Cayman Islands | 8200 | Not Applicable | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Z. Julie Gao, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP c/o 42/F, Edinburgh Tower, The Landmark 15 Queens Road, Central Hong Kong +852 3740 4700 |
Alan Seem, Esq.
Shearman & Sterling LLP 12th Floor, East Tower, Twin Towers B-12 Jianguomenwai Dajie, Beijing 100022 Peoples Republic of China +86 (10) 5922 8000 |
Proposed maximum
|
||||||
Title of each class of
|
aggregate
|
Amount of
|
||||
securities to be registered | offering price (2) | registration fee | ||||
Class A Common shares, par value $0.001 per
share
(1)(3)
|
$100,000,000 | $7,130.00 | ||||
(1) | Includes Class A common shares that may be purchased by the underwriters to cover over-allotments, if any. Also includes Class A common shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These Class A common shares are not being registered for the purpose of sales outside the United States. | |
(2) | Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933. | |
(3) | American depositary shares issuable upon deposit of the Class A common shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333- ). Each American depositary share represents Class A common shares. |
The information in
this preliminary prospectus is not complete and may be changed.
These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
|
Underwriting
|
Proceeds,
|
|||||||||||
discounts and
|
before expenses,
|
|||||||||||
Price to public | commissions | to us | ||||||||||
Per ADS
|
$ | $ | $ | |||||||||
Total
|
$ | $ | $ |
Credit Suisse | Morgan Stanley |
Piper Jaffray | Oppenheimer & Co. |
1
12
40
41
42
43
44
46
47
49
55
58
85
90
103
113
119
121
122
130
140
142
149
155
156
157
158
F-1
EX-3.1
EX-4.1
EX-4.4
EX-5.1
EX-8.1
EX-8.3
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-21.1
EX-23.1
EX-23.4
EX-23.5
EX-23.6
EX-23.7
EX-99.1
i
Table of Contents
Table of Contents
1
Table of Contents
largest K-12 after-school tutoring service provider in China;
brand strength;
outstanding student performance;
high teaching quality, strong content development and efficient
education management system;
largest Internet education platform in China; and
innovative and entrepreneurial management team with a passion
for education.
further penetrate our existing markets;
extend our geographic network into attractive new markets;
2
Table of Contents
expand our personalized premium services; and
further develop our online course offerings.
our ability to continue to attract students to enroll in our
courses;
our ability to continue to recruit, train and retain qualified
teachers;
our ability to improve the content of our existing course
offerings and to develop new courses in a timely and
cost-effective manner;
our ability to maintain and enhance our brand;
our historical financial and operating results, growth rates and
profitability may not serve as an adequate basis to judge our
future prospects and results of operations;
our ability to maintain and continue to improve our teaching
results in terms of student performance and the level of
satisfaction with our services; and
our ability to compete effectively against our competitors.
risks associated with our control of our variable interest
entities, which control is based upon contractual arrangements
rather than equity ownership;
risks associated with our ability to fund our expansion plan due
to PRC legal restrictions on foreign currency conversion and
restrictions on distribution of school profits, among others;
uncertainties with respect to PRC regulatory restrictions on
after-school tutoring services, including regulations issued by
certain provincial governmental authorities prohibiting private
schools from offering after-school tutoring classes to primary
and secondary school students; and
risks associated with our ability to obtain various operating
licenses and permits and to make registrations and filings for
all of our learning centers in China.
3
Table of Contents
(1)
Each person is an ultimate
beneficial owner and also a director or executive officer of TAL
Group.
exercise effective control over Xueersi Education, Xueersi
Network and their respective subsidiaries;
receive substantially all of the economic benefits of Xueersi
Education, Xueersi Network and their respective subsidiaries in
consideration for the services provided by us; and
have an exclusive option to purchase all of the equity interests
in Xueersi Education and Xueersi Network when and to the extent
permitted under PRC law.
4
Table of Contents
5
Table of Contents
we, us, our company, or
our refers to TAL Education Group, its subsidiaries
and its affiliated entities;
common shares refers to our Class A and
Class B common shares, par value US$0.001 per share;
preferred shares or Series A preferred
shares refers to our Series A convertible redeemable
preferred shares, par value US$0.001 per share;
ADSs refers to American depositary shares, each of
which
representing
Class A common shares;
variable interest entities, or VIEs,
refer to Beijing Xueersi Network Technology Co., Ltd. and
Beijing Xueersi Education Technology Co., Ltd., which are
domestic PRC companies in which we do not have equity interests
but whose financial results have been consolidated into our
consolidated financial statements in accordance with
U.S. GAAP due to our having effective control over, and our
being the primary beneficiary of, these companies; and
affiliated entities refers to our VIEs and the
VIEs direct and indirect subsidiaries and schools;
student enrollments refers to the cumulative total
number of courses enrolled in and paid for by our students,
including multiple courses enrolled in and paid for by the same
student;
annual retention rate refers to the percentage of
our students who subsequently enroll in one or more of our
courses after enrolling in at least one course in the previous
fiscal year;
China or PRC refers to the Peoples
Republic of China, excluding for purposes of this prospectus
only, Taiwan, Hong Kong and Macau;
K-12 refers to the year before the first grade
through the last year of high school;
Renminbi or RMB refers to the legal
currency of China; and
$, dollars or
U.S. dollars refers to the legal currency of
the United States.
6
Table of Contents
Offering price
We currently expect that the initial public offering price will
be between $ and
$ per ADS.
ADSs offered by us
ADSs.
ADSs.
shares, par value $0.001 per share, comprised of
(i) Class A
common shares, and
(ii) Class B
common shares.
ADSs to Class A common share ratio
XRS.
Common shares
Our common shares are divided into Class A common shares
and Class B common shares. Holders of Class A common
shares and Class B common shares have the same rights
except for voting and conversion rights. In respect of matters
requiring shareholders vote, each Class A common
share is entitled to one vote, and each Class B common
share is entitled to ten votes. Each Class B common share
is convertible into one Class A common share at any time by
the holder thereof. Class A common shares are not
convertible into Class B common shares under any
circumstances. Upon any transfer of Class B common shares
by a holder thereof to any person or entity which is not an
affiliate of such holder, such Class B common shares shall
be automatically and immediately converted into the equal number
of Class A common shares.
Depositary
JPMorgan Chase Bank, N.A.
Over-allotment option
The underwriters have a
30-day
option to purchase up
to
additional ADSs from us at the initial public offering price
less underwriting discounts and commissions.
Reserved ADSs
At our request, the underwriters have reserved for sale, at the
initial public offering price, up to 5% of the total number of
ADSs offered in this offering (assuming no exercise of the
over-allotment option) to some of our directors, officers,
employees, business associates and related persons through a
directed share program.
Use of proceeds
We plan to use the net proceeds received from this offering to
expand our network of learning centers and service centers,
build a national training center, pay a declared cash dividend
conditional upon the completion of this offering, strengthen our
curriculum and course material development capabilities and
improve our existing facilities, and for other general corporate
purposes, including strategic investments in and acquisitions of
complementary businesses, although we are not currently
negotiating any such investment or acquisition. See Use of
Proceeds for more information.
7
Table of Contents
Lock-up
We, our directors and executive officers and all of our existing
shareholders have agreed with the underwriters, subject to
certain exceptions, not to sell, transfer or dispose of any
ADSs, common shares or similar securities for a period of
180 days after the date this prospectus becomes effective.
See Underwriting for more information.
Risk factors
See Risk Factors and other information included in
this prospectus for a discussion of risks you should carefully
consider before investing in the ADSs.
assumes that the underwriters do not exercise their
over-allotment option to purchase additional ADSs;
reflects the conversion of all outstanding Series A
preferred shares into 5,000,000 Class B common shares
immediately prior to the completion of this offering;
excludes 5,419,500 Class A common shares issuable upon the
vesting of restricted shares issued under our 2010 share
incentive plan that are outstanding as of the date of this
prospectus; and
excludes Class A common shares reserved for future grants
under our 2010 share incentive plan.
8
Table of Contents
10
11
9
Table of Contents
For the Year Ended February 29/28,
For the Six Months Ended August 31,
2008
2009
2010
2009
2010
(in thousands of $, except for shares,
per share and per ADS data)
$
8,882
$
37,476
$
69,594
$
32,983
$
53,022
(4,367
)
(18,554
)
(37,649
)
(16,068
)
(26,255
)
(1)
4,515
18,922
31,945
16,915
26,767
(370
)
(2,353
)
(5,608
)
(1,958
)
(4,184
)
(2)
(2,478
)
(5,890
)
(10,872
)
(4,602
)
(7,808
)
(3)
(1,615
)
(2,848
)
(9,858
)
(16,480
)
(6,560
)
(11,992
)
1,667
9,064
15,465
10,355
14,775
11
77
283
103
162
(210
)
(124
)
(119
)
(27
)
(363
)
6
731
1,678
9,299
15,624
10,339
14,916
(165
)
(2,018
)
(1,379
)
(912
)
(1,670
)
$
1,513
$
7,281
$
14,245
$
9,427
$
13,246
(4,113
)
$
1,513
$
3,168
$
14,245
$
9,427
$
13,246
$
0.01
$
0.03
$
0.11
$
0.08
$
0.11
$
0.01
$
0.03
$
0.11
$
0.08
$
0.11
$
17.69
$
0.11
$
0.08
$
0.11
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
125,000,000
125,000,000
125,193,360
Notes:
(1)
Includes share-based compensation
expenses of $110 thousand.
(2)
Includes share-based compensation
expenses of $163 thousand.
(3)
Includes share-based compensation
expenses of $647 thousand.
(4)
Each ADS
represents
Class A common shares.
Table of Contents
As of February 29/28,
As of August 31,
2008
2009
2010
2010
Actual
Pro
Forma
(1)
(in thousands of $)
$
5,704
$
29,693
$
50,752
$
81,495
$
81,495
8,131
38,553
65,504
97,515
97,515
5,714
18,023
29,408
42,101
42,101
500
500
500
7,012
26,198
38,578
56,234
56,234
1,119
12,355
26,926
41,281
41,281
9,000
9,000
9,000
1,119
3,355
17,926
32,281
41,281
Note:
(1)
Reflects the automatic conversion
of all of our Series A preferred shares into 5,000,000
Class B common shares immediately prior to the completion
of this offering.
For the Year Ended February 29/28,
For the Six-Month Period Ended August 31,
2008
2009
2010
2009
2010
(in thousands of $)
$
6,324
$
23,468
$
27,175
16,198
30,955
(1,470
)
(5,116
)
(5,250
)
(696
)
(214
)
132
5,252
(903
)
(1,622
)
(163
)
As of and for the
As of and for the Year Ended February 29/28,
Six Months Ended August 31,
2008
2009
2010
2009
2010
67,996
215,080
382,505
175,638
236,919
30
73
98
83
108
Table of Contents
12
Table of Contents
13
Table of Contents
14
Table of Contents
we may fail to identify new cities with sufficient growth
potential into which to expand our network;
it may be difficult to increase the number of learning centers
in more developed cities;
we may fail to effectively market our services in new markets or
promote new courses in existing markets;
we may not be able to replicate our successful growth model in
Beijing and Shanghai to other geographic markets;
our analysis for selecting suitable new locations may not be
accurate and the demand for our services at such new locations
may not materialize or increase as rapidly as we expect;
we may fail to obtain the requisite licenses and permits
necessary to open learning centers at our desired locations from
local authorities;
we may not be able to continue to enhance our online course
offerings, generate profits from online courses, or adapt online
courses to changing student needs and technological
advances; and
we may fail to achieve the benefits we expect from our expansion.
15
Table of Contents
16
Table of Contents
17
Table of Contents
18
Table of Contents
19
Table of Contents
20
Table of Contents
21
Table of Contents
revoking the business and operating licenses of our PRC
subsidiaries and affiliated entities;
restricting or prohibiting related party transactions between
our PRC subsidiaries and affiliated entities;
imposing fines or other requirements with which we or our PRC
subsidiaries and affiliated entities may find difficult or
impossible to comply;
22
Table of Contents
requiring us or our PRC subsidiaries and affiliated entities to
restructure the relevant ownership structure or
operations; and
restricting or prohibiting the use of any proceeds from our
additional public offering to finance our business and
operations in China.
23
Table of Contents
24
Table of Contents
25
Table of Contents
26
Table of Contents
27
Table of Contents
degree of government involvement;
level of development;
rate of economic growth;
control of foreign exchange rates and currency conversion;
access to financing; and
allocation of resources.
28
Table of Contents
capital contributions to our subsidiaries in China, whether
existing ones or newly established ones, must be approved by the
PRC Ministry of Commerce or its local bureaus;
loans by us to our subsidiaries in China, each of which is a
foreign-invested enterprise, to finance their activities cannot
exceed statutory limits and must be registered with the PRC
State Administration of Foreign Exchange, or SAFE, or its local
bureaus;
loans by us to our VIEs and their respective subsidiaries, which
are domestic PRC entities, must be approved by the National
Development and Reform Commission and must also be registered
with SAFE or its local bureaus.
29
Table of Contents
30
Table of Contents
31
Table of Contents
32
Table of Contents
33
Table of Contents
34
Table of Contents
actual or anticipated fluctuations in our operating results,
changes in financial estimates by securities research analysts,
changes in the economic performance or market valuation of other
education companies,
announcements by us or our competitors of material acquisitions,
strategic partnerships, joint ventures or capital commitments,
addition or departure of our executive officers and key
personnel,
intellectual property litigation,
release or expiration of
lock-up
or
other transfer restrictions on our outstanding Class B
common shares or ADSs, and
economic, regulatory or political conditions in China.
35
Table of Contents
36
Table of Contents
37
Table of Contents
38
Table of Contents
39
Table of Contents
our anticipated growth strategies;
competition in the K-12 after-school tutoring market;
our future business development, results of operations and
financial condition;
expected changes in our revenues and certain cost and expense
items;
our ability to increase student enrollments and course fees and
expand course offerings;
risks associated with the expansion of our geographic reach;
the expected increase in spending on private education in
China; and
PRC laws, regulations and policies relating to private education
and providers of after-school tutoring services.
40
Table of Contents
41
Table of Contents
42
Table of Contents
on an actual basis;
on a pro forma basis to reflect the automatic conversion of all
of our Series A preferred shares into 5,000,000
Class B common shares immediately upon the completion of
this offering; and
on a pro forma as adjusted basis to reflect (i) the pro
forma adjustments above, (ii) the payment of a
$30 million cash dividend declared to our then existing
shareholders and payable upon the completion of this offering;
and (iii) the sale
of
Class A common shares in the form of ADSs by us in this
offering at an assumed initial public offering price of
$ per share, the midpoint of the
estimated range of our initial public offering price, after
deducting the underwriting discounts and commissions and the
estimated offering expenses payable by us.
As of August 31, 2010
Pro forma as
Actual
Pro forma
adjusted
9,000,000
120,000
125,000
1,699,503
10,694,503
30,173,018
30,173,018
288,226
288,226
32,280,747
41,280,747
32,280,747
41,280,747
Note:
(1)
Effective September 29, 2010,
our share capital was re-designated into Class A and
Class B common shares under our third amended and restated
memorandum and articles of association.
(2)
A $1.00 increase (decrease) in the
assumed initial public offering price of
$ would increase (decrease) each
of additional paid-in capital, total shareholders equity and
total capitalization by $ .
(3)
Includes $4.9 million in
statutory reserves that are not available for distribution
pursuant to PRC laws.
43
Table of Contents
Per Common
Share
Per ADS
$
$
$
$
$
$
$
$
$
$
44
Table of Contents
45
Table of Contents
Exchange Rate
Period End
Average
(1)
Low
High
(RMB per $1.00)
8.0702
8.1826
8.2765
8.0702
7.8041
7.9579
8.0702
7.8041
7.2946
7.5806
7.8127
7.2946
6.8225
6.9193
7.2946
6.7800
6.8259
6.8295
6.8470
6.8176
6.8258
6.8262
6.8270
6.8254
6.8247
6.8256
6.8275
6.8229
6.8305
6.8275
6.8310
6.8245
6.7815
6.8184
6.8323
6.7815
6.7735
6.7762
6.7807
6.7709
6.8069
6.7873
6.8069
6.7670
6.7035
6.7514
6.8102
6.7035
Source: Federal Reserve
Statistical Release
(1)
Annual averages were calculated by
using the average of the exchange rates on the last day of each
month during the relevant year. Monthly averages are calculated
by using the average of the daily rates during the relevant
month.
46
Table of Contents
recognize or enforce judgments of United States courts obtained
against us or our directors or officers predicated upon the
civil liability provisions of the securities laws of the United
States or any state in the United States; or
entertain original actions brought in each respective
jurisdiction against us or our directors or officers predicated
upon the securities laws of the United States or any state in
the United States.
47
Table of Contents
48
Table of Contents
49
Table of Contents
(1)
Each person is an ultimate
beneficial owner and also a director or executive officer of TAL
Group.
exercise effective control over Xueersi Education, Xueersi
Network and their respective subsidiaries;
receive substantially all of the economic benefits of Xueersi
Education, Xueersi Network and their respective subsidiaries in
consideration for the services provided by us; and
have an exclusive option to purchase all of the equity interests
in Xueersi Education and Xueersi Network when and to the extent
permitted under PRC law.
50
Table of Contents
51
Table of Contents
52
Table of Contents
the ownership structures of our affiliated entities and wholly
owned subsidiaries in China, both currently and after giving
effect to this offering, are in compliance with existing PRC
laws and regulations; and
the contractual arrangements among our wholly owned subsidiaries
in China, our affiliated entities, the shareholders of Xueersi
Education and the shareholders of Xueersi Network are valid,
binding and enforceable under, and will not result in any
violation of, PRC laws or regulations currently in effect.
revoking the business and operating licenses of our PRC
subsidiaries and affiliated entities;
restricting or prohibiting related party transactions between
our PRC subsidiaries and affiliated entities;
imposing fines or other requirements with which we or our PRC
subsidiaries and affiliated entities may find difficult or
impossible to comply;
requiring us or our PRC subsidiaries and affiliated entities to
restructure the relevant ownership structure or
operations; and
restricting or prohibiting the use of any proceeds from our
additional public offering to finance our business and
operations in China.
capital contributions to our subsidiaries in China, whether
existing ones or newly established ones, must be approved by the
PRC Ministry of Commerce or its local bureaus;
loans by us to our subsidiaries in China, each of which is a
foreign-invested enterprise, to finance their activities cannot
exceed statutory limits and must be registered with the PRC
State Administration of Foreign Exchange, or SAFE, or its local
bureaus; and
loans by us to our affiliated entities, which are domestic PRC
entities, must be approved by the relevant government
authorities and must also be registered with SAFE or its local
bureaus.
53
Table of Contents
54
Table of Contents
56
55
Table of Contents
For the Year Ended February 29/28,
For the Six Months Ended August 31,
2008
2009
2010
2009
2010
(in thousands of $, except for shares, per share and per ADS
data)
$
8,882
$
37,476
$
69,594
$
32,983
$
53,022
(4,367
)
(18,554
)
(37,649
)
(16,068
)
(26,255
)
(1)
4,515
18,922
31,945
16,915
26,767
(370
)
(2,353
)
(5,608
)
(1,958
)
(4,184
)
(2)
(2,478
)
(5,890
)
(10,872
)
(4,602
)
(7,808
)
(3)
(1,615
)
(2,848
)
(9,858
)
(16,480
)
(6,560
)
(11,992
)
1,667
9,064
15,465
10,355
14,775
11
77
283
103
162
(210
)
(124
)
(119
)
(27
)
(363
)
6
731
1,678
9,299
15,624
10,339
14,916
(165
)
(2,018
)
(1,379
)
(912
)
(1,670
)
$
1,513
$
7,281
$
14,245
$
9,427
$
13,246
(4,113
)
$
1,513
$
3,168
$
14,245
$
9,427
$
13,246
$
0.01
$
0.03
$
0.11
$
0.08
$
0.11
$
0.01
$
0.03
$
0.11
$
0.08
$
0.11
$
17.69
$
0.11
$
0.08
$
0.11
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
125,000,000
125,000,000
125,193,360
Notes:
(1)
Includes share-based compensation
expenses of $110 thousand.
(2)
Includes share-based compensation
expenses of $163 thousand.
(3)
Includes share-based compensation
expenses of $647 thousand.
(4)
Each ADS
represents Class A common
shares.
Table of Contents
As of February 29/28,
2008
2009
2010
As of August 31, 2010
Actual
Actual
Actual
Actual
Pro
Forma
(1)
(in thousands of $)
$
5,704
$
29,693
$
50,752
$
81,495
81,495
8,131
38,553
65,504
97,515
97,515
5,714
18,023
29,408
42,101
42,101
500
500
500
7,012
26,198
38,578
56,234
56,234
1,119
12,355
26,926
41,281
41,281
9,000
9,000
9,000
1,119
3,355
17,926
32,281
41,281
Note:
(1)
Reflects the automatic conversion
of all of our Series A preferred shares into 5,000,000
Class B common shares immediately prior to the completion
of this offering.
57
Table of Contents
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
58
Table of Contents
59
Table of Contents
60
Table of Contents
For the Year Ended February 29/28,
For the Six Months Ended August 31,
2008
2009
2010
2009
2010
$
%
$
%
$
%
%
$
%
(in thousands of $, except percentages)
8,882
100.0
%
37,476
100.0
%
69,594
100.0
%
32,983
100.0
%
53,022
100.0
%
(4,367
)
(49.2
)
(18,554
)
(49.5
)
(37,649
)
(54.1
)
(16,068
)
(48.7
)
(26,255
)
(1)
(49.5
)
(370
)
(4.2
)
(2,353
)
(6.3
)
(5,608
)
(8.1
)
(1,958
)
(5.9
)
(4,184
)
(2)
(7.9
)
(2,478
)
(27.9
)
(5,890
)
(15.7
)
(10,872
)
(15.6
)
(4,602
)
(14.0
)
(7,808
)
(3)
(14.7
)
(1,615
)
(4.3
)
(2,848
)
(32.1
)%
(9,858
)
(26.3
)%
(16,480
)
(23.7
)%
(6,560
)
(19.9
)%
(11,992
)
(22.6
)%
Notes:
(1)
Includes share-based compensation
expenses of $110 thousand.
(2)
Includes share-based compensation
expenses of $163 thousand.
(3)
Includes share-based compensation
expenses of $647 thousand.
61
Table of Contents
62
Table of Contents
63
Table of Contents
64
Table of Contents
65
Table of Contents
Net revenues of Wuhan School and Qianjiang School would grow at
a CAGR of 10.4% and 9.4%, respectively, from 2009 to 2014
primarily through an increase in the number of students. The
long-term growth rate of Wuhan School and Qianjiang School after
2014 was assumed to be 3% per year.
Cost of revenues mainly consists of teacher salary and welfare,
rent, and tutoring materials. Cost of revenues as a percentage
of revenues of Wuhan School was expected to decrease from 91% in
2009 to 62% of sales in 2014 because staff cost and rental would
not grow as fast as revenues. Cost of revenues as a percentage
of revenues of Qianjiang School was expected to increase from
53% in 2009 to 60% of sales in 2014.
Operating expenses as a percentage of revenues were expected to
decrease from 2009 to 2014 as we anticipated that corporate
overhead and administrative expense would not increase as fast
as revenues during the period due to the improvement of
operating efficiency.
There would be no material changes in the existing political,
legal, fiscal and economic conditions in China and in our
ability to recruit and retain competent management, key
personnel and technical staff to support our ongoing operations.
There was no material deviation in industry trends and market
conditions from economic forecasts.
66
Table of Contents
67
Table of Contents
68
Table of Contents
our financial and operating results;
the assumptions and basis of our financial projections;
the nature of our business;
the stage of development of our operations;
our business plan;
our business risks;
the nature and prospects of the private education industry in
China;
the global economic outlook in general and the specific economic
and competitive elements affecting our business, industry and
market; and
the market-derived investment returns of entities engaged in
similar business.
that no material change will occur in the applicable future
periods in the existing political, legal, fiscal or economic
conditions and in the education industry in China;
that no material change will occur in the current PRC law
applicable to us and the applicable tax rates will remain
unchanged;
that exchange rates and interest rates in the applicable future
periods will not differ materially from the current rates;
69
Table of Contents
that our future growth will not be constrained by lack of
funding;
that we have the ability to retain competent management and key
personnel to support our ongoing operations; and
that industry trends and market conditions for the education and
related industries will not deviate significantly from current
forecasts.
For the Year Ended February 29/28,
For the Six Months Ended August 31,
2008
2009
2010
2009
2010
$
%
$
%
$
%
%
$
%
(in thousands of $, except percentages)
$
8,882
100.0
%
$
37,476
100.0
%
$
69,594
100.0
%
$
32,983
100.0
$
53,022
100.0
%
(4,367
)
(49.2
)
(18,554
)
(49.5
)
(37,649
)
(54.1
)
(16,068
)
(48.7
)
(26,255
)
(1)
(49.5
)
4,515
50.8
18,922
50.5
31,945
45.9
16,915
51.3
26,767
50.5
(370
)
(4.2
)
(2,353
)
(6.3
)
(5,608
)
(8.1
)
(1,958
)
(5.9
)
(4,184
)
(2)
(7.9
)
(2,478
)
(27.9
)
(5,890
)
(15.7
)
(10,872
)
(15.6
)
(4,602
)
(14.0
)
(7,808
)
(3)
(14.7
)
(1,615
)
(4.3
)
(2,848
)
(32.1
)
(9,858
)
(26.3
)
(16,480
)
(23.7
)
(6,560
)
(19.9
)
(11,992
)
(22.6
)
1,667
18.7
9,064
24.2
15,465
22.2
10,355
31.4
14,775
27.9
11
0.1
77
0.2
283
0.4
103
0.3
162
0.3
(210
)
(0.6
)
(124
)
(0.2
)
(119
)
(0.4
)
(27
)
(0.1
)
(363
)
(1.0
)
6
0.0
731
2.0
1,678
18.8
9,299
24.8
15,624
22.4
10,339
31.3
14,916
28.1
(165
)
(1.8
)
(2,018
)
(5.4
)
(1,379
)
(1.9
)
(912
)
(2.7
)
(1,670
)
(3.1
)
$
1,513
17.0
%
$
7,281
19.4
%
$
14,245
20.5
%
$
9,427
28.6
%
$
13,246
25.0
%
70
Table of Contents
Notes:
(1)
Includes share-based compensation
expenses of $110 thousand.
(2)
Includes share-based compensation
expenses of $163 thousand.
(3)
Includes share-based compensation
expenses of $647 thousand.
71
Table of Contents
72
Table of Contents
73
Table of Contents
74
Table of Contents
75
Table of Contents
76
Table of Contents
For the Three Months Ended
November 30, 2008
February 28, 2009
May 31, 2009
August 31, 2009
November 30, 2009
February 28, 2010
May 31, 2010
August 31, 2010
% of Net
% of Net
% of Net
% of Net
% of Net
% of Net
% of Net
% of Net
$
Revenues
$
Revenues
$
Revenues
$
Revenues
$
Revenues
$
Revenues
$
Revenues
$
Revenues
(In thousands of $, except percentages)
10,229
100.0
%
14,203
100.0
%
15,439
100.0
%
17,544
100.0
%
16,374
100.0
%
20,237
100.0
%
20,496
100.0
%
32,526
100.0
%
(5,200
)
(50.8
)%
(7,057
)
(49.7
)%
(7,215
)
(46.7
)%
(8,853
)
(50.5
)%
(9,133
)
(55.8
)%
(12,448
)
(61.5
)%
(12,062
)
(58.9
)%
(14,193
)
(43.6
)%
5,029
49.2
%
7,146
50.3
%
8,224
53.3
%
8,691
49.5
%
7,241
44.2
%
7,789
38.5
%
8,434
41.1
%
18,333
56.4
%
(567
)
(5.6
)%
(855
)
(6.0
)%
(750
)
(4.9
)%
(1,209
)
(6.9
)%
(1,654
)
(10.1
)%
(1,996
)
(9.9
)%
(1,674
)
(8.1
)%
(2,510
)
(7.7
)%
(1,803
)
(17.6
)%
(2,022
)
(14.2
)%
(2,223
)
(14.4
)%
(2,379
)
(13.5
)%
(3,075
)
(18.8
)%
(3,196
)
(15.8
)%
(3,752
)
(18.3
)%
(4,056
)
(12.5
)%
(1,615
)
(11.4
)%
(2,370
)
(23.2
)%
(4,492
)
(31.6
)%
(2,973
)
(19.3
)%
(3,588
)
(20.4
)%
(4,729
)
(28.9
)%
(5,192
)
(25.7
)%
(5,426
)
(26.4
)%
(6,566
)
(20.2
)%
2,659
26.0
%
2,654
18.7
%
5,251
34.0
%
5,103
29.1
%
2,512
15.3
%
2,597
12.8
%
3,008
14.7
%
11,767
36.2
%
25
0.2
%
39
0.3
%
65
0.4
%
38
0.2
%
127
0.8
%
54
0.3
%
107
0.5
%
55
0.2
%
(25
)
(0.2
)%
(80
)
(0.5
)%
(38
)
(0.2
)%
(6
)
(0.0
)%
(33
)
(0.1
)%
6
0.0
%
(363
)
(2.6
)%
6
0.0
%
2,684
26.2
%
2,305
16.2
%
5,236
33.9
%
5,103
29.1
%
2,633
16.1
%
2,651
13.1
%
3,088
15.1
%
11,828
36.4
%
(583
)
(5.7
)%
(499
)
(3.5
)%
(462
)
(3.0
)%
(450
)
(2.6
)%
(232
)
(1.4
)%
(234
)
(1.2
)%
(346
)
(1.7
)%
(1,324
)
(4.1
)%
$
2,101
20.5
%
$
1,806
12.7
%
$
4,774
30.9
%
$
4,653
26.5
%
$
2,401
14.7
%
$
2,417
11.9
%
$
2,742
13.4
%
$
10,504
32.3
%
(1)
Includes share-based compensation
expenses of $110 thousand.
(2)
Includes share-based compensation
expenses of $163 thousand.
(3)
Includes share-based compensation
expenses of $647 thousand.
77
Table of Contents
78
Table of Contents
For the Year Ended February 29/28,
For the Six Months Ended August 31,
2008
2009
2010
2009
2010
(in thousands of $)
$
6,324
$
23,468
$
27,175
$
16,198
$
30,955
(1,470
)
(5,116
)
(5,250
)
(696
)
(214
)
132
5,252
(903
)
(1,622
)
(163
)
315
385
37
26
165
5,301
23,989
21,059
13,906
30,743
403
5,704
29,693
29,693
50,752
5,704
29,693
50,752
43,599
81,495
79
Table of Contents
80
Table of Contents
Payment due by period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
(in thousand $)
$
42,674
13,155
20,159
9,347
13
513
513
500
500
Notes:
(1)
Represents our non-cancelable
leases for our offices, learning centers and service centers.
(2)
Represents outstanding
consideration payable in connection with our acquisitions of
Tianjin Education, Jianli School, Qianjiang School and Wuhan
School as of February 28, 2010. $240,198 in acquisition
cash consideration payable for the acquisition of Tianjin
Education and Wuhan School was outstanding as of August 31,
2010.
(3)
Represents the principal amount due
to a third party pursuant to a convertible loan. The convertible
loan has a principal amount of $500,000, bears an annual
interest rate of 15% and will mature on January 30, 2012.
81
Table of Contents
82
Table of Contents
83
Table of Contents
84
Table of Contents
85
Table of Contents
86
Table of Contents
87
Table of Contents
Large classes:
in-class teaching with typically more than
30 students per class. This is the traditional format of
after-school tutoring. However, it is experiencing a declining
trend due to its lower effectiveness compared to the other
formats of after-school tutoring. In 2009, this segment
represented an estimated market size of RMB26.5 billion,
according to iResearch. iResearch expects the market share of
large classes to continue to decline over time.
Small classes:
in-class teaching with typically
10-30
students per class. The smaller class size allows teachers to
pay closer attention to individual students and better tailor
the classes to their study needs. This class setting therefore
has become the most popular format of after-school tutoring
given its attractive balance between affordability and the
amount of individual attention students are able to receive from
their teachers. In 2009, this segment represented an estimated
market size of RMB104.6 billion, according to iResearch.
iResearch expects this segment to grow at a CAGR of 19.3% over
the next five years.
One-on-one
personalized tutoring.
This class format offers the most
customized tutoring services based on a students specific
situations and study needs and has grown in popularity in recent
years driven by the increasing demand for highly tailored
tutoring services as well as an increase in the number of
high-income households in China. In 2009, the
one-on-one
personalized tutoring segment represented an estimated market
size of RMB56.2 billion, according to iResearch. iResearch
expects this segment to grow at a CAGR of 20.0% over the next
five years.
Online courses:
pre-recorded or live class videos coupled
with interactive teaching and testing materials offered through
educational websites. Online courses are able to reach a broader
base of students as they are unconstrained by geographic
location barriers and accessible on-demand by potential students
whose schedules or location do not allow them to attend courses
in person. In 2009, the online course segment represented an
estimated market size of RMB2.4 billion, according to
iResearch. iResearch expects this segment to grow at a CAGR of
40.2% over the next five years.
2009 (estimated)
2014 (estimated)
88
Table of Contents
89
Table of Contents
90
Table of Contents
91
Table of Contents
92
Table of Contents
93
Table of Contents
educate our students to become well-rounded people with
integrity and high moral standards;
motivate our students to set and achieve high long-term goals;
nurture our students passion for learning; and
foster a loving and caring character in our students.
94
Table of Contents
95
Table of Contents
96
Table of Contents
Primary School
Middle School
High School
K
1
2
3
4
5
6
7
8
9
10
11
12
: Currently
offered.
: Not
offered at the corresponding grade level in public schools in
China.
97
Table of Contents
Number of
Number of
Learning Centers
Service Centers
80
61
14
12
2
2
3
3
4
3
6
6
98
Table of Contents
99
Table of Contents
brand;
student achievements;
price/value;
type and quality of tutoring services offered; and
ability to effectively tailor service offerings to specific
needs of students, parents and educators.
3 trademark registrations for our brand and logo in China and
Hong Kong;
registrations of 13 domain names;
copyrights to substantially all of the course content we
developed in house, including all of our online courses; and
copyright registration certificates for 20 software programs
developed by us relating to different aspects of our operations.
100
Table of Contents
Our main webpage which is linked to the websites listed below
Online courses
College entrance examinations
High school entrance examinations
Personalized premium services
Mathematics for primary and middle schools; specialized training
for competition mathematics
English language
Chinese composition
Preschool and kindergarten education
Number of
Employees
% of Total
1,067
37.7
%
912
32.3
%
149
5.3
%
217
7.7
%
325
11.5
%
157
5.6
%
2,827
100.0
%
101
Table of Contents
102
Table of Contents
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
107
Table of Contents
108
Table of Contents
109
Table of Contents
110
Table of Contents
capital contributions to our subsidiaries in China, whether
existing ones or newly established ones, must be approved by the
PRC Ministry of Commerce or its local bureaus;
loans by us to our subsidiaries in China, each of which is a
foreign-invested enterprise, to finance their activities cannot
exceed statutory limits and must be registered with the PRC
State Administration of Foreign Exchange, or SAFE, or its local
bureaus; and
loans by us to our affiliated entities, which are domestic PRC
entities, must be approved by the National Development and
Reform Commission and must also be registered with SAFE or its
local bureaus.
111
Table of Contents
112
Table of Contents
29
Chairman of the Board of Directors and Chief Executive Officer
30
Director and President
48
Director
42
Independent Director Appointee*
45
Independent Director Appointee*
28
Vice President
28
Vice President
32
Chief Financial Officer
*
Jane Jie Sun and Wai Chau Lin have
accepted our appointment to be our independent directors,
effective upon the effectiveness of our registration statement
on
Form F-1,
of which this prospectus is a part.
113
Table of Contents
114
Table of Contents
appointing the independent auditors and pre-approving all
auditing and non-auditing services permitted to be performed by
the independent auditors;
reviewing with the independent auditors any audit problems or
difficulties and managements response;
discussing the annual audited financial statements with
management and the independent auditors;
reviewing the adequacy and effectiveness of our accounting and
internal control policies and procedures and any steps taken to
monitor and control major financial risk exposures;
reviewing and approving all proposed related party transactions;
meeting separately and periodically with management and the
independent auditors; and
monitoring compliance with our code of business conduct and
ethics, including reviewing the adequacy and effectiveness of
our procedures to ensure proper compliance.
reviewing and approving, or recommending to the board for its
approval, the compensation for our chief executive officer and
other executive officers;
reviewing and recommending to the board for determination with
respect to the compensation of our non-employee
directors; and
reviewing periodically and approving any incentive compensation
or equity plans, programs or similar arrangements.
selecting and recommending to the board nominees for election by
the shareholders or appointment by the board;
reviewing annually with the board the current composition of the
board with regards to characteristics such as independence,
knowledge, skills, experience and diversity;
making recommendations on the frequency and structure of board
meetings and monitoring the functioning of the committees of the
board; and
advising the board periodically with regards to significant
developments in the law and practice of corporate governance as
well as our compliance with applicable laws and regulations, and
making recommendations to the board on all matters of corporate
governance and on any remedial action to be taken.
115
Table of Contents
116
Table of Contents
Number of
Class A
Vesting
Restricted
Date of
Commencement
Vesting
Name
Shares
Grant
Date
Schedule
*
July 26, 2010
July 26, 2010
4 years
*
July 26, 2010
July 26, 2010
4 years
*
July 26, 2010
July 26, 2010
4 years
2,125,000
July 26, 2010
4 years
3,294,500
July 26, 2010
1 to 4 years
5,419,500
July 26, 2010
*
Less than 1% of the outstanding common shares.
117
Table of Contents
118
Table of Contents
each of our directors and executive officers; and
each person known to us to own beneficially more than 5% of our
common shares.
Shares Beneficially
Shares Beneficially
Owned after This Offering
Owned Prior to This Offering
% of Voting
Number
%
(1)
Number
%
(2)
Power
(3)
59,550,000
47.6
%
20,300,000
16.2
%
8,125,000
6.5
%
8,812,500
7.1
%
6,337,500
5.1
%
103,125,000
82.5
%
59,550,000
47.6
%
21,875,000
17.5
%
14,550,000
11.6
%
8,125,000
6.5
%
8,812,500
7.1
%
6,337,500
5.1
%
(1)
For each person and group included
in this column, percentage ownership is calculated by dividing
the number of shares beneficially owned by such person or group
by 125,000,000, being the sum of the total number of common
shares outstanding as of the date of the prospectus and the
number of common shares issuable upon conversion of all
outstanding series A preferred shares at the conversion
rate of one preferred share to one Class B common share.
(2)
For each person and group included
in this column, percentage ownership is calculated by dividing
the number of shares beneficially owned by such person or group
by ,
being the total number of common shares outstanding immediately
after the closing of this offering, assuming that the
underwriters do not exercise their over-allotment option.
(3)
Percentage of total voting power
represents voting power with respect to all of our Class A
and Class B common shares, as a single class. Each holder
of our Class B common shares is entitled to ten votes per
Class B common share and each holder of Class A common
shares is entitled to one vote per Class A common share
held by our shareholders on all matters submitted to them for a
vote. Our Class A common shares and Class B common
shares vote together as a single class on all matters submitted
to a vote of our shareholders, except as may otherwise be
required by law. Our Class B common shares are convertible
at any time by the holder into Class A common shares on a
1:1 basis.
(4)
Consists of
59,550,000 Class B common shares held by Bright Unison
Limited, a British Virgin Islands company. Bangxin Zhang is the
sole shareholder and the sole director of Bright Unison Limited.
Bangxin Zhangs business address is
c/o 18/F,
Hesheng Building, 32 Zhongguancun Avenue, Haidian District,
Beijing 100080, Peoples Republic of China.
119
Table of Contents
(5)
Consists of
(i) 14,550,000 Class B common shares held by
Central Glory Investments Limited, a British Virgin Islands
company, to which Yundong Cao is the sole shareholder and the
sole director and (ii) 5,750,000 Class B common shares
held by Passion Prance Limited, a British Virgin Islands
company, to which Yundong Caos spouse is the sole
shareholder and the sole director. Mr. Cao disclaims
beneficiary ownership of the shares held by Passion Prance
Limited. Yundong Caos business address is
c/o 18/F,
Hesheng Building, 32 Zhongguancun Avenue, Haidian District,
Beijing 100080, Peoples Republic of China.
(6)
Consists of
(i) 3,125,000 Class B common shares held by KTB
China Optimum Fund and (ii) 5,000,000 Class B common
shares issuable upon the conversion of the Series A
preferred shares held by KTB China Optimum Fund. See also
note (11) below to this table. Aieming Amy Yeh is an
executive director at KTB Capital, an affiliate of KTB China
Optimum Fund. Ms. Yeh disclaims beneficiary ownership of
the shares held by KTB China Optimum Fund except to the extent
of her pecuniary interest therein. Aieming Amy Yehs
business address is 3504, SoHo Donghai Plaza, 299 Tongren Road,
Shanghai, Peoples Republic of China.
(7)
Consists of
8,812,500 Class B common shares held by Perfect Wisdom
International Limited, a British Virgin Islands company. Yachao
Liu is the sole shareholder and the sole director of Perfect
Wisdom International Limited. Yachao Lius business address
is
c/o 18/F,
Hesheng Building, 32 Zhongguancun Avenue, Haidian District,
Beijing 100080, Peoples Republic of China.
(8)
Consists of
6,337,500 Class B common shares held by Excellent New
Limited, a British Virgin Islands company. Yunfeng Bai is the
sole shareholder and the sole director of Excellent New Limited.
Yunfeng Bais business address is
c/o 18/F,
Hesheng Building, 32 Zhongguancun Avenue, Haidian District,
Beijing 100080, Peoples Republic of China.
(9)
Bright Unison Limited is a company
incorporated in the British Virgin Islands. Bangxin Zhang is the
sole shareholder and the sole director of Bright Unison Limited.
Its registered office is at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin
Islands.
(10)
Tiger Global Five China Holdings is
a company organized under the laws of Mauritius and controlled
by Tiger Global Five Parent Holdings, which is in turn
controlled by Tiger Global Private Investment Partners V, L.P.,
or PIP V. PIP V is controlled by its general partner
Tiger Global PIP Performance V, L.P., which is controlled by its
general partner Tiger Global PIP Management V, Ltd., which is in
turn controlled by Charles P. Coleman III. The registered office
of Tiger Global Five China Holdings is Twenty Seven, Cybercity,
Ebene, Mauritius.
(11)
Central Glory Investments Limited
is a company incorporated in the British Virgin Islands. Yundong
Cao is the sole shareholder and the sole director of Central
Glory Investments Limited. Its registered office is at
P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola, British Virgin Islands.
(12)
Consists of
(i) 3,125,000 Class B common shares held by KTB
China Optimum Fund and (ii) 5,000,000 Class B common
shares issuable upon the conversion of the Series A
preferred shares held by KTB China Optimum Fund. KTB China
Optimum Fund was formed in Korea, and its general partner is KTB
Capital Co., Ltd. KTB Capital Co., Ltd., which is a wholly owned
subsidiary of KTB Securities Co., Ltd., a listed company on
Korea Stock Exchange, has the discretionary authority to vote
and dispose of the shares held by KTB China Optimum Fund. KTB
China Optimum Funds registered office is at KTB network
building
826-14
Yeoksam-dong Gangnam-gu, Seoul, Korea.
(13)
Perfect Wisdom International
Limited is a company incorporated in the British Virgin Islands.
Yachao Liu is the sole shareholder and the sole director of
Perfect Wisdom International Limited. Its registered office is
at P.O. Box 957, Offshore Incorporations Centre, Road
Town, Tortola, British Virgin Islands.
(14)
Excellent New Limited is a company
incorporated in the British Virgin Islands. Yunfeng Bai is the
sole shareholder and the sole director of Excellent New Limited.
Its registered office is at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin
Islands.
120
Table of Contents
121
Table of Contents
122
Table of Contents
123
Table of Contents
authorize our board of directors to issue preference shares in
one or more series and to designate the price, rights,
preferences, privileges and restrictions of such preference
shares without any further vote or action by our
shareholders; and
limit the ability of shareholders to requisition and convene
general meetings of shareholders.
124
Table of Contents
125
Table of Contents
the statutory provisions as to majority vote have been met;
the shareholders have been fairly represented at the meeting in
question;
the arrangement is such that a businessman would reasonably
approve; and
the arrangement is not one that would more properly be
sanctioned under some other provision of the Companies Law.
126
Table of Contents
a company is acting or proposing to act illegally or ultra vires;
the act complained of, although not ultra vires, could be
effected duly if authorized by more than a simple majority vote
which has not been obtained; and
those who control the company are perpetrating a fraud on
the minority.
127
Table of Contents
128
Table of Contents
129
Table of Contents
Cash.
The depositary will distribute any
U.S. dollars available to it resulting from a cash dividend
or other cash distribution or the net proceeds of sales of any
other distribution or portion thereof (to the
130
Table of Contents
extent applicable), on an averaged or other practicable basis,
subject to (i) appropriate adjustments for taxes withheld,
(ii) such distribution being impermissible or impracticable
with respect to certain registered ADR holders, and
(iii) deduction of the depositarys expenses in
(1) converting any foreign currency to U.S. dollars to
the extent that it determines that such conversion may be made
on a reasonable basis, (2) transferring foreign currency or
U.S. dollars to the United States by such means as the
depositary may determine to the extent that it determines that
such transfer may be made on a reasonable basis,
(3) obtaining any approval or license of any governmental
authority required for such conversion or transfer, which is
obtainable at a reasonable cost and within a reasonable time and
(4) making any sale by public or private means in any
commercially reasonable manner. If exchange rates fluctuate
during a time when the depositary cannot convert a foreign
currency, you may lose some or all of the value of the
distribution.
Shares.
In the case of a distribution in shares,
the depositary will issue additional ADRs to evidence the number
of ADSs representing such shares. Only whole ADSs will be
issued. Any shares which would result in fractional ADSs will be
sold and the net proceeds will be distributed in the same manner
as cash to the ADR holders entitled thereto.
Rights to receive additional shares.
In the case
of a distribution of rights to subscribe for additional shares
or other rights, if we provide evidence satisfactory to the
depositary that it may lawfully distribute such rights, the
depositary will distribute warrants or other instruments in the
discretion of the depositary representing such rights. However,
if we do not furnish such evidence, the depositary may:
sell such rights if practicable and distribute the net proceeds
in the same manner as cash to the ADR holders entitled
thereto; or
if it is not practicable to sell such rights, do nothing and
allow such rights to lapse, in which case ADR holders will
receive nothing.
Other Distributions.
In the case of a distribution
of securities or property other than those described above, the
depositary may either (i) distribute such securities or
property in any manner it deems equitable and practicable or
(ii) to the extent the depositary deems distribution of
such securities or property not to be equitable and practicable,
sell such securities or property and distribute any net proceeds
in the same way it distributes cash.
131
Table of Contents
temporary delays caused by closing our transfer books or those
of the depositary or the deposit of shares in connection with
voting at a shareholders meeting, or the payment of
dividends;
the payment of fees, taxes and similar charges; or
compliance with any U.S. or foreign laws or governmental
regulations relating to the ADRs or to the withdrawal of
deposited securities.
to receive any distribution on or in respect of shares,
to give instructions for the exercise of voting rights at a
meeting of holders of shares,
132
Table of Contents
to pay the fee assessed by the depositary for administration of
the ADR program and for any expenses as provided for in the
ADR, or
to receive any notice or to act in respect of other matters,
133
Table of Contents
a fee of $1.50 per ADR or ADRs for transfers of certificated or
direct registration ADRs;
a fee of up to $0.05 per ADS for any cash distribution made
pursuant to the deposit agreement;
a fee of up to $0.05 per ADS per calendar year (or portion
thereof) for services performed by the depositary in
administering the ADRs (which fee may be charged on a periodic
basis during each calendar year and shall be assessed against
holders of ADRs as of the record date or record dates set by the
depositary during each calendar year and shall be payable in the
manner described in the next succeeding provision);
reimbursement of such fees, charges and expenses as are incurred
by the depositary
and/or
any
of the depositarys agents (including, without limitation,
the custodian and expenses incurred on behalf of holders in
connection with compliance with foreign exchange control
regulations or any law or regulation relating to foreign
investment) in connection with the servicing of the shares, the
delivery of deposited securities or otherwise in connection with
the depositarys or its custodians compliance with
applicable law, rule or regulation (which charge shall be
assessed on a proportionate basis against holders as of the
record date or dates set by the depositary and shall be payable
at the sole discretion of the depositary by billing such holders
or by deducting such charge from one or more cash dividends or
other cash distributions);
a fee for the distribution of securities (or the sale of
securities in connection with a distribution), such fee being in
an amount equal to the fee for the execution and delivery of
ADSs which would have been charged as a result of the deposit of
such securities (treating all such securities as if they were
shares) but which securities or the net cash proceeds from the
sale thereof are instead distributed by the depositary to those
holders entitled thereto;
stock transfer or other taxes and other governmental charges;
cable, telex and facsimile transmission and delivery charges
incurred at your request in connection with the deposit or
delivery of shares;
transfer or registration fees for the registration of transfer
of deposited securities on any applicable register in connection
with the deposit or withdrawal of deposited securities; and
expenses of the depositary in connection with the conversion of
foreign currency into U.S. dollars.
134
Table of Contents
135
Table of Contents
payment with respect thereto of (i) any stock transfer or
other tax or other governmental charge, (ii) any stock
transfer or registration fees in effect for the registration of
transfers of shares upon any applicable register and
(iii) any applicable fees and expenses described in the
deposit agreement;
the production of proof satisfactory to it of (i) the
identity of any signatory and genuineness of any signature and
(ii) such other information, including without limitation,
information as to citizenship,
136
Table of Contents
residence, exchange control approval, beneficial ownership of
any securities, compliance with applicable law, regulations,
provisions of or governing deposited securities and terms of the
deposit agreement and the ADRs, as it may deem necessary or
proper; and
compliance with such regulations as the depositary may establish
consistent with the deposit agreement.
any present or future law, rule, regulation, fiat, order or
decree of the United States, the Cayman Islands, the
Peoples Republic of China (for this section only,
including the Hong Kong Special Administrative Region) or any
other country, or of any governmental or regulatory authority or
securities exchange or market or automated quotation system, the
provisions of or governing any deposited securities, any present
or future provision of our charter, any act of God, war,
terrorism or other circumstance beyond our, the
depositarys or our respective agents control shall
prevent, delay or subject to any civil or criminal penalty, any
act which the deposit agreement or the ADRs provide shall be
done or performed by us, the depositary or our respective agents
(including, without limitation, voting);
it exercises or fails to exercise discretion under the deposit
agreement or the ADR;
it performs its obligations under the deposit agreement and ADRs
without gross negligence or bad faith;
it takes any action or refrains from taking any action in
reliance upon the advice of or information from legal counsel,
accountants, any person presenting shares for deposit, any
registered holder of ADRs, or any other person believed by it to
be competent to give such advice or information; or
it relies upon any written notice, request, direction or other
document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
137
Table of Contents
138
Table of Contents
be a party to and bound by the terms of the deposit agreement
and the applicable ADR or ADRs, and
appoint the depositary its attorney-in-fact, with full power to
delegate, to act on its behalf and to take any and all actions
contemplated in the deposit agreement and the applicable ADR or
ADRs, to adopt any and all procedures necessary to comply with
applicable laws and to take such action as the depositary in its
sole discretion may deem necessary or appropriate to carry out
the purposes of the deposit agreement and the applicable ADR and
ADRs, the taking of such actions to be the conclusive
determinant of the necessity and appropriateness thereof.
139
Table of Contents
140
Table of Contents
1% of the number of our common shares then outstanding, in the
form of ADSs or otherwise, which will equal
approximately million shares
immediately after this offering, assuming the underwriters do
not exercise their over-allotment option; and
the average weekly trading volume of our ADSs on the New York
Stock Exchange during the four calendar weeks preceding the date
on which notice of the sale is filed with the SEC.
141
Table of Contents
142
Table of Contents
143
Table of Contents
144
Table of Contents
145
Table of Contents
146
Table of Contents
excess distribution
and/or
gain
will be allocated ratably over the U.S. Holders
holding period for the ADSs or common shares;
amount allocated to the current taxable year and any taxable
years in the U.S. Holders holding period prior to the
first taxable year in which we are classified as a PFIC, or
pre-PFIC year, will be taxable as ordinary income;
amount allocated to each prior taxable year, other than the
current taxable year or a pre-PFIC year, will be subject to tax
at the highest tax rate in effect applicable to the
U.S. Holder for that year; and
interest charge generally applicable to underpayments of tax
will be imposed on the tax attributable to each prior taxable
year, other than the current taxable year or a pre-PFIC year.
147
Table of Contents
148
Table of Contents
Number of ADSs
Per ADS
Total
No
Full
No
Full
Exercise
Exercise
Exercise
Exercise
$
$
$
$
149
Table of Contents
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any
common shares or ADSs or any securities convertible into or
exercisable or exchangeable for such common shares or ADSs or
enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers
to another, in whole or in part, any of the economic
consequences of ownership of the common shares or ADSs, whether
any such transaction described above is to be settled by
delivery of common shares or ADSs or such other securities, in
cash or otherwise;
file any registration statement with the SEC relating to the
offering of any common shares or ADSs or any securities
convertible into or exercisable or exchangeable for such common
shares or ADSs; or
publicly disclose the intention to make any such offer, pledge,
sale or disposition, or enter into any such transaction, swap,
hedge or other arrangement, or file any such registration
statement.
the sale of common shares or ADSs to the underwriters;
the issuance of common shares or the grant of options to
purchase common shares under our share incentive plan; and
the issuance by us of common shares upon the exercise of an
option or a warrant or the conversion of a security outstanding
on the date of this prospectus of which the underwriters have
been advised in writing or which is otherwise described in this
prospectus.
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any
common shares or ADSs or any securities convertible into or
exercisable or exchangeable for such common shares or ADSs or
enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers
to another, in whole or in part, any of the economic
consequences of ownership of the common shares or ADSs, whether
any such transaction described above is to be settled by
delivery of common shares or ADSs or such other securities, in
cash or otherwise; or
publicly disclose the intention to make any such offer, pledge,
sale or disposition, or enter into any such transaction, swap,
hedge or other arrangement.
150
Table of Contents
during the last 17 days of the
180-day
restricted period we issue an earnings release or material news
or a material event relating to our company occurs; or
prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period.
