☐ |
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Trading
Symbol(s)
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Name of each exchange
on which registered
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||
American depositary shares (each ADS representing two ordinary shares, par value US$0.00005 per share)
|
NEW
|
New York Stock Exchange
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||
Ordinary shares, par value US$0.00005 per share*
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New York Stock Exchange
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* |
Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.
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Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Emerging growth company | ☒ |
†
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The term
“new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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U.S. GAAP ☒
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|
International Financial Reporting Standards as issued
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Other ☐
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|
|
by the International Accounting Standards Board ☐
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Page
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1 | ||||||
3 | ||||||
4 | ||||||
ITEM 1.
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4 | |||||
ITEM 2.
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4 | |||||
ITEM 3.
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4 | |||||
ITEM 4.
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41 | |||||
ITEM 4A.
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72 | |||||
ITEM 5.
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73 | |||||
ITEM 6.
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90 | |||||
ITEM 7.
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98 | |||||
ITEM 8.
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99 | |||||
ITEM 9.
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99 | |||||
ITEM 10.
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100 | |||||
ITEM 11.
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108 | |||||
ITEM 12.
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108 | |||||
111 | ||||||
ITEM 13.
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111 | |||||
ITEM 14.
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111 | |||||
ITEM 15.
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111 | |||||
ITEM 16.
|
112 | |||||
ITEM 16A.
|
112 | |||||
ITEM 16B.
|
112 | |||||
ITEM 16C.
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112 | |||||
ITEM 16D.
|
112 | |||||
ITEM 16E.
|
112 | |||||
ITEM 16F.
|
113 | |||||
ITEM 16G.
|
113 | |||||
ITEM 16H.
|
113 | |||||
114 | ||||||
ITEM 17.
|
114 | |||||
ITEM 18.
|
114 | |||||
ITEM 19.
|
114 | |||||
116 |
• |
“ADSs” refers to our American depositary shares, each representing two of our ordinary shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs;
|
• |
“China” or “PRC” refers to the People’s Republic of China, excluding, for purposes of this annual report, Hong Kong, Macau and Taiwan;
|
• |
“K-12”
refers to the three years before the first grade through the last year of high school;
|
• |
“K-12
group class utilization rate” refers to the number of students enrolled in a
K-12
tutoring group class course as a percentage of the maximum number of students for that course;
|
• |
“K-12
group class student retention rate” refers to the number of students who continue to enroll in
K-12
tutoring group class courses (excluding promotional programs) at our learning centers after completing a
K-12
tutoring group class course in a particular period as a percentage of the total number of students who complete
K-12
tutoring group class courses during the same period;
|
• |
“learning centers” refers to the physical establishment of an education facility providing
K-12
tutoring services, study-abroad test preparation courses or study-abroad consulting services at a specific geographic location, directly owned and operated by our VIE or its subsidiaries. For the avoidance of doubt, references to and calculations of “learning centers” do not include the franchised schools operated under the brand of Global Education;
|
• |
“ordinary shares” refers to our ordinary shares, par value US$0.00005 per share, carrying one vote per share;
|
• |
“RMB” or “Renminbi” refers to the legal currency of China;
|
• |
“school” or “schools,” with respect to our acquisitions and business, refers to (i) entities providing
K-12
tutoring services and study-abroad test preparation services which are required to obtain the private school operation permits in China, and (ii) entities providing study-abroad consulting services or online education services in China;
|
• |
“student enrollments” refers to the cumulative total number of courses registered and paid for by our students during a given period of time; if one student enrolls in multiple courses, it will be counted as multiple student enrollments;
|
• |
“tier-1
cities” refers to cities with strong economic development and high per capita disposable income, including Beijing, Shanghai, Guangzhou and Shenzhen;
|
• |
“tier-2
cities” refers to capital cities in 30 provinces and certain economically developed prefecture-level cities;
|
• |
“training institution” or “training institutions” refers to the learning centers providing
K-12
tutoring services or study-abroad test preparation services, which are registered as corporate or private
non-enterprise
entities with relevant PRC government authorities;
|
• |
“U.S. dollars,” “US$” or “dollars” refers to the legal currency of the United States;
|
• |
“variable interest entity,” “VIE” or “Puxin Education” refers to Puxin Education Technology Group Co., Ltd., which is a PRC company 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, such entity; and
|
• |
“we,” “us,” “our company,” “our,” or “Puxin Limited” refers to Puxin Limited, a Cayman Islands exempted company with limited liability, and its subsidiaries, and unless the context requires otherwise, includes its VIE and VIE’s subsidiaries.
|
• |
our goals and growth strategies;
|
• |
our ability to retain and increase our student enrollments;
|
• |
our ability to offer new courses and services;
|
• |
our ability to engage, train and retain new teachers and consultants;
|
• |
expected demand for, and market acceptance of, our services and our brand;
|
• |
our ability to maintain and improve technology infrastructure necessary to operate our online platform;
|
• |
our future business development, financial condition and results of operations;
|
• |
expected changes in our revenues, costs or expenditures;
|
• |
growth of and competition trends in our industry;
|
• |
the expected increase in expenditures on education in China; and
|
• |
PRC laws, regulations and policies relating to private education and providers of private educational services.
|
ITEM 1.
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
ITEM 2.
|
OFFER STATISTICS AND EXPECTED TIMETABLE
|
ITEM 3.
|
KEY INFORMATION
|
A.
|
Selected Financial Data
|
For the Year Ended December 31,
|
||||||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||||||||
(in thousands, except share and share related data)
|
||||||||||||||||||||||||
Selected Consolidated Statements of Operations Data:
|
||||||||||||||||||||||||
Net revenues
|
439,181 | 1,282,562 | 2,228,117 | 3,103,958 | 2,903,915 | 445,044 | ||||||||||||||||||
Cost of revenues
(1)
|
257,995 | (794,342 | ) | (1,242,889 | ) | (1,629,447 | ) | (1,558,596 | ) | (238,865 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit
|
|
181,186
|
|
|
488,220
|
|
|
985,228
|
|
|
1,474,511
|
|
|
1,345,319
|
|
|
206,179
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Selling expenses
(1)
|
(123,370 | ) | (444,927 | ) | (848,088 | ) | (1,083,795 | ) | (1,048,521 | ) | (160,693 | ) | ||||||||||||
General and administrative expenses
(1)
|
(185,496 | ) | (362,748 | ) | (775,883 | ) | (748,259 | ) | (469,163 | ) | (71,902 | ) | ||||||||||||
Impairment loss on intangible assets
|
— | — | — | — | (4,100 | ) | (628 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses
|
|
(308,866
|
)
|
|
(807,675
|
)
|
|
(1,623,971
|
)
|
|
(1,832,054
|
)
|
|
(1,521,784
|
)
|
|
(233,223
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating loss
|
|
(127,680
|
)
|
|
(319,455
|
)
|
|
(638,743
|
)
|
|
(357,543
|
)
|
|
(176,465
|
)
|
|
(27,044
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Interest expense
|
— | (5,556 | ) | (51,901 | ) | (71,099 | ) | (80,319 | ) | (12,309 | ) | |||||||||||||
Interest income
|
464 | 549 | 2,826 | 25,542 | 46,150 | 7,073 | ||||||||||||||||||
Foreign exchange (loss) gain
|
— | — | (7,621 | ) | 243 | (1,322 | ) | (203 | ) | |||||||||||||||
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
— | (70,336 | ) | (131,748 | ) | (104,589 | ) | (20,917 | ) | (3,206 | ) | |||||||||||||
Loss on extinguishment of convertible notes
|
— | — | (900 | ) | — | — | — | |||||||||||||||||
Other income, net
|
— | — | — | — | 78,440 | 12,021 | ||||||||||||||||||
Gain on disposal of subsidiaries
|
— | — | — | — | 126,968 | 19,459 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Loss before income taxes
|
|
(127,216
|
)
|
|
(394,798
|
)
|
|
(828,087
|
)
|
|
(507,446
|
)
|
|
(27,465
|
)
|
|
(4,209
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income tax expenses
|
(388 | ) | (2,436 | ) | (5,322 | ) | (12,188 | ) | (9,195 | ) | (1,409 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss
|
|
(127,604
|
)
|
|
(397,234
|
)
|
|
(833,409
|
)
|
|
(519,634
|
)
|
|
(36,660
|
)
|
|
(5,618
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less: Net income (loss) attributable to non-controlling interest
|
(48 | ) | 79 | 2 | (1,101 | ) | (4,454 | ) | (683 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to ordinary shareholders of Puxin Limited
|
|
(127,556
|
)
|
|
(397,313
|
)
|
|
(833,411
|
)
|
|
(518,533
|
)
|
|
(32,206
|
)
|
|
(4,935
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss per share attributable to ordinary shareholders of Puxin Limited
|
||||||||||||||||||||||||
Basic and diluted
|
(1.29 | ) | (3.98 | ) | (5.78 | ) | (3.03 | ) | (0.18 | ) | (0.03 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss per ADS attributable to ordinary shareholders of Puxin Limited
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic and diluted
|
(2.58 | ) | (7.96 | ) | (11.56 | ) | (6.06 | ) | (0.36 | ) | (0.06 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average shares used in calculating basic and diluted net loss per share
|
98,670,361 | 99,705,361 | 144,157,947 | 170,903,317 | 174,156,247 | 174,156,247 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average ADS used in calculating basic and diluted net loss per share
|
49,335,181 | 49,852,680 | 72,078,973 | 85,451,659 | 87,078,124 | 87,078,124 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Share-based compensation expenses that were allocated as follows:
|
For the Year Ended December 31,
|
||||||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
Allocation of share-based compensation expenses:
|
||||||||||||||||||||||||
Cost of revenues
|
— | 1,152 | 6,420 | 4,352 | 2,294 | 352 | ||||||||||||||||||
Selling expenses
|
991 | 3,058 | 28,848 | 21,870 | 13,290 | 2,037 | ||||||||||||||||||
General and administrative expenses
|
50,272 | 51,625 | 339,689 | 204,218 | 12,439 | 1,906 |
As of December 31,
|
||||||||||||||||||||||||
2016
|
2017
|
2018
|
2019
|
2020
|
||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||||||||
(in thousands, expect for share data)
|
||||||||||||||||||||||||
Selected Consolidated Balance Sheet Data:
|
||||||||||||||||||||||||
Total current assets
|
136,380 | 307,678 | 916,303 | 927,992 | 942,992 | 144,519 | ||||||||||||||||||
Total assets
|
594,117 | 2,008,393 | 2,737,019 | 4,707,055 | 4,617,594 | 707,676 | ||||||||||||||||||
Total current liabilities
|
478,385 | 1,270,784 | 1,931,220 | 3,308,361 | 3,144,353 | 481,893 | ||||||||||||||||||
Total liabilities
|
511,421 | 2,161,178 | 2,189,147 | 4,446,997 | 4,198,471 | 643,444 | ||||||||||||||||||
Convertible redeemable preferred shares
|
120,000 | 120,000 | — | — | — | — | ||||||||||||||||||
Ordinary shares (par value of US$0.00005 per share; 100,000,000, 100,000,000, 1,000,000,000, 1,000,000,000 and 1,000,000,000 shares authorized, 100,000,000, 100,000,000, 188,627,228, 188,627,228 and 188,653,468 shares issued and 100,000,000, 100,000,000, 165,038,164, 174,025,810 and 174,453,992 shares outstanding as of December 31, 2016, 2017, 2018, 2019 and 2020, respectively)
|
34 | 34 | 62 | 62 | 62 | 9 | ||||||||||||||||||
Total shareholders’ (deficit) equity
|
(37,304 | ) | (272,785 | ) | 547,872 | 260,058 | 419,123 | 64,232 |
For the Year Ended December 31,
|
||||||||||||
2019
|
2020
|
2020
|
||||||||||
RMB
|
RMB
|
US$
|
||||||||||
(in thousands)
|
||||||||||||
Net loss
|
(519,634 | ) | (36,660 | ) | (5,618 | ) | ||||||
|
|
|
|
|
|
|||||||
Add:
|
||||||||||||
Income tax expenses
|
12,188 | 9,195 | 1,409 | |||||||||
Depreciation of property, plant and equipment
|
77,859 | 80,290 | 12,305 | |||||||||
Amortization of intangible assets
|
34,938 | 34,266 | 5,251 | |||||||||
Interest expense
|
71,099 | 80,319 | 12,309 | |||||||||
Less: Interest income
|
25,542 | 46,150 | 7,073 | |||||||||
|
|
|
|
|
|
|||||||
EBITDA
|
(349,092 | ) | 121,260 | 18,583 | ||||||||
Add:
|
||||||||||||
Share-based compensation expenses
|
230,440 | 28,023 | 4,295 | |||||||||
Loss on changes in fair value of derivative liabilities
|
104,589 | 20,917 | 3,206 | |||||||||
|
|
|
|
|
|
|||||||
Adjusted EBITDA
|
(14,063 | ) | 170,200 | 26,084 | ||||||||
|
|
|
|
|
|
For the Year Ended December 31,
|
||||||||||||
2019
|
2020
|
2020
|
||||||||||
RMB
|
RMB
|
US$
|
||||||||||
(in thousands)
|
||||||||||||
Net loss
|
(519,634 | ) | (36,660 | ) | (5,618 | ) | ||||||
|
|
|
|
|
|
|||||||
Add:
|
||||||||||||
Share-based compensation expenses
|
230,440 | 28,023 | 4,295 | |||||||||
Loss on changes in fair value of derivative liabilities
|
104,589 | 20,917 | 3,206 | |||||||||
|
|
|
|
|
|
|||||||
Adjusted net (loss) income
|
(184,605 | ) | 12,280 | 1,883 | ||||||||
|
|
|
|
|
|
B.
|
Capitalization and Indebtedness
|
C.
|
Reason for the Offer and Use of Proceeds
|
D.
|
Risk Factors
|
• |
Our business, financial condition and results of operations have been and are likely to continue to be materially and adversely affected by the outbreak of
COVID-19.
|
• |
We have a history of net loss and negative cash flows from our operating activities, which may continue or occur again in the future.
|
• |
We may not be able to effectively manage our business expansion and increasingly complicated operations and successfully integrate businesses we acquire, which could harm our business.
|
• |
Failure to attract and retain students to enroll in our courses and study-abroad consulting programs may have a material adverse impact on our business and prospects.
|
• |
We may not be able to effectively identify or pursue targets for acquisitions as we did in the past several years, and even if we are able to identify suitable targets, we may not be able to complete such transactions in a cost-effective manner, which may cause us to lose anticipated benefits from such acquisitions.
|
• |
New legislation or changes in the PRC regulatory requirements regarding private education may affect our business operations and prospects.
|
• |
We are required to obtain various operating licenses and permits and to make registrations and filings for our tutoring services in China; failure to comply with these requirements may materially and adversely affect our business operations.
|
• |
We face intense competition in our industry, and if we fail to compete effectively, we may lose our market share and our profitability may be adversely affected.
|
• |
We may not be able to continue to recruit, train and retain a sufficient number of qualified teachers and consultants.
|
• |
If the PRC government finds that the agreements that establish the structure for operating our business do not comply with applicable PRC laws and regulations, we could be subject to severe penalties.
|
• |
Uncertainties exist with respect to the interpretation and implementation of the Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance, business, financial condition and results of operations.
|
• |
We rely on contractual arrangements with our VIE and its shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership.
|
• |
Our VIE or its shareholders may fail to perform their obligations under the contractual arrangements.
|
• |
The shareholders of our VIE may have actual or potential conflicts of interest with us and not act in the best interests of our company.
|
• |
PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the education services market.
|
• |
Uncertainties with respect to the PRC legal system could adversely affect us.
|
• |
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.
|
• |
Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.
|
• |
Certain PRC regulations, including the M&A Rules and national security regulations, may require a complicated review and approval process which could make it difficult for us to pursue growth through acquisitions in China.
|
• |
PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into the PRC subsidiaries, limit PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
|
• |
Our independent registered public accounting firm, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection.
|
• |
We could be delisted if we are unable to meet the PCAOB inspection requirements in time.
|
• |
We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
|
• |
The market prices for the ADSs have fluctuated and may be volatile.
|
• |
Future sales or issuances, or perceived future sales or issuances, of substantial amounts of our ordinary shares or ADSs could cause the price of the ADSs to decline significantly.
|
• |
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.
|
• |
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on your investment.
|
• |
There can be no assurance that we were not a passive foreign investment company, or PFIC, for 2020 or that we will not be a PFIC for 2021 or any other taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or ordinary shares.
|
• |
implementing standardized integration process and performance management systems to ensure management philosophies, group-wide strategies, compliance measures and evaluation benchmarks can be effectively carried out at each acquired school;
|
• |
demonstrating to students of our acquired schools that the acquisitions will not result in adverse changes in the service quality and business focus;
|
• |
retaining qualified education professionals of our acquired schools;
|
• |
integrating and streamlining different system infrastructure;
|
• |
consolidating service offerings of different acquired schools;
|
• |
preserving strategic, marketing or other important relationships of the acquired schools;
|
• |
coordinating and optimizing research and development activities to launch new products and technologies with reduced cost; and
|
• |
integrating our data management system in newly acquired schools.
|
• |
pursuant to the Draft Implementation Rules, private training and education entities that provide after-school tutoring services for kindergarten kids or primary, middle and high school students are subject to approval and strict supervision by the government’s education department at or above county level, while private training and education entities that offer courses of language skills, arts, sports, science and technology, research and other subjects for personality development may apply to register as a corporate entity without obtaining prior approval from education government agencies; and
|
• |
pursuant to the Draft Implementation Rules, private schools that provide any online training and education services without awarding diplomas, or technology companies that provide any online platform or system for such online training and education, are required to obtain relevant Internet operation permits and file with education department or the human resources and social security department of the government at provincial level, and must review and record the identities of entities or individuals that apply for access to their online platforms or systems.
|
• |
our students are not satisfied with our services and their learning experience;
|
• |
we fail to maintain the quality and consistency of our service standards as we expand our course offerings into different subjects and extend our geographic or product reach;
|
• |
our learning center facilities do not meet the standards expected by parents and students;
|
• |
our teachers, study-abroad consultants or staff fail to provide students and their parents with prompt feedback and adequate attention;
|
• |
alleged misconduct or other improper activities committed by our directors, officers, teaching staff and other employees, including misrepresentation made by our employees to potential students during sales and marketing activities, and other fraudulent activities;
|
• |
we lose a license, permit or any other governmental authorization to operate a learning center;
|
• |
governmental and regulatory investigations or penalties resulting from our failure to comply with applicable laws and regulations; and
|
• |
operators of learning centers with lower quality abuse our brands or those with brand names similar to ours conduct fraudulent activities and create confusion in the market.
|
• |
investors’ perception of, and demand for, securities of educational service providers;
|
• |
conditions of the U.S. and other capital markets in which we may seek to raise funds;
|
• |
our future results of operations, financial condition and cash flows;
|
• |
PRC governmental regulation of the private education, in particular, the
K-12
after-school tutoring services;
|
• |
economic, political and other conditions in China; and
|
• |
PRC governmental policies relating to foreign currency borrowings.
|
• |
revoking the business and operating licenses held by our PRC subsidiaries and/or our VIE and its subsidiaries;
|
• |
discontinuing or restricting the operations of any related-party transactions among our PRC subsidiaries, our VIE and its subsidiaries;
|
• |
confiscating the income of our VIE and its subsidiaries;
|
• |
imposing fines, penalties or other requirements with which we, our PRC subsidiaries, or our VIE and its subsidiaries may not be able to comply;
|
• |
requiring us to restructure the relevant ownership structure or operations, terminate the contractual arrangements with our VIE or deregister the pledges on the equity interest in our VIE, which in turn would affect our ability to consolidate, derive economic interest from or exert effective control over our VIE;
|
• |
restricting or prohibiting our use of the proceeds of our offshore financing activities to finance our business and operations in China; or
|
• |
restricting the use of financing sources by us or our VIE and its subsidiaries, or otherwise restricting our or their ability to conduct business.
|
• |
regulatory developments affecting us or our industry, and customers of our education services;
|
• |
actual or anticipated fluctuations in our quarterly or annual results of operations, cash flows and changes or revisions of our expected results;
|
• |
changes in the market condition, market potential and competition in education services;
|
• |
announcements by us or our competitors of new education services, expansions, investments, acquisitions, strategic partnerships or joint ventures;
|
• |
fluctuations in global and Chinese economies;
|
• |
changes in financial estimates by securities analysts;
|
• |
adverse publicity, studies or reports about us;
|
• |
additions or departures of our key personnel and senior management;
|
• |
release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and
|
• |
potential litigation or regulatory investigations.
|
• |
the rules under the Exchange Act requiring the filing of quarterly reports on Form
10-Q
or current reports on Form
8-K
with the SEC;
|
• |
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
|
• |
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
|
• |
the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
|
• |
we have failed to timely provide the depositary with notice of meeting and related voting materials;
|
• |
we have instructed the depositary that we do not wish a discretionary proxy to be given;
|
• |
we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
|
• |
a matter to be voted on at the meeting would have a material adverse impact on shareholders; or
|
• |
the voting at the meeting is to be made on a show of hands.
|
ITEM 4.
|
INFORMATION ON THE COMPANY
|
A.
|
History and Development of the Company
|
B.
|
Business Overview
|
• |
Assessment and Positioning
in-depth
knowledge and experience in admission application for overseas schools and universities. Based on students’ academic qualifications, career goals, financial status and work experience, our consultants will help them choose the optimal target schools that address their aspirations and goals.
|
• |
Application Guidance
|
• |
Visa Assistance
|
• |
Puxin Dual-Teacher Classrooms. We offer live streaming classes where a teacher from one of our learning center partners with another teacher located in other learning centers to jointly conduct online lectures to students. Our Puxin Dual-Teacher Classrooms currently focus on classes among learning centers in same cities. In order to leverage our localized course contents and teaching staff, we plan to build learning centers in suburban areas or satellite cities within a reasonable proximity to the cities where we have already operated learning centers and offer Puxin Dual-Teacher Classrooms at these locations. We believe this initiative will enable us to further expand our coverage and penetration in local markets.
|
• |
Puxin Superior Classes. We provide a professional online learning platform for live and recorded broadcasted courses, gathering a large number of high-quality educational institutions and excellent teachers, covering
K-12
education, language training, education for
all-around
development, family education and other types of courses.
|
• |
Foreign Teacher Classes. We offer online interactive classes for students to interact with native speakers of foreign languages. Our foreign teacher classes have both
one-on-one
|
• |
GEDU Online. GEDU Online is the
web-based
platform of Global Education for students to enroll in online recorded IELTS or other study-abroad test preparation courses. The primary audience for GEDU Online is students in
tier-3
and
tier-4
cities where we have not yet established presence.
|
• |
We have a dedicated acquisition team systematically screen, evaluate and track the potential target schools in China. In stage one, we initiate the process by conducting extensive market research to identify high-quality targets in a specific city or province. We apply a set of rigorous criteria, including the target’s geographic location, reputation in the local market, growth potential, key performance indicators (KPIs), synergies with our existing schools and the probability for successful integration, as key considerations for acquisitions.
|
• |
In stage two, we begin outreach and initial conversations with target management and vetting the potential targets internally.
|
• |
In stage three, when we identify target schools, we conduct thorough and rigorous due diligence on these schools covering business operations, financial management, compliance, human resources and marketing of the target schools. During such due diligence process, we identify both the strengths and weakness of the target schools and therefore determine whether to acquire the target schools and the estimated valuation and develop appropriate post-acquisition plans for such schools.
|
• |
In stage four, we proceed with the acquisition plans for which we have obtained internal
pre-approvals
subject to certain acquisition conditions and will complete the acquisitions if the acquisition conditions are met.
|
• |
Student recruitment and marketing
pre-acquisition
due diligence and market research, we take various marketing measures to increase the acquired schools’ student enrollments. We focus on increasing the existing students’ retention rate and the number of courses enrolled by each student. In addition, we proactively encourage students and their parents to make referrals to other students and offer classes with promotion prices to attract new students. We also make specific marketing plans for the acquired schools.
|
• |
Curriculum and service offering
|
• |
Teachers
|
• |
IT systems
|
• |
Financial management
|
• |
scope and quality of course offerings;
|
• |
quality and performance of the teachers and education services offered;
|
• |
overall student experience and satisfaction;
|
• |
brand recognition;
|
• |
ability to effectively market course offerings to a broad base of prospective students and their parents;
|
• |
cost-effectiveness of courses;
|
• |
ability to attract, train, and retain high-quality teachers; and
|
• |
ability to align course offerings to specific needs of students.
|
• |
Sponsors of
for-profit
private schools are entitled to retain the profits and proceeds from the private schools and the operation surplus may be distributed to the sponsors pursuant to the PRC Company Law and other relevant laws and regulations;
|
• |
Sponsors of
non-profit
private schools are not entitled to the distribution of profits or proceed from the
non-profit
schools and all operation surplus of
non-profit
schools shall be used for the operation of the private schools;
|
• |
For-profit
private schools are entitled to set their own tuition and other miscellaneous fees without the obligation to seek prior approvals from or to report to the relevant government authorities. The collection of fees by
non-profit
private schools, on the other hand, shall be regulated by the provincial, autonomous regional or municipal governments;
|
• |
Both
for-profit
and
non-profit
private schools may enjoy preferential tax treatment.
Non-profit
private schools will be entitled to the same tax benefits as public schools. Taxation policies for
for-profit
private schools after the Amended Private Education Law takes effect are still unclear as more specific provisions are yet to be introduced;
|
• |
Where there is construction or expansion of a
non-profit
private school, the private school may acquire the land use rights through allocation by the government as a preferential treatment. Where there is construction or expansion of a
for-profit
private school, the private school may acquire the land use rights by purchasing them from the government;
|
• |
The remaining assets of
non-profit
private schools after liquidation shall continue to be used for the operation of
non-profit
schools. The remaining assets of
for-profit
private schools shall be distributed to the sponsors in accordance with the PRC Company Law; and
|
• |
The People’s governments at or above the county level may support private schools by subscribing to their services, providing student loans and scholarships, and leasing or transferring unused state assets. The governments may further take such measures as providing government subsidies, bonus funds and donation incentives to support
non-profit
private schools.
|
• |
Private training and education institutions that provide after-school tutoring services for kindergarten kids or primary, middle and high school students are subject to approval and supervision by the government’s education department at or above county level. Any private training institution which applies Internet technology to engage in online training education without awarding diplomas and/or operates an Internet technology platform to provide services to such institutions is required to obtain the relevant Internet business license and file with the education department or the human resources and social security department of the relevant provincial government for records. The institutions that provide academic education services through Internet technology may need to obtain the school operation permits. Nevertheless, a private training institution is not required to obtain the school operation permit for
non-academic
continuing education or personality development-oriented training activities, such as trainings on language, arts, sports, science and technology and research skills.
|
• |
Private training institutions are required to have adequate and appropriate venues, facilities, budgets, management experience, course resources, qualified teachers and other resources to provide training services.
|
• |
The private training institutions are allowed to establish tutoring branches within the approved cities after completing the filings for registrations with the approval authorities of such private training institutions and the local educational authorities where the tutoring branches are located.
|
• |
Private training institutions are prohibited from organizing any school admission-related academic competitions, level tests or other similar performance assessment activities for the children and teenagers at the ages of kindergarten, elementary or middle schools.
|
• |
Non-profit
private schools are required to set aside no less than 25% of their annual increase in net assets, and
for-profit
private schools are required to set aside no less than 25% of their annual net income as determined in accordance with generally accepted accounting principles in the PRC, to their development fund reserves for construction or maintenance of the schools, procurement or upgrading of educational equipment and training for teachers and staff.
|
• |
For-profit
private schools may enjoy preferential tax treatments which will be introduced by PRC central government.
|
• |
the amendment to the Implementation Rules for the Law on the Promotion of Private Education of the PRC;
|
• |
the local regulations relating to legal entity registration of
for-profit
and
non-profit
private schools; and
|
• |
the specific measures to be formulated and promulgated by the competent authorities responsible for the administration of private schools in the provinces in which our schools are located, including but not limited to the specific measures for registration of
pre-existing
private schools, the specific requirements for authenticating various parties’ property rights and payment of taxes and fees of
for-profit
private schools, taxation policies for
for-profit
private schools and measures for collection of
non-profit
private schools’ fees.
|
• |
for the income from equity investment assets, the competent tax authority for the income tax of the invested enterprise shall be the competent tax authority, while for the income from the dividends, extra dividends and other equity investment, the competent tax authority for the income tax of the enterprise distributing the income shall be the competent tax authority;
|
• |
the withholding obligator shall declare and pay the withheld tax to the competent tax authority in the place where such withholding obligator is located with seven days from the date of occurrence of the withholding obligation;
|
• |
where the income obtained by the withholding obligator and required to be withheld at source is in the form of dividends, extra dividends or any other equity investment gains, the date of occurrence of the obligation for withholding relevant payable tax is the date of actual payment of the dividends, extra dividends or other equity investment gains;
|
• |
for the income tax required to be withheld under Article 37 of the PRC EIT Law, if the withholding obligator fails to withhold in accordance with the law or is unable to perform withholding obligation, the nonresident enterprise obtaining the income shall declare and pay the tax not withheld to the competent tax authority of the place of the occurrence of the income in accordance with Article 39 of the PRC EIT Law and complete the Form of Report on Withholding of Enterprise Income Tax of the People’s Republic of China; where the nonresident enterprise fails to declare and pay tax in accordance with Article 39 of the PRC EIT Law, the tax authority may order it to pay the tax within a specified time limit and the nonresident enterprise shall declare and pay the tax within the time limit determined by the tax authority; the nonresident enterprise that declares and pays the tax voluntarily before the tax authority orders it to pay tax within a specified time limit shall be deemed as having paid tax as scheduled;
|
• |
the competent tax authority may require the taxpayer, withholding obligator and relevant parties with knowledge of relevant information to provide the contracts and other relevant materials relating to the withholding of tax. The withholding obligator shall set up the account books for withholding and payment of tax and file of contracts and materials to accurately record the withholding and payment of nonresident enterprise income tax; and
|
• |
where the withholding obligator fails to withhold the tax required to be withheld under Article 37 of the PRC EIT Law, the competent tax authority of the place where the withholding agent is located shall order the withholding obligator to make up for the withholding of tax in accordance with Article 23 of the Administrative Punishment Law of the People’s Republic of China and hold the withholding agent liable in accordance with the law; if recovery of tax payment from the taxpayer is necessary, the competent tax authority of the place where the income occurs shall implement the recovery in accordance with the law. If the place where the withholding obligator is located is different from the place where the income occurs, the competent tax authority of the place of occurrence of the income that is responsible for recovering the tax payment shall give notice to the competent tax authority of the place where the withholding obligator is located for verifying relevant information. The competent tax authority of the place where the withholding agent is located shall, within five working days from the date where it is determined that the payable tax is not withheld in accordance with the law, send the Contact Letter for Nonresident Enterprise Tax Matters to the competent tax authority of the place of occurrence of income and notify the latter of the
tax-related
matters of the nonresident enterprise.
|
C.
|
Organizational Structure
|
(1) |
Mr. Liang Gao, Mr. Gang Li, Mr. Yun Xiao, Tianjin Puxian Education and Technology Limited Partnership, Shanghai Trustbridge Investment Management Co., Ltd. and Ningbo Meishan Bonded Port Area Zhimei Phase V Equity Investment Limited Partnership hold a 5.698%, 3.419%, 1.140%, 18.233%, 3.6335% and 3.6335% equity interest in Puxin Education, respectively.
|
Subsidiary
|
Jurisdiction of Incorporation
|
Percentage of Ownership Interest
|
||||
Prepshine Holdings Co., Limited
|
Hong Kong | 100 | % | |||
Beijing Global Education & Technology Co., Ltd.
|
PRC | 100 | % | |||
Purong (Beijing) Information Technology Co., Ltd.
|
PRC | 100 | % |
Subsidiary of Puxin Education
|
Jurisdiction of
Incorporation |
Percentage of Ownership
Interest |
||||||
Beijing Meitong Education Consulting Co., Ltd.
(1)
|
PRC | 100 | % | |||||
Beijing Shangxin Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Taiyuan Puxin Culture and Arts Co., Ltd.
|
PRC | 100 | % | |||||
Taiyuan Puxin Culture Communication Co., Ltd.
|
PRC | 100 | % | |||||
Beijing Meikaida Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Tianjin Xinsiyuan Culture Communication Co., Ltd.
|
PRC | 100 | % | |||||
Beijing Puda Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Shenyang Huanggu Oriental Magic Arts Training School
|
PRC | 100 | % | |||||
Beijing Pule Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Beijing Pule Travel Co., Ltd.
|
PRC | 100 | % | |||||
Jinan Puxin Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Guizhou Puxintian Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Beijing Jiameixin Education Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Jinan Pude Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Jinan Qifa Education Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Nanjing Diyu Investment Management Co., Ltd.
|
PRC | 100 | % | |||||
Shaoxing Puxin Education Information Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Yunnan Pude Education Information Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Ningbo Puxin Education Technology Development Co., Ltd.
|
PRC | 100 | % | |||||
Chengdu Puxin Shenglong Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Nanjing Dreams & Stars Information Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Shenzhen Davis Information Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Shanghai Pukuan Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Luoyang Pucai Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Dalian Pude Education Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Xi’an Puxin Shanghe Culture Development Co., Ltd.
|
PRC | 100 | % | |||||
Luzhou Puxin Culture Communication Co., Ltd.
|
PRC | 100 | % | |||||
Beijing Xuezong Tianxia Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Chongqing Puxin Technology Co., Ltd.
