Business Development Bank of Canada incorporated under the
Business Development Bank of Canada Act (Canada);
[ ] (c) a subsidiary of any person referred to in paragraphs (a) or (b),
if the person owns all of the voting securities of the
subsidiary, except the voting securities required by law to be
owned by directors of that subsidiary;
[ ] (d) a person registered under the securities legislation of a
jurisdiction of Canada as an adviser or dealer, other than a
person registered solely as a limited market dealer under one or
both of the Securities Act (Ontario) or the Securities Act
(Newfoundland and Labrador);
[ ] (e) an individual registered or formerly registered under the
securities legislation of a jurisdiction of Canada as a
representative of a person referred to in paragraph (d);
74
[ ] (f) the Government of Canada or a jurisdiction of Canada, or any
crown corporation, agency or wholly owned entity of the
Government of Canada or a jurisdiction of Canada;
[ ] (g) a municipality, public board or commission in Canada and a
metropolitan community, school board, the Comite de gestion de la
taxe scolaire de Tile de Montreal or an intermunicipal management
board in Quebec;
[ ] (h) any national, federal, state, provincial, territorial or
municipal government of or in any foreign jurisdiction, or any
agency of that government;
[ ] (i) a pension fund that is regulated by either the Office of the
Superintendent of Financial Institutions (Canada) or a pension
commission or similar regulatory authority of a jurisdiction of
Canada;
[ ] (j) an individual who, either alone or with a spouse, beneficially
owns, directly or indirectly, financial assets having an
aggregate realizable value that before taxes, but net of any
related liabilities, exceeds $1,000,000;
[ ] (k) an individual whose net income before taxes exceeded $200,000 in
each of the 2 most recent calendar years or whose net income
before taxes combined with that of a spouse exceeded $300,000 in
each of the 2 most recent calendar years and who, in either case,
reasonably expects to exceed that net income level in the current
calendar year;
[ ] (l) an individual who, either alone or with a spouse, has net assets
of at least $5,000,000;
[ ] (m) a person, other than an individual or investment fund, that has
net assets of at least $5,000,000 as shown on its most recently
prepared financial statements;
[ ] (n) an investment fund that distributes or has distributed its
securities only to
(i) a person that is or was an accredited investor at the time
of the distribution;
(ii) a person that acquires or acquired securities in the
circumstances referred to in section 2.10 of NI 45-106
(Minimum amount investment), and section 2.19 of NI 45-106
(Additional investment in investment funds) or
(iii) a person described in paragraph (i) or (ii) above that
acquires or acquired securities under section 2,18 of NI
45-106 (Investment fund reinvestment)',
[ ] (o) an investment fund that distributes or has distributed securities
under a prospectus in a jurisdiction of Canada for which the
regulator or, in Quebec, the securities regulatory authority, has
issued a receipt;
[ ] (p) a trust company or trust corporation registered or authorized to
carry on business under the Trust and Loan Companies Act (Canada)
or
75
under comparable legislation in a jurisdiction of Canada or a
foreign jurisdiction, acting on behalf of a fully managed account
managed by the trust company or trust corporation, as the case
may be;
[ ] (q) a person acting on behalf of a fully managed account managed by
that person, if that person
(i) is registered or authorized to carry on business as an
adviser or the equivalent under the securities legislation
of a jurisdiction of Canada or a foreign jurisdiction, and
(ii) in Ontario is purchasing a security that is not a security
of an investment fund;
[ ] (r) a registered charity under the Income Tax Act (Canada) that, in
regard to the trade, has obtained advice from an eligibility
adviser or an advisor registered under the securities legislation
of the jurisdiction of the registered charity to give advice on
the securities being traded;
[ ] (s) an entity organized in a foreign jurisdiction that is analogous
to any of the entities referred to in paragraphs (a) to (d) or
paragraph (i) in form and function;
[ ] (t) a person in respect of which all of the owners of interests,
direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that are
accredited investors;
[ ] (u) an investment fund that is advised by a person registered as an
adviser or a person that is exempt from registration as an
adviser; or
[ ] (v) a person that is recognized or designated by the securities
regulatory authority or, except in Ontario and Quebec, the
regulator as
(i) an accredited investor, or
(ii) an exempt purchaser in Alberta or British Columbia and the
person has provided the Corporation and the Agent with
evidence of such recognition or designation.
CERTIFICATION
The foregoing certificate is true and accurate as of the date hereof and will be
true and accurate as of the Closing Time. If any representation or warranty
shall not be true and accurate prior to the Closing Time, the undersigned agrees
to give immediate written notice of that fact to the Corporation and the Agent.
The undersigned has executed this Certificate as of the _______ day of ________,
2005.
If a Corporation, Partnership or If an Individual:
Other Entity:
------------------------------------- ----------------------------------------
Name of Entity Signature
76
------------------------------------- ----------------------------------------
Type of Entity Name of Individual
-------------------------------------
Name of Signing Person
-------------------------------------
Title of Person Signing
77
SCHEDULE 8
FORM OF THE INVESTMENT AGREEMENT
78
The Common Seal of )
CANADIAN SOLAR INC. ) /s/
was affixed hereto )
in the presence of:- ) /s/
SIGNED by )
for and on behalf of ) /s/
HSBC HAV2 (III) LIMITED )
in the presence of:- )
SIGNED by )
for and on behalf of )
JAFCO ASIA TECHNOLOGY FUND II ) /s/
in the presence of:- /s/ )
SIGNED, SEALED and DELIVERED )
as a Deed by )
QU XXXX XXX ) /s/
in the presence of:- ) /s/
The Seal of ) /s/
(Chinese Characters) ) /s/
[company seal of CSI Solartronics
(Changshu) Co., Ltd.]