151
Table of Contents
152
Table of Contents
153
Table of Contents
154
Table of Contents
$
$
155
Table of Contents
156
Table of Contents
157
Table of Contents
F-9
F-11
F-43
158
Page(s)
F-2
F-3
F-4
F-5
F-6F-7
F-8F-36
F-37F-40
F-41
F-42
F-43
F-44
F-45-F-58
F-1
Table of Contents
F-2
Table of Contents
As of
As of
February 28,
February 28,
2009
2010
$
29,692,901
$
50,752,481
340,418
1,918,156
92,112
1,063
121,819
481,129
831,297
1,414,923
2,280,941
32,022,546
55,904,694
2,471,337
4,991,490
131,289
283,968
939,207
2,170,548
2,226,343
1,389,160
762,272
763,802
$
38,552,994
$
65,503,662
Liabilities, Convertible Redeemable Preferred Shares and
Equity
$
$
987,742
18,022,550
29,407,994
101,043
108,204
1,462,095
3,609,797
6,817,816
2,636,095
580,225
25,831,580
37,901,981
500,000
203,776
175,610
162,293
26,197,649
38,577,591
9,000,000
9,000,000
120,000
120,000
(120,000
)
(120,000
)
559,898
779,641
2,660,818
4,857,443
21,400
12,069,734
113,229
219,253
3,355,345
17,926,071
$
38,552,994
$
65,503,662
F-3
Table of Contents
For the year
For the year
For the year
ended
ended
ended
February 29,
February 28,
February 28,
2008
2009
2010
$
8,882,191
$
37,475,583
$
69,593,523
(4,367,086
)
(18,554,255
)
(37,648,875
)
4,515,105
18,921,328
31,944,648
(370,185
)
(2,353,011
)
(5,608,116
)
(2,478,092
)
(5,889,370
)
(10,871,866
)
(1,615,455
)
(2,848,277
)
(9,857,836
)
(16,479,982
)
1,666,828
9,063,492
15,464,666
10,485
119,922
323,861
(42,967
)
(40,643
)
(209,949
)
(124,400
)
(362,668
)
731,092
1,677,313
9,298,922
15,623,484
(164,741
)
(2,018,253
)
(1,378,525
)
1,512,572
7,280,669
14,244,959
1,512,572
7,280,669
14,244,959
(4,113,035
)
1,512,572
3,167,634
14,244,959
$
0.01
$
0.03
$
0.11
$
0.01
$
0.03
$
0.11
$
$
17.69
$
0.11
120,000,000
120,000,000
120,000,000
120,000,000
120,000,000
125,000,000
232,877
5,000,000
F-4
Table of Contents
Consolidated Statements of Changes in Equity and Comprehensive
Income
(In U.S. dollars, except share and share related data)
Total TAL
Class B common
Accumulated
Education
shares
Additional
other
Group
Class B common shares
subscription
paid-in
Statutory
(Accumulated deficit)/
comprehensive
shareholders
Comprehensive
Shares
Amount
receivable
capital
reserve
retained earnings
income (loss)
equity
income
1,000
$
1
$
(1
)
$
62,580
$
$
(555,968
)
$
$
(493,388
)
$
131,810
131,810
1,512,572
1,512,572
1,512,572
494,040
(494,040
)
42,102
42,102
42,102
(49,327
)
(49,327
)
(49,327
)
1,000
1
(1
)
194,390
494,040
462,564
(7,225
)
1,143,769
$
1,505,347
365,508
365,508
7,280,669
7,280,669
7,280,669
119,999,000
119,999
(119,999
)
2,166,778
(2,166,778
)
(1,442,020
)
(1,442,020
)
(4,113,035
)
(4,113,035
)
71,127
71,127
71,127
(216,784
)
(216,784
)
(216,784
)
266,111
266,111
266,111
120,000,000
120,000
(120,000
)
559,898
2,660,818
21,400
113,229
3,355,345
$
7,401,123
219,743
219,743
14,244,959
14,244,959
14,244,959
2,196,625
(2,196,625
)
21,493
21,493
21,493
84,531
84,531
84,531
120,000,000
$
120,000
$
(120,000
)
$
779,641
$
4,857,443
$
12,069,734
$
219,253
$
17,926,071
$
14,350,983
F-5
Table of Contents
For the year
For the year
For the year
ended
ended
ended
February 29,
February 28,
February 28,
2008
2009
2010
$
1,512,572
$
7,280,669
$
14,244,959
46,416
452,009
1,272,074
114,536
565,300
841,193
1,615,455
362,668
(731,092
)
(41,914
)
(91,458
)
92,247
(4,270
)
3,603
(120,688
)
425,014
(802,788
)
(862,708
)
(139,879
)
(602,485
)
(557,895
)
(235,756
)
(635,096
)
(1,228,785
)
987,204
3,701,239
11,995,607
11,343,086
(36,135
)
6,954
644,389
1,805,910
3,217,670
302,689
2,285,218
(2,060,038
)
6,325,036
23,467,385
27,175,273
(532,814
)
(2,142,362
)
(3,785,897
)
(277,022
)
(1,422,679
)
(660,519
)
(1,464,231
)
(1,551,362
)
(1,470,355
)
(5,116,403
)
(5,250,128
)
F-6
Table of Contents
For the year
For the year
For the year
ended
ended
ended
February 29,
February 28,
February 28,
2008
2009
2010
4,886,965
131,810
365,508
219,743
(180,345
)
(1,442,020
)
500,000
131,810
5,252,473
(902,622
)
315,097
384,961
37,057
5,301,588
23,988,416
21,059,580
402,897
5,704,485
29,692,901
5,704,485
29,692,901
50,752,481
$
1,931
$
335,439
$
3,997,584
F-7
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
1.
Organization
and Principal Activities
Place of
Later of date of
incorporation
Percentage of
incorporation
(or establishment)
economic
/operation
ownership
(Xueersi Hong Kong)
March 11, 2008
Hong Kong
100
%
Holding company
Co., Ltd. (TAL Beijing)
May 8, 2008
Beijing
100
%
Software sales,
and consulting service
Consulting Co., Ltd. (Huanqiu Zhikang)
September 17, 2009
Beijing
100
%
Education and management
consulting service
Co., Ltd. (Yidu Huida)
November 11, 2009
Beijing
100
%
Software sales and
consulting service
Co., Ltd. (Xueersi Education)
December 31, 2005
Beijing
100
%
Sales of educational
materials and products
Co., Ltd. (Xueersi Network)
August 23, 2007
Beijing
100
%
On-line education
School (Haidian Xueersi)
July 3, 2006
Beijing
100
%
After-school tutoring for primary
and secondary school students
Training School (Dongcheng Xueersi)
March 21, 2008
Beijing
100
%
After-school tutoring for primary
and secondary school students
Co., Ltd. (Zhikang)
June 30, 2008
Beijing
100
%
After- school tutoring for primary
and secondary school students
English Training School (Jianli School)
July 1, 2008
Hubei
100
%
Language education
English Training School (Qianjiang School)
July 1, 2008
Hubei
100
%
Language education
English Training School (Wuhan School)
July 1, 2008
Hubei
100
%
Language education
Information Co., Ltd. (Shanghai Lehai)
August 1, 2008
Shanghai
100
%
Technology development
and consulting service
School (Changning School)
August 1, 2008
Shanghai
100
%
After-school tutoring for primary
and secondary school students
School (Minhang School)
August 1, 2008
Shanghai
100
%
Language education
Training School (Xicheng Xueersi)
April 2, 2009
Beijing
100
%
After-school tutoring for primary
and secondary school students
F-8
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Place of
Later of date of
incorporation
Percentage of
incorporation
(or establishment)
economic
/operation
ownership
Consulting Co., Ltd. (Shanghai Education)
July 2, 2009
Shanghai
100
%
Educational information consulting
and educational software development
Consulting Co., Ltd. (Tianjin Education)
August 14, 2009
Tianjin
100
%
Educational information
consulting service
Co., Ltd. (Guangzhou Education)
August 16, 2009
Guangzhou
100
%
Educational technology
research and development
Co., Ltd. (Shenzhen Education)
December 22, 2009
Shenzhen
100
%
Teaching software research
and development
Agreements that transfer economic benefits to TAL Beijing
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Agreements that provide TAL Beijing effective control over the
VIEs
As of
As of
February 28,
February 28,
2009
2010
$
27,027,498
$
45,171,584
6,452,080
8,792,445
33,479,578
53,964,029
25,822,900
34,897,136
366,069
175,610
$
26,188,969
$
35,072,746
F-10
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
8,882,191
$
37,475,583
$
68,884,665
$
1,512,572
$
7,312,960
$
14,260,357
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
6,325,036
$
24,956,771
$
21,611,823
$
(1,470,355
)
$
(5,066,464
)
$
(5,250,128
)
$
131,810
$
365,508
$
(1,402,622
)
2.
Significant
Accounting Policies
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
3 years
4-5 years
3-5 years
Shorter of the lease term or estimated useful lives
10.0 years
3.5 years
2.6-3.5 years
3.0 years
2.0-3.0 years
0.9-2.0 years
F-12
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-13
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-14
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-15
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-16
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-17
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
3.
Acquisitions
F-18
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Amortization
period
$
12,504
3,189
177,822
3.50 years
97,656
3.50 years
2,915
2.00 years
2,915
1.50 years
1,338,753
(70,327
)
550,956
367,304
787,080
1,705,340
(139,913
)
$
1,565,427
F-19
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
Amortization
period
$
173,832
102,010
157,523
(344,380
)
(1,585
)
330,865
3.50 years
262,360
10.00 years
164,704
3.50 years
16,033
3.00 years
3,207
1.67 years
357,300
(194,292
)
$
1,027,577
F-20
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the years ended
February 29,
February 28,
2008
2009
(unaudited)
(unaudited)
$
9,517,600
$
37,876,116
$
1,546,449
$
6,598,516
$
0.01
$
0.02
$
0.01
$
0.02
$
17.68
4.
Extinguishment
of Liabilities
5.
Available-for-Sale
Securities
F-21
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
$
660,519
42,567
(73,623
)
629,463
(289,045
)
340,418
1,464,231
112,708
799
$
1,918,156
(1)
The Group determined the decline to be other-than temporary due
to the continuing challenging global financial markets, poor
performance of the equity markets, as well as the duration and
the extent to which the fair value of the securities had
continued to be less than the cost and therefore booked an
impairment loss in the income statement of $266,111, net of tax
effect of $96,557.
As of February 28, 2009
As of February 28, 2010
Gross
Gross
Gross
Gross
unrealized
unrealized
unrealized
unrealized
Cost
gains
(losses)
Fair value
Cost
gains
(losses)
Fair value
$
340,418
$
$
$
340,418
$
1,805,448
$
120,678
$
(7,970
)
$
1,918,156
6.
Prepaid
Expenses and Other Current Assets
As of
As of
February 28,
February 28,
2009
2010
$
797,674
$
1,344,238
391,049
305,782
165,257
450,705
60,943
180,216
$
1,414,923
$
2,280,941
F-22
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
7.
Property
and Equipment, Net
As of
As of
February 28,
February 28,
2009
2010
$
1,280,185
$
3,399,250
869,600
2,293,808
458,412
624,296
377,318
462,112
(514,178
)
(1,787,976
)
$
2,471,337
$
4,991,490
8.
Intangible
Assets, Net
As of
As of
February 28,
February 28,
2009
2010
$
1,846,858
$
1,846,858
425,576
425,576
348,566
348,566
262,360
262,360
19,200
19,200
9,902
9,902
(696,148
)
(1,537,341
)
10,029
14,039
$
2,226,343
$
1,389,160
F-23
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
9.
Accrued
Expenses and Other Current Liabilities
As of
As of
February 28,
February 28,
2009
2010
$
2,303,069
$
3,893,895
38,791
453,081
533,035
513,062
634,397
1,343,425
100,505
614,353
$
3,609,797
$
6,817,816
$
76,760
137,257
137,257
161,788
$
513,062
10.
Convertible
Loan
11.
Income
Taxes
F-24
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
304,620
$
2,620,738
$
1,936,420
(139,879
)
(602,485
)
(557,895
)
$
164,741
$
2,018,253
$
1,378,525
F-25
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
As of
As of
February 28,
February 28,
2009
2010
$
510,275
$
903,939
(29,146
)
(72,642
)
481,129
831,297
35,434
134,915
70,558
163,003
137,639
303,909
(112,342
)
(317,859
)
131,289
283,968
203,776
147,433
28,177
$
203,776
$
175,610
F-26
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
1,677,313
$
9,298,922
$
15,623,484
33
% (1)
25
%
25
%
553,513
2,324,731
3,905,871
64,410
214,023
23,593
257,357
289,945
(476,775
)
(923,868
)
(3,070,154
)
5,527
3,850
140,483
249,013
$
164,741
$
2,018,253
$
1,378,525
(1)
PRC statutory tax rate was 33% for the period between
March 1, 2007 and December 31, 2007 and 25% for the
period between January 1, 2008 and February 29, 2008.
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
476,775
$
923,868
$
3,070,154
$
0.01
$
0.02
$
0.09
$
$
17.68
$
0.09
$
0.01
$
0.02
$
0.09
F-27
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
12.
Impairment
Loss on Intangible Assets and Goodwill
As of February 28,
2009
2010
$
$
762,272
2,021,450
(1,256,084
)
(3,094
)
1,530
$
762,272
$
763,802
$
$
(1,256,084
)
(1,256,084
)
$
(1,256,084
)
$
(1,256,084
)
F-28
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
13.
Convertible
Redeemable Preferred Shares
F-29
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
14.
Common
Shares
F-30
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
15.
Net
Income per Share
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
1,512,572
$
7,280,669
$
14,244,959
4,113,035
1,512,572
3,167,634
14,244,959
1,512,572
3,161,499
(i)(ii)
13,675,161
(i)
4,119,170
(i)(iii)
569,798
(i)
1,512,572
3,161,499
14,244,959
120,000,000
120,000,000
120,000,000
232,877
5,000,000
120,000,000
120,000,000
125,000,000
$
0.01
$
0.03
$
0.11
$
$
17.69
$
0.11
$
0.01
$
0.03
$
0.11
F-31
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
(i)
In 2009 and 2010, undistributed net income was allocated between
common shares and preferred shares on pro rata basis on the
dividend participating rights. Since each Series A
convertible redeemable preferred share has the same
participating right as each common share, the allocation was
based on the weighted average numbers of common shares and
Series A convertible redeemable preferred shares. The net
income allocated for computing net income per preferred
share-basic also contains the deemed dividend for accretion of
the redemption premium.
(ii)
For the year ended February 28, 2009, $3,167,634 of
undistributed net income was allocated between the weighted
average numbers of 120,000,000 common shares and
232,877 Series A convertible redeemable preferred
shares. Therefore, undistributed net income allocated for common
shares was $3,161,499 and $6,135 for Series A convertible
redeemable preferred shares.
(iii)
For the year ended February 28, 2009, net income allocated
for computing net income per Series A convertible
redeemable preferred shares-basic was $4,119,170 of which $6,135
was undistributed net income allocated between the weighted
average numbers of common shares and Series A convertible
redeemable preferred shares and $4,113,035 was deemed dividend
on Series A convertible redeemable preferred shares.
16.
Commitments
and Contingencies
$
13,154,964
12,113,895
8,044,734
6,134,223
3,226,231
$
42,674,047
17.
Segment
Information
F-32
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
8,882,191
$
37,152,739
$
69,138,216
322,844
455,307
$
8,882,191
$
37,475,583
$
69,593,523
18.
Mainland
China Contribution Plan
19.
Statutory
Reserves
F-33
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
20.
Related
Party Transactions
(a)
Amounts due from the founding shareholders-non-trading
As of
As of
February 28,
February 28,
2009
2010
$
92,112
(i)
$
i.
The amounts represent cash advances to the founding shareholders
for business expansion.
(b)
Amount due to the founding shareholders-non-trading
As of
As of
February 28,
February 28,
2009
2010
$
101,043
(ii)
$
108,204
(ii)
ii.
The amount represents rental deposits and acquisition
consideration paid by the founding shareholder on behalf of the
Group.
21.
Capital
Contribution
22.
Distribution
to Shareholders
23.
Subsequent
Events
F-34
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-35
Table of Contents
Notes to Consolidated Financial Statements
For the Years Ended February 29, 2008, February 28, 2009
and February 28, 2010
(In U.S. dollars, except share and share related data)
F-36
Table of Contents
Additional InformationFinancial Statement
Schedule I
Condensed Financial Information of Parent Company Balance
Sheets
(In US$, except share and share related data)
As of
As of
February 28,
February 28,
2009
2010
$
5,000,000
$
500,000
5,000,000
500,000
5,000,000
7,490,488
22,076,253
$
12,490,488
$
27,576,253
Liabilities, Convertible Redeemable Preferred Shares and
Equity
$
126,463
$
135,233
8,680
14,949
135,143
150,182
500,000
135,143
650,182
9,000,000
9,000,000
120,000
120,000
(120,000
)
(120,000
)
2,682,218
16,927,177
559,898
779,641
113,229
219,253
3,355,345
17,926,071
$
12,490,488
$
27,576,253
F-37
Table of Contents
Additional InformationFinancial Statement
Schedule I
Condensed Financial Information of Parent Company Statements of
Operations
(In US$, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
$
(22,126
)
$
(8,834
)
(22,126
)
(8,834
)
18
43
(6,248
)
1,512,572
7,302,777
14,259,998
$
1,512,572
$
7,280,669
$
14,244,959
F-38
Table of Contents
Additional InformationFinancial Statement
Schedule I
Consolidated Statements of Changes in Equity and Comprehensive
Income
(In U.S. dollars, except share and share related data)
Class B
(Accumulated
Accumulated
Class B
common share
Additional
deficit)
other
common shares
subscription
paid-in
Retained
comprehensive
Total
Comprehensive
Shares
Amount
receivable
capital
earnings
Income (loss)
equity
income
1,000
$
1
$
(1
)
$
62,580
$
(555,968
)
$
$
(493,388
)
$
131,810
131,810
1,512,572
1,512,572
1,512,572
42,102
42,102
42,102
(49,327
)
(49,327
)
(49,327
)
1,000
1
(1
)
194,390
956,604
(7,225
)
1,143,769
$
1,505,347
365,508
365,508
7,280,669
7,280,669
7,280,669
119,999,000
119,999
(119,999
)
(1,442,020
)
(1,442,020
)
(4,113,035
)
(4,113,035
)
71,127
71,127
71,127
(216,784
)
(216,784
)
(216,784
)
266,111
266,111
266,111
120,000,000
120,000
(120,000
)
559,898
2,682,218
113,229
3,355,345
$
7,401,123
219,743
219,743
14,244,959
14,244,959
14,244,959
21,493
21,493
21,493
84,531
84,531
84,531
120,000,000
$
120,000
$
(120,000
)
$
779,641
$
16,927,177
$
219,253
$
17,926,071
$
14,350,983
F-39
Table of Contents
Additional InformationFinancial Statement
Schedule I
Condensed Financial Information of Parent Company Cash Flow
Statements
(In US$, except share and share related data)
For the year ended
For the year ended
For the year ended
February 29,
February 28,
February 28,
2008
2009
2010
$
1,512,572
$
7,280,669
$
14,244,959
(1,512,572
)
(7,302,777
)
(14,259,998
)
126,463
8,770
8,680
6,269
113,035
4,886,965
500,000
(5,000,000
)
4,886,965
(4,500,000
)
5,000,000
(4,500,000
)
5,000,000
$
$
5,000,000
$
500,000
F-40
Table of Contents
(In U.S. dollars, except share and share related
data)
As of
As of
As of
February 28,
August 31,
August 31,
2010
2010
2010
Pro forma
(unaudited)
(Note 2)
$
50,752,481
$
81,494,598
$
81,494,598
1,918,156
448,277
448,277
121,819
252,268
252,268
437,152
437,152
831,297
1,226,469
1,226,469
2,280,941
3,838,203
3,838,203
55,904,694
87,696,967
87,696,967
4,991,490
5,550,290
5,550,290
283,968
167,989
167,989
2,170,548
2,308,268
2,308,268
1,389,160
1,025,325
1,025,325
763,802
765,923
765,923
$
65,503,662
$
97,514,762
$
97,514,762
Liabilities, Convertible Redeemable Preferred Shares and
Equity
$
987,742
$
712,710
$
712,710
29,407,994
42,100,775
42,100,775
108,204
100,571
100,571
6,817,816
9,618,867
9,618,867
580,225
3,054,408
3,054,408
37,901,981
55,587,331
55,587,331
500,000
500,000
500,000
175,610
146,684
146,684
38,577,591
56,234,015
56,234,015
9,000,000
9,000,000
120,000
120,000
125,000
(120,000
)
779,641
1,699,503
10,694,503
4,857,443
4,857,443
4,857,443
12,069,734
25,315,575
25,315,575
219,253
288,226
288,226
17,926,071
32,280,747
41,280,747
$
65,503,662
$
97,514,762
$
97,514,762
F-41
Table of Contents
Six-Month
Six-Month
Period Ended
Period Ended
August 31,
August 31,
2009
2010
$
32,983,005
$
53,022,037
16,067,926
26,254,975
16,915,079
26,767,062
1,958,295
4,183,992
4,601,514
7,807,640
6,559,809
11,991,632
10,355,270
14,775,430
102,839
205,340
(43,452
)
(118,730
)
(27,373
)
6,429
10,339,379
14,916,374
912,268
1,670,533
9,427,111
13,245,841
9,427,111
13,245,841
9,427,111
13,245,841
$
0.08
$
0.11
$
0.08
$
0.11
$
0.08
$
0.11
120,000,000
120,000,000
125,000,000
125,193,360
5,000,000
5,000,000
F-42
Table of Contents
Class B
Total TAL
common
Accumulated
Education
Class B
shares
Additional
other
Group
common shares
subscription
paid-in
Statutory
Retained
comprehensive
shareholders
Comprehensive
Shares
Amount
receivable
capital
reserve
earnings
income
equity
income
120,000,000
$
120,000
$
(120,000
)
$
559,898
$
2,660,818
$
21,400
$
113,229
$
3,355,345
$
9,427,111
9,427,111
9,427,111
19,702
19,702
19,702
41,739
41,739
41,739
120,000,000
$
120,000
$
(120,000
)
$
559,898
$
2,660,818
$
9,448,511
$
174,670
$
12,843,897
$
9,488,552
120,000,000
$
120,000
$
(120,000
)
$
779,641
$
4,857,443
$
12,069,734
$
219,253
$
17,926,071
$
120,000
120,000
13,245,841
13,245,841
13,245,841
919,862
919,862
72,615
72,615
72,615
5,973
5,973
5,973
(9,615
)
(9,615
)
(9,615
)
120,000,000
$
120,000
$
$
1,699,503
$
4,857,443
$
25,315,575
$
288,226
$
32,280,747
$
13,314,814
Table of Contents
(In U.S. dollars, except share and share related data)
Six-Month
Six-Month
Periods Ended
Periods Ended
August 31,
August 31,
2009
2010
$
9,427,111
$
13,245,841
438,369
1,140,156
335,783
367,471
919,862
92,223
(48,578
)
(130,501
)
(705,149
)
(1,690,015
)
(274,942
)
(369,207
)
(308,730
)
(393,576
)
(157,500
)
84,417
(258,742
)
5,672,499
12,577,482
283,209
(7,948
)
1,480,818
3,054,910
(99,657
)
2,477,391
16,198,262
30,954,735
(695,551
)
(1,684,984
)
1,470,660
(695,551
)
(214,324
)
(180,345
)
(283,180
)
(1,442,020
)
120,000
(1,622,365
)
(163,180
)
25,399
164,886
13,905,745
30,742,117
29,692,901
50,752,481
43,598,646
81,494,598
1,381,236
1,369,739
F-44
Table of Contents
F-45
Table of Contents
As of
As of
February 28,
August 31,
2010
2010
$
45,171,584
$
55,158,850
8,792,445
8,366,390
53,964,029
63,525,240
34,897,136
42,938,739
175,610
146,684
$
35,072,746
$
43,085,423
Six-Month
Six-Month
Periods Ended
Periods Ended
August 31,
August 31,
2009
2010
$
32,983,005
$
46,589,727
$
10,385,657
$
14,324,095
Six-Month
Six-Month
Periods Ended
Periods Ended
August 31,
August 31,
2009
2010
$
16,902,677
$
9,329,391
$
(1,137,634
)
$
635,540
$
(1,622,365
)
$
(283,180
)
F-46
Table of Contents
F-47
Table of Contents
F-48
Table of Contents
1,918,156
(1,456,261
)
(12,819
)
(799
)
$
448,277
As of February 28, 2010
As of August 31, 2010
Gross
Gross
Gross
Gross
unrealized
unrealized
unrealized
unrealized
Cost
gains
(losses)
Fair value
Cost
gains
(losses)
Fair value
$
1,805,448
$
120,678
$
(7,970
)
$
1,918,156
$
340,418
$
107,859
$
448,277
As of
As of
February 28,
August 31,
2010
2010
$
1,344,238
$
2,262,829
305,782
247,566
450,705
197,781
603,146
180,216
526,881
$
2,280,941
$
3,838,203
F-49
Table of Contents
As of
As of
February 28,
August 31,
2010
2010
$
3,399,250
$
3,931,921
2,293,808
3,252,549
624,296
757,688
462,112
541,560
(1,787,976
)
(2,933,428
)
$
4,991,490
$
5,550,290
As of
As of
February 28,
August 31,
2010
2010
$
1,846,858
$
1,846,858
425,576
425,576
348,566
348,566
262,360
262,360
19,200
19,200
9,902
9,902
(1,537,341
)
(1,904,812
)
14,039
17,675
$
1,389,160
$
1,025,325
F-50
Table of Contents
8.
Accrued
Expenses and Other Current Liabilities
As of
As of
February 28,
August 31,
2010
2010
$
3,893,895
$
5,509,769
453,081
705,402
513,062
240,198
1,343,425
2,250,961
614,353
912,537
$
6,817,816
$
9,618,867
$
76,760
$
77,128
137,257
137,257
161,788
163,070
$
513,062
$
240,198
9.
Income
Taxes
F-51
Table of Contents
Six-Month
Six-Month
Periods ended
Periods ended
August 31,
August 31,
2009
2010
PRC income tax expenses
$
1,281,475
$
1,973,863
PRC income tax benefits
(369,207
)
(303,330
)
$
912,268
$
1,670,533
F-52
Table of Contents
As of
As of
February 28,
August 31,
2010
2010
$
903,939
$
1,299,540
(72,642
)
(73,071
)
831,297
1,226,469
134,915
196,579
163,003
162,914
303,909
587,294
(317,859
)
(778,798
)
283,968
167,989
147,433
120,127
28,177
26,557
$
175,610
$
146,684
F-53
Table of Contents
10.
Goodwill
As of
As of
February 28,
August 31,
2010
2010
$
762,272
$
763,802
1,530
2,121
$
763,802
$
765,923
F-54
Table of Contents
11.
Net
Income Per Share
Six-Month
Six-Month
Periods ended
Periods ended
August 31,
August 31,
2009
2010
$
9,427,111
$
13,245,841
9,427,111
13,245,841
9,050,027
(i)
12,716,007
(i)
377,084
(i)
529,834
(i)
9,427,111
13,245,841
120,000,000
120,000,000
5,000,000
5,000,000
193,360
(ii)
125,000,000
125,193,360
$
0.08
$
0.11
$
0.08
$
0.11
$
0.08
$
0.11
(i)
Undistributed net income was allocated between common shares and
preferred shares prorated on the dividend participation rights.
Since each Series A convertible redeemable preferred share
has the same participating right as each common share, the
allocation was based on the numbers of common shares and
Series A convertible redeemable preferred shares.
(ii)
The Group has nonvested shares outstanding which could diluted
basic net income per share in the future.
12.
Commitments
and Contingencies
F-55
Table of Contents
$
7,590,469
13,602,220
9,882,230
7,128,243
4,071,011
$
42,274,173
13.
Segment
Information
Six-Month
Six-Month
Periods Ended
Periods Ended
August 31,
August 31,
2009
2010
$
32,829,477
$
52,859,699
153,528
162,338
$
32,983,005
$
53,022,037
14.
Mainland
China Contribution Plan
F-56
Table of Contents
15.
Related
Party Transactions
As of
As of
February 28,
August 31,
2010
2010
$
108,204
(i)
$
100,571
(i)
i.
The amount represents rental deposits and acquisition
consideration paid by the founding shareholder on behalf of the
Group.
16.
Share-Based
Compensation
Number of
nonvested
shares
5,419,500
5,419,500
F-57
Table of Contents
17.
Subsequent
Events
F-58
Table of Contents
Table of Contents
Credit
Suisse
Morgan Stanley
Piper
Jaffray
Oppenheimer & Co.
Table of Contents
ITEM 6.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ITEM 7.
RECENT
SALES OF UNREGISTERED SECURITIES.
Underwriting
Date of Sale or
Number of
Discount and
Purchaser
Issuance
Securities
Consideration
Commission
January 24, 2008
565 common shares
Par Value
N/A
January 24, 2008
260 common shares
Par Value
N/A
January 24, 2008
100 common shares
Par Value
N/A
January 24, 2008
75 common shares
Par Value
N/A
January 22, 2009
67,799,435 common shares
Par Value
N/A
January 22, 2009
31,199,740 common shares
Par Value
N/A
January 22, 2009
11,999,900 common shares
Par Value
N/A
January 22, 2009
8,999,925 common shares
Par Value
N/A
KTB/UCI China
Ventures II Limited
February 12, 2009
5,000,000 Series A preferred shares
$5,000,000
N/A
July 26, 2010
5,419,500 restricted shares
Par Value
N/A
II-1
Table of Contents
ITEM 8.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
ITEM 9.
UNDERTAKINGS.
(1)
For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3)
For the purpose of determining liability under the Securities
Act to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it
II-2
Table of Contents
is first used after effectiveness;
provided, however,
that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(4)
For the purpose of determining any liability under the
Securities Act of 1993 to any purchaser in the initial
distribution of the securities, the undersigned registrant
undertakes in a primary offering of securities of the
undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
II-3
Table of Contents
By:
Title:
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
(principal executive officer)
Director and President
Chief Financial Officer
(principal financial and accounting officer)
Director
Table of Contents
By:
Name:
Kate Ledyard, on behalf of
Law Debenture Corporate Services Inc.
Table of Contents
Exhibit
1
.1*
Form of Underwriting Agreement
3
.1
Third Amended and Restated Memorandum and Articles of
Association of the Registrant as currently in effect
3
.2*
Fourth Amended and Restated Memorandum and Articles of
Association of the Registrant as effective upon closing of this
offering
4
.1
Form of Class A common share certificate
4
.2*
Form of American depositary receipt evidencing American
depositary shares (included in Exhibit 4.3)
4
.3*
Form of Deposit Agreement between the Registrant and the
depositary
4
.4
Amended and Restated Shareholders Agreement among the
Registrant, the Series A preferred holder, Tiger Global
Five China Holdings and other parties thereto, dated
August 12, 2009
5
.1
Form of Opinion of Maples and Calder, the Cayman Islands counsel
to the Registrant, regarding the issue of shares being registered
8
.1
Form of Opinion of Skadden, Arps, Slate, Meagher &
Flom LLP regarding certain U.S. federal tax matters
8
.2
Form of Opinion of Maples and Calder regarding certain Cayman
Islands tax matters (included in Exhibit 5.1)
8
.3
Form of Opinion of Tian Yuan Law Firm regarding certain PRC law
matters
10
.1
2010 Share Incentive Plan
10
.2
Share Purchase Agreement among the Registrant, the Series A
preferred holder and other parties thereto, dated
February 12, 2009
10
.3
Share Purchase Agreement among the Registrant, KTB China Optimum
Fund, Tiger Global Five China Holdings and other parties
thereto, dated August 12, 2009
10
.4
Assumption Agreement between the Registrant and KTB China
Optimum Fund, dated September 4, 2009
10
.5
Form of Indemnification Agreement with the Registrants
directors and officers
10
.6
Form of Employment Agreement between the Registrant and an
Executive Officer of the Registrant
10
.7
English translation of Exclusive Business Cooperation Agreement
among TAL Education Technology (Beijing) Co., Ltd., Beijing
Xueersi Education Technology Co., Ltd., Beijing Xueersi Network
Technology Co., Ltd., Bangxin Zhang, Yundong Cao, Yachao Liu,
Yunfeng Bai, and other parties thereto, dated June 25, 2010
10
.8
English translation of Call Option Agreement among TAL Education
Technology (Beijing) Co., Ltd., Beijing Xueersi Education
Technology Co., Ltd., Beijing Xueersi Network Technology Co.,
Ltd., Bangxin Zhang, Yundong Cao, Yachao Liu and Yunfeng Bai,
dated February 12, 2009
10
.9
English translation of Equity Pledge Supplemental Agreement
among TAL Education Technology (Beijing) Co., Ltd., Beijing
Xueersi Education Technology Co., Ltd., Bangxin Zhang, Yundong
Cao, Yachao Liu and Yunfeng Bai, dated June 25, 2010
10
.10
English translation of Equity Pledge Supplemental Agreement
among TAL Education Technology (Beijing) Co., Ltd., Beijing
Xueersi Network Technology Ltd., Bangxin Zhang, Yundong Cao,
Yachao Liu and Yunfeng Bai, dated June 25, 2010
10
.11
English translation of Powers of Attorney by Bangxin Zhang,
Yundong Cao, Yachao Liu and Yunfeng Bai, dated August 12,
2009
21
.1
Subsidiaries of the Registrant
23
.1
Consent of Deloitte Touche Tohmatsu CPA Ltd.
23
.2
Form of Consent of Maples and Calder (included in
Exhibit 5.1)
23
.3
Form of Consent of Tian Yuan Law Firm (included in
Exhibit 8.3)
23
.4
Consent of iResearch Consulting Group
23
.5
Consent of American Appraisal China Limited
23
.6
Consent of Jane Jie Sun, an independent director appointee
Table of Contents
Exhibit
23
.7
Consent of Wai Chau Lin, an independent director appointee
24
.1
Powers of Attorney (included on the signature page of this
registration statement)
99
.1
Code of Business Conduct and Ethics of the Registrant
*
To be filed by amendment.
1. | The name of the Company is TAL Education Group. | |
2. | The Registered Office of the Company shall be at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands or at such other place as the Directors may from time to time decide. | |
3. | The objects for which the Company is established are unrestricted and shall include, but without limitation, the following: |
(a) | (i) | To carry on the business of an investment company and to act as promoters and entrepreneurs and to carry on business as financiers, capitalists, concessionaires, merchants, brokers, traders, dealers, agents, importers and exporters and to undertake and carry on and execute all kinds of investment, financial, commercial, mercantile, trading and other operations. |
(ii) | To carry on whether as principals, agents or otherwise howsoever the business of realtors, developers, consultants, estate agents or managers, builders, contractors, engineers, manufacturers, dealers in or vendors of all types of property including services. |
(b) | To exercise and enforce all rights and powers conferred by or incidental to the ownership of any shares, stock, obligations or other securities including without prejudice to the generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some special proportion of the issued or nominal amount thereof, to provide managerial and other executive, supervisory and consultant services for or in relation to any company in which the Company is interested upon such terms as may be thought fit. | ||
(c) | To purchase or otherwise acquire, to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with real and personal property and rights of all kinds and, in particular, mortgages, debentures, produce, concessions, options, contracts, patents, annuities, licenses, stocks, shares, bonds, policies, book debts, business concerns, undertakings, claims, privileges and choses in action of all kinds. | ||
(d) | To subscribe for, conditionally or unconditionally, to underwrite, issue on commission or otherwise, take, hold, deal in and convert stocks, shares and securities of all kinds and to enter into partnership or into any arrangement for sharing profits, reciprocal concessions or cooperation with any person or company and to promote and aid in promoting, to constitute, form or organize any company, syndicate or partnership of any kind, for the purpose of acquiring and undertaking any property and liabilities of the Company or of advancing, directly or indirectly, the objects of the Company or for any other purpose which the Company may think expedient. |
- 2 -
(e) | To stand surety for or to guarantee, support or secure the performance of all or any of the obligations of any person, firm or company whether or not related or affiliated to the Company in any manner and whether by personal covenant or by mortgage, charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital or by any such method and whether or not the Company shall receive valuable consideration thereof. | ||
(f) | To engage in or carry on any other lawful trade, business or enterprise which may at any time appear to the Directors of the Company capable of being conveniently carried on in conjunction with any of the aforementioned businesses or activities or which may appear to the Directors or the Company likely to be profitable to the Company. |
In the interpretation of this Memorandum of Association in general and of this Article 3 in particular no object, business or power specified or mentioned shall be limited or restricted by reference to or inference from any other object, business or power, or the name of the Company, or by the juxtaposition of two or more objects, businesses or powers and that, in the event of any ambiguity in this clause or elsewhere in this Memorandum of Association, the same shall be resolved by such interpretation and construction as will widen and enlarge and not restrict the objects, businesses and powers of and exercisable by the Company. | ||
4. | Except as prohibited or limited by the Companies Law (2010 Revision), the Company shall have full power and authority to carry out any object and shall have and be capable of from time to time and at all times exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in doing in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects and whatever else may be considered by it as incidental or conducive thereto or consequential thereon, including, but without in any way restricting the generality of the foregoing, the power to make any alterations or amendments to this Memorandum of Association and the Articles of Association of the Company considered necessary or convenient in the manner set out in the Articles of Association of the Company, and the power to do any of the following acts or things, viz: to pay all expenses of and incidental to the promotion, formation and incorporation of the Company; to register the Company to do business in any other jurisdiction; to sell, lease or dispose of any property of the Company; to draw, make, accept, endorse, discount, execute and issue promissory notes, debentures, bills of exchange, bills of lading, warrants and other negotiable or transferable instruments; to lend money or other assets and to act as guarantors; to borrow or raise money on the security of the undertaking or on all or any of the assets of the Company including uncalled capital or without security; to invest monies of the Company in such manner as the Directors determine; to promote other companies; to sell the undertaking of the Company for cash or any other consideration; to distribute assets in specie to Members of the Company; to make charitable or benevolent donations; to pay pensions or gratuities or provide other benefits in cash or kind to Directors, officers, employees, past or present and their families; to purchase Directors and officers liability insurance and to carry on any trade or business and generally to do all acts and things which, in the opinion of the Company or the Directors, may be conveniently or profitably or usefully acquired and dealt with, carried on, executed or done by the Company in connection with the business aforesaid provided that the Company shall only carry on the businesses for which a license is required under the laws of the Cayman Islands when so licensed under the terms of such laws. | |
5. | The liability of each Member is limited to the amount from time to time unpaid on such Members shares. |
- 3 -
6. | The share capital of the Company is US$1,000,000.00 divided into (i) 500,000,000 Class A Common Shares of par value US$0.001 each, (ii) 495,000,000 of Class B Common Shares of par value US$0.001 each, and (iii) 5,000,000 Series A Preferred Shares of par value US$0.001 each, with power for the Company insofar as is permitted by applicable law and the Articles of Association (including without limitation Schedule A thereto), to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Companies Law (2010 Revision) and the Articles of Association and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference or otherwise shall be subject to the powers hereinbefore contained provided always that, notwithstanding any provision to the contrary contained in this Memorandum of Association, the Company shall have no power to issue bearer shares, warrants, coupons or certificates. | |
7. | If the Company is registered as exempted, its operations will be carried on subject to the provisions of Section 174 of the Companies Law (2010 Revision) and, subject to the provisions of the Companies Law (2010 Revision) and the Articles of Association, it shall have the power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands. |
- 4 -
1. | In these Articles Table A in the Schedule to the Statute does not apply and, unless there be something in the subject or context inconsistent therewith. |
Additional Transfer Notice
|
has the meaning ascribed to it in Clause 9.1(c)(i) of Schedule A . | |
|
||
Affiliate
|
means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any partner, officer, director, member or employee of such Person and any venture capital fund now or hereafter existing that is controlled by or under common control with one or more general partners or managing members of, or shares the same management company with, such Person; | |
|
||
Articles
or
Articles of Association
|
means the articles of association of the Company as originally framed or as from time to time altered by Special Resolution. | |
|
||
Auditors
|
means the persons for the time being performing the duties of auditors of the Company. | |
|
||
Board
|
means the board directors for the time being of the Company. | |
|
||
Business Day
|
means a day (other than a Saturday or Sunday) on which licensed banks are open for general banking business in Hong Kong and the PRC. | |
|
||
Chairman
|
means the chairman of the Board of the Company. | |
|
||
Class A Common Share
|
means a Class A Common Share in the capital of the Company with a par value of US$0.001 per share. | |
|
||
Class B Common Share
|
means a Class B Common Share in the capital of the Company with a par value of US$0.001 per share. | |
|
||
Closing
|
means the closing of the Series A Preferred Share financing. | |
|
||
Common Shareholders
|
means the persons registered in the Companys register of members as the holder of Common Shares, and the permitted transferees and assigns of any Common Shareholder. | |
|
||
Common Shares
|
means Class A Common Shares and Class B Common Shares collectively. |
- 1 -
Common Share Equivalents
|
means warrants, options and rights exercisable for Common Shares and instruments convertible or exchangeable for Common Shares. | |
|
||
Company
|
means the above named Company. | |
|
||
Conversion Price
|
shall have the meaning set forth in Clause 7.3 of Schedule A . | |
|
||
Co-Sale Participant
|
shall have the meaning set forth in Clause 9.2(a) of the Schedule A . | |
|
||
debenture
|
means debenture stock, mortgages, bonds and any other such securities of the Company whether constituting a charge on the assets of the Company or not. | |
|
||
Directors
or
Director
|
means the directors or a director of the Company. | |
|
||
Effective Conversion Price
|
with respect to any Common Shares Equivalent at a given time, an amount equal to the quotient of (i) the sum of any consideration, if any, received by the Company with respect to the issuance of such Common shares Equivalent and the consideration receivable by the Company, if any, upon the exercise, exchange, or conversion of the Common Share Equivalent over (ii) the number of Common Shares issuable upon the exercise, conversion or exchange of the Common Share Equivalent. | |
|
||
Equity Securities
|
means any Common Shares or Common Share Equivalents. | |
|
||
Exchange Act
|
means United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. | |
|
||
Existing Holder
|
The holder of the Series A Preferred Shares as of 29 September 2010. | |
|
||
Founders
and
Founder
|
includes ZHANG Bangxin, CAO Yundong, LIU Yachao and BAI Yunfeng, each a Founder . | |
|
||
Fully-Exercising Shareholder
|
has the meaning as set forth in Clause 10.2 of Schedule A . | |
|
||
Fully Participating Shareholder
|
has the meaning as set forth in Clause 9.1(b) of Schedule A . | |
|
||
Future Issuance Price
|
has the meaning as set forth in Clause 7.3(v)(A) of the Schedule A . | |
|
||
Group Entities
|
means the Company, TAL Group Limited, TAL Education Technology (Beijing) Co., Ltd. , Beijing Xueersi Education Technology Co., Ltd. , Beijing Xueersi Network Technology Co., Ltd. and their Subsidiaries (including the schools and company branches under the direct and indirect control of the above Companies), each a Group Entity . | |
|
||
Hong Kong
|
means the Hong Kong Special Administrative Region of the PRC. |
- 2 -
IPO
|
means an initial public offering by the Company of its Common Shares on a public stock exchange of the United States that has been registered under the Securities Act, or in a similar public offering of Common Shares in a jurisdiction and on a recognized securities exchange outside of the United States, provided such an initial public offering in terms of price, offering proceeds and regulatory approval is reasonably equivalent to the aforesaid public offering in the United States. | |
|
||
Issuance Notice
|
has the meaning as set forth in Clause 10.1 of the Schedule A . | |
|
||
Liquidation Event
|
has the meaning as set forth in Clause 2.1 of Schedule A . | |
|
||
Member
|
shall bear the meaning as ascribed to it in the Statute. | |
|
||
Memorandum of Association
|
means the memorandum of association of the Company as originally framed or as from time to time altered by Special Resolution. | |
|
||
month
|
means calendar month. | |
|
||
New Securities
|
means any Equity Securities of the Company; provided that the term New Securities does not include (i) securities issued upon conversion of the Preferred Shares; (ii) securities issued to employees, professional consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board; (iii) securities issued in a Qualified Public Offering; (iv) securities issued in connection with any stock split, stock dividend or re-capitalization of the Company; and (v) securities issued upon the exercise of that certain set forth in Section 6.6 of the Purchase Agreement; | |
|
||
Non-Selling Shareholders
or
Non-Selling Shareholder
|
has the meaning ascribed to it under Clause 9.1(a) of Schedule A . | |
|
||
Observer
|
has the meaning ascribed to it in Article 97 of these Articles. | |
|
||
Original Issue Price
|
means US$1.00 for each Series A Preferred Share, or the aggregate amount of issue price based on such price per share. | |
|
||
Over-allotment Notice
|
has the meaning ascribed to it in Clause 9.1(b)(vi) of Schedule A . | |
|
||
Over-allotment Shares
|
has the meaning ascribed to it in Clause 9.1(b)(vi) of Schedule A . | |
|
||
paid-up
|
means paid-up and/or credited as paid-up. | |
|
||
Participating Shareholders
|
has the meaning ascribed to it in Clause 9.1(b)(vi) of Schedule A . | |
|
||
Person
|
means any individual, person corporate, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or enterprise or entity. |
- 3 -
PRC
|
means the Peoples Republic of China. | |
|
||
Purchase Agreement
|
means the agreement entered into by and among the Company, the Sellers, the Founders, Tiger and other parties thereto dated August 12, 2009, setting forth the sale and purchase of certain number of Common Shares by Tiger from the Sellers. | |
|
||
Qualified Public Offering
or
Qualified IPO
|
means an initial public offering by the Company of its Common Shares on a public stock exchange of the United States that has been registered under the Securities Act, with the net proceeds to the Company of at least US$50,000,000 (excluding the underwriting discounts, selling commissions and expenses) and an implied market capitalization of the Company of at least US$300,000,000 or in a similar public offering of Common Shares in a jurisdiction and on a recognized securities exchange outside of the United States, provided such an initial public offering in terms of price, offering proceeds and regulatory approval is reasonably equivalent to the aforesaid public offering in the United States. | |
|
||
registered office
|
means the registered office for the time being of the Company. | |
|
||
Remaining Shares
|
has the meaning ascribed to it in Clause 9.1(c) of the Schedule A . | |
|
||
Restructuring
|
has the meaning ascribed to it in Clause 4 of Schedule A . | |
|
||
RMB
:
|
means the lawful currency of the Peoples Republic of China. | |
|
||
Seal
|
means the common seal of the Company and includes every duplicate seal. | |
|
||
Secretary
|
includes an Assistant Secretary and any person appointed to perform the duties of Secretary of the Company. | |
|
||
Securities Act
|
means the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder; | |
|
||
Sellers
or
Seller
|
Includes BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED, each a Seller ; | |
|
||
Selling Shareholders
or
Selling Shareholders
|
has the meaning ascribed to it in Clause 11.1 of the Schedule A . | |
|
||
Series A Director
|
has the meaning ascribed to it in Clause 64(c) of Schedule A . | |
|
||
Series A Financing
|
means the series A round of financing of the Company. | |
|
||
Series A Preferred Shares
|
means the Companys voting Series A Preferred Shares, with par value of US$0.001 each with the rights and privileges as set forth herein and in the Series A Share Purchase Agreement. | |
|
||
Series A Preferred Shareholders
|
means the persons registered in the Companys register of members as the holders of Series A Preferred Shares, and the permitted transferees and assigns of any Series A Preferred Shareholder. |
- 4 -
Shares
or
Share
|
means any class of shares in the share capital of the Company, includes a fraction of a share. | |
|
||
Shareholder
|
means a holder of Shares from time to time or its lawful successor. | |
|
||
Special Resolution
|
has the same meaning as in the Statute and includes a resolution approved in writing as described therein. | |
|
||
Statute
|
means the Companies Law of the Cayman Islands as amended and every statutory modification or re-enactment thereof for the time being in force. | |
|
||
Shareholders Agreement
|
means the agreement entered into among the Company, TAL Group Limited, TAL Education Technology (Beijing) Co., Ltd. , Beijing Xueersi Education Technology Co., Ltd. , Beijing Xueersi Network Technology Co., Ltd. , Series A Preferred Shareholders, Tiger Global Five China Holdings and certain other parties thereto dated August 12, 2009, to regulate certain matters among the Shareholders and certain affairs of the Company. | |
|
||
Series A Share Purchase Agreement
|
means the Series A Preferred Share Purchase Agreement executed by and among the Company, the Series A Preferred Shareholder, and certain other parties thereto. | |
|
||
Shares Offered by Shareholder
|
has the meaning ascribed to it in Clause 9.1(a) of the Schedule A . | |
|
||
Subsidiary(ies)
or
subsidiary
|
means as of the relevant date of determination, with respect to any Person (the subject entity ), (i) any Person: (1) more than 50% of whose shares or other interests entitled to vote in the election of directors or (2) more than a fifty percent (50%) interest in the profits or capital of such Person are owned or controlled directly or indirectly by the subject entity or through one (1) or more Subsidiaries of the subject entity, (ii) any Person whose assets, or portions thereof, are consolidated with the net earnings of the subject entity and are recorded on the books of the subject entity for financial reporting purposes in accordance with US GAAP (or other standard acceptable to the Series A Preferred Shareholders and Tiger), or (iii) any Person with respect to which the subject entity has the power to otherwise direct the business and policies of that entity directly or indirectly through another subsidiary. For the avoidance of doubt, the Subsidiaries of the Company shall include the Group Entities. | |
|
||
Tiger
|
means Tiger Global Five China Holdings, a company organized under the laws of Mauritius, and its Affiliates or any of its (or their) successor(s). | |
|
||
Transfer
|
has the meaning ascribed to it in Clause 9.1(a) of the Schedule A . | |
|
||
Transfer Notice
|
has the meaning ascribed to it in Clause 9.1(a) of the Schedule A . | |
|
||
Transferor
|
has the meaning ascribed to it in Clause 9.1(a) of the Schedule A . | |
|
||
US
|
means the lawful currency of the United States of America. |
- 5 -
|
||
written
and
in writing
|
include all modes of representing or reproducing words in visible form. | |
|
||
Written Consent
|
means a written resolution executed by the relevant number of Shareholders or Directors, as the case may be, in lieu of a shareholders meeting or a board meeting. |
Words importing the singular number only include the plural number and vice versa. | ||
Words importing the masculine gender only include the feminine gender. | ||
Words importing persons only include corporations. | ||
2. | The business of the Company may be commenced as soon after incorporation as the Directors shall see fit, notwithstanding that part only of the shares may have been allotted. | |
3. | The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company including the expenses of registration. | |
CERTIFICATES FOR SHARES | ||
4. | Certificates representing shares of the Company shall be in such form as shall be determined by the Directors. Such certificates may be under Seal. All certificates for shares shall be consecutively numbered or otherwise identified and shall specify the shares to which they relate. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered in the register of Members of the Company. All certificates surrendered to the Company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled. The Directors may authorize certificates to be issued with the seal and authorized signature(s) affixed by some method or system of mechanical process. | |
5. | Notwithstanding Article 4 of these Articles, if a share certificate be defaced, lost or destroyed, it may be renewed on payment of a fee of one dollar (US$l.00) or such less sum and on such terms (if any) as to evidence and indemnity and the payment of the expenses incurred by the Company in investigating evidence, as the Directors may prescribe. | |
ISSUE OF SHARES | ||
6. | Subject to the provisions, if any, in that behalf in the Memorandum of Association and to any direction that may be given by the Company in general meeting and without prejudice to any special rights previously conferred on the holders of existing shares, the Directors may allot, issue, grant options over or otherwise dispose of shares of the Company (including fractions of a share) with or without preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise and to such persons, at such times and on such other terms as they think proper, provided always that, notwithstanding any provision to the contrary contained in these Articles of Association, the Company shall be precluded from issuing bearer shares, warrants, coupons or certificates. |
- 6 -
7. | The Company shall maintain a register of its Members and every person whose name is entered as a Member in the register of Members shall be entitled without payment to receive within two months after allotment or lodgment of transfer (or within such other period as the conditions of issue shall provide) one certificate for all his shares or several certificates each for one or more of his shares upon payment of fifty cents (US$0.50) for every certificate after the first or such less sum as the Directors shall from time to time determine provided that in respect of a share or shares held jointly by several persons the Company shall not be bound to issue more than one certificate and delivery of a certificate for a share to one of the several joint holders shall be sufficient delivery to all such holders. | |
TRANSFER OF SHARES | ||
8. | The instrument of transfer of any share shall be in writing and shall be executed by or on behalf of the transferor and the transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register in respect thereof. | |
9. | The Directors may in their absolute discretion decline to register any transfer of shares without assigning any reason therefor. If the Directors refuse to register a transfer they shall notify the transferee within two months of such refusal. | |
10. | The registration of transfers may be suspended at such time and for such periods as the Directors may from time to time determine, provided always that such registration shall not be suspended for more than 45 days in any year. | |
COMMON SHARE CONVERSION | ||
11. | Each Class B Common Share is convertible into one (1) Class A Common Share at any time by the holder thereof. Class A Common Shares are not convertible into Class B Common Shares or Series A Preferred Shares under any circumstances. A conversion of Class B Common Shares to Class A Common Shares shall be effected by way of compulsory repurchase by the Company of the relevant Class B Common Shares for a redemption price equal to the original issue price for each Class B Common Share and the issue of Class A Common Shares for a subscription price equal to the redemption price for the equal number of Class B Common Shares. | |
If at any time the Founders, Tiger and the Existing Holder and their Affiliates collectively own less than 5% of the total number of the issued and outstanding Class B Common Shares of the Company (taking into account all of the issued and outstanding preferred shares on an as-converted basis), each issued and outstanding Class B Common Share shall be automatically and immediately converted into one share of Class A Common Share, and no Class B Common Shares shall be issued by the Company thereafter. | ||
Subject to the Statute and notwithstanding any other provisions of these Articles, upon any transfer of Class B Common Shares by a holder thereof to any person or entity which is not an Affiliate of such holder, such Class B Common Shares shall be automatically and immediately converted into an equal number of Class A Common Shares. |
- 7 -
REDEEMABLE SHARES | ||
12. | (a) | Subject to the provisions of the Statute and the Memorandum of Association, shares may be issued on the terms that they are, or at the option of the Company or the holder are, to be redeemed on such terms and in such manner as the Company, before the issue of the shares, may by Special Resolution determine. |
(b) | Subject to the provisions of the Statute and the Memorandum of Association, the Company may purchase its own shares (including fractions of a share), including any redeemable shares, provided that the manner of purchase has first been authorized by the Company in general meeting and may make payment therefore in any manner by the Statute, including out of capital. |
VARIATION OF RIGHTS OF SHARES | ||
13. | If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a Special Resolution passed at a general meeting of the holders of the shares of that class. | |
The provisions of these Articles relating to general meetings shall apply to every such general meeting of the holders of one class of shares except that the necessary quorum shall be one person holding or representing by proxy at least one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll. | ||
14. | Subject to Schedule A , the rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. | |
COMMISSION ON SALE OF SHARES | ||
15. | The Company may in so far as the Statute from time to time permits pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares of the Company. Such commissions may be satisfied by the payment of cash or the lodgment of fully or partly paid-up shares or partly in one way and partly in the other. The Company may also on any issue of shares pay such brokerage as may be lawful. | |
NON-RECOGNITION OF TRUSTS | ||
16. | No person shall be recognized by the Company as holding any share upon any trust and the Company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future, or partial interest in any share, or any interest in any fractional part of a share, or (except only as is otherwise provided by these Articles or the Statute) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder. |
- 8 -
LIEN ON SHARES | ||
17. | The Company shall have a first and paramount lien and charge on all shares (whether fully paid-up or not) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not) by such Member or his estate, either alone or jointly with any other person, whether a Member or not, but the Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. The registration of a transfer of any such share shall operate as a waiver of the Companys lien (if any) thereon. The Companys lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof. | |
18. | The Company may sell, in such manner as the Directors think fit, any shares on which the Company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder or holders for the time being of the share, or the person, of which the Company has notice, entitled thereto by reason of his death or bankruptcy. | |
19. | To give effect to any such sale the Directors may authorize some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. | |
20. | The proceeds of such sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. | |
CALL ON SHARES |
21. | (a) | The Directors may from time to time make calls upon the Members in respect of any monies unpaid on their shares (whether on account of the nominal value of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed terms, provided that no call shall be payable at less than one month from the date fixed for the payment of the last preceding call, and each Member shall (subject to receiving at least fourteen days notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on the shares. A call may be revoked or postponed as the Directors may determine. A call may be made payable by installments. |
(b) | A call shall be deemed to have been made at the time when the resolution of the Directors authorizing such call was passed. | ||
(c) | The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. |
22. | If a sum called in respect of a share is not paid before or on a day appointed for payment thereof, the persons from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate not exceeding ten per cent per annum as the Directors may determine, but the Directors shall be at liberty to waive payment of such interest either wholly or in part. |
- 9 -
23. | Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium or otherwise, shall for the purposes of these Articles be deemed to be a call duly made, notified and payable on the date on which by the terms of issue the same becomes payable, and in the case of non-payment all the relevant provisions of these Articles as to payment of interest forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. | |
24. | The Directors may, on the issue of shares, differentiate between the holders as to the amount of calls or interest to be paid and the times of payment. |
25. | (a) | The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the monies uncalled and unpaid upon any shares held by him, and upon all or any of the monies so advanced may (until the same would but for such advances, become payable) pay interest at such rate not exceeding (unless the Company in general meeting shall otherwise direct) seven per cent per annum, as may be agreed upon between the Directors and the Member paying such sum in advance. |
(b) | No such sum paid in advance of calls shall entitle the Member paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment, become presently payable. |
FORFEITURE OF SHARES | |||
26. | (a) | If a Member fails to pay any call or installment of a call or to make any payment required by the terms of issue on the day appointed for payment thereof, the Directors may, at any time thereafter during such time as any part of the call, installment or payment remains unpaid, give notice requiring payment of so much of the call, installment or payment as is unpaid, together with any interest which may have accrued and all expenses that have been incurred by the Company by reason of such non-payment. Such notice shall name a day (not earlier than the expiration of fourteen days from the date of giving of the notice) on or before which the payment required by the notice is to be made, and shall state that, in the event of non-payment at or before the time appointed the shares in respect of which such notice was given will be liable to be forfeited. | |
(b) | If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before the forfeiture. | ||
(c) | A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the Directors think fit. |
27. | A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture were payable by him to the Company in respect of the shares together with interest thereon, but his liability shall cease if and when the Company shall have received payment in full of all monies whenever payable in respect of the shares. |
- 10 -
28. | A certificate in writing under the hand of one Director or the Secretary of the Company that a share in the Company has been duly forfeited on a date stated in the declaration shall be conclusive evidence of the fact therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration given for the share on any sale or disposition thereof and may execute a transfer of the share in favor of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. | |
29. | The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium as if the same had been payable by virtue of a call duly made and notified. | |
REGISTRATION OF EMPOWERING INSTRUMENTS | ||
30. | The Company shall be entitled to charge a fee not exceeding one dollar (US$l.00) on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument. | |
TRANSMISSION OF SHARES | ||
31. | In case of the death of a Member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only person duly authorized by the Company as having any title to his interest in the shares, but nothing herein contained shall release the estate of any such deceased holder from any liability in respect of any shares which had been held by him solely or jointly with other persons. |
32. | (a) | Any person becoming entitled to a share in consequence of the death or bankruptcy or liquidation or dissolution of a Member (or in any other way than by transfer) may, upon such evidence being produced as may from time to time be required by the Directors and subject as hereinafter provided, elect either to be registered himself as holder of the share or to make such transfer of the share to such other person nominated by him as the deceased or bankrupt person could have made and to have such person registered as the transferee thereof, but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that Member before his death or bankruptcy as the case may be. |
(b) | If the person so becoming entitled shall elect to be registered himself as holder he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. |
33. | A person becoming entitled to a share by reason of the death or bankruptcy or liquidation or dissolution of the holder (or in any other case than by transfer) shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a Member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company PROVIDED HOWEVER that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share and if the notice is not complied with within ninety days the Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the share until the requirements of the notice have been complied with. | |
AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF LOCATION OF REGISTERED OFFICE & ALTERATION OF CAPITAL |
- 11 -
34. | (a) | Subject to and in so far as permitted by the provisions of the Statute, the Company may from time to time by ordinary resolution alter or amend its Memorandum of Association otherwise than with respect to its name and objects and may, without restricting the generality of the foregoing: |
(i) | increase the share capital by such sum to be divided into shares of such amount or without nominal or par value as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine. | ||
(ii) | consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; | ||
(iii) | by subdivision of its existing shares or any of them divide the whole or any part of its share capital into shares of smaller amount than is fixed by the Memorandum of Association or into shares without nominal or par value; | ||
(iv) | cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person. |
(b) | All new shares created hereunder shall be subject to the same provisions with reference to the payment of calls, liens, transfer, transmission, forfeiture and otherwise as the shares in the original share capital. | ||
(c) | Subject to the provisions of the Statute, the Company may by Special Resolution change its name or alter its objects. | ||
(d) | Without prejudice to Article 11 of these Articles and subject to the provisions of the Statute, the Company may by Special Resolution reduce its share capital and any capital redemption reserve fund. | ||
(e) | Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of its registered office. |
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE | ||
35. | For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any dividend, or in order to make a determination of Members for any other proper purpose, the Directors of the Company may provide that the register of Members shall be closed for transfers for a stated period but not to exceed in any case 40 days. If the register of Members shall be so closed for the purpose of determining Members entitled to notice of or to vote at a meeting of Members such register shall be so closed for at least ten days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the register of Members. | |
36. | In lieu of or apart from closing the register of Members, the Directors may fix in advance a date as the record date for any such determination of Members entitled to notice of or to vote at a meeting of the Members and for the purpose of determining the Members entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such dividend fix a subsequent date as the record date for such determination. |
- 12 -
37. | If the register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of or to vote at a meeting of Members or Members entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this section, such determination shall apply to any adjournment thereof. | |
GENERAL MEETING |
38. | (a) | Subject to paragraph (c) hereof, the Company shall within one year of its incorporation and in each year of its existence thereafter hold a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as the Directors shall appoint and if no other time and place is prescribed by them, it shall be held at the principal executive offices of the Company on the second Wednesday in December of each year at ten oclock in the morning. |
(b) | At these meetings the report of the Directors (if any) shall be presented. | ||
(c) | If the Company is exempted as defined in the Statute it may but shall not be obliged to hold an annual general meeting. |
39. | (a) | The Directors may whenever they think fit, and they shall on the requisition of Members of the Company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up capital of the Company as at the date of the deposit carries the right of voting at general meetings of the Company, proceed to convene a general meeting of the Company. |
(b) | The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office of the Company and may consist of several documents in like form each signed by one or more requisitionists. | ||
(c) | If the Directors do not within 21 days from the date of the deposit of the requisition duly proceed to convene a general meeting, the requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration of three months after the expiration of the said 21 days. | ||
(d) | A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors. |
NOTICE OF GENERAL MEETINGS | ||
40. | At least a ten (10) Business Day notice shall be given of an annual general meeting or any other general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business and shall be given in manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company provided that a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether or not the provisions of Article 38 of these Articles have been complied with, be deemed to have been duly convened if it is so agreed: |
(a) | in the case of a general meeting called as an annual general meeting by all the Members entitled to attend and vote thereat or their proxies; and |
- 13 -
(b) | in the case of any other general meeting by holders of not less than the minimum number of Shares required to approve the actions submitted to the Members for approval at such meeting, or their proxies. |
41. | The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a meeting by any person entitled to receive notice shall not invalidate the proceedings of that meeting. | |
PROCEEDINGS AT GENERAL MEETINGS | ||
42. | No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business; a meeting of the Shareholders is duly constituted if, at the commencement of and throughout the meeting, there are present in person or by proxy: (a) the Series A Preferred Shareholder; and (b) the holders of Common Shares holding not less than an aggregate of 75% of all Common Shares in issue. A person shall be deemed to be present at a general meeting if he participates by telephone or other electronic means and all persons participating in the meeting are able to hear each other. | |
43. | The adoption of any resolution of the General Meeting shall require the affirmative votes of or prior written consent of the holders holding an aggregate of no less than 50% of all outstanding shares of the Company. A resolution (including a Special Resolution) in writing (in one or more counterparts) signed by all Members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorized representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. | |
44. | The Chairman, if any, of the Board shall preside as Chairman at every general meeting of the Company, or if he shall not be present within three hours without due course or without authorizing any other Director to preside as Chairman at the general meeting after the time appointed for the holding of the meeting, or is unwilling to act, the Directors present shall elect one of their number to be Chairman of the meeting. | |
45. | If at any general meeting no Director is willing to act as Chairman or if no Director is present within three hours after the time appointed for holding the meeting, the Members present shall choose one of their number to be Chairman of the meeting. | |
46. | The Chairman may, with the consent of any general meeting duly constituted hereunder, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a general meeting is adjourned for 30 days or more, notice of the adjourned meeting shall be given as in the case of an original meeting; save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned general meeting. | |
47. | At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is, before or on the declaration of the result of the show of hands, demanded by the Chairman or any other Member present in person or by proxy. | |
48. | Unless a poll be so demanded a declaration by the Chairman that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the Companys minute book containing the minutes of the proceedings of the meeting shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favor of or against such resolution. | |
49. | The demand for a poll may be withdrawn. |
- 14 -
50. | Except as provided in Article 51 of these Articles, if a poll is duly demanded it shall be taken in such manner as the Chairman directs and the result of the poll shall be deemed to be the resolution of the general meeting at which the poll was demanded. | |
51. | In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the general meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. | |
52. | A poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the Chairman of the general meeting directs and any business other than that upon which a poll has been demanded or is contingent thereon may be proceeded with pending the taking of the poll. | |
VOTES OF MEMBERS | ||
53. | Subject to any rights or restrictions for the time being attached to any class or classes of shares, (i) on a show of hands, each Member of record present in person or by proxy at a general meeting shall have one vote, and (ii) on a poll, each Class A Common Share shall entitle its holder who is a Member of record present in person or by proxy at a general meeting to one vote and each Class B Common Share shall entitle its holder who is a Member of record present in person or by proxy at a general meeting to ten (10) votes. | |
54. | In the case of joint holders of record the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of Members. | |
55. | A Member of unsound mind, or in respect of whom an order has been made by any court, having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, receiver, curator bonis, or other person in the nature of a committee, receiver or curator bonis appointed by that court, and any such committee, receiver, curator bonis or other persons may vote by proxy. | |
56. | No Member shall be entitled to vote at any general meeting unless he is registered as a shareholder of the Company on the record date for such meeting nor unless all calls or other sums presently payable by him in respect of shares in the Company have been paid. | |
57. | No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at such general meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the general meeting whose decision shall be final and conclusive. | |
58. | On a poll or on a show of hands votes may be given either personally or by proxy. | |
PROXIES | ||
59. | The instrument appointing a proxy shall be in writing and shall be executed under the hand of the appointer or of his attorney duly authorized in writing, or, if the appointer is a corporation under the hand of an officer or attorney duly authorized in that behalf. A proxy need not be a Member of the Company. |
- 15 -
60. | The instrument appointing a proxy shall be deposited at the registered office of the Company or at such other place as is specified for that purpose in the notice convening the meeting no later than the time for holding the meeting, or adjourned meeting provided that the Chairman of the Meeting may at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited upon receipt of telex, cable or telecopy confirmation from the appointer that the instrument of proxy duly signed is in the course of transmission to the Company. | |
61. | The instrument appointing a proxy may be in any usual or common form and may be expressed to be for a particular meeting or any adjournment thereof or generally until revoked. An instrument appointing a proxy shall be deemed to include the power to demand or join or concur in demanding a poll. | |
62. | A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given provided that no intimation in writing of such death, insanity, revocation or transfer as aforesaid shall have been received by the Company at the registered office before the commencement of the general meeting, or adjourned meeting at which it is sought to use the proxy. | |
63. | Any corporation which is a Member of record of the Company may in accordance with its Articles or in the absence of such provision by resolution of its Directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which he represents as the corporation could exercise if it were an individual Member of record of the Company. | |
64. | Shares of its own capital belonging to the Company or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time. | |
DIRECTORS |
- 16 -
65. | The Board of the Company shall consist of up to five (5) Directors, whose nomination and election shall be as follows: |
(a) | The holders of majority (voting pursuant to Section 5 hereof) of Common Shares (excluding Common Shares held by Tiger and KTB CHINA OPTIMUM FUND, if any), shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be ZHANG Bangxin, and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position; | ||