(2)
|
PRC | 100 | % | |||||
Jilin Puxin Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Yancheng Tiantian Xiangshang Puxin Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Fuzhou Pude Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Hangzhou Puxin Technology Co., Ltd.
|
PRC | 100 | % | |||||
Shandong Zengyu Trading Co., Ltd.
|
PRC | 100 | % | |||||
Foshan Mingshi Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Nanjing Huoyanyan Culture Development Co., Ltd.
|
PRC | 100 | % | |||||
Dalian Keyuan Culture Consulting Co., Ltd.
|
PRC | 100 | % | |||||
Changchun Chaoyang Puxin Training School Co., Ltd.
|
PRC | 100 | % | |||||
Pude Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Shanghai Puyou Information Technology Co., Ltd.
(3)
|
PRC | 100 | % | |||||
Tianjin Puxing Education Technology Co., Ltd.
|
PRC | 100 | % | |||||
Zhengzhou Youshili Education Training School Co., Ltd.
(4)
|
PRC | 100 | % | |||||
Puhe Education Technology Co., Ltd.
|
PRC | 80 | % |
(1) |
Beijing Meitong Education Consulting Co., Ltd. holds the 100% equity interest in Shanghai Global Career Education & Technology Holdings Limited and ZMN International Education Consulting (Beijing) Co., Ltd., respectively.
|
(2) |
Puxin Education is in the process of being registered with local government authorities as shareholder of Chongqing Puxin Technology Co., Ltd.
|
(3) |
Puxin Education holds a 67% equity interest and Purong Beijing holds a 33% equity interest in Shanghai Puyou Information Technology Co., Ltd., respectively.
|
(4) |
Puxin Education is in the process of being registered with local government authorities as shareholder of Zhengzhou Youshili Education Training School Co., Ltd.
|
D.
|
Property, Plants and Equipment
|
ITEM 4A.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
A.
|
Operating Results
|
For the Year Ended December 31,
|
||||||||||||
2018
|
2019
|
2020
|
||||||||||
Learning centers at the beginning of the period
|
|
400
|
|
|
386
|
|
|
446
|
|
|||
Newly acquired learning centers during the period
|
14 | 41 | 25 | |||||||||
Newly constructed learning centers during the period
|
45 | 94 | 29 | |||||||||
Closed learning centers during the period
|
(73 | ) | (75 | ) | (93 | ) | ||||||
|
|
|
|
|
|
|||||||
Learning centers at the end of the period
|
|
386
|
|
|
446
|
|
|
407
|
|
|||
|
|
|
|
|
|
For the Year Ended December 31,
|
||||||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||||||
RMB
|
%
|
RMB
|
%
|
RMB
|
US$
|
%
|
||||||||||||||||||||||
(in thousands, except for percentages)
|
||||||||||||||||||||||||||||
K-12 tutoring services:
|
||||||||||||||||||||||||||||
Group class courses
|
817,843 | 36.7 | 1,103,607 | 35.6 | 1,153,658 | 176,806 | 39.7 | |||||||||||||||||||||
Personalized tutoring courses
|
364,554 | 16.4 | 553,654 | 17.8 | 580,533 | 88,970 | 20.0 | |||||||||||||||||||||
Full-time tutoring courses
|
— | — | 286,593 | 9.2 | 472,082 | 72,350 | 16.3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal
|
1,182,397 | 53.1 | 1,943,854 | 62.6 | 2,206,273 | 338,126 | 76.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Study-abroad tutoring services:
|
||||||||||||||||||||||||||||
Study-abroad test preparation
|
860,687 | 38.6 | 941,537 | 30.4 | 553,647 | 84,850 | 19.1 | |||||||||||||||||||||
Study-abroad consulting
|
185,033 | 8.3 | 218,567 | 7.0 | 143,995 | 22,068 | 4.9 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Subtotal
|
1,045,720 | 46.9 | 1,160,104 | 37.4 | 697,642 | 106,918 | 24.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total net revenues
|
|
2,228,117
|
|
|
100.0
|
|
|
3,103,958
|
|
|
100.0
|
|
|
2,903,915
|
|
|
445,044
|
|
|
100.0
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
||||||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||||||
RMB
|
%
|
RMB
|
%
|
RMB
|
US$
|
%
|
||||||||||||||||||||||
(in thousands, except for percentages)
|
||||||||||||||||||||||||||||
Net revenues
|
|
2,228,117
|
|
|
100.0
|
|
|
3,103,958
|
|
|
100.0
|
|
|
2,903,915
|
|
|
445,044
|
|
|
100.0
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cost of revenues:
|
||||||||||||||||||||||||||||
Teaching staff cost
(1)
|
824,931 | 37.0 | 1,066,892 | 34.4 | 981,245 | 150,382 | 33.8 | |||||||||||||||||||||
Rental expenses
|
247,534 | 11.1 | 287,385 | 9.3 | 298,212 | 45,703 | 10.3 | |||||||||||||||||||||
Facility maintenance expenses
|
39,478 | 1.8 | 50,858 | 1.6 | 59,346 | 9,095 | 2.0 | |||||||||||||||||||||
Depreciation and amortization expenses
|
38,235 | 1.7 | 55,589 | 1.8 | 55,607 | 8,522 | 1.9 | |||||||||||||||||||||
Others
|
92,711 | 4.2 | 168,723 | 5.4 | 164,186 | 25,163 | 5.7 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total cost of revenues
|
|
1,242,889
|
|
|
55.8
|
|
|
1,629,447
|
|
|
52.5
|
|
|
1,558,596
|
|
|
238,865
|
|
|
53.7
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes share-based compensation expenses of RMB6.4 million, RMB4.4 million and RMB2.3 million (US$0.4 million) for the years ended December 31, 2018, 2019 and 2020, respectively.
|
For the Year Ended December 31,
|
||||||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||||||
RMB
|
%
|
RMB
|
%
|
RMB
|
US$
|
%
|
||||||||||||||||||||||
(in thousands, except for percentages)
|
||||||||||||||||||||||||||||
Net revenues
|
|
2,228,117
|
|
|
100.0
|
|
|
3,103,958
|
|
|
100.0
|
|
|
2,903,915
|
|
|
445,044
|
|
|
100.0
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Cost of revenues:
|
||||||||||||||||||||||||||||
K-12
tutoring services
(1)
|
706,917 | 31.7 | 1,055,205 | 34.0 | 1,205,656 | 184,775 | 41.5 | |||||||||||||||||||||
Study-abroad tutoring services
(2)
|
535,972 | 24.1 | 574,242 | 18.5 | 352,940 | 54,090 | 12.2 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total cost of revenues
|
|
1,242,889
|
|
|
55.8
|
|
|
1,629,447
|
|
|
52.5
|
|
|
1,558,596
|
|
|
238,865
|
|
|
53.7
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Consists of group class courses, personalized tutoring courses and full-time tutoring courses.
|
(2) |
Consists of study-abroad test preparation services and study-abroad consulting services.
|
For the Year Ended December 31,
|
||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(in thousands)
|
||||||||||||||||
K-12
tutoring services
(1)
|
475,480 | 888,649 | 1,000,617 | 153,351 | ||||||||||||
Study-abroad tutoring services
(1)
|
509,748 | 585,862 | 344,702 | 52,828 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
|
985,228
|
|
|
1,474,511
|
|
|
1,345,319
|
|
|
206,179
|
|
||||
|
|
|
|
|
|
|
|
(1) |
Consists of group class courses, personalized tutoring courses and full-time tutoring courses.
|
(2) |
Consists of study-abroad test preparation services and study-abroad consulting services.
|
For the Year Ended December 31,
|
||||||||||||||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||||||||||||||
RMB
|
%
|
RMB
|
%
|
RMB
|
US$
|
%
|
||||||||||||||||||||||
(in thousands, except for percentages)
|
||||||||||||||||||||||||||||
Net revenues
|
|
2,228,117
|
|
|
100.0
|
|
|
3,103,958
|
|
|
100.0
|
|
|
2,903,915
|
|
|
445,044
|
|
|
100.0
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||||||
Selling expenses
(1)
|
848,088 | 38.1 | 1,083,795 | 34.9 | 1,048,521 | 160,693 | 36.1 | |||||||||||||||||||||
General and administrative expenses
(2)
|
775,883 | 34.8 | 748,259 | 24.1 | 469,163 | 71,902 | 16.2 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Impairment loss on intangible assets
|
— | — | — | — | 4,100 | 628 | 0.1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total operating expenses
|
|
1,623,971
|
|
|
72.9
|
|
|
1,832,054
|
|
|
59.0
|
|
|
1,521,784
|
|
|
233,223
|
|
|
52.4
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes share-based compensation expenses of RMB28.8 million, RMB21.9 million and RMB13.3 million (US$2.0 million) for the years ended December 31, 2018, 2019 and 2020, respectively.
|
(2) |
Includes share-based compensation expenses of RMB339.7 million, RMB204.2 million and RMB12.4 million (US$1.9 million) for the years ended December 31, 2018, 2019 and 2020, respectively.
|
For the Year Ended December 31,
|
||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(in thousands, except share and share related data)
|
||||||||||||||||
Net revenues
|
2,228,117 | 3,103,958 | 2,903,915 | 445,044 | ||||||||||||
Cost of revenues
(1)
|
(1,242,889 | ) | (1,629,447 | ) | (1,558,596 | ) | (238,865 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
|
985,228
|
|
|
1,474,511
|
|
|
1,345,319
|
|
|
206,179
|
|
||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||||||
Selling expenses
(1)
|
(848,088 | ) | (1,083,795 | ) | (1,048,521 | ) | (160,693 | ) | ||||||||
General and administrative expenses
(1)
|
(775,883 | ) | (748,259 | ) | (469,163 | ) | (71,902 | ) | ||||||||
Impairment loss on intangible assets
|
— | — | (4,100 | ) | (628 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
|
(1,623,971
|
)
|
|
(1,832,054
|
)
|
|
(1,521,784
|
)
|
|
(233,223
|
)
|
||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss
|
|
(638,743
|
)
|
|
(357,543
|
)
|
|
(176,465
|
)
|
|
(27,044
|
)
|
||||
|
|
|
|
|
|
|
|
|||||||||
Interest expense
|
(51,901 | ) | (71,099 | ) | (80,319 | ) | (12,309 | ) | ||||||||
Interest income
|
2,826 | 25,542 | 46,150 | 7,073 | ||||||||||||
Foreign exchange (loss) gain
|
(7,621 | ) | 243 | (1,322 | ) | (203 | ) | |||||||||
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
(131,748 | ) | (104,589 | ) | (20,917 | ) | (3,206 | ) | ||||||||
Loss on extinguishment of convertible notes
|
(900 | ) | — | — | — | |||||||||||
Other income, net
|
— | — | 78,440 | 12,021 | ||||||||||||
Gain on disposal of subsidiaries
|
— | — | 126,968 | 19,459 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes
|
|
(828,087
|
)
|
|
(507,446
|
)
|
|
(27,465
|
)
|
|
(4,209
|
)
|
||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expenses
|
(5,322 | ) | (12,188 | ) | (9,195 | ) | (1,409 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss
|
|
(833,409
|
)
|
|
(519,634
|
)
|
|
(36,660
|
)
|
|
(5,618
|
)
|
||||
|
|
|
|
|
|
|
|
|||||||||
Less: Net income (loss) attributable to
non-controlling
interest
|
2 | (1,101 | ) | (4,454 | ) | (683 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to ordinary shareholders of Puxin Limited
|
|
(833,411
|
)
|
|
(518,533
|
)
|
|
(32,206
|
)
|
|
(4,935
|
)
|
||||
|
|
|
|
|
|
|
|
(1) |
Share-based compensation expenses that were allocated as follows:
|
For the Year Ended December 31,
|
||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Allocation of share-based compensation expenses:
|
||||||||||||||||
Cost of revenues
|
6,420 | 4,352 | 2,294 | 352 | ||||||||||||
Selling expenses
|
28,848 | 21,870 | 13,290 | 2,037 | ||||||||||||
General and administrative expenses
|
339,689 | 204,218 | 12,439 | 1,906 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total
|
|
374,957
|
|
|
230,440
|
|
|
28,023
|
|
|
4,295
|
|
||||
|
|
|
|
|
|
|
|
• |
Net revenues from
K-12
tutoring services increased by 13.5% from RMB1,943.9 million in 2019 to RMB2,206.3 million (US$338.1 million) in 2020 despite the significant impact of the
COVID-19
pandemic. This increase was primarily due to the increase in student enrollments of our
K-12
tutoring services, which was largely attributable to the organic growth of our existing schools attributable to our increased sales efforts. Our student enrollments of
K-12
tutoring services increased by 30.0% from 2,799,851 in 2019 to 3,639,364 in 2020.
|
• |
Net revenues from study-abroad tutoring services decreased by 39.9% from RMB1,160.1 million in 2019 to RMB697.6 million (US$106.9 million) in 2020, primarily due to the decrease in student enrollments as a result of the adverse impact of
COVID-19.
Our student enrollments of study-abroad tutoring services decreased by 42.7% from 72,174 in 2019 to 41,378 in 2020.
|
• |
Teaching staff cost decreased by 8.0% from RMB1,066.9 million in 2019 to RMB981.2 million (US$150.4 million) in 2020, primarily due to the decrease in the number of our full-time study-abroad teachers and consultants. The number of our full-time teachers and consultants decreased from 5,932 as of December 31, 2019 to 4,936 as of December 31, 2020 as a result of the adverse impact of the
COVID-19
pandemic.
|
• |
Rental expenses increased by 3.8% from RMB287.4 million in 2019 to RMB298.2 million (US$45.7 million) in 2020. Facility maintenance expenses increased by 16.7% from RMB50.9 million in 2019 to RMB59.3 million (US$9.1 million) in 2020. Depreciation and amortization expenses remained unchanged from RMB55.6 million in 2019 to RMB55.6 million (US$8.5 million) in 2020. These increases were primarily associated with the upgrading of our existing
K-12
learning centers. The number of learning centers in our network decreased from 446 as of December 31, 2019 to 407 as of December 31, 2020, reflecting the combination of (i) 25 learning centers we acquired, (ii) 29 learning centers we constructed to expand the network of our existing schools, and (iii) 93 learning centers we closed during our integration process of acquired schools, some of which were combined with other learning centers to improve operational efficiency of our learning centers.
|
• |
Net revenues from
K-12
tutoring services increased by 64.4% from RMB1,182.4 million in 2018 to RMB1,943.9 million in 2019. This increase was primarily due to the increase in student enrollments of our
K-12
tutoring services, which was largely attributable to (i) the schools we acquired in 2019, including the schools offering full-time tutoring courses, which increased our overall student base and service capacity, and (ii) the organic growth of our existing schools attributable to improved operational efficiency. Our student enrollments of
K-12
tutoring services increased by 58.6% from 1,765,684 in 2018 to 2,799,851 in 2019.
|
• |
Net revenues from study-abroad tutoring services increased by 10.9% from RMB1,045.7 million in 2018 to RMB1,160.1 million in 2019, primarily due to the increase in student enrollments of personalized test preparation courses which usually have higher course fees compared to group class courses. Our student enrollments of study-abroad tutoring services decreased by 10.5% from 80,665 in 2018 to 72,174 in 2019. This decrease was because, in 2019, we started to count student enrollments of online foreign teacher classes based on the learning centers which recruited the students and therefore a portion of student enrollments were classified into
K-12
tutoring service.
|
• |
Teaching staff cost increased by 29.3% from RMB824.9 million in 2018 to RMB1,066.9 million in 2019. This increase was primarily due to the growth of the number of our full-time teachers and consultants as we continued to attract new and retain our existing teaching staff and acquired new
K-12
tutoring schools in 2019. The number of our full-time teachers and consultants increased from 4,592 as of December 31, 2018 to 5,932 as of December 31, 2019.
|
• |
Rental expenses increased by 16.1% from RMB247.5 million in 2018 to RMB287.4 million in 2019. Depreciation and amortization expenses increased by 45.4% from RMB38.2 million in 2018 to RMB55.6 million in 2019. Facility maintenance expenses increased by 28.8% from RMB39.5 million in 2018 to RMB50.9 million in 2019. These increases were primarily associated with the upgrading of our existing learning centers and new learning centers we acquired to expand our network. The number of learning centers in our network increased from 386 as of December 31, 2018 to 446 as of December 31, 2019, reflecting the combination of (i) 41 learning centers we acquired, (ii) 94 learning centers we constructed to expand the network of our existing schools, and (iii) 75 learning centers we closed during our integration process of acquired schools, some of which were combined with other learning centers to improve operational efficiency of our learning centers.
|
• |
exclusive management services and business cooperation agreement;
|
• |
equity pledge agreement;
|
• |
exclusive call option agreement;
|
• |
powers of attorney;
|
• |
loan agreements;
|
• |
spousal consent letters; and
|
• |
letters of commitment.
|
Grant Date
|
Number of
Options Granted |
Weighted Average
Exercise Price per Option |
Weighted Average
Fair Value per Option at the Grant Dates |
Intrinsic Value
per Option at the Grant Dates |
Type of Valuation
|
|||||||||||||||
(RMB)
|
(RMB)
|
(RMB)
|
||||||||||||||||||
March 31, 2018
|
16,400,000 | 48.780 | 24.200 | 0.885 | Retrospective | |||||||||||||||
March 6, 2019
|
8,879,986 | 0.01 | 20.560 | 20.560 | Retrospective |
Grant Date
|
||||||||
2018
|
2019
|
|||||||
Risk-free rate of interest
(1)
|
3.40 | % | 2.51 | % | ||||
Volatility
(2)
|
46 | % | 55 | % | ||||
Dividend yield
(3)
|
— | — | ||||||
Exercise multiples
(4)
|
2.2-2.8
|
2.8 | ||||||
Life of options (years)
(5)
|
7.0 | 7.0 | ||||||
Fair value of underlying ordinary shares
|
49.67 | 20.57 |
(1) |
We estimate risk-free interest rate based on the daily treasury long term rate of U.S. Department of the Treasury with a maturity period close to the expected term of the options, plus the country default spread of China.
|
(2) |
We estimated expected volatility based on the annualized standard deviation of the daily return embedded in historical share prices of comparable companies with a time horizon close to the expected expiry of the term.
|
(3) |
We have never declared or paid any cash dividends on our capital stock, and we do not anticipate any dividend payments on our ordinary shares in the foreseeable future.
|
(4) |
The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price as at the time when employees would decide to voluntarily exercise their vested options. As we did not have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
|
(5) |
Extracted from option agreements.
|
2019
|
2020
|
|||
Exit period
|
December 31, 2019 – December 31, 2020 | December 31, 2019 – June 30, 2020 | ||
Volatility
|
77% | 92% |
Recent
|
Accounting Pronouncements
|
B.
|
Liquidity and Capital Resources
|
For the Year Ended December 31,
|
||||||||||||||||
2018
|
2019
|
2020
|
||||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Net cash (used in)/generated from operating activities
|
(92,905 | ) | 24,684 | (203,330 | ) | (31,161 | ) | |||||||||
Net cash used in investing activities
|
(156,917 | ) | (411,309 | ) | (84,316 | ) | (12,922 | ) | ||||||||
Net cash generated from financing activities
|
831,506 | 204,246 | 256,246 | 39,270 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase/(decrease) in cash and cash equivalents, and restricted cash
|
629,815 | (175,947 | ) | (54,223 | ) | (8,311 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents, and restricted cash at beginning of the year
|
189,162 | 818,977 | 643,030 | 98,549 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents, and restricted cash at end of the year
|
818,977 | 643,030 | 588,807 | 90,238 | ||||||||||||
|
|
|
|
|
|
|
|
C.
|
Research and Development
|
D.
|
Trend Information
|
E.
|
Off-Balance
Sheet Arrangements
|
F.
|
Tabular Disclosure of Contractual Obligations
|
Payment Due by Period
|
||||||||||||||||||||
Total
|
Less than One
Year |
One to Three
Years |
Three to Five
Years |
More than Five
Years |
||||||||||||||||
(RMB in millions)
|
||||||||||||||||||||
Operating lease commitments
(1)
|
1,091.5 | 329.7 | 424.9 | 204.8 | 132.1 |
G.
|
Safe Harbor
|
(1) |
Represents minimum payments under
non-cancelable
operating leases related to offices and schools.
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
A.
|
Directors and Senior Management
|
Name
|
Age
|
Position/Title
|
||
Yunlong Sha
|
45 | Founder, Chairman, Chief Executive Officer | ||
Peng Wang
|
44 | Chief Financial Officer | ||
Ming Hu
|
49 | Independent Director | ||
Neng Wang
|
48 | Independent Director | ||
Yonghong Fan
|
53 | Independent Director |
B.
|
Compensation
|
Name
|
Ordinary Shares
Underlying Options Awarded |
Exercise Price per
Ordinary Share
(in US$)
|
Date of Grant
|
Date of Expiration
|
||||||||||||
Yunlong Sha
|
— | — | — | — | ||||||||||||
Peng Wang
|
* | 7.78 | March 31, 2018 | March 31, 2025 | ||||||||||||
Ming Hu
|
— | — | — | — | ||||||||||||
Neng Wang
|
— | — | — | — | ||||||||||||
Yonghong Fan
|
— | — | — | — |
* |
Less than 1% of our total outstanding shares.
|
C.
|
Board Practices
|
• |
appointing or removing the independent auditor and
pre-approving
all auditing and
non-auditing
services permitted to be performed by the independent auditor;
|
• |
setting clear hiring policies for employees or former employees of the independent auditor;
|
• |
reviewing with the independent auditor any audit problems or difficulties and management’s response;
|
• |
reviewing and approving all related-party transactions;
|
• |
discussing the annual audited financial statements with management and the independent auditor;
|
• |
discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations;
|
• |
reviewing analyses or other written communications prepared by management or the independent auditor relating to significant financial reporting issues and judgments made in connection with the preparation of the financial statements;
|
• |
reviewing with management and the independent auditor the effect of key transactions, related-party transactions and
off-balance
sheet transactions and structures;
|
• |
reviewing with management and the independent auditor the effect of regulatory and accounting initiatives;
|
• |
reviewing policies with respect to risk assessment and risk management;
|
• |
reviewing our disclosure controls and procedures and internal control over financial reporting;
|
• |
reviewing reports from the independent auditor regarding all critical accounting policies and practices to be used by our company;
|
• |
establishing procedures for the receipt, retention and treatment of complaints we received regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
|
• |
periodically reviewing and reassessing the adequacy of our audit committee charter;
|
• |
evaluating the performance, responsibilities, budget and staffing of our internal audit function and reviewing and approving the internal audit plan; and
|
• |
reporting regularly to the board of directors.
|
• |
reviewing and approving the compensation of our executive officers;
|
• |
reviewing and evaluating our executive compensation and benefits policies generally;
|
• |
in consultation with our chief executive officer, periodically reviewing our management succession planning;
|
• |
reporting to our board of directors periodically;
|
• |
evaluating its own performance and reporting to our board of directors on such evaluation;
|
• |
periodically reviewing and assessing the adequacy of the compensation committee charter and recommending any proposed changes to our board of directors; and
|
• |
selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
|
• |
identifying and recommending to the board of directors qualified individuals for membership on the board of directors and its committees;
|
• |
evaluating, at least annually, its own performance and reporting to the board of directors on such evaluation;
|
• |
leading our board of directors in a self-evaluation to determine whether it and its committees are functioning effectively;
|
• |
reviewing the evaluations prepared by each board committee of such committee’s performance and considering any recommendations for proposed changes to our board of directors;
|
• |
reviewing and approving compensation (including equity-based compensation) for our directors;
|
• |
overseeing compliance with the corporate governance guidelines and code of business conduct and ethics and reporting on such compliance to the board of directors; and
|
• |
reviewing and assessing periodically the adequacy of its charter and recommending any proposed changes to the board of directors for approval.
|
• |
convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;
|
• |
declaring dividends and distributions;
|
• |
appointing officers and determining the term of office of officers;
|
• |
exercising the borrowing powers of our company and mortgaging the property of our company; and
|
• |
approving the transfer of shares of our company, including the registering of such shares in our share register.
|
D.
|
Employees
|
Function
|
Number of Full-Time Employees
|
|||
Teachers, consultants and instructors
|
4,936 | |||
Managerial staff
|
828 | |||
Sales and marketing
|
2,644 | |||
Administrative staff
|
621 | |||
Information technology
|
126 | |||
Courses research and development
|
495 | |||
|
|
|||
Total
|
|
9,650
|
|
|
|
|
E.
|
Share Ownership
|
• |
each of our directors and executive officers;
|
• |
all of our directors and executive officers as a group; and
|
• |
each person known to us to own beneficially more than 5% of our ordinary shares.
|
Ordinary
Shares Beneficially Owned |
Percentage of
Total Voting Power held |
|||||||
Number
|
%
(1)
|
|||||||
Directors and Executive Officers:
|
||||||||
Yunlong Sha
(2)
|
81,070,862 | 46.3 | ||||||
Ming Hu
|
— | — | ||||||
Neng Wang
|
— | — | ||||||
Yonghong Fan
|
— | — | ||||||
Peng Wang
|
* | * | ||||||
All directors and executive officers as a group
|
81,971,260 | 46.8 | ||||||
Principal Shareholders:
|
||||||||
Long bright Limited
(3)
|
80,558,542 | 46.1 | ||||||
Serenity Investment Master Fund Limited
(4)
|
13,860,000 | 7.4 |
* |
Less than 1% of our total outstanding shares on an
as-converted
basis.
|
† |
The business address of Mr. Yunlong Sha and Mr. Peng Wang is Floor 5, Building 4, Dingjun Building, 75 Suzhou Street, Haidian District, Beijing, People’s Republic of China. The business address of Ms. Ming Hu is Room 1208, Tower 2, China Central Place, Jianguo Road, Chaoyang District, Beijing, China. The business address of Mr. Neng Wang is 3022 Broadway Uris Hall 812, New York, NY, the United States. The business address of Mr. Yonghong Fan is Haixia International Mansion, Floor 17, Building 1, 30 Sanlihe East Road, Xicheng District, Beijing, People’s Republic of China.
|
(1) |
For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of (i) 174,926,784 ordinary shares, being the number of ordinary shares issued and outstanding as of March 31, 2021 and (ii) the number of ordinary shares underlying options held by such person or group that are exercisable within 60 days after March 31, 2021.
|
(2) |
Represents (i) 80,558,542 ordinary shares held by Long bright Limited, a British Virgin Islands company wholly owned by Mr. Yunlong Sha, among which 9,589,566 ordinary shares are mortgaged to Haitong International Investment Holdings Limited and (ii) 256,160 ADSs (representing 512,320 ordinary shares) directly held by Mr. Yunlong Sha.
|
(3) |
Represents 80,558,542 ordinary shares held by Long bright Limited, a British Virgin Islands company wholly owned by Mr. Yunlong Sha, among which 9,589,566 ordinary shares are mortgaged to Haitong International Investment Holdings Limited. The registered address of Long bright Limited is Start Chambers, Wickham’s Cay II, P.O. Box 2221, Road Two, Tortola, British Virgin Islands.
|
(4) |
Represents 13,860,000 ordinary shares held by Serenity Investment Master Fund Limited, a corporation incorporated in the Cayman Islands, the number of which includes a convertible note convertible into 12,500,000 ordinary shares. Information regarding the beneficial ownership is reported as of April 19, 2021, based on the information contained in the Schedule 13G jointly filed by Serenity Investment Master Fund Limited and Serenity Capital LLC with the SEC on April 19, 2021. The address of Serenity Investment Master Fund Limited is c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Serenity Investment Master Fund Limited is managed by Serenity Capital LLC, a registered investment adviser and the manager of Serenity Investment Master Fund Limited.
|
ITEM 7.
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
A.
|
Major Shareholders
|
B.
|
Related Party Transactions
|
C.
|
Interests of Experts and Counsel
|
ITEM 8.
|
FINANCIAL INFORMATION
|
A.
|
Consolidated Statements and Other Financial Information
|
B.
|
Significant Changes
|
ITEM 9.
|
THE OFFER AND LISTING
|
A.
|
Offering and Listing Details
|
B.
|
Plan of Distribution
|
C.
|
Markets
|
D.
|
Selling Shareholders
|
E.
|
Dilution
|
F.
|
Expenses of the Issue
|
ITEM 10.
|
ADDITIONAL INFORMATION
|
A.
|
Share Capital
|
B.
|
Memorandum and Articles of Association
|
• |
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
|
• |
the instrument of transfer is in respect of only one class of shares;
|
• |
the instrument of transfer is properly stamped, if required;
|
• |
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and
|
• |
a fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof.
|
• |
increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe;
|
• |
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
|
• |
subdivide our existing shares, or any of them into shares of a smaller amount; or
|
• |
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.
|
C.
|
Material Contracts
|
D.
|
Exchange Controls
|
E.
|
Taxation
|
• |
banks, insurance companies and other financial institutions;
|
• |
dealers or traders in securities that use a
mark-to-market
|
• |
persons holding ADSs or ordinary shares as part of a straddle, conversion transaction or similar transaction;
|
• |
persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
|
• |
entities classified as partnerships for U.S. federal income tax purposes and their partners or investors;
|
• |
tax-exempt
entities, governmental organizations,
|
• |
tax-qualified
retirement plans;
|
• |
persons that own or are deemed to own ADSs or ordinary shares representing 10% or more of our voting power or value;
|
• |
persons who acquired our ADSs or ordinary shares pursuant to the exercise of an employee stock option or otherwise as compensation; or
|
• |
persons holding ADSs or ordinary shares in connection with a trade or business outside the United States.
|
• |
a citizen or individual resident of the United States;
|
• |
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or
|
• |
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
|
F.
|
Dividends and Paying Agents
|
G.
|
Statement by Experts
|
H.
|
Documents on Display
|
I.
|
Subsidiary Information
|
ITEM 11.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 12.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
A.
|
Debt Securities
|
B.
|
Warrants and Rights
|
C.
|
Other Securities
|
D.
|
American Depositary Shares
|
Service
|
Fees
|
|
• To any person to which ADSs are issued or to any person to which a distribution is made in respect of ADS distributions pursuant to stock dividends or other free distributions of stock, bonus distributions, stock splits or other distributions (except where converted to cash)
|
Up to US$0.05 per ADS issued | |
• Cancellation of ADSs, including the case of termination of the deposit agreement
|
Up to US$0.05 per ADS cancelled | |
• Distribution of cash dividends
|
Up to US$0.05 per ADS held | |
• Distribution of cash entitlements (other than cash dividends) and/or cash proceeds from the sale of rights, securities and other entitlements
|
Up to US$0.05 per ADS held | |
• Distribution of ADSs pursuant to exercise of rights.
|
Up to US$0.05 per ADS held | |
• Distribution of securities other than ADSs or rights to purchase additional ADSs
|
Up to US$0.05 per ADS held | |
• Depositary services
|
Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary bank |
• |
fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares);
|
• |
expenses incurred for converting foreign currency into U.S. dollars;
|
• |
expenses for cable, telex and fax transmissions and for delivery of securities;
|
• |
taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit);
|
• |
fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit;
|
• |
fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable to ordinary shares, deposited securities, ADSs and ADRs; and
|
• |
any applicable fees and penalties thereon.
|
ITEM 13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
ITEM 15.
|
CONTROLS AND PROCEDURES
|
ITEM 16.
|
[RESERVED]
|
ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
ITEM 16B.
|
CODE OF ETHICS
|
ITEM 16C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
For the Year Ended December 31,
|
||||||||
Services
|
2019
|
2020
|
||||||
RMB
|
RMB
|
|||||||
(in thousands)
|
||||||||
Audit fees
(1)
|
11,676 | 9,469 | ||||||
Tax fees
(2)
|
806 | 206 | ||||||
All other fees
(3)
|
— | 1,000 |
(1) |
“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual consolidated financial statements and the review of our comparative interim financial information.
|
(2) |
“Tax fees” represents the aggregated fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice, and tax planning.
|
(3) |
“All other fees” represents other fees billed by our independent registered public accounting firm other than services reported under audit fees and tax fees.
|
ITEM 16D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
ITEM 16F.
|
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
ITEM 16G.
|
CORPORATE GOVERNANCE
|
• |
We follow home country practice that permits our board of directors not to have a compensation committee composed solely of independent directors in lieu of complying with Section 303A.05 the New York Stock Exchange Listed Company Manual. Our compensation committee is currently composed of three members, two of whom are independent directors.
|
• |
We follow home country practice that permits our board of directors not to have a nomination committee composed solely of independent directors in lieu of complying with Section 303A.04 of the New York Stock Exchange Listed Company Manual. Our nominating and corporate governance committee is currently composed of three members, two of whom are independent directors.
|
• |
We follow home country practice that permits our independent directors not to hold regularly scheduled meetings at which only independent directors are present in lieu of complying with Section 303A.03 of the New York Stock Exchange Listed Company Manual.
|
• |
We follow home country practice that permits us not to obtain shareholder approval for adoption of new equity-compensation plans or amendments to our existing equity incentive plan in lieu of complying with Section 303A.08 of the New York Stock Exchange Listed Company Manual. Our board adopted our 2019 Noble Talent Share Incentive Plan in March 2019. We have followed the home country practice and obtained the board approval but not shareholder approval for adopting the 2019 share incentive plan as described above.
|
• |
We follow home country practice that permits us not to obtain shareholder approval for issuance of common stock, or of securities convertible into or exercisable for common stock in certain transaction or series of related transactions in lieu of complying with Section 312.03 of the New York Stock Exchange Listed Company Manual.
|
ITEM 16H.
|
MINE SAFETY DISCLOSURE
|
ITEM 17.
|
FINANCIAL STATEMENTS
|
ITEM 18.
|
FINANCIAL STATEMENTS
|
ITEM 19.
|
EXHIBITS
|
* |
Filed with this annual report on Form
20-F.
|
** |
Furnished with this annual report on Form
20-F.
|
*** |
As permitted by Item 601(b)(4)(iii)(A) of Regulation
S-K
and Item 2(b)(i) of the Instructions as to Exhibits in Form
20-F,
our company has not filed with this annual report certain instruments defining the rights of holders of long-term debt of our company and its subsidiaries because the total amount of securities authorized under any such instruments does not exceed 10% of the total assets of our company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any such agreement to the SEC upon request.