(CSI SOLARTRONICS CO., LTD.) )
was affixed hereto ) /s/
in the presence of:- ) /s/
[company seal of CSI
Solartronics Co., Ltd.]
79
The Seal of )
(Chinese Characters) )
(CSI SOLAR TECHNOLOGIES INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[company seal of CSI Solar
Technologies Inc.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR MANUFACTURING INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[company seal of CSI Solar
Manufacturing Inc.]
80
Supplemental Agreement dated February 28, 2006
EXECUTION COPY
THIS SUPPLEMENTAL AGREEMENT (this "AGREEMENT") is entered into as of
February 28, 2006 by and among:
(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 000 XX, Xxxxxx House, South 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) (Xxxxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000,
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) (Suite
C6017, China 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".
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO are parties to a Subscription Agreement dated as of 16 November 2005 (the
"SUBSCRIPTION AGREEMENT"), pursuant to which the Investors agreed to subscribe,
and the Company agrees to issue to the Investors the Convertible Notes (as
defined in the
1
Subscription Agreement) up to an aggregate principal amount of US$10,500,000, in
accordance with and subject to the terms set out in the Subscription Agreement
and the Conditions (as defined in the Subscription Agreement).
WHEREAS, the Subscription Agreement contemplated the Second Tranche
Subscription, subject to the terms and conditions thereof.
WHEREAS, the obligation of the Investors to complete the Second Tranche
Subscription is conditional upon satisfaction of certain conditions, one of
which being the delivery of the Satisfactory Audit Reports by the Company to
each of the Investors on or before 31 January 2006.
WHEREAS, in order to focus on the preparation of the proposed listing of
the Shares (or any other security) of the Company scheduled to occur in the
third quarter of 2006, the Company has delayed the delivery of the Satisfactory
Audit Report and has requested to extend the deadline for delivering the
Satisfactory Audit Report from January 31, 2006 to a later date and desires to
extend the deadline for Second Tranche Subscription to a date later than
February 28, 2006.
WHEREAS, in order to facilitate the Second Tranche Subscription , as set
forth herein, the Parties are desirous of modifying certain terms in the
Subscription Agreement on the terms and subject to the conditions set forth
herein.
WHEREAS, the Founder entered into Share Pledging Agreements.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
SECTION 1. AMENDMENT OF SUBSCRIPTION AGREEMENT
1.1 The second paragraph of Clause 2.2 of the Subscription Agreement is hereby
amended in its entirety to read as follows:
"PURSUANT TO A NOTE OPTION, THE RELEVANT INVESTOR SHALL HAVE THE RIGHT,
WHICH MAY BE EXERCISED IN WHOLE BUT NOT IN PART, AT ANY TIME DURING THE
PERIOD FROM THE SECOND COMPLETION DATE TO MAY 31, 2006, TO SUBSCRIBE FOR
CONVERTIBLE NOTES OF THE PRINCIPAL AMOUNT SET OPPOSITE ITS NAME ABOVE."
1.2 The first sentence of Clause 3.5 of the Subscription Agreement is hereby
amended in its entirety to read as follows:
"THE COMPANY SHALL USE ALL REASONABLE ENDEAVOURS TO PROCURE THAT THE
CONDITIONS SET OUT IN CLAUSE 3.2 ARE SATISFIED ON OR BEFORE APRIL 15,
2006".
1.3 The first paragraph of Clause 4.2 of the Subscription Agreement is hereby
amended in its entirety to read as follows:
"SUBJECT TO CLAUSE 3, SECOND COMPLETION SHALL TAKE PLACE ON THE SIXTH (6TH)
BUSINESS DAY AFTER ALL OF THE CONDITIONS SET OUT IN CLAUSE 3.2 HAVE BEEN
FULLY SATISFIED, OR IF NOT ALL OF THE CONDITIONS ARE SATISFIED, AFTER SUCH
CONDITIONS HAVE
2
BEEN WAIVED BY ALL OF THE INVESTORS IN WRITING. THE SECOND COMPLETION SHALL
OCCUR ON OR BEFORE MAY 15, 2006, OR SUCH OTHER LATER DATE AS THE COMPANY
AND ALL INVESTORS MAY AGREE IN WRITING, AT A PLACE AS THE COMPANY AND THE
INVESTORS MAY AGREE, WHEN ALL OF THE FOLLOWING BUSINESS SHALL BE TRANSACTED
SIMULTANEOUSLY".
SECTION 2. AMENDMENTS TO THE SHARE PLEDGING AGREEMENTS
2.1. The last sentence of Section 4 of each Share Pledging Agreement is hereby
amended in its entirety to read as follows:
"THE PLEDGEE ACKNOWLEDGES THAT IN THE EVENT THAT THE SATISFACTORY AUDIT
REPORT IS DELIVERED AFTER JANUARY 31, 2006 BUT ON OR BEFORE APRIL 15, 2006,
THE PLEDGEE SHALL NOT DECLARE AN "EVENT OF DEFAULT" UNDER CONDITION B7(H)
AS SET OUT IN CONDITIONS OF CONVERTIBLE NOTE."