(b) | Tiger, a holder of Common Shares, shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be CHEN Xiaohong, and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position. | ||
(c) | The Series A Preferred Shareholder shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be YEH Aieming Amy ( Series A Director ), and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position. | ||
(d) | Any Shareholder may nominate a Director to fill the remaining two (2) directors; provided that the election of such Director(s) shall be subject to the approval of all of the Shareholders voting together as a single class on an as-converted basis. |
66. | Directors shall serve without any remuneration, but all reasonable costs (including travel expenses) incurred by the Directors in the performance of their duties as members of the entire Board shall be borne by the Company. | |
67. | The Directors may by resolution award special remuneration to any Director of the Company undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity shall be in addition to his remuneration as a Director. | |
68. | A Director or alternate Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the Directors may determine. | |
69. | A Director or alternate Director may act by himself or his firm in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or alternate Director. | |
70. | A shareholding qualification for Directors may be fixed by the Company in general meeting, but unless and until so fixed no qualification shall be required. |
- 17 -
71. | A Director or alternate Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company. | |
72. | No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is so interested as aforesaid, provided however, that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him or the alternate Director appointed by him at or prior to its consideration and any vote thereon. | |
73. | A general notice that a Director or alternate Director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure under Article 71 of the Articles and after such general notice it shall not be necessary to give special notice relating to any particular transaction. | |
ALTERNATE DIRECTORS | ||
74. | Subject to the exception contained in Article 80 of these Articles, a Director who expects to be unable to attend Directors Meetings because of absence, illness or otherwise may appoint any person to be an alternate Director to act in his stead and such appointee whilst he holds office as an alternate Director shall, in the event of absence therefrom of his appointer, be entitled to attend meetings of the Directors and to vote thereat and to do, in the place and stead of his appointer, any other act or thing which his appointer is permitted or required to do by virtue of his being a Director as if the alternate Director were the appointer, other than appointment of an alternate to himself, and he shall ipso facto vacate office if and when his appointer ceases to be a Director or removes the appointee from office. Any appointment or removal under this Article shall be effected by notice in writing under the hand of the Director making the same. | |
POWERS AND DUTIES OF DIRECTORS | ||
75. | The business of the Company shall be managed by the Directors (or a sole Director if only one is appointed) who may pay all expenses incurred in promoting, registering and setting up the Company, and may exercise all such powers of the Company as are not, from time to time by the Statute, or by these Articles, or such regulations, being not inconsistent with the aforesaid, as may be prescribed by the Company in general meeting required to be exercised by the Company in general meeting, provided however, that no regulations made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made. | |
76. | The Directors may from time to time and at any time by powers of attorney appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorneys as the Directors may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him. |
- 18 -
77. | All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in such manner as the Directors shall from time to time by resolution determine. | |
78. | The Directors shall cause minutes to be made in books provided for the purpose: |
(a) | of all appointments of officers made by the Directors; | ||
(b) | of the names of the Directors (including those represented thereat by an alternate or by proxy) present at each meeting of the Directors and of any committee of the Directors; | ||
(c) | of all resolutions and proceedings at all meetings of the Company and of the Directors and of committees of Directors. |
81. | (a) | The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the three next following paragraphs shall be without prejudice to the general powers conferred by this paragraph. |
(b) | The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the Company and may appoint any persons to be members of such committees or local boards or any managers or agents and may fix their remuneration. | ||
(c) | The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities and discretions for the time being vested in the Directors and may authorize the members for the time being of any such local board, or any of them to fill up any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject to such conditions as the Directors may think fit and the Directors may at any time remove any person so appointed and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. | ||
(d) | Any such delegates as aforesaid my be authorized by the Directors to sub-delegate all or any of the powers, authorities, and discretions for the time being vested in them. | ||
(e) | A Compensation Committee of the Board shall be established to implement salary and equity guidelines for the Company, as well as approve compensation packages, severance agreements, employments stock options plan and employment agreements for all senior management of the Company. The Series A Preferred Shareholders shall be entitled to elect one member of the Compensation Committee and no resolution of the Compensation Committee shall be passed without the affirmative vote of written consent of such Member. |
- 19 -
MANAGING DIRECTORS | ||
82. | The Directors may, from time to time, appoint one or more of their body (but not an alternate Director) to the office of managing director for such term and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they may think fit but his appointment shall be subject to termination ipso facto if he ceases from any cause to be a Director and no alternate Director appointed by him can act in his stead as a Director or managing director. | |
83. | The Directors may entrust to and confer upon a managing director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit and either collaterally with or to the exclusion of their own powers and may from time to time revoke, withdraw, alter or vary all or any of such powers. | |
PROCEEDINGS OF DIRECTORS | ||
84. | Regular meetings of the Board shall be convened by the Chairman of the Board at least once every six (6) month. Not less than five (5) Business Days prior written notice of any meeting of the Board shall be given to all Directors with the following materials: (i) a written notice of the meeting; (ii) a meeting agenda for the meeting; and (iii) documents needed to be reported and distributed to the Directors; provided, however, that such notice period may be waived if approved by all of the Directors in writing; and for this purpose, the presence of a director at a meeting shall be deemed to constitute a waiver on his part in respect of such meeting. The location of each meeting of the Board shall be decided by the Chairman of the Board or if such is not available as agreed to by a majority of the Directors. The minutes of all Board meetings shall be kept on file by the Company. | |
85. | Except as otherwise provided by these Articles, the Directors shall meet together for the dispatch of business, convening, adjourning and otherwise regulating their meetings as they think fit. At any Board meeting, each Director may exercise one (1) vote. The adoption of any resolution of the Board shall require the affirmative votes of at least three (3) Directors and alternate Directors present at a meeting at which there is a quorum, the vote of an alternate Director not being counted if his appointer be present at such meeting. By notice and copy to all Directors, resolutions may be adopted by Written Consent executed by all Directors. In case of an equality of votes, the Chairman shall have a second or casting vote. | |
86. | A Director or alternate Director may, and the Secretary on the requisition of a Director or alternate Director shall, at any time summon a meeting of the Directors by at least five (5) Business Days notice in writing to every Director and alternate Director which notice shall set forth the general nature of the business to be considered unless notice is waived by all the Directors (or their alternates) either at, before or after the meeting is held and provided further if notice is given in person, by cable, telex or telecopy the same shall be deemed to have been given on the day it is delivered to the Directors or transmitting organization as the case may be. The provisions of Article 40 of these Articles shall apply mutatis mutandis with respect to notices of meetings of Directors. | |
87. | A meeting of the Board is duly constituted if there are present at least three (3) Directors including one director appointed by ZHANG Bangxin, one (1) Director appointed by the Series A Preferred Shareholders and one (1) Director appointed by Tiger. A Director and his appointed alternate Director being considered only one person for this purpose. For the purposes of this Article an alternate Director or proxy appointed by a Director shall be counted in a quorum at a meeting at which the Director appointing him is not present. If within three (3) hours from the time appointed for the meeting a quorum is not present without due cause, the meeting shall stand adjourned to the same day after two weeks at the same time and place or to such other time or such other place as the Directors may determine and if at the adjourned meeting a quorum is not present within three (3) hours from the time appointed for the meeting the Directors present shall be a quorum. |
- 20 -
88. | The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. | |
89. | The Directors may elect a Chairman of their Board with majority votes and determine the period for which he is to hold office; the Chairman of the Board shall preside as Chairman at every Board meeting of the Company, but if at any meeting the Chairman is not present within three(3) hours without due course or without authorizing any other Director to preside as Chairman at the meeting after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the meeting. | |
90. | The Directors may delegate any of their powers to committees consisting of such member or members of the Board (including Alternate Directors in the absence of their appointers) as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors. | |
91. | A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes the Chairman shall have a second or casting vote. | |
92. | All acts done by any meeting of the Directors or of a committee of Directors (including any person acting as an alternate Director) shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or alternate Director, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director or alternate Director as the case may be. | |
93. | Members of the Board or of any committee thereof may participate in a meeting of the Board or of such committee by means of telephone conference, video conference or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting at the same time pursuant to this provision shall constitute presence in person at such meeting. A resolution in writing (in one or more counterparts), signed by all the Directors for the time being or all the members of a committee of Directors (an alternate Director being entitled to sign such resolution on behalf of his appointer) shall be as valid and effectual as if it had been passed at a meeting of the Directors or committee as the case may be duly convened and held. |
94. | (a) | A Director may be represented at any meetings of the Board by a proxy appointed by him in which event the presence or vote of the proxy shall for all purposes be deemed to be that of the Director. |
(b) | The provisions of Articles 58 to 61 shall mutatis mutandis apply to the appointment of proxies by Directors. |
VACATION OF OFFICE OF DIRECTOR | ||
95. | The office of a Director shall be vacated: |
(a) | if he gives notice in writing to the Company that he resigns the office of Director; | ||
(b) | if he absents himself (without being represented by proxy or an alternate Director appointed by him) from three consecutive meetings of the Board without special leave of absence from the Directors, and they pass a resolution that he has by reason of such absence vacated office; |
- 21 -
(c) | if he dies, becomes bankrupt or makes any arrangement or composition with his creditors generally; | ||
(d) | if he is found a lunatic or becomes of unsound mind. |
100. | (a) | The Company may, if the Directors so determine, have a seal which shall, subject to paragraph (c) hereof, only be used by the authority of the Directors or of a committee of the Directors authorized by the Directors in that behalf and every instrument to which the Seal has been affixed shall be signed by one person who shall be either a Director or the secretary or secretary-treasurer or some person appointed by the Directors for the purpose. |
(b) | The Company may have for use in any place or places outside the Cayman Islands a duplicate seal or seals each of which shall be a facsimile of the Common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used. | ||
(c) | A Director, Secretary or other officer or representative or attorney may without further authority of the Directors affix the Seal of the Company over his signature alone to any document of the Company required to be authenticated by him under Seal or to be filed with the registrar of companies in the Cayman Islands or elsewhere wheresoever. |
- 22 -
OFFICERS | ||
101. | The Company may have a President, a Secretary or secretary-treasurer appointed by the Directors who may also from time to time appoint such other officers as they consider necessary, all for such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors from time to time prescribe. | |
DIVIDENDS, DISTRIBUTIONS AND RESERVE | ||
102. | Subject to the Statute, the Directors may from time to time declare dividends (including interim dividends) and distributions on shares of the Company outstanding and authorize payment of the same out of the funds of the Company lawfully available therefore. | |
103. | The Directors may, before declaring any dividends or distributions, set aside such sums as they think proper as a reserve or reserves which shall at the discretion of the Directors, be applicable for any purpose of the Company and pending such application may, at the like discretion, be employed in the business of the Company. | |
104. | No dividend or distribution shall be payable except out of the profits of the Company, realized or unrealized, or out of the share premium account or as otherwise permitted by the Statute. | |
105. | Subject to the rights of persons, if any, entitled to shares with special rights as to dividends or distributions, if dividends or distributions are to be declared on a class of shares they shall be declared and paid according to the amounts paid or credited as paid on the shares of such class outstanding on the record date for such dividend or distribution as determined in accordance with these Articles but no amount paid or credited as paid on a share in advance of calls shall be treated for the purpose of this Article as paid on the share. | |
106. | The Directors may deduct from any dividend or distribution payable to any Member all sums of money (if any) presently payable by him to the Company on account of calls or otherwise. | |
107. | The Directors may declare that any dividend or distribution be paid wholly or partly by the distribution of specific assets and in particular of paid up shares, debentures, or debenture stock of any other company or in any one or more of such ways and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors. | |
108. | Any dividend, distribution, interest or other monies payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the holder who is first named on the register of Members or to such person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends, bonuses, or other monies payable in respect of the share held by them as joint holders. | |
109. | No dividend or distribution shall bear interest against the Company. |
- 23 -
CAPITALISATION | ||
110. | The Company may upon the recommendation of the Directors by ordinary resolution authorizing the Director to capitalize any sum standing to the credit of any of the Companys reserve accounts (including share premium account and capital redemption reserve fund) or any sum standing to the credit of profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their behalf in paying up in full unissued shares for allotment and distribution credited as fully paid up to and amongst them in the proportion aforesaid. In such event the Directors shall do all acts and things required to give effect to such capitalization, with full power to the Directors to make such provisions as they think fit for the case of shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned). The Director may authorize any person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalization and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned. | |
BOOKS OF ACCOUNT | ||
111. | The Directors shall cause proper books of account to be kept with respect to: |
(a) | all sums of money received and expended by the Company and the matters in respect of which the receipt or expenditure takes place; | ||
(b) | all sales and purchases of goods by the Company; | ||
(c) | the assets and liabilities of the Company. |
Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the Companys affairs and to explain its transactions. | ||
112. | The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by Statue or authorized by the Directors or by the Company in general meeting. | |
113. | The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law. | |
AUDIT | ||
114. | The Company may at any annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the next annual general meeting and may fix his or their remuneration. | |
115. | The Directors may before the first annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the first annual general meeting unless previously removed by an ordinary resolution of the Members in general meeting in which case the Members at that meeting may appoint Auditors. The Directors may fill any casual vacancy in the office of Auditor but while any such vacancy continues the surviving or continuing Auditor or Auditors, if any, may act. The remuneration of any Auditor appointed by the Directors under these Articles may be fixed by the Directors. |
- 24 -
119. | (a) | Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter containing the notice, and to have been effected at the expiration of 60 hours after the letter containing the same is posted as aforesaid. |
(b) | Where a notice is sent by cable, telex, telecopy or electronic message, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization and to have been effected on the day the same is sent as aforesaid. |
120. | A notice may be given by the Company to the joint holders of record of a share by giving the notice to the joint holder first named on the register of Members in respect of the share. | |
121. | A notice may be given by the Company to the person or persons which the Company has been advised are entitled to a share or shares in consequence of the death or bankruptcy of a Member by sending it through the post as aforesaid in a pre-paid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the persons claiming to be so entitled, or at the option of the Company by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. | |
122. | Notice of every general meeting shall be given in any manner hereinbefore authorized to: |
(a) | every person shown as a Member in the register of Members as of the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the register of Members. | ||
(b) | every person upon whom the ownership of a share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a Member of record where the Member of record but for his death or bankruptcy would be entitled to receive notice of the meeting; and |
No other person shall be entitled to receive notices of general meetings. | ||
WINDING UP |
- 25 -
123. | If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Statute, divide amongst the Members in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability. | |
124. | If the Company shall be wound up, and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. And if in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the Members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. This Article is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions. | |
INDEMNITY | ||
125. | The Directors and officers for the time being of the Company and any trustee for the time being acting in relation to any of the affairs of the Company and their heirs, executors, administrators and personal representatives respectively shall be indemnified out of the assets of the Company from and against all actions, proceedings, costs, charges, losses, damages and expenses which they or any of them shall or may incur or sustain by reason of any act done or omitted in or about the execution of their duty in their respective offices or trusts, except such (if any) as they shall incur or sustain by or through their own willful neglect or default respectively and no such | |
Director, officer or trustee shall be answerable for the acts, receipts, neglects or defaults of any other Director, officer or trustee or for joining in any receipt for the sake of conformity or for the solvency or honesty of any banker or other persons with whom any monies or effects belonging to the Company may be lodged or deposited for safe custody or for any insufficiency of any security upon which any monies of the Company may be invested or for any other loss or damage due to any such cause as aforesaid or which may happen in or about the execution of his office or trust unless the same shall happen through the willful neglect or default of such Director, Officer or trustee. | ||
FINANCIAL YEAR | ||
126. | Unless the Directors otherwise prescribe, the financial year of the Company shall end on the last day of February in each year and, following the year of incorporation, shall begin on March 1st in each year. | |
AMENDMENTS OF ARTICLES | ||
127. | Subject to the Statute, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part, provided that no alteration or change shall be made to any of the rights, preferences, privileges or restrictions of the Series A Preferred Shares without the consent of the holders of a majority of the Series A Preferred Shares. |
- 26 -
TRANSFER BY WAY OF CONTINUATION | ||
128. | If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the Statute and with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands. |
- 27 -
1. | Dividend Right . |
1.1. | Subject to Articles 101 to 108 of these Articles, and further subject to the circumstances prevailing at the relevant time including, in particular, the working capital requirements of the Company and the unanimous approval of the Board, the Company may distribute dividend in accordance with the Articles in respect of each financial year out of such of its profits as are then lawfully available for distribution. | ||
1.2. | The dividend shall be distributed when, as and if declared by the Board among the then outstanding Common Shareholders and Series A Preferred Shareholders pro rata and on an as-if-converted basis in accordance with the amounts paid up on their respective Shares. For the avoidance of doubt, dividends shall be non-cumulative such that dividends shall only accrue and be payable when, as and if declared by the Board in its sole discretion. |
2. | Liquidation Right . | |
2.1 | Liquidation Event . The following events shall be treated as a liquidation, dissolution or winding up (each, a Liquidation Event ) unless waived by the holders of at least fifty-one percent (51%) of the then outstanding Series A Preferred Shares, voting together as a single class on an as-if-converted basis: |
(i) | any consolidation or merger of the Company with or into any Person, or any other corporate reorganization, including a sale or acquisition of equity securities of the Company, in which the Shareholders of the Company immediately before such transaction own less than 50% of the Companys voting power immediately after such transaction (excluding any transaction effected solely for tax purposes or to change the Companys domicile); | ||
(ii) | a sale of all or substantially all of the assets of the Company; or | ||
(iii) | any termination, liquidation, dissolution or winding up of the Company; |
and upon any such event, any proceeds generated therefrom to which the Shareholders of the Company shall be entitled to shall be distributed in accordance with the terms of Clause 2.2 of Schedule A . |
2.2 | Liquidation Preferences . Upon any Liquidation Event, whether voluntary or involuntary, unless any Preferred Shareholder has agreed otherwise in advance and in writing on the definitive liquidation plan of the Company: |
(i) | Before any distribution or payment shall be made to the holders of any Common Shares, the holder of Series A Preferred Shares shall be entitled to receive an amount equal to one hundred percent (100%) of the Original Issue Price (adjusted for any share splits, share dividends, combinations, recapitalizations and similar transactions), plus any declared but unpaid dividends with respect thereto (as adjusted for any share splits, share dividends, combinations, recapitalizations and similar transactions) per Series A Preferred Share then held by such holder. All |
1
arrears or accruals of dividends as declared by the Board due to the Series A Preferred Shareholders are in priority to the holders of all other shares. | |||
(ii) | After distribution or payment in full of the amount distributable or payable on the Series A Preferred Shares pursuant to Clause 2.2(i) of Schedule A , the remaining assets of the Company available for distribution to Shareholders shall be distributed ratably among the then holders of outstanding Common Shares and holders of Series A Preferred Shares on an as-if-converted basis. |
3. | Voting Rights . Each Existing Holder or its Affiliate shall be entitled to exercise the number of votes which such holder would have been entitled to exercise as if all the Series A Preferred Shares held by such holder had been converted into Class B Common Shares immediately before the holding of the general meeting at the Conversion Price then in effect; and each holder of Preferred Shares which is not an Existing Holder or its Affiliate is entitled to exercise the number of votes which such holder would have been entitled to exercise as if all the Series A Preferred Shares held by such holder had been converted into Class A Common Shares immediately before the holding of the general meeting at the Conversion Price then in effect. The holders of Series A Preferred Shares and Common Shares shall vote together and not as a separate class, except as otherwise required by the Articles or the Shareholders Agreement. Except as otherwise provided herein and subject to other voting requirements contained herein, the Company shall not carry out any of actions relating to the issues listed in Clause 4 and Clause 5 of Schedule A below, and no affirmative shareholders resolution shall be adopted to approve or carry out the same, except with the affirmative votes or prior written consent of the holders holding an aggregate of no less than 50% of all outstanding shares of the Company. | |
4. | Veto Rights of Series A Preferred Shareholder/Series A Director . Subject to Clause 5 below, so long as there are any Series A Preferred Shares outstanding, the Company shall not take, and shall procure that each Group Entity does not take, whether in one transaction or through a series of transactions, or whether by amending the Articles or otherwise, any of the following actions without (i) the prior written consent of the holders of majority of the outstanding Series A Preferred Shares; or (ii) the prior consent of the Board, including the affirmative consent of the Series A Director, and in the context of such matters set forth in this Clause 4 which are by applicable laws required to be determined by the shareholders of the Company, the approval of the holders of at least a majority of the then outstanding Series A Preferred Shares shall be deemed obtained if the matter is approved at a general meeting of the Company with the affirmative vote of the holders of at least a majority of the then outstanding Series A Preferred Shares or by way of written resolution signed by all the holders of the outstanding Series A Preferred Shares: |
(i) | dissolve or liquidate any Group Entity (other than as a result of the restructuring of the Companys Subsidiaries pursuant to a restructuring plan prior to the IPO that approved by the Board (the Restructuring ); | ||
(ii) | amend any of the charter/constitutional documents of any Group Entity or any of its Subsidiaries that may affect the rights, preferences or privileges of the Series A Preferred Shareholder; | ||
(iii) | make changes in the capital structure of any Group Entity or any of its Subsidiaries, including the creation or issuance of additional securities or securities convertible or exchangeable into equity of the Company (other than as a result of the Restructuring and/or a new round financing of the Company, as long as the pre-money valuation of the Company in the new round financing reaches either (x) within 12 months following Closing is at least 1.3 times of the post-money valuation of the Company in the Series A Financing on a fully diluted basis or (y) after 12 months following Closing is at least 1.5 times of the post-money valuation of the Company in the Series A Financing on a fully diluted |
2
basis, and in any case of (x) or (y), the rights of the Series A Preferred Shareholders shall rank at least pari passu with, and shall not be inferior to, the rights of the new round investor(s).); | |||
(iv) | make or result in mergers, amalgamations, investments, acquisitions, joint ventures and dispositions involving any Group Entity (other than as a result of the Restructuring); | ||
(v) | repurchase or redeem any shares, provided, however, that this restriction shall not apply to the repurchase of shares from employees, officers, directors, consultants or other persons performing services for the Group Entity or any of its Subsidiaries pursuant to agreements under which the Group Entity has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service; | ||
(vi) | make material changes to the scope, nature and/or activities of the business of any Group Entity and its Subsidiaries; | ||
(vii) | approve or amend any annual operating and capital budgets and annual business plan of any Group Entity; | ||
(viii) | make changes in the number of members of the board of any Group Entity or its Subsidiaries where there is Director nominated by the Series A preferred shareholders sitting in such board; | ||
(ix) | adopt any new employee stock option plan and formation of the compensation committee; and transactions with a related party; or | ||
(x) | make any dividend or distributions on shares of any Group Entity. |
5. | Veto Rights of Tiger . In addition to Clause 4 above, the Company shall not take, and shall procure that each Group Entity does not take, whether in one transaction or through a series of transactions, or whether by amending the Articles or otherwise, the following actions without the prior written consent of Tiger, and in the context of such matters set forth in this Clause 5 which are by applicable laws required to be determined by the shareholders of the Company, the approval of Tiger shall be deemed obtained if the matter is approved at a general meeting of the Company with the affirmative vote of Tiger or by way of written resolution signed by Tiger: |
(a) | actions as listed in Section 4(v) of this Schedule A , provided that (i) Series A Preferred Shareholders exercise of its redemption rights in accordance with Clause 8 of this Agreement, or (ii) the Companys exercise of its right of first refusal in accordance with Clause 9.1 of this Agreement shall not be subject to the veto rights of Tiger set out herein; | ||
(b) | enter into, or obligate itself to enter into, any related party transaction with an Affiliate of the Company or any Subsidiary of the Company or any employee, officer, director, administrator or shareholder of the Company or any Subsidiary of the Company or any member of such persons immediate family, or any corporation, partnership or other entity in which such person or family member is an officer, director, administrator or partner, or in which such person or family member has ownership or economic interests or otherwise controls such entity; or | ||
(c) | alter or change, either by means of amending the Group Entitys constitutional documents or otherwise, the rights, preferences or privileges of Tiger; |
3
6. | Matters Requiring Series A Preferred Shareholders Presence and Vote . So long as there are any Series A Preferred Shares outstanding, in addition to any other vote or consent required elsewhere in these Articles or by any applicable statute, matters listed below shall be discussed in the general meeting with the presence of the Series A Preferred Shareholder: |
(i) | incurrence of any debt, guarantees or liens in excess of RMB5,000,000 in the aggregate (excluding any extension, renewal or refinancing of debt, guarantees or liens outstanding at the Closing (as defined in the Series A Share Purchase Agreement) on comparable or better terms); | ||
(ii) | appoint and/or reappoint a corporate auditor or changes in the accounting principles of the Group Entity; | ||
(iii) | assignment and/or transfer by any Seller of the Equity Securities of the Company and/or transfer by any Founder of the shares of the Sellers; | ||
(iv) | appoint and/or reappoint the chief executive officer or the chief financial officer of the Company; or | ||
(v) | any capital expenditures in excess of RMB1 million outside of budget approved by the Board. |
7. | Conversion Rights . The Series A Preferred Shareholders shall have the following rights described below with respect to the conversion of the Series A Preferred Shares into Common Shares: The number of Common Shares to which the Series A Preferred Shareholders shall be entitled upon conversion of any Series A Preferred Share shall be the quotient of the Original Issue Price over the Conversion Price. For the avoidance of doubt, the initial conversion ratio for Series A Preferred Shares to Common Shares shall be 1:1, subject to adjustments of the Conversion Price as set forth in Clause 7.3 of Schedule A below. | |
7.1 | Optional Conversion . |
(i) | Subject to and in compliance with the provisions of this Clause 7.1 of Schedule A , (a) any Series A Preferred Shares held by the Existing Holder or its Affiliates may, at the option of such holder, be converted at any time into fully-paid and non-assessable Class A or Class B Common Shares, and (b) any Series A Preferred Shares held by a holder other than the Existing Holder or its Affiliates may, at the option of such holder, be converted at any time into fully-paid and non-assessable Class A Common Shares only, pursuant to Clause 7.1(ii) of Schedule A below. Upon such conversion, all preference rights attached to such Series A Preferred Share shall be automatically terminated. | ||
(ii) | The Series A Preferred Shareholder who desires to convert such Series A Preferred Shares into any class of Common Shares shall surrender the certificate therefore, duly endorsed, at the office of the Company or any transfer agent for the Series A Preferred Shares, and shall give written notice to the Company at such office that the Holder has elected to convert such Shares. Such notice shall state the number of Series A Preferred Shares being converted, and the class of Common Shares into which such Preferred Shares shall be converted, if applicable. Thereupon, the Company shall promptly issue and deliver to the Holder at such office a certificate for the number of the applicable class of Common Shares to which such Holder is entitled and shall promptly pay (i) in cash, any declared and unpaid dividends on the Series A Preferred Shares being converted and (ii) in cash, the value of any fractional Common Shares to which the Series A Preferred Shareholder would otherwise be entitled. |
4
Such conversion shall be deemed to have been made at the close of business on the date of the surrender of the certificates representing the Series A Preferred Shares to be converted, and the person entitled to receive the applicable class of Common Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Common Shares on such date. |
7.2 | Automatic Conversion . |
(i) | Without any action being required by the holder of such Series A Preferred Shares and whether or not the certificates representing such Series A Preferred Shares are surrendered to the Company or its transfer agent, (a) each Series A Preferred Share held by the Existing Holder or its Affiliates shall automatically be converted into Class B Common Shares and (b) each Series A Preferred Share held by a holder other than the Existing Holder or its Affiliates shall automatically be converted into Class A Common Shares, based on the then-effective Conversion Price, immediately upon the closing of a Qualified Public Offering. | ||
(ii) | The Company shall not be obligated to issue certificates for any Common Shares issuable upon the automatic conversion of any Series A Preferred Shares unless the certificate evidencing such Series A Preferred Shares is either delivered as provided below to the Company or any transfer agent for the Series A Preferred Shares, or the Series A Preferred Shareholder notifies the Company or its transfer agent that such certificate has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificate. The Company shall, as soon as practicable after receipt of certificate for Series A Preferred Shares, or satisfactory agreement for indemnification in the case of a lost certificate, promptly issue and deliver at its office to the Series A Preferred Shareholder thereof a certificate or certificates for the number of Common Shares to which such Series A Preferred Shareholder is entitled and shall promptly pay (i) in cash, any declared and unpaid dividends on the Series A Preferred Shares being converted and (ii) in cash, the value of any fractional Common Shares to which the Series A Preferred Shareholder would otherwise be entitled. Any person entitled to receive Common Shares issuable upon the automatic conversion of the Series A Preferred Shares shall be treated for all purposes as the record holder of such Common Shares on the date of such conversion. |
7.3 | Conversion Price . | |
The Conversion Price for the Series A Preferred Shares ( Conversion Price ) shall initially equal to the Original Issue Price and shall be adjusted from time to time as provided below: |
(i) | Adjustment for Share Splits and Combinations . If the Company shall at any time, or from time to time, effect a subdivision of the outstanding Common Shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately decreased. Conversely, if the Company shall at any time, or from time to time, combine the outstanding Common Shares into a smaller number of shares, the Conversion Price in effect immediately prior to the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. | ||
(ii) | Adjustment for Common Share Dividends and Distributions . If the Company at any time, or from time to time, makes (or fixes a record date for the |
5
determination of holders of Common Shares entitled to receive) a dividend or other distribution to the holders of Common Shares payable in Common Shares, in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance (or in the event such record date is fixed, as of the close of business on such record date) by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such dividend or distribution. |
(iii) | Adjustments for Other Dividends. If 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) a dividend or other distribution payable in securities of the Company other than Common Shares or Common Shares Equivalents, then, and in each such event, provision shall be made so that, upon conversion of any Series A Preferred Share thereafter, the Series A Preferred Shareholders thereof shall receive, in addition to the number of Common Shares issuable thereon, the amount of securities of the Company which the Series A Preferred Shareholder would have received had the Series A Preferred Share been converted into Common Shares immediately prior to such event, all subject to further adjustment as provided herein. | ||
(iv) | Reorganizations, Mergers, Consolidations, Reclassifications, Exchanges, Substitutions. If at any time, or from time to time, any capital reorganization or reclassification of the Common Shares (other than as a result of a share dividend, subdivision, split or combination otherwise treated above) occurs or the Company is consolidated, merged or reorganized with or into another Person (other than a consolidation, merger or reorganization treated in Clause 7.3.1 of Schedule A ), then in any such event, provision shall be made so that, upon conversion of any Series A Preferred Share thereafter, the Series A Preferred Shareholder thereof shall receive the kind and amount of shares and other securities and property which the Series A Preferred Shareholder of such share would have received had the Series A Preferred Share been converted into Common Shares on the date of such event, all subject to further adjustment as provided herein, or with respect to such other securities or property, in accordance with any terms applicable thereto. | ||
(v) | Sale of Shares below the Conversion Price. |
A. | Adjustment of Series A Conversion Price Upon Issuance of Additional Equity Securities. If at any time, or from time to time, the Company shall issue or sell New Securitas (other than (i) as a subdivision or combination of Common Shares provided for in Clause 7.3(i) of Schedule A above, (ii) as a dividend or other distribution provided for in Clause 5.3(ii) of Schedule A above, (iii) the issuance of Shares under any stock option plan, (iv) the conversion of Preferred Shares into Common Shares, or (v) the issuance of New Securities in a Qualified Public Offering) for a consideration of price per share (the Future Issuance Price ) less than the Series A Conversion Price, then, and in each such case, the Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to equal such Future Issuance Price. | ||
B. | Determination of Consideration . For the purpose of making any adjustment |
6
in the Conversion Price or number of Common Shares issuable upon conversion of the Series A Preferred Shares, as provided above: |
(a) | To the extent it consists of cash, the consideration received by the Company for any issue or sale of securities shall be computed at the net amount of cash received by the Company after deduction of any expenses payable directly or indirectly by the Company and any underwriting or similar commissions, compensations, discounts or concessions paid or allowed by the Company in connection with such issue or sale; | ||
(b) | To the extent it consists of property other than cash, consideration other than cash received by the Company for any issue or sale of securities shall be computed at the fair market value thereof, as determined in good faith by the Board as of the date of the adoption of the resolution specifically authorizing such issue or sale, irrespective of any accounting treatment of such property; and | ||
(c) | If New Securities or Common Share Equivalents exercisable, convertible or exchangeable for New Securities are issued or sold together with other stock or securities or other assets of the Company for consideration which covers both, the consideration received for the New Securities or Common Share Equivalents shall be computed as that portion of the consideration received which is reasonably determined in good faith by the Board to be allocable to such New Securities or Common Share Equivalents. | ||
C. | No Exercise . If all of the rights to exercise, convert or exchange any Common Share Equivalents shall expire without any of such rights having been exercised, the Series A Conversion Price as adjusted upon the issuance of such Common Share Equivalents shall be readjusted to the Series A Conversion Price which would have been in effect had no adjustment been made. |
(vi) | Certificate of Adjustment. In the case of any adjustment or readjustment of the Conversion Price, the Company, at its sole expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered Series A Preferred Shareholder at the holders address as shown in the Companys books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for any New Securities issued or sold or deemed to have been issued or sold, (ii) the number of New Securities issued or sold or deemed to be issued or sold, (iii) the Conversion Price in effect after such adjustment or readjustment, and (iv) the number of Common Shares and the type and amount, if any, of other property which would be received upon conversion of the Series A Preferred Shares after such adjustment or readjustment. | ||
(vii) | Notice of Record Date . In the event the Company shall propose to take any action of the type or types requiring an adjustment to the Conversion Price or the number or character of the Series A Preferred Shares as set forth herein, the Company shall give notice to the Series A Preferred Shareholder, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) |
7
on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon the occurrence of such action of deliverable upon the conversion of Series A Preferred Shares. In the case of any action which would require the fixing of a record date, such notice shall be given at least twenty (20) days prior to the date so fixed, and in the case of all other actions, such notice shall be given at least thirty (30) days prior to the taking of such proposed action. |
(viii) | Fractional Shares . No fractional Common Shares shall be issued upon conversion of any Series A Preferred Share. All Common Shares (including fractions thereof) issuable upon conversion of more than one Series A Preferred Share by the Series A Preferred Shareholder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after such aggregation, the conversion would result in the issuance of any fractional share, the Company shall round this fractional share up to 1 Share. | ||
(ix) | Reservation of Shares Issuable Upon Conversion . The Company shall at all times reserve and keep available out of its authorized but un-issued Common Shares, solely for the purpose of effecting the conversion of the Series A Preferred Shares. Such number of its Common Shares as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Shares. If at any time the number of authorized but un-issued Common Shares shall not be sufficient to effect the conversion of all then outstanding Series A Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but un-issued Common Shares to such number of Shares as shall be sufficient for such purpose. | ||
(x) | Notices . Any notice required by the provisions of this Clause 7.4 of Schedule A hall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to the Series A Preferred Shareholder of record at the address of the Series A Preferred Shareholder appearing on the books of the Company. | ||
(xi) | Payment of Taxes . The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of Common Shares upon conversion of Series A Preferred Shares, excluding any tax or other charge imposed in connection with any transfer involved in the issuance and delivery of Common Shares in a name other than that in which the Series A Preferred Shares so converted were registered. |
8. | Redemption Rights . |
8
8.1 | Redemption Right . Subject to the terms and conditions of this Agreement and to the extent permitted by applicable laws, at any time and from time to time after December 31, 2011, at the written request for redemption (made on one or more occasions) by the Series A Preferred Shareholder then outstanding, concurrently with surrender by such holder of certificates representing its Series A Preferred Shares, the Company shall redeem all the Series A Preferred Shares as may be requested by such holder. | |
8.2 | Redemption Price . The redemption price per Share at which such redemption shall be made by the Company for the number of Preferred Shares as requested to be redeemed shall be one hundred and eighty percent (180%) of the Original Issue Price. The Company shall pay such amount on each of the Series A Preferred Shares to be redeemed on the redemption date specified in the request of such Preferred Shareholder. | |
8.3 | Unredeemed Shares . If on the date of redemption, the number of Series A Preferred Shares that may then be legally redeemed by the Company is less than the number of Series A Preferred Shares to be redeemed, then any unredeemed preferred shares will be carried forward and redeemed as soon as the Company is legally able to do so. If the Company does not have sufficient cash legally available to redeem all of the Series A Preferred Shares required to be redeemed, the remainder of the unredeemed Series A Preferred Shares will be paid in the form of a one-year note to the Series A Preferred Shareholder bearing an interest of 25% for Series A Preferred Shares. | |
9. | RIGHT OF FIRST REFUSAL, CO-SALE . | |
9.1 | Right of First Refusal |
(a) | Transfer Notice from Shareholders . If at any time a Common Shareholder or a Series A Preferred Shareholder (a Transferor ) proposes to transfer Equity Securities to one or more third parties pursuant to an understanding with such third parties (the Transfer ), then, the Transferor shall give each of the other non-selling Shareholders (the Non-Selling Shareholders ) and the Company written notice of the Transferors intention to make the Transfer (the Transfer Notice ), provided, however, that the Transferor shall only give such Transfer Notice to each of the Common Shareholders if the Transferor is a Series A Preferred Shareholder which shall include (i) a description of the Equity Securities to be transferred ( Shares Offered by Shareholder ), (ii) the identity of the prospective transferee; and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall be evidence that the Transferor has received a firm offer from the prospective transferee and in good faith believes a binding agreement for the Transfer is obtainable on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer. | ||
(b) | Non-Selling Shareholders Rights of First Refusal . |
(i) | The Non-Selling Shareholders shall have an option for a period of thirty (30) days from its receipt of the Transfer Notice to elect to purchase its respective pro rata shares of the Shares Offered by Shareholder at the same price and subject to the same material terms and conditions as described in the Transfer Notice, provided, however that the Sellers shall have such option provided herein for a period of fifteen (15) days. | ||
(ii) | The Non-Selling Shareholders may exercise such purchase option and, thereby, purchase all or any portion of its pro rata share of the Shares Offered by Shareholder, by notifying Transferor in writing, before expiration of the |
9
applicable period as provided above as to the number of shares which it wishes to purchase. | |||
(iii) | The Non-Selling Shareholders pro rata share of the Shares Offered by Shareholder shall be a fraction, of which the numerator shall be the number of Equity Securities owned by such Non-Selling Shareholder on the date of the Transfer Notice, and the denominator shall be the total number of Equity Securities held by all the Non-Selling Shareholders on the date of the Transfer Notice. | ||
(iv) | Each of the Non-Selling Shareholders shall be entitled to apportion its pro rata share of the Shares Offered by Shareholder among its partners and Affiliates, provided that such Non-Selling Shareholder notifies the Transferor of such allocation. | ||
(v) | If any of the Non-Selling Shareholder gives the Transferor notice that it desires to purchase its pro rata share of the Shares Offered by Shareholder (the Participating Shareholder ), then payment for the Shares Offered by Shareholder shall be by check or wire transfer, against delivery of the Shares Offered by Shareholder to be purchased at a place agreed by the parties and at the time of the scheduled closing therefor, which shall be no later than the latest of (i) thirty (30) business days after the Non-Selling Shareholders receipt of the Transfer Notice, (ii) the closing date contemplated in the Transfer Notice, and (iii) the date on which the value of the purchase price is established pursuant to Clauses 9.1(d) of Schedule A . | ||
(vi) | In the event any Non-Selling Shareholder elects not to purchase its full pro rata share of the Shares Offered by Shareholder available pursuant to its option under Clause 9.1(b) of Schedule A within the time period set forth therein, then the Transferor shall promptly, but in any event within five (5) days, give written notice (the Over-allotment Notice ) to each Participating Shareholder that has elected to purchase all of its pro rata share of the Shares Offered by Shareholder (each a Fully Participating Shareholder ), which notice shall set forth the number of the Shares Offered by Shareholder not purchased by the other Non-Selling Shareholders (the Over-allotment Shares ), and shall offer the Fully Participating Shareholders the right to acquire the Over-allotment Shares. Each Fully Participating Shareholder shall have five (5) days after receipt of the Over-allotment Notice to deliver a written notice to the Transferor of its election to purchase its pro rata share of the Over-allotment Shares on the same terms and conditions as set forth in the Transfer Notice and indicating the maximum number of the Over-allotment Shares that it will purchase in the event that any other Fully Participating Shareholder elects not to purchase its pro rata share of the Over-allotment Shares. For purposes of this Clause 9.1(b) of Schedule A , each Fully Participating Shareholders pro rata share of the Over-allotment Shares shall be a fraction, of which the numerator shall be the number of Equity Securities owned by such Fully Participating Shareholder on the date of the Transfer Notice, and the denominator shall be the total number of Equity Securities held by all the Fully Participating Shareholder on the date of the Transfer Notice. | ||
(vii) | If the Non-Selling Shareholders fail to purchase any or all of the Shares Offered by Shareholder by exercising the option granted in this Clause 9.1(b) of Schedule A within the period provided, the remaining Shares Offered by Shareholder shall be subject to the options granted to the Company pursuant to Clause 9.1(c) of Schedule A . |
This Clause 9.1(b) shall be subject to Section 6.6 of the Purchase Agreement. |
10
(c) | The Companys Right of Refusal . | ||
Subject to the Non-Selling Shareholders option as set forth in Clause 9.1(b) , if at any time the Transferor propose a Transfer, within five (5) days after the Non-Selling Shareholders have declined to purchase all, or a portion, of the Shares Offered by Shareholder or the Non-Selling Shareholders option to so purchase the Shares Offered by Shareholder has expired, the Transferor shall give the Company an additional transfer notice ( Additional Transfer Notice ) that shall include all of the information and certifications required in a Transfer Notice and shall additionally identify the Shares Offered by Shareholder that the Non-Selling Shareholders have declined to purchase (the Remaining Shares ) and briefly describe the Companys rights of refusal with respect to the proposed Transfer. The Company shall have an option for a period of ten (10) days from its receipt of the Additional Transfer Notice to elect to purchase the Remaining Shares at the same price and subject to the same material terms and conditions as described in the Additional Transfer Notice, subject to compliance with the Companies Law of the Cayman Islands. The Company may exercise such purchase option and purchase all or any portion of the Remaining Shares by notifying the Transferor in writing before expiration of such ten (10) day period as to the number of such shares that it wishes to purchase. If the Company gives the Transferor notice that it desires to purchase such shares, then payment for the Remaining Shares to be purchased shall be made by check or wire transfer, against delivery of the Remaining Shares to be purchased at a place agreed upon between the Company and the Transferor and at the time of the scheduled closing therefor, which shall be no later than the latest of (i) thirty (30) business days after the Companys receipt of the Additional Transfer Notice, (ii) the closing date contemplated in the Additional Transfer Notice, and (iii) the date on which the value of the purchase price is established pursuant to Clause 9.1(d) of Schedule A . | |||
(d) | Valuation of Property . |
(i) | Should the purchase price specified in the Transfer Notice be payable in property other than cash or evidences of indebtedness, the Company or the Non-Selling Shareholder, as the case may be, shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. | ||
(ii) | If the Transferor and the Company (or the relevant Non-Selling Shareholder, as the case may be) fail to agree on such cash value within ten (10) days after the Companys (or such Non-Selling Shareholder) receipt of the Transfer Notice, the valuation shall be made by an appraiser of recognized standing selected by the Transferor and the Company (or the Non-Selling Shareholder, as the case may be) or, if they fail to agree on an appraiser within twenty (20) days after the receipt of the Transfer Notice, each shall select an appraiser of recognized standing and the two appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. | ||
(iii) | The cost of such appraisal shall be shared equally by the Transferor and the Company (or the relevant Non-Selling Shareholder(s), as the case may be, in which case, with the half of the cost to be borne pro rata by each of such Non-Selling Shareholders based on the number of shares to be purchased pursuant to this Clause 9 of Schedule A . | ||
(iv) | If the closing time for the Companys (or the Non-Selling Shareholders) purchase as provided in Clause 9.1(b) or (c) of Schedule A above has expired but for the determination of the value of the purchase price offered by the prospective transferee, such closing shall be held on or prior to the fifth |
11
business day after such valuation shall have been made pursuant to this sub-Section. |
9.2 | Right of Co-Sale . |
(a) | To the extent the Company and the Non-Selling Shareholders do not exercise their respective rights of first refusal as to all of the Shares Offered by a Shareholder pursuant to Clause 9.1 of Schedule A , the Series A Preferred Shareholder and Tiger (each a Co-Sale Participant ) which notifies the Transferor in writing within fifty (50) days after receipt of the Transfer Notice referred to in Clause 9.1(a) of Schedule A , shall have the right to participate in such sale of Equity Securities on the same terms and conditions as specified in the Transfer Notice. Notwithstanding anything to the contrary provided herein, Tiger shall be entitled to the right of co-sale as endowed by this Clause 9.2 of Schedule A to the extent that the Transferor is any of the Founders and/or Sellers. | ||
(b) | Number of Equity Securities for Co-sale. | ||
Each Co-Sale Participant may elect to sell up to such number of Equity Securities equal to (on a fully converted basis) the product of (i) the aggregate number of Shares Offered by Shareholder covered by the Transfer Notice that have not been subscribed for pursuant to this Clause 9 of Schedule A ; by (ii) a fraction, the numerator of which is the number of Equity Securities owned by such Co-Sale Participant on the date of the Transfer Notice and the denominator of which is the total number of Equity Securities owned by the Transferor and the Co-Sale Participants on the date of the Transfer Notice. | |||
(c) | The Co-Sale Participant shall effect its participation in the sale by promptly delivering to the Transferor for transfer to the prospective transferee one or more certificates, properly endorsed for transfer, which represent the type and number of Equity Securities which the Co-Sale Participant elects to sell; provided, however that if the prospective transferee objects to the delivery of Equity Securities in lieu of Common Shares, the Co-Sale Participant shall convert such Equity Securities into Common Shares and deliver certificates corresponding to such Common Shares. The Company agrees to make any such conversion concurrent with the actual transfer of such shares to the purchaser and contingent on such transfer. | ||
(d) | The share certificate or certificates that a Co-Sale Participant delivers to the Transferor pursuant to Clause 9.2(c) of Schedule A shall be transferred to the prospective transferee in consummation of the sale of the Equity Securities pursuant to the terms and conditions specified in the Transfer Notice, and the Transferor shall concurrently therewith remit to such Co-Sale Participant that portion of the sale proceeds to which such Co-Sale Participant is entitled by reason of its participation in such sale. | ||
(e) | To the extent that any prospective transferee prohibits the participation of a Co-Sale Participant exercising its co-sale rights hereunder in a proposed Transfer or otherwise refuses to purchase shares or other securities from a Co-Sale Participant exercising its co-sale rights hereunder, the Transferor shall not sell to such prospective transferee any Equity Securities unless and until, simultaneously with such sale, the Transferor shall purchase such shares or other securities from such Co-Sale Participant for the same consideration and on the same terms and conditions described in the Transfer Notice. |
9.3 | Non-exercise of Rights . | |
To the extent that the Company and the Non-Selling Shareholders have not exercised their rights to purchase the Shares Offered by Shareholder, the Remaining Shares or the Over-allotment Shares within the time periods specified in Clause 9.1 of Schedule A and the Series A Preferred Shareholder and Tiger have not exercised their rights to participate in the sale of the Equity |
12
Securities pursuant to and within the time periods specified in Clause 9.2 of Schedule A , the Transferor shall have a period of thirty (30) days from the expiration of such rights to sell the Shares Offered by Shareholder, the Remaining Shares or the Over-allotment Shares, as the case may be, upon terms and conditions (including the purchase price) no more favorable than those specified in the Transfer Notice to the third party prospective transferee(s) identified in the Transfer Notice. In the event such Transferor does not consummate the sale or disposition of the Shares Offered by Shareholder, the Remaining Shares and the Over-allotment Shares within the applicable time period from the expiration of these rights, the Companys first refusal rights and the Non-Selling Shareholders first refusal rights and co-sale rights shall continue to be applicable to any subsequent disposition of the Shares Offered by Shareholder or the Remaining Shares by the Transferor until such right lapses in accordance with the terms of these Articles. Furthermore, the exercise or non-exercise of the rights of the Non-Selling Shareholders under this Clause 9.3 of Schedule A shall not adversely affect their rights to make subsequent purchases or sales hereunder. |
9.4 | Limitation to and the Termination of the Rights of First Refusal and Co-Sale. |
(a) | Notwithstanding the provisions of Clause 9.1 , Clause 9.2 , Clause 9.3 and Clause 9.4 , a Transferor may sell or otherwise assign, with or without consideration, Shares to any spouse or member of such Transferors immediate family, or to a custodian, trustee, executor, or other fiduciary for the account of the Transferors spouse or members of the Transferors immediate family, or to a trust for the Transferors own self, or a charitable remainder trust, provided that each such transferee or assignee, prior to the completion of the sale, transfer, or assignment, shall have agreed in writing to be bound by provisions in these Articles. | ||
(b) | The rights of first refusal and co-sale rights provided under this Clause 9 shall be terminated immediately prior to the closing of a Qualified Public Offering. |
10. | PREEMPTIVE RIGHTS | |
10.1 | Right of First Offer . Subject to the terms and conditions specified in this Clause 10.4 of Schedule A , each time the Company proposes to issue any New Securities, the Company shall first offer such New Securities to each Series A Preferred Shareholder and Tiger in a written notice (an Issuance Notice ) setting forth (i) a description of the New Securities to be issued, including the rights and powers associated therewith, (ii) the number of such New Securities to be offered, and (iii) the price and terms upon which it proposes to offer the New Securities. | |
10.2 | Exercise of Preemptive Rights . By written notification received by the Company within twenty-one (21) calendar days after delivery of the Issuance Notice to a Series A Preferred Shareholder and Tiger, such Series A Preferred Shareholder and Tiger may elect to purchase, at the price and on the terms specified in the Issuance Notice, up to such portion of the New Securities offered as equal to the proportion to the number of Common Shares (including shares of Common Shares issuable upon conversion, exchange or exercise of Common Shares Equivalents) then held by such Series A Preferred Shareholder or Tiger, as the case may be, bears to the total number of shares of Common Shares then outstanding (determined on a fully-diluted basis, assuming the exercise, conversion or exchange of any Common Shares Equivalents). The Company shall promptly, in writing, inform the Series A Preferred Shareholder and Tiger that elect to purchase all the New Securities available to it pursuant to this Clause 10.2 (a Fully-Exercising Shareholder ) of any other Series A Preferred Shareholders or Tigers failure to do likewise. During the ten (10) day period commencing after such information is given, the Fully-Exercising Shareholder may elect to purchase a pro rata share of any New Securities unsubscribed by the Series A Preferred Shareholder or Tiger, pursuant to its rights hereunder, that is equal to the proportion that the number of Common Shares (including shares of Common Shares issuable upon conversion, exchange or exercise of Common Share Equivalents) then held by the Fully-Exercising Shareholder bears to the total number of Common Shares then |
13
outstanding (determined on a fully-diluted basis, assuming the exercise, conversion or exchange of any Common Shares Equivalents). |
10.3 | Issuance of Unsubscribed New Securities . Upon expiration of the period described in Clause 10.2 , unsubscribed New Securities may be offered by the Company during the one hundred and twenty (120) day period thereafter to any person or persons at a price not less, and upon terms no more favourable to the offeree, than specified in the Issuance Notice. If the Company does not enter into an agreement for the sale of the unsubscribed New Securities within such 120-day period, or if such agreement is not consummated within forty-five (45) days of the execution thereof, the preemptive rights of the Series A Preferred Shareholder and Tiger under this Clause 10.2 shall be deemed revived and such unsubscribed New Shares shall not be offered unless first re-offered to the Series A Preferred Shareholder and Tiger in accordance herewith. | |
10.4 | Exempted Issuance . Notwithstanding anything to the contrary provided herein, the preemptive rights described in this Clause 10 of Schedule A shall not apply to (i) the issuance of Equity Securities for the exercise of option of follow-on investments by Tiger, (ii) the issuance of Equity Securities in a Qualified Public Offering, (iii) the issuance by the Company of Common Shares (or options therefor) to employees, officers, directors or consultants of the Company pursuant to a stock option plan or other share option plans or other stock incentive arrangements approved by the Board of the Company, (iv) the issuance of Equity Securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, as a result of which the shareholders of the Company immediately after such merger, sale or consolidation will not hold securities representing a majority of the voting power of the outstanding securities of the surviving or resulting entity, provided that such issuance has obtained required approvals and consents pursuant to Clause 10 hereof; (v) Common Shares issued in connection with any share split or stock dividend, reclassification or the like; or (vi) the issuance of Equity Securities pursuant to the conversion, exchange or exercise of any warrant, option, right, or convertible or exchangeable instrument. | |
10.5 | Assignment . The rights of each of Series A Preferred Shareholder and Tiger under this Clause 10 shall only be assigned (i) to each other, (ii) to an Affiliate of such Series A Preferred Shareholder or Tiger (as the case may be) which acquires any of the Equity Securities thereof (provided that such Affiliate agrees in writing to be bound by the provisions hereof), or (ii) to an assignee or transferee who acquires all of the Equity Securities held by the Series A Preferred Shareholder or Tiger (as the case may be) (provided that such assignee or transferee agrees in writing to be bound by the provisions hereof). Tiger shall be entitled to apportion the right of first offer hereby granted it among itself and its members, partners and Affiliates in such proportions as it deems appropriate. | |
10.6 | Granted Rights . Series A Preferred Shareholder shall be granted any preemptive rights and registration rights granted to any subsequent purchasers of the New Securities of the Company to the extent that such subsequent rights are superior to those granted rights hereof. | |
10.7 | Termination . The rights of the Series A Preferred Shareholder, and the obligations of the Company, under this Clause 10 of Schedule A shall terminate immediately prior to the closing of a Qualified Public Offering. | |
11. | TAG ALONG RIGHTS | |
11.1 | Tag Along Rights . Without prejudice to any right and privilege of Series A Preferred Shareholder and Tiger provided under Clause 9.2 of Schedule A, if at any time the majority of Sellers propose to, by the way of assignment or transfer, transfer Equity Securities or any Common Shareholder(s) proposes to transfer or assign Equity Securities representing 50% or more voting power in the Company to one or more third parties ( Selling Shareholders , each a Selling Shareholders ) pursuant to an understanding with such third parties in bona fide and good faith, |
14
and based on a pre-money valuation of the Company which is at least USD 250 million, such Selling Shareholder shall give each of the Series A Preferred Shareholders and Tiger the Company written notice of its intention to make the transfer, which shall include (i) a description of the Equity Securities to be transferred, (ii) the identity of the prospective transferee of the Common Shares, and (iii) the consideration and the material terms and conditions upon which such Common Shares are to be transferred or assigned, and attached with a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed transfer. The Transfer Notice shall be evidence that such Selling Shareholder has received a firm offer from the prospective transferee and in good faith believes that a binding agreement for the transfer is obtainable on the terms set forth in the notice. |
11.2 | Option to Transfer the Shares of the Remaining Shareholders . Upon the receipt of the written notice of the Selling Shareholder pursuant to Clause 11.1 above, Series A Preferred Shareholder and Tiger shall have the option to require their Shares of the Company to be sold to the transferee on the same terms and conditions as set forth in such written notice. To exercise the option, the Series A Preferred Shareholder and Tiger shall give the Selling Shareholders of the Company and the Company written notice to such effect. Upon the receipt of such notice, the Selling Shareholders shall have the obligation to sell the respective shares of the Series A Preferred Shareholder and Tiger on the same terms and conditions with the sale of the Common Shares of the Company. | |
11.3 | Termination of the Rights of Tag Along Right. The right of tag along provided under this Clause 11 of Schedule A shall be terminated immediately prior to the closing of a Qualified Public Offering. | |
12. | INFORMATION AND INSPECTION RIGHTS | |
12.1 | Delivery of Financial Statements . The Company shall deliver to each of the Series A Preferred Shareholders and Tiger: |
(i) | within ninety (90) days after the end of each fiscal year of the Company, annual consolidated financial statements of the Company for such fiscal year, all prepared in accordance with US GAAP (or other standard acceptable to the Series A Preferred Shareholders and Tiger), and audited and certified by independent certified public accountants of recognized international standing and reputation selected by the Company and approved by the Board; | ||
(ii) | within thirty (30) days of the end of each quarter, unaudited consolidated financial statements for such quarter for the Company; and | ||
(iii) | at least forty (45) days prior to the end of each fiscal year, an annual consolidated budget for the succeeding fiscal year, including without limitation, for each month during such succeeding fiscal year projected balance sheets, income statements and statements of cash flows. |
12.2 | Financial Statements . For the purpose of this Clause 12.2 of Schedule A , the term financial statements shall be construed to include a balance sheet, statement of earnings, stockholders equity and cash flows for the applicable period, prepared in accordance with US GAAP (or other standard acceptable to the Series A Preferred Shareholders and Tiger) and compared against the Companys annual operating plan and budget. | |
12.3 | Inspection . The Company shall permit each of the Series A Preferred Shareholders and Tiger, as the same as any other Shareholders, to visit and inspect the properties and examine the books of account and records as deemed by the Series A Preferred Shareholders and/or Tiger to be material to the Companys performance and outlook of the Company and discuss the affairs, finances and accounts of the Company with the directors, officers, employees, accountants, legal counsel and |
15
investment bankers of the Company, all at such reasonable times as notified by the Series A Preferred Shareholders and/or Tiger. |
12.4 | Termination of Information and Inspection Covenants . The covenants set forth in Clause 12.1 , 12.2 and 12.3 of Schedule A shall terminate as to any Series A Preferred Shareholders and Tiger and be of no further force or effect upon the earlier of (i) immediately prior to the closing of a Qualified Public Offering, (ii) the date when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act (or comparable requirements under the laws of another jurisdiction), and (iii) such date as the Series A Preferred Shareholders do not hold any Series A Preferred Shares in the Company or Tiger does not hold any Common Shares in the Company (as the case may be). | |
12.5 | Assignment . The rights of any Series A Preferred Shareholder and Tiger under this Clause 12.5 of Schedule A shall only be assigned (i) among themselves, (ii) to an Affiliate which acquires any of the Equity Securities thereof, or (iii) to an assignee or transferee who acquires any of the Equity Securities thereof . |
16
Number | Share(s) |
DIRECTOR
|
||||
I | (the Transferor) for the value received | |
DO HEREBY transfer to | (the Transferee) the | |
shares standing in my name in the | ||
undertaking called TAL EDUCATION GROUP |
Witness | Transferor |
1.