|
PUXIN LIMITED | ||
By: |
/s/Yunlong Sha
|
|
Name: | Yunlong Sha | |
Title: | Chairman and Chief Executive Officer |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF PUXIN LIMITED
|
Pages
|
|||
F-2 | ||||
F-3 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 | ||||
F-51 |
As of December 31, | ||||||||||||
2019 | 2020 | 2020 | ||||||||||
RMB | RMB | USD | ||||||||||
(Note 2) | ||||||||||||
ASSETS
|
||||||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
256,763 | 48,497 | 7,432 | |||||||||
Restricted cash, current portion
|
349,540 | 514,496 | 78,850 | |||||||||
Inventories
|
13,311 | 15,210 | 2,331 | |||||||||
Prepaid expenses and other current assets
|
117,148 | 141,894 | 21,746 | |||||||||
Loan receivable
s
|
191,230 | 222,895 | 34,160 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets
|
927,992 | 942,992 | 144,519 | |||||||||
|
|
|
|
|
|
|||||||
Non-current
assets
|
||||||||||||
Restricted cash,
non-current
portion
|
36,727 | 25,814 | 3,956 | |||||||||
Operating lease
right-of-use
|
1,045,941 | 940,568 | 144,148 | |||||||||
Property, plant and equipment, net
|
298,719 | 265,029 | 40,617 | |||||||||
Intangible assets
|
264,540 | 225,170 | 34,509 | |||||||||
Goodwill
|
2,055,922 | 2,083,151 | 319,257 | |||||||||
Deferred tax assets
|
2,199 | 3,522 | 540 | |||||||||
Rental
deposits
|
75,015 | 71,948 | 11,027 | |||||||||
Other
non-current
assets
|
— | 59,400 | 9,103 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL ASSETS
|
4,707,055 | 4,617,594 | 707,676 | |||||||||
|
|
|
|
|
|
|||||||
LIABILITIES
|
||||||||||||
Current liabilities
|
||||||||||||
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIE without recourse to the Group of RMB930,674 and RMB743,499 as of December 31, 2019 and 2020, respectively)
|
983,715 | 784,894 | 120,290 | |||||||||
Income tax payable of the consolidated VIE without recourse to the Group
|
21,248 | 32,445 | 4,972 | |||||||||
Deferred revenue, current portion (including deferred revenue, current portion of the consolidated VIE without recourse to the Group of RMB1,195,723 and RMB1,013,606 as of December 31, 2019 and 2020, respectively)
|
1,205,609 | 1,023,037 | 156,787 | |||||||||
Operating lease liabilities, current portion (including operating lease liabilities, current portion of the consolidated VIE without recourse to the Group of RMB275,893 and RMB251,572 as of December 31, 2019 and 2020, respectively)
|
276,877 | 254,002 | 38,928 | |||||||||
Amounts due to related parties
, current portion
(including amounts due to related parties, current portion of the consolidated VIE without recourse to the Group of RMB254 and RMB nil as of December 31, 2019 and 2020, respectively)
|
1,451 | — | — | |||||||||
Bank borrowings of the consolidated VIE without recourse to the Group
|
318,600 | 585,000 | 89,655 | |||||||||
Loans payable to third parties
, current portion
(including loans payable to third parties, current portion of the consolidated VIE without recourse to the Group of RMB292,952 and RMB136,600 as of December 31, 2019 and 2020, respectively)
|
413,838 | 301,850 | 46,261 | |||||||||
Promissory note, current portion
|
87,023 | 163,125 | 25,000 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities
|
3,308,361 | 3,144,353 | 481,893 |
As of December 31, | ||||||||||||
2019 | 2020 | 2020 | ||||||||||
RMB | RMB | USD | ||||||||||
(Note 2) | ||||||||||||
Non-current
liabilities
|
||||||||||||
Deferred revenue,
non-current
portion of the consolidated VIE without recourse to the Group
|
101,372 | 81,805 | 12,537 | |||||||||
Deferred tax liabilities of the consolidated VIE without recourse to the Group
|
81,969 | 71,674 | 10,985 | |||||||||
Franchise deposits of the consolidated VIE without recourse to the Group
|
2,533 | 2,549 | 391 | |||||||||
Operating lease liabilities,
non-current
portion (including operating lease liabilities,
non-current
portion of the consolidated VIE without recourse to the Group of RMB693,505 and RMB594,624 as of December 31, 2019 and 2020, respectively)
|
693,505 | 605,827 | 92,847 | |||||||||
Promissory note,
non-current
portion
|
87,022 | — | — | |||||||||
Derivative liabilities
|
172,235 | — | — | |||||||||
Loans payable to third parties, non-current portion
|
— | 121,870 | 18,677 | |||||||||
Amounts due to related parties, non-current portion
|
— | 170,393 | 26,114 | |||||||||
TOTAL LIABILITIES
|
4,446,997 | 4,198,471 | 643,444 | |||||||||
|
|
|
|
|
|
|||||||
Commitments and Contingencies (Note
2
)
3
|
||||||||||||
SHAREHOLDERS’ EQUITY
|
||||||||||||
Ordinary shares (par value of USD0.00005 per share; 1,000,000,000 and 1,000,000,000 shares authorized, 188,627,228 and 188,653,468 shares issued and 174,025,810 and
|
62 | 62 | 9 | |||||||||
Additional
paid-in
capital
|
2,175,652 | 2,396,406 | 367,265 | |||||||||
Statutory reserve
|
7,979 | 11,444 | 1,754 | |||||||||
Accumulated other comprehensive income
|
68,707 | 43,711 | 6,699 | |||||||||
Accumulated deficit
|
(1,991,220 | ) | (2,026,891 | ) | (310,635 | ) | ||||||
|
|
|
|
|
|
|||||||
Total Puxin Limited shareholders’ equity
|
261,180 | 424,732 | 65,092 | |||||||||
|
|
|
|
|
|
|||||||
Non-controlling
interest
|
(1,122 | ) | (5,609 | ) | (860 | ) | ||||||
|
|
|
|
|
|
|||||||
TOTAL SHAREHOLDERS’ EQUITY
|
260,058 | 419,123 | 64,232 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL LIABILITIES AND TOTAL SHAREHOLDERS’ EQUITY
|
4,707,055 | 4,617,594 | 707,676 | |||||||||
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
(Note 2) | ||||||||||||||||
Net revenues
|
2,228,117 | 3,103,958 | 2,903,915 | 445,044 | ||||||||||||
Cost of revenues (including share-based compensation expenses of RMB6,420, RMB4,352 and RMB2,294 for the years ended December 31, 2018, 2019 and 2020, respectively)
|
(1,242,889 | ) | (1,629,447 | ) | (1,558,596 | ) | (238,865 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit
|
985,228 | 1,474,511 | 1,345,319 | 206,179 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses:
|
||||||||||||||||
Selling expenses (including share-based compensation expenses of RMB28,848, RMB21,870 and RMB13,290 for the years ended December 31, 2018, 2019 and 2020, respectively)
|
(848,088 | ) | (1,083,795 | ) | (1,048,521 | ) | (160,693 | ) | ||||||||
General and administrative expenses (including share-based compensation expenses of RMB339,689, RMB204,218 and RMB12,439 for the years ended December 31, 2018, 2019 and 2020, respectively)
|
(775,883 | ) | (748,259 | ) | (469,163 | ) | (71,902 | ) | ||||||||
Impairment loss on intangible assets
|
— | — | (4,100 | ) | (628 | ) | ||||||||||
Total operating expenses
|
(1,623,971 | ) | (1,832,054 | ) | (1,521,784 | ) | (233,223 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss
|
(638,743 | ) | (357,543 | ) | (176,465 | ) | (27,044 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Interest expense
|
(51,901 | ) | (71,099 | ) | (80,319 | ) | (12,309 | ) | ||||||||
Interest income
|
2,826 | 25,542 | 46,150 | 7,073 | ||||||||||||
Foreign exchange
(
loss
)
gain
|
(7,621 | ) | 243 | (1,322 | ) | (203 | ) | |||||||||
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
(131,748 | ) | (104,589 | ) | (20,917 | ) | (3,206 | ) | ||||||||
Loss on extinguishment of convertible notes
|
(900 | ) | — | — | — | |||||||||||
Other income, net
|
— | — | 78,440 | 12,021 | ||||||||||||
Gain on disposal of subsidiaries
|
— | — | 126,968 | 19,459 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes
|
(828,087 | ) | (507,446 | ) | (27,465 | ) | (4,209 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expenses
|
(5,322 | ) | (12,188 | ) | (9,195 | ) | (1,409 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss
|
(833,409 | ) | (519,634 | ) | (36,660 | ) | (5,618 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: Net income (loss) attributable to
non-
controlling
interest
|
2 | (1,101 | ) | (4,454 | ) | (683 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to ordinary shareholders of Puxin Limited
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | (4,935 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share attributable to ordinary shareholders of Puxin Limited
|
||||||||||||||||
Basic and diluted
|
(5.78 | ) | (3.03 | ) | (0.18 | ) | (0.03 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares used in calculating basic and diluted net loss per share
|
144,157,947 | 170,903,317 | 174,156,247 | 174,156,247 | ||||||||||||
|
|
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
(Note 2) | ||||||||||||||||
Net loss
|
(833,409 | ) | (519,634 | ) | (36,660 | ) | (5,618 | ) | ||||||||
Other comprehensive income
(loss),
net of tax of nil:
|
||||||||||||||||
Change in cumulative foreign currency translation adjustments
|
52,496 | 493 | (24,996 | ) | (3,831 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss
|
(780,913 | ) | (519,141 | ) | (61,656 | ) | (9,449 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: Comprehensive income (loss) attributable to non-controlling interest
|
2 | (1,101 | ) | (4,454 | ) | (683 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss attributable to Puxin Limited
|
(780,915 | ) | (518,040 | ) | (57,202 | ) | (8,766 | ) | ||||||||
|
|
|
|
|
|
|
|
Attributable to shareholders of the Company | ||||||||||||||||||||||||||||||||||||
Number of
ordinary shares |
Ordinary
shares |
Additional
paid-in
capital |
Statutory
reserve |
Accumulated
other comprehensive income |
Accumulated
deficit |
Total Puxin
Limited shareholders’ (deficit) equity |
Non-
controlling interest |
Total
(deficit) equity |
||||||||||||||||||||||||||||
Balance as of January 1, 2018
in RMB
|
100,000,000 | 34 | 391,099 | — | 15,718 | (679,613 | ) | (272,762 | ) | (23 | ) | (272,785 | ) | |||||||||||||||||||||||
Issuance of ordinary shares
|
26,827,744 | 16 | 720 | — | — | — | 736 | — | 736 | |||||||||||||||||||||||||||
Issuance of ordinary shares upon initial public offering (“IPO”) (net of issuance cost of RMB38,711)
|
16,560,000 | 5 | 798,825 | — | — | — | 798,830 | — | 798,830 | |||||||||||||||||||||||||||
Net loss for the year
|
— | — | — | — | — | (833,411 | ) | (833,411 | ) | 2 | (833,409 | ) | ||||||||||||||||||||||||
Provision of statutory reserve
|
— | — | — | 4,595 | — | (4,595 | ) | — | — | — | ||||||||||||||||||||||||||
Share-based compensation
|
— | — | 345,503 | — | — | — | 345,503 | — | 345,503 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | — | 52,496 | — | 52,496 | — | 52,496 | |||||||||||||||||||||||||||
Repurchase of convertible redeemable preferred shares
|
— | — | (131,088 | ) | — | — | — | (131,088 | ) | — | (131,088 | ) | ||||||||||||||||||||||||
Conversion of convertible notes
|
8,067,228 | 3 | 438,717 | — | — | — | 438,720 | — | 438,720 | |||||||||||||||||||||||||||
Conversion of convertible redeemable preferred shares
|
11,917,880 | 4 | 71,084 | — | — | — | 71,088 | — | 71,088 | |||||||||||||||||||||||||||
Cumulative effect of adopting Topic 606
|
— | — | — | — | — | 48,316 | 48,316 | — | 48,316 | |||||||||||||||||||||||||||
Restricted shares granted
|
1,631,200 | — | 29,454 | — | — | — | 29,454 | — | 29,454 | |||||||||||||||||||||||||||
Option exercised
|
|
|
34,112
|
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of December 31, 2018 in RMB
|
165,038,164 | 62 | 1,944,325 | 4,595 | 68,214 | (1,469,303 | ) | 547,893 | (21 | ) | 547,872 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net loss for the year
|
— | — | — | — | — | (518,533 | ) | (518,533 | ) | (1,101 | ) | (519,634 | ) | |||||||||||||||||||||||
Provision of statutory reserve
|
— | — | — | 3,384 | — | (3,384 | ) | — | — | — | ||||||||||||||||||||||||||
Share-based compensation
|
— | — | 230,440 | — | — | — | 230,440 | — | 230,440 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
— | — | — | — | 493 | — | 493 | — | 493 | |||||||||||||||||||||||||||
Option exercised
|
8,987,646 | — | 887 | — | — | — | 887 | — | 887 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of December 31, 2019 in RMB
|
174,025,810 | 62 | 2,175,652 | 7,979 | 68,707 | (1,991,220 | ) | 261,180 | (1,122 | ) | 260,058 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net loss for the year
|
— | — | — | — | — | (32,206 | ) | (32,206 | ) | (4,454 | ) | (36,660 | ) | |||||||||||||||||||||||
Provision of statutory reserve
|
— | — | — | 3,465 | — | (3,465 | ) | — | — | — | ||||||||||||||||||||||||||
Share-based compensation
|
— | — | 28,023 | — | — | — | 28,023 | — | 28,023 | |||||||||||||||||||||||||||
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(24,996
|
)
|
|
|
—
|
|
|
|
(24,996
|
)
|
|
|
—
|
|
|
|
(24,996
|
)
|
Option exercised
|
428,182 | — | 1,466 | — | — | — | 1,466 | — | 1,466 | |||||||||||||||||||||||||||
Purchase of non-controlling interest
|
— | — | (3,000 | ) | — | — | — | (3,000 | ) | — | (3,000 | ) | ||||||||||||||||||||||||
Disposal of non-controlling interest
(Note 4)
|
— | — | — | — | — | — | — | (33 | ) | (33 | ) | |||||||||||||||||||||||||
Extinguishment of derivative liabilities (Note 13)
|
— | — | 194,265 | — | — | — | 194,265 | — | 194,265 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of December 31, 2020 in RMB
|
174,453,992 | 62 | 2,396,406 | 11,444 | 43,711 | (2,026,891 | ) | 424,732 | (5,609 | ) | 419,123 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of December 31, 2020 in USD
|
174,453,992 | 9 | 367,265 | 1,754 | 6,699 | (310,635 | ) | 65,092 | (860 | ) | 64,232 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD (Note 2) | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||||||
Net loss
|
|
|
(833,409 |
)
|
|
|
(519,634 |
)
|
|
|
(36,660 |
)
|
|
|
(5,618 |
)
|
Adjustments to reconcile net loss to net cash (used in) generated from operating activities:
|
||||||||||||||||
Depreciation of property, plant and equipment
|
|
|
57,696 |
|
|
|
77,859 |
|
|
|
80,290 |
|
|
|
12,305 |
|
Amortization of intangible assets
|
|
|
32,749 |
|
|
|
34,938 |
|
|
|
34,266 |
|
|
|
5,251 |
|
Foreign exchange loss (gain)
|
|
|
7,621 |
|
|
|
(243 |
)
|
|
|
1,322 |
|
|
|
203 |
|
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
|
|
131,748 |
|
|
|
104,589 |
|
|
|
20,917 |
|
|
|
3,206 |
|
Loss on extinguishment of convertible notes
|
|
|
900 |
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(Gain) loss on disposal of property, plant and equipment
|
|
|
(266 |
)
|
|
|
7,938 |
|
|
|
8,197 |
|
|
|
1,256 |
|
Share-based compensation
|
|
|
374,957 |
|
|
|
230,440 |
|
|
|
28,023 |
|
|
|
4,295 |
|
Deferred income taxes
|
|
|
(8,943 |
)
|
|
|
(7,930 |
)
|
|
|
(11,366 |
)
|
|
|
(1,742 |
)
|
Gain on disposal of subsidiaries
|
|
|
—
|
|
|
|
—
|
|
|
|
(126,968 |
)
|
|
|
(19,459 |
)
|
Impairment loss on intangible assets
|
|
|
—
|
|
|
|
—
|
|
|
|
4,100 |
|
|
|
628 |
|
Changes in operating assets and liabilities:
|
||||||||||||||||
Inventories
|
|
|
723 |
|
|
|
(2,144 |
)
|
|
|
(1,893 |
)
|
|
|
(290 |
)
|
Prepaid expenses and other current assets
|
|
|
(48,772 |
)
|
|
|
23,884 |
|
|
|
10,641
|
|
|
|
1,631 |
|
Amounts due from related parties
|
|
|
113 |
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Deferred revenue
|
|
|
(32,052 |
)
|
|
|
(16,407 |
)
|
|
|
(183,405 |
)
|
|
|
(28,108 |
)
|
Accrued expenses and other current liabilities
|
|
|
(10,267 |
)
|
|
|
138,173 |
|
|
|
(39,947 |
)
|
|
|
(6,121 |
)
|
Income tax payable
|
|
|
5,733 |
|
|
|
5,493 |
|
|
|
11,197 |
|
|
|
1,716 |
|
Amounts due to related parties
|
|
|
230,657 |
|
|
|
(53,042 |
)
|
|
|
(2,060 |
)
|
|
|
(316 |
)
|
Franchise deposits
|
|
|
(2,093 |
)
|
|
|
770 |
|
|
|
16 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|||||||||
Net cash (used in) generated from operating activities
|
|
|
(92,905 |
)
|
|
|
24,684 |
|
|
|
(203,330 |
)
|
|
|
(31,161 |
)
|
|
|
|
|
|
|
|
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||
Acquisition of businesses, net of cash acquired
|
|
|
(73,208 |
)
|
|
|
(104,534 |
)
|
|
|
(1,095 |
)
|
|
|
(168 |
)
|
Purchase of property, plant and equipment
|
|
|
(83,709 |
)
|
|
|
(115,545 |
)
|
|
|
(70,968 |
)
|
|
|
(10,876 |
)
|
Loans to third parties
|
|
|
—
|
|
|
|
(191,230 |
)
|
|
|
(43,663 |
)
|
|
|
(6,692 |
)
|
Proceeds from disposal of subsidiaries, net of cash disposed
|
|
|
—
|
|
|
|
—
|
|
|
|
34,410 |
|
|
|
5,274 |
|
Purchase of non-control
l
ing interest
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,000 |
)
|
|
|
(460 |
)
|
|
|
|
|
|
|
|
|
|||||||||
Net cash used in investing activities
|
|
|
(156,917 |
)
|
|
|
(411,309 |
)
|
|
|
(84,316 |
)
|
|
|
(12,922 |
)
|
|
|
|
|
|
|
|
|
|||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||||||
Acquisition of businesses
|
|
|
—
|
|
|
|
(147,592 |
)
|
|
|
(192,349 |
)
|
|
|
(29,479 |
)
|
Proceeds from IPO (net of IPO expenses)
|
|
|
799,208 |
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from promissory notes
|
50,000 |
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
||
Repayments of promissory notes
|
—
|
|
|
|
(190,000 |
)
|
|
|
—
|
|
|
|
—
|
|
||
Repurchase of convertible redeemable preferred shares
|
|
(180,000 |
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Loans from third parties
|
139,500 |
|
|
|
547,038 |
|
|
|
326,146 |
|
|
|
49,984 |
|
||
Repayments to third parties
|
(83,802 |
)
|
|
|
(212,700 |
)
|
|
|
(314,953 |
)
|
|
|
(48,269 |
)
|
||
Borrowings from banks
|
110,873 |
|
|
|
449,600 |
|
|
|
675,000 |
|
|
|
103,448 |
|
||
Repayments of bank borrowings
|
(4,273 |
)
|
|
|
(242,100 |
)
|
|
|
(408,600 |
)
|
|
|
(62,621 |
)
|
||
Loans from related parties
|
— |
|
|
|
— |
|
|
|
265,138 |
|
|
|
40,634 |
|
||
Repayments to related parties
|
— |
|
|
|
— |
|
|
|
(94,136 |
)
|
|
|
(14,427 |
)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net cash generated from financing activities
|
831,506 |
|
|
|
204,246 |
|
|
|
256,246
|
|
|
|
39,270 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Effect of exchange rate changes
|
48,131 |
|
|
|
6,432 |
|
|
|
(22,823 |
)
|
|
|
(3,498 |
)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents, and restricted cash
|
629,815 |
|
|
|
(175,947 |
)
|
|
|
(54,223 |
)
|
|
|
(8,311 |
)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents, and restricted cash at beginning of the year
|
189,162 |
|
|
|
818,977 |
|
|
|
643,030 |
|
|
|
98,549 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents, and restricted cash at end of the year
|
818,977 |
|
|
|
643,030 |
|
|
|
588,807 |
|
|
|
90,238 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Supplemental schedule of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Income taxes paid
|
8,532 |
|
|
|
14,625 |
|
|
|
9,364
|
|
|
|
1,435
|
|
||
Interest paid
|
55,098 |
|
|
|
60,528 |
|
|
|
77,131 |
|
|
|
11,821 |
|
||
Acquisition consideration payable
|
48,128 |
|
|
|
376,187 |
|
|
|
191,431 |
|
|
|
29,338 |
|
||
|
|
|
|
|
|
|
|
|||||||||
Reconciliation to amounts on consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
778,006 |
|
|
|
256,763 |
|
|
|
48,497 |
|
|
|
7,432 |
|
||
Restricted cash
|
40,971 |
|
|
|
386,267 |
|
|
|
540,310 |
|
|
|
82,806 |
|
||
|
|
|
|
|
|
|
|
|||||||||
Total cash, cash equivalents, and restricted cash
|
818,977 |
|
|
|
643,030 |
|
|
|
588,807 |
|
|
|
90,238 |
|
||
|
|
|
|
|
|
|
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
(i) |
Agreements that transfer economic benefits to the Group:
|
(ii) |
Agreements that provide the Company effective control over Puxin Education:
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
(iii) |
Risks in relation to VIE structure
|
• |
Puxin Education and its shareholders may have or develop interests that conflict with the Group’s interests, which may lead them to pursue opportunities in violation of the aforementioned contractual agreements. If the Group cannot resolve any conflicts of interest or disputes between the Group and the shareholders of Puxin Education, the Group would have to rely on legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings.
|
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES
|
• |
Puxin Education and its shareholders could fail to obtain the proper operating licenses or fail to comply with other regulatory requirements. As a result, the PRC government could impose fines, new requirements or other penalties on the VIE or the Group, mandate a change in ownership structure or operations for the VIE or the Group, restrict the VIE or the Group’s use of financing sources or otherwise restrict the VIE or the Group’s ability to conduct business.
|
• |
The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the relevant regulations, have a different interpretation of such regulations, or otherwise determine that the Group or the VIE have failed to comply with the legal obligations required to effectuate such contractual arrangements.
|
• |
If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government may restrict or prohibit the Group’s business and operations in China.
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Cash and cash equivalents
|
238,907 | 37,843 | ||||||
Prepaid expenses and other current assets
|
88,571 | 78,425 | ||||||
Total current assets
|
340,789 | 147,148 | ||||||
Total assets
|
3,569,949 | 3,264,946 | ||||||
Total current liabilities
|
3,035,344 | 2,762,722 | ||||||
Total liabilities
|
3,914,723 | 3,513,374 |
For the years ended
December 31, |
||||||||||||
2018 | 2019 | 2020 | ||||||||||
RMB | RMB | RMB | ||||||||||
Net revenues
|
2,219,638 | 3,094,044 | 2,897,010 | |||||||||
Net
(
loss
)
income
|
(254,754 | ) | (31,712 | ) | 149,378 | |||||||
Net cash (used in) generated from operating activities
|
(81,041 | ) | 142,437 | (49,168 | ) | |||||||
Net cash used in investing activities
|
(156,917 | ) | (219,186 | ) | (54,383 | ) | ||||||
Net cash generated from (used in) financing activities
|
20,505 | 83,361 | (82,301 | ) |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Category
|
Estimated useful life | |
Buildings
|
37 years | |
Electronic equipment
|
3 years | |
Motor vehicles
|
5 years | |
Furniture and education equipment
|
5 years | |
Leasehold improvement
|
Shorter of lease term or
estimated economic life |
Category
|
Amortization periods | |||
Student base
|
2.2 - 7 years | |||
Trademark
|
5.4
|
|||
Relationship with partnership school
|
6.4 years | |||
Franchise agreement
|
3.4 years |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
For the years ended
December 31, |
||||||||||||
2018 | 2019 | 2020 | ||||||||||
RMB | RMB | RMB | ||||||||||
Services:
|
||||||||||||
K-12
tutoring services - group class
|
817,843 | 1,103,607 | 1,153,658 | |||||||||
K-12
tutoring services - personalized
|
364,554 | 553,654 | 580,533 | |||||||||
K-12
tutoring services - full-time
|
— | 286,593 | 472,082 | |||||||||
Study-abroad test preparation services
|
860,687 | 941,537 | 553,647 | |||||||||
Study-abroad consulting services
|
185,033 | 218,567 | 143,995 | |||||||||
|
|
|
|
|
|
|||||||
Total net revenues
|
2,228,117 | 3,103,958 | 2,903,915 | |||||||||
|
|
|
|
|
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
(i) |
K-12
tutoring services
|
(ii)
|
Study abroad tutoring services
|
|
•
|
|
Study-abroad test preparation services
|
• |
Study-abroad consulting services
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Depreciation or
amortization period |
|||||||
RMB | ||||||||
Prepaid expenses and other current assets
|
37,169 | |||||||
Property, plant and equipment, net
|
1,241 |
3-5
|
||||||
Rental deposits
|
290 | |||||||
Accrued expenses and other current liabilities
|
(2,219 | ) | ||||||
Deferred revenue
|
(35,534 | ) | ||||||
Intangible assets-student base
|
6,700 |
2.2
|
||||||
Deferred tax liabilities
|
(1,675 | ) | ||||||
Goodwill
|
71,028 | |||||||
|
|
|||||||
Total
|
77,000 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Amortization period
|
|||||||
RMB | ||||||||
Cash and cash equivalents
|
54 | |||||||
Prepaid expenses and other current assets
|
8,504 | |||||||
Restricted cash
|
200 | |||||||
Accrued expenses and other current liabilities
|
(769 | ) | ||||||
Deferred revenue
|
(8,704 | ) | ||||||
Intangible assets-student base
|
1,100 |
3.5
|
||||||
Deferred tax liabilities
|
(275 | ) | ||||||
Goodwill
|
19,876 | |||||||
|
|
|||||||
Total
|
19,986 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Depreciation or
amortization period |
|||||||
RMB | ||||||||
Cash and cash equivalents
|
20,057 | |||||||
Inventories
|
1,508 | |||||||
Prepaid expenses and other current assets
|
52,596 | |||||||
Property, plant and equipment, net
|
205 |
3-5
years
|
||||||
Operating lease
right-of-use
|
63,652 | |||||||
Accrued expenses and other current liabilities
|
(1,392 | ) | ||||||
Deferred revenue
|
(108,406 | ) | ||||||
Operating lease liabilities
|
(58,621 | ) | ||||||
Intangible assets - trademark
|
43,700 | Indefinite | ||||||
Deferred tax liabilities
|
(10,925 | ) | ||||||
Goodwill
|
167,626 | |||||||
|
|
|||||||
Total
|
170,000 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
|
|
Amount
|
|
|
Depreciation or
amortization period |
|
||
|
|
RMB
|
|
|
|
|
||
Cash and cash equivalents
|
|
|
22,245
|
|
|
|||
Prepaid expenses and other current assets
|
|
|
47
|
|
|
|||
Rental deposits
|
|
|
464
|
|
|
|||
Property, plant and equipment, net
|
|
|
2,074
|
|
|
|
3-5 years
|
|
Operating lease
right-of-use
|
|
|
45,269
|
|
|
|||
Accrued expenses and other current liabilities
|
|
|
(6,072
|
)
|
|
|||
Deferred revenue
|
|
|
(45,581
|
)
|
|
|||
Operating lease liabilities
|
|
|
(41,469
|
)
|
|
|||
Intangible assets - student base
|
|
|
15,700
|
|
|
|
3.5 years
|
|
Deferred tax liabilities
|
|
|
(3,925
|
)
|
|
|||
Goodwill
|
|
|
124,248
|
|
|
|||
|
|
|
|
|
||||
Total
|
|
|
113,000
|
|
|
|||
|
|
|
|
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Depreciation or
amortization period |
|||||||
RMB | ||||||||
Cash and cash equivalents
|
8,223 | |||||||
Prepaid expenses and other current assets
|
64,330 | |||||||
Rental deposits
|
931 | |||||||
Property, plant and equipment, net
|
1,204 |
3-5
|
||||||
Operating lease
right-of-use
|
37,780 | |||||||
Accrued expenses and other current liabilities
|
(6,280 | ) | ||||||
Deferred revenue
|
(67,415 | ) | ||||||
Bank borrowing
|
(4,500 | ) | ||||||
Operating lease liabilities
|
(32,333 | ) | ||||||
Intangible assets - student base
|
12,600 |
4.1
|
||||||
Deferred tax liabilities
|
(3,150 | ) | ||||||
Goodwill
|
160,560 | |||||||
|
|
|||||||
Total
|
171,950 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Depreciation or
amortization period |
|||||||
RMB | ||||||||
Cash and cash equivalents
|
14,329 | |||||||
Prepaid expenses and other current assets
|
105,367 | |||||||
Rental deposits
|
1,155 | |||||||
Restricted cash
|
1,951 | |||||||
Property, plant and equipment, net
|
1,990 |
3-5
years
|
||||||
Operating lease
right-of-use
|
69,970 | |||||||
Accrued expenses and other current liabilities
|
(6,595 | ) | ||||||
Deferred revenue
|
(148,484 | ) | ||||||
Operating lease liabilities
|
(62,772 | ) | ||||||
Intangible assets - student base
|
8,500 |
2.6-3.6 years
|
||||||
Deferred tax liabilities
|
(2,125 | ) | ||||||
Goodwill
|
359,671 | |||||||
|
|
|||||||
Total
|
342,957 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
Amount |
Depreciation or
amortization period |
|||||||
RMB | ||||||||
Cash and cash equivalents
|
1,420 | |||||||
Inventories
|
168 | |||||||
Prepaid expenses and other current assets
|
33,683 | |||||||
Rental deposits
|
558 | |||||||
Property, plant and equipment, net
|
52 |
3-5 years
|
||||||
Operating lease right-of-use assets
|
23,413 | |||||||
Accrued expenses and other current liabilities
|
(655 | ) | ||||||
Deferred revenue
|
(36,682 | ) | ||||||
Operating lease liabilities
|
(21,925 | ) | ||||||
Intangible assets - student base
|
3,600 | 4.1 years | ||||||
Deferred tax liabilities
|
(900 | ) | ||||||
Goodwill
|
47,574 | |||||||
|
|
|||||||
Total
|
50,306 | |||||||
|
|
3.
|
BUSINESS ACQUISITION
|
For the year ended
December 31, 2018 |
||||||||
Shandong
Zengyu |
Others | |||||||
RMB | RMB | |||||||
Net revenues
|
8,074 | 4,495 | ||||||
Net (loss)
|
(1,362 | ) | (27 | ) |
For the year ended
December 31, |
||||||||||||||||
Beijing Xiaoze | Xi’an Intest | Dalian Keyuan | Others | |||||||||||||
RMB | RMB | RMB | RMB | |||||||||||||
Net revenues
|
116,355 | 61,194 | 11,697 | 174,149 | ||||||||||||
Net income (loss)
|
11,300 | (1,740 | ) | 758 | 33,460 |
For the year ended
December 31, 2020 |
||||
Zhengzhou Youshili | ||||
RMB | ||||
Net revenues
|
5,800 | |||
Net income
|
249 |
For the years ended
December 31, |
||||||||
2017 | 2018 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
pro forma net revenues
|
1,392,146 | 2,317,937 | ||||||
pro forma net (loss)
|
(389,366 | ) | (824,909 | ) |
3.
|
BUSINESS ACQUISITION
|
For the years ended
December 31, |
||||||||
2018 | 2019 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
pro forma net revenues
|
2,928,589 | 3,481,809 | ||||||
pro forma net (loss)
|
(836,874 | ) | (516,704 | ) |
For the years ended
December 31, |
||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Unaudited | Unaudited | |||||||
pro forma net revenues
|
3,185,922 | 2,970,758 | ||||||
pro forma net (loss)
|
(520,417 | ) | (37,745 | ) |
4.
|
DISPOSAL OF SUBSIDIARIES
|
5.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Prepaid service fees
|
68,913 | 55,683 | ||||||
Staff advances
|
20,067 | 17,430 | ||||||
Interest receivable
|
17,052 | 48,513 | ||||||
Receivable from disposal
of
subsidiaries
|
— | 8,470 | ||||||
Others
|
11,116 | 11,798 | ||||||
|
|
|
|
|||||
117,148 | 141,894 | |||||||
|
|
|
|
6.
|
LOAN RECEIVABLE
S
|
7.
|
PROPERTY, PLANT AND EQUIPMENT, NET
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Buildings
|
87,792 | 87,792 | ||||||
Electronic equipment
|
87,658 | 91,524 | ||||||
Motor vehicles
|
9,149 | 8,111 | ||||||
Furniture and education equipment
|
46,132 | 48,173 | ||||||
Leasehold improvement
|
239,148 | 248,724 | ||||||
|
|
|
|
|||||
Total
|
469,879 | 484,324 | ||||||
|
|
|
|
|||||
Less: Accumulated depreciation
|
(171,160 | ) | (219,295 | ) | ||||
|
|
|
|
|||||
298,719 | 265,029 | |||||||
|
|
|
|
8.