2.2 Section 7 of each Share Pledging Agreement is hereby amended in its
entirety to read as follows:
"IF (A) CSI DELIVERS TO THE PLEDGEE THE SATISFACTORY AUDIT REPORTS
ACCORDING TO SECTION 4; (B) CSI FAILS TO DELIVER SUCH SATISFACTORY AUDIT
REPORTS ACCORDING TO SECTION 4 BUT THE PLEDGEE DOES NOT DELIVER ANY NOTICE
OF REDEMPTION REFERRED TO IN SECTION 4 ON OR BEFORE MAY 15, 2006; OR (C)
CSI FAILS TO DELIVER SUCH SATISFACTORY AUDIT REPORTS ACCORDING TO SECTION 4
BUT REDEEMS THE CONVERTIBLE NOTES WITHIN TWO (2) MONTHS FROM THE DATE ON
WHICH CSI RECEIVES THE PLEDGEE'S NOTICE OF REDEMPTION, THEN THE PLEDGEE
SHALL BE REQUIRED TO DELIVER UP TO THE PLEDGOR THE PLEDGED SHARES AND UPON
SUCH DELIVERY TO THE PLEDGOR THIS SHARE PLEDGING AGREEMENT SHALL BE
TERMINATED AND OF NO FURTHER FORCE OR EFFECT. FOR THE AVOIDANCE OF DOUBT,
THE TERMINATION OF THIS SHARE PLEDGING AGREEMENT SHALL NOT AFFECT ANY
RIGHTS OF THE PLEDGEE UNDER THE TRANSACTION DOCUMENTS.".
SECTION 3. AMENDMENTS TO THE CERTIFICATE FOR THE CONVERTIBLE NOTES AND THE
CONDITIONS
3.1 Condition (B)7(h) of the Certificate for the Convertible Notes and the
Conditions is hereby amended in its entirety to read as follows:
"(H) IF THE COMPANY FAILS TO DELIVER TO EACH INVESTOR ON OR BEFORE APRIL
15, 2006 THE SATISFACTORY AUDITED REPORTS IN ACCORDANCE WITH CLAUSE 3.2(A)
OF THE SUBSCRIPTION AGREEMENT;".
SECTION 4. MISCELLANEOUS
4.1 Definitions and Interpretation. Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings given them in the
Subscription Agreement.
4.2 Assignment. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
No party to this Agreement shall assign any of its rights hereunder without
the written consent of the other parties.
3
4.3 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original with the same effect as if the signatures
thereto and hereto were upon the same instrument.
4.4 Survival. All other provisions of the Subscription Agreement (including the
definitions, Schedules and Disclosure Letter) and the Share Pledging
Agreements which are not specifically amended pursuant to Section 1 or
Section 2, as the case may be, of this Agreement shall survive this
Agreement and continue in full force and effect.
4.5 Entire Agreement; Conflict. The Transaction Documents, as amended by this
Agreement constitutes the entire understanding of the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, of the parties with respect to the
subject matter of such documents. In the event of any conflict or
inconsistency between the Subscription Agreement or the Share Pledging
Agreements on the one hand, and this Agreement on the other hand, the terms
of this Agreement shall prevail.
4.6 Governing Law. This Agreement is governed by and shall be construed in
accordance with the laws of Hong Kong.
(Signatures Follow)
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
The Common Seal of )
CANADIAN SOLAR INC. ) /s/
was affixed hereto ) /s/
in the presence of:- )
5
SIGNED, SEALED and DELIVERED )
as a Deed by ) /s/
QU XXXX XXX ) /s/
in the presence of:- )
The Seal of )
(Chinese Characters) )
(CSI SOLARTRONICS CO., LTD.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solartronics Co.,
Ltd.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR TECHNOLOGIES INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solar
Technologies Inc.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR MANUFACTURING INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solar
Manufacturing Inc.]
6
SIGNED by )
for and on behalf of ) /s/
HSBC HAV2 (III) LIMITED ) /s/
in the presence of:- )
SIGNED by )
for and on behalf of ) /s/
JAFCO ASIA TECHNOLOGY FUND II ) /s/
in the presence of:- )
7
Supplemental Agreement dated March 29, 2006
EXECUTION COPY
THIS SUPPLEMENTAL AGREEMENT (this "SUPPLEMENTAL AGREEMENT") is entered into
as of March 29, 2006 by and among:
(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 000 XX, Xxxxxx House, South 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) (Xxxxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000,
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) (Suite
C6017, China 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".
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO are parties to a Subscription Agreement dated as of November 16, 2005, as
amended on February 28, 2006, (the "SUBSCRIPTION AGREEMENT"), pursuant to which
the Investors agreed to subscribe, and the Company agreed to issue to the
Investors the Convertible Notes (as defined in the Subscription Agreement) up to
an aggregate principal amount of US$10,500,000 together with the granting of
options (the "NOTES OPTION") to
1
the Investors to acquire additional Convertible Notes up to an aggregate
principal amount of $2,500,000, in accordance with and subject to the terms set
out in the Subscription Agreement and the Conditions (as defined in the
Subscription Agreement).
WHEREAS, on November 30, 2005, pursuant to the First Tranche Subscription
(as defined in the Subscription Agreement), the Company issued: (i) a
Certificate for the Convertible Notes and the Conditions in the principal amount
of US$5,400,000 to the Funds (the "FUNDS CONVERTIBLE NOTES"); and (ii) a
Certificate for the Convertible Notes and the Conditions in the principal amount
of US$2,700,000 to JAFCO (the "JAFCO CONVERTIBLE NOTES" and together with the
Funds Convertible Notes, the "FIRST TRANCHE CONVERTIBLE NOTES").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on February 28, 2006 modifying
certain terms in the Subscription Agreement, the Share Pledging Agreements and
the Certificate for the Convertible Notes and the Conditions on the terms and
subject to the conditions set forth therein (the "FEBRUARY 28 SUPPLEMENTAL
AGREEMENT").