|
DEFINITIONS AND INTERPRETATION | 3 | ||||
|
||||||
1.1
|
DEFINITIONS. | 3 | ||||
|
||||||
1.2
|
INTERPRETATION. | 8 | ||||
|
||||||
2.
|
ORIGINAL SHAREHOLDERS AGREEMENT | 8 | ||||
|
||||||
3.
|
DIVIDEND RIGHTS | 9 | ||||
|
||||||
4.
|
BOARD SIZE AND COMPOSITION. | 9 | ||||
|
||||||
5.
|
PROTECTIVE PROVISIONS | 9 | ||||
|
||||||
6.
|
CONVERSION RIGHTS. | 11 | ||||
|
||||||
7.
|
LIQUIDATION RIGHTS | 16 | ||||
|
||||||
8.
|
INFORMATION AND INSPECTION RIGHTS | 16 | ||||
|
||||||
9.
|
TAG ALONG RIGHTS | 17 | ||||
|
||||||
10.
|
PREEMPTIVE RIGHTS | 18 | ||||
|
||||||
11.
|
RIGHT OF FIRST REFUSAL, CO-SALE | 19 | ||||
|
||||||
12.
|
REGISTRATION RIGHTS | 24 | ||||
|
||||||
13.
|
REDEMPTION RIGHT | 33 | ||||
|
||||||
14.
|
SHARE PREFERENCES; DOCUMNENT RELATIONS | 33 | ||||
|
||||||
15.
|
NOTICE | 34 | ||||
|
||||||
16.
|
MISCELLANEOUS | 34 |
(1) | Xueersi International Education Group ( ), a company organized under the laws of Cayman Islands (the Company ); | ||
(2) | TAL Group Limited , a company organized under the laws of Hong Kong (the HK Company ); | ||
(3) | TAL Education Technology (Beijing) Co., Ltd. ( ), a wholly foreign-owned enterprise organized under the laws of the PRC (the WFOE ); | ||
(4) | Beijing Xueersi Education Technology Co., Ltd. ( ), a company organized under the laws of the PRC ( Xueersi Education ); | ||
(5) | Beijing Xueersi Network Technology Co., Ltd. ( ), a company organized under the laws of the PRC ( Xueersi Technology , together with Xueersi Education, Domestic Companies ); | ||
Unless the context requires or provides otherwise, the Company, HK Company, the WFOE, the Domestic Companies and their Subsidiaries (including schools and company branches under direct or indirect control thereof) are hereinafter collectively referred to as Group Entities , and each a Group Entity . | |||
(6) | BRIGHT UNISON LIMITED , a company organized under the laws of BRITISH VIRGIN ISLAND; | ||
(7) | CENTRAL GLORY INVESTMENTS LIMITED , a company organized under the laws of BRITISH VIRGIN ISLAND; | ||
(8) | PERFECT WISDOM INTERNATIONAL LIMITED , a company organized under the laws of BRITISH VIRGIN ISLAND; | ||
(9) | EXCELLENT NEW LIMITED a company organized under the laws of BRITISH VIRGIN ISLAND; | ||
Unless the context requires or provides otherwise, BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED are hereinafter collectively referred to as the Sellers , and each a Seller . | |||
(10) | ZHANG Bangxin , a Chinese resident, with its PRC ID number of 321182198010012913 ( Zhang ); | ||
(11) | CAO Yundong , a Chinese resident, with its PRC ID number of 372831197910205618 ( Cao ); | ||
(12) | LIU Yachao , a Chinese resident, with its PRC ID number of 211103198110152138 ( Liu ); |
1
(13) | BAI Yunfeng , a Chinese resident, with its PRC ID number of 360521198109240073 ( Bai ); | ||
Unless the context requires or provides otherwise, Zhang, Cao, Liu and Bai are hereinafter collectively referred to as the Founders , and each a Founder . | |||
(14) | KTB/UCI China Ventures II Limited , a limited liability company with its BVI Company Number: 1039743 and registered address at Portcullis TrustNet (BVI) Limited of Portcullis TrustNet Chambers, PO Box 3444, Road Town, Tortola, British Virgin Islands ( KTB or Series A Preferred Shareholder ); and | ||
(15) | TIGER GLOBAL FIVE CHINA HOLDINGS , a company organized under the laws of Mauritius ( Tiger ). |
(1) | The Company is a company incorporated under the laws of the Cayman Islands, the particulars of which as at the date hereof are set out in Schedule 1 hereof; | ||
(2) | On February 12, 2009, the Company, Series A Preferred Shareholder, Founders, and certain relevant parties entered into a shareholders agreement (the Original Shareholders Agreement ); | ||
(3) | On May 18, 2009, each of Zhang Bangxin, Cao Yundong, Liu Yachao and Bai Yunfeng entered into a Sale of Shares with BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED, respectively, pursuant to which Sellers purchased all the shares held by the Founders in the Company and assumed all the right and obligations of Founders in the Company; | ||
(4) | On August 12, 2009, the Company, the Sellers, KTB CHINA OPTIMUM FUND, Tiger and certain other parties entered into a share purchase agreement, pursuant to which Tiger purchased certain number of Common Shares of the Company from the Sellers and KTB CHINA OPTIMUM FUND was granted an option to purchase certain number of Common Shares from the Sellers on a date no later than September 4, 2009 (the Purchase Agreement ); | ||
(5) | To induce KTB CHINA OPTIMUM FUND and Tiger to enter into the Purchase Agreement and pursuant to Section 2.7 thereof, the Company, the Sellers, the Series A Preferred Shareholder and Tiger hereby agree that this Agreement shall restate and amend the Original Shareholders Agreement, and govern certain shareholder rights and other relevant matters as set out in this Agreement. |
2
1. | DEFINITIONS AND INTERPRETATION |
1.1 | Definitions. |
Additional Transfer Notice
|
has the meaning set forth in Section 11.1(c) ; | |
|
||
Affiliate
|
means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any partner, officer, director, member or employee of such Person and any venture capital fund now or hereafter existing that is controlled by or under common control with one or more general partners or managing members of, or shares the same management company with, such Person; | |
|
||
Agreement
|
has the meaning set forth in the introductory paragraph; | |
|
||
Applicable Securities Law
|
means (i) with respect to any offering of securities in the United States of America, the securities law of the United States, as amended from time to time, including the Exchange Act and the Securities Act, and any applicable law of any state of the United States of America, and (ii) with respect to any offering of securities in any jurisdiction other than the United States of America, the applicable laws of that jurisdiction; | |
|
||
Articles
|
means the Articles of Association of the Company, as amended from time to time; | |
|
||
Board
|
means the board of directors for the time being of the Company; | |
|
||
Business Day
|
means any day, other than a Saturday, Sunday or other day on which the commercial banks in Hong Kong and Beijing are authorized or required to be closed for the conduct of regular banking business; | |
|
||
Closing
|
has the meaning set forth in the Series A Share Purchase Agreement; | |
|
||
Commission
|
means (i) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States, the regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction; | |
|
||
Common Shares
|
means the Common Shares of the Company with par value of US$0.001 per share; |
3
Common Share Equivalents
|
means warrants, options and rights exercisable for Common Shares and instruments convertible or exchangeable for Common Shares; | |
|
||
Company
|
has the meaning set forth in the introductory paragraph (1); | |
|
||
Conversion Price
or Applicable Conversion Price |
has the meaning set forth in Section 6.3 ; | |
|
||
Co-sale Participant
|
has the meaning set forth in Section 11.2(a) ; | |
|
||
Domestic Companies
|
has the meaning set forth in the introductory paragraph (5); | |
|
||
Equity Securities
|
means any Common Shares or Common Share Equivalents; | |
|
||
Exchange Act
|
means United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; | |
|
||
Founders
|
has the meaning set forth in Section the introductory paragraph (13); | |
|
||
Fully-Exercising Shareholder
|
has the meaning set forth in Section 10.2 ; | |
|
||
Fully Participating Shareholder
|
has the meaning set forth in Section 11.1(b) ; | |
|
||
Future Issuance Price
|
has the meaning set forth in Section 6.3(5)(a) ; | |
|
||
Group Entities
|
has the meaning set forth in the introductory paragraph (5); | |
|
||
Holders
|
means Tiger, KTB or any person to whom the shares of the Company held by any of them is transferred; | |
|
||
Hong Kong
|
means the Hong Kong Special Administrative Region of the PRC; | |
|
||
HK Company
|
has the meaning set forth in the introductory paragraph (2); | |
|
||
HKIAC
|
has the meaning set forth in Section 16.8(c) ; | |
|
||
Initiating Holders
|
has the meaning set forth in Section 12.1(1) ; | |
|
||
IPO
|
means an initial public offering by the Company of its Common Shares on a public stock exchange of the United States that has been registered under the Securities Act, or in a similar public offering of Common Shares in a jurisdiction and on a recognized securities exchange outside of the United States, provided such an initial public offering in terms of price, offering proceeds and regulatory approval is reasonably equivalent to the aforesaid public offering in the United States. |
4
Issuance Notice
|
has the meaning set forth in Section 10.1 ; | |
|
||
KTB
|
has the meaning set forth in the introductory paragraph (14); | |
|
||
Liquidation Event
|
has the meaning set forth in Section 7.1 ; | |
|
||
New Common Director
|
has the meaning set forth in Section 4(b) ; | |
|
||
New Common Shares
|
means the Common Shares acquired by Tiger and KTB CHINA OPTIMUM FUND, if any, from the Sellers pursuant to the Purchase Agreement; | |
|
||
New Securities
|
means any Equity Securities of the Company; provided that the term New Securities does not include (i) securities issued upon conversion of the Preferred Shares; (ii) securities issued to employees, professional consultants, officers or directors of the Company pursuant to any stock option, stock purchase or stock bonus plan, agreement or arrangement approved by the Board; (iii) securities issued in a Qualified Public Offering; (iv) securities issued in connection with any stock split, stock dividend or re-capitalization of the Company; and (v) securities issued upon the exercise of that certain set forth in Section 6.6 of the Purchase Agreement; | |
|
||
Non-selling Shareholder
|
has the meaning as set forth in Section 11.1(a) ; | |
|
||
Original Issue Price
|
means US$1.00 for each Series A Preferred Share, or the aggregate amount of issue price based on such price per share; | |
|
||
Original Shareholders Agreement
|
has the meaning set forth in Recital (2); | |
|
||
Over-allotment Notice
|
has the meaning set forth in Section 11.1(b) ; | |
|
||
Over-allotment Shares
|
has the meaning set forth in Section 11.1(b) ; | |
|
||
Participating Shareholders
|
has the meaning set forth in Section 11.1(b) ; | |
|
||
Person
|
means any individual, person corporate, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or enterprise or entity; | |
|
||
PRC
|
means the Peoples Republic of China, for the purpose of this Agreement, excluding Hong Kong, the Macau Special Administrative Region and Taiwan; | |
|
||
Preferred Shareholders
|
means all of Series A Preferred Shareholder; | |
|
||
Purchase Agreement
|
has the meaning set forth in Recital(3); |
5
Qualified Public Offering
or
Qualified IPO
|
means an initial public offering by the Company of its Common Shares on a public stock exchange of the United States that has been registered under the Securities Act, with the net proceeds to the Company of at least US$50,000,000 (excluding the underwriting discounts, selling commissions and expenses) and an implied market capitalization of the Company of at least US$300,000,000 or in a similar public offering of Common Shares in a jurisdiction and on a recognized securities exchange outside of the United States, provided such initial public offering in terms of price, offering proceeds and regulatory approval is reasonably equivalent to the aforesaid public offering in the United States; | |
|
||
Registration
or
Registrations
|
means a registration or the registrations effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of that Registration Statement; | |
|
||
Registrable Securities
|
means any (i) Series A Preferred Shares and New Common Shares (ii) any shares issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his, her or its rights under Section 12 of this Agreement are not assigned; | |
|
||
Remaining Shares
|
has the meaning set forth in Section 11.1(c) ; | |
|
||
Restructuring
|
has the meaning set forth in Section 5.1(a) ; | |
|
||
Rule 144
|
means Rule 144 promulgated under the United States Securities Act of 1933, as such rule may be amended from time to time, or any successor or substitute rule, law or provision; | |
|
||
Securities Act
|
means the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder; | |
|
||
Sellers
|
has the meaning set forth in Section the introductory paragraph (9); | |
|
||
Selling Expenses
|
means all underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to this Agreement; | |
|
||
Selling Shareholders
|
has the meaning set forth in Section 9.1 ; | |
|
||
Series A Preferred Shares
or
Preferred Shares
|
means the Companys voting Series A Preferred Shares, with |
6
|
par value of US$0.001 each with the rights and privileges as set forth in this Agreement and the Articles; | |
|
||
Series A Preferred Shareholders
|
has the meaning set forth in the introductory paragraph (10); | |
|
||
Series A Share Purchase Agreement
|
means the certain share purchase agreement dated February 12, 2009 by and among the same parties to the Original Shareholders Agreement in connection with the subscription of Series A Preferred Shares by KTB. | |
|
||
Share
|
means a share or, where applicable, Share Equivalent (on as-converted basis) in the share capital of the Company (of whatever class); | |
|
||
Share Offered by Shareholder
|
has the meaning set forth in Section 11.1(a) ; | |
|
||
Shareholder
|
means a holder of Shares from time to time or its lawful successor; | |
|
||
Subsidiary(ies)
or
subsidiary
|
means as of the relevant date of determination, with respect to any Person (the subject entity ), (i) any Person: (1) more than 50% of whose shares or other interests entitled to vote in the election of directors or (2) more than a fifty percent (50%) interest in the profits or capital of such Person are owned or controlled directly or indirectly by the subject entity or through one (1) or more Subsidiaries of the subject entity, (ii) any Person whose assets, or portions thereof, are consolidated with the net earnings of the subject entity and are recorded on the books of the subject entity for financial reporting purposes in accordance with US GAAP (or other standard acceptable to the Series A Preferred Shareholders and Tiger), or (iii) any Person with respect to which the subject entity has the power to otherwise direct the business and policies of that entity directly or indirectly through another subsidiary. For the avoidance of doubt, the Subsidiaries of the Company shall include the Group Entities. | |
|
||
Tiger
|
means Tiger Global Five China Holdings, a company organized under the laws of Mauritius, and its Affiliates or any of its (or their) successor(s). | |
|
||
Transfer
|
has the meaning set forth in Section 11.1(a) ; | |
|
||
Transfer Notice
|
has the meaning set forth in Section 11.1(a) ; | |
|
||
Transferor
|
has the meaning set forth in Section 11.1(a) ; | |
|
||
Violation
|
has the meaning set forth in Section 12.4(1) (a) ; | |
|
||
WFOE
|
has the meaning set forth in the introductory paragraph (3); |
7
Xueersi Education
|
has the meaning set forth in the introductory paragraph (4); and | |
|
||
Xueersi Technology
|
has the meaning set forth in the introductory paragraph (5); |
1.2 | Interpretation. |
(a) | the terms defined in this Section 1 shall have the meanings assigned to them in this Section 1 and include the plural as well as the singular; | ||
(b) | references to a Shareholder shall include references to his successors or permitted assignees; | ||
(c) | all accounting terms not otherwise defined herein have the meanings assigned under IAS; | ||
(d) | all references in this Agreement to designated Sections and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement; | ||
(e) | pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms; | ||
(f) | the words herein, hereof and hereunder and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision; and | ||
(g) | all references in this Agreement to designated schedules, exhibits and annexes are to the Schedules, Exhibits and Annexes attached to this Agreement unless explicitly stated otherwise. |
2. | ORIGINAL SHAREHOLDERS AGREEMENT |
2.1 | Each of the parties to the Original Shareholders Agreement hereby agrees that the Original Shareholders Agreement (including any and all of its rights, privileged and benefits as endowed thereby) shall be terminated and replaced in its entirety by this Agreement effective from and as of the date hereof. Without limitation to the foregoing, the Series A Preferred Shareholder hereby irrevocably and unconditionally waives its rights under Section 10 of the Original Shareholders Agreement and Articles 129 through 131 of the Companys first amended and restated articles of association, dated February 12, 2009, in connection with the acquisition of Common Shares by Tiger and KTB from the Sellers pursuant to the Purchase Agreement. | |
2.2 | Each of the parties to the Original Shareholders Agreement hereby irrevocably and unconditionally waives any and all of its rights, as endowed by the Original Shareholders Agreement, to initiate any claim, demand, dispute, obligation, liability and issue, contingent or otherwise which it has, or may in the future have, against the other parties arising out of or in connection with the Original Shareholders Agreement. |
8
3. | DIVIDEND RIGHTS |
3.1 | Dividend Rights. Subject to the circumstances prevailing at the relevant time including, in particular, the working capital requirements of the Company, the Company may distribute by way of dividend in accordance with the Articles in respect of each financial year such of its profits as are then lawfully available for distribution as subject to the discretion of the Board. The dividend shall be distributed among the Common Shareholders and Holders ratably according to the number of Common Shares each Preferred Share may be converted into. Dividends shall be non-cumulative. |
4. | BOARD SIZE AND COMPOSITION. |
(a) | The holders of majority of Common Shares (excluding Common Shares held by Tiger and KTB CHINA OPTIMUM FUND, if any), shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be ZHANG Bangxin, and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position; | ||
(b) | Tiger shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be CHEN Xiaohong ( New Common Director ), and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position. | ||
(c) | The Series A Preferred Shareholder shall be entitled to, by written notice to the Company, nominate and elect one (1) Director to the Board, initially to be YEH Aieming Amy ( Series A Director ), and shall also be entitled to remove any such Director occupying such position and to fill any vacancy caused by the resignation, death or renewal of any such Director occupying such position. | ||
(d) | Any Shareholder may nominate a Director to fill the remaining two (2) directors; provided that the election of such Director(s) shall be subject to the approval of all of the Shareholders voting together as a single class on an as-converted basis. |
5. | Protective Provisions |
5.1 | Veto Rights of KTB . Subject to Section 5.2 below, so long as there are any Series A Preferred Shares outstanding, the Company shall not take, and shall procure that each Group Entity does not take, whether in one transaction or through a series of transactions, or whether by amending the Articles or otherwise, any of the following actions without (i) the prior written consent of the holders of majority of the outstanding Series A Preferred Shares; or (ii) the prior consent of the Board, including the affirmative consent of the Series A Director, and in the context of such matters set forth in this Section 5.1 which are by applicable laws required to be determined by the shareholders of the Company, the approval of the holders of at least a majority of the then |
9
outstanding Series A Preferred Shares shall be deemed obtained if the matter is approved at a general meeting of the Company with the affirmative vote of the holders of at least a majority of the then outstanding Series A Preferred Shares or by way of written resolution signed by all the holders of the outstanding Series A Preferred Shares: |
(a) | dissolve or liquidate any Group Entity (other than as a result of the restructuring of the Companys Subsidiaries pursuant to a restructuring plan prior to the IPO that is approved by the Board) (the Restructuring ); | ||
(b) | amend any of the charter/constitutional documents of any Group Entity or any of its Subsidiaries that may affect the rights, preferences or privileges of KTB; | ||
(c) | make changes in the capital structure of any Group Entity or any of its Subsidiaries, including the creation or issuance of additional securities or securities convertible or exchangeable into equity of the Company (other than as a result of the Restructuring and/or a new round financing of the Company, as long as the pre-money valuation of the Company in the new round financing reaches either (x) within 12 months following Closing is at least 1.3 times of the post-money valuation of the Company in the Series A financing on a fully diluted basis or (y) after 12 months following Closing is at least 1.5 times of the post-money valuation of the Company in the Series A financing on a fully diluted basis, and in any case of (x) or (y), the rights of KTB shall rank at least pari passu with, and shall not be inferior to, the rights of the new round investor(s).); | ||
(d) | make or result in mergers, amalgamations, investments, acquisitions, joint ventures and dispositions involving any Group Entity (other than as a result of the Restructuring); | ||
(e) | repurchase or redeem any shares, provided, however that this restriction shall not apply to the repurchase of shares from employees, officers, directors, consultants or other persons performing services for the Group Entity or any of its Subsidiaries pursuant to agreements under which the Group Entity has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service; | ||
(f) | make material changes to the scope, nature and/or activities of the business of any Group Entity and its Subsidiaries; | ||
(g) | approve or amend any annual operating and capital budgets and annual business plan of any Group Entity; | ||
(h) | make changes in the number of members of the board of any Group Entity or its Subsidiaries where there is Director nominated by KTB sitting in such board; | ||
(i) | adopt any new employee stock option plan and formation of the compensation committee; and transactions with a related party; or | ||
(j) | make any dividend or distributions on shares of any Group Entity. |
5.2 | Veto Rights of Tiger . In addition to Section 5.1 above, the Company shall not take, and shall procure that each Group Entity does not take, whether in one transaction or through a series of transactions, or whether by amending the Articles or otherwise, the following actions without the prior written consent of Tiger, and in the context of such matters set forth in this Section 5.2 which are by applicable laws required to be determined by the shareholders of the Company, the |
10
approval of Tiger shall be deemed obtained if the matter is approved at a general meeting of the Company with the affirmative vote of Tiger or by way of written resolution signed by Tiger: |
(a) | actions listed in Section 5.1(e) of this Agreement, provided that (i) KTBs exercise of its redemption rights in accordance with Section 13 of this Agreement, or (ii) the Companys exercise of its right of first refusal in accordance with Section 11.1 of this Agreement shall not be subject to the veto rights of Tiger set out herein; | ||
(b) | enter into, or obligate itself to enter into, any related party transaction with an Affiliate of the Company or any Subsidiary of the Company or any employee, officer, director, administrator or shareholder of the Company or any Subsidiary of the Company or any member of such persons immediate family, or any corporation, partnership or other entity in which such person or family member is an officer, director, administrator or partner, or in which such person or family member has ownership or economic interests or otherwise controls such entity; or | ||
(c) | alter or change, either by means of amending the Group Entitys constitutional documents or otherwise, the rights, preferences or privileges of Tiger. |
5.3 | Matters Requiring Holders Presence and Vote . | |
So long as there are any Series A Preferred Shares outstanding, in addition to any other vote or consent required elsewhere in this Agreement, matters listed below shall be discussed in the shareholders meeting with the presence of the Series A Preferred Shareholder: |
(a) | incurrence of any debt, guarantees or liens in excess of RMB5,000,000 in the aggregate (excluding any extension, renewal or refinancing of debt, guarantees or liens outstanding at the Closing (as defined in the Series A Share Purchase Agreement) on comparable or better terms); | ||
(b) | appoint and/or reappoint a corporate auditor or changes in the accounting principles of the Group Entity; | ||
(c) | assignment and/or transfer by any Seller of the Equity Securities of the Company and/or transfer by any Founder of the shares of the Sellers; | ||
(d) | appoint and/or reappoint the chief executive officer or the chief financial officer of the Company; or | ||
(e) | any capital expenditures in excess of RMB1 million outside of budget approved by the Board. |
6. | Conversion Rights. |
The Series A Preferred Shareholder shall have the following rights described below with respect to the conversion of the Series A Preferred Shares into Common Shares: The number of Common Shares to which the Series A Preferred Shareholder shall be entitled upon conversion of any Series A Preferred Share shall be the quotient of the Original Issue Price over the Conversion Price. For the avoidance of doubt, the initial conversion ratio for Series A Preferred Shares to Common Shares shall be 1:1, subject to adjustments of the Conversion Price as set forth below. |
11
6.1 | Optional Conversion . |
(1) | Subject to and in compliance with the provisions of this Section 6 , any Preferred Shares may, at the option of the Holder, be converted at any time into fully-paid and non-assessable Common Shares pursuant to Section 6.1(2) below. Upon such conversion, all preference rights attached to such Series A Preferred Share shall be automatically terminated. | ||
(2) | The Series A Preferred Shareholder who desires to convert such Series A Preferred Shares into Common Shares shall surrender the certificate therefore, duly endorsed, at the office of the Company or any transfer agent for the Series A Preferred Shares, and shall give written notice to the Company at such office that the Holder has elected to convert such Shares. Such notice shall state the number of Series A Preferred Shares being converted. Thereupon, the Company shall promptly issue and deliver to the Holder at such office a certificate for the number of Common Shares to which such Holder is entitled and shall promptly pay (i) in cash, any declared and unpaid dividends on the Series A Preferred Shares being converted and (ii) in cash, the value of any fractional Common Shares to which the Series A Preferred Shareholder would otherwise be entitled. Such conversion shall be deemed to have been made at the close of business on the date of the surrender of the certificates representing the Series A Preferred Shares to be converted, and the person entitled to receive the Common Shares issuable upon such conversion shall be treated for all purposes as the record holder of such Common Shares on such date. |
6.2 | Automatic Conversion . |
(1) | Without any action being required by the holder of such Series A Preferred Shares and whether or not the certificates representing such Series A Preferred Shares are surrendered to the Company or its transfer agent, each Series A Preferred Share shall automatically be converted, based on the then-effective Conversion Price, immediately upon the closing of the Qualified Public Offering. | ||
(2) | The Company shall not be obligated to issue certificates for any Common Shares issuable upon the automatic conversion of any Series A Preferred Shares unless the certificate evidencing such Series A Preferred Shares is either delivered as provided below to the Company or any transfer agent for the Series A Preferred Shares, or the Series A Preferred Shareholder notifies the Company or its transfer agent that such certificate has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificate. The Company shall, as soon as practicable after receipt of certificate for Preferred Shares, or satisfactory agreement for indemnification in the case of a lost certificate, promptly issue and deliver at its office to the Series A Preferred Shareholder thereof a certificate or certificates for the number of Common Shares to which such Series A Preferred Shareholder is entitled and shall promptly pay (i) in cash, any declared and unpaid dividends on the Series A Preferred Shares being converted and (ii) in cash, the value of any fractional Common Shares to which the Series A Preferred Shareholder would otherwise be entitled. Any person entitled to receive Common Shares issuable upon the automatic conversion of the Series A Preferred Shares shall be treated for all purposes as the record holder of such Common Shares on the date of such conversion. |
6.3 | Conversion Price . |
12
The Conversion Price for the Series A Preferred Shares ( Conversion Price ) shall initially equal to the Original Issue Price and shall be adjusted from time to time as provided below: |
(1) | Adjustment for Share Splits and Combinations. If the Company shall at any time, or from time to time, effect a subdivision of the outstanding Common Shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately decreased. Conversely, if the Company shall at any time, or from time to time, combine the outstanding Common Shares into a smaller number of shares, the Conversion Price in effect immediately prior to the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. | ||
(2) | Adjustment for Common Share Dividends and Distributions. If 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) a dividend or other distribution to the holders of Common Shares payable in Common Shares, in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance (or in the event such record date is fixed, as of the close of business on such record date) by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such dividend or distribution. | ||
(3) | Adjustments for Other Dividends. If 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) a dividend or other distribution payable in securities of the Company other than Common Shares or Common Shares Equivalents, then, and in each such event, provision shall be made so that, upon conversion of any Preferred Share thereafter, the Series A Preferred Shareholder thereof shall receive, in addition to the number of Common Shares issuable thereon, the amount of securities of the Company which the Series A Preferred Shareholders would have received had the Series A Preferred Share been converted into Common Shares immediately prior to such event, all subject to further adjustment as provided herein. | ||
(4) | Reorganizations, Mergers, Consolidations, Reclassifications, Exchanges, Substitutions. If at any time, or from time to time, any capital reorganization or reclassification of the Common Shares (other than as a result of a share dividend, subdivision, split or combination otherwise treated above) occurs or the Company is consolidated, merged or reorganized with or into another Person (other than a consolidation, merger or reorganization treated in Section 6.1 ), then in any such event, provision shall be made so that, upon conversion of any Preferred Share thereafter, the Series A Preferred Shareholder thereof shall receive the kind and amount of shares and other securities and property which the Series A Preferred Shareholder of such share would have received had the Series A Preferred Share been converted into Common Shares on the date of such event, all subject to further adjustment as provided herein, or with respect to such other securities or property, in accordance with any terms applicable thereto. | ||
(5) | Sale of Shares below the Conversion Price. |
13
(a) | Adjustment of Series A Conversion Price Upon Issuance of Additional Equity Securitie s. If at any time, or from time to time, the Company shall issue or sell New Securities (other than (i) as a subdivision or combination of Common Shares provided for in Section 6.3 (1) above, (ii) as a dividend or other distribution provided for in Section 6.3 (2) above, (iii) the issuance of Shares under any stock option plan, (iv) the conversion of Preferred Shares into Common Shares, or (v) the issuance of New Securities in a Qualified Public Offering) for a consideration of price per share (the Future Issuance Price ) less than the Series A Conversion Price, then, and in each such case, the Conversion Price shall be reduced, as of the opening of business on the date of such issue or sale, to equal such Future Issuance Price. | ||
(b) | Determination of Consideration . For the purpose of making any adjustment in the Conversion Price or number of Common Shares issuable upon conversion of the Series A Preferred Shares, as provided above: |
(i) | To the extent it consists of cash, the consideration received by the Company for any issue or sale of securities shall be computed at the net amount of cash received by the Company after deduction of any expenses payable directly or indirectly by the Company and any underwriting or similar commissions, compensations, discounts or concessions paid or allowed by the Company in connection with such issue or sale; | ||
(ii) | To the extent it consists of property other than cash, consideration other than cash received by the Company for any issue or sale of securities shall be computed at the fair market value thereof, as determined in good faith by the Board as of the date of the adoption of the resolution specifically authorizing such issue or sale, irrespective of any accounting treatment of such property; and | ||
(iii) | If New Securities or Common Share Equivalents exercisable, convertible or exchangeable for New Securities are issued or sold together with other stock or securities or other assets of the Company for consideration which covers both, the consideration received for the New Securities or Common Share Equivalents shall be computed as that portion of the consideration received which is reasonably determined in good faith by the Board to be allocable to such New Securities or Common Share Equivalents. |
(c) | No Exercise . If all of the rights to exercise, convert or exchange any Common Share Equivalents shall expire without any of such rights having been exercised, the Series A Conversion Price as adjusted upon the issuance of such Common Share Equivalents shall be readjusted to the Series A Conversion Price which would have been in effect had no such adjustment been made. |
(6) | Certificate of Adjustment. In the case of any adjustment or readjustment of the Conversion Price, the Company, at its sole expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered Series A Preferred Shareholder at the holders address as shown in the Companys books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received or deemed to be received by the Company for |
14
any New Securities issued or sold or deemed to have been issued or sold, (ii) the number of New Securities issued or sold or deemed to be issued or sold, (iii) the Conversion Price in effect after such adjustment or readjustment, and (iv) the number of Common Shares and the type and amount, if any, of other property which would be received upon conversion of the Preferred Shares after such adjustment or readjustment. | |||
(7) | Notice of Record Date. In the event the Company shall propose to take any action of the type or types requiring an adjustment to the Conversion Price or the number or character of the Series A Preferred Shares as set forth herein, the Company shall give notice to the Series A Preferred Shareholder, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place. Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon the occurrence of such action of deliverable upon the conversion of Series A Preferred Shares. In the case of any action which would require the fixing of a record date, such notice shall be given at least twenty (20) days prior to the date so fixed, and in the case of all other actions, such notice shall be given at least thirty (30) days prior to the taking of such proposed action. |
6.4 | Fractional Shares . No fractional Common Shares shall be issued upon conversion of any Preferred Share. All Common Shares (including fractions thereof) issuable upon conversion of more than one Preferred Share by the Series A Preferred Shareholder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after such aggregation, the conversion would result in the issuance of any fractional share, the Company shall round this fractional share up to 1 Share. | |
6.5 | Reservation of Shares Issuable Upon Conversion . The Company shall at all times reserve and keep available out of its authorized but un-issued Common Shares, solely for the purpose of effecting the conversion of the Series A Preferred Shares. Such number of its Common Shares as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Shares. If at any time the number of authorized but un-issued Common Shares shall not be sufficient to effect the conversion of all then outstanding Series A Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but un-issued Common Shares to such number of Shares as shall be sufficient for such purpose. | |
6.6 | Notices . Any notice required by the provisions of this Section 6 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to the Series A Preferred Shareholder of record at the address of the Series A Preferred Shareholder appearing on the books of the Company. | |
6.7 | Payment of Taxes . The Company will pay all taxes (other than taxes based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of Common Shares upon conversion of Series A Preferred Shares, excluding any tax or other charge imposed in connection with any transfer involved in the issuance and delivery of Common Shares in a name other than that in which the Series A Preferred Shares so converted were registered. |
15
7. | LIQUIDATION RIGHTS |
7.1 | Liquidation Event . The following events shall be treated as a liquidation, dissolution or winding up (each, a Liquidation Event ) unless waived by the holders of at least fifty-one percent (51%) of the then outstanding Series A Preferred Shares, voting together as a single class on an as-converted basis: |
(i) | any consolidation or merger of the Company with or into any Person, or any other corporate reorganization, including a sale or acquisition of equity securities of the Company, in which the Shareholders of the Company immediately before such transaction own less than 50% of the Companys voting power immediately after such transaction (excluding any transaction effected solely for tax purposes or to change the Companys domicile); | ||
(ii) | a sale of all or substantially all of the assets of the Company; or | ||
(iii) | any termination, liquidation, dissolution or winding up of the Company; |
and upon any such event, any proceeds generated therefrom to which the Shareholders of the Company are entitled to shall be distributed in accordance with the terms of Section 7.2 . | ||
7.2 | Liquidation Preferences . Upon any Liquidation Event, whether voluntary or involuntary, unless any Preferred Shareholder has agreed otherwise in advance and in writing on the definitive liquidation plan of the Company, |
(i) | Before any distribution or payment shall be made to the holders of any Common Shares, the holder of Series A Preferred Shares shall be entitled to receive an amount equal to one hundred percent (100%) of the Original Issue Price (adjusted for any share splits, share dividends, combinations, recapitalizations and similar transactions), plus any declared but unpaid dividends with respect thereto (as adjusted for any share splits, share dividends, combinations, recapitalizations and similar transactions) per Series A Preferred Share then held by such holder. All arrears or accruals of dividends as declared by the Board due to the holders of Series A Preferred Shares are in priority to the holders of all other shares. | ||
(ii) | After distribution or payment in full of the amount distributable or payable on the Series A Preferred Shares pursuant to Section 7.2(i) of this Agreement, the remaining assets of the Company available for distribution to Shareholders shall be distributed ratably among the then holders of outstanding Common Shares and holders of Series A Preferred Shares on an as-converted basis. |
8. | INFORMATION AND INSPECTION RIGHTS |
8.1 | Delivery of Financial Statements . The Company shall deliver to each of the Holders: |
(a) | within ninety (90) days after the end of each fiscal year of the Company, annual consolidated financial statements of the Company for such fiscal year, all prepared in accordance with US GAAP (or other standard acceptable to the Holders), and audited and certified by independent certified public accountants of recognized international standing |
16
and reputation selected by the Company and approved by the Board; | |||
(b) | within thirty (30) days of the end of each quarter, unaudited consolidated financial statements for such quarter for the Company; and | ||
(c) | at least forty-five (45) days prior to the end of each fiscal year, an annual consolidated budget for the succeeding fiscal year, including without limitation, for each month during such succeeding fiscal year projected balance sheets, income statements and statements of cash flows. |
8.2 | Financial Statements . For the purpose of this Section 8 , the term financial statements shall be construed to include a balance sheet, statement of earnings, stockholders equity and cash flows for the applicable period, prepared in accordance with US GAAP (or other standard acceptable to the Holders) and compared against the Companys annual operating plan and budget. | |
8.3 | Inspection . The Company shall permit each Holder, as the same as any other Shareholders, to visit and inspect the properties and examine the books of account and records as deemed by the Holders to be material to the Companys performance and outlook of the Company and discuss the affairs, finances and accounts of the Company with the directors, officers, employees, accountants, legal counsel and investment bankers of the Company, all at such reasonable times as notified by the Holders. | |
8.4 | Termination of Information and Inspection Covenants . The covenants set forth in Sections 8.1 to 8.3 shall terminate as to any Holder and be of no further force or effect upon the earlier of (i) immediately prior to the closing of a Qualified Public Offering, (ii) the date when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Exchange Act (or comparable requirements under the laws of another jurisdiction), and (iii) such date as the Holder holds no shares in the Company. | |
8.5 | Assignment . The rights of any Holder under this Section 8 shall only be assigned (i) to another Holder, (ii) to an Affiliate of such Holder which acquires any of the Equity Securities thereof, or (iii) to an assignee or transferee who acquires any of the Equity Securities thereof. |
9. | TAG ALONG RIGHTS |
9.1 | Tag Along Rights . Without prejudice to any right and privilege of Series A Preferred Shareholder and Tiger provided under Section 11.2 of this Agreement, if at any time the majority of Sellers propose to, by the way of assignment or transfer, transfer Equity Securities or any Common Shareholder(s) proposes to transfer or assign Equity Securities representing 50% or more voting power in the Company to one or more third parties ( Selling Shareholders , each a Selling Shareholder ) pursuant to an understanding with such third parties in bona fide and good faith, and based on a pre-money valuation of the Company which is at least US$250 million, such Selling Shareholder shall give each of the Holders and the Company written notice of its intention to make the transfer, which shall include (i) a description of the Equity Securities to be transferred, (ii) the identity of the prospective transferee of the Common Shares, and (iii) the consideration and the material terms and conditions upon which such Common Shares are to be transferred or assigned, and attached with a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed transfer. The Transfer Notice shall be evidence that such Selling Shareholder has received a firm offer from the prospective transferee and in good faith believes that a binding agreement for the transfer is obtainable on terms set forth in the notice. |
17
9.2 | Option to Transfer the Shares of the Remaining Shareholders . Upon the receipt of the written notice of the Selling Shareholder pursuant to Section 9.1 above, the Holders shall have the option to require their Shares of the Company to be sold to the transferee on the same terms and conditions as set forth in such written notice. To exercise the option, the Holders shall give the Selling Shareholders of the Company and the Company written notice to such effect. Upon the receipt of such notice, the Selling Shareholders shall have the obligation to sell the respective shares of the Holders on the same terms and conditions with the sale of the Common Shares of the Company. | |
9.3 | Termination of the Rights of Tag Along Right . The right of tag along provided under this Section 9 shall be terminated immediately prior to the closing of a Qualified Public Offering. |
10. | PREEMPTIVE RIGHTS |
10.1 | Right of First Offer . Subject to the terms and conditions specified in this Section 10, each time the Company proposes to issue any New Securities, the Company shall first offer such New Securities to each of the Holders in a written notice (an Issuance Notice ) setting forth (i) a description of the New Securities to be issued, including the rights and powers associated therewith, and (ii) the number of such New Securities to be offered, and (iii) the price and terms upon which it proposes to offer the New Securities. | |
10.2 | Exercise of Preemptive Rights . By written notification received by the Company within twenty-one (21) calendar days after delivery of the Issuance Notice to the Holders, such Holders may elect to purchase, at the price and on the terms specified in the Issuance Notice, up to such portion of the New Securities offered as equal to the proportion that the number of Common Shares (including shares of Common Shares issuable upon conversion, exchange or exercise of Common Shares Equivalents) then held by such Holder bears to the total number of shares of Common Shares then outstanding (determined on a fully-diluted basis, assuming the exercise, conversion or exchange of any Common Shares Equivalents). The Company shall promptly, in writing, inform the Holders that elect to purchase all the New Securities available to it pursuant to this Section 10.2 (a Fully-Exercising Shareholder ) of any other Holders failure to do likewise. During the ten (10) day period commencing after such information is given, the Fully-Exercising Shareholder may elect to purchase a pro rata share of any New Securities unsubscribed by the Holders, pursuant to its rights hereunder, that is equal to the proportion that the number of Common Shares (including shares of Common Shares issuable upon conversion, exchange or exercise of Common Shares Equivalents) then held by the Fully-Exercising Shareholder bears to the total number of Common Shares then outstanding (determined on a fully-diluted basis, assuming the exercise, conversion or exchange of any Common Shares Equivalents). | |
10.3 | Issuance of Unsubscribed New Securities . Upon expiration of the period described in Section 10.2 hereof, unsubscribed New Securities may be offered by the Company during the one hundred and twenty (120) day period thereafter to any person or persons at a price not less, and upon terms no more favourable to the offeree, than specified in the Issuance Notice. If the Company does not enter into an agreement for the sale of the unsubscribed New Securities within such 120-day period, or if such agreement is not consummated within forty-five (45) days of the execution thereof, the pre-emptive rights of the Holders under this Section 10 shall be deemed revived and such unsubscribed New Securities shall not be offered unless first re-offered to the Holders in accordance herewith. | |
10.4 | Exempted Issuance . Notwithstanding anything to the contrary provided herein, the preemptive rights described in this Section 10 shall not apply to (i) the issuance of Equity Securities for the |
18
exercise of option of follow-on investments by Tiger, (ii) the issuance of Equity Securities in a Qualified Public Offering, (iii) the issuance by the Company of Common Shares (or options therefor) to employees, officers, directors or consultants of the Company pursuant to a stock option plan or other share option plans or other stock incentive arrangements approved by the Board of the Company, (iv) the issuance of Equity Securities in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, as a result of which the shareholders of the Company immediately after such merger, sale or consolidation will not hold securities representing a majority of the voting power of the outstanding securities of the surviving or resulting entity, provided that such issuance has obtained required approvals and consents pursuant to Section 5 hereof, (v) Common Shares issued in connection with any share split or stock dividend, reclassification or the like; or (vi) the issuance of Equity Securities pursuant to the conversion, exchange or exercise of any warrant, option, right, or convertible or exchangeable instrument. | ||
10.5 | Assignment . The rights of any Holder under this Section 10 shall only be assigned (i) to another Holder, (ii) to an Affiliate of such Holder which acquires any of the Equity Securities thereof (provided that such Affiliate agrees in writing to be bound by the provisions hereof), or (iii) to an assignee or transferee who acquires all of the Equity Securities held by the Holder (provided that such assignee or transferee agrees in writing to be bound by the provisions hereof), (collectively referred to as the Permitted Assignees, and individually referred to as a Permitted Assignee.). A Permitted Assignee which is a Holder shall be entitled to apportion the right of first offer hereby granted it among itself and its members, partners and Affiliates in such proportions as it deems appropriate. | |
10.6 | Granted Rights . Each of the Holders shall be granted any preemptive rights and registration rights granted to any subsequent purchasers of the New Securities of the Company to the extent that such subsequent rights are superior to those granted rights hereof. | |
10.7 | Termination . The rights of the Holders and the obligations of the Company, under this Section 10 shall terminate immediately prior to the closing of a Qualified Public Offering. |
11. | RIGHT OF FIRST REFUSAL, CO-SALE |
11.1 | Right of First Refusal |
(a) | Transfer Notice from Shareholders. | ||
If at any time a Common Shareholder or a Series A Preferred Shareholder (a Transferor ) proposes to transfer Equity Securities to one or more third parties pursuant to an understanding with such third parties (the Transfer ), then, the Transferor shall give each of the other non-selling Shareholders (the Non-Selling Shareholders ) and the Company written notice of the Transferors intention to make the Transfer (the Transfer Notice ), provided, however, that the Transferor shall only give such Transfer Notice to each of the Common Shareholders if the Transferor is a Series A Preferred Shareholder, which shall include (i) a description of the Equity Securities to be transferred ( Shares Offered by Shareholder ), (ii) the identity of the prospective transferee; and (iii) the consideration and the material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall be evidence that the Transferor has received a firm offer from the prospective transferee and in good faith believes a binding agreement for the Transfer is obtainable on the terms set forth in the Transfer Notice. The Transfer Notice shall also include a copy of any written proposal, |
19
term sheet or letter of intent or other agreement relating to the proposed Transfer. |
(b) | Non-Selling Shareholders Rights of First Refusal. |
(i) | The Non-Selling Shareholders shall have an option for a period of thirty (30) days from its receipt of the Transfer Notice to elect to purchase its respective pro rata shares of the Shares Offered by Shareholder at the same price and subject to the same material terms and conditions as described in the Transfer Notice, provided, however that the Sellers shall have such option provided herein for a period of fifteen (15) days. | ||
(ii) | The Non-Selling Shareholders may exercise such purchase option and, thereby, purchase all or any portion of its pro rata share of the Shares Offered by Shareholder , by notifying Transferor in writing, before expiration of the applicable period as provided above as to the number of shares which it wishes to purchase. | ||
(iii) | The Non-Selling Shareholders pro rata share of the Shares Offered by Shareholder shall be a fraction, of which the numerator shall be the number of Equity Securities owned by such Non-Selling Shareholder on the date of the Transfer Notice, and the denominator shall be the total number of Equity Securities held by all the Non-Selling Shareholders on the date of the Transfer Notice. | ||
(iv) | Each of the Non-Selling Shareholders shall be entitled to apportion its pro rata share of the Shares Offered by Shareholder among its partners and Affiliates, provided that such Non-Selling Shareholder notifies the Transferor of such allocation. | ||
(v) | If any of the Non-Selling Shareholder gives the Transferor notice that it desires to purchase its pro rata share of the Shares Offered by Shareholder (the Participating Shareholder ), then payment for the Shares Offered by Shareholder shall be by check or wire transfer, against delivery of the Shares Offered by Shareholder to be purchased at a place agreed by the parties and at the time of the scheduled closing therefor, which shall be no later than the latest of (i) thirty (30) business days after the Non-Selling Shareholders receipt of the Transfer Notice, (ii) the closing date contemplated in the Transfer Notice and (iii) the date on which the value of the purchase price is established pursuant to Section 11.1(d) . | ||
(vi) | In the event any Non-Selling Shareholder elects not to purchase its full pro rata share of the Shares Offered by Shareholder available pursuant to its option under Section 11.1(c) within the time period set forth therein, then the Transferor shall promptly, but in any event within five (5) days, give written notice (the Over-allotment Notice ) to each Participating Shareholder that has elected to purchase all of its pro rata share of the Shares Offered by Shareholder (each a Fully Participating Shareholder ), which notice shall set forth the number of the Shares Offered by Shareholder not purchased by the other Non-Selling Shareholders (the Over-allotment Shares ), and shall offer the Fully Participating Shareholders the right to acquire the Over-allotment Shares. Each Fully Participating Shareholder shall have five (5) days after receipt of the Over-allotment Notice to deliver a written notice to the Transferor of its election to purchase its pro rata share of the Over-allotment Shares on the same terms and conditions as set forth in the Transfer Notice and indicating the maximum number |
20
of the Over-allotment Shares that it will purchase in the event that any other Fully Participating Shareholder elects not to purchase its pro rata share of the Over-allotment Shares. For purposes of this Section 11.1(b) , each Fully Participating Shareholders pro rata share of the Over-allotment Shares shall be a fraction, of which the numerator shall be the number of Equity Securities owned by such Fully Participating Shareholder on the date of the Transfer Notice, and the denominator shall be the total number of Equity Securities held by all the Fully Participating Shareholder on the date of the Transfer Notice. | |||