|
INTANGIBLE ASSETS
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Student base
|
140,409 | 127,155 | ||||||
Trademark
|
216,100 | 216,100 | ||||||
Relationship with partnership school
|
5,300 | 5,300 | ||||||
Franchise agreement
|
4,400 | 4,400 | ||||||
|
|
|
|
|||||
Total
|
366,209 | 352,955 | ||||||
|
|
|
|
|||||
Less: Accumulated amortization
|
(101,669 | ) | (123,685 | ) | ||||
Accumulated impairment loss
|
— | (4,100 | ) | |||||
264,540 | 225,170 | |||||||
|
|
|
|
9.
|
GOODWILL
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Costs:
|
||||||||
Beginning balance
|
1,243,817 | 2,055,922 | ||||||
Acquisition of subsidiaries and schools
|
812,105 | 47,574 | ||||||
Disposal of subsidiaries and schools
|
—
|
(20,345 | ) | |||||
Ending balance
|
2,055,922 | 2,083,151 | ||||||
|
|
|
|
|||||
Goodwill
impairment loss
|
— | — | ||||||
|
|
|
|
|||||
Goodwill, net
|
2,055,922 | 2,083,151 | ||||||
|
|
|
|
10.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Consideration payable in connection with business acquisitions
|
376,187 | 191,431 | ||||||
Salary and welfare payable
|
335,024 | 258,635 | ||||||
Refund liabilities (Note a)
|
137,510 | 147,093 | ||||||
Accrued expenses
|
61,962 | 129,900 | ||||||
Other tax payable
|
25,060 | 12,531 | ||||||
Interest payable
|
20,342 | 23,530 | ||||||
Payables for purchase of property, plant and equipment
|
16,113 | 8,759 | ||||||
Others
|
11,517 | 13,015 | ||||||
|
|
|
|
|||||
983,715 | 784,894 | |||||||
|
|
|
|
Note a: |
Refund liabilities represented estimated amounts of service fee collected that may be subject to refund to the customers related to K-12 tutoring services and study abroad tutoring services.
|
11.
|
BANK BORROWINGS
|
12.
|
LOANS PAYABLE TO THIRD PARTIES
|
13.
|
CONVERTIBLE NOTES
|
13.
|
CONVERTIBLE NOTES
|
14.
|
PROMISSORY NOTES
|
1
5
.
|
FAIR VALUE MEASUREMENT
|
|
|
For the years ended
December 31, |
|
|||||
|
|
2019
|
|
|
2020
|
|
||
Exit period
|
|
|
2019/12/31
|
|
|
|
2019/12/31
|
|
|
|
–2020/12/31
|
|
|
|
–2020/6/30
|
|
|
Volatility
|
|
|
77
|
%
|
|
|
92
|
%
|
1
5
.
|
FAIR VALUE MEASUREMENT
|
Fair Value Measurement as of December 31, 2019
|
||||||||||||||||
Quoted Prices in
Active Market for
Identical Assets
(Level 1)
|
Significant
Other
Observable Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total
|
|||||||||||||
|
|
|
RMB
|
|
|
|
RMB
|
|
|
|
RMB
|
|
|
|
RMB
|
|
Cash and cash equivalents
|
|
256,763
|
|
|
—
|
|
|
—
|
|
|
256,763
|
|
||||
Restricted cash
|
|
386,267
|
|
|
—
|
|
|
—
|
|
|
386,267
|
|
||||
Promissory notes
|
|
—
|
|
|
174,045
|
|
|
—
|
|
|
174,045
|
|
||||
Derivative liabilities
|
|
—
|
|
|
—
|
|
|
172,235
|
|
|
172,235
|
|
||||
|
|
|
|
|
|
|
|
|||||||||
Total
|
|
643,030
|
|
|
174,045
|
|
|
172,235
|
|
|
989,310
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Fair Value Measurement as of December 31, 2020
|
|
|||||||||
|
|
Quoted Prices in
Active Market for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable Inputs
(Level 2)
|
|
|
Total
|
|
|||
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|||
Cash and cash equivalents
|
|
|
48,497
|
|
|
|
—
|
|
|
|
48,497
|
|
Restricted cash
|
|
|
540,310
|
|
|
|
—
|
|
|
|
540,310
|
|
Promissory notes
|
|
|
—
|
|
|
|
163,125
|
|
|
|
163,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
588,807
|
|
|
|
163,125
|
|
|
|
751,932
|
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
FAIR VALUE MEASUREMENT
|
1
6
.
|
SHARE-BASED COMPENSATION
|
1
6
.
|
SHARE-BASED COMPENSATION
|
|
|
For the years ended
December 31, |
|
|||||
Grant date
|
|
2018
|
|
|
2019
|
|
||
Risk-free interest rate
|
3.40 | % | 2.51 | % | ||||
Volatility
|
46 | % | 55 | % | ||||
Dividend yield
|
— | — | ||||||
Exercise multiples
|
2.2-2.8
|
2.8 | ||||||
Life of options
|
7.0 | 7.0 | ||||||
Fair value of underlying ordinary shares
|
49.67 | 20.57 |
(1) |
Risk-free interest rate
|
(2) |
Volatility
|
(3) |
Dividend yield
|
(4) |
Exercise multiples
|
(5) |
Life of options
|
(6) |
Fair value of underlying ordinary shares
|
1
6
.
|
SHARE-BASED COMPENSATION
|
Outstanding options | ||||||||||||||||
Number of
options |
Weighted
average exercise price |
Weighted average
remaining contractual term (years) |
Aggregate
intrinsic value |
|||||||||||||
Options outstanding at January 1, 2020
|
21,646,232 | 37.78 | 4.77 | 123,239 | ||||||||||||
Granted
|
— | — | ||||||||||||||
Exercised
|
428,182 | 3.42 | ||||||||||||||
Forfeited
|
1,317,461 | 40.53 | ||||||||||||||
|
|
|
|
|||||||||||||
Options outstanding at December 31, 2020
|
19,900,589 | 38.22 | 3.79 | 67,901 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options vested and expected to vest as of December 31, 2020
|
19,900,589 | 38.22 | 3.79 | 67,901 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Option exercisable as of December 31, 2020
|
15,948,198 | 36.97 | 3.71 | 64,135 | ||||||||||||
|
|
|
|
|
|
|
|
1
7
.
|
INCOME TAXES
|
For the years ended
December 31, |
||||||||||||
2018 | 2019 | 2020 | ||||||||||
RMB | RMB | RMB | ||||||||||
Current tax expenses
|
14,265 | 20,118 | 20,561 | |||||||||
Deferred tax expenses
|
(8,943 | ) | (7,930 | ) | (11,366 | ) | ||||||
|
|
|
|
|
|
|||||||
5,322 | 12,188 | 9,195 | ||||||||||
|
|
|
|
|
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Deferred tax assets:
|
||||||||
Accrued expenses
|
42,443 | 33,946 | ||||||
Net operating loss carrying forwards
|
222,722 | 229,332 | ||||||
|
|
|
|
|||||
Total deferred tax assets
|
265,165 | 263,278 | ||||||
|
|
|
|
|||||
Less: Valuation allowance
|
(262,966 | ) | (259,756 | ) | ||||
|
|
|
|
|||||
Deferred tax assets, net
|
2,199 | 3,522 | ||||||
|
|
|
|
17.
|
INCOME TAXES
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Deferred tax liabilities:
|
||||||||
Acquired intangible assets
|
81,969 | 71,674 | ||||||
|
|
|
|
|||||
Total deferred tax liabilities
|
81,969 | 71,674 | ||||||
|
|
|
|
For the years ended
December 31, |
||||||||||||
2018 | 2019 | 2020 | ||||||||||
RMB | RMB | RMB | ||||||||||
Loss before income taxes
|
(828,087 | ) | (507,446 | ) | (27,465 | ) | ||||||
Income tax benefit computed at an applicable tax rate of 25%
|
(207,022 | ) | (126,862 | ) | (6,866 | ) | ||||||
Effect of non-deductible expenses
|
108,479 | 57,888 | 33,462 | |||||||||
Effect of research and development super-deduction
|
|
|
(1,970
|
)
|
|
|
(6,672
|
)
|
|
|
(9,473
|
)
|
Effect of income tax rate differences in jurisdictions other than PRC
|
38,490 | 30,189 | (3,075 | ) | ||||||||
Effect of preferential tax rate
|
(554 | ) | (12,211 | ) | (14,228 | ) | ||||||
Change in valuation allowance
|
67,899 | 69,856 | 9,375 | |||||||||
|
|
|
|
|
|
|||||||
5,322 | 12,188 | 9,195 | ||||||||||
|
|
|
|
|
|
18
.
|
ORDINARY SHARES
|
19
.
|
NET LOSS PER SHARE
|
For the years ended
December 31, |
||||||||||||
2018 | 2019 | 2020 | ||||||||||
RMB | RMB | RMB | ||||||||||
Numerator used in basic and diluted net loss per share:
|
||||||||||||
Net loss attributable to ordinary shareholders of Puxin Limited
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | ||||||
|
|
|
|
|
|
|||||||
Shares (denominator):
|
||||||||||||
Weighted average common shares outstanding used in computing basic and diluted net loss per share (Note 1)
|
144,157,947 | 170,903,317 | 174,156,247 | |||||||||
|
|
|
|
|
|
|||||||
Net loss per share basic and diluted
|
(5.78 | ) | (3.03 | ) | (0.18 | ) | ||||||
|
|
|
|
|
|
2
0
.
|
EMPLOYEE DEFINED CONTRIBUTION PLAN
|
2
1
.
|
RELATED PARTY TRANSACTION
|
(1) |
Related parties
|
Name of related parties
|
Relationship with the Group
|
|
Mr. Yunlong Sha | The CEO and the Chairman of the Board of Directors of the Company | |
Ms. Wenjing Song | Spouse of Mr. Yunlong Sha |
(2) |
The significant balances between the Group and its related parties were as follows:
|
As of December 31, | ||||||||
2019 | 2020 | |||||||
RMB | RMB | |||||||
Amounts due to:
|
||||||||
Mr. Yunlong Sha
|
1,197 | 170,229 | ||||||
Ms. Wenjing Song
|
254 | 164 | ||||||
|
|
|
|
|||||
1,451 | 170,393 | |||||||
|
|
|
|
2
2
.
|
LEASES
|
|
|
For the year
s
ended
December 31,
|
|
|||||
|
|
|
2019
|
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
||||
Operating cash flows used in operating leases
|
|
373,230
|
|
|
361,432 | |||
Right-of-use assets
|
|
|
|
|
||||
Operating leases
|
|
643,722
|
|
|
315,751 | |||
Weighted average remaining lease term
|
|
|
||||||
Operating leases
|
|
4.59 years
|
|
|
4.63 years | |||
Weighted average discount rate
|
|
|
||||||
Operating lease
s
|
|
7.46
|
%
|
|
7.53 | % |
Years ending December 31,
|
||||
2021
|
329,673 | |||
2022
|
243,799 | |||
2023
|
181,106 | |||
2024
|
120,543 | |||
2025
|
84,251 | |||
T
hereafter
|
132,094 | |||
|
|
|||
Less imputed interest
|
150,898 | |||
|
|
|||
Total
|
940,568 | |||
|
|
2
3
.
|
COMMITMENTS AND CONTINGENCIES
|
2
3
.
|
COMMITMENTS AND CONTINGENCIES
|
2
4
.
|
SEGMENT INFORMATION
|
For the year ended December 31, 2018
|
||||||||||||
K-12
|
Study abroad
|
|||||||||||
tutoring services
|
tutoring services
|
Consolidated
|
||||||||||
Net revenues
|
|
1,182,397
|
|
|
1,045,720
|
|
|
2,228,117
|
|
|||
Cost of revenues
|
|
706,917
|
|
|
535,972
|
|
|
1,242,889
|
|
|||
|
|
|
|
|
|
|||||||
Gross profit
|
|
475,480
|
|
|
509,748
|
|
|
985,228
|
|
|||
|
|
|
|
|
|
For the year ended December 31, 2019
|
||||||||||||
K-12
|
Study abroad
|
|||||||||||
tutoring services
|
tutoring services
|
Consolidated
|
||||||||||
Net revenues
|
|
1,943,854
|
|
|
1,160,104
|
|
|
3,103,958
|
|
|||
Cost of revenues
|
|
1,055,205
|
|
|
574,242
|
|
|
1,629,447
|
|
|||
|
|
|
|
|
|
|||||||
Gross profit
|
|
888,649
|
|
|
585,862
|
|
|
1,474,511
|
|
|||
|
|
|
|
|
|
For the year ended December 31, 2020
|
||||||||||||
K-12
|
Study abroad
|
|||||||||||
tutoring services
|
tutoring services
|
Consolidated
|
||||||||||
Net revenues
|
|
2,206,273
|
|
|
697,642
|
|
|
2,903,915
|
|
|||
Cost of revenues
|
|
1,205,656
|
|
|
352,940
|
|
|
1,558,596
|
|
|||
|
|
|
|
|
|
|||||||
Gross profit
|
|
1,000,617
|
|
|
344,702
|
|
|
1,345,319
|
|
|||
|
|
|
|
|
|
2
5
.
|
RESTRICTED NET ASSETS
|
2
5
.
|
RESTRICTED NET ASSETS
|
26.
|
SUBSEQUENT EVENTS
|
As of December 31, | ||||||||||||
2019 | 2020 | 2020 | ||||||||||
RMB | RMB | USD | ||||||||||
(Note 3) | ||||||||||||
ASSETS
|
||||||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
3,103 | — | — | |||||||||
Amounts due from subsidiaries and VIEs
|
1,099,759 | 1,061,832 | 162,733 | |||||||||
Prepaid expenses and other current assets
|
11,448 | 47,200 | 7,234 | |||||||||
Loan receivable
s
|
191,230 | 207,225 | 31,759 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets
|
1,305,540 | 1,316,257 | 201,726 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL ASSETS
|
1,305,540 | 1,316,257 | 201,726 | |||||||||
|
|
|
|
|
|
|||||||
LIABILITIES
|
||||||||||||
Current liabilities
|
||||||||||||
Accrued expenses and other current liabilities
|
7,258 | 6,804 | 1,044 | |||||||||
Promissory note, current portion
|
87,023 | 163,125 | 25,000 | |||||||||
Loan payable to
a third party
|
— | 65,250 | 10,000 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities
|
94,281 | 235,179 | 36,044 | |||||||||
Non-current
liabilities
|
||||||||||||
Promissory note,
non-current
portion
|
87,022 | — | — | |||||||||
Derivative liabilities
|
172,235 | — | — | |||||||||
Investments deficit in subsidiaries and VIEs
|
690,822 | 656,346 | 100,590 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL LIABILITIES
|
1,044,360 | 891,525 | 136,634 | |||||||||
|
|
|
|
|
|
|||||||
SHAREHOLDERS’ EQUITY
|
||||||||||||
Ordinary shares (par value of USD0.00005 per share; 1,000,000,000 and 1,000,000,000 shares authorized, 188,627,228 and 188,653,468 shares issued and 174,025,810 and 174,453,992 shares outstanding as of December 31, 2019 and 2020, respectively)
|
62 | 62 | 9 | |||||||||
Additional
paid-in
capital
|
2,175,652 | 2,396,406 | 367,265 | |||||||||
Statutory reserve
|
7,979 | 11,444 | 1,754 | |||||||||
Accumulated other comprehensive income
|
68,707 | 43,711 | 6,699 | |||||||||
Accumulated deficit
|
(1,991,220 | ) | (2,026,891 | ) | (310,635 | ) | ||||||
|
|
|
|
|
|
|||||||
TOTAL SHAREHOLDERS’ EQUITY
|
261,180 | 424,732 | 65,092 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL LIABILITIES AND TOTAL SHAREHOLDERS’ EQUITY
|
1,305,540 | 1,316,257 | 201,726 | |||||||||
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
(Note 3) | ||||||||||||||||
General and administrative expenses
|
(8,728 | ) | (12,102 | ) | (191 | ) | (28 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses
|
(8,728 | ) | (12,102 | ) | (191 | ) | (28 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Interest expense
|
(13,218 | ) | (15,250 | ) | (17,244 | ) | (2,643 | ) | ||||||||
Interest income
|
2,104 | 10,985 | 37,092 | 5,685 | ||||||||||||
Foreign exchange
(
loss
) gai
n
|
(10,358 | ) | (3,753 | ) | 18,885 | 2,894 | ||||||||||
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
(124,648 | ) | (104,589 | ) | (20,917 | ) | (3,206 | ) | ||||||||
Equity in loss of subsidiaries and VIEs
|
(678,563 | ) | (393,824 | ) | (49,831 | ) | (7,637 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | (4,935 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income tax expenses
|
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | (4,935 | ) | ||||||||
|
|
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
(Note 3) | ||||||||||||||||
Net loss
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | (4,935 | ) | ||||||||
Other comprehensive loss, net of tax
of nil
:
|
||||||||||||||||
Change in cumulative foreign currency translation adjustments
|
52,496 | 493 | (24,996 | ) | (3,831 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive loss
|
(780,915 | ) | (518,040 | ) | (57,202 | ) | (8,766 | ) | ||||||||
|
|
|
|
|
|
|
|
For the years ended December 31, | ||||||||||||||||
2018 | 2019 | 2020 | 2020 | |||||||||||||
RMB | RMB | RMB | USD | |||||||||||||
(Note 3) | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||||||
Net loss
|
(833,411 | ) | (518,533 | ) | (32,206 | ) | (4,935 | ) | ||||||||
Adjustments to reconcile net loss
to net cash used in operating
activities:
|
||||||||||||||||
Equity in loss of subsidiaries and VIEs
|
678,563 | 393,824 | 49,831 | 7,637 | ||||||||||||
Foreign exchange loss
(gain
)
|
10,358 | 3,753 | (18,885 | ) | (2,894 | ) | ||||||||||
Loss on changes in fair value of convertible notes, derivative liabilities and warrants
|
124,648 | 104,589 | 20,917 | 3,206 | ||||||||||||
Changes in operating assets and liabilities:
|
||||||||||||||||
Prepaid expenses and other current assets
|
— | (10,449 | ) | (37,145 | ) | (5,693 | ) | |||||||||
Accrued expenses and other current liabilities
|
(5,230 | ) | 1,409 | — | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash used in operating activities
|
(25,072 | ) | (25,407 | ) | (17,488 | ) | (2,679 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||
Loans to subsidiaries and VIEs
|
(396,495 | ) | (221,418 | ) | (23,775 | ) | (3,644 | ) | ||||||||
Loan to a third party
|
— | (191,230 | ) | (27,993 | ) | (4,290 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash used in investing activities
|
(396,495 | ) | (412,648 | ) | (51,768 | ) | (7,934 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||||||
Proceeds from IPO (net of IPO expenses)
|
811,001 | — | — | — | ||||||||||||
Loan from a third party
|
— | — | 65,250 | 10,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash generated from financing activities
|
811,001 | — | 65,250 | 10,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Effect of exchange rate changes
|
43,773 | 3,545 | 903 | 137 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase
(decrease) in
cash and cash equivalents, and restricted cash
|
433,207 | (434,510 | ) | (3,103 | ) | (476 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents, and restricted cash at beginning of the year
|
4,406 | 437,613 | 3,103 | 476 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash and cash equivalents, and restricted cash at end of the year
|
437,613 | 3,103 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
1.
|
BASIS FOR PREPARATION
|
2.
|
INVESTMENT IN SUBSIDIARIES
|
3.
|
CONVENIENCE TRANSLATION
|
Exhibit 2.4
Description of Rights of Securities Registered under Section 12 of the Securities Exchange Act of 1934
American Depositary Shares (ADSs), each representing two ordinary shares of Puxin Limited (our company) are listed on the New York Stock Exchange and the shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of (i) the holders of ordinary shares and (ii) ADS holders. Shares underlying the ADSs are held by Deutsche Bank Trust Company Americas, as depositary, and holders of ADSs will not be treated as holders of the ordinary shares.
Description of Ordinary Shares (Items 9.A.3, 9.A.5, 9.A.6, 9.A.7, 10.B.3, 10.B.4, 10.B.6, 10.B.7, 10.B.8, 10.B.9 and 10.B.10 of Form 20-F)
Ordinary Shares
General. Holders of ordinary shares have the same rights. All of our outstanding ordinary shares are fully paid and non-assessable. Our shareholders who are non-residents of the Cayman Islands may freely hold and transfer their ordinary shares.
Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our second amended and restated memorandum and articles of association provide that dividends may be declared and paid out of the funds legally available. Dividends may also be declared and paid out of share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Act (as amended) of the Cayman Islands, which is referred to as Companies Act below.
Voting Rights. In respect of all matters subject to a shareholders vote, each ordinary share is entitled to one vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholders present in person or by proxy entitled to vote. An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding ordinary shares at a meeting and includes an unanimous written resolution. A special resolution will be required for important matters such as a change of name, reducing the share capital or making changes to our second amended and restated memorandum and articles of association.
Transfer of Ordinary Shares. Subject to the restrictions contained in our second amended and restated memorandum and articles of association, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
|
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; |
|
the instrument of transfer is in respect of only one class of shares; |
|
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and |
|
a fee of such maximum sum as the New York Stock Exchange, or NYSE, may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof. |
If our directors refuse to register a transfer, they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the NYSE, be suspended and the register of members closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register of members closed for more than 30 days in any year as our board may determine.
Liquidation. On a return of capital on winding-up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.
Calls on Ordinary Shares and Forfeiture of Ordinary Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares. The Companies Act and our second amended and restated memorandum and articles of association permit us to purchase our own shares. In accordance with our second amended and restated memorandum and articles of association and provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined by our board of directors.
Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Act, be varied with the consent in writing of the holders of not less than two-thirds of the issued shares of that class, or with the sanction of a resolution passed by at least a two-thirds majority of the holders of shares of the class present in person or by proxy at a separate general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be materially adversely varied by or abrogated by, inter alia, the creation or allotment or issue of further shares ranking pari passu with or subsequent to such existing class of shares.
General Meetings of Shareholders. Shareholders meetings may be convened by a majority of our board of directors. Advance notice of at least 10 calendar days is required for the convening of our annual general shareholders meeting and any other general meeting of our shareholders, provided that a general meeting of the Company shall be deemed to have been duly convened if it is so agreed:
(i) |
in the case of an annual general meeting by all the shareholders (or their proxies) entitled to attend and vote thereat; and |
(ii) |
in the case of an extraordinary general meeting by a majority in number of the shareholders (or their proxies) having a right to attend and vote at the meeting, being a majority together holding not less than 95% in par value of the shares giving that right. |
Inspection of Books and Records. Holders of our ordinary shares (not being our directors) will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will in provide our shareholders with the right to inspect our list of shareholders and to receive annual audited financial statements.
Changes in Capital. We may from time to time by ordinary resolution:
|
increase the share capital by such sum, to be divided into shares of such amount, as the resolution shall prescribe; |
|
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; |
|
subdivide our existing shares, or any of them into shares of a smaller amount; or |
|
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. |
We may by special resolution, subject to any confirmation or consent required by the Companies Act, reduce our share capital or any capital redemption reserve in any manner permitted by law.
Differences in Corporate Law
We were incorporated under, and are governed by, the laws of the Cayman Islands. The corporate statutes of the State of Delaware and the Cayman Islands are similar, and the flexibility available under Cayman Islands law has enabled us to adopt a second amended and restated memorandum and articles of association that provide shareholders with rights that do not vary in any material respect from those they would enjoy if we were incorporated under Delaware law. Set forth below is a summary of some of the differences between provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in Delaware and their shareholders.
Directors Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
Cayman Islands law provides that every director of a Cayman Islands company, in exercising his powers or performing his duties, shall act honestly and in good faith and in what the director believes to be in the best interests of the company. Additionally, the director shall exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances taking into account, without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of his responsibilities. In addition, Cayman Islands law provides that a director shall exercise his powers as a director for a proper purpose and shall not act, or agree to the company acting, in a manner that contravenes Cayman Islands law or the memorandum and articles of association of the company.
Written Consent of Directors
Under Delaware corporate law, a written consent of the directors must be unanimous to take effect. Under Cayman Islands law and our second amended and restated memorandum and articles of association, only a simple majority of the directors will be required to sign a written consent in order for such consent to take effect.
Shareholder Proposals
Under Delaware corporate law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. Our second amended and restated memorandum and articles of association provide that our directors shall call an annual meeting of the shareholders and may convene any additional meetings as they consider necessary or desirable.
Sale of Assets
Under Delaware corporate law, a vote of the shareholders is required to approve a sale of assets only when all or substantially all assets are being sold to a person other than a subsidiary of the company. Under Cayman Islands law, generally speaking, shareholder approval is not required for the disposal of assets of an exempted company.
Redemption of Shares
Under Delaware corporate law, any stock may be made subject to redemption by the corporation at its option, at the option of the holders of that stock or upon the happening of a specified event, provided shares with full voting power remain outstanding. The stock may be made redeemable for cash, property or rights, as specified in the certificate of incorporation or in the resolution of the board of directors providing for the issue of the stock. As permitted by Cayman Islands law and our second amended and restated memorandum and articles of association, shares may be purchased, redeemed or otherwise acquired by us. However, the consent of the shareholder whose shares are to be purchased, redeemed or otherwise acquired must be obtained, except as specified in the terms of the applicable class or series of shares or as described under Compulsory Acquisition below. In addition, our directors must be satisfied, on reasonable grounds, that, immediately following the purchase, redemption or other acquisition, the value of our assets will exceed our liabilities, and we will be able to pay our debts as they fall due.
Compulsory Acquisition
Under Delaware General Corporation Law § 253, in a process known as a short form merger, a corporation that owns at least 90% of the outstanding shares of each class of stock of another corporation may either merge the other corporation into itself and assume all of its obligations or merge itself into the other corporation by executing, acknowledging and filing with the Delaware Secretary of State a certificate of such ownership and merger setting forth a copy of the resolution of its board of directors authorizing such merger. If the parent corporation is a Delaware corporation that is not the surviving corporation, the merger also must be approved by a majority of the outstanding stock of the parent corporation. If the parent corporation does not own all of the stock of the subsidiary corporation immediately prior to the merger, the minority shareholders of the subsidiary corporation party to the merger may have appraisal rights as set forth in § 262 of the Delaware General Corporation Law.
Under the Companies Act, where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as the transferor company) to another company, whether a company within the meaning of the Companies Act or not (in this section referred to as the transferee company) has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than 90% in value of the shares affected, the transferee company may, at any time within two months after the expiration of the said four months, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares, and where such notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given, the court of the Cayman Islands thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which under the scheme or contract the shares of the approving shareholders are to be transferred to the transferee company.
Independent Directors
There are no provisions under Delaware corporate law nor under the Companies Act that require a majority of our directors to be independent.
Cumulative Voting
Under Delaware corporate law, cumulative voting for elections of directors is not permitted unless the companys certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholders voting power with respect to electing such director. There are no prohibitions on cumulative voting under the laws of the Cayman Islands, but our second amended and restated memorandum and articles of association do not provide for cumulative voting.
Removal of Directors
Under Delaware corporate law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Similarly, as permitted by Cayman Islands law, our second amended and restated memorandum and articles of association provide that directors may be removed at any time, with or without cause, by a resolution of shareholders approved by a vote of more than 50% of the votes of the shares entitled to vote on such matter that are present at the meeting of shareholders and are voted.
Mergers
Under Delaware corporate law, one or more constituent corporations may merge into and become part of another constituent corporation in a process known as a merger. A Delaware corporation may merge with a foreign corporation as long as the law of the foreign jurisdiction permits such a merger. To effect a merger under Delaware General Corporation Law § 251, an agreement of merger must be properly adopted and the agreement of merger or a certificate of merger must be filed with the Delaware Secretary of State. In order to be properly adopted, the agreement of merger must be adopted by the board of directors of each constituent corporation by a resolution or unanimous written consent. In addition, the agreement of merger generally must be approved at a meeting of shareholders of each constituent corporation by a majority of the outstanding stock of the corporation entitled to vote, unless the certificate of incorporation provides for a supermajority vote. In general, the surviving corporation assumes all of the assets and liabilities of the disappearing corporation or corporations as a result of the merger.
Under the Companies Act, two or more companies may merge or consolidate in accordance with the statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent companies, and a consolidation means the consolidating of two or more constituent companies into a new company. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation, which must be authorized by a resolution of shareholders. One or more companies may also merge or consolidate with one or more companies incorporated under the laws of jurisdictions outside the Cayman Islands if the merger or consolidation is permitted by the laws of the jurisdictions in which the companies incorporated outside the Cayman Islands are incorporated. In respect of such a merger or consolidation, a Cayman Islands company is required to comply with the provisions of the Companies Act, and a company incorporated outside the Cayman Islands is required to comply with the laws of its jurisdiction of incorporation.
Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right to vote if the plan of merger or consolidation contains any provision that, if proposed as an amendment to our second amended and restated memorandum and articles of association, would entitle them to vote as a class or series on the proposed amendment. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation.
Conflicts of Interest
Under Delaware corporate law, a contract between a corporation and a director or officer, or between a corporation and any other organization in which a director or officer has a financial interest, is not void as long as (i) the material facts as to the directors or officers relationship or interest are disclosed or known and (ii) either a majority of the disinterested directors authorizes the contract in good faith or the shareholders vote in good faith to approve the contract. Nor will any such contract be void if it is fair to the corporation when it is authorized, approved or ratified by the board of directors, a committee or the shareholders.
As permitted by Cayman Islands law and our second amended and restated memorandum and articles of association, a director interested in a particular transaction will be permitted to vote on it, attend meetings at which it is considered and sign documents on our behalf that relate to the transaction, provided that the material facts of such directors interest in the transaction are disclosed to the other directors or are known by the other directors.
Transactions with Interested Shareholders
Delaware corporate law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by that statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an interested shareholder for three years following the date that the person becomes an interested shareholder. An interested shareholder generally is a person or group that owns or owned 15% or more of the companys outstanding voting stock within the past three years. This statute has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the company in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which the shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction that resulted in the person becoming an interested shareholder.
Cayman Islands law has no comparable provision. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that these transactions must be entered into in the bona fide best interests of the company and not with the effect of constituting a fraud on the minority shareholders
Dissolution; Winding Up
Under Delaware corporate law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporations outstanding shares. Delaware corporate law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the Companies Act, our company may be dissolved, liquidated or wound up by a special resolution, or by an ordinary resolution on the basis that our company is unable to pay our debts as they fall due in the ordinary course of business.
Variation of Rights of Shares
Under Delaware corporate law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of that class, unless the certificate of incorporation provides otherwise. As permitted by our second amended and restated memorandum and articles of association, the rights attached to any class of shares may, subject to any rights or restrictions for the time being attached to any class, only be materially adversely varied or abrogated with the consent in writing of the holders of not less than two-thirds of the issued shares of the relevant class, or with the sanction of a resolution passed at a separate meeting of the holders of the shares of such class by a majority of two-thirds of the votes cast at such a meeting.
Amendment of Governing Documents
Under Delaware corporate law, with very limited exceptions, a vote of the shareholders of a corporation is required to amend the certificate of incorporation. In addition, Delaware corporate law provides that shareholders have the right to amend the corporations bylaws, but the certificate of incorporation may confer such right on the directors of the corporation.
Our second amended and restated memorandum and articles of association can be amended by the affirmative vote of not less than two-thirds of the votes of the shares entitled to vote on such matter that are present at the meeting of shareholders and are voted.
Rights of Non-resident or Foreign Shareholders
There are no limitations imposed by our second amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our second amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.
Preemptive Rights
The shareholders of our company do not have preemptive right.
Other Rights
Not applicable.
Description of Debt Securities, Warrants and Rights and Other Securities (Items 12.A, 12.B and 12.C of Form 20-F)
Not applicable.
Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
Deutsche Bank Trust Company Americas, as depositary, registers and delivers the ADSs. Each ADS represents two ordinary shares, deposited with Deutsche Bank AG, Hong Kong Branch, as custodian for the depositary, located at 52/F International Commerce Centre, 1Austin Road West, Kowloon, Hong Kong. Each ADS represents ownership of any other securities, cash or other property which may be held by the depositary. The principal executive office of the depositary is located at 60 Wall Street, New York, NY10005, USA.
The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto.
We do not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, do not have shareholder rights. Cayman Islands law governs shareholder rights. The depositary is the holder of the ordinary shares underlying your ADSs. As a holder of ADSs, you have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners of ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of American Depositary Receipt.
Holding the ADSs
How will you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (b) by holding ADSs in DRS, or (2) indirectly through your broker or other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly. ADSs will be issued through DRS, unless you specifically request certificated ADRs. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent as of the record date (which will be as close as practicable to the record date for our ordinary shares) set by the depositary with respect to the ADSs.
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Cash. The depositary will convert or cause to be converted any cash dividend or other cash distribution we pay on the ordinary shares or any net proceeds from the sale of any ordinary shares, rights, securities or other entitlements under the terms of the deposit agreement into U.S. dollars if it can do so on a practicable basis, and can transfer the U.S. dollars to the United States and will distribute promptly the amount thus received. If the depositary shall determine in its judgment that such conversions or transfers are not practical or lawful or if any government approval or license is needed and cannot be obtained at a reasonable cost within a reasonable period or otherwise sought, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold or cause the custodian to hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid and such funds will be held for the respective accounts of the ADS holders. It will not invest the foreign currency and it will not be liable for any interest for the respective accounts of the ADS holders. |
Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that must be paid, will be deducted. It will distribute only whole U.S. dollars and cents and will round down fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.