WHEREAS, the Parties are desirous of further modifying certain terms in the
Subscription Agreement and the Certificate for the Convertibles Notes and the
Conditions on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree, as follows:
SECTION 1. AMENDMENTS TO THE SUBSCRIPTION AGREEMENT AND CERTIFICATE FOR THE
CONVERTIBLE NOTES AND THE CONDITIONS
1.1 Schedule 5 (Form of the Certificate for the Convertible Notes and the
Conditions) to the Subscription Agreement is hereby amended by:
(a) replacing Condition (B)5(c)(iii)(II) in its entirety with the
following:
(II) IN THE CASE OF A REDEMPTION UNDER CONDITION (B)5(A)(II), OF SUCH
AMOUNT THAT WOULD GIVE THE NOTEHOLDER AN INTERNAL RATE OF RETURN OF
EIGHTEEN PER CENT. (18%) PER ANNUM IN RESPECT OF THE PRINCIPAL AMOUNT, ALL
PAID AND UNPAID INTEREST, SPECIAL INTEREST AND EXTRAORDINARY INTEREST
ACCRUED UNDER CONDITION (B)2 IN RESPECT OF THE CONVERTIBLE NOTE (OR THE
RELEVANT PART THEREOF) TO BE REDEEMED FOR THE PERIOD FROM THE ISSUE DATE UP
TO AND INCLUDING THE DATE OF FULL REPAYMENT OF REDEMPTION MONIES.
(b) replacing Condition (B)7(h) in its entirely with the following:
"(H) IF THE COMPANY FAILS TO DELIVER TO EACH INVESTOR ON OR BEFORE APRIL
30, 2006 THE SATISFACTORY AUDIT REPORTS IN ACCORDANCE WITH CLAUSE 3.2(A) OF
THE SUBSCRIPTION AGREEMENT;"
(c) replacing the definition of "Guaranteed 2005 XXX" in Condition A(3) in
its entirely with the following:
2
"GUARANTEED 2005 XXX" MEANS SIX MILLION FIVE HUNDRED THOUSAND UNITED STATES
DOLLARS (US$6,500,000) MINUS ANY ACCOUNTING CHARGES INCURRED BY THE COMPANY
ARISING SOLELY IN CONNECTION WITH PRIOR CONDITION (B)5(C)(III)(II) (WHICH
WAS INCLUDED PREVIOUSLY IN SCHEDULE 5 TO THE SUBSCRIPTION AGREEMENT PRIOR
TO ITS AMENDMENT)"
1.2 If the Company issues Convertible Notes to the Investors pursuant to the
Second Tranche Subscription (as defined in the Subscription Agreement) and
the Notes Option, the Certificates for the Convertible Notes and Conditions
issued in connection therewith shall be in the form set forth in Schedule
5, as amended in this Supplemental Agreement and the February 28
Supplemental Agreement.
1.3 The parties have reached an agreement as of the date hereof that the Form
of the Certificate for the Convertible Notes and the Conditions as set
forth in Schedule 5 (as amended) to the Subscription Agreement will apply
to the First Tranche Convertible Notes. To effect this agreement, the
Investors shall return forthwith the First Tranche Convertible Notes to the
Company and the Company shall, in exchange therefor, provide forthwith new
Certificates for Convertible Notes and Conditions to the Investors
identical to the First Tranche Convertible Notes and on the same terms and
conditions and in the same principal amounts, except for such amended terms
that are reflected in Schedule 5 (as amended) to the Subscription
Agreement.
SECTION 2. MISCELLANEOUS
2.1 Definitions and Interpretation. Capitalized terms used but not otherwise
defined in this Supplemental Agreement shall have the meanings given them
in the Subscription Agreement.
2.2 Assignment. This Supplemental Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. No party to this Supplemental Agreement shall assign any of
its rights hereunder without the written consent of the other parties.
2.3 Counterparts. This Supplemental Agreement may be executed in counterparts,
each of which shall be deemed to be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
2.4 Survival. All other provisions of the Subscription Agreement (including the
definitions, Schedules and Disclosure Letter) which are not specifically
amended pursuant to Section 1 of this Supplemental Agreement shall survive
this Supplemental Agreement and continue in full force and effect.
2.5 Entire Agreement; Conflict. The Transaction Documents, as amended by this
Supplemental Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, of the parties with
respect to the subject matter of such documents. In the event of any
conflict or inconsistency between the Subscription Agreement on the one
hand, and this Supplemental Agreement on the other hand, the terms of this
Supplemental Agreement shall prevail.
3
2.6 Governing Law. This Supplemental Agreement is governed by and shall be
construed in accordance with the laws of Hong Kong.
(Signatures Follow)
4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Agreement
to be executed as of the date first above written.
The Common Seal of )
CANADIAN SOLAR INC. ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Signature Pages for Supplemental Agreement]
5
SIGNED, SEALED and DELIVERED )
as a Deed by ) /s/
QU XXXX XXX ) /s/
in the presence of:- )
The Seal of )
(Chinese Characters) )
(CSI SOLARTRONICS CO., LTD.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solartronics Co.,
Ltd.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR TECHNOLOGIES INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solar Technologies
Inc.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR MANUFACTURING INC.) ) /s/
was affixed hereto ) /s/
in the presence of:- )
[Company seal of CSI Solar
Manufacturing Inc.]