(vii) | If the Non-Selling Shareholders fail to purchase any or all of the Shares Offered by Shareholder by exercising the option granted in this Section 11.1(b) within the period provided, the remaining Shares Offered by Shareholder shall be subject to the options granted to the Company pursuant to Section 11.1(c) . |
This Section 11.1(b) shall be subject to Section 6.6 of the Purchase Agreement. | |||
(c) | The Companys Right of Refusal. | ||
Subject to the Non-Selling Shareholders option as set forth in Section 11.1(b) , if at any time the Transferor propose a Transfer, within five (5) days after the Non-Selling Shareholders have declined to purchase all, or a portion, of the Shares Offered by Shareholder or the Non-Selling Shareholders option to so purchase the Shares Offered by Shareholder has expired, the Transferor shall give the Company an additional transfer notice ( Additional Transfer Notice ) that shall include all of the information and certifications required in a Transfer Notice and shall additionally identify the Shares Offered by Shareholder that the Non-Selling Shareholders have declined to purchase (the Remaining Shares ) and briefly describe the Companys rights of refusal with respect to the proposed Transfer. The Company shall have an option for a period of ten (10) days from its receipt of the Additional Transfer Notice to elect to purchase the Remaining Shares at the same price and subject to the same material terms and conditions as described in the Additional Transfer Notice, subject to compliance with the Companies Law of the Cayman Islands. The Company may exercise such purchase option and purchase all or any portion of the Remaining Shares by notifying the Transferor in writing before expiration of such ten (10) day period as to the number of such shares that it wishes to purchase. If the Company gives the Transferor notice that it desires to purchase such shares, then payment for the Remaining Shares to be purchased shall be made by check or wire transfer, against delivery of the Remaining Shares to be purchased at a place agreed upon between the Company and the Transferor and at the time of the scheduled closing therefor, which shall be no later than the latest of (i) thirty (30) business days after the Companys receipt of the Additional Transfer Notice, (ii) the closing date contemplated in the Additional Transfer Notice, and (iii) the date on which the value of the purchase price is established pursuant to Section 11.1(d) . | |||
(d) | Valuation of Property. |
(i) | Should the purchase price specified in the Transfer Notice be payable in property other than cash or evidences of indebtedness, the Company or the Non-Selling Shareholders, as the case may be, shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. | ||
(ii) | If the Transferor and the Company (or the relevant Non-Selling Shareholder, as the |
21
case may be) fail to agree on such cash value within ten (10) days after the Companys (or such Non-Selling Shareholders) receipt of the Transfer Notice, the valuation shall be made by an appraiser of recognized standing selected by the Transferor and the Company (or the Non-Selling Shareholder, as the case may be) or, if they fail to agree on an appraiser within twenty (20) days after the receipt of the Transfer Notice, each shall select an appraiser of recognized standing and the two appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. | |||
(iii) | The cost of such appraisal shall be shared equally by the Transferor and the Company (or the relevant Non-Selling Shareholder(s), as the case may be, in which case, with the half of the cost to be borne pro rata by each of such Non-Selling Shareholders based on the number of shares to be purchased pursuant to this Section 11.1 . | ||
(iv) | If the closing time for the Companys (or the Non-Selling Shareholders) purchase as provided in Section 11.1(b)(v) above has expired but for the determination of the value of the purchase price offered by the prospective transferee, such closing shall be held on or prior to the fifth business day after such valuation shall have been made pursuant to Section 11.1(c) . |
11.2 | Right of Co-Sale . |
(a) | To the extent the Company and the Non-Selling Shareholders do not exercise their respective rights of first refusal as to all of the Shares Offered by a Shareholder pursuant to Section 11.1 , the Series A Preferred Shareholder and Tiger (each a Co-Sale Participant ) which notifies the Transferor in writing within fifty (50) days after receipt of the Transfer Notice referred to in Section 11.1(a) , shall have the right to participate in such sale of Equity Securities on the same terms and conditions as specified in the Transfer Notice. Notwithstanding anything to the contrary provided herein, Tiger shall be entitled to the right of co-sale as endowed by this Section 11.2 to the extent that the Transferor is any of the Founders and/or Sellers. | ||
(b) | Number of Equity Securities for Co-sale. | ||
Each Co-Sale Participant may elect to sell up to such number of Equity Securities equal to (on a fully converted basis) the product of (i) the aggregate number of Shares Offered by Shareholder covered by the Transfer Notice that have not been subscribed for pursuant to Section 11.1 above; by (ii) a fraction, the numerator of which is the number of Equity Securities owned by such Co-Sale Participant on the date of the Transfer Notice and the denominator of which is the total number of Equity Securities owned by the Transferor and the Co-Sale Participants on the date of the Transfer Notice. | |||
(c) | The Co-Sale Participant shall effect its participation in the sale by promptly delivering to the Transferor for transfer to the prospective transferee one or more certificates, properly endorsed for transfer, which represent the type and number of Equity Securities which the Co-Sale Participant elects to sell; provided, however that if the prospective third-party transferee objects to the delivery of Equity Securities in lieu of Common Shares, the Co-Sale Participant shall convert such Equity Securities into Common Shares and deliver certificates corresponding to such Common Shares. The Company agrees to make any such conversion concurrent with the actual transfer of such shares to the purchaser and |
22
contingent on such transfer. | |||
(d) | The share certificate or certificates that a Co-Sale Participant delivers to the Transferor pursuant to Section 11.2(c) shall be transferred to the prospective transferee in consummation of the sale of the Equity Securities pursuant to the terms and conditions specified in the Transfer Notice, and the Transferor shall concurrently therewith remit to such Co-Sale Participant that portion of the sale proceeds to which such Co-Sale Participant is entitled by reason of its participation in such sale. | ||
(e) | To the extent that any prospective transferee prohibits the participation of a Co-Sale Participant exercising its co-sale rights hereunder in a proposed Transfer or otherwise refuses to purchase shares or other securities from a Co-Sale Participant exercising its co-sale rights hereunder, the Transferor shall not sell to such prospective transferee any Equity Securities unless and until, simultaneously with such sale, the Transferor shall purchase such shares or other securities from such Co-Sale Participant for the same consideration and on the same terms and conditions as described in the Transfer Notice. |
11.3 | Non-exercise of Rights . | |
To the extent that the Company and the Non-Selling Shareholders have not exercised their rights to purchase the Shares Offered by Shareholder, the Remaining Shares or the Over-allotment Shares within the time periods specified in Section 11.1 and the Series A Preferred Shareholder and Tiger have not exercised their rights to participate in the sale of the Equity Securities pursuant to and within the time periods specified in Section 11.2 , the Transferor shall have a period of thirty (30) days from the expiration of such rights to sell the Shares Offered by Shareholder, the Remaining Shares or the Over-allotment Shares, as the case may be, upon terms and conditions (including the purchase price) no more favorable than those specified in the Transfer Notice to the third-party prospective transferee(s) identified in the Transfer Notice. In the event such Transferor does not consummate the sale or disposition of the Shares Offered by Shareholder, the Remaining Shares and the Over-allotment Shares within the applicable time period from the expiration of these rights, the Companys first refusal rights and the Non-Selling Shareholders first refusal rights and co-sale rights shall continue to be applicable to any subsequent disposition of the Shares Offered by Shareholder or the Remaining Shares by the Transferor until such right lapses in accordance with the terms of this Agreement. Furthermore, the exercise or non exercise of the rights of the Non-Selling Shareholders under this Section 11 shall not adversely affect their rights to make subsequent purchases or sales hereunder. | ||
11.4 | Limitation to and the Termination of the Rights of First Refusal and Co-sale |
(a) | Notwithstanding the provisions of this Section 11 , a Transferor may sell or otherwise assign, with or without consideration, Shares to any spouse or member of such Transferors immediate family, or to a custodian, trustee, executor, or other fiduciary for the account of the Transferors spouse or members of the Transferors immediate family, or to a trust for the Transferors own self, or a charitable remainder trust, provided that each such transferee or assignee, prior to the completion of the sale, transfer, or assignment, shall have agreed in writing to be bound by provisions in this Agreement. | ||
(b) | The rights of first refusal and co-sale rights provided under this Section 11 shall be terminated immediately prior to the closing of a Qualified Public Offering. |
23
12. | REGISTRATION RIGHTS |
12.1 | Demand Registration . |
(1) | Registration Other Than on Form F-3. Subject to the terms of this Section 12 , at any time after the earlier of (i) the date that is six (6) months following the effective date of the registration statement for the IPO, or (ii) the date that is three (3) years after the Closing, the holders of at least 30% of the aggregate shares initially purchased by the Series A Preferred Shareholders and Tiger, together on an as-converted basis, (for the purposes of this Section 12.1 , collectively, the Initiating Holders ) may request the Company in writing to file a Registration covering the registration of Registrable Securities for a public offering with anticipated gross proceeds of at least US$5,000,000 in the aggregate. Upon receipt of such a request, the Company shall (a) promptly give written notice of the proposed Registration to all other Holders, and (b) as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause Registrable Securities specified in the request, to be Registered and/or qualified for sale and distribution in such jurisdictions as the Initiating Holders may reasonably request. | ||
Notwithstanding the foregoing and subject to Section 12.1(3) below, the Company shall not be required to effect a registration pursuant to this Section 12.1(1) : |
(a) | with respect to a Registration initiated pursuant to Section 12.1(1) , after the Company has effected two (2) Registrations pursuant to this Section 12.1(1) , and such Registration have been declared or ordered effective (and have not been subject to a stop order or otherwise withdrawn); or | ||
(b) | if the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form F-3 pursuant to Section 12.1(2) hereof; |
(2) | Registration on Form F-3. Subject to the terms of this Agreement, at any time after a Qualified Public Offering, the Initiating Holders may request the Company in writing to file a Registration on Form F-3 (or any successor form to Form F-3, or any comparable form for Registration in a jurisdiction other than the United States, to the extent that the Company is qualified to use such form to register the requested Registrable Securities) for a public offering of all or a part of the Registrable Securities owned by such Initiating Holders. Upon receipt of such a request, the Company shall, (a) promptly give written notice of the proposed registration to all other Holders, and (b) as soon as practicable, and in any event within sixty (60) days of the receipt of such request, cause the Registrable Securities specified in the request, to be registered and qualified for sale and distribution in such jurisdictions as the Initiating Holders may reasonably request. The Initiating Holders may at any time, and from time to time, require the Company to effect the Registration of Registrable Securities under this Section 12.1(2) , provided that the Company shall not be obligated to effect more than two (2) Registrations on demand of the Initiating Holders any 12-month period pursuant to this Section 12.1(2) . | ||
Notwithstanding the foregoing and subject to Section 12.1(3) below, the Company shall not be required to effect a registration pursuant to this Section 12.1(2) : |
(a) | if Form F-3 (or its comparable form) is not available for such offering by the Holders; or |
24
(b) | if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters discounts or commissions) of less than US$500,000. |
(3) | Right of Deferral. |
(a) | the Company shall be entitled to postpone or suspend, for a reasonable period of time, the filing, effectiveness or use of, or trading under, any registration statement as requested by the Initiating Holders pursuant to Section 12.1(1) or 12.1(2) , if the Company shall determine that any such filing or the sale of any securities pursuant to such registration statement would in the good faith judgment of the Board: |
(i) | materially impede, delay or interfere with any material pending or proposed financing, acquisition, corporate reorganization or other similar transaction involving the Company for which the Board has authorized negotiations; or | ||
(ii) | require disclosure of material nonpublic information that, if disclosed at such time, would be materially harmful to the interests of the Company and its shareholders; provided , however that during any such period all executive officers and directors of the Company are also prohibited from selling securities of the Company (or any security of any of the Companys Subsidiaries or Affiliates); |
(b) | if, after receiving a request from the Initiating Holders pursuant to Section 12.1(1) or Section 12.1(2) , the Company furnishes to each Initiating Holder a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of the Company, it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed in the near future, the Companys obligation to use its commercially reasonable efforts to file a registration statement shall be deferred for a period not to exceed ninety (90) days from the receipt of any request duly submitted by the Initiating Holders under Section 12.1(1) or 12.1(2) to register Registrable Securities; provided that the Company shall not exercise the right contained in this Section 12.1(3)(b) more than once in any twelve (12) month period; and provided further that the Company shall not register any securities of the Company for the account of itself or any other shareholder during such ninety (90) day period. |
(4) | Underwritten Offerings. If, in connection with a request to register Registrable Securities under Section 12.1(1) or Section 12.1(2) , the Initiating Holders intend to distribute such Registrable Securities by means of an underwriting, they shall so advise the Company as a part of the request, and the Company shall include such information in the written notice to the other Holders. In such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holders participation in such underwriting and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Agreement, if the underwriter advises the Company that marketing factors (including the |
25
aggregate number of securities requested to be registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of securities underwritten (including Registrable Securities), then the Company shall so advise all Holders that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the underwriting shall be allocated to such Holders pro rata based on the number of Registrable Securities held by all such Holders (including the Initiating Holders). In no event shall any Registrable Securities be excluded from such underwriting unless all other securities are first excluded. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the Registration. |
12.2 | Piggyback Registrations |
(1) | Registration of the Companys Securities. Subject to Section 12.2(3) , if the Company proposes to register for its own account (including for this purpose a registration statement filed by the Company for shareholders other than the Holders) any of its Equity Securities in connection with the public offering of such securities, the Company shall promptly give each Holder written notice of such Registration and, upon the written request of any Holder given within twenty (20) days after delivery of such notice, the Company shall use commercially reasonable efforts to include in such Registration any Registrable Securities thereby requested by the Holders. The Holders right to demand the piggyback registration pursuant to this Section 12.2 is unlimited. | ||
(2) | Right to Terminate Registration. The Company shall have the right to terminate or withdraw any Registration initiated by it under Section 12.2(1) prior to the effectiveness of such Registration, whether or not any Holder has elected to include Registrable Securities in such Registration. The expenses of such withdrawn Registration shall be borne by the Company in accordance with Section 12.3 . | ||
(3) | Underwriting Requirements. |
(a) | In connection with any offering involving an underwriting of the Companys Equity Securities, the Company shall not be required under this Section 12.2 to include any Holders Registrable Securities in such underwriting unless such Holder enters into an underwriting agreement in customary form with the underwriters selected by the Company and setting forth such terms for the underwriting as have been agreed upon between the Company and the underwriters. In the event the underwriters advise the Holders seeking Registration of Registrable Securities pursuant to this Section 12.2 in writing that market factors (including the aggregate number of Registrable Securities requested to be Registered, the general condition of the market, and the status of the persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Equity Securities to be underwritten, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters may advise will not jeopardize the success of the offering. In no event shall any Registrable Securities be excluded from such offering unless all other selling shareholders securities have been first excluded. In the event that the underwriters advise that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be apportioned pro rata among the selling Holders based on the number of Registrable Securities held by all selling Holders or in such other proportions as shall mutually be agreed to |
26
by all such selling Holders. Notwithstanding the foregoing, in no event shall the amount of securities included in the Registration on behalf of the Holders be reduced below thirty percent (30%) of the total shares requested to be included by the Holders in such offering, unless such offering is the Qualified Public Offering, in which case the amount of securities of Tiger included in the offering may be reduced on the basis and as advised by the underwriters as provided above, including completely, if, no other shareholders securities are included in such offering. For purposes of the preceding sentence concerning apportionment, for any selling shareholder that is a Holder of Registrable Securities and that is an investment fund, partnership, limited liability company or corporation, the affiliated investment funds, partners, members, retired partners, retired members and shareholders of such Holder, or the estates and family members of any such partners, members, retired members and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single selling Holder, and any pro rata reduction with respect to such selling Holder, shall be based upon the aggregate amount of Registrable Securities owned by all such related entities and individuals. | |||
(b) | If any Series A Preferred Shareholder disapproves of the terms of any underwriting, such Preferred Shareholder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least seven (7) days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from the underwriting shall be withdrawn from the Registration. |
12.3 | Procedures . |
(1) | Registration Procedures and Obligations. Subject to provisions under Section 12.1(3) , whenever required under this Agreement to effect the Registration of any Registrable Securities held by a Holder, the Company shall, as expeditiously as possible: |
(a) | Prepare and file with the Commission a registration statement with respect to those Registrable Securities and use its reasonable best efforts to cause that registration statement to become effective, and, upon the request of the Holders of thirty percent (30%) of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed; | ||
(b) | Prepare and file with the Commission amendments and supplements to that registration statement and the prospectus used in connection with the registration statement as may be necessary to comply with the provisions of Applicable Securities Law with respect to the disposition of all securities covered by the registration statement; | ||
(c) | Furnish to the Holders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Law, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; | ||
(d) | Use its reasonable best efforts to register and qualify the securities covered by the registration statement under the securities laws of any jurisdiction, as reasonably requested by the Holders, provided that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdictions; |
27
(e) | In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of the offering; | ||
(f) | Notify each Holder of Registrable Securities covered by the registration statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Law or of the happening of any event as a result of which any prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; | ||
(g) | Provide a transfer agent and registrar for all Registrable Securities registered pursuant to the registration statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration; | ||
(h) | Furnish, at the request of any Preferred Shareholder requesting Registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this Agreement, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters; and | ||
(i) | Take all reasonable action necessary to cause all such Registrable Securities registered pursuant to this Section 12.3(1) to be listed or admitted for quotation on the primary exchange upon which the Companys securities are then listed or admitted for quotation. |
(2) | Information from Holders. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of any selling Holder that the such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the Registration of such Holders Registrable Securities. | ||
(3) | Expenses of Registration. All expenses, other than Selling Expenses, incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including (without limitation) all Registration, filing and qualification fees, printers and accounting fees, fees and disbursements of counsel for the Company and disbursements of one counsel of the selling Holders, shall be borne by the Company. | ||
(4) | Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any Registration as the result of any controversy that may arise with respect to the interpretation or implementation of this Section 12 . | ||
(5) | IPO Preparation. In anticipation of the IPO, the Company shall have the right to designate the Companys Chief Financial Officer and its principle and accounting and legal firms, |
28
provided that such person and firms are acceptable to the Holders. |
12.4 | Indemnification under Registration Rights . |
(1) | Company Indemnity. |
(a) | To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers, directors, shareholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holders and each Person, if any, who controls (as defined in the Securities Act) such Holder against any losses, claims, damages or liabilities (joint or several) to which they may become subject to under laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration, qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a Violation ): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state in the registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws. The Company will reimburse each such Holder, underwriter or controlling person or other aforementioned persons for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. | ||
(b) | The indemnity agreement contained in this Section 11.4(1) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such Registration by any such Holder, underwriter or controlling person. | ||
(c) | With respect to any preliminary prospectus, the foregoing indemnity shall not inure to the benefit of any Holder or underwriter, or any Person controlling (within the meaning of the Securities Act) such Holder or underwriter, from whom the Person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such Person, if required by law to have been so delivered, at or prior to the written confirmation of the sale of the shares to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. |
(2) | Holder Indemnity. |
29
(a) | To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, its directors, officers who has signed the registration statement, legal counsel and accountants, any underwriter, and each Person, if any, who controls (within the meaning of the Securities Act) the Company or such underwriter, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the selling Holders expressly for use in connection with such Registration; and such selling Holder will reimburse any person intended to be indemnified pursuant to this Section 12.4(2) , for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action. | ||
(b) | The indemnity contained in this Section 12.4(2) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such selling Holders (which consent shall not be unreasonably withheld), and in no event shall any indemnity under this Section 12.4(2) exceed the gross proceeds from the offering received by such selling Holder. |
(3) | Notice of Indemnification Claim. Promptly after receipt by an indemnified party under Section 12.4(1) or Section 12.4(2) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under Section 12.4(1) or Section 12.4(2) , deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnifying parties. An indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 12.4 , but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 12.4 . | ||
(4) | Contribution. If any indemnification provided for in Section 12.4(1) or Section 12.4(2) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, |
30
damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. | |||
(5) | Underwriting Agreement. To the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. | ||
(6) | Survival. The obligations of the Company and the selling Holders under this Section 12.4 shall survive the closing of any offering of Registrable Securities in a registration statement under this Agreement, and otherwise. |
12.5 | Additional Undertakings . |
(1) | Reports under the Exchange Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Law that may at any time permit a Holder to sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 (or any comparable form in a jurisdiction other than the United States), the Company agrees to: |
(a) | make and keep public information available, as those terms are understood and defined in Rule 144 (or comparable provision under Applicable Securities Laws in any jurisdiction where the Companys securities are listed), at all times after the effective date of a Qualified Public Offering; | ||
(b) | file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and | ||
(c) | at any time following ninety (90) days after the effective date of the Qualified Public Offering, promptly furnish to any Holder, upon request (i) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Companys securities are listed), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as may be filed by the Company with the Commission, and (iii) such other information as may be reasonably requested in availing such Holder of any rule or regulation of the Commission, that permits the selling of any such securities without Registration or pursuant to such form. |
(2) | Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities, enter into any agreement with any holder or prospective holder of any Equity Securities of the Company that would allow such holder or prospective holder (a) to include such securities in any Registration filed under Section 12.2 , unless under the terms of such agreement such holder or prospective holder may include such Equity |
31
Securities in any such Registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included, (b) to demand Registration of their securities, or (c) to enjoy registration rights otherwise superior to or in parity with those of the Holders as endowed by this Agreement. | |||
(3) | Market Stand-Off Agreement. The Holders agree that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Companys IPO and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred and eighty (l80) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Equity Securities (whether then owned or thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Equity Securities, whether any such transaction described in Section (i) or (ii) above is to be settled by delivery of Equity Securities or such other securities, in cash or otherwise. The foregoing provision of this Section 12.5(3) shall apply only to the Companys Qualified Public Offering and shall only be applicable to the Holders if all officers, directors and greater than 1% shareholder of the Company enter into similar agreements to the extent requested by the managing underwriter. The underwriters in connection with the Companys IPO are intended third party beneficiaries of this Section 12.5(3) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. | ||
(4) | Each Holder agrees that a legend reading substantially as follows shall be placed on all certificates representing all Registrable Securities of each Holder (and the shares or securities of every other person subject to the restriction contained in this Section 12.5(3) ): | ||
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE ISSUERS INITIAL PUBLIC OFFERING AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUERS PRINCIPAL OFFICE. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES. | |||
(5) | Assignment of Registration Rights. The rights to cause the Company to Register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations under this Agreement) by a Holder to a transferee or assignee of such securities that (i) is an Affiliate of such Holder, or (ii) after such assignment or transfer, holds Registrable Securities representing at least 50% Common Shares (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations), provided that: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; (c) such transfer or assignment shall be effective only if immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under Applicable Securities Law; (d) the transferee is not a business |
32
competitor of the Company; (e) the transfer is in connection with a transfer of all securities of the transfer; and (f) the transfer is to constituent partners or shareholders who agree to act through a single representative. In the event of a transfer or assignment of Registrable Securities which does not satisfy the conditions set forth above, such securities shall no longer be deemed to constitute Registrable Securities for purposes of this Agreement. | |||
(6) | Exercise of Series A Preferred Shares. Notwithstanding anything to the contrary provided in this Agreement, the Company shall have no obligation to Register Registrable Securities which, if constituting Common Share Equivalents, have not been exercised, converted or exchanged, as applicable, for Common Shares. |
12.6 | Termination of the Registration Right . No Holder shall be entitled to exercise any right provided for in this Section 12 after five (5) years following the consummation of the Qualified Public Offering or (b) as to any Holder, such earlier time after the Qualified Public Offering at which such Holder (i) can sell all shares held by it in compliance with Rule 144(b)(1)(i) or (ii) holds one percent (1%) or less of the Companys outstanding Common Shares and all Registrable Securities held by such Holder (together with any Affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in any ninety (90) day period without registration in compliance with Rule 144. |
13. | REDEMPTION RIGHT |
13.1 | Redemption Right . Subject to the terms and conditions of this Agreement and to the extent permitted by applicable laws, at any time and from time to time after December 31, 2011, at the written request for redemption (made on one or more occasions) by the Series A Preferred Shareholder then outstanding, concurrently with surrender by such holder of certificates representing its Series A Preferred Shares, the Company shall redeem all the Series A Preferred Shares as may be requested by such holder. | |
13.2 | Redemption Price . The redemption price per Share at which such redemption shall be made by the Company for the number of Preferred Shares as requested to be redeemed shall be one hundred and eighty percent (180%) of the Original Issue Price. The Company shall pay such amount on each of the Series A Preferred Shares to be redeemed on the redemption date specified in the request of such Preferred Shareholder. | |
13.3 | Unredeemed Shares . If on the date of redemption, the number of Preferred Shares that may then be legally redeemed by the Company is less than the number of Preferred Shares to be redeemed, then any unredeemed preferred shares will be carried forward and redeemed as soon as the Company is legally able to do so. If the Company does not have sufficient cash legally available to redeem all of the Preferred Shares required to be redeemed, the remainder of the unredeemed Preferred Shares will be paid in the form of a one-year note to the Preferred Shareholder bearing an interest of 25% for Series A Preferred Shares. |
14. | SHARE PREFERENCES; DOCUMNENT RELATIONS |
14.1 | Share Preference . Subject to other terms in this Agreement, the rights, preferences and privileges attached to the Series A Preferred Shares shall not be subordinated to those attached to any other class of Shares, and will at all times be at least pari passu with the rights attached to all other Shares, including currently issued and outstanding Common Shares or Preferred Shares or any other Shares to be issued in the future, unless each of the Series A Preferred Shareholder gives its prior written consent to the Companys issuance of any new class of securities of the Company or |
33
assignment to existing securities having or receiving rights, preferences or privileges in parity with or senior to the Series A Preferred Shares. |
15. | NOTICE |
15.1 | Any notice or other communication given or made under this Agreement shall be in writing. | |
15.2 | Any such notice or other communication shall be addressed as provided in this Section 14 and, if so addressed, shall be deemed to have been duly given or made as follows: |
(a) | if sent by personal delivery, upon delivery at the address of the relevant Party; | ||
(b) | if sent by registered post, five (5) Business Days after the date of posting; and | ||
(c) | if sent by facsimile, upon despatch to the facsimile number of the recipient, with the production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. |
15.3 | The relevant address and facsimile number of each Party for the purposes of this Agreement are set out in the relevant schedule as attached to the Share Purchase Agreement. | |
15.4 | A Party may notify the other Parties to this Agreement of a change to its/his name, address or facsimile number for the purpose of this Section PROVIDED THAT such notification shall only be effective on: |
(a) | if Sub-Section (ii) does not apply, the date specified in the notification as the date on which the change is to take place; or | ||
(b) | if no date is specified or the date specified is less than seven (7) Business Days after (and excluding) the date on which the notice is given, the date falling seven (7) Business Days after notice of any such change has been given. |
16. | MISCELLANEOUS |
16.1 | Successors and Assigns . |
(a) | Series A Preferred Shareholder shall be entitled to transfer all or part of its Series A Preferred Shares to one or more affiliated partnerships or funds managed by or affiliated with it or any of their respective directors, officers or partners, provided such transferee agrees in writing to be subject to the terms of the Share Purchase Agreement and related agreements as if it were a purchaser of such Series A Preferred Shares thereunder. | ||
(b) | Subject to sub-Section (i) above, this Agreement is personal to the Parties hereto and save as expressly provided herein, none of them may assign, mortgage, charge or sub-license any of their respective rights herein, or sub-contract or otherwise delegate any of its obligations herein, except with the prior written consent of the other Parties hereto. | ||
(c) | Subject to sub-Section (ii) above, this Agreement shall be binding on and inure for the benefit of the successors, permitted assigns and personal representatives (as the case may be) of each of the Parties hereto. |
34
(d) | Notwithstanding the above, it is agreed that Series A Preferred Shareholders may, subject to Section 10.1 hereof, transfer and assign all the rights and obligations hereunder to any third parties without prior written consent of any other party in this agreement except to a transferee or assignee who is a direct or indirect competitor of the Group Entities and except that any such transfer will at the reasonable discretion of the Company have material adverse impact on the business of Group Entities, and it is further agreed that any such transfer conducted by Series A Preferred Shareholders causing adverse material impact on the business of Group Entity should be null and void on and after the date when such transfer is executed. To avoid doubt, the Sellers not exercising the Right of First Refusal under this Agreement should not be construed as a waiver of the Indemnitees to their right hereunder in the event that such transfer conducted by Series A Preferred Shareholder has material adverse impact on the business of Group Entities. Any transfer in violation of this sub-Section (iv) shall constitute breach of this Agreement. | ||
(e) | Subject to sub-Section (vi) below, without prior written consent from all Preferred Shareholders, any Common Shareholder shall not assign or transfer its Equity Securities in the Company to any third party. The aforesaid share transfer restriction will expire upon the closing of Qualified IPO. | ||
(f) | Notwithstanding the sub-Section (v) above but subject to Section 10.1 hereof, each Seller shall be entitled to, without prior consent of the Series A Preferred Shareholder, transfer up to 8% of the total number of Shares held by such transferring Seller at the time of Closing to the investors if and when such transfer is associated with, and conducted concurrently with, a new round of financing for the Company, and the Series A Preferred Shareholder shall take all necessary action, and shall procure the Director it nominated or appointed in the Board of Director of the Company to take all necessary action, including but not limited to vote in favor of such transfer in the relevant resolutions. To avoid doubt, this sub-Section (vi) provided herein is not subject to Section 9 of this Agreement. |
16.2 | Cumulative Rights . | |
Unless otherwise provided in this Agreement, any remedy conferred on any Party hereto for breach of this Agreement shall be in addition and without prejudice to all other rights and remedies available to it. | ||
16.3 | Entire Agreement; Amendments . | |
This Agreement shall supersede all and any previous agreements, understandings or arrangements (if any) between and among the Parties hereto or any of them in relation to the subject matter hereof and all or any such previous agreements, understandings or arrangements (if any) shall cease and determine with effect from the date hereof. This Agreement constitutes the whole agreement between and among the Parties hereto or any of them in relation to the subject matter hereof (no Party having relied on any representation, warranty or undertaking made by any other party which is not a term of this Agreement). | ||
Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of (i) the Company, (ii) the Series A Preferred Shareholder representing more than 50% of all Series A Preferred Shares, (iii) Sellers, and (iv) Tiger. Any amendment or waiver effected in accordance with this paragraph shall be |
35
binding upon the Parties and their respective successors and assigns. | ||
16.4 | Further Assurance . | |
Each of the Parties hereto undertakes with each of the other Parties that it shall do, or shall procure to be done, all such acts and things and shall execute, or shall procure to be executed, all such documents as may be necessary or appropriate to implement the provisions of this Agreement or otherwise to give full legal force and effect thereof. | ||
16.5 | Severability . | |
The Parties hereto intended that the provisions of this Agreement shall be enforced to the maximum extent permissible under the laws applied in each jurisdiction in which enforcement of any provisions of this Agreement is sought. If any particular provision or part of this Agreement shall be held to be invalid or unenforceable, this Agreement shall be deemed to be amended by the deletion of the provision or part held to be invalid or unenforceable or, to the extent permissible by the applicable laws of the relevant jurisdiction in which such enforcement is sought, such provision or part shall be deemed to be varied in such a way as to achieve most closely the purpose of the original provision or part in a manner which is valid and enforceable, provided that for the avoidance of doubt, such amendments shall apply only with respect to the operation of this Agreement in the particular jurisdiction in which the decision as to invalidity or unenforceability is made. | ||
16.6 | Non-waiver . | |
No delay or omission on the part of any Party hereto in exercising any right, power or privilege shall operate to impair such right, power or privilege or be construed as a waiver by such Party of the same and no single or partial exercise or non-exercise or delay in exercising any right, power or privilege by any Party hereto shall in any circumstances preclude any other or further exercise by such Party of such right, power or privilege or the exercise of any other right, power or privilege by such Party. | ||
16.7 | Counterparts . | |
This Agreement may be executed in counterparts and by different Parties hereto on separate copies or counterparts and which taken together shall constitute one and the same agreement. The facsimile transmissions of any executed original document (including without limitation, any page of an original document on which an original signature appears) and/or retransmission of any such facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any Party hereto, the other Parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. | ||
16.8 | Dispute Resolution; Governing Law . |
(a) | This Agreement shall be governed by and construed in accordance with the Law of the State of New York as to matters within the scope thereof, without regard to its principles of conflicts of laws. | ||
(b) | Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through consultation. Such consultation shall begin immediately after one Party hereto has delivered to the other |
36
Party hereto a written request for such consultation. If within thirty (30) days following the date on which such notice is given the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of either Party with notice to the other. | |||
(c) | The arbitration shall be conducted in Hong Kong under the auspices of Hong Kong International Arbitration Commission Center ( HKIAC ) in accordance with its arbitration rules. If the parties do not agree to appoint the arbitrator(s) who has/have consented to participate within thirty (30) days after a notice of arbitration, the relevant appointment shall be made by HKIAC. | ||
(d) | The arbitration proceedings shall be conducted in English. | ||
(e) | The arbitrators shall decide any dispute submitted by the Parties to the arbitration strictly in accordance with the substantive law of New York and shall not apply any other substantive law. | ||
(f) | Each Party hereto shall cooperate with the other(s) in making full disclosure of and providing complete access to all information and documents requested by the other in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such party. | ||
(g) | The award of the arbitration tribunal shall be final and binding upon the disputing parties, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award. | ||
(h) | Any Party in dispute with another shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction pending the constitution of the arbitral tribunal. |
16.9 | This Agreement shall take effect, after being duly executed and delivered by all the Parties hereto, upon the effectiveness of the Share Purchase Agreement. | |
16.10 | Cross-Guarantees . | |
Each of Zhang Bangxin, Cao Yundong, LIU Yachao and BAI Yunfeng shall unconditionally guarantees the performance of BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED respectively under this Agreement and vice versa, each of BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED shall unconditionally guarantees the performance of Zhang Bangxin, Cao Yundong, LIU Yachao and BAI Yunfeng respectively under this Agreement. | ||
16.11 | Power of Attorney. | |
KTB hereby authorizes the Company, on behalf of itself and as agent for KTB, to enter into the Assumption Agreement in the form attached as Exhibit B-2 of the Purchase Agreement pursuant to Section 6.23 thereunder. |
37
SELLERS |
BRIGHT UNISON LIMITED
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin ( ) | |||
CENTRAL GLORY INVESTMENTS LIMITED
|
||||
By: | /s/ Yundong Cao | |||
Name: | CAO Yundong ( ) | |||
PERFECT WISDOM INTERNATIONAL LIMITED
|
||||
By: | /s/ Yachao Liu | |||
Name: | LIU Yachao ( ) | |||
EXCELLENT NEW LIMITED
|
||||
By: | /s/ Yunfeng Bai | |||
Name: | BAI Yunfeng ( ) | |||
FOUNDERS |
ZHANG Bangxin (
)
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin | |||
CAO YUNDONG (
)
|
||||
By: | /s/ Yundong Cao | |||
Name: | CAO Yundong | |||
LIU Yachao (
)
|
||||
By: | /s/ Yachao Liu | |||
Name: | LIU Yachao | |||
BAI YUNFENG (
)
|
||||
By: | /s/ Yunfeng Bai | |||
Name: | BAI Yunfeng | |||
COMPANY: |
XUEERSI INTERNATIONAL EDUCATION GROUP
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin | |||
Title: | Director | |||
HK COMPANY: |
TAL GROUP LIMITED
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin | |||
Title: | Director | |||
WFOE: |
TAL EDUCATION TECHNOLOGY (BEIJING) CO., LTD.
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin | |||
Title: | Legal Representative | |||
Affix Seal: | ||||
DOMESTIC COMPANIES |
BEIJING XUEERSI EDUCATION TECHNOLOGY CO., LTD.
|
|||
By: | /s/ Yachao Liu | |||
Name: | LIU Yachao | |||
Title: | Legal Representative | |||
Affix Seal: | ||||
BEIJING XUEERSI NETWORK TECHNOLOGY CO., LTD.
|
||||
By: | /s/ Yachao Liu | |||
Name: | LIU Yachao | |||
Title: | Legal Representative | |||
Affix Seal: | ||||
SERIES A PREFERRED SHAREHOLDER: |
KTB/UCI China Ventures II Limited
|
|||
By: | /s/ Authorized Signatory | |||
Name: | ||||
Title: | Legal Representative | |||
Affix Seal: |
TIGER: |
Tiger Global Five China Holdings
|
|||
By: | /s/ Authorized Signatory | |||
Name: | ||||
Title: | ||||
1. | Name: Xueersi International Education Group( ) | |
2. | Date of Incorporation: January 10, 2008 | |
3. | Country of incorporation and status of company: Cayman Islands, Private company limited by shares |
4. | Registered office: | The Registered Office of the Company shall be at the offices of Offshore Incorporations (Cayman) Limited, Scotia Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Island. |
5. | Authorized share capital: | US$200,000.00, divided into 200,000,000 shares of par value of US$0.001 each, of which 195,000,000 are classified as Common Shares and 5,000,000 shares are designated as Series A Preferred Shares. |
6. | Issued or reserved shares: | 125,000,000 Common Shares and 5,000,000 Series A Preferred Shares |
7. | Directors: ZHANG Bangxin, CAO Yundong, LIU Yachao, BAI Yunfeng, YEH Aieming Amy | |
8. | Secretary: CIA Nominee Holdings Limited | |
9. | Financial year end: the last day of February |
Schedule 1
1 | Documents Reviewed |
1.1 | the certificate of incorporation dated 8 January 2008; | |
1.2 | the third amended and restated memorandum and articles of association of the Company as adopted by a special resolution passed on 29 September 2010 (the Pre IPO M&A ); | |
1.3 | the fourth amended and restated memorandum and articles of association of the Company as conditionally adopted by special resolution passed on 29 September and effective immediately upon the completion of the Companys initial public offering of ADSs representing its Class A Common Shares on the New York Stock Exchange (the IPO M&A ); | |
1.4 | the written resolutions of the Board of Directors of the Company dated 29 September 2010 (the Directors Resolutions ); | |
1.5 | the written resolutions of the shareholders of the Company dated 29 September 2010 (the Shareholders Resolutions ); |
1.6 | a certificate from a Director of the Company addressed to this firm dated ________ 2010 (the Directors Certificate ); | |
1.7 | a certificate of good standing dated __________ 2010, issued by the Registrar of Companies in the Cayman Islands (the Certificate of Good Standing ); and | |
1.8 | the Registration Statement. | |
2 | Assumptions |
2.1 | copy documents or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals; and | |
2.2 | the genuineness of all signatures and seals. | |
3 | Opinion |
3.1 | the Company has been duly incorporated as an exempted company with limited liability for an unlimited duration and is validly existing and in good standing under the laws of the Cayman Islands; | |
3.2 | immediately upon the completion of the Companys initial public offering of its ADSs representing its Class A Common Shares on the New York Stock Exchange, the authorised share capital of the Company will be US$______ divided into (i) _______ Class A Common Shares of a nominal or par value of US$0.001 each and (ii) _______ Class B Common Shares of a nominal or par value of US$0.001 each and (iii) _______ shares of such Class or Classes (howsoever designated) as the Board of Directors may determine in accordance with Articles 8 and 9 of the Articles of Association; | |
3.3 | the issuance and allotment of the Shares has been duly authorised and when allotted, issued and paid for as contemplated in the Registration Statement and entered in the register of members (shareholders), the Shares will be legally issued, fully paid and non-assessable; and | |
3.4. | the statements under the captions Enforceability of Civil Liabilities, Taxation and Legal Matters and elsewhere in the prospectus forming part of the Registration Statement, to the extent that they constitute statements of Cayman Islands law, are accurate in all material respects and such statements constitute our opinion. |
4 | Qualifications |
Re: | American Depositary Shares of TAL Education Group (the Company) |
(a) | the Registration Statement; and | ||
(b) | such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth below. |
Very truly yours,
|
||||
To:
|
TAL Education Group
18/F, Hesheng Building 32 Zhongguancun Avenue, Haidian District Beijing 100080 Peoples Republic of China |
|
Re:
|
Legal Opinion on Certain PRC Law Matters |
A. | Documents Examined, Definition and Information Provided |
1
B. | Assumptions |
1. | all signatures, seals and chops are genuine and were made or affixed by representatives duly authorized by the respective parties, all natural persons have the necessary legal capacity, all Documents submitted to us as originals are authentic, and all Documents submitted to us as certified or photo static copies conform to the originals; |
2
2. | no amendments, revisions, modifications or other changes have been made with respect to any of the Documents after they were submitted to us for the purposes of this opinion; and | ||
3. | each of the parties to the Documents (except that we do not make such assumptions about the VIEs and the PRC Affiliated Entities) is duly organized and validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation, and has been duly approved and authorized where applicable by the competent governmental authorities of the relevant jurisdiction to carry on its business and to perform its obligations under the Documents to which it is a party. |
C. | Opinion |
3
D. | Consent |
4
Very truly yours,
|
|
Tian Yuan Law Firm
|
5
1. | Beijing Dongcheng District Xueersi Training School | |
2. | Beijing Haidian District Lejiale Training School | |
3. | Tianjin Xueersi Education Information Consulting Co., Ltd. | |
4. | Shenzhen Xueersi Education Technology Co., Ltd. | |
5. | Beijing Xicheng District Xueersi Training School | |
6. | Beijing Haidian District Xueersi Training School | |
7. | Beijing Zhikang Culture Distribution Co., Ltd. | |
8. | Shanghai Lehai Science and Technology Information Co., Ltd. | |
9. | Shanghai Changning District Xueersi-Lejiale School | |
10. | Shanghai Minhang District Lejiale School | |
11. | Shanghai Xueersi Education Information Consulting Co., Ltd. | |
12. | Guangzhou Xueersi Education Technology Co., Ltd. | |
13. | Wuhan Jianghanqu Xiaoxinxing English Training School | |
14. | Hubei Qianjiang Xiaohafu English Training School | |
15. | Hubei Jianli Hafu English Training School | |
16. | Tianjin Hexi District Xueersi Training School |
6
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
RECITALS:
|
2 | |||
1. AGREEMENT TO PURCHASE AND SELL SHARES
|
3 | |||
2. CLOSING; DELIVERY
|
4 | |||
3. REPRESENTATIONS AND WARRANTIES OF THE GROUP COMPANIES AND THE FOUNDERS
|
5 | |||
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
|
12 | |||
5. COVENANTS OF THE GROUP COMPANIES, THE FOUNDERS AND THE INVESTORS
|
13 | |||
6. CONDITIONS TO INVESTORS OBLIGATIONS AT THE CLOSING
|
15 | |||
7. CONDITIONS TO COMPANYS OBLIGATIONS AT THE CLOSING
|
17 | |||
8. MISCELLANEOUS
|
17 |
1
2
3
Common Shares/ | ||||||||
Shareholders | Preferred Shares | Share Percentage | ||||||
Zhang Bangxin (
)
|
67,800,000 Common Shares | 54.24 | % | |||||
Cao Yundong (
)
|
31,200,000 Common Shares | 24.96 | % | |||||
Liu Yachao (
)
|
12,000,000 Common Shares | 9.6 | % | |||||
Bai Yunfeng (
)
|
9,000,000 Common Shares | 7.2 | % | |||||
Investors
|
5,000,000 Series A Shares | 4.0 | % | |||||
Total
|
125,000,000 shares | 100 | % |
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
THE COMPANY: | ||||||||
|
||||||||
TAL GROUP | ||||||||
|
||||||||
|
By: | /s/ Bangxin Zhang | ||||||
Name: ZHANG Bangxin | ||||||||
Title: Director | ||||||||
|
||||||||
HK SUBSIDIARY: | ||||||||
|
||||||||
TAL GROUP LIMITED | ||||||||
|
||||||||
|
By: | /s/ Bangxin Zhang | ||||||
Name: ZHANG Bangxin | ||||||||
Title: Director | ||||||||
|
||||||||
|
WFOE: | |||||||
|
||||||||
TAL EDUCATION TECHNOLOGY (BEIJING) CO., LTD.
( ) |
||||||||
|
||||||||
|
By: | /s/ Bangxin Zhang | ||||||
Name: ZHANG Bangxin | ||||||||
Title: Legal Representative |
20
BEIJING XUEERSI EDUCATION TECHNOLOGY CO., LTD.
( ) |
||||||||
|
||||||||
|
By: | /s/ Yachao Liu | ||||||
|
||||||||
|
Name: LIU Yachao | |||||||
|
Title: Legal Representative | |||||||
|
||||||||
Beijing Xueersi Network Technology Co., Ltd.