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Shares. For any ordinary shares we distribute as a dividend or free distribution, either (1) the depositary will distribute additional ADSs representing such ordinary shares or (2) existing ADSs as of the applicable record date will represent rights and interests in the additional ordinary shares distributed, to the extent reasonably practicable and permissible under law, in either case, net of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. The depositary will only distribute whole ADSs. It will try to sell ordinary shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. The depositary may sell a portion of the distributed ordinary shares sufficient to pay its fees and expenses, and any taxes and governmental charges, in connection with that distribution. |
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Elective Distributions in Cash or Shares. If we offer holders of our ordinary shares the option to receive dividends in either cash or shares, the depositary, after consultation with us and having received timely notice as described in the deposit agreement of such elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to you as a holder of the ADSs. We must timely first instruct the depositary to make such elective distribution available to you and furnish it with satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practicable to make such elective distribution available to you. In such case, the depositary shall, on the basis of the same determination as is made in respect of the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash distribution, or additional ADSs representing ordinary shares in the same way as it does in a share distribution. The depositary is not obligated to make available to you a method to receive the elective dividend in shares rather than in ADSs. There can be no assurance that you will be given the opportunity to receive elective distributions on the same terms and conditions as the holders of ordinary shares. |
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Rights to Purchase Additional Shares. If we offer holders of our ordinary shares any rights to subscribe for additional shares, the depositary shall having received timely notice as described in the deposit agreement of such distribution by us, consult with us, and we must determine whether it is lawful and reasonably practicable to make these rights available to you. We must first instruct the depositary to make such rights available to you and furnish the depositary with satisfactory evidence that it is legal to do so. If the depositary decides it is not legal or reasonably practicable to make the rights available but that it is lawful and reasonably practicable to sell the rights, the depositary will endeavor to sell the rights and in a riskless principal capacity or otherwise, at such place and upon such terms (including public or private sale) as it may deem proper distribute the net proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them. |
If the depositary makes rights available to you, it will establish procedures to distribute such rights and enable you to exercise the rights upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. The Depositary shall not be obliged to make available to you a method to exercise such rights to subscribe for ordinary shares (rather than ADSs).
U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place.
There can be no assurance that you will be given the opportunity to exercise rights on the same terms and conditions as the holders of ordinary shares or be able to exercise such rights.
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Other Distributions. Subject to receipt of timely notice, as described in the deposit agreement, from us with the request to make any such distribution available to you, and provided the depositary has determined such distribution is lawful and reasonably practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will distribute to you anything else we distribute on deposited securities by any means it may deem practicable, upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. If any of the conditions above are not met, the depositary will endeavor to sell, or cause to be sold, what we distributed and distribute the net proceeds in the same way as it does with cash; or, if it is unable to sell such property, the depositary may dispose of such property in any way it deems reasonably practicable under the circumstances for nominal or no consideration, such that you may have no rights to or arising from such property. |
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if we and/or the depositary determines that it is illegal or not practicable for us or the depositary to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposit ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons entitled thereto.
How do ADS holders cancel an American Depositary Share?
You may turn in your ADSs at the depositarys corporate trust office or by providing appropriate instructions to your broker. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, to the extent permitted by law.
How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.
Voting Rights
How do you vote?
You may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs at any meeting at which you are entitled to vote pursuant to any applicable law, the provisions of our second amended and restated memorandum and articles of association, and the provisions of or governing the deposited securities. Otherwise, you could exercise your right to vote directly if you withdraw the ordinary shares. However, you may not know about the meeting sufficiently enough in advance to withdraw the ordinary shares.
If we ask for your instructions and upon timely notice from us by regular, ordinary mail delivery, or by electronic transmission, as described in the deposit agreement, the depositary will notify you of the upcoming meeting at which you are entitled to vote pursuant to any applicable law, the provisions of our second amended and restated memorandum and articles of association, and the provisions of or governing the deposited securities, and arrange to deliver our voting materials to you. The materials will include or reproduce (a) such notice of meeting or solicitation of consents or proxies; (b) a statement that the ADS holders at the close of business on the ADS record date will be entitled, subject to any applicable law, the provisions of our second amended and restated memorandum and articles of association, and the provisions of or governing the deposited securities, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the ordinary shares or other deposited securities represented by such holders ADSs; and (c) a brief statement as to the manner in which such instructions may be given or deemed given in accordance with the second to last sentence of this paragraph if no instruction is received, to the depositary to give a discretionary proxy to a person designated by us. Voting instructions may be given only in respect of a number of ADSs representing an integral number of ordinary shares or other deposited securities. For instructions to be valid, the depositary must receive them in writing on or before the date specified. The depositary will try, as far as practical, subject to applicable law and the provisions of our second amended and restated memorandum and articles of association, to vote or to have its agents vote the ordinary shares or other deposited securities (in person or by proxy) as you instruct. The depositary will only vote or attempt to vote as you instruct. If we timely requested the depositary to solicit your instructions but no instructions are received by the depositary from an owner with respect to any of the deposited securities represented by the ADSs of that owner on or before the date established by the depositary for such purpose, the depositary shall deem that owner to have instructed the depositary to give a discretionary proxy to a person designated by us with respect to such deposited securities, and the depositary shall give a discretionary proxy to a person designated by us to vote such deposited securities. However, no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter if we inform the depositary we do not wish such proxy given, substantial opposition exists or the matter materially and adversely affects the rights of holders of the ordinary shares.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the ordinary shares underlying your ADSs. In addition, there can be no assurance that ADS holders and beneficial owners generally, or any holder or beneficial owner in particular, will be given the opportunity to vote or cause the custodian to vote on the same terms and conditions as the holders of our ordinary shares.
The depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and you may have no recourse if the ordinary shares underlying your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we will give the depositary notice of any such meeting and details concerning the matters to be voted at least 30 business days in advance of the meeting date.
Compliance with Regulations
Information Requests
Each ADS holder and beneficial owner shall (a) provide such information as we or the depositary may request pursuant to law, including, without limitation, relevant Cayman Islands law, any applicable law of the United States of America, our second amended and restated memorandum and articles of association, any resolutions of our board of directors adopted pursuant to such second amended and restated memorandum and articles of association, the requirements of any markets or exchanges upon which the ordinary shares, ADSs or ADRs are listed or traded, or to any requirements of any electronic book-entry system by which the ADSs or ADRs may be transferred, regarding the capacity in which they own or owned ADRs, the identity of any other persons then or previously interested in such ADRs and the nature of such interest, and any other applicable matters, and (b) be bound by and subject to applicable provisions of the laws of the Cayman Islands, our second amended and restated memorandum and articles of association, and the requirements of any markets or exchanges upon which the ADSs, ADRs or ordinary shares are listed or traded, or pursuant to any requirements of any electronic book-entry system by which the ADSs, ADRs or ordinary shares may be transferred, to the same extent as if such ADS holder or beneficial owner held ordinary shares directly, in each case irrespective of whether or not they are ADS holders or beneficial owners at the time such request is made.
Disclosure of Interests
Each ADS holder and beneficial owner shall comply with our requests pursuant to Cayman Islands law, the rules and requirements of NYSE and any other stock exchange on which the ordinary shares are, or will be, registered, traded or listed, or our second amended and restated memorandum and articles of association, which requests are made to provide information, inter alia, as to the capacity in which such ADS holder or beneficial owner owns ADS and regarding the identity of any other person interested in such ADS and the nature of such interest and various other matters, whether or not they are ADS holders or beneficial owners at the time of such requests.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and other charges specifically payable by ADS holders under the deposit agreement, or materially prejudices a substantial existing right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. If any new laws are adopted which would require the deposit agreement to be amended in order to comply therewith, we and the depositary may amend the deposit agreement in accordance with such laws and such amendment may become effective before notice thereof is given to ADS holders.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 90 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign, or if we have removed the depositary, and in either case we have not appointed a new depositary within 90 days. In either such case, the depositary must notify you at least 30 days before termination.
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property and deliver ordinary shares and other deposited securities upon cancellation of ADSs after payment of any fees, charges, taxes or other governmental charges. Six months or more after the date of termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest.
After such sale, the depositarys only obligations will be to account for the money and other cash. After termination, we shall be discharged from all obligations under the deposit agreement except for our obligations to the depositary thereunder.
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the Company, the ADRs and the deposit agreement.
The depositary will maintain facilities in the Borough of Manhattan, The City of New York to record and process the issuance, cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed at any time or from time to time when such action is deemed necessary or advisable by the depositary in connection with the performance of its duties under the deposit agreement or at our reasonable written request.
Limitations on Obligations and Liability
The deposit agreement expressly limits our obligations and the obligations of the depositary and the custodian. It also limits our liability and the liability of the depositary. The depositary and the custodian:
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are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct; |
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are not liable if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement and any ADR, by reason of any provision of any present or future law or regulation of the United States or any state thereof, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or future, of our second amended and restated memorandum and articles of association or any provision of or governing any deposited securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure); |
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are not liable by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in our second amended and restated memorandum and articles of association or provisions of or governing deposited securities; |
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are not liable for any action or inaction of the depositary, the custodian or us or their or our respective controlling persons or agents in reliance upon the advice of or information from legal counsel, any person presenting ordinary shares for deposit or any other person believed by it in good faith to be competent to give such advice or information; |
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are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement; |
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are not liable for any special, consequential, indirect or punitive damages for any breach of the terms of the deposit agreement, or otherwise; |
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may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party; |
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disclaim any liability for any action or inaction or inaction of any of us or our respective controlling persons or agents in reliance upon the advice of or information from legal counsel, accountants, any person presenting ordinary shares for deposit, holders and beneficial owners (or authorized representatives) of ADSs, or any person believed in good faith to be competent to give such advice or information; and |
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disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available to holders of deposited securities but not made available to holders of ADS. |
The depositary and any of its agents also disclaim any liability (i) for any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities, the credit-worthiness of any third party, (iv) for any tax consequences that may result from ownership of ADSs, ordinary shares or deposited securities, or (v) for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potential liability arises the depositary performed its obligations without gross negligence or willful misconduct while it acted as depositary.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, split-up, subdivide or combine ADSs, make a distribution on an ADS or permit withdrawal of ordinary shares, the depositary may require:
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payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of the depositary; |
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satisfactory proof of the identity and genuineness of any signature or any other matters contemplated in the deposit agreement; and |
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compliance with (A) any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to the withdrawal or delivery of deposited securities and (B) such reasonable regulations and procedures as the depositary may establish, from time to time, consistent with the deposit agreement and applicable laws, including presentation of transfer documents. |
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or our transfer books are closed or at any time if the depositary or we determine that it is necessary or advisable to do so.
Your Right to Receive the Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time except:
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when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the transfer of ordinary shares is blocked to permit voting at a shareholders meeting; or (3) we are paying a dividend on our ordinary shares; |
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when you owe money to pay fees, taxes and similar charges; |
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when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of ordinary shares or other deposited securities; |
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other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General Instructions may be amended from time to time); or |
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for any other reason if the depositary or we determine, in good faith, that it is necessary or advisable to prohibit withdrawals. |
The depositary shall not knowingly accept for deposit under the deposit agreement any ordinary shares or other deposited securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such ordinary shares.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an ADS holder, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register such transfer.
Exhibit 4.19
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Convertible Note Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, this Agreement) is made as of February 25, 2021, by and between PUXIN LIMITED, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company), and the purchaser listed on Exhibit A attached to this Agreement (the Purchaser and, together with the Company, the Parties).
RECITALS
WHEREAS, Purchaser desires to purchase from the Company and the Company desires to issue a convertible promissory note in substantially the form attached to this Agreement as Exhibit B, in the original principal amount set forth on Exhibit A hereto (the Note), which shall be convertible on the terms stated therein into the Companys ADSs, indirectly through the conversion into Ordinary Shares (as defined below) (the ADSs issued or issuable upon conversion of the Note into the Underlying Shares (as defined below) and delivery of those Underlying Shares to the Depositary are referred to herein as the Conversion Shares and, together with the Note, the Securities). As used herein, Ordinary Shares means the ordinary shares, par value US$0.00005 per share, of the Company, ADS means an American Depositary Share representing two such Ordinary Shares, ADR means an American Depositary Receipt evidencing the ADSs and Underlying Shares means the Ordinary Shares underlying the ADSs.
NOW THEREFORE, on and subject to the terms hereof, the Parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
The terms defined in this Article I (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Agreement shall have the respective meanings specified in this Article I. The terms defined in this Article I include the plural as well as the singular.
ADR shall have the meaning specified in the recitals.
ADS shall have the meaning specified in the recitals.
Affiliated Entity shall have the meaning specified in Section 4.2.
Agreement shall have the meaning specified in the preamble.
Anti-Corruption Laws shall have the meaning specified in Section 4.22.
Anti-Money Laundering Laws shall have the meaning specified in Section 4.24.
Closing shall have the meaning specified in Section 2.3.
Closing Date shall have the meaning specified in Section 2.3.
Company shall have the meaning specified in the preamble.
Company Reports shall have the meaning specified in Section 4.1.
Conversion Shares shall have the meaning specified in the recitals.
Deloitte shall have the meaning specified in Section 4.9.
Deposit Agreement means the Deposit Agreement dated as of June 14, 2018 among the Company, Deutsche Bank Trust Company Americas, as depositary, and the owners and holders from time to time of the ADSs issued thereunder, as it may be amended, restated, supplemented or otherwise modified from time to time.
Depositary means Deutsche Bank Trust Company Americas, as depositary under the Deposit Agreement.
Enforceability Exceptions shall have the meaning specified in Section 3.2.
Environmental Laws shall have the meaning specified in Section 4.20.
Evaluation Date shall have the meaning specified in Section 4.25.
Exchange Act means the United States Securities and Exchange Act of 1934, as amended.
Intellectual Property Rights shall have the meaning specified in Section 4.21.
Interest Payment Date shall have the meaning specified in Section 2.2.
Issue Price shall have the meaning specified in Section 2.1.
Knowledge shall have the meaning specified in Section 4.12.
Material Adverse Effect shall have the meaning specified in Section 4.2.
Material Contract shall have the meaning specified in Section 4.14.
Material Permits shall have the meaning specified in Section 4.13.
Note shall have the meaning specified in the recitals.
OFAC shall have the meaning specified in Section 4.23.
Ordinary Shares shall have the meaning specified in the recitals.
Person shall have the meaning specified in Section 4.23.
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PFIC means a passive foreign investment company within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended.
PRC shall have the meaning specified in Section 4.2.
Purchase shall have the meaning specified in Section 2.3.
Purchaser shall have the meaning specified in the preamble.
Regulation D shall have the meaning specified in Section 3.3.
Registration Rights Agreement means the Registration Rights Agreement, to be entered into by and between the Company and the Purchaser, substantially in the form attached hereto as Exhibit C.
Restricted Shares means any ordinary shares or other equity securities of the Company issued to (i) any eligible senior management employee, including without limitation any director, executive, officer and employee, whether full time or part time, employed by the Company or its Subsidiaries; (ii) any eligible consultant to the Company or its Subsidiaries that is employed by the Company and/or its Subsidiaries (excluding the Company and its Subsidiaries), and (iii) any eligible Person who contributes to the development of the Company and its Subsidiaries as from time to time approved by the Companys board of directors pursuant to the Share Incentive Plans and subject to a vesting schedule thereof.
SAFE Rules and Regulations means collectively, the Circular 37 and any other applicable SAFE rules and regulations, as amended.
Sanctions shall have the meaning specified in Section 4.23.
SEC shall have the meaning specified in Section 3.6.
Securities shall have the meaning specified in the recitals.
Securities Act shall have the meaning specified in Section 3.3.
Share Incentive Plans means the 2018 Great Talent Share Incentive Plan and 2019 Noble Talent Share Incentive Plan both adopted by the Company.
Subsidiary shall have the meaning specified in Section 4.2.
Underlying Shares shall have the meaning specified in the recitals.
U.S. GAAP shall have the meaning specified in Section 4.10.
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ARTICLE II
ISSUANCE OF NOTE
Section 2.1 Issuance of Note. Subject to the terms set forth in this Agreement, at the Closing (as defined herein), the Company agrees to issue the Note, and Purchaser agrees to purchase a Note with the principal amount set forth opposite Purchasers name on Exhibit A at the issue price of 100% of the principal amount of such Note (the Issue Price).
Section 2.2 Interest Applicable. Interest shall accrue on the principal amount of the Note (in each case computed on the basis of a 365/366-day year and the actual number of days elapsed in any year) at a simple rate equal to 3.00% per annum from the Closing Date, which shall be payable in cash on each Interest Payment Date, and on the final maturity of the Note. The Company shall pay to the holder of the Note all accrued interest semiannually on each March 1 and September 1 of each year (each, an Interest Payment Date), commencing on September 1, 2021 and including March 1, 2026, which is the final maturity date of this Note. Interest shall accrue on any principal payment due under the Note until such time as payment therefor is actually delivered to the holder of the Note; provided that if any portion of the principal amount is duly converted into Conversion Shares pursuant to and in accordance with the Note, interest shall cease to accrue on the portion of the principal amount being converted.
Section 2.3 Closing. The closing (the Closing) of the issuance and subscription of the Note (the Purchase) shall occur on a date (the Closing Date) no later than three business days after the date of this Agreement after all closing conditions specified in Sections 6.1 and 6.2 have been waived or satisfied. At the Closing, (i) the Purchaser shall deliver or cause to be delivered to the Company the Issue Price, and (ii) the Company shall issue to the Purchaser the Note.
Section 2.4 Maturity, Payment and Conversion. The provisions pertaining to maturity, payment, conversion and acceleration of the Note are set forth in the form of Note attached hereto as Exhibit B.
Section 2.5 Subordination. The Note and the interest accrued under the Note are the senior obligations of the Company and will rank pari passu in right of payment with all other senior and unsubordinated obligations of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to the Company, and all such representations and warranties shall survive the Closing.
Section 3.1 Power and Authorization. Purchaser is duly organized, validly existing and in good standing, and has the power, authority and capacity to execute this Agreement, to perform its obligations hereunder, and to consummate the Purchase.
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Section 3.2 Valid and Enforceable Agreement; No Violations. This Agreement has been duly authorized, executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (such qualifications in clauses (a) and (b) being the Enforceability Exceptions). The execution and the delivery of this Agreement and consummation of the Purchase (including execution of the Registration Rights Agreement) will not violate, conflict with, or result in a breach of or default under (i) Purchasers organizational documents, (ii) any agreement or instrument to which Purchaser is a party or by which Purchaser or any of its assets are bound or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to Purchaser.
Section 3.3 Investor Status. Purchaser is an accredited investor within the meaning of Rule 501(a) of Regulation D (Regulation D) promulgated under the Securities Act of 1933, as amended (the Securities Act). The Securities are being offered and sold pursuant to the exemption from registration afforded by Section 4(a)(2) of the Securities Act.
Section 3.4 Restricted Note and Shares. Purchaser (a) acknowledges that (i) the issuance of the Note pursuant to this Agreement and the issuance of any Conversion Shares have not been registered under the Securities Act or any United States state securities laws, (ii) the Note and, subject to the conversion of the Note into Underlying Shares to be delivered to the Depositary for issuance of the Conversion Shares, the Conversion Shares are being offered and sold in reliance upon exemptions provided in the Securities Act and such state securities laws for transactions not involving any public offering and, therefore, cannot be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless they are subsequently registered and qualified under the Securities Act and applicable state securities laws or unless an exemption from such registration and qualification is available and (iii) the Note and Conversion Shares are restricted securities as that term is defined in Rule 144 promulgated under the Securities Act; and (b) is purchasing the Note and Conversion Shares for investment purposes only for the account of Purchaser and not with any view toward a distribution thereof or with any intention of selling, distributing or otherwise disposing of the Note or Conversion Shares in a manner that would violate the registration requirements of the Securities Act. Purchaser is able to bear the economic risk of holding the Note and Conversion Shares for an indefinite period and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment in the Note and Conversion Shares.
Section 3.5 Legends. Purchaser understands and agrees that any certificates, book-entry or ADRs representing the Note and Conversion Shares shall bear the restrictive legend set forth in the form of Note attached hereto as Exhibit B or in Section 7.2 below, respectively.
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Section 3.6 Adequate Information; No Reliance. Purchaser acknowledges and agrees that (a) Purchaser has been furnished with all materials it considers relevant to making an investment decision to enter into the Purchase and has had the opportunity to review the Companys filings and submissions with the Securities and Exchange Commission (the SEC), including, without limitation, all information filed or furnished pursuant to the Exchange Act and all information incorporated into such filings and submissions, (b) Purchaser has sufficient knowledge and expertise to make an investment decision with respect to the transactions contemplated hereby and is able to bear the economic risks of an investment in the Securities, (c) Purchaser has had a full opportunity to speak directly with directors and officers of the Company and to ask questions of the Company and such directors and officers of the Company concerning the Company, its business, operations, financial performance, financial condition and prospects, and the terms and conditions of the Purchase, and to obtain such additional information as it deems necessary to verify the accuracy of the information furnished to it and has asked such questions, received such answers and obtained such information as it deems necessary, (d) Purchaser has had the opportunity to consult with its accounting, tax, financial and legal advisors to be able to evaluate the risks involved in the Purchase and to make an informed investment decision with respect to the Purchase and (e) Purchaser is not relying, and has not relied, upon any statement, advice (whether accounting, tax, financial, legal or other), representation or warranty made by the Company or any of the Companys directors, officers, affiliates or representatives, except for (i) the publicly available filings and submissions made by the Company with the SEC under the Exchange Act and (ii) the representations and warranties made by the Company in this Agreement.
Section 3.7 No Public Market. Purchaser understands that no public market exists for the Note, and that there is no assurance that a public market will ever develop for the Note.
Section 3.8 No General Solicitation or Advertising. The offer to enter into the Purchase was directly communicated to Purchaser, and Purchaser was able to ask questions and receive answers concerning the terms of this transaction. At no time was Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.
Section 3.9 Brokers Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on Purchasers behalf who would be entitled to any fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties, each of which is and shall be true and correct on the date hereof and at the Closing, to Purchaser, and all such representations and warranties shall survive the Closing.
Section 4.1 Exchange Act Filings. The Company has filed or furnished, as applicable, on a timely basis all forms, statements, certifications, reports and documents required to be filed or furnished by it with the SEC pursuant to the Exchange Act or the Securities Act since December 31, 2019 (the Company Reports). The Company Reports, when they became effective or were filed with or furnished to the SEC, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations thereunder and none of such documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed or furnished after the date hereof and on or prior to the Closing, when such documents become effective or are filed with the SEC, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
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Section 4.2 Due Incorporation. Each of the Company, its Subsidiaries and each of the entities through which the Company conducts its operations in the Peoples Republic of China (the PRC) by way of contractual arrangements (each an Affiliated Entity) has been duly organized and is validly existing as a corporation or other legal entity in good standing (or the foreign equivalent thereof) under the laws of its jurisdiction of incorporation or organization. Except as disclosed in the Company Reports, each of the Company, its Subsidiaries and its Affiliated Entities is duly qualified to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction in which its ownership or lease of its properties or the conduct of its business requires such qualification and has all power and authority (corporate or other) necessary to own or hold its properties and to conduct the businesses in which each is engaged, except where the failure to so qualify or have such power or authority (i) would not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, assets or business of the Company, its Subsidiaries, and Affiliated Entities taken as a whole, or (ii) impair in any material respect the ability of the Company to perform its obligations under this Agreement or the Note or to consummate any transactions contemplated hereby or thereby (any such effect as described in clauses (i) or (ii), a Material Adverse Effect). As used in this Agreement, Subsidiary shall have the meaning set forth in Rule 1-02 of Regulation S-X of the SEC.
Section 4.3 Subsidiaries. The capital stock of each Subsidiary have been duly authorized and validly issued, are duly paid to the extent that is required by their applicable charter documents and nonassessable and, except to the extent set forth in the Company Reports, are owned by the Company directly, free and clear of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party.
Section 4.4 Due Authorization. The Company has the full right, power and authority to enter into this Agreement and the Registration Rights Agreement and to perform and discharge its obligations hereunder and thereunder; and this Agreement and the Registration Rights Agreement and the performance by the Company of its obligations hereunder and thereunder have been duly authorized. This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject to the Enforceability Exceptions. The Registration Rights Agreement, when executed and delivered by the Company and the Purchaser will constitute a valid and binding obligation of the Company, enforceable in accordance with its terms, subject to the Enforceability Exceptions.
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Section 4.5 The Note and the Conversion Shares. The Note has been duly authorized and, when issued and delivered upon sale, will have been duly executed, authenticated, issued and delivered and will constitute a valid and legally binding obligation of the Company. The Ordinary Shares to be issued by the Company upon conversion in whole or in part of the Note have been duly authorized for issuance. Upon subscription by each holder of the Note for the number of Ordinary Shares issuable in connection with the conversion in whole or in part of such Note, such Ordinary Shares shall constitute Underlying Shares to be deposited with the Depositary for the issuance of Conversion Shares in the form of ADRs. When issued in accordance with the terms of the Note, such Conversion Shares evidenced by such ADRs, and the Underlying Shares, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights, and the Purchaser will be entitled to the rights specified respectively therein and in the Deposit Agreement (as defined below); no preemptive right, resale right, right of first refusal or similar rights exist with respect to any of the Ordinary Shares in the form of the Conversion Shares and the issuance thereof will be free of any restriction upon the voting or transfer thereof pursuant to the laws of the Cayman Islands or any agreement or other instrument to which the Company is a party. Each Note and all Conversion Shares will be issued in compliance with all U.S. federal and state securities laws and the securities laws of any other applicable jurisdiction.
Section 4.6 Capitalization. As of February 19, 2021, the share capital of the Company consists of 188,653,468 issued Ordinary Shares, fully paid, and with a par value of US$0.00005 each, and total authorized capital of 1,000,000,000 Ordinary Shares. All of the outstanding shares of capital stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable and were issued in compliance with all applicable securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right. Except as set forth in the Company Reports with respect to share incentive awards that may be issued from time to time under the Companys Share Incentive Plans, the Company has no shares of capital stock reserved for issuance, with the exception of the shares authorized for issuance in connection with the Note to be issued pursuant hereto. Except as set forth above or pursuant to this Agreement, the Company does not have outstanding any options to purchase, or any rights or warrants to subscribe for, any securities or obligations convertible into, or any contracts or commitments to issue or sell, any shares of capital stock, or any such warrants, convertible securities or obligations.
Section 4.7 No Default, Termination or Lien. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the issuance and delivery of the Note by the Company, the issuance and delivery of all Conversion Shares in accordance with the terms of the Note, the consummation of the transactions contemplated hereby and thereby, and compliance by the Company with the terms of this Agreement and the Registration Rights Agreement will not (with or without notice or lapse of time or both) conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default under, give rise to any right of termination or other right or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give rise to the creation or imposition of any lien, encumbrance, security interest, claim or charge upon any property or assets of the Company or any Subsidiary or Affiliated Entity pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries or Affiliated Entities is a party or by which the Company or any of its Subsidiaries or Affiliated Entities is bound or to which any of the property or assets of the Company or any of its Subsidiaries or Affiliated Entities is subject, nor will such actions result in any violation of the provisions of the organizational documents of the Company or any of its Subsidiaries or Affiliated Entities or any law, statute, rule, regulation, judgment, order or decree of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or Affiliated Entities or any of their properties or assets.
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Section 4.8 No Consents. No consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or blue sky laws of the various states of the United States and the New York Stock Exchange in connection with the offer and issuance of the Notes.
Section 4.9 Independent Accountants. Deloitte Touche Tohmatsu Certified Public Accountants LLP (Deloitte), who has certified certain financial statements and related schedules included or incorporated by reference in the Company Reports, is an independent registered public accounting firm as required by the Securities Act and the Exchange Act and the rules and regulations thereunder and the Public Company Accounting Oversight Board (United States). Except as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, Deloitte has not been engaged by the Company to perform any prohibited activities (as defined in Section 10A of the Exchange Act).
Section 4.10 Financial Statements. The financial statements, together with the related notes and schedules, included in the Company Reports present fairly in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the respective dates thereof and the results of operations and cash flows of the Company and its consolidated Subsidiaries for the respective periods covered thereby, all in conformity with United States Generally Accepted Accounting Principles (U.S. GAAP) applied on a consistent basis throughout the entire period involved, except as otherwise disclosed in the Company Reports. Such financial statements, together with the related notes and schedules, comply in all material respects with the Securities Act, the Exchange Act and the rules and regulations thereunder. No other financial statements or supporting schedules or exhibits are required by the Exchange Act or the rules and regulations thereunder to be filed with the SEC.
Section 4.11 No Material Adverse Change. There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its Subsidiaries and Affiliated Entities, taken as a whole, from that set forth or contemplated in the Company Reports filed prior to the date hereof.
Section 4.12 Legal Proceedings. There are no legal or governmental proceedings, actions, suits or claims (i) pending or, to the Companys Knowledge, threatened to which the Company or any of its Subsidiaries or Affiliated Entities is a party or to which any of the properties or assets of the Company or any of its Subsidiaries or Affiliated Entities is subject, other than proceedings accurately described in all material respects in the Company Reports and proceedings that would not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (ii) that are required to be described in the Company Reports and are not so described; and there are no statutes, regulations, contracts or other documents to which the Company or any of its Subsidiaries or Affiliated Entities is subject or by which the Company or any of its Subsidiaries or Affiliated Entities is bound that are required to be described in the Company Reports or to be filed as exhibits to the Company Reports that are not described therein or filed as required. Neither the Company nor any Subsidiary or Affiliated Entities, nor any director or officer thereof, is or has been the subject of any legal or governmental proceedings, actions, suits or claims of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. For purposes of this Agreement, Knowledge means the actual knowledge (after due inquiry) of the executive officers (as defined in Exchange Act Rule 3b-7) of the Company or its Subsidiaries or Affiliated Entities, as applicable.
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Section 4.13 Regulatory Permits. Each of the Company and its Subsidiaries and Affiliated Entities possesses or has applied for all certificates, authorizations, licenses, franchises, permits, orders and approvals issued or granted by the appropriate governmental or regulatory authorities, agencies, courts, commissions or other entities, whether federal, state, local or foreign, or applicable self-regulatory organizations necessary to conduct its business as currently conducted, except (i) where the failure to possess such certificates, authorizations, licenses, franchises, permits, orders and approval, individually or in the aggregate, has not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (Material Permits) and (ii) as accurately described in all material respects in the Company Reports, and neither the Company nor any of its Subsidiaries or Affiliated Entities has received any written notice of proceedings relating to the revocation or material adverse modification of any such Material Permits (except as accurately described in all material respects in the Company Reports), and to the Companys Knowledge, there are no facts or circumstances that would give rise to the revocation, termination or material adverse modifications of any Material Permits.
Section 4.14 Material Contracts. Except for the Material Contracts, the Company and its Subsidiaries and Affiliated Entities are not party to any agreements, contracts or commitments that are material to the business, financial condition, assets or operations of the Company and its Subsidiaries and Affiliated Entities or that would be required to be filed pursuant to Item 19 and the Instructions as to Exhibits of Form 20-F. Neither the Company nor any of its Subsidiaries or Affiliated Entities is in material default under, or in material violation of, nor has received written notice of termination or default under any Material Contract. For purposes of this Agreement, Material Contract means any contract of the Company that was filed as an exhibit to the Company Reports pursuant to Item 19 and the Instructions as to Exhibits of Form 20-F.
Section 4.15 Investment Company Act. Neither the Company nor any of its Subsidiaries is or, after giving effect to the Purchase and the application of the proceeds thereof, will become an investment company within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.
Section 4.16 No Price Stabilization. Neither the Company, its Subsidiaries nor any of the Companys or its Subsidiaries officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which would in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.
Section 4.17 Title to Property. The Company and its Subsidiaries and Affiliated Entities have good and marketable title to all real and personal property owned by them which is material to the business of the Company and its Subsidiaries and Affiliated Entities, taken as a whole, in each case free and clear of all liens, encumbrances and defects of title except such as are described in the Company Reports or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries and Affiliated Entities; and any real property and buildings held under lease by the Company and its Subsidiaries and Affiliated Entities are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries and Affiliated Entities, in each case except as described in the Company Reports.
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Section 4.18 No Labor Disputes. No strike, labor dispute, slowdown or stoppage is pending or, to the Knowledge of the Company or the Subsidiaries or Affiliated Entities, threatened against the Company or any of the Subsidiaries or Affiliated Entities, except any labor dispute that would not have, individually or in the aggregate, a Material Adverse Effect, and no union representation dispute currently is existing concerning the employees of the Company or any of the Subsidiaries or Affiliated Entities. To the Knowledge of the Company or the Subsidiaries or Affiliated Entities, no union organizing activities are currently taking place concerning the employees of the Company or any of the Subsidiaries or Affiliated Entities and there has been no violation of any United States federal, state, local or foreign law or collective bargaining agreement relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or retirement benefits, or any provision of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder concerning the employees of the Company or any of the Subsidiaries or Affiliated Entities.
Section 4.19 Taxes. The Company (i) has filed all necessary national, regional, local and other tax returns (or timely filed applicable extensions therefore) that have been required to be filed, (ii) is not in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any which the Company is contesting in good faith and for which adequate reserves have been provided and reflected in the financial statements included in the Company Reports, (iii) does not have any tax deficiency that has been or, to the Companys Knowledge, is reasonably likely to be asserted or threatened against it, except, in each case, for any failure to pay tax or file a tax return or any deficiencies that, individually or in the aggregate, would not have a Material Adverse Effect.
Section 4.20 Compliance with Environmental Laws. Except as disclosed in the Company Reports, neither the Company nor any of its Subsidiaries or Affiliated Entities is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, Environmental Laws), or, to the Companys Knowledge, operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would or would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.