[Signature Pages for Supplemental Agreement]
6
SIGNED by )
for and on behalf of ) /s/
HSBC HAV2 (III) LIMITED ) /s/
in the presence of:- )
SIGNED by )
for and on behalf of ) /s/
JAFCO ASIA TECHNOLOGY FUND II ) /s/
in the presence of:- )
[Signature Pages for Supplemental Agreement]
7
Supplemental Agreement dated June 9, 2006
EXECUTION COPY
THIS SUPPLEMENTAL AGREEMENT (this "SUPPLEMENTAL AGREEMENT") is entered into
as of June 9, 2006 by and among:
(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 000 XX, Xxxxxx House, South 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) (Xxxxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000,
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) (Suite
C6017, China 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".
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO are parties to a Subscription Agreement dated as of November 16, 2005, as
amended (the "SUBSCRIPTION AGREEMENT"), pursuant to which the Investors agreed
to subscribe, and the Company agreed to issue to the Investors the Convertible
Notes (as
1
defined in the Subscription Agreement) up to an aggregate principal amount of
US$10,500,000 together with the granting of options (the "NOTES OPTION") to the
Investors to acquire additional Convertible Notes up to an aggregate principal
amount of $2,500,000, in accordance with and subject to the terms set out in the
Subscription Agreement and the Conditions (as defined in the Subscription
Agreement).
WHEREAS, on November 30, 2005, pursuant to the First Tranche Subscription
(as defined in the Subscription Agreement), the Company issued: (i) a
Certificate for the Convertible Notes and the Conditions in the principal amount
of US$5,400,000 to the Funds (the "FIRST TRANCHE FUNDS CONVERTIBLE NOTES"); and
(ii) a Certificate for the Convertible Notes and the Conditions in the principal
amount of US$2,700,000 to JAFCO (the "FIRST TRANCHE JAFCO CONVERTIBLE NOTES" and
together with the First Tranche Funds Convertible Notes, the "FIRST TRANCHE
CONVERTIBLE NOTES").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on February 28, 2006 modifying
certain terms in the Subscription Agreement, the Share Pledging Agreements and
the Certificate for the Convertible Notes and the Conditions on the terms and
subject to the conditions set forth therein (the "FEBRUARY 28 SUPPLEMENTAL
AGREEMENT").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on March 29, 2006 modifying certain
terms in the Subscription Agreement and the Certificate for the Convertible
Notes and the Conditions on the terms and subject to the conditions set forth
therein (the "MARCH 29 SUPPLEMENTAL AGREEMENT").
WHEREAS, on March 30, 2006, pursuant to the March 29 Supplemental
Agreement, the Company issued: (i) a Certificate for the Convertible Notes and
the Conditions in the principal amount of US$5,400,000 to the Funds (the "FIRST
TRANCHE FUNDS REPLACEMENT CONVERTIBLE NOTES") in replacement of the First
Tranche Funds Convertible Notes which became cancelled upon such replacement;
and (ii) a Certificate for the Convertible Notes and the Conditions in the
principal amount of US$2,700,000 to JAFCO (the "FIRST TRANCHE JAFCO REPLACEMENT
CONVERTIBLE NOTES") in replacement of the First Tranche JAFCO Convertible Notes
which became cancelled upon such replacement; and First Tranche JAFCO
Replacement Convertible Notes together with the First Tranche Funds Replacement
Convertible Notes, the "FIRST TRANCHE REPLACEMENT CONVERTIBLE NOTES").
WHEREAS, on March 30, 2006, pursuant to the Second Tranche Subscription (as
defined in the Subscription Agreement), the Company issued: (i) a Certificate
for the Convertible Notes and the Conditions in the principal amount of
US$2,350,000 to the Funds (the "SECOND TRANCHE FUNDS CONVERTIBLE NOTES"); and
(ii) a Certificate for the Convertible Notes and the Conditions in the principal
amount of US$1,300,000 to JAFCO (the "SECOND TRANCHE JAFCO CONVERTIBLE NOTES"
and together with the Funds Convertible Notes, the "SECOND TRANCHE CONVERTIBLE
NOTES").
WHEREAS, the Parties are desirous of further modifying certain terms in the
Subscription Agreement and the Certificate for the Convertibles Notes and the
Conditions on the terms and subject to the conditions set forth herein.
2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree, as follows:
SECTION 1. AMENDMENTS TO THE SUBSCRIPTION AGREEMENT AND CERTIFICATE FOR THE
CONVERTIBLE NOTES AND THE CONDITIONS
1.1 Schedule 5 (Form of the Certificate for the Convertible Notes and the
Conditions) to the Subscription Agreement is hereby amended by:
(a) deleting Condition (B)4(e) in its entirety.
1.2 The parties have reached an agreement as of the date hereof that the Form
of the Certificate for the Convertible Notes and the Conditions as set
forth in Schedule 5 (as amended) to the Subscription Agreement will apply
to the First Tranche Replacement Convertible Notes. To effect this
agreement, the Investors shall return forthwith the First Tranche
Replacement Convertible Notes to the Company and the Company shall, in
exchange therefor, provide forthwith new Certificates for Convertible Notes
and Conditions to the Investors identical to the First Tranche Replacement
Convertible Notes and on the same terms and conditions and in the same
principal amounts, except for such amended terms that are reflected in
Schedule 5 (as amended by this Supplemental Agreement, the February 28
Supplemental Agreement and the March 29 Supplemental Agreement) to the
Subscription Agreement.