( ) |
||||||||
|
||||||||
|
By: | /s/ Yachao Liu | ||||||
Name: LIU Yachao | ||||||||
Title: Legal Representative |
21
FOUNDERS: | ||||||||
|
||||||||
/s/ Bangxin Zhang | ||||||||
ZHANG BANGXIN
( ) |
||||||||
|
||||||||
/s/ Yundong Cao | ||||||||
CAO YUNDONG
( ) |
||||||||
|
||||||||
/s/ Yachao Liu | ||||||||
LIU YACHAO
( ) |
||||||||
|
||||||||
/s/ Yunfeng Bai | ||||||||
BAI YUNFENG
( ) |
22
Investors: | KTB/UCI China Ventures II Limited | |||
By: | /s/ Authorized Signatory | |||
Name: | ||||
Title: | Legal Representative | |||
23
8.17
Rights Cumulative
21
8.18
No Waiver
21
8.19
No Presumption
22
8.20
Third Party Beneficiaries
22
8.21
Termination of Agreement
22
8.22
Cross-Guarantees
23
Schedule of the Sellers
Schedule of the Purchaser
Schedule of Founders
Schedule of Schools, Subsidiary Companies and Company Branches
Consent of Spouse
Definitions
Representations and Warranties of the Warrantors
Representations and Warranties of the Purchaser
Capitalization Table
Notices
2
1. | PURCHASE AND SALE OF COMMON SHARES. |
1.1 | Sale of Common Shares; Purchase Price. |
1.2 | Closing. |
(a) | Closing . The purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures, on a date specified by the Parties, or at such other time and place as the Sellers and Tiger mutually agree upon, which date shall be no later than five (5) Business Days after the satisfaction or waiver of each condition to the Closing by Tiger set forth in Section 2 and Section 3 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) (which time and place are designated as the Closing ). |
(1) | At the Closing, the Sellers shall cause the Companys share register to be updated to reflect the Shares purchased by Tiger, and the Sellers shall deliver, or cause the Company to deliver a copy of such updated share register to Tiger, certified as a true and correct copy by the Companys registered agent in the Cayman Islands. | ||
(2) | At or prior to the Closing, each Seller shall deliver the original share certificates(s) representing the Common Shares held by such Seller (such share certificates to be cancelled and reissued to reflect the sale of Shares) together with executed copies of such transfer documents as may be required by the Companys registered agent in the Cayman Islands to effectively transfer title to the Shares to Tiger. | ||
(3) | At the Closing, Tiger shall wire transfer immediately available U.S. dollar funds representing that portion of the aggregate Purchase Price to which each Seller is entitled as set forth opposite such Sellers name on Schedule 1A (less the pro rata portion of Tigers fees and expenses pursuant to Section 8.9 hereof) to an account designated by each such Seller; provided that each such Seller delivers wire transfer instructions to Tiger at least three (3) business days prior to the Closing. | ||
(4) | At the Closing, the Company shall deliver to Tiger an updated copy of the Companys register of directors, reflecting the addition of CHEN Xiaohong |
3
designated by Tiger to the Companys board of directors, certified as a true and correct copy by the Companys registered agent in the Cayman Islands. |
(b) | Within five (5) Business Days after the Closing, the Seller shall cause the Companys secretary to deliver to Tiger one or more certificates representing the Shares. |
1.3 | Filing with the Registrar of the Companies of Cayman Islands . | |
Within three (3) days after the Closing and upon the receipt of the respective Purchase Price by each and all the Sellers, the Sellers shall, serverally and jointly, cause the Company to file the Restated Articles, change to the updated Register of Directors, the resolutions of the members adopting the Restated Articles with the Registrar of the Companies of Cayman Islands. |
2. | CONDITIONS TO THE OBLIGATIONS OF TIGER AT CLOSING. |
The obligations of Tiger to purchase the Shares at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived in writing by Tiger: |
2.1 | Completion of Due Diligence. | |
Tiger shall have satisfactorily completed its business, legal and financial due diligence review. |
2.2 | Material Adverse Effect . | |
Since the date of this Agreement, no event, circumstance or change shall have occurred that, individually or in the aggregate with one or more other events, circumstances or changes, have had or reasonably could be expected to have a Material Adverse Effect on the Company or any other Group Entity. |
2.3 | Proceedings and Documents . | |
All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incidental thereto shall be reasonably satisfactory in form and substance to Tiger, and Tiger (or their legal counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates or analogous certificates in other jurisdictions. Each Seller and the Company shall have each performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by such parties on or before the Closing. |
2.4 | Authorizations . | |
Each Seller shall have obtained any and all authorizations, approvals, waivers or permits of |
4
any Person or any Governmental Authority necessary for the consummation of all of the transactions contemplated by this Agreement and other Transaction Documents, including without limitation, the consent of such Sellers spouse (if applicable) in the form attached hereto as Schedule 2B and any other authorizations, approvals, waivers or permits that are required in connection with the lawful sale or transfer of the Shares. Each Seller shall have fully satisfied (including with respect to rights of timely notification) or obtained enforceable waivers in respect of any preemptive or similar rights directly or indirectly affecting any of its shares or securities (including the waiver of holders of Series A Preferred Shares of its preemptive rights in their entirety), as applicable. |
5
directors jointly appointed by the Shareholders. |
2.11 | Letters of Commitment and Non-competition . | |
Each Seller shall have entered into a Letter of Commitment and Non-Compete in the form and substance attached hereto as Exhibit E-1 . | ||
2.12 | Compliance Certificates . | |
Tiger shall have received (a) a certificate executed and delivered by the chief executive officer of the Company in the form attached hereto as Exhibit F-1 , and (b) a certificate executed and delivered by each Seller in the form attached as Exhibit F-2 . | ||
2.13 | Director Indemnification Agreement . | |
The Company shall have executed and delivered the Director Indemnification Agreement with respect to the Tiger nominated directors in the form and substance attached hereto as Exhibit G . | ||
2.14 | Management Rights Letter . | |
The Company shall have executed and delivered to Tiger a Management Rights Letter in the form attached hereto as Exhibit H. | ||
2.15 | Key Persons Proprietary Information and Inventions Assignment Agreements . | |
Each of the Key Persons of the Group Entities, the name of which are listed on Exhibit E-3 attached hereto, shall have entered into a confidentiality and proprietary information agreement with the WFOE in the form and substance attached hereto as Exhibit E-2 , as an integral part of his/her employment agreement with the WFOE, that shall include provisions relating to the assignment of inventions, duty of non-solicitation and non-competition during and after termination of employment agreement. | ||
2.16 | Investment Committee Approval . | |
Tigers investment committee shall have approved the execution of this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby. | ||
2.17 | Registration of Equity Pledge . | |
The Company shall have registered the equity pledge agreement (included as part of the variable interest control documents) with the competent administration for industry and commerce pursuant to the Measures on Equity Pledge Registration effective as of October 1, 2008 and shall have provided the registration approval for the examination of Tiger. | ||
2.18 | WFOE Registered Address Alteration . | |
The WFOEs registered address alteration from the 2nd Floor, No.1 Suzhou Street, Haidian District, Beijing to Room 1702-1703, Lantian Hesheng Plaza, No. 32, |
6
Zhongguancun St., Haidian District, Beijing ( ) shall have been duly registered with Beijing Administration for Industry and Commerce, and as a result of such alteration, there is not any education or training activities being conducted on the leased premise of the WFOE. |
2.19 | Removal of Contents from Website. | |
All textbooks and audio materials displayed on the Companys website (www.eduu.com) that is known to infringe upon the intellectual properties of a third party shall be removed from the website in its entirety, it being understood that known offending content posted by third party users on the Companys bulletin board system (BBS) after that day which is three days prior to the Closing may not have been removed at Closing but shall be timely addressed by the Company following the Closing through regular monitoring. | ||
2.20 | Assignment of Cooperation Agreement . | |
The rights and obligations of Haidian School under the Cooperation Agreement entered into by and between Haidian School and Audio-Video Publishing House of Beijing Normal University of Education in connection with the publishing of certain textbooks on May 12, 2008 shall have been assigned to Xueersi Network or terminated in accordance with an agreement duly signed by relevant parties. | ||
2.21 | Execution of Power of Attorney . | |
The shareholders of the Domestic Companies shall have entered into a power of attorney with the WFOE in a form and substance acceptable to Tiger, pursuant to which, the shareholders of the Domestic Companies shall have authorized the WFOE to exercise their rights as shareholders of the Domestic Companies. |
3. | CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AT CLOSING. |
The obligations of each Seller to sell the Shares to Tiger at the Closing are subject to the fulfillment by Tiger, on or before the Closing, of each of the following conditions, unless otherwise waived by writing: |
3.1 | Representations and Warranties. | |
The representations and warranties of the Purchaser contained in Schedule 6 shall be true, complete and correct in all material respects as of the Closing. | ||
3.2 | Performance . | |
The Purchaser shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. | ||
3.3 | Qualifications . |
7
All authorizations, approvals or permits, if any, of any Governmental Authority that are required in connection with the lawful sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing. |
4. | REPRESENTATIONS AND WARRANTIES OF THE WARRANTORS. |
The Warrantors hereby, jointly and severally, represent and warrant to the Purchaser that the statements contained in Schedule 4 attached hereto are true, correct and complete with respect to (i) each Warrantor, on and as of the Execution Date, and (ii) each Warrantor, on and as of the date of the Closing (with the same effect as if made on and as of the date of the Closing), except as set forth on the Disclosure Schedule attached hereto as Schedule 5 (the Disclosure Schedule ), which exceptions shall be deemed to be representations and warranties as if made hereunder. |
5. | REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. |
The Purchaser represents and warrants to the Sellers that the statements contained in Schedule 6 attached hereto are true, correct and complete with respect to the Purchaser as of the Closing. |
6. | UNDERTAKINGS. |
6.1 | Ordinary Course of Business . | |
From the Execution Date until the earlier of the Termination Date or the Closing, the Founders, the Sellers and the Company, jointly and severally, shall cause each Group Entity to be conducted in the ordinary course of business and shall use its commercially reasonable efforts to maintain the present character and quality of the business, including without limitation, its present operations, physical facilities, working conditions, goodwill and relationships with lessors, licensors, suppliers, customers, employees and independent contractors. Commencing with the execution and delivery of this Agreement and continuing until the earlier of the Termination Date or the Closing, no Group Entity may take any of the actions specified in Section 5.2 of the Shareholders Agreement without written consent of Tiger. |
6.2 | Employee Share Incentive Plan . |
(a) | In the event that the Company adopts a share option or an employee share incentive plan to selected officers, directors, employees and consultants of the Company (a Share Plan ) at any time after Closing, such Share Plan shall be subject to the following conditions: (i) option grants shall be at a minimum exercise price per share of no less than the Purchase Price (as appropriately adjusted for stock dividends, stock splits, reverse stock splits and the like), (ii) Zhang Bangxin and Cao Yundong shall not be entitled to receive any option grants, restricted stock grants or other equity incentives from the Company under a Share Plan or otherwise, and (iii) without the written consent of Tiger, the total number of options reserved or issued under the Share Plan shall not be more than 8% of the then effective capitalization of the Company. Notwithstanding the foregoing, the |
8
Company may grant 2% of the total options reserved under the Share Plan at an exercise price per share that is less than the Purchase Price. | |||
(b) | The Company and the Sellers shall use, and shall cause the WFOE and the Domestic Company to use, their best efforts to obtain (or cause the Subsidiaries to obtain) all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary to adopt the Share Plan in compliance with the Laws of the PRC, and will cooperate fully with the Purchaser in promptly seeking to obtain all such authorizations, consents, orders and approvals. |
6.3 | Exclusivity . | |
From the Execution Date until the earlier of the Termination Date or the Closing, each Warrantor agrees not to (i) discuss the sale of any equity securities or any other instruments convertible into the equity securities of any Group Entity with any third party, or (ii) to provide any information with respect to any Group Entity to a third party in connection with a potential investment by such third party in any equity securities or any other instruments convertible into the equity securities of such Group Entity, or (iii) to close any financing transaction of any equity securities or any other instruments convertible into the equity securities of any Group Entity with any third party (the Exclusivity Period ). | ||
6.4 | Notice of Certain Events . | |
If, at any time before the Closing, any Warrantor becomes aware of any material fact or event which: (i) is in any way inconsistent with any of the representations and warranties in this Agreement; (ii) suggests that any fact warranted hereunder may not be as warranted or may be misleading; or (iii) might affect the willingness of a prudent investor to purchase the Shares on the terms contained in the Transaction Documents or the amount of the consideration a prudent investor would be prepared to pay for the Shares; then the Warrantors shall immediately notify the Purchaser in writing, describing the fact or event in reasonable detail. | ||
6.5 | Compliance . | |
The Company and each Group Entity, and each of the Sellers shall take necessary steps to ensure that the Company and each Group Entity, shall comply with all applicable laws and regulations, including without limitation compliance with all contributions required to be made under the PRC social insurance and housing schemes. | ||
6.6 | Option for Follow-on Investments . |
(a) | The Company and each of the Sellers, jointly and severally, grant an option to Tiger to acquire such additional securities of the Company, prior to the Companys IPO to enable Tiger to increase its equity in the Company to 25% (on fully-diluted basis) at a fair market value (which shall not in any event fall below the par value of the shares of the Company where the Company is issuing new shares of the Company) to be determined by the Company or selling party(ies), as the case may be. |
9
(b) | Notwithstanding the above, in the event that the foregoing option is exercised by way of share transfer by any Seller to Tiger ( Transfer of Secondary Shares ), each of Tiger and KTB (or KTB/UCI China Ventures II Limited substituting KTB) may purchase its respective pro rata portion of the shares offered by any such Seller by following the procedures provided in Section 11.1(b)(i) through (iv) of the Shareholders Agreement. | ||
To avoid doubt, set forth below are the formula for calculating the number of shares each of Tiger and KTB: |
(i) | Number of shares that KTB is entitled to purchase = [X / (X+Y)] × selling shares offered by any of the Sellers | ||
(ii) | Number of shares that Tiger is entitled to purchase = [Y / (X+Y)] × selling shares offered by any of the Sellers |
X = number of shares then held by KTB and KTB/UCI China Ventures II Limited in the Company | |||
Y = number of shares then held by Tiger in the Company | |||
Further, the Parties understand that in the event of the Transfer of Secondary Shares, each of the Seller/Sellers, who do not elect or is/are not required to sell shares to Tiger, shall waive, pursuant to Section 11.1 (b) of the Shareholders Agreement,their respective rights of first refusal that they would otherwise have under Section 11 of the Shareholders Agreement and Section 9 of Schedule A of the Restated Articles. |
6.7 | Service Agreement . | |
As soon as practicable and in any event prior to the IPO, (i) the Sellers and the Company shall, jointly and severally, cause Xueersi Education and the Schools within the Group Entity to enter into the service agreements, pursuant to which, the Company Branches under Xueersi Education will provide administrative services including without limitation to student enrolment and tuition collection services to the Training Centres opened by the School; (ii) the Seller and the Company shall jointly and severally cause each of the Schools (other than Haidian School) within the Group Entities to enter into a set of service agreements with the WFOE including technical support and technical service agreement, education material research and development agreement, education software license agreement, and etc. | ||
6.8 | Filing for Incorporation of Tianjin Subsidiary . | |
As soon as practicable following the Closing, the Company shall file the documents required for the incorporation of subsidiary in Tianjin by Xueersi Education to Tianjin Administration for Industry and Commerce and shall have provided the relevant filing documents to Tiger. |
10
6.9 | Registration of Teaching Centres . | |
As soon as practicable following the Closing and in any event prior to the IPO of the Company, the Sellers and the Company shall use its best efforts to have substantial all of the Teaching Centres operated by the Schools registered with the competent district education commission. | ||
6.10 | Amendment to Employment Contract and Teaching Agreement . | |
As soon as practicable following the Closing, the Domestic Companies shall use commercially reasonable effort to amend, and shall cause the Schools to amend the labor contracts entered into by and between the relevant Group Entities and all the employees in the Group Entities to make them not in violation of the PRC Labor Contract Law. | ||
6.11 | Foreigner Employment Permit . | |
As soon as practicable following the Closing, the Sellers and the Company shall use its best efforts to apply for Foreigner Employment Certificate ( ) from Shanghai Human Resource and Social Security Protection Bureau ( ) for the employees of foreign nationality of the Group Entities. | ||
6.12 | Foreign Exchange Compliance . | |
Each Seller of the Company shall update its registration with the Beijing Branch of the State Foreign Exchange Administration in accordance with the requirements of Notice Regarding Certain Administrative Measures on Financing and Inbound Investments by PRC Residents Through Offshore Special Purpose Vehicles and any successor rules or regulations under Laws of the PRC within thirty (30) Business Days following the Closing. | ||
6.13 | Trademark Assignment to the WFOE or HK Company . | |
Within two (2) years following the Closing, the Domestic Companies and the Sellers (as the case may be) have entered into a trademark assignment agreement with the WFOE or the HK Company, pursuant to which certain trademarks shall be assigned to the WFOE or the HK Company other than those trademarks that are necessary for the operation of value added telecommunication business via the website of the Company using the domain name eduu.com. The foregoing trademark assignment shall be conducted based on the opinion of the tax advisor acceptable to Tiger. | ||
6.14 | Social Insurance and Housing Fund Compliance . | |
Prior to the IPO of the Company, the Domestic Companies shall duly pay, and shall cause the Schools to duly pay, for the social insurance and housing fund in full compliance with the Laws of the PRC. | ||
6.15 | Restructuring . |
(a) | Xueersi Education shall set up a subsidiary in Tianjin, which shall be the capital |
11
contributor of the schools to be established in Tianjin. Following the completion of the foregoing restructuring, (i) the schools in Tianjin shall continue the education and training activities originally conducted by Xueersi Education Tianjin Branch, and (ii) Xueersi Education Tianjin Branch shall cease to conduct any education and training activities and shall be converted into a service branch supporting the administration of schools in Tianjin. | |||
(b) | For the purpose of avoiding any potential negative tax consequences that the current structure may impose on Tiger, the Sellers and the Company agree to undertake any restructuring of the Group Entities reasonably requested by Tiger. |
6.16 | Insurance . | |
Within six (6) months following the Closing, the Company shall have purchased from financially sound and reputable insurers (i) directors and officers liability insurance, and (ii) property and casualty insurance, in each case upon terms acceptable to Tiger, and will use best efforts to cause such insurance policies to be maintained until such time as Tiger determines that such insurance should be discontinued. | ||
6.17 | Consent of Sellers . | |
The Parties understand that Xueersi Network entered into two share purchase agreements both dated June 19, 2008 in connection with its acquisition of Hubei Qianjiang School and Wuhan Jianghan School, respectively, from the relevant original sponsors of the two schools (the School Purchase Agreements ). In the event that the original sponsors require Xueersi Network to settle the unpaid consideration, when it is due, in the form of equity interest in the Company when listed pursuant to the School Purchase Agreements, the Sellers agree jointly and severally that they shall take such actions, or cause such actions to be taken as necessary to (i) assume and discharge in full Xueersi Networks obligations under the School Purchase Agreement with respect to the settlement of the unpaid consideration thereunder; and (ii) avoid Tigers equity interests in the Company being in any way diluted by such settlement. | ||
6.18 | Audit of the Group Entities . | |
The Sellers and the Company shall jointly and severally cause the Group Entities be audited by one of the Big 4 accounting firms (i.e., PricewaterhouseCoopers, KPMG, Deloitte & Touche or Ernst & Young) at a certain time following the Closing that is acceptable to Tiger. | ||
6.19 | Amendment to Articles of Association . | |
As soon as practicable and in any event prior to the IPO of the Company, the Articles of Association of Wuhan Jianghan School and Hubei Jianli School shall have been amended to include provisions setting forth a reasonable return on investment to the capital contributors in accordance with the PRC Non-state Education Promotional Law ( ) and its implementing rules. |
12
6.20 | R&D Employees Proprietary Information and Inventions Assignment Agreements . | |
Within three (3) months following the Closing, each of employees engaged in research and development of software and teaching materials for the Group Entities shall have entered into a confidentiality and proprietary information agreement with his/her respective employer within the Group Entities, in the form and substance attached hereto as Exhibit E-2 , as an integral part of his/her employment agreement with such employer, that shall include provisions relating to the assignment of inventions, duty of non-solicitation and non-competition after termination of employment agreement. | ||
6.21 | Adjustment for Dilutive Issuances . | |
If, after the Closing, the Company issues additional equity securities for a per share consideration (the Future Issuance Price ) less than the Purchase Price (as appropriately adjusted for stock splits, stock dividends and the like), then in such event, immediately prior to such issuance, each of the Sellers shall transfer such additional shares (on a post-split or post-stock dividend basis, if applicable) to Tiger in accordance with the following formula hereunder: | ||
Additional Shares = (X/Future Issuance Price) (X/Purchase Price)
X = amount of consideration received by such Seller for selling Shares to Tiger. |
||
6.22 | Tax Covenants. |
(a) | In the event that the Company is determined by counsel or accountants for the Purchaser to be a CFC with respect to the shares held by the Purchaser, the Company agrees (a) to use commercially reasonable efforts to avoid generating Subpart F Income (as defined in Section 952 of the Code) ( Subpart F Income ) and (b) to the extent permitted by law, to annually make dividend distributions to the Purchaser in an amount equal to 50% of any income deemed distributed to the Purchaser that would have been deemed distributed to the Purchaser pursuant to Section 951(a) of the Code had the Purchaser been a United States person as such term is defined in Section 7701(a)(30) of the Code (or such lesser amount determined by the Purchaser in its sole discretion). No later than 45 days following the end of each Company taxable year, the Company shall provide the following information to the Purchaser: (i) the Companys capitalization table as of the end of the last day of such taxable year and (ii) a report regarding the Companys status as a CFC. In addition, the Company shall provide the Purchaser with access to such other Company information as may be required by the Purchaser to determine the Companys status as a CFC and to determine whether the Purchaser or any of the Purchasers Partners is required to report its pro rata portion of the Companys Subpart F Income on its United States federal income tax return, or to allow the Purchaser or such Purchasers Partners to otherwise comply with applicable United States federal income tax laws. For purposes of this Section 6.21 , (i) the term Purchasers Partners shall mean each of the Purchasers shareholders, partners, members or other equity holders and any direct or indirect equity owners of such entities and (ii) the Company shall mean the Company and any of its subsidiaries. |
13
(b) | The Company shall engage a Big 4 accounting firm (i.e., PricewaterhouseCoopers, KPMG, Deloitte & Touche or Ernst & Young) to determine the Companys status as a PFIC on an annual basis and shall report such status to the Purchaser on or prior to February 15 of each calendar year and further provide a copy of the written certification from its accounting firm regarding such status. In addition, to ensure that the Purchasers Partners have sufficient information to make a Qualified Electing Fund election or file a Protective Statement pursuant to Treasury Regulation Section 1.1295-3, as amended (or any successor thereto), the Company shall provide annual financial information to the Purchaser in the form provided in the attached PFIC Exhibit in Exhibit I (or in such other form as may be required to reflect changes in applicable law) as soon as reasonably practicable following the end of each taxable year of the Company (but in no event later than 45 days following the end of each such taxable year), and shall provide the Purchaser with access to such other Company information as may be required for purposes of filing U.S. federal income tax returns in connection with such Qualified Electing Fund election or Protective Statement. In the event that an Purchasers Partner has made a Qualified Electing Fund election must include in its gross income for a particular taxable year its pro rata share of the Companys earnings and profits pursuant to Section 1293 of the Code, the Company agrees to make a dividend distribution to the Purchaser (no later than 45 days following the end of the Companys taxable year or, if later, 45 days after the Company is informed by the Purchaser that the Purchasers Partner has been required to recognize such an income inclusion) in an amount equal to 50% of the amount that would be included by the Purchaser if the Purchaser were a United States person as such term is defined in Section 7701(a)(30) of the Code and had the Purchaser made a valid and timely Qualified Electing Fund election which was applicable to such taxable year. | ||
(c) | The Company shall take such actions, including making an election to be treated as a corporation or refraining from making an election to be treated as a partnership, as may be required to ensure that at all times the Company is treated as corporation for United States federal income tax purposes. | ||
(d) | The Company shall make due inquiry with its tax advisors (and shall cooperate with the Purchasers tax advisors with respect to such inquiry) on at least an annual basis regarding whether the Purchasers or any Purchasers Partners direct or indirect interest in the Company is subject to the reporting requirements of either or both of Sections 6038 and 6038B of the Code (and the Company shall duly inform the Purchaser of the results of such determination), and in the event that the Purchasers or any Purchasers Partners direct or indirect interest in Company is determined by the Companys tax advisors or the Purchasers tax advisors to be subject to the reporting requirements of either or both of Sections 6038 and 6038B, the Company agrees, upon a request from the Purchaser, to provide such information as may be necessary to fulfill the Purchasers or the Purchasers Partners obligations thereunder. | ||
(e) | The Parties acknowledge that neither the Group Entities nor the Purchaser be |
14
responsible in any way for any taxes or any withholdings related to the transactions contemplated in this agreement. |
6.23 | Option for KTBs Investment . | |
Each of the Sellers, jointly and severally, grants an option to KTB to acquire such number of Shares set forth opposite such Sellers name on Schedule 1A and in the column of Number of Common Shares to be Sold to KTB, on a date no later than September 4, 2009, at the Purchase Price for an aggregate purchase price of no more than US$5,000,000. The obligations of KTB to exercise such option are subject to the fulfilment, of each of the following conditions, unless otherwise waived in writing by KTB: |
(a) | Opinion of Offshore Counsel. | ||
The Company and the Sellers shall have delivered to KTB from Conyers Dill & Pearman, the Cayman Islands legal counsel to the Company, a legal opinion, dated as of the Closing by Tiger, in a form and substance substantially in the form attached as Exhibit C to this Agreement. | |||
(b) | Opinion of PRC Counsel. | ||
KTB shall have received from PRC legal counsel of the Company a legal opinion, dated as of the Closing by Tiger, in a form and substance substantially in the form attached as Exhibit D to this Agreement. | |||
(c) | Delivery to KTB of all the documents as set forth in Section 1.2(a)(1) and 1.2(a)(2) hereof as applicable mutatis mutandis to KTB. | ||
The Existing Shareholders (as defined in the Assumption Agreement) of the Company hereby authorize, either by way of signing this Agreement or pursuant to Section 16.11 of the Shareholders Agreement, the Company, on behalf of itself and as agent for the Existing Shareholders of the Company, to enter into the Assumption Agreement with KTB in the form attached as Exhibit B-2 of this Agreement, when KTB exercises its option of investment provided hereunder. |
7. | CURE OF BREACHES; INDEMNITY. |
7.1 | In the event of: |
(a) | any breach or violation of, or inaccuracy or misrepresentation in, any representation or warranty made by the Warrantors or the Purchaser contained herein or any of the other Transaction Documents; and | ||
(b) | any breach or violation of any covenant or agreement contained herein or any of the other Transaction Documents attributable to the Warrantors or the Purchaser; | ||
(each of (a) and (b), a Breach ), then (i) if the Breach is on the part of the Warrantors, the Sellers shall, jointly and severally, cause the Company or cause the other Warrantors, as |
15
the case may be, to, cure such Breach (to the extent that such Breach is curable); and (ii) if the Breach is on the part of the Purchaser, the Purchaser shall cure such Breach (to the extent that such Breach in curable). |
7.2 | Each Seller and the Founder holding such Seller shall, severally and not jointly, indemnify and keep indemnified the Group Companies, the Purchaser and the Purchasers Affiliates, limited partners, members, stockholders, employees, agents and representatives (the Indemnitees ) at all times and hold the Indemnitees harmless against any and all losses, liabilities, damages, liens, claims, obligations, penalties, settlements, deficiencies, costs expenses, diminution in value and lost opportunities paid, suffered, sustained or incurred by the Indemnitees including without limitation reasonable advisors fees and other reasonable expenses of investigation, assessment, contesting of, any claim, settlement of any claim or any legal proceedings (each, an Indemnifiable Loss ), resulting from, or arising out of, or due to, directly or indirectly, (A) any claim that such Seller and/or Founder has failed to (x) properly make any tax filing or report the proceeds of the transactions contemplated by this Agreement in accordance with applicable law and/or (y) pay any applicable taxes related to the income or gain derived by such Seller and/or Founder in the transactions contemplated by this Agreement in accordance with applicable laws and regulations or (B) any claim that any Group Company and/or the Purchaser is responsible for any taxes or withholdings for the transactions contemplated by this Agreement. | |
7.3 | Notwithstanding any other provision contained herein, absent fraud, gross negligence or willful misconduct by any of the Warrantors, this Section 7 shall be the sole and exclusive remedy of the Indemnitees for any claim against the Warrantors for any Breach. |
8. | MISCELLANEOUS. |
8.1 | Survival of Warranties. | |
Unless otherwise set forth in this Agreement, the representations and warranties of the Warrantors contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchaser or the Sellers. | ||
8.2 | Confidentiality . |
(a) | Disclosure of Terms . The terms and conditions of this Agreement, any term sheet or memorandum of understanding entered into pursuant to the transactions contemplated hereby, all exhibits and schedules attached hereto and thereto, and the transactions contemplated hereby and thereby (collectively, the Transaction Terms ), including their existence, shall be considered confidential information and shall not be disclosed by any party hereto to any third party except as permitted in accordance with the provisions set forth below. | ||
(b) | Permitted Disclosures . Notwithstanding the foregoing, the Sellers and Company may disclose (i) the existence of the investment to its bona fide prospective |
16
Purchaser, employees, Directors, bankers, lenders, accountants, legal counsels and business partners, or to any person or entity to which disclosure is approved in writing by the Purchaser; and (ii) the transaction terms to its current shareholders, employees, Directors, bankers, lenders, accountants and legal counsels, in each case only where such persons or entities are under appropriate nondisclosure obligations substantially similar to those set forth in this Section 8.2 , or to any person or entity to which disclosure is approved in writing by the Purchaser. The Purchaser may disclose (x) the existence of the investment and the Transaction Terms to any Affiliate, partner, limited partner, former partner, potential partner or potential limited partner of the Purchaser or other related third parties and (y) the fact of the investment to the public, in each case as it deems appropriate in its sole discretion. Any Party hereto may also provide disclosure in order to comply with applicable Laws, as set forth in Section 8.2(c) below. |
(c) | Legally Compelled Disclosure . In the event that any Party is requested or becomes legally compelled (including without limitation, pursuant to any applicable tax, securities, or other Laws and regulations of any jurisdiction) to disclose the existence of this Agreement or content of any of the Transaction Terms, such party (the Disclosing Party ) shall provide the other parties with prompt written notice of that fact and shall consult with the other parties regarding such disclosure. At the request of another party, the Disclosing Party shall, to the extent reasonably possible and with the cooperation and reasonable efforts of the other parties, seek a protective order, confidential treatment or other appropriate remedy. In any event, the Disclosing Party shall furnish only that portion of the information that is legally required and shall exercise reasonable efforts to obtain reliable assurance that confidential treatment will be accorded such information. | ||
(d) | Other Exceptions . Notwithstanding any other provision of this Section 8.2 , the confidentiality obligations of the parties shall not apply to: (i) information which a restricted party learns from a third party having the right to make the disclosure, provided the restricted party complies with any restrictions imposed by the third party; (ii) information which is rightfully in the restricted partys possession prior to the time of disclosure by the protected party and not acquired by the restricted party under a confidentiality obligation; or (iii) information which enters the public domain without breach of confidentiality by the restricted party. | ||
(e) | Press Releases, Etc . No announcements regarding the Purchasers investment in the Company may be made by any party hereto in any press conference, professional or trade publication, marketing materials or otherwise to the public without the prior written consent of the Purchaser and the Company, provided , that any such announcement made by any partner, limited partner, bona fide potential partner or bona fide potential limited partner of the Purchaser shall not be subject to the consent of the Company or the Sellers. Further, the Company and the Sellers shall not use the Purchasers name and logo in any manner, context or format (including references or links to websites, press releases, etc,) without obtaining the approval from the Purchaser in writing. |
17
(f) | Other Information . The provisions of this Section 8.2 shall terminate and supersede the provisions of any separate nondisclosure agreement executed by any of the Parties with respect to the transactions contemplated hereby. |
8.3 | Transfer; Successors and Assigns . | |
The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Save as expressly provided in this Agreement, nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement. | ||
8.4 | Governing Law . | |
This Agreement shall be governed by and construed in accordance with the Law of the State of New York as to matters within the scope thereof, without regard to its principles of conflicts of laws. | ||
8.5 | Counterparts; Facsimile . | |
This Agreement may be executed and delivered by facsimile or other electronic signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. | ||
8.6 | Titles and Subtitles . | |
The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. | ||
8.7 | Notices . | |
All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been delivered by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after delivery by an internationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature pages, Schedule 1 or Schedule 2 , as the case may be, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 8.7 . | ||
8.8 | No Finders Fees . | |
Each Party represents that it neither is nor will be obligated for any finders fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company and the Sellers from any liability for any commission or |
18
compensation in the nature of a finders or brokers fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees, or representatives is responsible. The Company and the Sellers agree to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finders or brokers fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. | ||
8.9 | Fees and Expenses . | |
Each Seller shall each pay all of his or its own costs and expenses incurred in connection with the negotiation, execution, delivery and performance of this Agreement and other Transaction Documents and the transactions contemplated hereby and thereby. The Sellers shall pay all reasonable costs and expenses incurred or to be incurred by the Purchaser on a pro rata basis based on the relative number of Shares sold hereunder, including all reasonable costs and expenses in conducting due diligence investigations on the Group Entities and in preparing, negotiating and executing all documentation, including all reasonable fees and expenses of any outside legal counsel, as well as all costs and expenses related to the financial due diligence review of the Group Entities, up to a maximum aggregate amount of US$150,000 for Tiger and up to a maximum aggregate amount of RMB150,000 for KTB, which shall be deducted from the aggregate Purchase Price paid by Tiger and KTB respectively to each Seller at each Closing. | ||
8.10 | Attorneys Fees . | |
If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the Transaction Documents, the prevailing party shall be entitled to reasonable attorneys fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. | ||
8.11 | Amendments and Waivers . | |
Any term of this Agreement may be amended, terminated or waived only with the written consent of the Seller, the holders of a majority-in-interest among the Purchaser. Any amendment or waiver effected in accordance with this Section 8.11 shall be binding upon the Company, the Sellers, the Purchaser, and each transferee of the Shares and each future holder of all such securities. | ||
8.12 | Severability . | |
The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. | ||
8.13 | Delays or Omissions . | |
No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall |
19
impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. |
8.14 | Entire Agreement . | |
This Agreement (including the Schedules and Exhibits hereto), the Restated Articles and the other Transaction Documents constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled. | ||
8.15 | Dispute Resolution . |
(a) | Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall first be subject to resolution through consultation of the parties to such dispute, controversy or claim. Such consultation shall begin within seven (7) days after one Party hereto has delivered to the other Parties involved a written request for such consultation. If within thirty (30) days following the commencement of such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any Party with notice to the other Parties. | ||
(b) | The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the HKIAC ). There shall be three arbitrators. The complainant and the respondent to such dispute shall each select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the Parties shall not be limited in their selection to any prescribed list. The Chairman of the HKIAC shall select the third arbitrator, who shall be qualified to practice Law in New York. If either party to the arbitration does not appoint an arbitrator who has consented to participate within thirty (30) days after selection of the first arbitrator, the relevant appointment shall be made by the Chairman of the HKIAC. | ||
(c) | The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the HKIAC in effect at the time of the arbitration. However, if such rules are in conflict with the provisions of this Section 8.15 , including the provisions concerning the appointment of arbitrators, the provisions of this Section 8.15 shall prevail. |
20
(d) | The arbitrators shall decide any dispute submitted by the parties to the arbitration strictly in accordance with the substantive Law of the State of New York and shall not apply any other substantive law. | ||
(e) | Each Party hereto shall cooperate with any party to the dispute in making full disclosure of and providing complete access to all information and documents requested by such party in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on the Party receiving the request. | ||
(f) | The award of the arbitration tribunal shall be final and binding upon the disputing parties, and any party to the dispute may apply to a court of competent jurisdiction for enforcement of such award. | ||
(g) | Any party to the dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal. |
8.16 | No Commitment for Additional Financing . | |
The Company and the Sellers acknowledge and agree that the Purchaser has not made any representation, undertaking, commitment or agreement to provide or assist the Company in obtaining any financing, investment or other assistance, other than the purchase of the Shares as set forth herein and subject to the conditions set forth herein. In addition, the Company acknowledges and agrees that (i) no oral statements made by any Purchaser or its representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment, (ii) the Company shall not rely on any such statement by any Purchaser or its representatives and (iii) an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment may only be created by a written agreement, signed by such Purchaser and the Company, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement. Each Purchaser shall have the right, in it sole and absolute discretion, to refuse or decline to participate in any other financing of or investment in the Company, and shall have no obligation to assist or cooperate with the Company in obtaining any financing, investment or other assistance. | ||
8.17 | Rights Cumulative . | |
Each and all of the various rights, powers and remedies of a Party will be considered to be cumulative with and in addition to any other rights, powers and remedies which such Party may have at law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such Party. | ||
8.18 | No Waiver . | |
Failure to insist upon strict compliance with any of the terms, covenants, or conditions |
21
hereof will not be deemed a waiver of such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy power hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times. |
8.19 | No Presumption . | |
The Parties acknowledge that any applicable law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. If any claim is made by a Party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any Party or its counsel. | ||
8.20 | Third Party Beneficiaries . | |
Each of the Indemnitees shall be a third party beneficiary of this Agreement with the full ability to enforce Section 7 of this Agreement as if it were a Party hereto. | ||
8.21 | Termination of Agreement . |
(a) | This Agreement may be terminated before the Closing as follows: |
(1) | at the election of the Purchaser on or after October 31, 2009, if the Closing shall not have occurred on or before such date unless such date is extended by the mutual written consent of the Seller and the Purchaser, provided that: (i) the Purchaser are not in material default of any of their obligations hereunder, and (ii) the right to terminate this Agreement pursuant to this Section 8.22(a) shall not be available to the Purchaser if their breach of any provision of this Agreement has been the cause of, or resulted, directly or indirectly in, the failure of the Closing to be consummated by October 31, 2009; | ||
(2) | by mutual written consent of the Sellers and the Purchaser as evidenced in writing signed by each of the Sellers and the Purchaser; | ||
(3) | by the Purchaser in the event of any breach or violation of any representation or warranty, covenant or agreement contained herein or in any of the other Transaction Documents by any Warrantor that is not cured or curable within thirty (30) Business Days of written notice; | ||
(4) | by the Purchaser if any event, circumstance or change shall have occurred that, individually or in the aggregate with one or more other events, circumstances or changes, have had or reasonably could be expected to have a Material Adverse Effect on the Company or any other Group Entity; or | ||
(5) | by the Sellers jointly in the event of any breach or violation of any |
22
representation or warranty, covenant or agreement contained herein or in any of the other Transaction Documents by the Purchaser with respect to such Purchaser that is not cured or curable within thirty (30) Business Days of written notice. |
(b) | Effect of Termination. The date of termination of this Agreement pursuant to Section 8.21(a) hereof shall be referred to as Termination Date . In the event of termination by the Sellers and/or the Purchaser pursuant to Section 8.21(a) hereof, written notice thereof shall forthwith be given to the other Party and this Agreement shall terminate, and the purchase of the Shares hereunder shall be abandoned and rescinded, without further action by the Parties hereto. Each of the Parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to the Sellers or the Purchaser; provided that no such termination shall relieve any party hereto from liability for any breach of this Agreement. The provisions of this Section 8.21 , Section 7 , Section 8.1 , Section 8.2 , Section 8.9 and Section 8.15 , hereof shall survive any termination of this Agreement. |
8.22 | Cross-Guarantees . | |
Each of Zhang Bangxin, Cao Yundong, LIU Yachao and BAI Yunfeng shall unconditionally guarantees the performance of BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED respectively under this Agreement and vice versa, each of BRIGHT UNISON LIMITED, CENTRAL GLORY INVESTMENTS LIMITED, PERFECT WISDOM INTERNATIONAL LIMITED and EXCELLENT NEW LIMITED shall unconditionally guarantees the performance of Zhang Bangxin, Cao Yundong, LIU Yachao and BAI Yunfeng respectively under this Agreement. |
23
SELLERS
|
BRIGHT UNISON LIMITED | |
|
||
|
By: /s/ Bangxin Zhang | |
|
Name: ZHANG Bangxin ( ) | |
|
||
|
||
|
CENTRAL GLORY INVESTMENTS LIMITED | |
|
||
|
By: /s/ Yundong Cao | |
|
Name: CAO Yundong ( ) | |
|
||
|
||
|
PERFECT WISDOM INTERNATIONAL LIMITED | |
|
||
|
By: /s/ Yachao Liu | |
|
Name: LIU Yachao ( ) | |
|
||
|
||
|
EXCELLENT NEW LIMITED | |
|
||
|
By: /s/ Yunfeng Bai | |
|
Name: BAI Yunfeng ( ) |
FOUNDERS | ZHANG Bangxin ( ) | |||
|
||||
|
By: | /s/ Bangxin Zhang | ||
|
||||
Name: ZHANG Bangxin | ||||
|
||||
|
||||
CAO YUNDONG ( ) | ||||
|
||||
|
By: | /s/ Yundong Cao | ||
|
||||
Name: CAO Yundong | ||||
|
||||
|
||||
LIU Yachao ( ) | ||||
|
||||
|
By: | /s/ Yachao Liu | ||
|
||||
Name: LIU Yachao | ||||
|
||||
|
||||
BAI YUNFENG ( ) | ||||
|
||||
|
By: | /s/ Yunfeng Bai | ||
|
||||
Name: BAI Yunfeng |
COMPANY: | XUEERSI INTERNATIONAL EDUCATION GROUP | |||
|
||||
|
By: | /s/ Bangxin Zhang | ||
|
||||
Name: ZHANG Bangxin | ||||
Title: Director | ||||
|
||||
|
||||
HK COMPANY: | TAL GROUP LIMITED | |||
|
||||
|
By: | /s/ Bangxin Zhang | ||
|
||||
Name: ZHANG Bangxin | ||||
Title: Director | ||||
|
||||
|
||||
WFOE: | TAL EDUCATION TECHNOLOGY (BEIJING) CO., LTD. | |||
|
||||
|
By: | /s/ Bangxin Zhang | ||
|
||||
Name: ZHANG Bangxin | ||||
Title: Legal Representative | ||||
|
||||
Affix Seal: |
DOMESTIC COMPANIES | BEIJING XUEERSI EDUCATION TECHNOLOGY CO., LTD. | |||
|
||||
|
By: | /s/ Yachao Liu | ||
|
||||
Name: LIU Yachao | ||||
Title: Legal Representative | ||||
|
||||
Affix Seal: | ||||
|
||||
|
||||
BEIJING XUEERSI NETWORK TECHNOLOGY CO., LTD. | ||||
|
||||
|
By: | /s/ Yachao Liu | ||
|
||||
Name: LIU Yachao | ||||
Title: Legal Representative | ||||
|
||||
Affix Seal: |
PURCHASER: | Tiger Global Five China Holdings | |||
|
||||
|
By: | /s/ Authorized Signatory | ||
|
||||
Name: | ||||
Title: |
PURCHASER: | KTB CHINA OPTIMUM FUND | |||
|
||||
|
By: | /s/ Authorized Signatory | ||
|
||||
Name: | ||||
Title: Legal Representative |
Number of
Number of
Number of Common
Common Shares
Consideration
Common
Consideration
Shares Held Prior to
to be Sold to
Paid by Tiger
Shares to be
Paid by KTB
Name
Closing
Tiger
(US$)
Sold to KTB
(US$)
67,800,000
5,000,000
8,000,000
250,000
400,000
31,200,000
10,087,500
16,140,000
812,500
1,300,000
12,000,000
3,875,000
6,200,000
812,500
1,300,000
9,000,000
2,912,500
4,660,000
1,250,000
2,000,000
120,000,000
21,875,000
35,000,000
3,125,000
5,000,000
Purchaser | Number of Shares | Consideration | ||||
Tiger Global Five China Holdings
|
21,875,000 | US$35,000,000 | ||||
|
||||||
[KTB CHINA OPTIMUM FUND]
|
3,125,000 | US$5,000,000 | ||||
Total
|
25,000,000 | US$40,000,000 |
SCHEDULE
1B
1
Name | Identity Card | |
ZHANG Bangxin (
)
|
3211 8219 8010 0129 13 | |
|
||
CAO Yundong (
)
|
3728 3119 7910 2056 18 | |
|
||
LIU Yachao (
)
|
2111 0319 8110 1521 38 | |
|
||
BAI Yunfeng (
)
|
3605 2119 8109 2400 73 |
SCHEDULE
1C
1
Definitions | Full Name of the Schools | |||
1.
|
Beijing Haidian School | Beijing Haidian Xueersi Training School ( ) | ||
|
||||
2.
|
Beijing Dongcheng School | Beijing Dongcheng Xueersi Training School ( ) | ||
|
||||
3.
|
Beijing Xicheng School | Beijing Xicheng Xueersi Training School ( ) | ||
|
||||
4.
|
Shanghai Changning School | Shanghai Changning Lejiale Training School ( ) | ||
|
||||
5.
|
Shanghai Minhang School | Shanghai Minhang Lejiale Training School ( ) | ||
|
||||
6.
|
Wuhan Jianghan School |
Wuhan Jianghan Small New Star English
Training School
( ) |
||
|
||||
7.
|
Hubei Jianli School | Hubei Jianli Harvard English School ( ) | ||
|
||||
8.
|
Hubei Qianjiang School |
Hubei Qianjiang Small Harvard English
Training School
( ) |
Definitions | Full Name of Subsidiary Companies | |||
1.
|
Beijing Zhikang | Beijing Zhikang Cultural Co., Ltd. ( ) | ||
|
||||
2.
|
Shanghai Lehai |
Shanghai Lehai Information Technology Co., Ltd.
( ) |
Definitions | Full Name of Company Branches | |||
1.
|
Xueersi Education No. 2 Branch |
No. 2 Branch of Xueersi Education Technology
Co., Ltd.
( ) |
||
|
||||
2.
|
Xueersi Education No. 3 Branch |
No. 3 Branch of Xueersi
Education Technology Co., Ltd.
( ) |
||
|
||||
3.
|
Xueersi Education Haidian No. 4 Branch |
Haidian No. 4 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
SCHEDULE 2A
1
Definitions | Full Name of Company Branches | |||
4.
|
Xueersi Education No. 5 Branch |
No. 5 Branch of Xueersi Education Technology
Co., Ltd.
( ) |
||
|
||||
5.
|
Xueersi Education Haidian No. 6 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
6.
|
Xueersi Education Haidian No. 7 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
7.
|
Xueersi Education Haidian No. 8 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
8.
|
Xueersi Education Haidian No. 9 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
9.
|
Xueersi Education Haidian No. 10 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
10.
|
Xueersi Education Haidian No. 11 Branch |
Haidian No. 7 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
11.
|
Xueersi Education Chaoyang No. 1 Branch |
Chaoyang No. 1 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
12.
|
Xueersi Education Chaoyang No. 2 Branch |
Chaoyang No. 2 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
13.
|
Xueersi Education Chaoyang No. 3 Branch |
Chaoyang No. 2 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
14.
|
Xueersi Education Chaoyang No. 4 Branch |
Chaoyang No. 4 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
15.
|
Xueersi Education Chaoyang No. 5 Branch |
Chaoyang No. 5 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
16.
|
Xueersi Education Chaoyang No. 6 Branch |
Chaoyang No. 5 Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
17.
|
Xueersi Education Shijingshan Branch |
Shijingshan Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
18.
|
Xueersi Education Fangzhuang Branch |
Fangzhuang Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
19.
|
Xueersi Education Dengshikou Branch |
Fangzhuang Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
20.
|
Xueersi Education Dongcheng Branch |
Dongcheng Branch of Xueersi Education Technology
Co., Ltd.
( ) |
SCHEDULE 2A
2
Definitions | Full Name of Company Branches | |||
21.
|
Xueersi Education Pinganli
Branch |
Pinganli Branch of Xueersi Education Technology
Co., Ltd.
( ) |
||
|
||||
22.
|
Xueersi Education
Fuchengmen Branch |
Fuchengmen Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
23.
|
Xueersi Education
Zhichunlu Branch |
Fuchengmen Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
24.
|
Xueersi Education Fengtai No. Branch |
Fuchengmen Branch of Xueersi Education
Technology Co., Ltd.
( ) |
||
|
||||
25.
|
Xueersi Education Tianjin
Branch |
Tianjin Branch of Xueersi Education Technology
Co., Ltd.
( ) |
SCHEDULE 2A
3
Name:
[
]
Date : [ ] |
SCHEDULE 2B
1
1. | Affiliate means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any partner, officer, director, member or employee of such Person and any venture capital fund now or hereafter existing that is controlled by or under common control with one or more general partners or managing members of, or shares the same management company with, such Person. | |
2. | Agreement has the meaning ascribed to it in the Preamble to this Agreement. | |
3. | Beneficial Owner has the meaning set forth in Section 10(c) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
4. | Breach has the meaning set forth in Section 7.1 . | |
5. | Board of Directors means the Companys Board of Directors. | |
6. | Business Day means any day, other than a Saturday, Sunday or other day on which the commercial banks in Hong Kong or Beijing are authorized or required to be closed for the conduct of regular banking business. | |
7. | Business Plan has the meaning set forth in Section 29 of Schedule 4 . | |
8. | Change in Control has the meaning set forth in Section 10(c) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
9. | Commitment Period has the meaning ascribed to it in Section 1 of Exhibit E . | |
10. | Common Share means Common Share of par value US$0.001 in the capital of the Company. | |
11. | Company means Xueersi International Education Group, an exempted company duly incorporated with limited liability and validly existing under the Laws of the Cayman Islands. | |
12. | Company Branches mean those branches indirectly controlled by the Company, as listed on Schedule 2A . | |
13. | Company Intellectual Property means all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, trade secrets, licenses, domain names, mask works, information and proprietary rights and processes as are necessary to the conduct of the Companys business as now conducted and as presently proposed to be conducted. | |
14. | Company Law means the Companies Law (as amended) of the Cayman Islands. |
SCHEDULE 3
1
15. | Confidential Information has the meaning ascribed to it in Section 8 of Exhibit E. | |
16. | Confidential Information Agreements has the meaning ascribed to it in Section 21 of Schedule 4 . | |
17. | Contract means a legally binding contract, agreement, understanding, indenture, note, bond, loan, instrument, lease, mortgage, franchise or license. | |
18. | Control or control of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, which power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person; the terms Controlling and Controlled (and their lower-case counterparts) have meanings correlative to the foregoing. | |
19. | Convertible Securities means, with respect to any specified Person, securities convertible or exchangeable into any shares of any class of such specified Person, however described and whether voting or non-voting. | |
20. | Director or Directors means a member or the members of the Board of Directors. | |
21. | Disclosing Party has the meaning ascribed to it in Section 8.2(c) . | |
22. | Disclosure Schedule has the meaning ascribed to it in Section 4 . | |
23. | Domestic Companies means Beijing Xueersi Education Technology Co., Ltd. ( ) ( Xueersi Education ) and Beijing Xueersi Network Technology Co., Ltd. ( ), companies organized and existing under the laws of the PRC. | |
24. | Employee Benefit Plans has the meaning ascribed to it in Section 16.7 of Schedule 4 . | |
25. | Employment Agreement has the meaning ascribed to it in Section 2.16 . | |
26. | Establishment Documents has the meaning ascribed to it in Section 22.2 of Schedule 4 . | |
27. | Exchange Act has the meaning ascribed it in Section 8(a) of Exhibit G, for the purpose of Director Indemnification Letter only. | |
28. | Exclusivity Period has the meaning ascribed to it in Section 6.3. | |
29. | Execution Date shall mean the date of this Agreement. | |
30. | Financial Statements shall mean the consolidated balance sheet, income statement and statement of cash flows, prepared in accordance with the PRC GAAP and applied on a |
SCHEDULE 3
2
consistent basis throughout the periods indicated. |
31. | fines has the meaning set forth in Section 10(b) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
32. | Foreigner Employment Certificate shall mean the certificate to be applied with and issued by the human resource and social security department, only by virtue of which, the foreigners is permitted to work with the entities in the PRC. | |
33. | Founders or Founder includes ZHANG Bangxin (a PRC citizen with ID Card No. 3211 8219 8010 0129 13), CAO Yundong (a PRC citizen with ID Card No. 3728 3119 7910 2056 18), LIU Yachao (a PRC citizen with ID Card No. 2111 0319 8110 1521 38) and BAI Yunfeng (a PRC citizen with ID Card No. 3605 2119 8109 2400 73), each a Founder . | |
34. | Future Issuance Price has the meaning ascribed to it in Section 6.20 . | |
35. | Fund has the meaning ascribed to it in the preamble of Exhibit G , for the purpose of Director Indemnification Letter only. | |
36. | Governmental Authority means the government of any nation, province, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, regulation or compliance, and any corporation or other entity owned or controlled, through share or capital ownership or otherwise, by any of the foregoing. | |
37. | Group Entities means the Company, the WFOE, the Domestic Company, and any other direct or indirect Subsidiary of any Group Entity collectively, and Group Entity means any one of them. | |
38. | GC Product or Service has the meaning ascribed to it in Section 8.7 of Schedule 4 . | |
39. | Hong Kong means the Hong Kong Special Administrative Region of the PRC. | |
40. | HKIAC has the meaning ascribed to it in Section 8.15(b) . | |
41. | HK Company means TAL Group Limited incorporated and existing under the laws of Hong Kong. | |
42. | Indemnifiable Loss has the meaning set forth in Section 7.2 . | |
43. | Indemnitees has the meaning set forth in Section 7.2 . | |
44. | Independent Legal Counsel has the meaning set forth in Section 10(d) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
45. | Intellectual Property means all patents, patent applications, trademarks, service marks, trade names, copyrights, trade secrets, processes, compositions of matter, formulas, |
SCHEDULE 3
3
designs, inventions, proprietary rights, know-how and any other confidential or proprietary information owned or otherwise used by the Group Entities. |
46. | IPO means an initial public offering by the Company of its Common Shares on a public stock exchange of the United States that has been registered under the Securities Act, or in a similar public offering of Common Shares in a jurisdiction and on a recognized securities exchange outside of the United States, provided such an initial public offering in terms of price, offering proceeds and regulatory approval is reasonably equivalent to the aforesaid public offering in the United States. | |
47. | Key Persons means those individuals listed on Exhibit E-3 of this Agreement. | |
48. | Knowledge including the phrase to the Warrantors knowledge shall mean the actual knowledge after reasonable investigation of the Sellers. | |
49. | KTB means KTB CHINA OPTIMUM FUND. | |
50. | Law means any constitutional provision, statute or other law, rule, regulation, official policy or interpretation of any Governmental Authority and any injunction, judgment, order, ruling, assessment or writ issued by any Governmental Authority. | |
51. | Letter of Commitment shall mean the Letter of Commitment and Non-competition (Sellers) as provided under Exhibit E . | |
52. | Lien means any mortgage, pledge, claim, security interest, encumbrance, title defect, lien, charge or other restriction or limitation. | |
53. | Material Adverse Effect means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, prospects or results of operations of the Group Entities, taken as a whole. | |
54. | Material Agreements has the meaning ascribed to such term in Section 10.1 of Schedule 4 . | |
55. | New Concept English means an English teaching textbook and audio material published by Foreign Language Teaching and Research Press and Longman Press. | |
56. | not opposed to the best interests of the Company has the meaning set forth in Section 10(b) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
57. | Order means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Authority. | |
58. | OFAC has the meaning ascribed to it in Section 18.2(a) of Schedule 4 . | |
59. | OFAC Sanctions has the meaning ascribed to it in Section 18.2(a) of Schedule 4 . | |
60. | OFAC Sanctioned Person has the meaning ascribed to such term is Section 18.2(b ) of |
SCHEDULE 3
4
Schedule 4 . |
61. | other enterprise has the meaning set forth in the Section 10(b) of the Exhibit G , for the purpose of Director Indemnification Letter. | |
62. | Party and Parties has the meaning set forth in the Preamble hereof. | |
63. | Period of Non-competition has the meaning ascribed to such term in Section 4 of Exhibit E . | |
64. | Permitted Liens means (i) Liens for taxes not yet delinquent or the validity of which are being contested and (ii) Liens incurred in the ordinary course of business, which (x) do not in the aggregate materially detract from the value of the assets that are subject to such Liens and (y) were not incurred in connection with the borrowing of money. | |
65. | Person means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity. | |
66. | PFIC has the meaning ascribed to such term in Section 17.3 of Schedule 4 . | |
67. | PRC means the Peoples Republic of China, excluding Hong Kong, the Macau Special Administrative Region and Taiwan. | |
68. | PRC GAAP means the generally accepted accounting principles applicable in the PRC. | |
69. | Purchase Price has the meaning ascribed to it in Section 1.1 . | |
70. | Projections has the meaning ascribed to it in Section 28 of Schedule 4 . | |
71. | Public Official means an employee of a Governmental Authority, a member of a political party, a political candidate, an officer of a public international organization, or an officer or employee of a state-owned enterprise, including a PRC state-owned enterprise. | |
72. | Public Software has the meaning ascribed to it in Section 8.7 of Schedule 4 . | |
73. | Purchaser has the meaning ascribed to it in Preamble hereof. | |
74. | Related Party has the meaning ascribed to it in Section 11.4 of Schedule 4 . | |
75. | Related Party Transaction means any transaction between any Group Entity on the one hand, and any Founder, or any Affiliate of any Founder on the other hand, other than transactions arising in the ordinary course of an employer/employee relationship. | |
76. | Representative has the meaning set forth in Section (1) of Exhibit H-2 , for the purpose of Director Indemnification Letter only. | |
77. | Reserve or Reservation has the meaning ascribed to it in Section 4 of Schedule 4 . |
SCHEDULE 3
5
78. | Restated Articles has the meaning ascribed to it in Section 2.6 . | |
79. | Restricted Securities has the meaning ascribed to it in Section 5 of Schedule 6 . | |
80. | Reviewing Party has the meaning set forth in Section 10(e) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
81. | RMB means the Renminbi, the lawful currency of the PRC. | |
82. | Schools means those education and training schools indirectly controlled by the Company, as listed on Schedule 2A . | |
83. | SDN List has the meaning ascribed to such term is Section 18.2(b ) of Schedule 4 . | |
84. | SEC has the meaning ascribed to such term in Section 7 of Schedule 6 . | |
85. | Secretary has the meaning ascribed to such term is Section 18.2(a ) of Schedule 4. | |
86. | Securities Act means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (or comparable Laws in jurisdictions other than the United States). | |
87. | Sellers and Sellers has the meaning ascribed to such terms in the Preamble. | |
88. | Series A Preferred Shares means the series A preferred shares, par value US$0.001 each of the Company, issued pursuant to the Series A Purchase Agreement. | |
89. | Series A Purchase Agreement means the share purchase agreement entered into by and among the Company, KTB and certain other parties thereto on February 12, 2009 for the issuance of series A preferred shares in the Company. | |
90. | serving at the request of the Company has meaning as set forth in Section 10(b) of Exhibit G , for the purpose of Director Indemnification Letter only. | |
91. | Shares has the meaning ascribed to it in Recitals. | |
92. | Shareholders means a holder of Shares from time to time or its lawful successor. | |
93. | Shareholders Agreement means the agreement proposed to be entered into among the Company, the Sellers, the Purchaser and certain other parties thereto, in the form of Exhibit C attached to this Agreement. | |
94. | Share Purchase Agreement the agreement proposed to be entered into among the Company, the Sellers, the Purchaser and certain other parties thereto concerning the purchase of certain Common Shares of the Company by the Purchaser from the Sellers. | |
95. | Share Plan has the meaning ascribed to it in Section 6.2(a) . Seller and Sellers shall mean each of the Persons listed in Schedule 1A . |
SCHEDULE 3
6
96. | Statement Date has the meaning ascribed to it in Section 14.1 of Schedule 4 . | |
97. | Subsidiary or subsidiary means, as of the relevant date of determination, with respect to any Person (the subject entity), (i) any Person (x) more than 50% of whose shares or other interests entitled to vote in the election of directors or (y) more than a 50% interest in the profits or capital of such Person are owned or controlled directly or indirectly by the subject entity or through one (1) or more Subsidiaries of the subject entity, (ii) any Person whose assets, or portions thereof, are consolidated with the net earnings of the subject entity and are recorded on the books of the subject entity for financial reporting purposes in accordance with International Financial Reporting Standards or U.S. GAAP, or (iii) any Person with respect to which the subject entity has the power to otherwise direct the business and policies of that entity directly or indirectly through another subsidiary. For the avoidance of doubt, the Subsidiaries of the Company shall include the Group Entities. | |
98. | Subsidiary Companies mean those companies indirectly controlled by the Company, as listed on Schedule 2A . | |
99. | Tiger means Tiger Global Five China Holdings, a company organized under the laws of Mauritius, and its Affiliates or any of its (or their) successor(s). | |
100. | Training Centres means the teaching centres operated by the Schools that are engaging in education and training activities in the PRC. | |
101. | Termination Date has the meaning ascribed to it Section 8.21(b) . | |
102. | Transaction Documents means this Agreement, the Shareholders Agreement and any other agreements, instruments or documents entered into in connection with this Agreement. | |
103. | Transaction Terms has the meaning ascribed to it in Section 8.2(a) . | |
104. | United States Person has the meaning ascribed to such term is Section 18.2(c ) of Schedule 4 . | |
105. | Unrepresented Party has the meaning set forth in Section (1) of Exhibit H-2 , for the purpose of Management Rights Letter only. | |
106. | US$ means the United States dollar, the lawful currency of the United States of America. | |
107. | Warrantors means each of the Founders and the Sellers, the Company, the HK Company, the WFOE, each of the Domestic Companies, and Warrantor means any one of them. | |
108. | WFOE means TAL Education Technology (Beijing) Co., Ltd. ( ), a wholly foreign-owned enterprise established and existing under the laws of the PRC. | |
109. | Xueersi Education means Beijing Xueersi Education Technology Co., Ltd. ( ), a company established and existing under the laws of the PRC. |
SCHEDULE 3
7
110. | Xueersi Technology means Beijing Xueersi Education Technology Co., Ltd. ( ), a company established and existing under the laws of the PRC. |
SCHEDULE 3
8
1. | Organization, Good Standing, Corporate Power and Qualification . |
Each Group Entity is a corporation duly organized, validly existing and in good standing under the laws of their jurisdiction of incorporation and has all requisite corporate power and authority to carry on its business as presently conducted and as proposed to be conducted. Each Group Entity is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect. |
2. | Capitalization of the Company . |
The authorized capital of the Company consists, immediately prior to the Closing, of: | ||
2.1 | 195,000,000 Common Shares, of which 120,000,000 shares are issued and outstanding, immediately prior to the Closing. All of the outstanding Common Shares have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable securities laws. | |
2.2 | 5,000,000 Series A Preferred Shares, of which 5,000,000 shares have been designated Series A Preferred Shares, all of which have been issued and outstanding immediately prior to the Closing. The rights, privileges and preferences of the Series A Preferred Shares are as stated in the Restated Articles and as provided by the Company Law. | |
2.3 | The Company has not reserved any Common Shares, any class of preferred shares or equity securities of any kind for issuance to officers, directors, employees and consultants of the Company under any equity incentive plan, stock option plan or other similar plan. | |
2.4 | Schedule 7 sets forth the capitalization of the Company immediately following the Closing including the number of shares of the following: (i) issued and outstanding Common Shares, including, with respect to restricted Common Shares, vesting schedule and repurchase price; (ii) issued and granted stock options; (iii) stock options not yet issued but reserved for issuance, including vesting schedule and exercise price; (iv) each Series A Preferred Shares; and (v) warrants or stock purchase rights, if any. Except for (A) the conversion privileges of the Series A Preferred Shares issued under the Series A Purchase Agreement dated February 12, 2009, (B) the rights provided in the Shareholders Agreement, and (C) the rights described in Section 6.6 of the Agreement, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any Common Share or Series A Preferred Share, or any securities convertible into or exchangeable for Common Share or Series A Preferred Share. The Companys issued and outstanding Common Shares held by the Sellers and all the |
0