Section 4.21 Intellectual Property Rights. The Company and its Subsidiaries and Affiliated Entities own or possess, or have the right to use, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, Intellectual Property Rights) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights, except such as would not and would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
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Section 4.22 Compliance with Anti-Corruption Laws. Neither the Company nor any of its Subsidiaries or Affiliated Entities, nor any director or officer thereof nor, to the Companys Knowledge, any employee, agent, affiliate or representative of the Company or of any of its Subsidiaries or Affiliated Entities, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to induce such government official to do or omit to do any act in violation of his or her lawful duties, influence official action or secure, obtain or retain business or any other improper advantage; (iii) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit; or (iv) will use, directly or indirectly, the proceeds of the sale of the Note in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, the Anti-Unfair Competition Law of the PRC, the Criminal Law of the PRC or any applicable anti-corruption laws (collectively, the Anti-Corruption Laws); and the Company and its Subsidiaries and Affiliated Entities and affiliates have conducted their businesses in compliance with Anti-Corruption Laws and have instituted, maintained and implemented, and will continue to maintain and implement, policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein. .
Section 4.23 OFAC and Similar Laws. None of the Company, any of its Subsidiaries and Affiliated Entities or, to the Companys Knowledge, any director, officer, agent, employee, affiliate or representative of the Company or any of its Subsidiaries or Affiliated Entities is an individual or entity (Person) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasurys Office of Foreign Assets Control (OFAC), the United Nations Security Council, the European Union, Her Majestys Treasury or other relevant sanctions authority (collectively, Sanctions), nor is the Company or any of its Subsidiaries or Affiliated Entities located, organized or resident in a country or territory that is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the issuance of the Note, or lend, contribute or otherwise make available such proceeds to any Subsidiaries, Affiliated Entities, joint venture partners or other Person, to knowingly fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
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Section 4.24 Compliance with Anti-Money Laundering Laws. The operations of the Company and its Subsidiaries and Affiliated Entities are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Anti-Money Laundering Law of the PRC, the Currency and Foreign Transactions Reporting Act of 1970, as amended, the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of all jurisdictions where the Company and its Subsidiaries and Affiliated Entities conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Anti-Money Laundering Laws), and no investigation, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries or Affiliated Entities with respect to the Anti-Money Laundering Laws is pending or, to the Companys Knowledge, threatened.
Section 4.25 Disclosure Controls and Procedures. Except as disclosed in the Company Reports, the Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company, including any consolidated Subsidiaries, is made known to its chief executive officer and chief financial officer by others within those entities. The Companys certifying officers have evaluated the effectiveness of the Companys controls and procedures as of the end of the period covered by the most recently filed annual report under the Exchange Act (such date, the Evaluation Date). The Company presented in its most recently filed annual report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date and except as disclosed in the Company Reports, there have been no material changes in the Companys internal controls (as such term is defined in the rules of the SEC under the Exchange Act) or, to the Companys Knowledge, in other factors that could affect the Companys internal controls.
Section 4.26 Accounting Controls. The Company and its Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with managements general or specific authorization and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of the Companys most recent audited fiscal year, there has been (A) no material weakness in the Companys internal control over financial reporting (whether or not remediated) and (B) no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Section 4.27 Absence of Material Changes. Subsequent to the respective dates as of which information is given in the Company Reports, and except as may be otherwise disclosed in such Company Reports, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Company, (iii) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company, which is material to the Company, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, (v) any change in the capital stock (other than a change in the number of outstanding Ordinary Shares or ADSs due to grants of share under the Companys Share Incentive Plans existing on the date hereof or the issuance of shares upon the exercise of outstanding options or warrants) or (vi) any issuance of options, warrants, convertible securities or other rights to purchase the capital share (other than grants of share options under the Companys Share Incentive Plans existing on the date hereof) of the Company.
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Section 4.28 Brokers Fees. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company for a brokerage commission, finders fee or like payment in connection with the offering and issuance of any Note or any transaction contemplated by this Agreement.
Section 4.29 Listing and Maintenance Requirements. The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, as applicable. The ADSs are registered pursuant to Section 12(b) of the Exchange Act and are listed on the New York Stock Exchange, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the ADSs under the Exchange Act or delisting the ADSs from the New York Stock Exchange, nor has the Company received any notification that either the SEC or the New York Stock Exchange is contemplating terminating such registration or listing. The Conversion Shares will be duly authorized for listing on the New York Stock Exchange immediately upon conversion of each Note in accordance with the terms of each Note and the issuance of the ADSs by the Depositary following the deposit of the Underlying Shares.
Section 4.30 Sarbanes-Oxley Act. The Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated thereunder or implementing provisions thereof that are then in effect.
Section 4.31 New York Stock Exchange Approval Rules. No further approval of the shareholders of the Company under the rules and regulations of the New York Stock Exchange is required for the Company to issue and deliver the Note to Purchaser or the Conversion Shares upon conversion of the Note.
Section 4.32 No General Solicitation. Neither the Company nor any person acting on its or their behalf has engaged in any general solicitation or general advertising in connection with the offering or issuance of any Note, including but not limited to the methods described in Rule 502(c) under the Securities Act.
Section 4.33 Integration. Neither the Company nor any other person acting on its behalf has, directly or indirectly, offered or sold or will, directly or indirectly, offer or sell any securities of the same or similar class as the Note, or take any other action, so as to cause the offer and issuance of the Note to fail to be entitled to the exemption afforded by Regulation D under the Securities Act.
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Section 4.34 PFIC Status. The Company was not a PFIC as of the end of its most recent taxable year and, based on the expected composition of its income and the value of its assets, does not expect to be a PFIC for the current taxable year.
Section 4.35 No Transaction or Other Taxes. No transaction, stamp, capital or other documentary, issuance, registration, transaction, transfer, withholding or other similar taxes or duties are payable by or on behalf of the Purchaser to the government of the PRC, Hong Kong or Cayman Islands or any political subdivision or taxing authority thereof in connection with the execution, delivery or performance of this Agreement, the Registration Rights Agreement or the Note.
Section 4.36 Absence of Accounting Issues. The Company has not received any notice, oral or written, from the board of directors stating that it is reviewing or investigating, and neither the Companys independent auditors nor its internal auditors have recommended that the board of directors review or investigate, (i) adding to, deleting, changing the application of, or changing the Companys disclosure with respect to any of the Companys material accounting policies; or (ii) any matter which could result in a restatement of the Companys financial statements for any annual or interim period during the current or prior two fiscal years.
Section 4.37 Payment of Dividends. All Conversion Shares shall be entitled to rights to participate in all dividends and other distributions the record one of which falls after the date on which the Note has been surrendered for conversion at the principal office of the Company, as the case may be.
Section 4.38 Foreign Private Issuer. The Company is a foreign private issuer within the meaning of Rule 405 under the Securities Act.
Section 4.39 No Immunity. None of the Company, its Subsidiaries and Affiliated Entities or any of their respective properties, assets or revenues has any right of immunity, under the laws of the Cayman Islands, Hong Kong, the PRC, the State of New York or the United States, from any legal action, suit or proceeding, the giving of any relief in any such legal action, suit or proceeding, set-off or counterclaim, the jurisdiction of any Cayman Islands, Hong Kong, PRC, the State of New York or United States federal court, service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement, the Note, the Registration Rights Agreement or the Deposit Agreement; and, to the extent that the Company, any of the Subsidiaries and Affiliated Entities or any of their respective properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, each of the Company and the Subsidiaries and Affiliated Entities waives or will waive such right to the extent permitted by law.
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ARTICLE V
OTHER AGREEMENTS
Section 5.1 Depositary. As more fully described in the Note, upon conversion of all or any portion of a Note held by Purchaser in accordance with the terms thereof, the Company will cause the Depositary to deliver the relevant number of Conversion Shares to Purchaser against deposit of the Underlying Shares, pursuant to the Deposit Agreement, and the owners and holders from time to time of the ADSs issued thereunder, and Purchaser shall cooperate with the Company and the Depositary in connection therewith.
Section 5.2 Supplemental Listing Application. Within two business days following the Closing Date, the Company shall file with the New York Stock Exchange a supplemental listing application reflecting the transactions contemplated hereby.
Section 5.3 Listing of Shares; Certificates. The Company covenants that all Conversion Shares will, at all times that any Note is convertible, be duly approved for listing subject to official notice of issuance on the New York Stock Exchange. The Company covenants that the certificates, if any, representing the ADRs to be issued to evidence any Conversion Shares issued upon conversion of Notes will comply with applicable law.
Section 5.4 SAFE Rules and Regulations. To the extent practicable, the Company will, on a continuous basis, use its reasonable efforts to cause each of the Companys direct or indirect shareholders who are a domestic resident (as defined in Circular 37), and cause one of its Affiliated Entities or its subsidiaries in China to work with each of the participants of the Share Incentive Plans, who is a domestic resident (as defined in Circular 7) and directly or indirectly holds Restricted Shares of the Company, who is a domestic resident (as defined in Circular 7), to duly complete, obtain and keep current the foreign exchange registrations with the competent local branch of the SAFE in accordance with the requirements of the SAFE Rules and Regulations.
Section 5.5 Confidentiality. Each Party agrees not to disclose the other Partys identity and not to permit such disclosure by any of its Subsidiaries and affiliates unless such disclosure is required, in the good faith determination by qualified legal counsel, by applicable law or regulation (including any rules or regulations of any securities exchange). In the case that disclosure is so required, the Company will provide Purchaser with a draft of the proposed disclosure at least ten days prior to its release, publication or filing and will accept reasonable comments on such disclosure.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Purchasers Conditions Precedent. The obligation of Purchaser to complete the Purchase is subject to the satisfaction of each of the following conditions precedent:
(a) each of the representations and warranties of the Company contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;
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(b) the Company shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing;
(c) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof;
(d) the Company shall have executed and delivered the Registration Rights Agreement to Purchaser; and
(e) the Chief Executive Officer or Chief Financial Officer of the Company shall have delivered to Purchaser a certificate, dated as of the Closing Date, certifying to their knowledge, after reasonable inquiry, as to the matters set forth in paragraphs (a) and (b) of this Section 6.1.
Section 6.2 Company Conditions Precedent. The obligation of the Company to complete the issuance of the Note to Purchaser contemplated by this Agreement is subject to the satisfaction of each of the following conditions precedent:
(a) each of the representations and warranties of Purchaser contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;
(b) Purchaser shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing;
(c) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof; and
(d) Purchaser shall have delivered to the Company a certificate, dated as of the Closing Date, executed by a duly authorized officer of the Purchaser, certifying to his or her knowledge, after reasonable inquiry, as to the matters set forth in paragraphs (a) and (b) of this Section 6.2.
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ARTICLE VII
CERTAIN COVENANTS
Section 7.1 Certain Actions. The Company and Purchaser shall reasonably cooperate with each other and use (and shall cause their respective affiliates to use) reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement, applicable law and stock exchange listing standards to consummate the transactions contemplated by this Agreement as soon as practicable.
Section 7.2 Legends. To the extent reasonably necessary under applicable law, any certificate, book-entry or ADR representing Conversion Shares which are issued following conversion of the Note and deposit of the Underlying Shares with the Depositary shall have endorsed, to the extent appropriate, upon its face the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.
Section 7.3 Legend Removal. Upon the request of the Purchaser or any transferee or proposed transferee thereof, the Company shall instruct the Depositary to remove the legend contemplated by Section 7.2 of this Agreement (and shall revoke any related stop transfer or similar instructions to its registrar and transfer agent), if the Conversion Shares are covered by an effective registration statement under the Securities Act or if such person provides reasonable evidence and an opinion of counsel to the effect that a sale, transfer or assignment of such Conversion Shares may be made without registration under the Securities Act or that such Conversion Shares are eligible for resale pursuant to Rule 144 under the Securities Act.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Entire Agreement. This Agreement and any documents and agreements executed in connection with the Purchase embody the entire agreement and understanding of the Parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the Parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.
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Section 8.2 Construction. References in the singular shall include the plural, and vice versa, unless the context otherwise requires. References in the masculine shall include the feminine and neuter, and vice versa, unless the context otherwise requires. Headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meanings of the provisions hereof. Neither party, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions of this Agreement, and all language in all parts of this Agreement shall be construed in accordance with its fair meaning, and not strictly for or against either party.
Section 8.3 Governing Law; Arbitration. This Agreement shall in all respects be construed in accordance with and governed by the substantive laws of the State of New York without reference to its choice of law rules. Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination (Dispute) shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules then in force. In the case of any Dispute, there shall be three arbitrators. The claimant(s) shall have the right to appoint one arbitrator, the respondent(s) shall have the right to appoint another arbitrator, and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. The seat of arbitration shall be Hong Kong.
Section 8.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Any counterpart or other signature hereon delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery of this Agreement by such party.
Section 8.5 Certain Definitional Provisions. Unless the express context otherwise requires, the words hereof, herein and hereunder and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; any references herein to a specific Section, Schedule or Annex shall refer, respectively, to Sections, Schedules or Annexes of this Agreement; wherever the word include, includes or including is used in this Agreement, it shall be deemed to be followed by the words without limitation; and references herein to any gender includes each other gender.
[Signature Page Follows]
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IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to be executed as of the date first above written.
The Company |
PUXIN LIMITED |
By: /s/ Yunlong Sha |
Name: Yunlong Sha |
Title: Chairman and Chief Executive Officer |
Purchaser |
SERENITY INVESTMENT MASTER FUND LIMITED |
By: /s/Wang CHEN |
Name: Wang CHEN |
Title: Director |
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EXHIBIT A
SCHEDULE OF PURCHASERS
Serenity Investment Master Fund Limited
Aggregate Principal Amount of Notes: $50,000,000
A-1
EXHIBIT B
FORM OF CONVERTIBLE PROMISSORY NOTE
B-1
THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT). ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THE TRANSFER OF THIS SECURITY IS ALSO SUBJECT TO THE CONDITIONS SPECIFIED IN THE CONVERTIBLE NOTE AGREEMENT, DATED AS OF [], 2021, AS AMENDED AND MODIFIED FROM TIME TO TIME, BETWEEN PUXIN LIMITED (THE COMPANY) AND THE PURCHASER PARTY THERETO. THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
PUXIN LIMITED
CONVERTIBLE PROMISSORY NOTE
[●], 2021 | US$50,000,000 |
Puxin Limited, a Cayman Islands exempted company with limited liability (the Company), hereby promises to pay to the order of Serenity Investment Master Fund Limited (the Purchaser) or its transferee, the principal amount of Fifty Million Dollars ($50,000,000). This Note is being issued pursuant to a Convertible Note Purchase Agreement, dated as of [●], 2021 (the Purchase Agreement), between the Company and the Purchaser. The Purchase Agreement contains terms governing the rights of the holder of this Note, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Unless otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement.
ARTICLE I
DEFINED TERMS
The terms defined in this Article I (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Note shall have the respective meanings specified in this Article I. The words herein, hereof, hereunder and words of similar import refer to this Note as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article I include the plural as well as the singular.
ADSs shall have the meaning specified in Section 3.2.
Board of Directors shall have the meaning specified in Section 5.3(a).
Closing Sale Price shall have the meaning specified in Section 5.1(d).
Company shall have the meaning specified in the preamble.
Conversion Date shall have the meaning specified in Section 5.1(b).
Conversion Rate shall have the meaning specified in Section 5.2.
Deposit Agreement means Deposit Agreement dated as of June 14, 2018 among the Company, Deutsche Bank Trust Company Americas, as depositary, and the owners and holders from time to time of the ADSs issued thereunder, as it may be amended, restated, supplemented or otherwise modified from time to time.
Depositary means Deutsche Bank Trust Company Americas, as depositary under the Deposit Agreement.
Distributed Assets shall have the meaning specified in Section 5.3(d).
Event of Default shall have the meaning specified in Section 4.1.
Expiration Date shall have the meaning specified in Section 5.3(f).
Expiration Time shall have the meaning specified in Section 5.3(f).
Fundamental Change means the occurrence of any of the following:
(a) except as described in clause (b) below, (A) a person or group within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Subsidiaries, the employee benefit plans of the Company and its Subsidiaries and any Permitted Holder, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of the Companys ordinary share capital (including ordinary share capital held in the form of ADSs) representing more than 50% of the voting power of the Companys ordinary share capital or (B) a person or group within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the Companys then outstanding Ordinary Shares (including Ordinary Shares held in the form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Ordinary Shares or the ADSs (other than changes resulting from a subdivision or combination) as a result of which the Ordinary Shares or the ADSs would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or merger of the Company or any similar transaction pursuant to which the Ordinary Shares or the ADSs will be converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries and consolidated affiliated entities, taken as a whole, to any Person other than one of the Companys Subsidiaries or consolidated affiliated entities; provided, however, that a transaction described in clause (B) in which the holders of all classes of the Companys ordinary share capital immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of ordinary shares of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-à-vis each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
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(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or Ordinary Shares or other common equity then underlying the Note) cease to be listed or quoted on any of The New York Stock Exchange (or its successors); or
(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official application thereof (a Change in Law) that results in (x) the Company, its subsidiaries and its consolidated affiliated entities (collectively, the Company Group) (as in existence immediately subsequent to such Change in Law), as a whole, being legally prohibited from operating substantially all of the business operations conducted by the Company Group (as in existence immediately prior to such Change in Law) as of the last date of the period described in the Companys consolidated financial statements for the most recent fiscal quarter and (y) the Company being unable to continue to derive substantially all of the economic benefits from the business operations conducted by the Company Group (as in existence immediately prior to such Change in Law) in the same manner as reflected in the Companys consolidated financial statements for the most recent fiscal quarter.
Interest Payment Date shall have the meaning specified in Section 2.1.
Make Whole Fundamental Change means the occurrence of any Fundamental Change contemplated by clauses (a), (b), (d), or ( e) of the definition thereof.
Make Whole Fundamental Change Premium means the product of the then applicable Conversion Rate multiplied by 1.20.
Merger Event shall have the meaning specified in Section 5.4.
Ordinary Shares shall have the meaning specified in Section 3.2.
Permitted Holders means Mr. Yunlong Sha and Long bright Limited, together with any other respective person or group subject to aggregatation of ordianry share capital of the Company (including ordinary share capital held in the form of ADSs) with any of the aforementioned person and entity under Section 13(d) of the Exchange Act.
Person means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization.
Purchase Agreement shall have the meaning specified in the preamble.
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Purchaser shall have the meaning specified in the preamble.
Reference Price means US$4.00 per Ordinary Share (equivalent to US$8.00 per ADS), subject to the same adjustments to the Conversion Rate pursuant to this Note.
Reference Property shall have the meaning specified in Section 5.4.
Securities Act shall have the meaning specified in the legend above.
Spin-Off shall have the meaning specified in Section 5.3(d).
Spin-Off Valuation Period shall have the meaning specified in Section 5.3(d).
Successor Company shall have the meaning specified in Section 13.1.
Trigger Event shall have the meaning specified in Section 5.3(d).
Underlying Shares shall have the meaning specified in Section 5.1(d)(i).
US$ or $ refers to United States dollars, the lawful currency of the United States.
ARTICLE II
PAYMENT OF INTEREST
Section 2.1 Interest Payments. Interest shall accrue on the principal amount of the Note (in each case computed on the basis of a 365/366-day year and the actual number of days elapsed in any year) at a simple rate equal to 3.00% per annum. The Company shall pay to the holder of this Note all accrued interest in cash semiannually on each [●] and [●] of each year (each, an Interest Payment Date), commencing on [●], 2021 and including [●], which is the final maturity date of this Note. Interest shall accrue on any principal payment due under this Note until such time as payment therefor is actually delivered to the holder of this Note; provided that if any portion of the principal amount is duly converted into Conversion Shares pursuant to and in accordance with the Note, interest shall cease to accrue on the portion of the principal amount being converted.
Section 2.2 Payment of Interest Upon Conversion. Accrued and unpaid interest that would have been payable on the next Interest Payment Date will not be payable with respect to any portion of the Note submitted for conversion prior to such Interest Payment Date except for (i) a Note submitted for conversion after [●] (the last Interest Payment Date prior to maturity of the Note; (ii) if a Fundamental Change has occurred and the Note is submitted for conversion prior to the last day that the Note may be submitted for repurchase pursuant to Section 6.3; or (iii) to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to the Note.
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ARTICLE III
PAYMENT OF PRINCIPAL ON NOTE
Section 3.1 Scheduled Payment. Unless converted as set forth below, the principal amount (including any accrued and unpaid interest) of this Note shall be due and payable on [●], 2026.
Section 3.2 Conversion. Notwithstanding any provision contained in this Article III, the holder of this Note may convert, indirectly through the procedure set forth in Section 5.1(c), all or any portion of the outstanding principal amount (including any accrued and unpaid interest) of this Note into the Companys American Depositary Shares (ADSs), each representing two (2) ordinary shares of the Company, par value US$0.00005 per share (Ordinary Shares), in accordance with Article V, until such time as the outstanding principal amount (including any accrued and unpaid interest) has been paid in full. For the avoidance of doubt, any reference in this Note to the conversion of the Note into ADSs shall mean the issuance of ADSs following conversion of the Note in accordance with the procedure set forth in Section 5.1(c).
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES ON DEFAULT
Section 4.1 Event of Default. An Event of Default shall exist if any of the following conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of principal or interest on the Note when the same becomes due and payable, whether at maturity, an Interest Payment Date or at a date fixed for prepayment or by declaration or otherwise and such failure to pay is not cured within three (3) business days after the occurrence thereof; or
(b) the Company defaults in the performance of, or compliance with, any material term contained in the Purchase Agreement or the Note and the default is not remedied within thirty (30) days after the Company receives written notice of the default from the holder of the Note; or
(c) the Company (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property or (v) is adjudicated as insolvent or to be liquidated; or
(d) the Company, any subsidiary of the Company or any of their respective affiliates fails to pay principal when due (whether at stated maturity or otherwise) or an uncured default exists that results in the acceleration of maturity of any indebtedness for borrowed money of the Company, any subsidiary of the Company or any of their respective affiliates in an aggregate amount in excess of $10,000,000 (or its foreign currency equivalent), unless such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within any applicable cure period set forth in the relevant agreement or instrument; or
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(e) one or more final non-appealable judgments for the payment of money in any aggregate amount in excess of $10,000,000 shall be rendered against the Company, any subsidiary of the Company or any of their respective affiliates and the same shall remain undischarged for a period of sixty (60) days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Company, any subsidiary of the Company or any of their respective affiliates to enforce any such judgment; or
(f) a court or governmental authority of competent jurisdiction enters an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, or any such petition shall be filed against the Company and such petition shall not be dismissed within sixty (60) days.
Section 4.2 Acceleration.
(a) If an Event of Default with respect to the Company described in subsection (c) of Section 4.1 has occurred, the Note shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the holder of the Note may at any time at his, her or its option, by notice to the Company, declare the Note to be immediately due and payable.
(c) Upon the Note becoming due and payable under this Section 4.2, whether automatically or by declaration, the Note will forthwith mature and the entire unpaid principal amount (including any accrued and unpaid interest) shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.
Section 4.3 Other Remedies. If any Event of Default has occurred and is continuing, and irrespective of whether the Note has become or has been declared immediately due and payable under Section 4.2, the holder of the Note may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, for an injunction against a violation of any of the terms hereof or thereof or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
Section 4.4 No Waivers or Election of Remedies; Expenses. No course of dealing and no delay on the part of the holder of the Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holders rights, powers or remedies. The Company shall pay the principal aomut (including any accrued and unpaid interest) of the Note without any deduction for any setoff or counterclaim. No right, power or remedy conferred by the Purchase Agreement or by the Note upon the holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. The Company will pay to the holder of the Note on demand such further amount as shall be sufficient to cover all reasonable costs and expenses of such holder incurred in any enforcement or collection under this Article IV, including, without limitation, reasonable attorneys fees, expenses and disbursements.
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ARTICLE V
CONVERSION
Section 5.1 Conversion Procedure.
(a) At any time prior to the payment of this Note in full, the holder of this Note may convert all or any portion of the outstanding principal amount this Note into a number of ADSs (excluding any fractional ADS) equal to the product obtained by dividing (i) the portion of the principal amount designated by such holder to be converted, by (ii) the Conversion Rate then in effect.
(b) Except as otherwise expressly provided herein, each conversion of this Note shall be deemed to have been effected as of the close of business on the date on which this Note has been surrendered for conversion at the principal office of the Company (the Conversion Date). At such time as such conversion has been effected, the rights of the holder of this Note as such holder to the extent of the conversion shall cease, and the Person or Persons in whose name or names the ADSs are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the ADSs represented thereby.
(c) As soon as possible after a conversion has been effected (but in any event within five (5) business days in the case of clause (i) below), the holder of this Note shall subscribe for the number of Ordinary Shares issuable upon conversion (in whole or in part) of this Note, and the Company shall do the following:
(i) register the issuance to the converting holder of the number of Ordinary Shares issuable upon conversion (in whole or in part) of this Note (the Underlying Shares) in the Companys share transfer registry;
(ii) issue the Underlying Shares and deposit such Underlying Shares with Deutsch Bank Trust Company Americas, as depositary (the Depositary), in the name and on behalf of the holder of the Note;
(iii) cause the Depositary to issue and deliver to the converting holder certificates or a book-entry transfer for the number of ADSs to which the holder shall be entitled against deposit of the Underlying Shares, pursuant to the Deposit Agreement ; and
(iv) deliver to the converting holder a new Note representing any portion of the principal amount that was represented by the Note surrendered to the Company in connection with such conversion, but which was not converted or which could not be converted because it would have required the issuance of a fractional Ordinary Share.
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The converting holder shall cooperate with the Company and the Depositary to facilitate the process outlined above, including through the execution of a subscription form for the Ordinary Shares satisfactory to the converting holder and the execution of a power of attorney authorizing the Company to deliver the Underlying Shares to the Depositary on such holders behalf.
(d) If a fractional ADS would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall in the event the conversion is being consummated in connection with repayment in full of the Note, pay in cash an amount equal to the market price of such fractional share based on the closing price of the ADSs on the New York Stock Exchange (the Closing Sale Price) on the Conversion Date.
(e) The issuance of the Underlying Shares and ADSs upon conversion of this Note shall be made without charge to the holder hereof for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of Underlying Shares and ADSs, unless the tax is due because the holder requests such Underlying Shares and ADSs to be issued in a name other than the holders name, in which case the holder shall pay the tax. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Ordinary Shares and ADSs issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.
(f) The Company shall not close its books against the transfer of Ordinary Shares or ADSs issued or issuable upon conversion of this Note in any manner which interferes with the timely conversion of this Note.
Section 5.2 Conversion Rate. The initial Conversion Rate shall be 125.0000 ADSs (subject to adjustment as provided in this Article V, the Conversion Rate) per $1,000 principal amount of the Note. To address dilution of the conversion rights granted under the Note, the Conversion Rate shall be subject to adjustment from time to time pursuant to Section 5.3. The Conversion Rate will also be subject to adjustment upon the occurrence of certain Make Whole Fundamental Changes pursuant to Section 6.2.
Section 5.3 Adjustments to Conversion Rate. If the number of Ordinary Shares represented by each ADS is changed, after the date of this Note, for any reason other than one or more of the events described in this Section 5.3, the Company shall make an appropriate adjustment to the Conversion Rate such that the number of Ordinary Shares represented by the ADSs upon which conversion of the Note is based remains the same. In addition, the Conversion Rate shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall, at any time or from time to time while the Note is outstanding, pay a dividend in Ordinary Shares (directly or in the form of ADSs) or make a distribution in Ordinary Shares to all or substantially all holders of Ordinary Shares, then the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such dividend or distribution; | ||
CR1 | = | the Conversion Rate in effect on the ex-dividend date for such dividend or distribution; | ||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such dividend or distribution; and | ||
OS1 | = | the number of Ordinary Shares that would be outstanding immediately after, and solely as a result of, such dividend or distribution. |
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Any adjustment made pursuant to this Section 5.3(a) shall become effective immediately prior to 9:00 a.m., New York City time, on the ex-dividend date for such dividend or distribution. If any dividend or distribution that is the subject of this Section 5.3(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors of the Company (the Board of Directors) publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. For purposes of this Section 5.3(a), the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such dividend or distribution shall not include Ordinary Shares held in treasury, if any. The Company will not pay any dividend or make any distribution on Ordinary Shares held in treasury, if any.
(b) In case outstanding Ordinary Shares (directly or in the form of ADSs) shall be subdivided or split into a greater number of Ordinary Shares or combined or reverse split into a smaller number of Ordinary Shares (in each case, other than in connection with a transaction to which Section 5.4 applies), the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the effective date of such subdivision or combination; | ||
CR1 | = | the Conversion Rate in effect on the effective date of such subdivision or combination; | ||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the effective date of such subdivision or combination; and |
OS1 | = | the number of Ordinary Shares that would be outstanding immediately after, and solely as a result of, such subdivision or combination. |
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Any adjustment made pursuant to this Section 5.3(b) shall become effective immediately prior to 9:00 a.m., New York City time, on the effective date of such subdivision or combination.
(c) In case the Company shall issue rights (other than rights issued pursuant to a shareholders rights plan or a dividend or distribution on Ordinary Shares in Ordinary Shares as set forth in (a) above) or warrants to all or substantially all holders of its Ordinary Shares (whether direct or in the form of ADSs), other than an issuance in connection with a transaction to which Section 5.4 applies, entitling them to purchase, for a period expiring within forty-five (45) calendar days of the date of issuance, Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share less than the average of the Closing Sale Prices of the ADSs divided by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for the distribution, the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such issuance; | ||
CR1 | = | the Conversion Rate in effect on the ex-dividend date for such issuance; | ||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such issuance; | ||
X | = | the total number of Ordinary Shares issuable (directly or in the form of ADSs) pursuant to such rights or warrants; and | ||
Y | = | the number of Ordinary Shares equal to the quotient of (x) aggregate price payable to exercise such rights or warrants, divided by (y) the average of the Closing Sale Prices of the ADSs during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for such issuance. |
Any adjustment made pursuant to this Section 5.3(c) shall become effective immediately prior to 9:00 a.m., New York City time, on the ex-dividend date for such issuance. If any rights or warrants described in this Section 5.3(c) are not so issued, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to issue such rights or warrants, to the Conversion Rate that would then be in effect if such issuance had not been declared. To the extent that such rights or warrants are not exercised prior to their expiration or Ordinary Shares are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of Ordinary Shares actually delivered. In determining the aggregate price payable to exercise such rights and warrants, there shall be taken into account any consideration received by the Company for such rights or warrants and the value of such consideration (if other than cash, to be determined in good faith by the Board of Directors). For purposes of this Section 5.3(c), the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such issuance shall not include Ordinary Shares held in treasury, if any. The Company will not issue any such rights or warrants in respect of Ordinary Shares held in treasury, if any.
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(d) In case the Company shall, by dividend or otherwise, distribute to all or substantially all holders of its outstanding Ordinary Shares (whether direct or in the form of ADSs) of any class of capital stock of the Company or evidences of its indebtedness or assets (including securities, but excluding (i) any dividends or distributions referred to in Section 5.3(a), (ii) any rights or warrants referred to in Section 5.3(c), (iii) any dividends or distributions referred to in Section 5.3(e), (iv) any dividends or distributions in connection with a transaction to which Section 5.4 applies, or (v) any Spin-Offs to which the provisions set forth below in this Section 5.3(d) applies) (any of the foregoing hereinafter in this Section 5.3(d) called the Distributed Assets), then, in each such case, the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such distribution; | ||
CR1 | = | the Conversion Rate in effect on the ex-dividend date for such distribution; | ||
SP0 | = | the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for such distribution; and | ||
FMV | = | the fair market value on the ex-dividend date for such distribution of the Distributed Assets so distributed applicable to one (1) Ordinary Share, as determined in good faith by the Board of Directors. |
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In the event where there has been a payment of a dividend or other distribution on the Ordinary Shares (directly or in the form of ADSs) or shares of capital stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company (a Spin-Off) that are, or when issued, will be, traded or listed on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or any other U.S. national securities exchange or market, then the Conversion Rate shall instead be adjusted based on the following formula:
where
CR0 | = |
the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such distribution; |
||
CR1 | = | the Conversion Rate in effect on the ex-dividend date for such distribution; | ||
FMV0 | = | the average of the Closing Sale Prices of the Distributed Assets applicable to one (1) Ordinary Share during the ten consecutive trading day period commencing on and including the effective date of the Spin-Off (the Spin-Off Valuation Period); and | ||
MP0 | = | the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the Spin-Off Valuation Period. |
Any adjustment made pursuant to this Section 5.3(d) shall become effective immediately prior to 9:00 a.m., New York City time, on the ex-dividend date for such distribution. If any dividend or distribution of the type described in this Section 5.3(d) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
Rights or warrants distributed by the Company to all holders of Ordinary Shares (whether direct or in the form of ADSs) entitling the holders thereof to subscribe for or purchase shares of the Companys capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (Trigger Event): (i) are deemed to be transferred with such Ordinary Shares; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Ordinary Shares, shall be deemed not to have been distributed for purposes of this Section 5.3 (and no adjustment to the Conversion Rate under this Section 5.3 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 5.3(d). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and record date with respect to new rights or warrants with such rights. In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 5.3 was made, (A) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Ordinary Shares with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Ordinary Shares as of the date of such redemption or repurchase and (B) in the case of such rights or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights and warrants had not been issued.
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No adjustment of the Conversion Rate shall be made pursuant to this Section 5.3(d) in respect of rights or warrants distributed or deemed distributed on any Trigger Event to the extent that such rights or warrants are actually distributed to a holder upon conversion of this Note.