1.3 The parties have reached an agreement as of the date hereof that the Form
of the Certificate for the Convertible Notes and the Conditions as set
forth in Schedule 5 (as amended) to the Subscription Agreement will apply
to the Second Tranche Convertible Notes. To effect this agreement, the
Investors shall return forthwith the Second Tranche Convertible Notes to
the Company and the Company shall, in exchange therefor, provide forthwith
new Certificates for Convertible Notes and Conditions to the Investors
identical to the Second Tranche Convertible Notes and on the same terms and
conditions and in the same principal amounts, except for such amended terms
that are reflected in Schedule 5 (as amended by this Supplemental
Agreement, the February 28 Supplemental Agreement and the March 29
Supplemental Agreement) to the Subscription Agreement.
SECTION 2. MISCELLANEOUS
2.1 Definitions and Interpretation. Capitalized terms used but not otherwise
defined in this Supplemental Agreement shall have the meanings given them
in the Subscription Agreement.
2.2 Assignment. This Supplemental Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. No party to this Supplemental Agreement shall assign any of
its rights hereunder without the written consent of the other parties.
3
2.3 Counterparts. This Supplemental Agreement may be executed in counterparts,
each of which shall be deemed to be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
2.4 Survival. All other provisions of the Subscription Agreement (including the
definitions, Schedules and Disclosure Letter) which are not specifically
amended pursuant to Section 1 of this Supplemental Agreement shall survive
this Supplemental Agreement and continue in full force and effect.
2.5 Entire Agreement; Conflict. The Transaction Documents, as amended by this
Supplemental Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, of the parties with
respect to the subject matter of such documents. In the event of any
conflict or inconsistency between the Subscription Agreement on the one
hand, and this Supplemental Agreement on the other hand, the terms of this
Supplemental Agreement shall prevail.
2.6 Governing Law. This Supplemental Agreement is governed by and shall be
construed in accordance with the laws of Hong Kong.
(Signatures Follow)
4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Agreement
to be executed as of the date first above written.
The Common Seal of )
CANADIAN SOLAR INC. ) /s/
was affixed hereto )
in the presence of:- )
[Signature Pages for Supplemental Agreement]
5
SIGNED, SEALED and DELIVERED )
as a Deed by ) /s/
QU XXXX XXX )
in the presence of:- )
The Seal of )
(Chinese Characters) )
(CSI SOLARTRONICS CO., LTD.) ) /s/
was affixed hereto )
in the presence of:- )
[Company seal of CSI Solartronics Co.,
Ltd.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR TECHNOLOGIES INC.) ) /s/
was affixed hereto )
in the presence of:- )
[Company seal of CSI Solar Technologies
Inc.]
The Seal of )
(Chinese Characters) )
(CSI SOLAR MANUFACTURING INC.) ) /s/
was affixed hereto )
in the presence of:- )
[Company seal of CSI Solar
Manufacturing Inc.]
[Signature Pages for Supplemental Agreement]
6
SIGNED by )
for and on behalf of ) /s/
HSBC HAV2 (III) LIMITED )
in the presence of:- )
SIGNED by )
for and on behalf of ) /s/
JAFCO ASIA TECHNOLOGY FUND II ) /s/
in the presence of:- )
[Signature Pages for Supplemental Agreement]
7
Supplemental Agreement dated July 1, 2006
EXECUTION COPY
THIS SUPPLEMENTAL AGREEMENT (this "SUPPLEMENTAL AGREEMENT") is entered into
as of July 1, 2006 by and among:
(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 000 XX, Xxxxxx House, South 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) (Xxxxxxxx Xxxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx 000000,
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) (Suite C6017,
China 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".
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO are parties to a Subscription Agreement dated as of November 16, 2005, as
amended (the "SUBSCRIPTION AGREEMENT"), pursuant to which the Investors agreed
to subscribe, and the Company agreed to issue to the Investors the Convertible
Notes (as defined in the Subscription Agreement) up to an aggregate principal
amount of US$10,500,000 together with the granting of options (the "NOTES
OPTION") to the Investors
1
to acquire additional Convertible Notes up to an aggregate principal amount of
$2,500,000, in accordance with and subject to the terms set out in the
Subscription Agreement and the Conditions (as defined in the Subscription
Agreement).
WHEREAS, on November 30, 2005, pursuant to the First Tranche Subscription
(as defined in the Subscription Agreement), the Company issued: (i) a
Certificate for the Convertible Notes and the Conditions in the principal amount
of US$5,400,000 to the Funds (the "FIRST TRANCHE FUNDS CONVERTIBLE NOTES"); and
(ii) a Certificate for the Convertible Notes and the Conditions in the principal
amount of US$2,700,000 to JAFCO (the "FIRST TRANCHE JAFCO CONVERTIBLE NOTES" and
together with the First Tranche Funds Convertible Notes, the "FIRST TRANCHE
CONVERTIBLE NOTES").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on February 28, 2006 modifying
certain terms in the Subscription Agreement, the Share Pledging Agreements and
the Certificate for the Convertible Notes and the Conditions on the terms and
subject to the conditions set forth therein (the "FEBRUARY 28 SUPPLEMENTAL
AGREEMENT").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on March 29, 2006 modifying certain
terms in the Subscription Agreement and the Certificate for the Convertible
Notes and the Conditions on the terms and subject to the conditions set forth
therein (the "MARCH 29 SUPPLEMENTAL AGREEMENT").