Companys underlying outstanding options are subject to (i) a right of first refusal in favor of the Company upon any proposed transfer (other than transfers for estate planning purposes); and (ii) a lock-up or market standoff agreement of not less than 180 days following the Companys IPO pursuant to a registration statement filed with the SEC under the Securities Act. | ||
2.5 | The Company is the sole legal and beneficial owner of one hundred percent (100%) of shares of the HK Company. | |
2.6 | The HK Company is the sole legal and beneficial owner of one hundred percent (100%) of the equity of the WFOE. | |
2.7 | The Sellers are the sole legal and beneficial owner(s) of the Common Shares of the Company. | |
2.8 | Section 2.7 of the Disclosure Schedule sets forth the capitalization and equity holders of the Domestic Companies, including all issued and outstanding equity capital of the Domestic Companies. There are no outstanding options, warrants, rights (including conversion or, preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire any equity interest or share capital, or any securities convertible into or exchangeable for an equity interest or share capital, of the Domestic Companies. |
3. | Subsidiaries . |
Except as set forth in Section 3 of the Disclosure Schedule , the Company and each Group Entity do not currently own or control, directly or indirectly, any interest in any other company, corporation, partnership, trust, joint venture, association, or other business entity. Neither the Company nor any Group Entity is a participant in any joint venture, partnership or similar arrangement. |
4. | Authorization . |
All corporate action required to be taken by the relevant Group Entitys board of directors and shareholders in order to authorize each respective Group Entity to enter into the Transaction Documents to which such Group Entity is a party, and to issue the Shares at the Closing, has been taken or will be taken prior to the Closing. All action on the part of the officers of the relevant Group Entity necessary for the execution and delivery of the Transaction Documents, the performance of all obligations of such Group Entity under the Transaction Documents to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. All action on the part of the officers of the relevant Group Entity necessary for the performance of all obligations of such Group Entity under the Transaction Documents to be performed as of the Closing has been taken or will be taken prior to the Closing. The Transaction Documents, when executed and delivered by the relevant Group Entity, shall constitute valid and legally binding obligations of the relevant Group Entity, enforceable against such Group Entity in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general |
SCHEDULE 4
1
application relating to or affecting the enforcement of creditors rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained in the Shareholders Agreement and the Indemnification Agreement may be limited by applicable securities laws. The sale of the Shares or is not subject to any preemptive rights or rights of first refusal, or if any such preemptive rights or rights of first refusal exist, waiver of such rights has been obtained from the holders thereof. For the purpose only of this Agreement, reserve , reservation or similar words with respect to a specified number of Common Shares or Series A Preferred Shares of the Company shall mean that the Company shall, and the Board of Directors of the Company shall procure that the Company shall, refrain from issuing such number of shares so that such number of shares will remain in the authorized but unissued share capital of the Company until the conversion rights of the holders of any Convertible Securities exercisable for such shares are exercised in accordance with the Restated Articles or otherwise. |
5. | Title to Shares . |
5.1 | Except for the restrictions on transfer contained in the Agreement and listed on Section 12.5(3) and Section 12.5(4) in the Shareholders Agreement, all of the Common Shares owned and held by each Seller and listed opposite such Sellers name on Schedule 1 hereto have been duly authorized, are validly issued and outstanding, are fully paid non-assessable, and are owned by such Sellers, free and clear of any lien, claim, restriction upon transfer (other than pursuant to applicable securities laws), option, charge, security interest or other encumbrance. | |
5.2 | Upon delivery by each Seller or the Company of the certificates representing the Common Shares owned and held by such Sellers and listed opposite such Sellers name on Schedule 1 hereto pursuant to this Agreement, and assuming the Purchaser acquires such Shares without knowledge of any adverse claim thereto, the Purchaser will acquire good valid title to the Shares, free and clear of any Lien. | |
5.3 | The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, the Shareholders Agreement, applicable securities laws and liens or encumbrances created by or imposed by the Purchaser. Subject in part to the accuracy of the representations of the Purchaser in Schedule 6 of this Agreement, the Shares will be issued in compliance with all applicable securities laws. | |
5.4 | All presently outstanding Common Shares of the Company were duly and validly issued, fully paid and non-assessable, and are free and clear of any liens and free of restrictions on transfer (except for any restrictions on transfer under applicable securities laws) and have been issued in compliance in all material respects with the requirements of all applicable securities laws and regulations, including, to the extent applicable, the Securities Act. |
6. | Governmental Consents and Filings . |
SCHEDULE 4
2
No consent, approval, order or authorization of or registration, qualification, designation, declaration or filing with, any Governmental Authority is required on the part of the Company is required in connection with the valid execution, delivery and consummation of the transactions contemplated by this Agreement, Shareholders Agreement or the offer or sale of the Shares. |
7. | Litigation . |
Save as set out in the Section 7 of the Disclosure Schedule , there is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or to the Warrantors knowledge, currently threatened (i) against any Group Entity or any officer, director or employee of any Group Entity that would either individually or in aggregate, reasonably be expected to have a Material Adverse Effect; or (ii) to the Warrantors knowledge, that questions the validity of the Transaction Documents or the right of any Group Entity to enter into them, or to consummate the transactions contemplated by the Transaction Documents. None of the Group Entities, its officers or directors, is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which would either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no action, suit, proceeding or investigation by any Group Entity pending or which any Group Entity intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Warrantors) involving the prior employment of any of the Group Entitys employees, their services provided in connection with Group Entitys business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. |
8. | Intellectual Property . |
8.1 | Each Group Entity owns or possesses sufficient legal rights to (i) all trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and proprietary rights and processes and (ii) to the Warrantors knowledge, all patents and patent rights, as are necessary to the conduct of such Group Entitys business as now conducted and as presently proposed to be conducted, without any known conflict with, or infringement of, the rights of others. Section 8.1 of the Disclosure Schedule contains a complete and accurate list of all Intellectual Property owned, licensed to or used by each Group Entity, whether registered or not, and a complete and accurate list of all licenses granted by such Group Entity to any third party with respect to any Intellectual Property. No product or service marketed or sold (or proposed to be marketed or sold) by any Group Entity violates or will violate any license or infringe any intellectual property rights of any other party. |
8.2 | No Group Entity has received any communications alleging that any Group Entity has violated or, by conducting its business, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets or other proprietary rights or processes of any other person or entity. Except as set forth in Section 8.2.1 of the Disclosure Schedule , each Group Entity has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic |
SCHEDULE 4
3
devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with such Group Entitys business. To the Warrantors knowledge, it will not be necessary to use any inventions of any of its employees (or persons it currently intends to hire) made prior to their employment by a Group Entity. Each employee has assigned to the Group Entities all intellectual property rights he or she owns that are related to the Group Entities business as now conducted. Section 8.2.2 of the Disclosure Schedule lists all patents, patent applications, registered trademarks, trademark applications, registered service marks, service mark applications, registered copyrights and domain names of each Group Entity. | ||
8.3 | Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the foregoing, nor is any Group Entity bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity. | |
8.4 | No proceedings or claims, in which any Group Entity alleges that any person is infringing upon, or otherwise violating, its Intellectual Property rights are pending, and none has been served, instituted or asserted by any Group Entity. | |
8.5 | None of the employees of any Group Entity or the Sellers is obligated under any Contract (including a Contract of employment), or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his or her best efforts to promote the interests of the Group Entities, or that would conflict with the business of any Group Entity as presently conducted. To the knowledge of the Warrantors, it will not be necessary to utilize in the course of any Group Entitys business operations any inventions of any of the employees of any Group Entity made prior to their employment by the such Group Entity, except for inventions that have been validly and properly assigned or licensed to such Group Entity as of the date hereof. | |
8.6 | Each Group Entity has taken all security measures that in the judgment of such Person are commercially prudent in order to protect the secrecy, confidentiality, and value of its material Intellectual Property. | |
8.7 | To the best knowledge of the Warrantors, no Public Software (as defined below) forms substantial part of any product or service provided by any Group Entity ( GC Product or Service ), and no Public Software was or is used in connection with the development of any GC Product or Service or is incorporated into, in substantial part, or has been distributed with, in substantial part, any GC Product or Service. As used in this Section 8.7, Public Software means any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software (as defined by the Free Software Foundation), open source software (e.g., Linux or software distributed under any license approved by the Open Source Initiative as set forth www.opensource.org) or similar licensing or distribution models which require the distribution or making available of source code as well as object code of the software to licensees without charge (except for |
SCHEDULE 4
4
the cost of the medium) and (b) the right of the licensee to modify the software and redistribute both the modified and unmodified versions of the software, including software licensed or distributed under any of the following licenses: (i) GNUs General Public License (GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL); (iii) the Mozilla Public License; (iv) the Netscape Public License; (v) the BSD License; or (vi) the Apache License. |
9. | Compliance with Other Instruments . |
9.1 | The Group Entities and the Sellers are not in violation or default (i) of any provisions of its Memorandum of Association (if any), Articles of Association or any other applicable constitutional document, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule, or (v) of any provision of statute, rule or regulation applicable to such Group Entity, the violation of which would either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated by the Transaction Documents will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of any Group Entity or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to any Group Entity, which would either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. | |
9.2 | Penalties and Fines . | |
Except as disclosed in Section 9.2 of the Disclosure Schedule , there are no penalties and fines of whatsoever nature that has ever been imposed on the any of the Group Entity. |
10. | Agreements; Actions . |
10.1 | Save for the agreements set out in Section 10.1 of the Disclosure Schedule (the Material Agreements ) and the Transaction Documents, there are no other agreements, understandings, instruments, contracts or proposed transactions to which any Group Entity is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, any Group Entity in excess of US$100,000 per annum or in excess of US$100,000 in the aggregate, (ii) the transfer or license of any patent, copyright, trade secret or other proprietary right to or from any Group Entity, other than from or to another Group Entity or from a Founder to a Group Entity, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other person or affect any Group Entitys exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by any Group Entity with respect to infringements of proprietary rights. All the Material Agreements are valid, binding and enforceable obligations of the parties thereto and the terms thereof have been complied with by the |
SCHEDULE 4
5
relevant Group Entity, and to the knowledge of the Warrantors, by all the other parties thereto. There are to the knowledge of the Warrantors, no circumstances likely to give rise to any material breach of such terms, no grounds for rescission, avoidance or repudiation of any of the Material Agreements which would have a Material Adverse Effect and no notice of termination or of intention to terminate has been received in respect of any Material Agreement. | ||
10.2 | Save as set out in Section 10.2 of the Disclosure Schedule , the Company has not declared or paid any dividends, or authorized or made any distribution upon or with respect to any class of its share capital, and no Group Entity has (i) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of US$100,000 or in excess of US$100,000 in the aggregate, (ii) made any loans or advances to any person, other than ordinary advances for travel expenses and trade receivables in the ordinary course of business, or (iii) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business or otherwise envisaged in this Agreement. For the purposes of Sections 10.1 and 10.2 of this Schedule 4 all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection. | |
10.3 | No Group Entity is a guarantor or indemnitor of any indebtedness of any other person, firm or corporation that is not a Group Entity. | |
10.4 | Save as set out in Section 10.4 of the Disclosure Schedule or in connection with this Agreement and the other Transaction Documents, no Group Entity has engaged in the past three (3) months in any discussion with any representative of any corporation, partnership, trust, joint venture, limited liability company, association or other entity, or any individual, regarding (i) a sale of all or substantially all of such Group Entitys assets, or (ii) any merger, consolidation or other business combination transaction of such Group Entity with or into another corporation, entity or person. |
11. | Conflict of Interest and Related Party Transactions . |
11.1 | Other than (i) standard employee benefits generally made available to all employees, (ii) standard director and officer indemnification agreements approved by the Board of Directors, and (iii) the purchase of the Companys share capital in accordance with applicable law, and the issuance of options to purchase the Companys Common Shares, in each instance, disclosed in Section 11.1 of the Disclosure Schedule , there are no agreements, understandings or proposed transactions between any Group Entity and any of its officers, directors, consultants or employees, or any Affiliate thereof, respectively. | |
11.2 | No Group Entity is indebted, directly or indirectly, to any of its directors, officers or employees or to their respective immediate family members or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses. None of the Group Entities directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing (i) are, directly or indirectly, indebted to any Group Entity or, |
SCHEDULE 4
6
(ii) to the Warrantors knowledge, have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which any Group Entity has a business relationship, or any firm or corporation which competes with any Group Entity except that directors, officers or employees or shareholders of the Company may own shares in (but not exceeding one percent (1%) of the outstanding shares of) publicly traded companies that may compete with any Group Entity. To the Warrantors knowledge, none of the Group Entities employees or directors or any members of their immediate families or any Affiliate of any of the foregoing are, directly or indirectly, interested in any contract with any Group Entity. None of the directors or officers, or any members of their immediate families, has any material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Group Entities five (5) largest business relationship partners, service providers, joint venture partners, licensees and competitors. | ||
11.3 | Except for the Group Entities and the entities set forth in Section 11.3 of Disclosure Schedule , there are no corporations, partnerships, trusts, joint ventures, limited liability companies or other business entities in which any Founder owns or controls, directly or indirectly, 10% or more of the outstanding voting interests. | |
11.4 | Except as disclosed in Section 11.4 of the Disclosure Schedule , no employee, officer, or director of any Group Entity ( Related Party ) or member of such Related Partys immediate family, or any corporation, limited liability company, partnership or other entity in which such Related Party is an officer, director or partner, or in which such Related Party has significant ownership interests or otherwise controls, loans, or extend or guarantee credit) to any of them. To the Companys knowledge and except as provided in Section 11.4 of the Disclosure Schedule , none of such persons has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except that employees, officers, or directors of the Company and members of such Related Partys immediate families may own stock in publicly traded companies that may compete with the Company. Except as provide in Section 11.4 of the Disclosure Schedule , no Related Party or member of their immediate family is directly or indirectly interested in any material contract with the Company. |
12. | Rights of Registration and Voting Rights . |
Except as provided in the Shareholders Agreement, no Group Entity is under any obligation to register under the Securities Act or any other applicable securities laws, any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Warrantors knowledge, except as contemplated in the Shareholders Agreement, no shareholder of any Group Entity has entered into any agreements with respect to the voting of shares in the capital of the Company. Except as contemplated by or disclosed in the Transaction Documents, no Founder is a party to or has any knowledge of any agreements, written or oral, relating to the acquisition, disposition, registration under the Securities Act, or voting of the shares or securities of any Group Entity. |
SCHEDULE 4
7
13. | Absence of Liens . |
Except as provided in Section 13 of the Disclosure Schedule , the property and assets owned by the Group Entities are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Group Entities ownership or use of such property or assets. With respect to the property and assets it leases, each Group Entity is in compliance with such leases and, to the Warrantors knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. |
14. | Financial Statements . |
14.1 | The Domestic Companies have delivered to the Purchaser its unaudited Financial Statements as of December 31, 2008 and for the fiscal year ended December 31, 2008 and its unaudited Financial Statements as of June 30, 2009 and for the six-month period ended June 30, 2009 (the Statement Date ). The unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present in all material respects the financial condition and operating results of the Domestic Companies and Schools as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Domestic Companies and the Schools has no material liabilities or obligations, contingent or otherwise, as of the Statement Date, other than (i) liabilities incurred in the ordinary course of business subsequent to the Statement Date, (ii) obligations under contracts and commitments incurred in the ordinary course of business and (iii) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect. The Domestic Companies and the Schools maintain and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles. | |
14.2 | The Company and each Group Entity has filed (or has had filed on its behalf), will timely file or will cause to be timely filed, or has timely filed for an extension of the time to file all tax returns and reports (including information returns and reports) as required by law. These returns and reports are true and correct in all material respects except to the extent that a reserve has been reflected on the Financial Statements in accordance with the applicable accounting principles. The Company and each Group Entity has paid all taxes and other assessments due, except those contested by it in good faith that are listed in Section 14.2 of the Disclosure Schedule and except to the extent that a reserve has been reflected on the Financial Statements in accordance with the applicable accounting principles. The provision for taxes of the Company and the Group Entities as shown in the Financial Statements is adequate for taxes due or accrued as of the date thereof. Neither the Company nor any Group Entity has made any elections pursuant to the United States Internal Revenue Code of 1986, as amended (the Code ) or pursuant to the applicable tax laws of any jurisdiction other than the United States (other than elections that relate solely to methods of accounting, depreciation or amortization) that would have a material adverse |
SCHEDULE 4
8
effect on the Companys consolidated financial condition, business as presently conducted or proposed to be conducted or any of its properties or material assets. Neither the Company nor any Group Entity has had any tax deficiency assessed, or to the knowledge of the Company or the Founder, proposed against it or has executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge that remains in effect. Neither the Companys nor any Group Entitys tax returns, federal, state or otherwise, have been audited by any relevant governmental authority. Since the Financial Statement Date, neither the Company nor any Group Entity has incurred any taxes, assessments or governmental charges other than in the ordinary course of business and the Company has made adequate provisions on its books of account for all taxes, assessments and governmental charges with respect to their businesses, properties and operations for such period. The Group Entities have withheld or collected from each payment made to each of their employees, the amount of any taxes required to be withheld or collected therefrom, and have timely paid (or has had timely paid on its behalf) the same to the proper tax receiving officers or authorized depositories. |
15. | Changes . |
Since the Statement Date, except as set forth in Section 15 of the Disclosure Schedule or as contemplated by this Agreement or the Transaction Documents, there has not been: |
(a) | any change in the assets, liabilities, financial condition or operating results of any Group Entity from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect on a Group Entity; | ||
(b) | any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect on a Group Entity; | ||
(c) | any waiver or compromise by any Group Entity of a valuable right or of a material debt owed to it; | ||
(d) | any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by any Group Entity, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect; | ||
(e) | any material change to a material contract or agreement by which any Group Entity or any of its assets is bound or subject; | ||
(f) | any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder; | ||
(g) | any resignation or termination of employment of any officer or employee of any Group Entity that might affect the continuity of business operation of the relevant Group Entity; | ||
(h) | any mortgage, pledge, transfer of a security interest in, or lien, created by any Group Entity, with respect to any of its material properties or assets, except liens |
SCHEDULE 4
9
for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair such Companys ownership or use of such property or assets; | |||
(i) | any dividend, loans or guarantees made by any Group Entity to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business; | ||
(j) | any declaration, setting aside or payment or other distribution in respect of any Group Entitys share capital, or any direct or indirect redemption, purchase, or other acquisition of any of such shares by any Group Entity; | ||
(k) | any sale, assignment or transfer of any Group Entity Intellectual Property that could reasonably be expected to result in a Material Adverse Effect; | ||
(l) | receipt of notice that there has been a loss of, or material order cancellation by, any major customer of any Group Entity; | ||
(m) | to the Warrantors knowledge, any other event or condition of any character, other than events affecting the economy or the Companys industry generally, that could reasonably be expected to result in a Material Adverse Effect; or | ||
(n) | any arrangement or commitment by the Company to do any of the things described in this Section 15 . |
16. | Employee Matters . |
16.1 | Section 16.1 of the Disclosure Schedule sets forth a detailed description of all compensation, including salary, bonus, severance obligations and deferred compensation paid or payable for each officer, employee, consultant and independent contractor of any Group Entity who received compensation in excess of US$100,000 for the past tweleve (12) months. | |
16.2 | To the Warrantors knowledge, no employee of any Group Entity is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employees ability to promote the interest of the Group Entities or that would conflict with the Group Entities business. Neither the execution or delivery of the Transaction Documents, nor the carrying on of the Companys business by the employees of the Group Entities, nor the conduct of the business as now conducted and as presently proposed to be conducted, will, to the Warrantors knowledge, 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 such employee is now obligated. | |
16.3 | No Group Entity is delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct |
SCHEDULE 4
10
compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants, or independent contractors. Each Group Entity has complied in all material respects with all applicable laws related to employment, including those related to wages, hours, worker classification, and collective bargaining, and the payment and withholding of taxes and other sums as required by law except where noncompliance with any applicable law would not result in a Material Adverse Effect. Each Group Entity has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of such Group Entity and is not liable for any arrears of wages, taxes, penalties, or other sums for failure to comply with any of the foregoing. | ||
16.4 | To the Warrantors knowledge, no employee who is crucial for the business operation of the Company Entities intends to terminate employment with any Group Entity or is otherwise likely to become unavailable to continue as a employee, nor does any Group Entity have a present intention to terminate the employment of any of the foregoing. The employment of each employee of the Company is terminable at the will of the Company. Except as set forth in Section 16.4 of the Disclosure Schedule or as required by law, upon termination of the employment of any such employees, no severance or other payments will become due. Except as set forth in Section 16.4 of the Disclosure Schedule , the Company has no policy, practice, plan, or program of paying severance pay or any form of severance compensation in connection with the termination of employment services. | |
16.5 | The Company has not made any representations regarding equity incentives to any officer, employees, director or consultant that are inconsistent with the share amounts and terms set forth in the Companys board minutes. | |
16.6 | Each former employee whose employment was terminated by the Company has entered into an agreement with the Company providing for the full release of any claims against the Company or any related party arising out of such employment. | |
16.7 | Save as set out in Section 16.7 of the Disclosure Schedule , each Group Entity has completed its social security registration with the relevant labor bureau in the PRC, and has duly performed its legal obligations in all material aspects to make social security (including basic pension, basic medical insurance, unemployment insurance, work-related injury insurance and maternity insurance) and housing fund contributions (the Employee Benefit Plans ) for its employees in full and on a timely basis as required by applicable laws. | |
16.8 | No Group Entity is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the Warrantors knowledge, has sought to represent any of the employees, representatives or agents of any Group Entity. There is no strike or other labor dispute involving any Group Entity pending, or to the Warrantors knowledge, threatened, which could have a Material Adverse Effect, nor is the Company aware of any labor organization activity involving its employees. | |
16.9 | To the Warrantors knowledge, none of the Sellers or directors of any Group Entity during |
SCHEDULE 4
11
the previous four (4) years, has been (a) subject to voluntary or involuntary petition under any applicable bankruptcy laws or any state insolvency laws or the appointment of manager, a receiver or similar officer by a court for his business or property; (b) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (c) subject to any order, judgment, or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him from engaging, or otherwise imposing limits or conditions on his engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (d) found by a court of competent jurisdiction in a civil action or by any relevant regulatory organization to have violated any applicable securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated. |
17. | Tax Matters . |
17.1 | The provisions for taxes as shown on the balance sheet included in the Financial Statements are sufficient in all material respects for the payment of all accrued and unpaid applicable taxes of the Group Entities as of the date of each such balance sheet, whether or not assessed or disputed as of the date of each such balance sheet. Except as set forth in Section 17 of the Disclosure Schedule , there have been no extraordinary examinations or audits of any tax returns or reports by any applicable Governmental Authority. Except as set forth in Section 17 of the Disclosure Schedule , each Group Entity has filed or caused to be filed on a timely basis all tax returns that are or were required to be filed (to the extent applicable), all such returns are correct and complete, and each Group Entity has paid all taxes that have become due, or have reflected such taxes in accordance with US GAAP (or another international recognized accounting standard acceptable to the Board of Directors including the approval of Series A Director) as a reserve for taxes on the Financial Statements. There are in effect no waivers of applicable statutes of limitations with respect to taxes for any year. | |
17.2 | Immediately after the Closing, the Company will not be a Controlled Foreign Corporation ( CFC ) as defined in the U.S. Internal Revenue Code of 1986, as amended (or any successor thereto) (the Code ) with respect to the shares held by the Purchaser. | |
17.3 | The Company has never been, and, to the best of its knowledge after consultation with its tax advisors, will not be with respect to its taxable year during which the Closing occurs, a passive foreign investment company ( PFIC ) within the meaning of Section 1297 of the Code. The Company shall use its best efforts to avoid being a PFIC. | |
17.4 | The Company hereby represents, warrants and acknowledges that (i) it has no plan to (and it has not engaged in any transactions to) complete the direct or indirect acquisition of substantially all of the properties held directly or indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic partnership, (ii) it is not a surrogate foreign corporation within the meaning of Section 7874(a)(2)(B) of the Code. |
SCHEDULE 4
12
17.5 | No shareholder of any member of a Group Entity, solely by virtue of its status as shareholder of such Group Entity, have personal liability under local law for the debts and claims of such Group Entity. There has been no communication from any tax authority relating to or affecting the tax classification of any member of the Group Entities. |
18. | OFAC Compliance . |
18.1 | Neither the Company nor any Group Entity or, to the Companys knowledge, any directors, administrators, officers, board of directors (supervisory and management) members or employees of the Company or any Group Entity is an OFAC Sanctioned Person (as defined below). The Group Entities and, to the Companys knowledge, their directors, administrators, officers, administrators, board of directors (supervisory and management) members or employees are in compliance with, and have not previously violated, the USA Patriot Act of 2001, and all other applicable United States and PRC anti-money laundering laws and regulations. None of (i) the purchase and sale of the Shares, (ii) the execution, delivery and performance of this Agreement or any of the documents in Exhibits attached hereto, or (iii) the consummation of any transaction contemplated hereby or thereby, or the fulfillment of the terms hereof or thereof, will result in a violation by anyone, including without limitation the Shareholder, of any of the OFAC Sanctions or of any anti-money laundering laws of the United States, the PRC or any other jurisdiction. | |
18.2 | For the purposes of this Section 18 : |
(a) | OFAC Sanctions means any sanctions program administered by the Office of Foreign Assets Control of the United States Department of the Treasury ( OFAC ) under authority delegated to the Secretary of the Treasury (the Secretary ) by the President of the United States or provided to the Secretary by statute, and any order or license issued by, or under authority delegated by, the President or provided to the Secretary by statute in connection with a sanctions program thus administered by OFAC. For ease of reference, and not by way of limitation, OFAC Sanctions programs are described on OFACs website at www.treas.gov/ofac . | ||
(b) | OFAC Sanctioned Person means any government, country, corporation or other entity, group or individual with whom or which the OFAC Sanctions prohibit a United States Person from engaging in transactions, and includes without limitation any individual or corporation or other entity that appears on the current OFAC list of Specially Designated Nationals and Blocked Persons (the SDN List ). For ease of reference, and not by way of limitation, OFAC Sanctioned Persons other than government and countries can be found on the SDN List on OFACs website at ww.treas.gov/offices/enforcement/ofac/sdn. | ||
(c) | United States Person means any United States citizen, permanent resident alien, entity organized under the laws of the United States (including foreign branches), or any person (individual or entity) in the United States, and, with respect to the Cuban Assets Control Regulations, also includes any corporation or other entity that is owned or controlled by one of the foregoing, without regard to where it is organized or doing business. |
SCHEDULE 4
13
19. | Foreign Corrupt Practices Act . |
None of the Company or any Group Entity or, to the Companys or the Sellers knowledge, any of their directors, administrators, officers, board of directors (supervisory and management) members or employees have made, directly or indirectly, any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to (a) any foreign official (as such term is defined in the FCPA) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a governmental authority, or (b) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, in the case of both (a) and (b) above in order to assist the Company or any Group Entity to obtain or retain business for, or direct business to the Company or any Group Entity, as applicable. None of the Company, any Group Entity or any of their directors, administrators, officers, board of directors (supervisory and management) members or employees has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. |
20. | Insurance . |
Section 20 of the Disclosure Schedule provides a complete list of each Group Entitys insurance policies currently in effect. No Group Entity has done or omitted to do or suffered anything to be done or not to be done other than any acts in the ordinary course of business which has or would render any policies of insurance taken out by it or by any other person in relation to any such Group Entitys assets void or voidable or which would result in an increase in the rate of premiums on the said policies and there are no claims outstanding and no circumstances which would give rise to any claim under any such policies of insurance. |
21. | Confidential Information and Invention Assignment Agreements . |
Each current and former employee, consultant and officer of the Company or any Group Entity has executed an agreement with the Company or such Group Entity regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Purchaser (the Confidential Information Agreements ). No current or former employee has excluded works or inventions from his or her assignment of inventions pursuant to such employees Confidential Information Agreement. The Company and any Group Entity are not aware that any of the employees is in violation thereof. |
22. | Governmental and Other Permits . |
Save as set out in Section 16.7 of the Disclosure Schedule, each Group Entity has all franchises, governmental permits, licenses and any similar authority necessary for the |
SCHEDULE 4
14
conduct of its business. No Group Entity is in default in any material respect under any of such franchises, governmental permits, licenses or other similar authority. | ||
22.1 | The Domestic Companies have applied and obtained all requisite licenses, clearance and permits required under PRC Laws as necessary for the conduct of its businesses, and the Domestic Companies have complied in all material respects with all PRC Laws in connection with foreign exchange, including without limitation, carrying out all relevant filings, registrations and applications for relevant permits with the PRC State Administration of Foreign Exchange and any other relevant authorities, and all such permits are validly subsisting. | |
22.2 | The registered capital of the Domestic Companies and the WFOE has been fully paid up in accordance with the schedule of payment stipulated in its respective articles of association, approval document, certificate of approval and legal person business license (hereinafter referred to as the Establishment Documents ) and in compliance with PRC Laws and regulations, and there is no outstanding capital contribution commitment. | |
22.3 | The Establishment Documents of the Domestic Companies and the WFOE have been duly approved and filed in accordance with the laws of the PRC and are valid and enforceable. | |
22.4 | The business scope specified in the Establishment Documents of the Domestic Companies comply with the requirements of all relevant PRC Laws. The operation and conduct of the business by and the term of operation of the Domestic Companies in accordance with the Establishment Documents is in compliance with the Laws of the PRC. | |
22.5 | The Domestic Companies and the Schools have passed its annual inspection by the relevant governmental authorities for their operation in its last three years (where applicable), and the relevant administration for industry and commerce has affixed an annual inspection chop on its business license. | |
22.6 | The Disclosure Schedule sets out full and accurate details of all loan agreements entered into between any one Group Entity regarding any inter-company loan, shareholders loan or foreign exchange loan obtained by them. Such loan agreements have been duly registered in accordance with the laws of the PRC (where necessary) and all such registrations are validly subsisting under the laws of the PRC. |
23. | Corporate Documents . |
The Memorandum and Articles of Association, and all other constitutional documents (or analogous constitutional documents) of each Group Entity made after the closing of the previous financing of the Company are in the form provided to the Purchaser. The copy of the minute books of the Company provided to the Purchaser contains minutes of all meetings of directors and shareholders and all actions by written consent without a meeting by the directors and shareholders since the date of incorporation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and shareholders with respect to all transactions referred to in such minutes. |
24. | Liabilities . |
SCHEDULE 4
15
Except as set forth in Section 24 of the Disclosure Schedule or arising under the instruments set forth in Section 10 of the Disclosure Schedule , the Domestic Companies and the WFOE have no liabilities of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except for (i) liabilities set forth in the Financial Statements, (ii) trade or business liabilities incurred in the ordinary course of business, and (iii) other liabilities that do not exceed US$20,000 in the aggregate. |
25. | Compliance with Laws. |
25.1 | Except as set forth in Section 25.1 of the Disclosure Schedule , each Group Entity is in material compliance with all applicable laws applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets or properties; | |
25.2 | Except as set forth in Section 25.2 of the Disclosure Schedule , no event has occurred and no circumstance exists that to the Warrantors knowledge (i) may constitute or result in a violation by any Group Entity, or a failure on the part of any Group Entity to comply with any law, or (ii) may give rise to any obligation on the part of any Group Entity to undertake, or to bear all or any portion of the cost of, any remedial action of any nature, except for such violations or failures by a Group Entity that, individually or in the aggregate, would not result in any Material Adverse Effect; | |
25.3 | No Group Entity has received any written notice from any Governmental Authority regarding (i) any actual, alleged or likely material violation of, or material failure to comply with, any law, or (ii) any actual, alleged or likely material obligation on the part of any Group Entity to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; | |
25.4 | No Group Entity, nor any director, agent, employee or any other person acting for or on behalf of any Group Entity, has directly or indirectly (i) made any contribution, gift, bribe, payoff, influence payment, kickback, or any other fraudulent payment in any form, whether in money, property, or services to any public official or otherwise (A) to obtain favorable treatment in securing business for a Group Entity, (B) to pay for favorable treatment for business secured, or (C) to obtain special concessions or for special concessions already obtained, for or in respect of any Group Entity, in each case which would have been in violation of any applicable law or (ii) established or maintained any fund or assets in which any Group Entity shall have proprietary rights that have not been recorded in the books and records of a Group Entity. |
26. | Environmental and Safety Laws . |
To the knowledge of the Company, no Group Entity is in violation of any applicable statute, law, or regulation relating to the environment or occupational health and safety, except where such failure would not have a material adverse effect on such Group Entitys business or properties, and no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. |
27. | Manufacture, Marketing and Development Rights . |
SCHEDULE 4
16
No Group Entity has granted rights to manufacture, produce, assemble, license, market, or sell its respective products or services to any other person and is not bound by any agreement that affects any Group Entitys exclusive rights to develop, manufacture, assemble, distribute, market or sell its respective products or services. |
28. | Disclosure; Projections . |
The Company and the Sellers has made available to the Purchaser all the information reasonably available to the Company that the Purchaser have requested for deciding whether to acquire the Shares, including certain of financial projections with respect to the Company (the Projections ), each of which were prepared in good faith. To the Warrantors knowledge, no representation or warranty of any Warrantor contained in this Agreement, as qualified by the Disclosure Schedule, and no certificate furnished or to be furnished to the Purchaser at the Closing contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. |
29. | Business Plan and Budget . |
The Company has delivered to the Purchaser on or before the Closing a business plan and budget for the twelve (12) months following the Closing (the Business Plan ). Such Business Plan was prepared in good faith based upon assumptions and projections which the Sellers believe are reasonable and not materially misleading. |
30. | Entire Business . |
The Company was formed solely to acquire and hold equity interest in the Group Entities, and since its formation has not engaged in any business and has not incurred any material liability in the course of its business of acquiring and holding its equity interest in the Group Entities. The Group Entities are engaged solely in the principal businesses disclosed to the Purchaser and have no other activities. |
31. | SAFE Requirements .The Sellers and all other shareholders of the Company who are deemed PRC domestic residents have completed the overseas investment foreign exchange registration procedures as required by the State Administration on Foreign Exchange with regard to the capitalization of the Group Entities. |
SCHEDULE 4
17
1. | Authorization . |
Such Purchaser has full power, authority and legal capacity to enter into, deliver and perform the Transaction Documents. The Transaction Documents to which the Purchaser is a party, when executed and delivered by such Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors rights generally, and as limited by laws relating to the availability of a specific performance, injunctive relief, or other equitable remedies, or (ii) to the extent the indemnification provisions contained in the Shareholders Agreement may be limited by applicable securities laws. |
2. | Compliance with other Instruments . |
The execution, delivery and performance by the Purchaser of the Transaction Documents does not and will not contravene, breach or violate the terms of any agreement, document or instrument to which such Purchaser is a party or by which any of such Purchasers assets or properties are bound. |
3. | Disclosure of Information . |
Such Purchaser has had an opportunity to discuss the Group Entities business, management, financial affairs and the terms and conditions of the offering of the Shares with the Group Entities management and has had an opportunity to review the Group Entities facilities. The foregoing, however, does not limit or modify the representations and warranties of the Warrantor in Schedule 4 of this Agreement, or the right of the Purchaser to rely thereon save as set forth in the Disclosure Schedule. |
4. | Purchase Entirely for Own Account . |
This Agreement is made with the Purchaser in reliance upon the Purchasers representation to the Company, which by the Purchasers execution of this Agreement, the Purchaser hereby confirms, that the Shares to be acquired by the Purchaser will be acquired for investment for the Purchasers own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to |
SCHEDULE 6
1
any of the Shares. The Purchaser has not been formed for the specific purpose of acquiring the Shares.] |
5. | Restricted Securities . |
The Purchaser understands that the Shares have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchasers representations as expressed herein. The Purchaser understands that the Shares are Restricted Securities under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Shares indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Shares for resale except as set forth in the Shareholders Agreement. The Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, and on requirements relating to the Company which are outside of the Purchasers control, and which the Company is under no obligation and may not be able to satisfy. The Purchaser understands that this offering is not intended to be part of the public offering, and that the Purchaser will not be able to rely on the protection of Section 11 of the Securities Act. |
6. | No Public Market . |
The Purchaser understands that no public market now exists for the Shares, and that the Company has made no assurances that a public market will ever exist for the Shares. |
7. | Accredited Investor . |
The Purchaser is an accredited investor as defined in the Securities and Exchange Commission ( SEC ) Rule 501(a) of Regulation D, as presently in effect, under the Securities Act. |
SCHEDULE 6
2
Shareholding | ||||||||||||
Shareholder | No. of Shares | Percentage | ||||||||||
Pre-Closing | BRIGHT UNISON LIMITED | 67,800,000 | 54.240 | % | ||||||||
|
CENTRAL GLORY INVESTMENTS LIMITED | 31,200,000 | 24.960 | % | ||||||||
|
PERFECT WISDOM INTERNATIONAL LIMITED | 12,000,000 | 9.600 | % | ||||||||
|
EXCELLENT NEW LIMITED | 9,000,000 | 7.200 | % | ||||||||
|
KTB/UCI China Ventures II Limited | 5,000,000 | 4.000 | % | ||||||||
|
Number of Shares | 125,000,000 | 100.000 | % | ||||||||
Post-Closing | BRIGHT UNISON LIMITED | 62,800,000 | 50.240 | % | ||||||||
|
CENTRAL GLORY INVESTMENTS LIMITED | 21,112,500 | 16.890 | % | ||||||||
|
PERFECT WISDOM INTERNATIONAL LIMITED | 8,125,000 | 6.500 | % | ||||||||
|
EXCELLENT NEW LIMITED | 6,087,500 | 4.870 | % | ||||||||
|
Tiger Global Five China Holdings | 21,875,000 | 17.500 | % | ||||||||
|
KTB/UCI China Ventures II Limited | 5,000,000 | 4.000 | % | ||||||||
|
Number of Shares | 125,000,000 | 100.000 | % |
SCHEDULE 7
3
SCHEDULE 8
1
(A) | As of August 12, 2009, the Company, certain existing shareholders of the Company and certain other parties entered into a Share Purchase Agreement (the Purchase Agreement ) and Shareholders Agreement (the Shareholders Agreement ), attached hereto as Exhibit A and Exhibit B, respectively . |
(B) | The New KTB Investor wishes to purchase an aggregate of up to 3,125,000 Common Shares (as defined in the Shareholders Agreement) from the Sellers (as defined in the Shareholders Agreement) by way of exercising its option of investment pursuant to Section 6.23 of the Purchase Agreement, and in accordance with the Purchase Agreement has agreed to enter into this Assumption Agreement (the Assumption Agreement ). |
(C) | The Company is entering into this Assumption Agreement on behalf of itself and as agent for all the existing Shareholders and other signing parties of the Shareholders Agreement of the Company as listed below: |
(1) | BRIGHT UNISON LIMITED; | ||
(2) | CENTRAL GLORY INVESTMENTS LIMITED; | ||
(3) | PERFECT WISDOM INTERNATIONAL LIMITED; | ||
(4) | EXCELLENT NEW LIMITED; | ||
(5) | KTB/UCI China Ventures II Limited; | ||
(6) | Tiger Global Five China Holdings (collectively with the shareholders listed under (1) to (5) above, the Existing Shareholders ); | ||
(7) | TAL Group Limited; | ||
(8) | TAL Education Technology (Beijing) Co., Ltd. ( ); | ||
(9) | Beijing Xueersi Education Technology Co., Ltd. ( ); | ||
(10) | Beijing Xueersi Network Technology Co., Ltd. ( ); |
1
(11) | ZHANG Bangxin; | ||
(12) | CAO Yundong; | ||
(13) | LIU Yachao; and | ||
(14) | BAI Yunfeng. |
1. | INTERPRETATION | |
In this Assumption Agreement, except as the context may otherwise require, all words and expressions defined in the Shareholders Agreement shall have the same meanings when used herein. | ||
2. | COVENANT | |
The New KTB Investor hereby covenants to the Company as trustee for all other persons who are at present or who may hereafter become bound by the Shareholders Agreement, and to the Company itself, to adhere to and be bound by all the duties, burdens and obligations of a party holding Common Shares imposed pursuant to the provisions of the Shareholders Agreement and all documents expressed in writing to be supplemental or ancillary thereto as if the New KTB Investor had been an original party to the Shareholders Agreement as a common shareholder of the Company since the date thereof. | ||
3. | ENFORCEABILITY | |
Each of the Existing Shareholders and the Company shall be entitled to enforce the Shareholders Agreement against the New KTB Investor, and the New KTB Investor shall be entitled to all rights and benefits of a common shareholder under the Shareholders Agreement, in each case as if New KTB Investor had been an original party to the Shareholders Agreement since the date hereof. | ||
4. | GOVERNING LAW | |
This Assumption Agreement shall be governed by and construed under the Law of the State of New York, without regard to principles of conflicts of law thereunder. | ||
5. | COUNTERPARTS | |
This Assumption Agreement may be signed in any number of counterparts which together shall form one and the same agreement. |
2
6. | FURTHER ASSURANCE | |
Each party agrees to take all such further action as may be reasonably necessary to give full effect to this Assumption Agreement on its terms and conditions. | ||
7. | HEADINGS | |
The headings used in this Assumption Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. |
3
COMPANY: |
Xueersi International Education Group
|
|||
By: | /s/ Bangxin Zhang | |||
Name: | ZHANG Bangxin | |||
Title: | Director | |||
New KTB Investor: |
KTB CHINA OPTIMUM FUND
|
|||
By: | /s/ Authorized Signatory | |||
Name: | ||||
Title: | Legal Representative | |||
4
1
2
3
4
5
6
7
8
9
1. | EMPLOYMENT | |
The Company hereby agrees to employ the Executive and the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth (the Employment ). |
2. | TERM | |
Subject to the terms and conditions of the Agreement, the initial term of the Employment shall be years, commencing on , (the Effective Date ) and ending on , (the Initial Term ), unless terminated earlier pursuant to the terms of the Agreement. Upon expiration of the Initial Term of the Employment, the Employment shall be automatically extended for successive periods of months each (each, an Extension Period ) unless either party shall have given 60 days advance written notice to the other party, in the manner set forth in Section 19 below, prior to the end of the Extension Period in question, that the term of this Agreement that is in effect at the time such written notice is given is not to be extended or further extended, as the case may be (the period during which this Agreement is effective being referred to hereafter as the Term ). |
3. | POSITION AND DUTIES |
(a) | During the Term, the Executive shall serve as of the Company or in such other position or positions with a level of duties and responsibilities consistent with the foregoing with the Company and/or its subsidiaries and affiliates as the Board of Directors of the Company (the Board ) may specify from time to time and shall have the duties, responsibilities and obligations customarily assigned to individuals serving in the position or positions in which the Executive serves hereunder and as assigned by [the Board], or if authorized by the Board, by the Companys Chief Executive Officer. |
(b) | The Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company or any parent, subsidiaries or affiliated entity of the Company (collectively, the Group ) and as a member of any committees of the board of directors of any such entity, provided that the Executive is indemnified for serving in any and all such capacities on a basis no less favorable than is currently provided to any other director of any member of the Group. | ||
(c) | The Executive agrees to devote all of his or her working time and efforts to the performance of his/her duties for the Company and to faithfully and diligently serve the Company in accordance with the Agreement and the guidelines, policies and procedures of the Company approved from time to time by the Board. |
4. | NO BREACH OF CONTRACT | |
The Executive hereby represents to the Company that: (i) the execution and delivery of the Agreement by the Executive and the performance by the Executive of the Executives duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or by which the Executive is otherwise bound, except that the Executive does not make any representation with respect to agreements required to be entered into by and between the Executive and any member of the Group pursuant to the applicable law of the jurisdiction in which the Executive is based, if any; (ii) that the Executive is not in possession of any information (including, without limitation, confidential information and trade secrets) the knowledge of which would prevent the Executive from freely entering into the Agreement and carrying out his/her duties hereunder; (iii) that the Executive is not bound by any confidentiality, trade secret or similar agreement with any person or entity other than any member of the Group. |
5. | LOCATION | |
The Executive will be based in , China or any other location as requested by the Company during the Term. |
6. | COMPENSATION AND BENEFITS |
(a) | Cash Compensation . As compensation for the performance by the Executive of his or her obligations hereunder, during the Term, the Company shall pay the Executive cash compensation (inclusive of the statutory benefit contributions that the Company is required to set aside for the Executive under applicable law) pursuant to Schedule A hereto, subject to annual review and adjustment by the Board or any committee designated by the Board. | ||
(b) | Equity Incentives . During the Term, the Executive shall be eligible to participate, at a level comparable to similarly situated executives of the Company, in such long-term compensation arrangements as may be authorized from time to time by the Board, including any share incentive plan the Company may adopt from time to time in its sole discretion. | ||
(c) | Benefits . During the Term, the Executive shall be entitled to participate in all of the employee benefit plans and arrangements made available by the Company to its similarly situated executives, including, but not limited to, any retirement plan, medical insurance |
2
plan and travel/holiday policy, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. |
7. | TERMINATION OF THE AGREEMENT |
The Employment may be terminated as follows: | |||
(a) | Death . The Employment shall terminate upon his/her death. | ||
(b) | Disability . The Employment shall terminate if the Executive has a disability, including any physical or mental impairment which, as reasonably determined by the Board, renders the Executive unable to perform the essential functions of his/her position at the Company, even with reasonable accommodation that does not impose an undue burden on the Company, for more than 180 days in any 12-month period, unless a longer period is required by applicable law, in which case that longer period shall apply. | ||
(c) | Cause . The Company may terminate the Executives employment hereunder for Cause. The occurrence of any of the following, as reasonably determined by the Company, shall be a reason for Cause, provided that, if the Company determines that the circumstances constituting Cause are curable, then such circumstances shall not constitute Cause unless and until the Executive has been informed by the Company of the existence of Cause and given an opportunity of [ten] business days to cure, and such Cause remains uncured at the end of such [ten]-day period: |
(1) | continued failure by the Executive to satisfactorily perform his duties; | ||
(2) | willful misconduct or gross negligence by the Executive in the performance of his duties hereunder, including insubordination; | ||
(3) | the Executives conviction or entry of a guilty or nolo contendere plea of any felony or any misdemeanor involving moral turpitude; | ||
(4) | the Executives commission of any act involving dishonesty that results in material financial, reputational or other harm, monetary or otherwise, to any member of the Group, including but not limited to an act constituting misappropriation or embezzlement of the property of any member of the Group as determined in good faith by the Board; or | ||
(5) | any material breach by the Executive of this Agreement. |
(d) | Good Reason . The Executive may terminate his employment hereunder for Good Reason upon the occurrence, without the written consent of the Executive, of an event constituting a material breach of this Agreement by the Company that has not been fully cured within [ten] business days after written notice thereof has been given by the Executive to the Company setting forth in sufficient detail the conduct or activities the Executive believes constitute grounds for Good Reason, including but not limited to: |
(1) | the assignment to the Executive of any duties materially inconsistent with the Executives status as a senior officer of the Company or a |
3
substantial adverse alteration in the nature or status of the Executives responsibilities; and |
(2) | the failure by the Company to pay to the Executive any portion of the Executives current compensation or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within [seven] business days of the date such compensation is due. |
(e) | Without Cause by the Company; Without Good Reason by the Executive . The Company may terminate the Executives employment hereunder at any time without Cause upon one-month prior written notice to the Executive. The Executive may terminate the Executives employment voluntarily for any reason or no reason at any time by giving one-month prior written notice to the Company. | ||
(f) | Notice of Termination. Any termination of the Executives employment under the Agreement shall be communicated by written notice of termination ( Notice of Termination )from the terminating party to the other party. The notice of termination shall indicate the specific provision(s) of the Agreement relied upon in effecting the termination. | ||
(g) | Date of Termination . The Date of Termination shall mean (i) if the Executives employment is terminated by the Executives death, the date of his death, (ii) if the Executives employment is terminated by the Executives disability, by the Company for Cause or by the Executive without Good Reason, the date specified in the Notice of Termination and (iii) if the Executives employment is terminated without cause or by the Executive for Good Reason, the date on which a Notice of Termination is given or any later date (within thirty (30) days) set forth in such Notice of Termination. | ||
(h) | Compensation upon Termination . |
(1) | Death . If the Executives employment is terminated by reason of the Executives death, the Company shall have no further obligations to the Executive under this Agreement and the Executives benefits shall be determined under the Companys retirement, insurance and other benefit and compensation plans or programs then in effect in accordance with the terms of such plans and programs. | ||
(2) | By Company without Cause or by the Executive for Good Reason . If the Executives employment is terminated by the Company other than for Cause or by the Executive for Good Reason, the Company shall (i) continue to pay and otherwise provide to the Executive, during any notice period (not to exceed thirty (30) days), all compensation, base salary and previously earned but unpaid incentive compensation, if any, and shall continue to allow the Executive to participate in any benefit plans in accordance with the terms of such plans during such notice period; and (ii) pay to the Executive, in lieu of benefits under any severance plan or policy of the Company, an amount equal to the sum of the Executives 12 months base salary as in effect as of the Date of Termination. |
4
(3) | By Company for Cause or by the Executive other than for Good Reason . If the Executives employment shall be terminated by the Company for Cause or by the Executive other than for Good Reason, the Company shall pay the Executive his base salary at the rate in effect at the time Notice of Termination is given through the Date of Termination, and the Company shall have no additional obligations to the Executive under this Agreement. | ||
(4) | Compensation Upon any Termination . Following any termination of the Executives employment, the Company shall pay the Executive all amounts, if any, to which the Executive is entitled as of the Date of Termination under any compensation plan or benefit plan or program of the Company, at the time such payments are due in accordance with the terms of such plans or programs. |
(i) | Return of Company Property . The Executive agrees that following the termination of the Executives employment for any reason, or at any time prior to the Executives termination upon the request of the Company, he/she shall return all property of the Group, which is then in or thereafter comes into his/her possession, including, but not limited to, any Confidential Information (as defined below) or Intellectual Property (as defined below), or any other documents, contracts, agreements, plans, photographs, projections, books, notes, records, electronically stored data and all copies, excerpts or summaries of the foregoing, as well as any automobile or other materials or equipment supplied by the Group to the Executive, if any. | ||
(j) | Requirement for a Release . Notwithstanding the foregoing, the Companys obligations to pay or provide any benefits shall (1) cease as of the date the Executive breaches any of the provisions of Sections 8, 9 and 11 hereof, and (2) be conditioned on the Executive signing the Companys customary release of claims in favor of the Group and the expiration of any revocation period provided for in such release. |
8. | CONFIDENTIALITY AND NONDISCLOSURE |
(a) | Confidentiality and Non-Disclosure. |
(1) | The Executive acknowledges and agrees that: (A) the Executive holds a position of trust and confidence with the Company and that his employment by the Company will require that the Executive have access to and knowledge of valuable and sensitive information, material, and devices relating to the Company and/or its business, activities, products, services, customers and vendors, including, but not limited to, the following, regardless of the form in which the same is accessed, maintained or stored: the identity of the Companys actual and prospective customers and their representatives; prior, current or future research or development activities of the Company and/or its customers; the products and services provided or offered by the Company to customers or potential customers and the manner in which such services are performed or to be performed; the product and/or service needs of actual or prospective customers; pricing and cost information; information concerning the development, engineering, design, |
5
specifications, acquisition or disposition of products and/or services of the Company; unique and/or proprietary computer equipment, programs, software and source codes, licensing information, personnel information, vendor information, marketing plans and techniques, forecasts, and other trade secrets (Confidential Information); and (B) the direct and indirect disclosure of any such Confidential Information would place the Company at a competitive disadvantage and would do damage, monetary or otherwise, to the Companys business. | |||
(2) | During the Term and at all times thereafter, the Executive shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, consultant, principal or agent of any business, or in any other capacity, publish or make known, disclose, furnish, reproduce, make available, or utilize any of the Confidential Information without the prior express written approval of the Company, other than in the proper performance of the duties contemplated herein, unless and until such Confidential Information is or shall become general public knowledge through no fault of the Executive. | ||
(3) | In the event that the Executive is required by law to disclose any Confidential Information, the Executive agrees to give the Company prompt advance written notice thereof and to provide the Company with reasonable assistance in obtaining an order to protect the Confidential Information from public disclosure. | ||
(4) | The failure to mark any Confidential Information as confidential shall not affect its status as Confidential Information under this Agreement. |
(c) | Third Party Information in the Executives Possession . The Executive agrees that he shall not, during the Term, (i) improperly use or disclose any proprietary information or trade secrets of any former employer or other person or entity with which the Executive has an agreement or duty to keep in confidence information acquired by Executive, if any, or (ii) bring into the premises of Company any document or confidential or proprietary information belonging to such former employer, person or entity unless consented to in writing by such former employer, person or entity. The Executive will indemnify the Company and hold it harmless from and against all claims, liabilities, damages and expenses, including reasonable attorneys fees and costs of litigation, arising out of or in connection with any violation of the foregoing. | ||
(d) | Third Party Information in the Companys Possession . The Executive recognizes that the Company may have received, and in the future may receive, from third parties their confidential or proprietary information subject to a duty on the Companys part to maintain the confidentiality of such information and to use it only for certain limited purposes. The Executive agrees that the Executive owes the Company and such third parties, during the Term and thereafter, a duty to hold all such confidential or proprietary information in strict confidence and not to disclose such information to any person or firm, or otherwise use such information, in a manner inconsistent with the limited purposes permitted by the Companys agreement with such third party. |
6
This Section 8 shall survive the termination of the Agreement for any reason. In the event the Executive breaches this Section 8, the Company shall have right to seek remedies permissible under applicable law. |
9. | INTELLECTUAL PROPERTY |
(a) | Prior Inventions. The Executive has attached hereto, as Schedule B , a list describing all inventions, ideas, improvements, designs and discoveries, whether or not patentable and whether or not reduced to practice, original works of authorship and trade secrets made or conceived by or belonging to the Executive (whether made solely by the Executive or jointly with others) that (i) were developed by Executive prior to the Executives employment by the Company (collectively, Prior Inventions ), (ii) relate to the Company actual or proposed business, products or research and development, and (iii) are not assigned to the Company hereunder; or, if no such list is attached, the Executive represents that there are no such Prior Inventions. Except to the extent set forth in Schedule B , the Executive hereby acknowledges that, if in the course of his/her service for the Company, the Executive incorporates into a Company product, process or machine a Prior Invention owned by the Executive or in which he has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual, worldwide right and license (which may be freely transferred by the Company to any other person or entity) to make, have made, modify, use, sell, sublicense and otherwise distribute such Prior Invention as part of or in connection with such product, process or machine. | ||
(b) | Assignment of Intellectual Property. The Executive hereby assigns to the Company or its designees, without further consideration and free and clear of any lien or encumbrance, the Executives entire right, title and interest (within the United States and all foreign jurisdictions), to any and all inventions, discoveries, improvements, developments, works of authorship, concepts, ideas, plans, specifications, software, formulas, databases, designees, processes and contributions to Confidential Information created, conceived, developed or reduced to practice by the Executive (alone or with others) during the Employment Period which (A) are related to the Companys current or anticipated business, activities, products, or services, (B) result from any work performed by Executive for the Company, or (iii) are created, conceived, developed or reduced to practice with the use of Company property, including any and all Intellectual Property Rights (as defined below) therein ( Work Product ). Any Work Product which falls within the definition of work made for hire, as such term is defined in the U.S. Copyright Act, shall be considered a work made for hire, the copyright in which vests initially and exclusively in the Company. The Executive waives any rights to be attributed as the author of any Work Product and any droit morale (moral rights) in Work Product. The Executive agrees to immediately disclose to the Company all Work Product. For purposes of this Agreement, Intellectual Property shall mean any patent, copyright, trademark or service mark, trade secret, or any other proprietary rights protection legally available. | ||
(c) | Patent and Copyright Registration. The Executive agrees to execute and deliver any instruments or documents, and to do all other things reasonably requested by the Company in order to more fully vest the Company with all ownership rights in the Work Product. If any Work Product is deemed by the Company to be patentable or otherwise registrable, the Executive shall assist the Company (at the Companys expense) in obtaining letters of patent or other applicable registration therein and shall execute all |
7
documents and do all things, including testifying (at the Companys expense) necessary or appropriate to apply for, prosecute, obtain, or enforce any Intellectual Property right relating to any Work Product. Should the Company be unable to secure the Executives signature on any document deemed necessary to accomplish the foregoing, whether due to the Executives disability or other reason, the Executive hereby irrevocably designates and appoints the Company and each of its duly authorized officers and agents as the Executives agent and attorney-in-fact to act for and on the Executives behalf and stead to take any of the actions required of Executive under the previous sentence, with the same effect as if executed and delivered by the Executive, such appointment being coupled with an interest. |