(e) In case the Company shall pay a dividend or otherwise distribute to all or substantially all holders of its Ordinary Shares (direct or in the form of ADSs) a dividend or other distribution of exclusively cash excluding (i) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary and (ii) any dividend or distribution in connection with a transaction to which Section 5.4 applies, then the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the ex-dividend date for such dividend or distribution; | ||
CR1 | = | the Conversion Rate in effect on the ex-dividend date for such dividend or distribution; | ||
SP0 | = | the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for such distribution; and | ||
DIV | = | the amount in cash per Ordinary Share the Company distributes to holders of its Ordinary Shares. |
Any adjustment made pursuant to this Section 5.3(e) shall become effective immediately prior to 9:00 a.m., New York City time, on the ex-dividend date for such dividend or distribution. If any dividend or distribution of the type described in this Section 5.3(e) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
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(f) In case of purchases of the Ordinary Shares (directly or in the form of ADSs) pursuant to a tender offer or exchange offer made by the Company or any Subsidiary of the Company for all or any portion of the Ordinary Shares (directly or indirectly in the form of ADSs), to the extent that the fair market value, as determined in good faith by the Board of Directors, of cash and any other consideration included in the payment per Ordinary Share (or equivalent payment per Ordinary Share represented by the ADSs) exceeds the Closing Sale Price of the ADSs divided by the number of ADSs then represented by each ADS on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender offer or exchange offer (as it may be amended) (the Expiration Date), the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = |
the Conversion Rate in effect at 5:00 p.m., New York City time, on the Expiration Date; |
||
CR1 | = | the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the Expiration Date; | ||
FMV | = | the fair market value, on the Expiration Date, of the aggregate value of all cash and any other consideration paid or payable for Ordinary Shares (directly or indirectly in the form of ADSs) validly tendered or exchanged and not withdrawn as of the Expiration Date, as determined in good faith by the Board of Directors; | ||
OS1 | = | the number of Ordinary Shares outstanding immediately after the last time tenders or exchanges may be made pursuant to such tender offer or exchange offer (the Expiration Time), after giving effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender or exchange offer; | ||
OS0 | = | the number of Ordinary Shares outstanding immediately before the Expiration Time; and | ||
SP1 | = | the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period commencing on the trading day immediately after the Expiration Date. |
Any adjustment made pursuant to this Section 5.3(f) shall become effective immediately prior to 9:00 a.m., New York City time, on the trading day immediately following the Expiration Date. If the Company, or one of its Subsidiaries, is obligated to purchase Ordinary Shares (directly or indirectly in the form of ADSs) pursuant to any such tender or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable law from effecting all such purchases or all such purchases are rescinded, the Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made. Except as set forth in the preceding sentence, if the application of this Section 5.3(f) to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this Section 5.3(f).
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(g) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Note or on the exercise of any other rights, existing as of the date of issuance of the Note, of conversion into, or exchange or subscription for, Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs (the Relevant Securities, which for the purposes of this definition excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs issued or granted in accordance with any share incentive plan of the Company), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each ADS) which is less than the Reference Price per ADS, the Conversion Rate shall be adjusted based on the following formula:
where:
CR0 | = |
the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities; |
||
CR1 | = | the Conversion Rate in effect as from the date of issue of the Relevant Securities; | ||
A | = | the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities; | ||
B | = | the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then represented by each ADS; and | ||
C | = | the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities, provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights. |
(h) In cases where:
(i) the fair market value, as determined in good faith by the Board of Directors, of Distributed Assets and cash, including with respect to a Spin-Off, as to which Sections 5.3(d) and 5.3(e) apply, applicable to one (1) Ordinary Share, distributed to holders of the Ordinary Shares (whether direct or in the form of ADSs) equals or exceeds the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for such distribution, or
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(ii) the average of the Closing Sale Prices of the ADSs multiplied by the number of Ordinary Shares then represented by each ADS during the ten (10) consecutive trading day period ending on the trading day immediately preceding the ex-dividend date for such distribution exceeds the fair market value, as determined in good faith by the Board of Directors, of such Distributed Assets or cash so distributed by less than $1.00, rather than being entitled to an adjustment in the Conversion Rate, the holder will be entitled to receive upon conversion, in addition to the ADS, the kind and amount of assets, debt securities or rights, warrants or options comprising the distribution, if any, that the holder would have received if the holder had converted this Note immediately prior to the record date for determining the shareholders entitled to receive the distribution.
(i) In addition to those adjustments required by clauses (a)-(h) of this Section 5.3, and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on which any of the Companys securities are then listed, the Company from time to time may increase the Conversion Rate by any amount for a period of at least twenty (20) business days if the Board of Directors determines that such increase would be in the Companys best interest, and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the Ordinary Shares or the ADSs or rights to purchase Ordinary Shares or ADSs in connection with a dividend or distribution of Ordinary Shares or ADSs (or rights to acquire Ordinary Shares or ADSs) or similar event.
(j) All calculations under this Article V shall be made in good faith by the Company in accordance with this Article V, and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of an Ordinary Share, as the case may be. No adjustment need be made for rights to purchase Ordinary Shares (directly or indirectly in the form of ADSs) pursuant to a Company plan for reinvestment of dividends or for any issuance of Ordinary Shares (directly or indirectly in the form of ADSs) or convertible or exchangeable securities or, except as provided in this Section 5.3, rights to purchase Ordinary Shares (directly or indirectly in the form of ADSs) or convertible or exchangeable securities. The Company shall certify to the holder that all calculations are made in compliance with this Article V, and shall show the holder in detail the facts upon which such calculations and adjustments were made.
(k) For purposes of this Section 5.3, the number of Ordinary Shares at any time outstanding shall not include Ordinary Shares held in the treasury of the Company but shall include Ordinary Shares issuable in respect of scrip certificates issued in lieu of fractions of Ordinary Shares. The Company will not pay any dividend or make any distribution on Ordinary Shares held in the treasury of the Company.
(l) Notwithstanding any of the foregoing clauses in this Section 5.3, the applicable Conversion Rate will not be adjusted pursuant to this Section 5.3 (i) if the holder participates in the transaction that would otherwise give rise to adjustment pursuant to this Section 5.3 on an as-converted basis or (ii) solely by reason of the issuance or conversion of any other Note pursuant to the Purchase Agreement.
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Section 5.4 Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the ADSs or Ordinary Shares (other than changes resulting from a subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Companys Subsidiaries substantially as an entirety or
(iv) any statutory share exchange,
in each case, as a result of which the ADS or the Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event, a Merger Event), then, prior to or at the effective time of such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute an amendment to the Note providing that, at and after the effective time of such Merger Event, the right to convert each $1,000 principal amount of the Note shall be changed into a right to convert such principal amount of Note into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the Reference Property, with each unit of Reference Property meaning the kind and amount of Reference Property that a holder of one ADS is entitled to receive) upon such Merger Event; provided, however, that any ADSs that the Company would have been required to deliver upon conversion of the Note shall instead be deliverable in the amount and type of Reference Property that a holder of that number of ADSs would have been entitled to receive in such Merger Event.
If the Merger Event causes the ADSs or Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Note will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the holders of ADSs, and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration referred to in clause (i) attributable to one ADS. If the holders of the ADSs or Ordinary Shares receive only cash in such Merger Event, then for all conversions for which the relevant Conversion Date occurs after the effective date of such Merger Event the consideration due upon conversion of each $1,000 principal amount of Notes shall be solely cash in an amount equal to the Conversion Rate in effect on the Conversion Date, multiplied by the price paid per ADS or Ordinary Share, as applicable, in such Merger Event.
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Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article V (it being understood that no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of common equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute such amendment and such amendment shall contain such additional provisions to protect the interests of the holder of the Note.
(b) The Company shall not become a party to any Merger Event unless its terms are consistent with this Section 5.4. None of the foregoing provisions shall affect the right of a holder of a Note to convert its Note pursuant to the terms of the Note.
(c) The above provisions of this Section 5.4 shall similarly apply to successive Merger Events.
Section 5.5 Notices.
(a) Immediately upon any adjustment of the Conversion Rate, the Company shall send written notice thereof to the holder of this Note, setting forth in reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall send written notice to the holder of this Note at least twenty (20) days prior to the date on which the Company closes its books or takes a record (i) with respect to any dividend or distribution upon Ordinary Shares (whether direct or in the form of ADSs), any subdivision, stock split, reverse stock split or combination, or any tender offer or exchange offer, (ii) with respect to any pro rata subscription offer to holders of Ordinary Shares (whether direct or in the form of ADSs) or (iii) for determining rights to vote with respect to any Fundamental Change, dissolution or liquidation.
(c) The Company shall also give at least twenty (20) days prior written notice to the holder of this Note of the date on which any Fundamental Change, dissolution or liquidation shall take place.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Additional Amounts.
(a) All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or with respect the Note, including payments of principal, payments of interest and payments of cash and/or deliveries of ADSs (together with payments of cash for any fractional ADS) upon conversion of the Note, shall be made free from any restriction or condition without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business (each, as applicable, a Relevant Taxing Jurisdiction) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a Relevant Jurisdiction, and in each case, any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company or any successor to the Company shall pay to the holder such additional amounts (Additional Amounts) as may be necessary to ensure that the net amount received by the holder after such withholding or deduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received by such holder had no such withholding or deduction been required; provided that no Additional Amounts shall be payable for or on account of
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(i) any tax, duty, assessment or other governmental charge that would not have been imposed but for:
(1) the existence of any present or former connection between the holder of the Note and the Relevant Jurisdiction, other than merely holding such Note or the receipt of payments thereunder, including such holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein;
(2) the failure of the holder to comply with a timely request from the Company or any successor of the Company, addressed to the holder, to provide certification, information, documents or other evidence concerning the holders or nationality, residence, identity or connection with the Relevant Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if and to the extent that due and timely compliance with such request is required by statute, regulation or administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable; or
(3) the presentation of the Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
(ii) any estate, inheritance, gift, sale, transfer, excise, personal property or similar tax, assessment or other governmental charge; or
(iii) any tax, duty, assessment or other governmental charge that is payable otherwise than by withholding from payments or deliveries under or with respect to the Note.
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(b) If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with respect to the Note, it shall deliver to the holder official tax receipts evidencing the remittance to the relevant tax authorities of the amounts so withheld or deducted.
Section 6.2 Increase in Conversion Rate Upon a Make Whole Fundamental Change Upon the occurrence of a Make Whole Fundamental Change, the Conversion Rate will be adjusted to be the Make Whole Fundamental Change Premium with respect to any conversion requests made by the holder from the date of the announcement by the Company of the event giving rise to the Make Whole Fundamental Change until ten days after the consummation of such event.
Section 6.3 Repurchase of the Note Upon a Fundamental Change.
(a) Upon the occurrence of a Fundamental Change, the Company will offer to repurchase the Note at a purchase price of 100% plus accrued and unpaid interest, calculated to but excluding the date of repurchase.
(b) The Company will permit the holder of the Note to present the Note for repurchase at any time prior to ten days following the consummation of the event giving rise to the Fundamental Change.
(c) If the Fundamental Change giving rise to the repurchase obligation pursuant to this Section 6.3 is also a Make Whole Fundamental Change, then the Company will permit the holder of the Note to present the Note for repurchase pursuant to this Section 6.3 for as long as the Note may also be converted at the Make Whole Fundamental Change Premium, as contemplated by Section 6.2.
Section 6.4 Incurrence of Indebtedness. So long as any Note remain outstanding, the Company will not and will not permit any of its Subsidiaries to incur, directly or indirectly, contingently or otherwise, or otherwise become liable in respect of, any indebtedness for borrowed money; provided that the Company and its Subsidiaries may incur indebtedness if the aggregate amount of indebtedness incurred by the Company and its Subsidiaries after the date of issuance of the Note on a consolidated basis shall not exceed 6.5 times the Companys EBITDA for 2021 which is agreed to be RMB300,000,000 or, at the time of incurrence, the equivalent amount in the U.S. dollars.
Section 6.5 Certain ADS Matters.
(a) The Company covenants that all ADSs delivered upon conversion of the Note, and all Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company covenants that, if any ADSs to be provided for the purpose of conversion of the Note hereunder, or any Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or state law before such ADSs may be validly issued upon conversion, the Company will, to the extent then permitted by the rules and interpretations of the SEC, secure such registration or approval, as the case may be.
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(c) The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated quotation system, any ADSs deliverable upon conversion of the Note.
(d) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the conversion of the Note into ADSs and the issuance, and deposit into the ADS facility, of the Ordinary Shares represented by such ADSs. The Company also undertakes to maintain, as long as the Note is outstanding, the effectiveness of a registration statement on Form F-6 relating to the ADSs and an adequate number of ADSs available for issuance thereunder such that ADSs can be delivered in accordance with the terms of the Note and the Deposit Agreement upon conversion of the Note.
(e) If the Ordinary Shares cease to be represented by ADSs issued under a depositary receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a reference to the number of Ordinary Shares (and other property, if any) represented by the ADSs on the last day on which the ADSs represented the Ordinary Shares and as if the Ordinary Shares and the other property had been distributed to holders of the ADSs on that day. In addition, all appropriate adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination will apply. The Company shall provide written notice to the Holder upon the occurrence of the foregoing.
(b) Offer to Purchase. (a) The holder of the Note will have the right to require the Company to repurchase for cash all or part of the Note on [●], 2024, being the third anniversary of the date of issuance of the Note, at a repurchase price equal to 100% of the principal amount of the Note to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date. The Company will provide notice of this repurchase right no less than 30 days and no more than 60 days prior to [●], 2024 and the holder of the Note may submit its Note for redemption until two business days prior to such date.
Section 6.6 Transfers of the Note. (a) Purchaser or any subsequent holder of the Note may transfer all or a portion of the Note, in a single transaction or multiple transactions, to any third party so long as such transfer complies with the legends set forth on the Note and otherwise complies with applicable securities laws. Notwithstanding the foregoing, Purchaser shall not, directly or indirectly (including through any of its affiliate), transfer the Note to any Person without the prior written consent of the Company. Any transfer of the Note made in violation of this Section 6.6 shall be null and void ab initio and shall not be recorded on the books and records of the Company.
(b) Any holder of the Note seeking to transfer all or a portion of the Note will deliver notice of such intended transfer to the Company. Upon receipt of such Notice, the Company will take all action necessary to effect such transfer, including promptly issuing one or more new Notes to such transferees.
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(c) In the event that all or a portion of the Note has been transferred to multiple holders, references in the Note to the singular form of Note and holder shall instead refer to the plural form of such words, mutatis mutandis.
ARTICLE VII
AMENDMENT AND WAIVER
The provisions of any Note may only be amended with the consent of the holder of the Note, provided that the Company can amend the Note pursuant to Section 5.4 or Article XIII in any manner specifically contemplated by such provisions that does not adversely impact the legal rights of the holder of the Note.
ARTICLE VIII
CANCELLATION
After the entire principal amount (including any accrued and unpaid interest) at any time owed on this Note has been paid in full or this Note has been converted in full to ADSs or other property, this Note shall be surrendered to the Company for cancellation and shall not be reissued.
ARTICLE IX
PAYMENTS
This Note is payable without relief from valuation or appraisement laws. All payments to be made to the holder of the Note shall be made in the lawful money of the United States of America in immediately available funds; provided, that the Company shall not have the right to pre-pay the outstanding principal of any Note without the consent of the holder of the Note.
ARTICLE X
PLACE OF PAYMENT
Payments of principal and interest shall be delivered to the holder at the following address: [●] or to such other address or to the attention of such other Person as specified by prior written notice to the Company.
ARTICLE XI
GOVERNING LAW AND DISPUTE RESOLUTION
THIS NOTE AND ALL ISSUES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
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Section 11.1 THIS NOTE AND ALL ISSUES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
Section 11.2 Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination (Dispute) shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules then in force. In the case of any Dispute, there shall be three arbitrators. The claimant(s) shall have the right to appoint one arbitrator, the respondent(s) shall have the right to appoint another arbitrator, and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. The seat of arbitration shall be Hong Kong.
ARTICLE XII
SUBORDINATION
This Note and the interest accrued under the Note are the senior obligations of the Company and will rank pari passu in right of payment with all other senior and unsubordinated obligations of the Company.
ARTICLE XIII
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 13.1 Company may Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 13.2, the Company shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person, unless:
(a) the resulting, surviving or transferee person (the Successor Company), if not the Company, shall be a corporation organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company) shall expressly assume, by amendment of the Note all of the obligations of the Company under the Note; and
(b) immediately after giving effect to such transaction, no Event of Default or an event that would become an Event of Default with notice and/or the passage of time shall have occurred and be continuing.
For purposes of this Section 13.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Company to another Person.
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Section 13.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company by amendment to the Note of the due and punctual payment of the principal of and accrued and unpaid interest on the Note, the due and punctual delivery or payment, as the case may be, of any consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of the Note to be performed by the Company, such Successor Company (if not the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Companys properties and assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has executed and delivered this Note on [●], 2021.
PUXIN LIMITED | ||
By: |
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Name: |
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Title: |
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EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
C-1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this Agreement) is entered into as of [●], 2021, by and among PUXIN LIMITED, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company), and the investor listed on the signature page hereto (the Purchaser). Capitalized terms used but not defined elsewhere herein are defined in Exhibit A. The Purchaser and any other party that may become a party hereto pursuant to Section 4.1 are referred to collectively as the Holders and individually each as a Holder.
WHEREAS, the Company and the Purchaser are parties to Convertible Note Purchase Agreement, dated as of [●], 2021 (as amended from time to time, the Purchase Agreement), pursuant to which the Company is selling to the Purchaser, and the Purchaser is purchasing from the Company, an aggregate of $[●] Convertible Notes (the Convertible Notes), which are convertible into American Depositary Shares of the Company (ADSs) each representing two Ordinary Shares (Ordinary Shares) of the Company with a per value of $0.00005 per share.
WHEREAS, the Company has granted certain registration rights (the Convertible Notes Registration Rights) to the Holders of the Convertible Notes.
WHEREAS, as a condition to the obligations of the Company and the Purchaser under the Purchase Agreement, the Company and the Purchaser are entering into this Agreement for the purpose of granting certain registration and other rights to the Holders.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 Demand Registration.
(a) Request by Holders.(b) If the Company shall receive a written request from the Purchaser or any other Holder (or any of its successors, permitted assigns or transferees, each, an Initiating Holder) that the Company file a registration statement under the Securities Act (other than on Form F-3 or Form S-3) covering the registration of all or a portion of the Registrable Securities of such requesting Initiating Holder with an aggregate public offering price covering the amount requested of at least $10,000,000 pursuant to this Section 1.1, then the Company shall, within ten (10) Business Days of the receipt of such written request, give written notice of such request (the Request Notice) to all the Holders, and use its reasonably best efforts to effect, as soon as practicable, the registration under the Securities Act of all the Registrable Securities that the Holders request to be registered and included in such registration (including the Initiating Holder(s)) by written notice given by such Holders to the Company within ten (10) Business Days after receipt of the Request Notice.
(b) Underwritten Offering. If any Initiating Holder intends to distribute the Registrable Securities covered by its request by means of an underwritten offering, then it shall so advise the Company as a part of its request made pursuant to this Section 1.1 and the Company shall include such information in the Request Notice. 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 (unless otherwise mutually agreed by a majority in interest of the Initiating Holder(s) and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwritten offering shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities being registered and reasonably acceptable to the Company. Notwithstanding any other provision of this Section 1.1, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwritten offering shall be reduced as required by the underwriter(s) and allocated among the Holders on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration (including the Initiating Holder(s)); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not Registrable Securities and are held by any other Person who is not a Holder, including, without limitation, any Person who is an employee, officer or director of the Company or any Subsidiary of the Company; provided further, that, in any event, at least fifty percent (50%) of shares of Registrable Securities requested by the Holders to be included in such underwriting and registration shall be so included. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company shall not be obligated to effect more than three (3) such demand registration requested by each Initiating Holder pursuant to this Section 1.1; provided that if the sale of all of the Registrable Securities sought to be included in a registration statement pursuant to this Section 1.1 is not consummated for any reason other than due to the action or inaction of the Holders including Registrable Securities in such registration statement, such registration shall not be deemed to constitute one of the registration rights granted pursuant to this Section 1.1.
(d) Deferral. Notwithstanding the foregoing, if the Company shall furnish to the Holders requesting registration pursuant to this Section 1.1, a certificate signed by the chief executive officer of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for a registration statement to be filed at such time, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holder(s); provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; provided further, that the Company shall not register any other of its Ordinary Shares during such deferral period. A demand right shall not be deemed to have been exercised until such deferred registration shall have been effected.
Section 1.2 Piggyback Registration.
(a) Participation. Subject to the terms of this Agreement, if the Company proposes to register for its own account any of its equity securities in connection with a public offering of such securities, or if any registration of equity securities is requested by other current or future investors in the Company, the Company shall notify all the Holders of the Registrable Securities in writing at least thirty (30) Business Days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to any primary or secondary offering of securities of the Company, but excluding registration statements relating to any registration under Section 1.1 or Section 1.3 of this Agreement or to any employee benefit plan or a corporate reorganization), and shall afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall within ten (10) Business Days after receipt of the above described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company or any subsequent investors, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. No shareholder of the Company shall hereafter be granted piggyback registration rights that are superior to those of the Holders without prior written consent of Holders who hold or would upon conversion of the Convertible Notes hold Registrable Securities representing at least sixty percent (60%) of the number of shares of Registrable Securities then outstanding.
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(b) Underwritten offering. If a registration statement under which the Company gives notice under this Section 1.2 is for an underwritten offering, then the Company shall so advise the Holders. In such event, the right of any such Holders Registrable Securities to be included in a registration pursuant to this Section 1.2 shall be conditioned upon such Holders participation in such underwritten offering and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All the Holders proposing to distribute their Registrable Securities through such underwritten offering shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement but subject to Section 5.2, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares from the registration and the underwritten offering, and the number of shares that may be included in the registration and the underwritten offering shall be allocated, first, to the Company, second, to each holder of Registrable Securities requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on the respective percentages of the Registrable Securities requested to be included in such offering by such Holders, and third, to holders of other securities of the Company; provided, however, that the right of the underwriter(s) to exclude Ordinary Shares (including the Registrable Securities) from the registration and underwritten offering as described above shall be restricted so that (i) the number of the Registrable Securities included in any such registration is not reduced below thirty percent (30%) of the aggregate number of Ordinary Shares of the Registrable Securities, on a pro rata basis, for which inclusion has been requested; and (ii) all Ordinary Shares that are not Registrable Securities and are held by any other Person, including, without limitation, any Person who is an employee, officer or director of the Company (or any Subsidiary of the Company) shall first be excluded from such registration and underwritten offering before any Registrable Securities are so excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwritten offering shall be excluded and withdrawn from the registration.
(c) Not Demand Registration. Registration pursuant to this Section 1.2 shall not be deemed to be a demand registration as described in Section 1.1 above. There shall be no limit on the number of times Holders may request registration of Registrable Securities under this Section 1.2.
Section 1.3 Form F-3 or Form S-3 Registration.
(a) Resale Shelf Registration Statement. Subject to the other applicable provisions of this Agreement, the Company shall use its commercially reasonable efforts to prepare and file, as soon as reasonably practicable after the Companys Form 20-F for the year ended December 31, 2021 is filed, a registration statement covering the sale or distribution from time to time by the Holders, on a delayed or continuous basis pursuant to Rule 415 of the Securities Act, of all of the Registrable Securities on Form F-3 or Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form F-3 or Form S-3, then such registration shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Holders in accordance with any reasonable method of distribution elected by the Holders) (the Resale Shelf Registration Statement) and shall use its commercially reasonable efforts to cause such Resale Shelf Registration Statement to be declared effective by the SEC as promptly as is reasonably practicable after the filing thereof (it being agreed that the Resale Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule 462(e) is then available to the Company).
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(b) Effectiveness Period. Once declared effective, the Company shall, subject to the other applicable provisions of this Agreement, use its commercially reasonable efforts to cause the Resale Shelf Registration Statement to be continuously effective and usable until such time as there are no longer any Registrable Securities (the Effectiveness Period).
(c) Subsequent Shelf Registration Statement. If any Shelf Registration Statement ceases to be effective under the Securities Act for any reason at any time during the Effectiveness Period, the Company shall use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf Registration Statement to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf Registration Statement), and shall use its commercially reasonable efforts to as promptly as is reasonably practicable amend such Shelf Registration Statement in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf Registration Statement or file an additional registration statement (a Subsequent Shelf Registration Statement) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the holders thereof of all securities that are Registrable Securities as of the time of such filing. If a Subsequent Shelf Registration Statement is filed, the Company shall use its commercially reasonable efforts to (a) cause such Subsequent Shelf Registration Statement to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule 462(e) is available to the Company) and (b) keep such Subsequent Shelf Registration Statement continuously effective and usable until the end of the Effectiveness Period. Any such Subsequent Shelf Registration Statement shall be a registration statement on Form F-3 or Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration Statement shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Holders in accordance with any reasonable method of distribution elected by the Holders.
(d) Supplements and Amendments. The Company shall supplement and amend any Shelf Registration Statement if required by the Securities Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement.
(e) Subsequent Holder Notice. If a Person entitled to the benefits of this Agreement becomes a holder of Registrable Securities after a Shelf Registration Statement becomes effective under the Securities Act, the Company shall, as promptly as is reasonably practicable following delivery of written notice to the Company of such Person becoming a holder of Registrable Securities and requesting for its name to be included as a selling securityholder in the prospectus related to the Shelf Registration Statement (a Subsequent Holder Notice):
(i) if required and permitted by applicable law, file with the SEC a supplement to the related prospectus or a post-effective amendment to the Shelf Registration Statement so that such holder of Registrable Securities is named as a selling securityholder in the Shelf Registration Statement and the related prospectus in such a manner as to permit such holder of Registrable Securities to deliver a prospectus to purchasers of the Registrable Securities in accordance with applicable law; provided, however, that the Company shall not be required to file more than one (1) post-effective amendment or a supplement to the related prospectus for such purpose in any 30-day period;
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(ii) if, pursuant to Section 1.3(e)(i), the Company shall have filed a post-effective amendment to the Shelf Registration Statement that is not automatically effective, use its commercially reasonable efforts to cause such post-effective amendment to become effective under the Securities Act as promptly as is reasonably practicable; and
(iii) notify such holder of Registrable Securities as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 1.3(e)(i).
(f) Underwritten offering.
(i) The Holders may, after the Resale Shelf Registration Statement becomes effective, deliver a written notice to the Company specifying that the sale of some or all of the Registrable Securities subject to the Shelf Registration Statement, is intended to be conducted through an underwritten offering; provided, however, that the Holders of Registrable Securities may not, without the Companys prior written consent, (i) launch an underwritten offering the anticipated gross proceeds of which shall be less than $30.0 million (unless such holders are proposing to sell all of their remaining Registrable Securities), (ii) launch more than one (1) underwritten offering at the request of such holders within any twelve (12) month-period.
(ii) In the event of an underwritten offering, the Holders shall select the managing underwriter(s) to administer the underwritten offering; provided that the choice of such managing underwriter(s) shall be subject to the consent of the Company, which is not to be unreasonably withheld. The Company, the holders of Registrable Securities and holders of any other securities of the Company participating in an underwritten offering will enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such offering.
(iii) The Company will not include in any underwritten offering pursuant to this Section 1.3(f) any securities that are not Registrable Securities without the prior written consent of the Holders. If the managing underwriter or underwriters advise the Company and the Holders in writing that in its or their good faith opinion the number of Registrable Securities (and, if permitted hereunder, other securities requested to be included in such offering) exceeds the number of securities which can be sold in such offering in light of market conditions or is such so as to adversely affect the success of such offering, the Company will include in such offering only such number of securities that can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the Registrable Securities of the Holders that have requested to participate in such underwritten offering, allocated pro rata among such Holders on the basis of the respective percentages of the Registrable Securities requested to be included in such offering by such Holders, and (ii) second, any other securities of the Company that have been requested to be so included. The Company shall use its commercially reasonable efforts to cooperate in a timely manner with any request of the Holders in respect of any underwritten block trade.
(g) Take-Down Notice. Subject to the other applicable provisions of this Agreement, at any time that any Form F-3 or Form S-3 registration statement is effective, if any Holder delivers a notice to the Company stating its intention to effect a sale or distribution of all or part of its Registrable Securities on any Form F-3 or Form S-3 registration statement (a Shelf Offering) and stating the number of the Registrable Securities to be included in such Shelf Offering, then the Company shall amend, subject to the other applicable provisions of this Agreement, or supplement the Form F-3 or Form S-3 registration statement as may be necessary, in order to enable such Registrable Securities to be sold and distributed pursuant to the Shelf Offering, including pursuant to an underwritten offering.
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(h) Not Demand Registration. Form F-3 or Form S-3 registrations shall not be deemed to be demand registrations as described in Section 1.1 above. Except as otherwise provided herein, there shall be no limit on the number of times the Holders may request registration of the Registrable Securities under this Section 1.3.
ARTICLE II
ADDITIONAL PROVISIONS REGARDING REGISTRATION RIGHTS
Section 2.1 Expenses. All Registration Expenses incurred in connection with any registration pursuant to Section 1.1, Section 1.2 or Section 1.3 (but excluding the Selling Expenses) shall be borne by the Company. Each Holder participating in a registration pursuant to Section 1.1, Section 1.2 or Section 1.3 shall bear such Holders proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all the Selling Expenses, in connection with such offering by the Holders.
Section 2.2 Obligation of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible:
(a) Registration Statement. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, and keep such registration statement effective for a period of up to ninety (90) days or, in the case of the Registrable Securities registered under Form F-3 or Form S-3 in accordance with Rule 415 under the Securities Act or a successor rule, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such ninety (90) day period shall be extended for a period of time equal to the period any Holder refrains from selling any securities included in such registration at the request of the underwriter(s), and (ii) in the case of any registration of the Registrable Securities which are intended to be offered on a continuous or delayed basis, such ninety (90) day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold.
(b) Amendments and Supplements. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration.
(d) Blue Sky. Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service of process in such jurisdiction and except as may be required by the Securities Act.
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(e) Underwriting. In the event of any underwritten public offering, participate in standard due diligence exercises and enter into and perform its obligations under an underwriting agreement in usual and customary form, in each case with the managing underwriter(s) of such offering.
(f) Notification. Notify each holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of (i) the issuance of any stop order by the SEC in respect of such registration statement, or (ii) the happening of any event as a result of which the prospectus included in such 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) Opinion and Comfort Letter. Furnish, at the request of any Holder requesting registration of the Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion and a negative assurance letter, each dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) comfort letters dated as of (x) the effective date of the registration statement covering such Registrable Securities and (y) the closing date of the offering, 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 and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.
(h) Compliance. Comply with all applicable rules and regulations of the SEC, and make available to the Companys security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the registration statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the registration statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) Listing. Cause all such Registrable Securities (in the form of ADSs or otherwise) to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided that the applicable listing requirements are satisfied.
(j) FINRA. Cooperate with the Holders and each underwriter or agent participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA, including the use of commercially reasonable efforts to obtain FINRAs pre-clearance or pre-approval of the registration statement and applicable prospectus upon filing with the SEC.
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(k) Updates. Keep Holders counsel advised in writing as to the initiation and progress of any registration under Section 1.1, Section 1.2 or Section 1.3 of this Agreement.
(l) Cooperation. Cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made.
(m) Marketing Efforts. In connection with an underwritten offering, cause its officers to use their commercially reasonable efforts to support the marketing of the Registrable Securities covered by such offering (including participation in roadshows or other similar marketing efforts).
(n) Other Reasonable Steps. Take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby.
Section 2.3 Other Obligations of the Company. So long as any Registrable Securities remain outstanding, the Company shall not terminate the Deposit Agreement and shall, if necessary, direct the Depositary to file, and cooperate with the Depositary in filing, amendments to the Form F-6 registering ADSs to increase the amount of ADSs registered thereunder to cover the total number of ADSs corresponding to the Registrable Securities then outstanding.
Section 2.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 1.1, Section 1.2 or Section 1.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to timely effect the registration of their Registrable Securities.
Section 2.5 Rule 144 Reporting. With a view to making available the benefits of Rule 144 to the Holders, the Company agrees that, for so long as a Holder owns Registrable Securities, the Company will use its commercially reasonable efforts to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times
(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or its qualification as a registrant whose securities may be resold pursuant to Form F-3 or Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form F-3 or Form S-3.
Section 2.6 Re-sale Rights. The Company shall at its own cost use its reasonable best efforts to assist each Holder in the sale or disposition of, and to enable the Holder to sell under Rule 144 promulgated under the Securities Act, the maximum number of, its Registrable Securities, including without limitation (a) the prompt delivery of applicable instruction letters to the Companys transfer agent to remove legends from the Holders share certificates, (b) if legal opinions from the Companys counsel are specifically required by the transfer agent, causing the prompt delivery of such legal opinions in forms reasonably satisfactory to the transfer agent, (c) (i) the prompt delivery of instruction letters to the Companys share registrar and depository agent to convert the Holders securities into depository receipts or similar instruments to be deposited in the Holders brokerage account(s), and (ii) the prompt payment of all costs and fees related to such depositary facility, including maintenance fees and conversion fees for Registrable Securities held by the. The Company acknowledges that time is of the essence with respect to its obligations under this Section 2.6, and that any delay will cause the Holders irreparable harm and constitutes a material breach of its obligations under this Agreement.
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ARTICLE III
INDEMNIFICATION
Section 3.1 Indemnification by Company. To the extent permitted by applicable law, the Company will, with respect to any Registrable Securities covered by a registration statement or prospectus, or as to which registration, qualification or compliance under applicable blue sky laws has been effected pursuant to this Agreement, indemnify and hold harmless each Holder, each Holders officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, and each Person controlling such Holder within the meaning of Section 15 of the Securities Act and such Persons officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, and each underwriter (as defined in the Securities Act) thereof, if any, and each Person who controls any such underwriter within the meaning of Section 15 of the Securities Act (collectively, the Company Indemnified Parties), from and against any and all expenses, claims, losses, damages, costs (including costs of preparation and reasonable attorneys fees and any legal or other fees or expenses actually incurred by such party in connection with any investigation or proceeding), judgments, fines, penalties, charges, amounts paid in settlement and other liabilities, joint or several, (or actions in respect thereof) (collectively, Losses) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, issuer free writing prospectus (as such term is defined in Rule 433 under the Securities Act), in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, any other applicable securities laws or any rules or regulations thereunder applicable to the Company and (without limiting the preceding portions of this Section 3.1), the Company will reimburse each of the Company Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.1, settling any such Losses or action, as such expenses are incurred; provided that the Companys indemnification obligations shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable to a Holder in any such case for any such Losses or action to the extent that it arises out of or is based upon a violation or alleged violation of any state or federal law (including any claim arising out of or based on any untrue statement or alleged untrue statement or omission or alleged omission in the registration statement or prospectus) which occurs in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives expressly for use in connection with such registration by or on behalf of any Holder.