WHEREAS, on March 30, 2006, pursuant to the March 29 Supplemental
Agreement, the Company issued: (i) a Certificate for the Convertible Notes and
the Conditions in the principal amount of US$5,400,000 to the Funds (the "FIRST
TRANCHE FUNDS REPLACEMENT CONVERTIBLE NOTES") in replacement of the First
Tranche Funds Convertible Notes which became cancelled upon such replacement;
and (ii) a Certificate for the Convertible Notes and the Conditions in the
principal amount of US$2,700,000 to JAFCO (the "FIRST TRANCHE JAFCO REPLACEMENT
CONVERTIBLE NOTES") in replacement of the First Tranche JAFCO Convertible Notes
which became cancelled upon such replacement; and First Tranche JAFCO
Replacement Convertible Notes together with the First Tranche Funds Replacement
Convertible Notes, the "FIRST TRANCHE REPLACEMENT CONVERTIBLE NOTES").
WHEREAS, on March 30, 2006, pursuant to the Second Tranche Subscription (as
defined in the Subscription Agreement), the Company issued: (i) a Certificate
for the Convertible Notes and the Conditions in the principal amount of
US$2,350,000 to the Funds (the "SECOND TRANCHE FUNDS CONVERTIBLE NOTES"); and
(ii) a Certificate for the Convertible Notes and the Conditions in the principal
amount of US$1,300,000 to JAFCO (the "SECOND TRANCHE JAFCO CONVERTIBLE NOTES"
and together with the Second Tranche Funds Convertible Notes, the "SECOND
TRANCHE CONVERTIBLE NOTES").
WHEREAS, the Company, the PRC Subsidiaries, the Founder, the Funds and
JAFCO entered into a supplemental agreement on June 9, 2006 modifying certain
terms in the Subscription Agreement and the Certificate for the Convertible
Notes and the Conditions on the terms and subject to the conditions set forth
therein (the "JUNE 9 SUPPLEMENTAL Agreement").
2
WHEREAS, on June 9, 2006, pursuant to the June 9 Supplemental Agreement,
the Company issued: (i) a Certificate for the Convertible Notes and the
Conditions in the principal amount of US$5,400,000 to the Funds (the "FIRST
TRANCHE FUNDS REPLACEMENT (2) CONVERTIBLE NOTES") in replacement of the First
Tranche Funds Convertible Replacement Notes which became cancelled upon such
replacement; (ii) a Certificate for the Convertible Notes and the Conditions in
the principal amount of US$2,700,000 to JAFCO (the "FIRST TRANCHE JAFCO
REPLACEMENT (2) CONVERTIBLE NOTES" together with the First Tranche Funds
Replacement (2) Convertible Notes, the "FIRST TRANCHE REPLACEMENT (2)
CONVERTIBLE NOTES") in replacement of the First Tranche JAFCO Replacement
Convertible Notes which became cancelled upon such replacement; (i) a
Certificate for the Convertible Notes and the Conditions in the principal amount
of US$2,350,000 to the Funds (the "SECOND TRANCHE FUNDS REPLACEMENT CONVERTIBLE
NOTES") in replacement of the Second Tranche Funds Convertible Notes which
became cancelled upon such replacement; and (ii) a Certificate for the
Convertible Notes and the Conditions in the principal amount of US$1,300,000 to
JAFCO (the "SECOND TRANCHE JAFCO REPLACEMENT CONVERTIBLE NOTES" together with
the Second Tranche Funds Replacement Convertible Notes, the "SECOND TRANCHE
REPLACEMENT CONVERTIBLE NOTES") in replacement of the Second Tranche JAFCO
Convertible Notes which became cancelled upon such replacement.
WHEREAS, the Parties are desirous of further modifying certain terms in the
Subscription Agreement and the Certificate for the Convertibles Notes and the
Conditions on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree, as follows:
SECTION 1. AMENDMENTS TO THE SUBSCRIPTION AGREEMENT AND CERTIFICATE FOR THE
CONVERTIBLE NOTES AND THE CONDITIONS
1.1 Schedule 5 (Form of the Certificate for the Convertible Notes and the
Conditions) to the Subscription Agreement is hereby amended, so as to
conform with the original intention of the parties, by:
(a) deleting Condition (B)2(a) in its entirety and replacing it with the
following:
"The Convertible Note shall bear interest from the Issue Date at the rate
of twelve per cent (12%) per annum on the principal amount of the
Convertible Note outstanding, such interest shall, subject to
sub-paragraphs (b) and (c) below, accrue from day to day, be calculated on
the basis of the actual number of days that elapsed in a year of 365 days
and be payable as follows: (i) two per cent (2%) per annum shall be payable
in cash by four equal quarterly instalments in arrears (the first payment
being on the date falling three (3) months after the Issue Date), and (ii)
ten per cent (10%) per annum shall be payable in a balloon payment as at
the date of conversion or redemption as the case may be. In the event that
the Convertible Note has been wholly converted into Common Shares in
accordance with these Conditions, the Noteholder shall be entitled to
interest in respect of the whole of the principal amount being converted
for the period from the date immediately
3
preceding the last interest payment date (or the Issue Date, as the case
may be) up to and including the date of conversion, and such interest
(which has not been paid before the conversion) shall be payable by the
Company on the date of conversion."
(b) deleting Condition (B)5(c) in its entirety and replacing it with the
following:
"The redemption monies in respect of the Convertible Note (or the
relevant part thereof) comprise of:
(i) the principal amount so redeemed;
(ii) arrears of interest, special interest and extraordinary interest
accrued in accordance with Condition (B)2; and
(iii) any outstanding amount payable in respect of the Convertible
Note (or the relevant part thereof)."