This Section 9 shall survive the termination of the Agreement for any reason. In the event the Executive breaches this Section 9, the Company shall have right to seek remedies permissible under applicable law. |
10. | CONFLICTING EMPLOYMENT. |
The Executive hereby agrees that, during the Term, he/she will not engage in any other employment, occupation, consulting or other business activity related to the business in which the Company is now involved or becomes involved during the Term, nor will the Executive engage in any other activities that conflict with his/her obligations to the Company without the prior written consent of the Company. |
11. | NON-COMPETITION AND NON-SOLICITATION |
(a) | Non-Competition . In consideration of the compensation provided to the Executive by the Company hereunder, the adequacy of which is hereby acknowledged by the parties hereto, the Executive agree that during the Term and for a period of two years following the termination of the Employment for whatever reason, the Executive shall not engage in Competition (as defined below) with the Group. For purposes of this Agreement, Competition by the Executive shall mean the Executives engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, agent, stockholder, member, owner or partner of, or permitting the Executives name to be used in connection with the activities of, any other business or organization which competes, directly or indirectly, with the Group in the Business; provided , however , it shall not be a violation of this Section 11(a) for the Executive to become the registered or beneficial owner of up to five percent (5%) of any class of the capital stock of a corporation in Competition with the Group that is registered under the U.S. Securities Exchange Act of 1934, as amended, provided that the Executive does not otherwise participate in the business of such corporation. | ||
For purposes of this Agreement, the Business means after-school tutoring services and any other business which the Group engages in, or is preparing to become engaged in, during the Term. | |||
(b) | Non-Solicitation; Non-Interference . During the Employment Period and for a period of one year following the termination of the Executives employment for any reason, the Executive agrees that he or she will not, directly or indirectly, for the Executives benefit or for the benefit of any other person or entity, do any of the following: |
8
(1) | solicit from any customer doing business with the Group during the Term business of the same or of a similar nature to the Business; | ||
(2) | solicit from any known potential customer of the Group business of the same or of a similar nature to that which has been the subject of a known written or oral bid, offer or proposal by the Group, or of substantial preparation with a view to making such a bid, proposal or offer; | ||
(3) | solicit the employment or services of, or hire or engage, any person who is known to be employed or engaged by the Group; or | ||
(4) | otherwise interfere with the business or accounts of the Group, including, but not limited to, with respect to any relationship or agreement between the Group and any vendor or supplier. |
(c) | Injunctive Relief; Indemnity of Company . The Executive agrees that any breach or threatened breach of subsections (a) and (b) of this Section 12 would result in irreparable injury and damage to the Company for which an award of money to the Company would not be an adequate remedy. The Executive therefore also agrees that in the event of said breach or any reasonable threat of breach, the Company shall be entitled to seek an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive. The terms of this paragraph shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including, but not limited to, remedies available under this Agreement and the recovery of damages. The Executive and the Company further agree that the provisions of this Section 11 are reasonable. The Executive agrees to indemnify and hold harmless the Company from and against all reasonable expenses (including reasonable fees and disbursements of counsel) which may be incurred by the Company in connection with, or arising out of, any violation of this Agreement by the Executive. This Section 11 shall survive the termination of the Agreement for any reason. |
12. | WITHHOLDING TAXES | |
Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to the Agreement such national, provincial, local or any other income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation. |
13. | ASSIGNMENT | |
The Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer the Agreement or any rights or obligations hereunder; provided, however, that the Company may assign or transfer the Agreement or any rights or obligations hereunder to any member of the Group without such consent. If the Executive should die while any amounts would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executives devisee, legatee, or other designee or, if there be no such designee, to the Executives estate. The Company will require any and all successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this |
9
Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Company had terminated the Executives employment other than for Cause, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, Company shall mean the Company as herein before defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 13 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. | ||
14. | SEVERABILITY | |
If any provision of the Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of the Agreement are declared to be severable. | ||
15. | ENTIRE AGREEMENT | |
The Agreement constitutes the entire agreement and understanding between the Executive and the Company regarding the terms of the Employment and supersedes all prior or contemporaneous oral or written agreements concerning such subject matter. The Executive acknowledges that he has not entered into the Agreement in reliance upon any representation, warranty or undertaking which is not set forth in the Agreement. | ||
16. | GOVERNING LAW | |
The Agreement shall be governed by and construed in accordance with the law of the State of New York, USA, without regard to the conflicts of law principles. | ||
17. | AMENDMENT | |
The Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to the Agreement, which agreement is executed by both of the parties hereto. | ||
18. | WAIVER | |
Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under the Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. |
10
19. | NOTICES | |
All notices, requests, demands and other communications required or permitted under the Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand, (ii) otherwise delivered against receipt therefor, (iii) sent by a recognized courier with next-day or second-day delivery to the last known address of the other party; or (iv) sent by e-mail with confirmation of receipt. | ||
20. | COUNTERPARTS | |
The Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. The Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose. | ||
21. | NO INTERPRETATION AGAINST DRAFTER | |
Each party recognizes that the Agreement is a legally binding contract and acknowledges that such party has had the opportunity to consult with legal counsel of choice. In any construction of the terms of the Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such terms. |
11
IN WITNESS WHEREOF, the Agreement has been executed as of the date first written above. |
TAL EDUCATION GROUP
|
||||
By: | ||||
Name: | ||||
Title: | ||||
Executive
|
||||
Signature: | ||||
Name: | ||||
Amount | Pay Period | |||
|
||||
Base Salary
|
||||
|
||||
Cash Bonus
|
13
Identifying Number | ||||
Title | Date | or Brief Description | ||
|
||||
|
||||
|
||||
|
14
1
1. | Provision of Services |
1.1 | In accordance with the terms and conditions herein, Party B and Party C appoint Party A as Party Bs exclusive service provider to provide comprehensive intellectual property licensing, technical and business support services as described in detail in Appendix II hereto to Party B and Affiliated Entities of Party B. | ||
Party B shall, and cause Affiliated Entities of Party B to, determine the specific terms of services within the scope listed in Appendix II with Party A or any entity designated by Party A in accordance with the actual business needs of Party B and Affiliated Entities of Party B. | |||
1.2 | Party B, Affiliated Entities of Party B and Party C further agree that during the term of this Agreement, Party B, Affiliated Entities of Party B and Party C shall not, and shall ensure that their affiliates do not, directly or indirectly obtain the same or similar services as those provided under this Agreement from any third party, or establish any similar business cooperative relation with any third party with respect to the matters stipulated herein without the prior written consent of Party A. | ||
1.3 | To ensure the normal operations of the ordinary business of Party B and Affiliated Entities of Party B, Party A may, but is not obligated to, in its discretion and to the extent permitted by laws and regulations of PRC, act as guarantor for the performance of the agreements entered into by Party B or Affiliated Entities of Party B with any third parties with respect to the business of Party B and Affiliated Entities of Party B. Party B, Affiliated Entities of Party B and Party C hereby agree and affirm that if they need to provide any guarantee for the performance of any agreements or the repayment of loans by their affiliated entities in their affiliated entities course of business, they will first seek Party A to act as guarantor. |
2. | Service Fee and Payment |
2.1 | With respect to the specific services provided and the customers of the services, relevant Parties shall determine a fair service fee and proper payment methods based on the income and the total number of student enrollments during a set period of the Party receiving the services. The formula for calculating service fees and determining |
2
payment methods is set forth in Appendix II hereto. | |||
2.2 | If Party A determines the formula for calculating service fees specified herein shall no longer apply due to any reason, Parties receiving the services shall negotiate in good faith with Party A within 10 business days after Party A delivers a written request for fee adjustment to set a new formula for service fees or new payment methods. If any Party receiving the services does not respond within the aforementioned 10-day period, it shall be deemed to have accepted the adjustments proposed by Party A. Party A shall also negotiate in good faith with Parties receiving the services regarding any fee adjustment request by such Parties. The Parties hereby reaffirm that Party A and Affiliated Entities of Party B have orally agreed on and implemented the service agreements in accordance with Article 2.2 of the Agreement, and retroactively affirm all service fee adjustmenst since February 12, 2009. |
3. | Intellectual Properties |
3.1 | Any intellectual properties created in connection with the performance of this Agreement, including but not limited to copyrights, patents, and technological secrets, belong to Party A, and Party B and its Affiliated entities enjoy no rights other than those provided herein. The Parties agree that this clause shall remain effective regardless of whether the Agreement is modified or terminated. | ||
3.2 | However, if any development by Party A is based on intellectual properties owned by Party B or Affiliated Entities of Party B, Party B and Affiliated entities of Party shal ensure that such intellectual properties are not defective. Party B and Affiliated Entities of Party B shall bear all damages and losses of Party A as a result of defects in such intellectual properties. If Party A is to bear any liabilities to any third party because of defects in such intellectual properties, it has the right to recover all of its losses from Party B or relevant Affiliated Entities of Party B. |
4. | Term |
4.1 | The Agreement is executed and becomes effective as of the date first stated above. | ||
4.2 | The Agreement is effective within the operation term of Party A, Party B and Affiliated Entities of Party B unless earlier terminated by mutual agreement of the Parties. |
5. | Confidentiality |
5.1 | This Agreement and all clauses hereof are confidential information and shall not be disclosed to any third parties except for relevant senior officers, directors, employees, agents or professional consultants. This clause shall not apply in the event any Party is required by laws or regulations to disclose information relating to this Agreement to any governmental authorities, the public or the shareholders, or file this Agreement with |
3
relevant authorities for record. | |||
5.2 | This clause shall survive any modification or termination of this Agreement. |
6. | Liabilities for Breach of Agreement | |
In the event any Party shall fail to perform any of its obligations under this Agreement, or make any untrue or inaccurate representation or warranty, such Party shall have breached the Agreement and shall be liable for all the losses of the other Parties for breach of the Agreement, or pay penalties according to any agreement otherwise reached by the relevant Parties. | ||
7. | Force Majeure | |
In the event the performance of the Agreement is effected by any Force Majeure event, the Party affected by such an event shall notify the other Parties by telegram, facsimile or other electronic means immediately after the occurrence of such event and shall provide written documents evidencing the occurrence of such Force Majeure event within fifteen (15) business days. The Parties shall determine through negotiation whether to terminate, partly terminate or suspend the performance of this Agreement according to the extent the Agreement is effected by such a Force Majeure event. | ||
8. | Change of Parties |
8.1 | If Party B shall add any affiliated entities at any time after the effectiveness of this Agreement, Party B and Party C shall cause such newly added affiliated entity to eexecute assumption agreement or other legal documents permitted or required by the PRC laws to include such newly added affiliated entity in the Agreement such that it enjoys all rights and undertakes all obligations as Affiliated Entities of Party B under this Agreement. As of the date of execution of such assumption agreement or other legal documents permitted or required by PRC laws, the newly added affiliated entity shall be deemed as a party to this Agreement. Other Parties of the Agreement hereby agree to the aforementioned arrangement. | ||
8.2 | Rights and obligations under this Agreement shall be legally binding upon assignees, successors of Partiesf, no matter such assignment of obligations and rights is caused by takeover, restructuring, inheritance, assignment or any other reason. |
9. | Miscellaneous |
9.1 | This Agreement shall be governed by and construed in accordance with the PRC laws. All disputes arising out of or in connection with this Agreement shall be resolved through good faith negotiations between the Parties. Unresolved disputes shall be settled through arbitration by the Beijing Arbitration Committee according to such committees |
4
rules of arbitration. The arbitration shall take place in Beijing. The arbitration ruling shall be final. | |||
9.2 | The Agreement shall replace any and all promises, memorandums, agreements or other documents among the Parties, including but not limited to: |
(1) | Technical Service Agreement for Management Information System of Registration and Payment Collection; | ||
(2) | Agreement for the Development and Use of Online Networks; | ||
(3) | Exclusive Management and Consulting Agreement; | ||
(4) | Technical Support and Service Agreement; | ||
(5) | Teaching Materials Research and Development Agreement; | ||
(6) | Technical Service Agreement for Internal Information Management System; | ||
(7) | Technical Service Agreement for Human Resource Information Management System (the above seven agreements were all executed on February 12, 2009 and are collectively referred to herein as the Service Agreements ); | ||
(8) | Supplemental Agreement to the Service Agreements (dated as of April 9, 2009); and | ||
(9) | Exclusive Business Cooperation Framework Agreement (dated as of June 10. 2010). |
In the event of any conflict between any of the above listed agreements and the Agreement, the provisions of the Agreement including its appendixes shall prevail. | |||
9.3 | This Agreement is written in Chinese. The number of original copies of the Agreement corresponds to the number of parties hereto. Each of Party A, Party B, Affiliated Entities of Party B and shareholders listed under Party C shall have an original copy. |
5
1. | Beijing Dongcheng District Xueersi Training School | |
2. | Beijing Haidian Lejiale Training School | |
3. | Tianjin Xueersi Education Information Consulting Co., Ltd. | |
4. | Shenzhen Xueersi Education Technology Co., Ltd. | |
5. | Beijing Xicheng District Xueersi Training School | |
6. | Beijing Haidian District Xueersi Training School | |
7. | Beijing Zhikang Culture Distribution Co., Ltd. | |
8. | Shanghai Lehai Science and TechnologyInformation Co., Ltd. | |
9. | Shanghai Changning District Xueersi-Lejiale School | |
10. | Shanghai Minhang District Lejiale School | |
11. | Shanghai Xueersi Education Information Consulting Co., Ltd. | |
12. | Guangzhou Xueersi Education Technology Co., Ltd. | |
13. | Wuhan Jianghanqu Xiaoxinxing English Training School | |
14. | Hubei Qianjiang Xiaohafu English Training School | |
15. | Hubei Jianli Hafu English Training School |
1. | List of Services |
(1) | Providing educational software and course materials research and development services; | |
(2) | Providing employee training services; | |
(3) | Providing technology development, transfer and consulting services; | |
(4) | Providing public relation services; | |
(5) | Providing market survey, research and consulting services; | |
(6) | Providing near-to-mid-term market development and market planning services; | |
(7) | Providing human resource management and internal information management; | |
(8) | Providing network development, upgrade and ordinary maintenance services; | |
(9) | Providing sales services of proprietary products; | |
(10) | Licensing of software and trademarks; and/or | |
(11) | Other services agreed upon from time to time by Party A and the Parties receiving services according to the business needs and the capacity to provide services. | |
2. | Calculation and Payment of Service Fee | |
The Fee for the services provided under this Agreement is calculated based on a percentage of the total revenues of the Party receiving the services or according to the total number of student enrollments of Affiliated Entities of Party B. The specific percentage or amount shall be agreed upon by both Party A and the Party receiving the services taking into account the actual services provided as evidenced by service bills or other written documents delivered by Party A to the Party receiving the services. | ||
3. | The amount of service fees shall be determined by the Parties taking into account the following factors: |
(1) | The technical difficulty and complexity of the services; | ||
(2) | The amount of time spent by employees of Party A to render the services; | ||
(3) | The content and commercial value of the services; | ||
(4) | The market prices for similar services. |
4. | Party A shall calculate the total amount fees payable on a fixed schedule and send Parties receiving the services a bill of service fees to notify such party, who shall pay the stated fees to the bank account designated by Party A within 10 business days after receipt of the bill and send a copy of the remittance certificate by facsimile or mail to Party A within 10 business days after payment. |
TAL Education Technology (Beijing) Co., Ltd., a wholly foreign owned enterprise duly established and validly existing under the laws of the Peoples Republic of China (PRC) with its legal address at No.1 Floor 2, Suzhou Street, Haidian District, Beijing. |
Bangxin Zhang, ID Card No. 321182198010012913
Yundong Cao, ID Card No. 372831197910205618 Yachao Liu, ID Card No. 211103198110152138 Yunfeng Bai, ID Card No. 360521198109240073 |
1. | Call Option | |
1.1 | Party A has the right to demand at any time Party B to transfer all or part of the equity interests ( Target Equity Interests ) of Party C it owns ( Purchase Right ), as the specific demand may be, and Party B shall accordingly transfer Target Equity Interests to Party A or any third party designated by Party A, in the following circumstances,: |
(1) | Party A or any third party designated by Party A is allowed to own all or part of Target Equity Interests under the laws and regulations of PRC; or | ||
(2) | In other circumstances where Party A deems appropriate or necessary. |
The Purchase Right of Party A under this Agreement is exclusive, unconditional and irrevocable. |
1
1.2 | The Parties agree that Party A has the sole discretion to determine whether to exercise the Purchase Right in part or in all to acquire all or part of Target Equity Interests. The Parties further agree that there shall be no restriction on the timing, manner, quantity and frequency with respect to Party As exercise of the Purchase Right. | |
1.3 | The Parties agree that Party A may designate any third party to purchase part or all of Target Equity Interests. Party B shall not refuse to transfer Target Equity Interests to such third party unless such transfer is prohibited by any PRC laws or regulations. | |
1.4 | Party B shall not transfer Target Equity Interests to any third party without the prior written approval by Party A before Target Equity Interests are transferred under this Agreement to Party A or a third party designated by Party A. | |
2. | Procedures | |
2.1 | Party B hereby confirms that the Equity Interest Transfer Agreement and the Consent Letter to be delivered upon an exercise of Purchase Right by Party A shall be in the form set forth in the Appendix attached hereto. | |
2.2 | If Party A decides to exercise its Purchase Right pursuant to Article 1.1, it shall deliver a written notice (the Exercise Notice ) in the form set forth in the Appendix attached hereto to Party B, stating the amount or percentage of the equity interests to be purchased and the name and identity of the purchaser. Party B and Party C shall, within seven days of the delivery of the Exercise Notice, provide all materials and documents necessary for the transfer of Target Equity Interests, including signing the Equity Interest Transfer Agreement and Consent Letter in the form set forth in the Appendix attached hereto. | |
2.3 | Except for the Exercise Notice provided in Article 2.2, there are no other conditions precedent or incidental to, or procedures for, Party As exercise of Purchase Right. | |
2.4 | Party B shall provide Party C with timely and necessary assistance for Party C to complete the approving procedures (if required by law) with competent authorities and the registration procedures of the equity interest transfer with relevant business authorities according to the applicable PRC laws and regulations. | |
2.5 | The date of completion of the transfer of all Target Equity Interests is the date of consummation of the exercise of Purchase Right. | |
3. | Purchase Price | |
3.1 | When all the Target Equity Interests are transferred in whole, the purchase price shall be the lowest price permitted by the PRC laws and regulations at the time such Target Equity Interests are being transferred. In the event the Target Equity Interests are transferred in part |
2
or in installments, the purchase price shall be determined based on the time and the percentage of Target Equity Interests being transferred. | ||
3.2 | Each party shall bear any taxes or expenses incurred by it in the transfer of Target Equity Interests. | |
3.3 | Party B hereby agrees to assign to Party C without any consideration from Party C the entire amount of purchase price paid by Party A or any third party designated by Party A for Target Equity Interests in exercising Purchase Right. | |
4. | Representations and Warranties | |
4.1 | Each Party represents and warrants to the other Parties as follows: | |
(a) | It has full rights, capacity and authorization to execute this Agreement and bear all the obligations and liabilities hereunder; | |
(b) | It has gone through all necessary internal procedures for the execution of this Agreement and has obtained all necessary internal and external authorizations and approvals; and | |
(c) | Its execution and performance of this Agreement will not breach any material agreements or contracts by which it or its assets are bound. | |
4.2 | Party B and Party C severally and jointly represent and warrant to Party A as follows: | |
(a) | As of the date of the effectiveness of this Agreement, Party B legally owns the equity interests of Party C, and has full and valid right of disposal of such equity interests. The registered capital of Party C has been fully contributed. Except for the pledge under the Equity Interest Pledge Agreement and other rights consented to in writing by Party A, the equity interests of Party C owned by Party B are not subject to any pledge, mortgage, guaranty or any other rights or interests of any third party, and are free from any claims by any third party. No third party may demand any distribution, issuance, sales, transfer or exchange of any of Partys equity interests pursuant to any option, conversion right, right of first refusal or other agreements. | |
(b) | During the term of this Agreement, Party B shall not transfer, pledge, mortgage or create any other security interest in the equity interests of Party C without the prior written consent from Party A. | |
(c) | Party B and Party C shall extend the operation period of Party C to the extent permitted by relevant PRC laws and regulations to match the approved operation period of Party A. | |
5. | Appendix | |
Appendixes of this Agreement constitute an integrated part of this Agreement and have |
3
equally binding legal effect as other sections of this Agreement. | ||
6. | Confidentiality | |
This Agreement and all clauses herein are confidential information and shall not be disclosed to any third party except for the relevant senior officers, directors, employees, agents and professional consultants. This clause shall not apply in the event parties hereto are required by relevant laws or regulations to disclose information relating to this Agreement to any governmental authorities, the public or the shareholders, or file this Agreement with relevant authorities for record. | ||
This clause shall survive any modification or termination of this Agreement. | ||
7. | Liabilities for Breach of Agreement | |
If any party hereto shall fail to perform any of its obligations under this Agreement, make any untrue or inaccurate representation or breach any warranty, such party shall be liable for all the losses of the other parties hereto for its breach of this Agreement. | ||
8. | Force Majeure | |
A Force Majeure event means any unforeseen event which cannot be prevented, controlled or overcome by any party of the Agreement, including but not limited to earthquake, typhoon, flood, fire, boycott, war or riot and etcetera. | ||
Any party encountering a Force Majeure event shall (i) notify the other parties by telegram, facsimile or other electronic means immediately after the occurrence of such Force Majeure event and shall provide written documents evidencing the occurrence of such Force Majeure event within fifteen (15) business days; and (ii) to the extent reasonable and lawful under the circumstances, use its best efforts to mitigate or eliminate the effect of such Force Majeure event, and resume its performance of the Agreement after such effect is mitigated or eliminated. The parties to the Agreement shall determine through negotiation whether to terminate, partly terminate or suspend the performance of this Agreement taking into account the extent to which the Agreement is effected by such Force Majeure event. | ||
9. | Miscellaneous |
9.1 | This Agreement shall be governed by and construed in accordance with the PRC laws in all respects. All disputes arising out of or in connection with this Agreement shall be resolved through good faith negotiations between the Parties. Unresolved disputes shall be submitted to binding arbitration by China International Economic and Trade Arbitration Commission under its rules. The arbitration shall take place in Beijing. The arbitration ruling shall be final. Other provisions of the Agreement that are not subject of any arbitration proceedings shall remain in effect. |
4
9.2 | This Agreement becomes effective on the date of execution by all parties hereto and shall terminate upon Party As exercise of Purchase Right to purchased all Target Equity Interests according to the Agreement or the Agreement is terminated by mutual agreement of all the parties hereto. | ||
9.3 | The Agreement is written in Chinese and has three original copies, with each of Party A, Party B and Party C holding one original copy. | ||
9.4 | This Agreement together with its appendixes constitute the entire agreement among the parties hereto and supersedes all prior oral or written communications, undertakings and memorandums among the parties with respect to the subject matter hereof. | ||
9.5 | Any modification of this Agreement shall be made in signed writing by all the parties hereto only. |
5
1. | Transferor agrees to transfer 100% equity interests of Beijing Xueersi Education Technology Co., Ltd. it owns ( Target Equity Interests ) to Transferee for a total consideration of RMB 500,000, and Transferee agrees to purchase such Target Equity Interests. |
2. | Upon consummation of the transfer of Target Equity Interests, Transferor shall no longer enjoy any rights or bear any obligations as holders of Target Equity Interests, and Transferee shall enjoy all such rights and bear all such obligations. |
3. | Other related matters not set forth in the Agreement may be determined by supplemental agreements between the parties. |
4. | The Agreement becomes effective on the date of execution by both parties. |
5. | The Agreement shall have four original copies, with each party holding one copy and the remaining copies reserved registration with business authorities. |
Transferor:
|
||
Bangxin Zhang:
|
Yundong Cao: | |
Signature:
|
Signature: | |
Yachao,Liu:
|
Yunfeng Bai: | |
Signature:
|
Signature: |
1. | I agree to and accept all the terms and conditions of the Call Option Agreement entered into between the Company and TAL Education Technology (Beijing) Co., Ltd.( WFOE ) on February 12, 2009, and waive my right of first refusal to acquire equity interests of the Company when WFOE exercises its Purchase Right under the Call Option Agreement. I will take all measures to assist WFOE in procedures for transferring such equity interests. |
2. | I agree to waive my right of first refusal with respect to the Companys equity interests when any other shareholder of the Company transfers equity interests of the Company it owns to WFOE or any third party designated by WFOE. |
3. | In the event any other shareholder of the Company transfers equity interests of the Company it owns to WFOE or any third party designated by WFOE, I will execute or provide necessary documents for the transfer of such equity interests. |
Bangxin Zhang:
|
Yundong Cao: | |
Signature:
|
Signature: | |
|
||
Yachao,Liu:
|
Yunfeng Bai: | |
Signature:
|
Signature: |
To: |
Shareholders of Beijing Xueersi Education Technology Co., Ltd.; and/or
Beijing Xueersi Education Technology Co., Ltd. (the Company ) |
1. | Transferor agrees to transfer 100% equity interests of Beijing Xueersi Network Technology Co., Ltd. it owns ( Target Equity Interest ) to Transferee for a total consideration of RMB 3,000,000, and Transferee agrees to purchase such Target Equity Interest. |
2. | Upon consummation of the transfer of Target Equity Interest, Transferor shall no longer enjoy any rights or bear any obligations as holders of Target Equity Interests, and Transferee shall enjoy all such rights or bear all such obligations. |
3. | Other related matters not set forth in the Agreement may be determined by supplemental agreements between the parties. |
4. | The Agreement becomes effective on the date of execution by both parties. |
5. | The Agreement shall have four original copies, with each party holding one copy and the remaining copies reserved registration with business authorities. |
Transferor:
|
||
Bangxin Zhang:
|
Yundong Cao: | |
Signature:
|
Signature: | |
Yachao,Liu:
|
Yunfeng Bai: | |
Signature:
|
Signature: |
1. | I agree to and accept all the terms and conditions of the Call Option Agreement entered into between the Company and TAL Education Technology (Beijing) Co., Ltd.( WFOE ) on February 12, 2009, and waive my right of first refusal to acquire equity interests of the Company when WFOE exercises its Purchase Right under the Call Option Agreement. I will take all measures to assist WFOE in procedures for transferring such equity interests. | |
2. | I agree to waive my right of first refusal with respect to the Companys equity interests when any other shareholder of the Company transfers equity interests of the Company it owns to WFOE or any third party designated by WFOE. | |
3. | In the event any other shareholders of the Company transfers equity interest of the Company it owns to WFOE or any third party designated by WFOE, I will execute or provide necessary documents for the transfer of equity interest. |
Bangxin Zhang:
|
Yundong Cao: | |
Signature:
|
Signature: | |
|
||
Yachao,Liu:
|
Yunfeng Bai: | |
Signature:
|
Signature: |
(1) | Party A, Party B, Party C and the subsidiaries and schools of Party C (the Affiliated Entities , a list of which is attached hereto as Appendix I, and such list may be modified after the execution of this Agreement upon changes to Party Cs investments) have already executed the agreement listed in Appendix II hereto (the Main Agreement ); | |
(2) | Party C received capital contributions in the amount of RMB 2 million on October 27, 2009, including RMB1.13 million from Bangxin Zhang, RMB0.52 million from Yundong Cao, RMB0.2 million from Yachao Liu and RMB0.15 million from Yunfeng Bai. Bangxin Zhang, Yundong Cao, Yachao Liu and Yunfeng Bai collectively owns 100% of the equity interests of Party C. | |
(3) | The Parties entered into the Equity Pledge Agreement on February 12, 2009 (the Original Agreement ), pursuant to which Party B agreed to irrevocably and unconditionally pledge 100% of the equity interests of Party C it owned to Party A. and registered such equity pledge |
1
valued at RMB0.50 million. on August 7, 2009. |
1. | Pledge |
Party B agrees to unconditionally and irrevocably pledge 100% of the equity interests of Party C it owns (the Pledged Equity Interests ), valued at RMB2,000,000, to Party A, as security for the performance of the obligations by Party B, Party C and Party Cs subsidiaries and schools (the Affiliated Entities ) under the Main Agreement (listed in Annex II) (the Pledge ). |
2. | Scope of Pledge |
The Pledge under this Agreement extends to all obligations of Party B, Party C and the Affiliated Entities under the Main Agreements (including but not limited to any amounts payable, penalties, damages and etcetera owing to Party A), any fees relating exercising the creditors rights and the rights under the Pledge, and any other related expenses. |
3. | Term of Pledge |
The Pledge under this Agreement shall be effective from the date of registration of the Pledge with competent Industrial and Commercial authorities to the latest of the complete performance, expiration and termination of all of the Main Agreements. During the term of the Pledge, if Party B, Party C or the Affiliated Entities shall fail to perform any of their obligations under the Main Agreements, or if any of the events provided in Article 6.1 hereof shall occur, Party A is entitled to dispose the Pledged Equity Interests in accordance with the provisions of this Agreement. |
4. | Registration |
4.1 | Party B and Party C promise to Party A that Party B and Party C shall: (i) on the date of the execution of the Agreement, record the Pledge under this Agreement on the shareholders register of Party C and deliver the shareholders register to Party As custody; (ii) on the date of the execution of the Agreement, deliver the Capital Contribution Certificate of Party B issued by Party C to Party As custody; (iii) within ten (10) business days after the execution of this Agreement or a shorter period that is practicable, register the Pledged Equity Interests with relevant Industrial and Commercial Registration authorities and obtain documents evidencing such registration. Without limitation to any other provisions of this Agreement, during the term of this Agreement, the shareholders register of Party C shall always be in the custody of Party A or any person designated by Party A, except when any necessary registration or modification of registration is required in the operation of Party C or the Affiliated |
2
Entities. |
4.2 | Party B and Party C further covenant that after the execution of this Agreement, Party B may make capital contribution to Party C with the prior consent of Party A, provided that any such capital contribution by Party B to Party C shall become part of the Pledged Equity Interests. Party B and Party C shall make necessary modifications to the shareholders register and record of capital contributions by shareholders and perform the pledge registration procedures according to Article 4.1. | ||
4.3 | The pledgor and the pledge shall each bear its fees and expenses related to this Agreement, including but not limited to registration fees, costs, stamp duties or any other taxes and expenses according to relevant laws and regulations. |
5. | Representations and Warranties of Party B and Party C |
Party B and Party C hereby jointly and severally represent and warrant to Party A as follows: |
5.1 | Party B is the lawful owner of the Pledged Equity Interests, the ownership of which is not subject to any existing or potential dispute. Party B has the right to dispose the Pledged Equity Interests or any part thereof without any restriction by any third party. | ||
5.2 | Except for the Pledge provided hereunder, Party B has not created any other pledge or any other third party interest on the Pledged Equity Interests. | ||
5.3 | Party B and Party C fully understand and voluntarily enter into this Agreement based on a true understanding of the Agreement. Party B and Party C have taken all necessary measures and obtained all necessary internal authorizations required to execute and perform this Agreement, and executed all necessary documents to make sure the Pledge under the Agreement is lawful and valid. | ||
5.4 | During the term of this Agreement, Party B shall not transfer or assign the Pledged Equity Interests, grant any rights, options or other interests relating to the Pledged Equity Interests to any third party, or create or permit to be created any security or other interests which may potentially affect on the rights or benefits of the Party A without prior written consent of Party A. | ||
5.5 | During the term of this Agreement, Party B and Party C shall abide by and comply with all relevant PRC laws and regulations concerning the pledge of rights, and in the event of receiving any notice, order or recommendation from competent authorities concerning the Pledged Equity Interests, shall timely notify Party A and |
3
show to Party A such notice or order within five (5) business days upon receipt thereof, comply with such notice or order or upon Party As reasonable request or written consent, raise objections to such notice or order. |
5.6 | Party B and Party C shall not perform or permit to be performed any conduct that may damage the value of the Pledged Equity Interests or the Pledge right of Party A. Party B and Party C shall notify Party A of any event that may affect the value of the Pledged Equity Interests or the Pledge right of Party A within five (5) business days after it becomes aware of such event. Party A shall bear no responsibility to any reduction in the value of the Pledged Equity Interests, for which Party B and Party C shall have no right to demand any compensation from or make any request to Party A. | ||
5.7 | To the extent permitted by the PRC laws and regulations, the Pledge under this Agreement shall remain in full effect during the term of the Agreement, and shall not be affected by any insolvency, liquidation, loss of capacity, or change of organizational structure or status of Party B or Party C, any offset among the Parties or any other events. | ||
5.8 | For the purpose of performing this Agreement, Party A is entitled to dispose the Pledged Equity Interests in accordance with the provisions of this Agreement. Party As exercise of such right shall not be interrupted or jeopardized by Party B or Party C, or their successors or agents, or any other persons by way of legal proceedings. | ||
5.9 | In order to protect and perfect the security provided by this Agreement for the obligations of Party B, Party C and the Affiliated Entities under the Main Agreements, Party B and Party C shall faithfully execute and cause any related parties to execute all certificates and agreements requested by Party A in connection with the performance of the Agreement, take or cause such third parties to take any measures required by Party A relating to the Agreement, and provide assistance to Party A concerning the exercise of the Pledge right hereunder. | ||
5.10 | In order to protect the interests of Party A, Party B and Party C shall abide by and perform all warranties, covenants, agreements, representations and conditions. In the event Party B or Party C shall fail to do so resulting in damages to Party A, Party B and Party C shall indemnify Party A for all of such damages and losses. |
6. | Events of Default and Exercise of the Pledge Right |
4
6.1 | If any of the following events ( Events of Default ) shall occur, Party A may require Party B or Party C to perform all the obligations under this Agreement and may immediately claim the Pledge under the Agreement: |
a) | Any warranties or representations made by Party B, Party C or the Affiliated Entities in the Agreement or the Main Agreements are inconsistent, incorrect, untrue or become untrue or incorrect; Party B, Party C or the Affiliated Entities fail to perform all the obligations, covenants or warranties made by them under the Agreement or the Main Agreements; or | ||
b) | Any obligation of Party B, Party C or the Affiliated Entities under the Agreement or the Main Agreements is deemed to be illegal or invalid; or | ||
c) | A material breach by Party B or Party C of its obligations hereunder. |
6.2 | If an Events of Default shall occur, Party A may exercise its Pledge right pursuant to the relevant PRC laws and regulations by purchasing at a discount, designating another party to purchase at a discount, auctioning or selling the Pledged Equity Interests. Party A may exercise such Pledge right without exercising any other security rights, or take any other measures or proceedings against Party B, Party C or any other party. | ||
6.3 | Upon request by Party A, Party B and Party C shall take all lawful and appropriate measures to permit the exercise of the Pledge right by Party A. For such a purpose, Party B and Party C shall execute all appropriate documents and materials, and take all proper measures reasonably requested by Party A. |
7. | Transfer or Assignment |
7.1 | Party B and Party C have no right to transfer or assign the rights and obligations under this Agreement without the prior written consent from Party A, which does not apply to the Call Option Agreement entered into by Party A and Party B. | ||
7.2 | The Agreement shall be binding upon Party B and its successors and be effective for Party A and its successors and assignees. | ||
7.3 | Party A may transfer or assign all and any of its rights and obligations under the Main Agreements to any person (natural or legal) it designates, in which case, the assignee shall enjoy the same rights and undertake the same obligations as Party A hereunder as if the assignee were an original party hereto. Upon Party As transfer or assignment of the rights and obligations under the Main Agreements and Party As request, Party B and/or Party C shall execute relevant agreements and documents with respect to such transfer or assignment. | ||
7.4 | Subsequent to an assignment or transfer by Party A, the new parties to the Pledge shall re- |
5
execute a separate agreement. Party B and Party C shall provide assistance to the assignee with respect to the registration procedures of the Pledge (if applicable). |
8. | Confidentiality |
This Agreement and all clauses hereof are confidential information and shall not be disclosed to any third party except for the relevant senior officers, directors, employees, agents or professional consultants. This clause shall not apply in the event parties hereto are required by relevant laws or regulations to disclose information relating to this Agreement to any governmental authorities, the public or the shareholders, or file this Agreement with relevant authorities for record. | ||
This clause shall survive any modification or termination of this Agreement. |
9. | Liabilities for Breach of Agreement |
In the event any Party shall fail to perform any of its obligations under this Agreement, or make any untrue or inaccurate representation or warranty, such Party shall be liable for all the actual losses of the other Parties for breach of the Agreement. |
10. | Force Majeure |
A Force Majeure event means any unforeseen event which cannot be prevented, controlled or overcome by any party of the Agreement, including but not limited to earthquake, typhoon, flood, fire, boycott, war or riot and etcetera. | ||
Any party encountering a Force Majeure event shall (i) notify the other parties by telegram, facsimile or other electronic means immediately after the occurrence of such Force Majeure event and shall provide written documents evidencing the occurrence of such Force Majeure event within fifteen (15) business days; and (ii) to the extent reasonable and lawful under the circumstances, use its best efforts to mitigate or eliminate the effect of such Force Majeure event, and resume its performance of the Agreement after such effect is mitigated or eliminated. The parties to the Agreement shall determine through negotiation whether to terminate, partly terminate or suspend the performance of this Agreement taking into account the extent to which the Agreement is effected by such Force Majeure event. |
11. | Miscellaneous |
11.1 | This Agreement shall be governed by and construed in accordance with the PRC laws in all respects. All disputes arising out of or in connection with this Agreement shall be resolved through good faith negotiations between the Parties. Unresolved disputes shall be submitted to binding arbitration by China International Economic and Trade Arbitration Commission under its rules. The arbitration shall take place in Beijing. The |
6
arbitration ruling shall be final. Other provisions of the Agreement that are not subject of any arbitration proceedings shall remain in effect. |
11.2 | This Agreement becomes effective on the date of execution by all Parties and terminates when all the obligations under the Main Agreements are completely fulfilled or terminated for any reason. | ||
11.3 | This Agreement amends and restates the Original Agreement. In the case of any discrepancies between this Agreement and the Original Agreement, this Agreement shall govern. | ||
11.4 | The Agreement has seven (7) original copies, with each of Party A, Party B and Party C holding one copy, and the remaining copy to be submitted to relevant Industrial and Commercial authorities for filing and registration. | ||
11.5 | Any modification or amendment of this Agreement shall be in writing and shall only become effective upon signing by all Parties of the Agreement. |
7
8
1. | Beijing Dongcheng District Xueersi Training School | |
2. | Beijing Haidian District Lejiale Training School | |
3. | Tianjin Xueersi Education Information Consulting Co., Ltd. | |
4. | Shenzhen Xueersi Education Technology Co., Ltd. |
9
10
TAL Education Technology (Beijing) Co., Ltd., a wholly foreign owned enterprise duly established and validly existing under the laws of the Peoples Republic of China ( PRC ) with its legal address at Room 1702-03, Lantian Hesheng Building, No.32, Zhongguancun Street, Haidian District, Beijing. |
Bangxin Zhang, ID Card No. 321182198010012913
Yundong Cao, ID Card No. 372831197910205618 Yachao Liu, ID Card No. 211103198110152138 Yunfeng Bai, ID Card No. 360521198109240073 |
Beijing Xueersi Network Technology Co., Ltd., a corporation duly established and validly existing under the PRC laws with its legal address at Room 509, Tower A, Zhongding Building, A No.18, West Road of the North 3 rd Ring, Haidian District, Beijing. |
(1) | The Parties entered into the Equity Pledge Agreement on February 12, 2009 (the Original Agreement ) pursuant to which Party B unconditionally and irrevocably pledged 100% of the equity interests of Party C it owns to Party A; | |
(2) | The Parties entered into the Termination Agreement on June 10, 2010, pursuant to which the Intellectual Property License Agreement was terminated before any actual performance thereof; and the Parties entered into the Exclusive Business Cooperation Agreement on June 25, 2010, which replaces in the entirety the seven agreements (including any supplemental agreements) listed in Appendix II of the Original Agreement. The Main Agreements as defined in the Original Agreement therefore have changed. |
1
1. | Pledge |
Party B agrees to unconditionally and irrevocably pledge 100% of the equity interests of Party C it owns (the Pledged Equity Interests ), at a value of RMB3,000,000, to Party A, as security for the performance of the obligations by Party B, Party C and Party Cs subsidiaries and schools (the Affiliated Entities ) under the Main Agreement (listed in Annex II). |
2. | Scope of Pledge |
The Pledge under this Agreement extends to all obligations of Party B, Party C and the Affiliated Entities under the Main Agreements (including but not limited to any amounts payable, penalties, damages and etcetera owing to Party A), any fees relating exercising the creditors rights and the rights under the Pledge, and any other related expenses. |
3. | Term of Pledge |
The Pledge under this Agreement shall be effective from the date of registration of the Pledge with competent Industrial and Commercial authorities to the latest of the complete performance, expiration and termination of all of the Main Agreements. During the term of the Pledge, if Party B, Party C or the Affiliated Entities shall fail to perform any of their obligations under the Main Agreements, or if any of the events provided in Article 6.1 hereof shall occur, Party A is entitled to dispose the Pledged Equity Interests in accordance with the provisions of this Agreement. |
4. | Registration |
4.1 | Party B and Party C promise to Party A that Party B and Party C shall: (i) on the date of the execution of the Agreement, record the Pledge under this Agreement on the shareholders register of Party C and deliver the shareholders register to Party As custody; (ii) on the date of the execution of the Agreement, deliver the Capital Contribution Certificate of Party B issued by Party C to Party As custody; (iii) within ten (10) business days after the execution of this Agreement or a shorter period that is practicable, register the Pledged Equity Interests with relevant Industrial and Commercial Registration authorities and obtain documents evidencing such registration. Without limitation to any other provisions of this Agreement, during the term of this Agreement, the shareholders register of Party C shall always be in the custody of Party A or any person designated by Party A, except when any necessary registration or modification of registration is required in the operation of Party C or the Affiliated Entities. | ||
4.2 | Party B and Party C further covenant that after the execution of this Agreement, Party B may make capital contribution to Party C with the prior consent of Party A, provided that any such capital contribution by Party B to Party C shall become part of the Pledged Equity Interests. Party B and Party C shall make necessary modifications to the |
2
shareholders register and record of capital contributions by shareholders and perform the pledge registration procedures according to Article 4.1. | |||
4.3 | The pledgor and the pledge shall each bear its fees and expenses related to this Agreement, including but not limited to registration fees, costs, stamp duties or any other taxes and expenses according to relevant laws and regulations. |
5. | Representations and Warranties of Party B and Party C |
Party B and Party C hereby jointly and severally represent and warrant to Party A as follows: |
5.1 | Party B is the lawful owner of the Pledged Equity Interests, the ownership of which is not subject to any existing or potential dispute. Party B has the right to dispose the Pledged Equity Interests or any part thereof without any restriction by any third party. | ||
5.2 | Except for the Pledge provided hereunder, Party B has not created any other pledge or any other third party interest on the Pledged Equity Interests. | ||
5.3 | Party B and Party C fully understand and voluntarily enter into this Agreement based on a true understanding of the Agreement. Party B and Party C have taken all necessary measures and obtained all necessary internal authorizations required to execute and perform this Agreement, and executed all necessary documents to make sure the Pledge under the Agreement is lawful and valid. | ||
5.4 | During the term of this Agreement, Party B shall not transfer or assign the Pledged Equity Interests, grant any rights, options or other interests relating to the Pledged Equity Interests to any third party, or create or permit to be created any security or other interests which may potentially affect on the rights or benefits of the Party A without prior written consent of Party A. | ||
5.5 | During the term of this Agreement, Party B and Party C shall abide by and comply with all relevant PRC laws and regulations concerning the pledge of rights, and in the event of receiving any notice, order or recommendation from competent authorities concerning the Pledged Equity Interests, shall timely notify Party A and show to Party A such notice or order within five (5) business days upon receipt thereof, comply with such notice or order or upon Party As reasonable request or written consent, raise objections to such notice or order. | ||
5.6 | Party B and Party C shall not perform or permit to be performed any conduct that |
3
may damage the value of the Pledged Equity Interests or the Pledge right of Party A. Party B and Party C shall notify Party A of any event that may affect the value of the Pledged Equity Interests or the Pledge right of Party A within five (5) business days after it becomes aware of such event. Party A shall bear no responsibility to any reduction in the value of the Pledged Equity Interests, for which Party B and Party C shall have no right to demand any compensation from or make any request to Party A. | |||
5.7 | To the extent permitted by the PRC laws and regulations, the Pledge under this Agreement shall remain in full effect during the term of the Agreement, and shall not be affected by any insolvency, liquidation, loss of capacity, or change of organizational structure or status of Party B or Party C, any offset among the Parties or any other events. | ||
5.8 | For the purpose of performing this Agreement, Party A is entitled to dispose the Pledged Equity Interests in accordance with the provisions of this Agreement. Party As exercise of such right shall not be interrupted or jeopardized by Party B or Party C, or their successors or agents, or any other persons by way of legal proceedings. | ||
5.9 | In order to protect and perfect the security provided by this Agreement for the obligations of Party B, Party C and the Affiliated Entities under the Main Agreements, Party B and Party C shall faithfully execute and cause any related parties to execute all certificates and agreements requested by Party A in connection with the performance of the Agreement, take or cause such third parties to take any measures required by Party A relating to the Agreement, and provide assistance to Party A concerning the exercise of the Pledge right hereunder. | ||
5.10 | In order to protect the interests of Party A, Party B and Party C shall abide by and perform all warranties, covenants, agreements, representations and conditions. In the event Party B or Party C shall fail to do so resulting in damages to Party A, Party B and Party C shall indemnify Party A for all of such damages and losses. |
6. | Events of Default and Exercise of the Pledge Right |
6.1 | If any of the following events ( Events of Default ) shall occur, Party A may require Party B or Party C to perform all the obligations under this Agreement and may immediately claim the Pledge under the Agreement: |
a) | Any warranties or representations made by Party B, Party C or the Affiliated Entities in the Agreement or the Main Agreements are |
4
inconsistent, incorrect, untrue or become untrue or incorrect; Party B, Party C or the Affiliated Entities fail to perform all the obligations, covenants or warranties made by them under the Agreement or the Main Agreements; or | |||
b) | Any obligation of Party B, Party C or the Affiliated Entities under the Agreement or the Main Agreements is deemed to be illegal or invalid; or | ||
c) | A material breach by Party B or Party C of its obligations hereunder. |
6.2 | If an Events of Default shall occur, Party A may exercise its Pledge right pursuant to the relevant PRC laws and regulations by purchasing at a discount, designating another party to purchase at a discount, auctioning or selling the Pledged Equity Interests. Party A may exercise such Pledge right without exercising any other security rights, or take any other measures or proceedings against Party B, Party C or any other party. | ||
6.3 | Upon request by Party A, Party B and Party C shall take all lawful and appropriate measures to permit the exercise of the Pledge right by Party A. For such a purpose, Party B and Party C shall execute all appropriate documents and materials, and take all proper measures reasonably requested by Party A. |
7. | Transfer or Assignment |
7.1 | Party B and Party C have no right to transfer or assign the rights and obligations under this Agreement without the prior written consent from Party A, which does not apply to the Call Option Agreement entered into by Party A and Party B. | ||
7.2 | The Agreement shall be binding upon Party B and its successors and be effective for Party A and its successors and assignees. | ||
7.3 | Party A may transfer or assign all and any of its rights and obligations under the Main Agreements to any person (natural or legal) it designates, in which case, the assignee shall enjoy the same rights and undertake the same obligations as Party A hereunder as if the assignee were an original party hereto. Upon Party As transfer or assignment of the rights and obligations under the Main Agreements and Party As request, Party B and/or Party C shall execute relevant agreements and documents with respect to such transfer or assignment. | ||
7.4 | Subsequent to an assignment or transfer by Party A, the new parties to the Pledge shall re-execute a separate agreement. Party B and Party C shall provide assistance to the assignee with respect to the registration procedures of the Pledge (if applicable). |
8. | Confidentiality |
This Agreement and all clauses hereof are confidential information and shall not be disclosed |
5
to any third party except for the relevant senior officers, directors, employees, agents or professional consultants. This clause shall not apply in the event parties hereto are required by relevant laws or regulations to disclose information relating to this Agreement to any governmental authorities, the public or the shareholders, or file this Agreement with relevant authorities for record. | ||
This clause shall survive any modification or termination of this Agreement. |
9. | Liabilities for Breach of Agreement |
In the event any Party shall fail to perform any of its obligations under this Agreement, or make any untrue or inaccurate representation or warranty, such Party shall be liable for all the actual losses of the other Parties for breach of the Agreement. |
10. | Force Majeure |
A Force Majeure event means any unforeseen event which cannot be prevented, controlled or overcome by any party of the Agreement, including but not limited to earthquake, typhoon, flood, fire, boycott, war or riot and etcetera. | ||
Any party encountering a Force Majeure event shall (i) notify the other parties by telegram, facsimile or other electronic means immediately after the occurrence of such Force Majeure event and shall provide written documents evidencing the occurrence of such Force Majeure event within fifteen (15) business days; and (ii) to the extent reasonable and lawful under the circumstances, use its best efforts to mitigate or eliminate the effect of such Force Majeure event, and resume its performance of the Agreement after such effect is mitigated or eliminated. The parties to the Agreement shall determine through negotiation whether to terminate, partly terminate or suspend the performance of this Agreement taking into account the extent to which the Agreement is effected by such Force Majeure event. |
11. | Miscellaneous |
11.1 | This Agreement shall be governed by and construed in accordance with the PRC laws in all respects. All disputes arising out of or in connection with this Agreement shall be resolved through good faith negotiations between the Parties. Unresolved disputes shall be submitted to binding arbitration by China International Economic and Trade Arbitration Commission under its rules. The arbitration shall take place in Beijing. The arbitration ruling shall be final. Other provisions of the Agreement that are not subject of any arbitration proceedings shall remain in effect. | ||
11.2 | This Agreement becomes effective on the date of execution by all Parties and terminates when all the obligations under the Main Agreements are completely fulfilled or terminated for any reason. |
6
11.3 | This Agreement amends and restates the Original Agreement. In the case of any discrepancies between this Agreement and the Original Agreement, this Agreement shall govern. | ||
11.4 | The Agreement has seven (7) original copies, with each of Party A, Party B and Party C holding one copy, and the remaining copy to be submitted to relevant Industrial and Commercial authorities for filing and registration. | ||
11.5 | Any modification or amendment of this Agreement shall be in writing and shall only become effective upon signing by all Parties of the Agreement. |
7
8
1.
|
Beijing Xicheng District Xueersi Training School | |
2.
|
Beijing Haidian District Xueersi Training School | |
3.
|
Beijing Zhikang Culture Distribution Co., Ltd. | |
4.
|
Shanghai Lehai Science and TechnologyInformation Co., Ltd. | |
5.
|
Shanghai Changning District Xueersi-Lejiale School | |
6.
|
Shanghai Minhang District Lejiale School | |
7.
|
Shanghai Xueersi Education Information Consulting Co., Ltd. | |
8.
|
Guangzhou Xueersi Education Technology Co., Ltd. | |
9.
|
Wuhan Jianghanqu Xiaoxinxing English Training School | |
10.
|
Hubei Jianli Hafu English Training School | |
11.
|
Hubei Qianjiang Xiaohafu English Training School |
9
10
1. | Attending shareholders meetings of Xueersi Education and Xueersi Network; | |
2. | Exercising all the rights of shareholders of Xueersi Education and Xueersi Network on such shareholders meetings pursuant to relevant laws and regulations and the articles of association of such companies, which rights include but are not limited to the right to nominate and the right to vote. |
/s/ Bangxin Zhang
|
/s/ Yundong Cao | |
Bangxin Zhang
|
Yundong Cao | |
|
||
/s/ Yachao Liu
|
/s/ Yunfeng Bai | |
Yachao Liu
|
Yunfeng Bai |
Name | Jurisdiction of Incorporation | Affiliate Relationship with The Registrant | ||
Subsidiaries:
|
||||
Beijing Huanqiu Zhikang Shidai Education Consulting Co., Ltd.
|
PRC | Wholly-owned subsidiary | ||
Beijing Yidu Huida Education Technology Co., Ltd.
|
PRC | Wholly-owned subsidiary | ||
TAL Education Technology (Beijing) Co., Ltd.
|
PRC | Wholly-owned subsidiary | ||
Xueersi International Education Group Limited
|
Hong Kong | Wholly-owned subsidiary | ||
|
||||
Affiliated Entities:
|
||||
Beijing Xueersi Education Technology Co., Ltd.
|
PRC | Affiliated entity | ||
Beijing Xueersi Network Technology Co., Ltd.
|
PRC | Affiliated entity | ||
Beijing Dongcheng District Xueersi Training School
|
PRC | Affiliated entity | ||
Beijing Haidian District Xueersi Training School
|
PRC | Affiliated entity | ||
Beijing Haidian Lejiale Training School
|
PRC | Affiliated entity | ||
Beijing Xicheng District Xueersi Training School
|
PRC | Affiliated entity | ||
Beijing Zhikang Culture Distribution Co., Ltd.
|
PRC | Affiliated entity | ||
Guangzhou Xueersi Education Technology Co., Ltd.
|
PRC | Affiliated entity | ||
Hubei Jianli Hafu English Training School
|
PRC | Affiliated entity | ||
Hubei Qianjiang Xiaohafu English Training School
|
PRC | Affiliated entity | ||
Shanghai Changning District Xueersi-Lejiale School
|
PRC | Affiliated entity | ||
Shanghai Lehai Science and Technology Information Co., Ltd.
|
PRC | Affiliated entity | ||
Shanghai Minhang District Lejiale School
|
PRC | Affiliated entity | ||
Shanghai Xueersi Education Information Consulting Co., Ltd.
|
PRC | Affiliated entity | ||
Shenzhen Xueersi Education Technology Co., Ltd.
|
PRC | Affiliated entity | ||
Tianjin Hexi District Xueersi Training School
|
PRC | Affiliated entity | ||
Tianjin Xueersi Education Information Consulting Co., Ltd.
|
PRC | Affiliated entity | ||
Wuhan Jianghanqu Xiaoxinxing English Training School
|
PRC | Affiliated entity |
|
/s/ iResearch Consulting Group |
|
Yours faithfully,
|
||||
/s/ AMERICAN APPRAISAL CHINA LIMITED | ||||
Sincerely yours,
|
||||
/s/ Jane Jie Sun | ||||
Name: | Jane Jie Sun | |||
Sincerely yours,
|
||||
/s/ Wai Chau Lin | ||||
Name: | Wai Chau Lin | |||
I. | PURPOSE |
| honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; | ||
| full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the U.S. Securities and Exchange Commission (the SEC) and in other public communications made by the Company; | ||
| compliance with applicable laws, rules and regulations; | ||
| prompt internal reporting of violations of the Code; and | ||
| accountability for adherence to the Code. |
II. | APPLICABILITY |
1
III. | CONFLICTS OF INTEREST |
| Competing Business . No employee may be employed by a business that competes with the Company or deprives it of any business. | ||
| Corporate Opportunity . No employee should use corporate property, information or his or her position with the Company to secure a business opportunity that would otherwise be available to the Company. If an employee discovers a business opportunity that is in the Companys line of business through the use of the Companys property, information or position, the employee must first present the business opportunity to the Company before pursuing the opportunity in your individual capacity. |
| Financial Interests . |
(i) | No employee may have any financial interest (ownership or otherwise), either directly or indirectly through a spouse or other family member, in any other business or entity if such interest adversely affects the employees performance of duties or responsibilities to the Company, or requires the employee to devote time to it during such employees working hours at the Company; | ||
(ii) | No employee may hold any ownership interest in a privately held company that is in competition with the Company; | ||
(iii) | An employee may hold up to 5% ownership interest in a publicly traded company that is in competition with the Company; provided that if the employees ownership interest in such publicly traded company increases to more than 5%, the employee must immediately report such ownership to the Compliance Officer; |
2
(iv) | No employee may hold any ownership interest in a company that has a business relationship with the Company if such employees duties at the Company include managing or supervising the Companys business relations with that company; and | ||
(v) | Notwithstanding the other provisions of this Code, | ||
(a) a director or any immediate family member of such director (collectively, Director Affiliates ) or a senior officer or any immediate family member of such senior officer (collectively, Officer Affiliates ) may continue to hold his or her investment or other financial interest in a business or entity (an Interested Business ) that: | |||
(1) was made or obtained either (x) before the Company invested in or otherwise became interested in such business or entity; or (y) before the director or senior officer joined the Company (for the avoidance of doubt, regardless of whether the Company had or had not already invested in or otherwise become interested in such business or entity at the time the director or senior officer joined the Company); or | |||
(2) may in the future be made or obtained by the director or senior officer, provided that at the time such investment or other financial interest is made or obtained, the Company has not yet invested in or otherwise become interested in such business or entity; | |||
provided that such director or senior officer shall disclose such investment or other financial interest to the Board; | |||
(b) an interested director or senior officer shall refrain from participating in any discussion among senior officers of the Company relating to an Interested Business and shall not be involved in any proposed transaction between the Company and an Interested Business; and | |||
(c) before any Director Affiliate or Officer Affiliate (i) invests, or otherwise acquires any equity or other financial interest, in a business or entity that is in competition with the Company; or (ii) enters into any transaction with the Company, the related director or senior officer shall obtain prior approval from the Audit Committee of the Board. |
For purposes of this Code, a company or entity is deemed to be in competition with the Company if it competes with the Companys business of providing private educational services and/or any other business in which the Company is engaged. |
| Loans or Other Financial Transactions . No employee may obtain loans or guarantees of personal obligations from, or enter into any other personal financial transaction with, any company that is a material customer, supplier or competitor of the Company. |
3
This guideline does not prohibit arms-length transactions with recognized banks or other financial institutions. |
| Service on Boards and Committees . No employee shall serve on a board of directors or trustees or on a committee of any entity (whether profit or not-for-profit) whose interests could reasonably be expected to conflict with those of the Company. Employees must obtain prior approval from the Board before accepting any such board or committee position. The Company may revisit its approval of any such position at any time to determine whether an employees service in such position is still appropriate. |
| Is the action to be taken legal? | ||
| Is it honest and fair? | ||
| Is it in the best interests of the Company? |
4
IV. | GIFTS AND ENTERTAINMENT |
V. | FCPA COMPLIANCE |
VI. | PROTECTION AND USE OF COMPANY ASSETS |
5
| Exercise reasonable care to prevent theft, damage or misuse of Company property; | ||
| Promptly report any actual or suspected theft, damage or misuse of Company property; | ||
| Safeguard all electronic programs, data, communications and written materials from unauthorized access; and | ||
| Use Company property only for legitimate business purposes. |
| any contributions of the Companys funds or other assets for political purposes; | ||
| encouraging individual employees to make any such contribution; and | ||
| reimbursing an employee for any political contribution. |
VII. | INTELLECTUAL PROPERTY AND CONFIDENTIALITY |
| All inventions, creative works, computer software, and technical or trade secrets developed by an employee in the course of performing the employees duties or primarily through the use of the Companys assets or resources while working at the Company shall be the property of the Company. | ||
| Employees should maintain the confidentiality of information entrusted to them by the Company or its customers, except when disclosure is authorized or legally mandated. Confidential information includes all non-public information that might be of use to competitors, or harmful to the company or its customers, if disclosed. | ||
| The Company maintains a strict confidentiality policy. During an employees term of employment with the Company, the employee shall comply with any and all written or unwritten rules and policies concerning confidentiality and shall fulfill the duties and responsibilities concerning confidentiality applicable to the employee. | ||
| In addition to fulfilling the responsibilities associated with his position in the Company, an employee shall not, without obtaining prior approval from the Company, disclose, announce or publish trade secrets or other confidential |
6
business information of the Company, nor shall an employee use such confidential information outside the course of his duties to the Company. |
| Even outside the work environment, an employee must maintain vigilance and refrain from disclosing important information regarding the Company or its business, customers or employees. | ||
| An employees duty of confidentiality with respect to the confidential information of the Company survives the termination of such employees employment with the Company for any reason until such time as the Company discloses such information publicly or the information otherwise becomes available in the public sphere through no fault of the employee. | ||
| Upon termination of employment, or at such time as the Company requests, an employee must return to the Company all of its property without exception, including all forms of medium containing confidential information, and may not retain duplicate materials. |
VIII. | ACCURACY OF FINANCIAL REPORTS AND OTHER PUBLIC COMMUNICATIONS |
| Financial results that seem inconsistent with the performance of the underlying business; | ||
| Transactions that do not seem to have an obvious business purpose; and | ||
| Requests to circumvent ordinary review and approval procedures. |
7
| issuing or reissuing a report on the Companys financial statements that is not warranted in the circumstances (due to material violations of U.S. GAAP, generally accepted auditing standards or other professional or regulatory standards); | ||
| not performing audit, review or other procedures required by generally accepted auditing standards or other professional standards; | ||
| not withdrawing an issued report when withdrawal is warranted under the circumstances; or | ||
| not communicating matters required to be communicated to the Companys Audit Committee. |
IX. | COMPANY RECORDS |
X. | COMPLIANCE WITH LAWS AND REGULATIONS |
8
XI. | DISCRIMINATION AND HARASSMENT |
XII. | FAIR DEALING |
XIII. | HEALTH AND SAFETY |
XIV. | VIOLATIONS OF THE CODE |
9
XV. | WAIVERS OF THE CODE |
XVI. | CONCLUSION |
10