(c) deleting Condition (B)9(a) in its entirety and replacing it with the
following:
"All payments in respect of the Convertible Note will be made 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 Company or
the Founder (as the case may be) will pay such additional amounts as
may be necessary in order that the net amounts received by the
Noteholder after such withholding or deduction shall equal the
respective amounts receivable in respect of the Convertible Note in
the absence of such withholding or deduction, provided that,
notwithstanding any agreement to the contrary, no withholding tax
shall be payable under the Canadian income tax laws in respect of any
amounts deemed to constitute interest paid upon conversion of the
Convertible Note."
1.2 The parties have reached an agreement as of the date hereof that the Form
of the Certificate for the Convertible Notes and the Conditions as set
forth in Schedule 5 (as amended) to the Subscription Agreement will apply
to the First Tranche Replacement (2) Convertible Notes. To effect this
agreement, the Investors shall return forthwith the First Tranche
Replacement (2) Convertible Notes to the Company and the Company shall, in
exchange therefor, provide forthwith new Certificates for Convertible Notes
and Conditions to the Investors identical to the First Tranche Replacement
(2) Convertible Notes and on the same terms and conditions and in the same
principal amounts, except for such amended terms that are reflected in
Schedule 5 (as amended by this Supplemental Agreement, the February 28
Supplemental Agreement, the March 29 Supplemental Agreement and the June 9
Supplemental Agreement) to the Subscription Agreement.
4
1.3 The parties have reached an agreement as of the date hereof that the Form
of the Certificate for the Convertible Notes and the Conditions as set
forth in Schedule 5 (as amended) to the Subscription Agreement will apply
to the Second Tranche Convertible Replacement Notes. To effect this
agreement, the Investors shall return forthwith the Second Tranche
Replacement Convertible Notes to the Company and the Company shall, in
exchange therefor, provide forthwith new Certificates for Convertible Notes
and Conditions to the Investors identical to the Second Tranche Replacement
Convertible Notes and on the same terms and conditions and in the same
principal amounts, except for such amended terms that are reflected in
Schedule 5 (as amended by this Supplemental Agreement, the February 28
Supplemental Agreement, the March 29 Supplemental Agreement and the June 9
Supplemental Agreement) to the Subscription Agreement.
1.4 The parties agree that the Conversion Price per Common Share should be
adjusted to be US$5.770563156 on the basis that (i) a total of 5,668,421
Common Shares are currently in issue; (ii) the maximum number of Common
Shares that may be issued pursuant to the ESOP shall be 1,000,000; (iii) an
aggregate of 2,036,195.824 Common Shares are expected to be issued to all
Investors upon the full conversion of all Convertible Notes of an aggregate
principal amount of US$11,750,000; and (iv) immediately following the full
conversion of all Convertible Notes, the Common Shares will be split on a 1
for 1.168130772 basis although the maximum number of Common Shares that may
be issued pursuant to the ESOP shall remain 1,000,000, such that the
aggregate shareholding of all Investors in the Company following the share
split shall be 23.79%.
SECTION 2. MISCELLANEOUS
2.1 Definitions and Interpretation. Capitalized terms used but not otherwise
defined in this Supplemental Agreement shall have the meanings given them
in the Subscription Agreement.
2.2 Assignment. This Supplemental Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
and assigns. No party to this Supplemental Agreement shall assign any of
its rights hereunder without the written consent of the other parties.
2.3 Counterparts. This Supplemental Agreement may be executed in counterparts,
each of which shall be deemed to be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
2.4 Survival. All other provisions of the Subscription Agreement (including the
definitions, Schedules and Disclosure Letter) which are not specifically
amended pursuant to Section 1 of this Supplemental Agreement shall survive
this Supplemental Agreement and continue in full force and effect.
2.5 Entire Agreement; Conflict. The Transaction Documents, as amended by this
Supplemental Agreement constitutes the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, of the parties with
respect to the subject matter of such documents. In the event of any
conflict or inconsistency between the
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Subscription Agreement on the one hand, and this Supplemental Agreement on
the other hand, the terms of this Supplemental Agreement shall prevail.
2.6 Governing Law. This Supplemental Agreement is governed by and shall be
construed in accordance with the laws of Hong Kong.
(Signatures Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Agreement
to be executed as of the date first above written.
The Common Seal of )
CANADIAN SOLAR INC. )
was affixed hereto ) /s/
in the presence of:- ) /s/
[Signature Pages for Supplemental Agreement]
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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/
The Seal of )
(Chinese Characters) )
(CSI SOLAR TECHNOLOGIES INC.) )
was affixed hereto ) /s/
in the presence of:- ) /s/
The Seal of )
(Chinese Characters) )
(CSI SOLAR MANUFACTURING INC.) )
was affixed hereto ) /s/
in the presence of:- ) /s/
[Signature Pages for Supplemental Agreement]
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SIGNED by Xxxxxx Xxxxx )
for and on behalf of )
HSBC HAV2 (III) LIMITED ) /s/
in the presence of:- ) /s/
/s/
-------------------------------------
Laetitia X.X. Xx
Witness
[Signature Pages for Supplemental Agreement]
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SIGNED by )
for and on behalf of )
JAFCO ASIA TECHNOLOGY FUND II ) /s/
in the presence of:- Xxx Xxxx Ning ) /s/
[Signature Pages for Supplemental Agreement]
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