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Section 3.2 Indemnification by Holders. To the extent permitted by applicable law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which registration or qualification or compliance under applicable blue sky laws is being effected, indemnify, severally and not jointly with any other holders of Registrable Securities, the Company, each of its officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, each Person who controls the Company within the meaning of Section 15 of the Securities Act (collectively, the Holder Indemnified Parties), against all Losses (or actions in respect thereof) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular, issuer free writing prospectus or other document, in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse each of the Holder Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.2, settling any such Losses or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, issuer free writing prospectus or other document in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives and stated to be specifically for use therein; provided, however, that, except for liability for fraud or willful misrepresentation, in no event shall any indemnity under this Section 3.2 payable by the Holder exceed an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement. The indemnity agreement contained in this Section 3.2 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the prior written consent of the applicable Holder (which consent shall not be unreasonably withheld or delayed).
Section 3.3 Notification. If any Person shall be entitled to indemnification under this ARTICLE III (each, an Indemnified Party), such Indemnified Party shall give prompt written notice to the party required to provide indemnification (each, an Indemnifying Party) of any claim or of the commencement of any proceeding as to which indemnity is sought. The Indemnifying Party shall have the right, exercisable by giving written notice to the Indemnified Party as promptly as reasonably practicable after the receipt of written notice from such Indemnified Party of such claim or proceeding, to assume, at the Indemnifying Partys expense, the defense of any such claim or litigation, with counsel reasonably satisfactory to the Indemnified Party and, after notice from the Indemnifying Party to such Indemnified Party of its election to assume the defense thereof, the Indemnifying Party will not (so long as it shall continue to have the right to defend, contest, litigate and settle the matter in question in accordance with this paragraph) be liable to such Indemnified Party hereunder for any legal expenses and other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or litigation, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the Indemnifying Party shall have failed within a reasonable period of time to assume such defense and the Indemnified Party is or would reasonably be expected to be materially prejudiced by such delay. The failure of any Indemnified Party to give notice as provided herein shall relieve an Indemnifying Party of its obligations under this ARTICLE III only to the extent that the failure to give such notice is materially prejudicial or harmful to such Indemnifying Partys ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the prior written consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this ARTICLE III shall not apply to amounts paid in settlement of any claim, loss, damage, liability or action if such settlement is effected without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. The indemnification set forth in this ARTICLE III shall be in addition to any other indemnification rights or agreements that an Indemnified Party may have. An Indemnifying Party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such Indemnifying Party with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim.
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Section 3.4 Contribution. If the indemnification provided for in this ARTICLE III is held by a court of competent jurisdiction to be unavailable to an Indemnified Party, other than pursuant to its terms, with respect to any Losses or action referred to therein, then, subject to the limitations contained in this ARTICLE III, 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 Losses or action in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other, in connection with the actions, statements or omissions that resulted in such Losses or action, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by such Indemnifying Party or such Indemnified Party, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.4 was determined solely upon pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentence of this Section 3.4. Notwithstanding the foregoing, the amount each Holder will be obligated to contribute pursuant to this Section 3.4 will be limited to an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement which gives rise to such obligation to contribute. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE IV
TRANSFER AND TERMINATION OF REGISTRATION RIGHTS
Section 4.1 Transfer of Registration Rights. Any rights of a Holder under this Agreement, including any right to cause the Company to register securities granted to a Holder under this Agreement, may be transferred or assigned by such Holder to another Person without the consent of any other Person in connection with a transfer of any Registrable Securities to such Person in a Transfer permitted by the Purchase Agreement and the terms of the Convertible Notes; provided, however, that (i) prior written notice of such assignment of rights is given to the Company and (ii) such Holder agrees in writing to be bound by, and subject to, this Agreement pursuant to a joinder agreement in the form attached hereto as Exhibit B.
Section 4.2 Termination of Registration Rights. The rights of any particular Holder to cause the Company to register securities under ARTICLE I shall terminate with respect to such Holder upon the earlier of (i) the termination, liquidation, dissolution of the Company, or (ii) when such Holder no longer holds any Registrable Securities; provided, however, that such rights shall not terminate before the first anniversary of the date hereof.
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ARTICLE V
MISCELLANEOUS
Section 5.1 Amendments and Waivers. Subject to compliance with applicable law, this Agreement may be amended or supplemented in any and all respects by written agreement of the Company and the Purchaser or if the Purchaser is no longer a Holder, by Holders holding a majority of the Registrable Securities.
Section 5.2 No Registration Rights to Third Parties. Without the prior written consent of the Holders of at least sixty percent (60%) of the number of Registrable Securities then outstanding, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any Person any registration rights of any kind (whether similar to the demand, piggyback or Form F-3 or Form S-3 registration rights described in this Agreement, or otherwise) relating to any securities of the Company which are senior to those granted to the holders of Registrable Securities. In any event, if the Company grants to any holder of the Companys security any registration right of any nature that are superior to the Holders, as determined in good faith by the Board, the Company shall grant such superior registration right to the Holders as well.
Section 5.3 Extension of Time, Waiver, Etc. The parties hereto may, subject to applicable law, (a) extend the time for the performance of any of the obligations or acts of the other party or (b) waive compliance by the other party with any of the agreements contained herein applicable to such party or, except as otherwise provided herein, waive any of such partys conditions. Notwithstanding the foregoing, no failure or delay by the parties hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 5.4 Assignment. Except as provided in Section 4.1, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties hereto without the prior written consent of the other party hereto.
Section 5.5 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
Section 5.6 Entire Agreement; No Third Party Beneficiary. This Agreement constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties and their affiliates, or any of them, with respect to the subject matter hereof and thereof. No provision of this Agreement shall confer upon any Person other than the parties hereto and their permitted assigns any rights or remedies hereunder.
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Section 5.7 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles.
(b) Any disputes, actions and proceedings against any party hereto or arising out of or in any way relating to this Agreement shall be submitted to the Hong Kong International Arbitration Centre (HKIAC) and resolved in accordance with the Arbitration Rules of HKIAC in force at the relevant time and as may be amended by this Section 5.7(b) (the Rules). The place of arbitration shall be Hong Kong. The official language of the arbitration shall be English and the tribunal shall consist of three arbitrators (each, an Arbitrator). The claimant(s), irrespective of number, shall nominate jointly one Arbitrator; the respondent(s), irrespective of number, shall nominate jointly one Arbitrator; and a third Arbitrator will be nominated jointly by the first two Arbitrators and shall serve as chairman of the arbitration tribunal. In the event the claimant(s) or respondent(s) or the first two Arbitrators shall fail to nominate or agree the joint nomination of an Arbitrator or the third Arbitrator within the time limits specified by the Rules, such Arbitrator shall be appointed promptly by the HKIAC. The arbitration tribunal shall have no authority to award punitive or other punitive-type damages. The award of the arbitration tribunal shall be final and binding upon the disputing parties. Any party to an award may apply to any court of competent jurisdiction for enforcement of such award and, for purposes of the enforcement of such award, the parties hereto irrevocably and unconditionally submit to the jurisdiction of any court of competent jurisdiction and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum.
(c) Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 5.9. Nothing in this Agreement will affect the right of any party to serve process in any other manner permitted by law.
Section 5.8 Specific Enforcement. The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to enforce specifically the terms and provisions hereof in the courts described in Section 5.7 without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of this Agreement and without that right, neither the Company nor the Purchaser would have entered into this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, and agree not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 5.7 shall not be required to provide any bond or other security in connection with any such order or injunction.
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Section 5.9 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
(a) If to the Company, to it at:
Puxin Limited
5/F, building 4, Dingjun building
75 Suzhou Street, Haidian District
Beijing 100080
Peoples Republic of China
E-mail: wangpeng6@pxjy.com
Attn: Mr. Peng Wang
(b) If to the Holders at:
[●]
with a copy (which shall not constitute notice) to:
[●]
or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 5.10 Severability. If any term, condition or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term, condition or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law.
Section 5.11 Expenses. Except as provided in Section 2.1, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written.
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EXHIBIT A
DEFINED TERMS
1. The following capitalized terms have the meanings indicated:
Business Day means any day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized or required by law to be closed.
Ordinary Shares mean the ordinary shares of the Company, with a par value of $0.00005 each.
Exchange Act means the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
FINRA means the Financial Industry Regulatory Authority, Inc.
Form F-3 or Form S-3 means such respective form of registration statement under the Securities Act (including Form S-3 or Form F-3, as appropriate) or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or any other entity, including a governmental authority.
register, registered and registration refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement or the automatic effectiveness of such registration statement, as applicable.
Registration Expenses means all expenses incurred by the Company in complying with Section 1.1, Section 1.2 and Section 1.3 hereof, including, without limitation, (i) SEC, stock exchange and FINRA registration and filing fees, (ii) all fees and expenses incurred in complying with securities or blue sky laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with blue sky qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and expenses of counsel to the Company and of its independent public accountants and any other accounting fees, charges and expenses incurred by the Company (including any expenses arising from any cold comfort letters or any special audits incident to or required by any registration or qualification), and (v) any liability insurance or other premiums for insurance obtained in connection with Section 1.1, Section 1.2 and Section 1.3 hereof, regardless of whether any registration statement is declared effective.
registration statements means, as the context requires, a Form F-3 or S-3 or a registration statement on Form F-1 or S-1 under the Securities Act (or any successor registration form under the Securities Act subsequently adopted by the SEC available to an issuer if a Form F-3 or S-3 is not available to such issuer).
Registrable Securities means, as of any date of determination, any Ordinary Shares owned by any Holder, including Ordinary Shares issued or issuable upon the conversion of the Convertible Notes, and Ordinary Shares issued or issuable in respect of such Ordinary Shares upon any share split, share dividend, share combination or consolidation, recapitalization, reclassification or other similar event in relation to the Ordinary Shares (including, in each case, as long as the ADSs remain listed on a national recognized securities market, Ordinary Shares in the form of ADSs (it being understood that while any offers and sales made under a registration statement contemplated by this Agreement will be of ADSs, the securities to be registered by any such registration statement under the Securities Act are Ordinary Shares, and the ADSs are registered under a separate Form F-6)). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) such securities are sold or otherwise transferred pursuant to an effective registration statement under the Securities Act, (ii) such securities shall have ceased to be outstanding, (iii) such securities have been transferred in a transaction in which the Holders rights under this Agreement are not assigned to the transferee of the securities, (iv) such securities are sold in a brokers transaction under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or (v) the stock certificates or evidences of book-entry registration relating to such securities have had all restrictive legends removed.
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number of shares of Registrable Securities then outstanding means the number of Ordinary Shares that are Registrable Securities and are then issued and outstanding or would be outstanding assuming full conversion of the Convertible Notes then outstanding.
Rule 144 means Rule 144 promulgated under the Securities Act and any successor provision.
Rule 462(e) means Rule 462(e) promulgated under the Securities Act and any successor provision.
Selling Expenses means all underwriting discounts and commissions payable to underwriters applicable to the sale of Registrable Securities pursuant to Section 1.1, Section 1.2 or Section 1.3 hereof.
SEC means the U.S. Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
Shelf Registration Statement means the Resale Shelf Registration Statement or a Subsequent Shelf Registration Statement, as applicable.
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2. The following terms are defined in the Sections of the Agreement indicated:
INDEX OF TERMS
Term |
Section |
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ADS | Recitals | |
Agreement | Preamble | |
Arbitrator | Section 5.7(b) | |
Company | Preamble | |
Company Indemnified Parties | Section 3.1 | |
Convertible Notes | Recitals | |
Convertible Note Purchase Agreements | Recitals | |
Convertible Notes Registration Rights | Recitals | |
Effectiveness Period | Section 1.4(b) | |
HKIAC | Section 5.7(b) | |
Holder Indemnified Parties | Section 3.2 | |
Indemnified Party | Section 3.3 | |
Indemnifying Party | Section 3.3 | |
Initiating Holder | Section 1.1(a) | |
Inspector(s) | Section 2.2(h) | |
Losses | Section 3.1 | |
Purchaser | Preamble | |
Records | Section 2.2(h) | |
Request Notice | Section 1.2(a) | |
Resale Shelf Registration Statement | Section 1.4(a) | |
Rules | Section 5.7(b) | |
Subsequent Holder Notice | Section 1.4(e) | |
Subsequent Shelf Registration Statement | Section 1.4(c) |
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
JOINDER
The undersigned is executing and delivering this Joinder pursuant to the Registration Rights Agreement dated as of [●], 2021 (as the same may hereafter be amended, the Registration Rights Agreement), among PUXIN LIMITED, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company) and SERENTIY INVESTMENT MASTER FUND LIMITED. Capitalized terms used herein but not defined shall have the meanings given to them in the Registration Rights Agreement.
By executing and delivering this Joinder to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of the Registration Rights Agreement as a holder of Registrable Securities in the same manner as if the undersigned were an original signatory to the Registration Rights Agreement.
Accordingly, the undersigned has executed and delivered this Joinder as of the day of , .
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Exhibit 4.20
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Convertible Note Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, this Agreement) is made as of March 18, 2021, by and between (A) Puxin Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company); and (B) Shine Honour Opportunity VI Limited, a company organized under the laws of the British Virgin Islands, or its designated Affiliate (designated by Shine Honour Opportunity VI Limited in writing no later than two Business Days prior to the Closing Date) (the Purchaser). The Company and the Purchaser are hereinafter referred to individually as a Party and collectively as the Parties.
RECITALS
WHEREAS, on February 25, 2021, the Company entered into a convertible note purchase agreement and related documents with a group of institutional investors, pursuant to which the Company would issue and sell convertible notes in an aggregate principal amount of US$69,000,000 (the Other CBs) through a private placement to such investors.
WHEREAS, the Purchaser desires to purchase from the Company, and the Company desires to issue to the Purchaser, (a) one or more convertible promissory notes substantially in the form attached hereto as Exhibit A (each a Note), upon and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1 Definitions. As used herein, the following terms shall have the meanings set forth below:
ADR means American Depositary Receipt representing the ADSs.
ADS means American Depositary Shares, each representing two Ordinary Shares as of the date hereof.
Affiliate means, with respect to any specified Person, any other Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with, such specified Person.
Agreement shall have the meaning specified in the preamble.
Anti-Corruption Laws shall have the meaning specified in Section 4.22.
Anti-Money Laundering Laws shall have the meaning specified in Section 4.24.
Business Day means any day that is not a Saturday, a Sunday or another day on which banks are required or authorized by laws to be closed in New York City.
Closing shall have the meaning specified in Section 2.2.
Closing Date means the date on which the Closing occurs.
Company shall have the meaning specified in the preamble.
Company Reports shall have the meaning specified in Section 4.1.
Contract means any agreement, contract, lease, indenture, instrument, note, debenture, bond, mortgage or deed of trust or other agreement, commitment, arrangement or understanding.
Control (including the terms Controlled by and under common Control with) means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
Conversion Securities shall have the meaning specified in Section 4.4.
Deloitte shall have the meaning specified in Section 4.9.
Deposit Agreement means the Deposit Agreement dated as of June 14, 2018 among the Company, Deutsche Bank Trust Company Americas, as depositary, and the owners and holders from time to time of the ADSs issued thereunder, as it may be amended, restated, supplemented or otherwise modified from time to time.
Depositary means Deutsche Bank Trust Company Americas, as depositary under the Deposit Agreement.
Dispute shall have the meaning specified in Section 8.5.
Encumbrance means any security interest, pledge, mortgage, lien, charge, claim, hypothecation, title defect, right of first option or refusal, right of pre-emption, third-party right or interests, put or call right, adverse claim of ownership or use, or other encumbrance of any kind, other than encumbrances created by virtue of the transactions contemplated by any Transaction Document.
Enforceability Exceptions shall have the meaning specified in Section 3.2.
Environmental Laws shall have the meaning specified in Section 4.20.
Evaluation Date shall have the meaning specified in Section 4.25.
Exchange Act means the United States Securities Exchange Act of 1934, as amended.
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Financial Statements shall have the meaning specified in Section 4.10.
Fundamental Representations shall have the meaning specified in Section 8.1.
Indemnified Liabilities shall have the meaning specified in Section 8.2(a).
Indemnitees shall have the meaning specified in Section 8.2(a).
Indemnitor shall have the meaning specified in Section 8.2(a).
Intellectual Property Rights shall have the meaning specified in Section 4.21.
Issue Price shall have the meaning specified in Section 2.1.
Knowledge shall have the meaning specified in Section 4.12.
Material Adverse Effect shall have the meaning specified in Section 4.2.
Material Contract shall have the meaning specified in Section 4.14.
Material Permits shall have the meaning specified in Section 4.13.
Memorandum and Articles means the Amended and Restated Memorandum and Articles of Association of the Company in effect from time to time.
Note shall have the meaning specified in the recitals.
OFAC shall have the meaning specified in Section 4.23.
Ordinary Shares means the ordinary shares, par value US$0.00005 per share, of the Company.
Other CB Documents means all documents and instruments entered into or delivered in connection with the issuance of the Other CBs, which are the convertible note purchase agreement, the convertible promissory note and the registration rights agreement in respect thereof.
Other CBs shall have the meaning specified in the recitals.
Parties shall have the meaning specified in the preamble.
Person means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability company, organization or entity (including any governmental entity).
PFIC shall have the meaning specified in Section 4.34.
PRC means the Peoples Republic of China, excluding, for the purposes of this Agreement only, Hong Kong, Macau and Taiwan.
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Principal Business means the provision of K-12 after-school tutoring services in the PRC.
Purchaser shall have the meaning specified in the preamble.
Registration Rights Agreement means the Registration Rights Agreement to be entered into by and between the Company and the Purchaser, substantially in the form attached hereto as Exhibit B.
Restricted Shares means any ordinary shares or other equity securities of the Company issued to (a) any eligible senior management employee, including without limitation any director, executive, officer and employee, whether full time or part time, employed by the Company or its Subsidiaries; (b) any eligible consultant to the Company or its Subsidiaries that is employed by the Company and/or its Subsidiaries (excluding the Company and its Subsidiaries), or (c) any eligible Person who contributes to the development of the Company and its Subsidiaries as from time to time approved by the Companys board of directors pursuant to the Share Incentive Plans and subject to a vesting schedule thereof.
SAFE Rules and Regulations means collectively, the Circular 37 and any other applicable SAFE rules and regulations, as amended.
Sanctions shall have the meaning specified in Section 4.23.
SEC means the U.S. Securities and Exchange Commission.
Securities means any Ordinary Shares (including in the form of ADSs) or any equity interest in, or shares of any class in the share capital (ordinary, preferred or otherwise) of, the Company, or any securities convertible, exercisable or exchangeable for or deriving from any Ordinary Shares or such equity interest or shares of any class in the share capital of the Company, or any rights to participate in the profits of the Company, or any options, warrants or rights to acquire any of the above.
Securities Act means the United States Securities Act of 1933, as amended.
Share Incentive Plans means the 2018 Great Talent Share Incentive Plan, 2018 Grand Talent Share Incentive Plan and the 2019 Noble Talent Share Incentive Plan, in each case adopted by the Company.
Subsidiary means, with respect to any specified Person, any other Person that is Controlled by such specified Person and, for the avoidance of doubt, the Subsidiaries of any specified Person shall include any other Person over which such specified Person or any of its Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such specified Person in accordance with the accounting standards applicable to such specified Person. For purposes of this Agreement, Subsidiaries of the Company include each Person that is a significant subsidiary of the Company as defined in and determined pursuant to Rule 1-02(w) of Regulation S-X under the Exchange Act.
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Transaction Documents means this Agreement, the Notes, the Registration Rights Agreement, and each of the other agreements and documents entered into or delivered thereunder or in connection with therewith.
U.S. GAAP shall have the meaning specified in Section 4.10.
Voting Company Debt shall have the meaning specified in Section 4.5.
Section 1.2 Interpretation. The headings contained in this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement. In this Agreement, except as otherwise provided:
(a) the terms include, includes and including shall be deemed to be followed by the words without limitation;
(b) where a reference is made herein to an Article, Section, Exhibit or Schedule, such reference is to an Article, Section, Exhibit or Schedule of this Agreement;
(c) the words hereof, herein and hereunder and words of similar import refer to this Agreement as a whole;
(d) any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders;
(e) references to a Person are also to its successors and permitted assigns; and
(f) references to any legislation or to any provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued or related to such legislation.
ARTICLE II
PURCHASE AND ISSUANCE OF THE NOTES
Section 2.1 Issuance of the Notes. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to the Purchaser, and the Purchaser shall subscribe for and purchase from the Company, one or more Notes with an aggregate principal amount of US$20,000,000, in each case at the issue price of 100% of the principal amount of such Notes (the Issue Price).
Section 2.2 Closing.
(a) The closing of the transactions contemplated in Section 2.1 (the Closing) shall take place remotely via the exchange of documents and signatures or at such places as the Parties mutually agree in writing, as soon as practicable but in no event later than (i) the third Business Day following the satisfaction or waiver of the conditions to the Closing set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or (ii) such other date and time as may be mutually agreed in writing by the Company and the Purchaser.
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(b) At the Closing, the Purchaser shall:
(i) pay the Issue Price in U.S. dollars by wire transfer of immediately available funds to a bank account designated in writing by the Company at least three (3) Business Days prior to the Closing Date; and
(ii) deliver to the Company the Registration Rights Agreement duly executed by the Purchaser.
(c) At the Closing, the Company shall deliver to the Purchaser:
(i) the Note(s), duly executed by the Company, with an aggregate principal amount of US$20,000,000 dated as of the Closing Date and registered in the name of the Purchaser;
(ii) a copy of the resolutions of the board of directors of the Company approving the entry into and execution of the Transaction Documents and the consummation of all transactions contemplated therein, including the issuance of the Notes;
(iii) a certificate of good standing in respect of the Company issued by the Registrar of Companies in the Cayman Islands, dated within 30 days before the Closing; and
(iv) the Registration Rights Agreement duly executed by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby makes the following representations and warranties to the Company, in each case as of the date hereof and as of the Closing Date:
Section 3.1 Organization. The Purchaser is duly organized, validly existing and in good standing under the laws of the British Virgin Islands.
Section 3.2 Authorization; Enforcement; Validity. The Purchaser has the power, authority and capacity to execute this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereunder. This Agreement has been duly authorized, executed and delivered by the Purchaser, and (assuming the due authorization, execution and delivery by the Company) constitutes a legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, except that such enforcement may be subject to (a) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding at law or in equity (such qualifications in clauses (a) and (b) being the Enforceability Exceptions).
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Section 3.3 No Conflicts. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder (including execution of the Registration Rights Agreement) will not violate, conflict with, or result in a breach of or default under (i) the Purchasers organizational documents, (ii) any agreement or instrument to which the Purchaser is a party or by which the Purchaser or any of its assets are bound, or (iii) any laws, regulations or governmental or judicial decrees, injunctions or orders applicable to the Purchaser.
Section 3.4 Investor Status. The Purchaser is either an accredited investor within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act, or not a U.S. person within the meaning of Regulation S under the Securities Act.
Section 3.5 Restricted Notes and Shares. The Purchaser (a) acknowledges that (i) the issuance of the Note pursuant to this Agreement and the issuance of any Conversion Securities have not been registered under the Securities Act or any United States state securities laws, (ii) the Notes and the Conversion Securities are being offered and sold in reliance upon exemptions provided in the Securities Act for transactions not involving any public offering and, therefore, cannot be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from such registration is available, and (iii) the Notes and the Conversion Securities are restricted securities as that term is defined in Rule 144 promulgated under the Securities Act; and (b) is purchasing the Notes and the Conversion Securities for investment purposes only for the account of the Purchaser and not with any view toward a distribution thereof or with any intention of selling, distributing or otherwise disposing of the Notes or the Conversion Securities in a manner that would violate the registration requirements of the Securities Act.
Section 3.6 Legends. The Purchaser understands and agrees that any certificates, book-entry or ADRs representing the Notes and the Conversion Securities shall bear the restrictive legend set forth in Section 5.11.
Section 3.7 Adequate Information; No Reliance. The Purchaser acknowledges and agrees that (a) the Purchaser has had the opportunity to review the Companys filings and submissions with the SEC, including all information filed or furnished pursuant to the Exchange Act and all information incorporated into such filings and submissions; (b) the Purchaser has sufficient knowledge and expertise to make an investment decision with respect to the transactions contemplated hereby and is able to bear the economic risks of an investment in the Securities; (c) the Purchaser has had a full opportunity to speak directly with directors and officers of the Company and to ask questions concerning the Company and its business, operations, financial performance, financial condition and prospects, and has received such answers and obtained such information as it deems necessary; (d) the Purchaser has had the opportunity to consult with its accounting, tax, financial and legal advisors to be able to evaluate the risks involved in, and to make an informed investment decision with respect to, the transactions contemplated hereunder; and (e) the Purchaser is not relying, and has not relied, upon any statement, advice (whether accounting, tax, financial, legal or other), representation or warranty made by the Company or any of the Companys directors, officers, affiliates or representatives, except for (i) the publicly available filings and submissions made by the Company with the SEC and (ii) the representations and warranties made by the Company in the Transaction Documents.
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Section 3.8 No Public Market. The Purchaser understands that no public market exists for the Notes, and that there is no assurance that a public market will ever develop for the Notes.
Section 3.9 No General Solicitation or Advertising. The offer to issue the Notes to the Purchaser was directly communicated to the Purchaser, and at no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.
Section 3.10 Brokers Fees. There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on the Purchasers behalf who would be entitled to any fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to the Purchaser, in each case as of the date hereof and as of the Closing Date:
Section 4.1 Exchange Act Filings. The Company has filed or furnished, as applicable, on a timely basis all forms, statements, certifications, reports and documents required to be filed or furnished by it with the SEC under the Securities Act or the Exchange Act (all of the foregoing documents filed with or furnished to the SEC and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the Company Reports). The Company Reports, when they became effective or were filed with or furnished to the SEC, as the case may be, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations promulgated thereunder, and none of such documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed or furnished after the date hereof and on or prior to the Closing, when such documents become effective or are filed with the SEC, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the SEC promulgated thereunder and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comment letters received from the SEC or its staff.
Section 4.2 Organization and Qualification.
(a) Each of the Company and its Subsidiaries has been duly organized and is validly existing as a corporation or other legal entity in good standing (or the foreign equivalent thereof) under the laws of its jurisdiction of incorporation or organization.
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(b) Except as disclosed in the Company Reports, each of the Company and its Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction in which its ownership or lease of its properties or the conduct of its business requires such qualification and has all power and authority (corporate or other) necessary to own or hold its properties and to conduct the businesses in which each is engaged, except where the failure to so qualify or have such power or authority would not have and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on (i) the condition (financial or otherwise), operations, results of operations, assets, liabilities, or business of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents or to consummate any transactions contemplated hereby or thereby (any such effect as described in clause (i) or (ii), a Material Adverse Effect).
Section 4.3 Authorization; Enforcement; Validity.
(a) The Company has the full right, power and authority to enter into the Transaction Documents and to perform and discharge its obligations thereunder.
(b) The execution, delivery and performance by the Company of the Transaction Documents, including the issuance of the Notes and the Conversion Securities, have been duly authorized by all necessary corporate action on the part of the Company.
(c) This Agreement has been duly executed and delivered by the Company, and (assuming the due authorization, execution and delivery by the Purchaser) constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to the Enforceability Exceptions. The Registration Rights Agreement will be duly executed and delivered by the Company at Closing, and will (assuming the due authorization, execution and delivery by the Purchaser) constitute legal, valid and binding obligations of the Company, enforceable against it in accordance with its terms, subject to the Enforceability Exceptions.
Section 4.4 Valid Issuance.
(a) The Notes have been duly authorized and, when issued and delivered by the Company against payment therefor by the Purchaser in accordance with the terms hereof, will be duly executed and delivered, authenticated, validly issued, free and clear of any Encumbrance (except for restrictions on transfer under applicable securities laws), and will constitute valid and legally binding obligations of the Company, enforceable against it in accordance with their respective terms, subject to the Enforceability Exceptions.
(b) The Securities issuable upon conversion in whole or in part of the Notes (the Conversion Securities) have been duly authorized and validly reserved for issuance. When issued in compliance with the provisions of this Agreement, the Notes and the Memorandum and Articles, the Conversion Securities will be validly issued, fully paid and nonassessable, free and clear of any Encumbrance (except for restrictions on transfer under applicable securities laws), and the Purchaser will be entitled to the rights specified therein and in the Deposit Agreement.
(c) The Notes and the Conversion Securities will be issued in compliance with all U.S. securities laws and the securities laws of any other applicable jurisdiction.
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Section 4.5 Capitalization.
(a) The authorized share capital of the Company consists of 1,000,000,000 Ordinary Shares with a par value of US$0.00005 each. As of December 31, 2020, 174,453,992 Ordinary Shares were issued and outstanding. The Company has not issued any shares of capital stock between December 31, 2020 and the Closing Date, except as a result of the grant, vesting or exercise of equity awards in respect of not more than 22,422,584 Ordinary Shares in accordance with the Share Incentive Plans. All issued and outstanding shares of capital stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable, were issued in compliance with all applicable securities laws, and were not issued in violation of any preemptive right, resale right, right of first refusal or similar right.
(b) Except as set forth in the Company Reports with respect to share incentive awards that may be issued from time to time under the Companys Share Incentive Plans, the Company has no shares of capital stock reserved for issuance, with the exception of the shares authorized for issuance upon conversion of the Notes or the Other CBs.
(c) The Company has issued equity awards in respect of not more than 31,872,524 Ordinary Shares in accordance with the Share Incentive Plans. As of December 31, 2020, equity awards in respect of 9,449,940 Ordinary Shares had been exercised and converted into Ordinary Shares, and equity awards in respect of 22,422,584 Ordinary Shares were unexercised. Except for the Notes, the Other CBs and such equity awards, there are (i) no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, Securities having the right to vote) on any matters on which holders of the Ordinary Shares may vote (Voting Company Debt), (ii) no Securities, stock-based performance units, share appreciation rights or other rights, Contracts or undertakings of any kind to which the Company is a party or by which the Company is bound obligating the Company to issue, deliver or sell additional Securities or any Voting Company Debt, and (iii) no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any Securities, stock-based performance units, share appreciation rights or other rights.
Section 4.6 No Default, Termination or Lien. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and delivery of the Note by the Company, the issuance and delivery of all Conversion Securities in accordance with the terms of the Note, the consummation of the transactions contemplated hereby and thereby, and compliance by the Company with the terms of the Transaction Documents will not (with or without notice or lapse of time or both) conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default under, give rise to any right of termination or other right or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give rise to the creation or imposition of any lien, encumbrance, security interest, claim or charge upon any property or assets of the Company or any of its Subsidiaries pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the property or assets of the Company or any of its Subsidiaries is subject, nor will such actions result in any violation of the provisions of the organizational documents of the Company or any of its Subsidiaries or any law, statute, rule, regulation, judgment, order or decree of any court or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any of its Subsidiaries or any of their properties or assets.
Section 4.7 No Consents. No consent, approval, authorization or order of, or qualification with, any governmental body or agency or any other Person is required for the performance by the Company of its obligations under the Transaction Documents, except such as may be required by the New York Stock Exchange in connection with the offer and issuance of the Notes.
Section 4.8 Subsidiaries. The capital stock of each Subsidiary that meets the definition of a significant subsidiary in Rule 1-02(w) of Regulation S-X under the Exchange Act has been duly authorized and validly issued, is fully paid to the extent that is required by its charter documents and applicable laws and nonassessable and, except to the extent set forth in the Company Reports, is owned by the Company directly, free and clear of any Encumbrance.
Section 4.9 Independent Accountants. Deloitte Touche Tohmatsu Certified Public Accountants LLP (Deloitte), who has certified certain financial statements and related schedules included or incorporated by reference in the Company Reports, is an independent registered public accounting firm as required by the Securities Act and the Exchange Act and the rules and regulations thereunder and the Public Company Accounting Oversight Board (United States). Except as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, Deloitte has not been engaged by the Company to perform any prohibited activities (as defined in Section 10A of the Exchange Act).
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Section 4.10 Financial Statements. The financial statements of the Company, together with the related notes and schedules, included in the Company Reports (the Financial Statements) fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the respective dates thereof and the results of operations and cash flows of the Company and its consolidated Subsidiaries for the respective periods covered thereby, all in conformity with United States Generally Accepted Accounting Principles (U.S. GAAP) applied on a consistent basis throughout the entire period involved, except as otherwise disclosed in the Company Reports. The Financial Statements comply in all material respects with the Securities Act, the Exchange Act and the rules and regulations thereunder. No other financial statements or supporting schedules or exhibits are required to be filed with the SEC.
Section 4.11 No Material Adverse Change. There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its Subsidiaries, taken as a whole, from that set forth or contemplated in the Company Reports filed prior to the date hereof.
Section 4.12 Legal Proceedings. There are no legal or governmental proceedings, actions, suits or claims (a) pending or, to the Companys Knowledge, threatened to which the Company or any of its Subsidiaries is a party or to which any of the properties or assets of the Company or any of its Subsidiaries is subject, other than proceedings accurately described in all material respects in the Company Reports and proceedings that would not have and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (b) that are required to be described in the Company Reports and are not so described; and there are no statutes, regulations, contracts or other documents to which the Company or any of its Subsidiaries is subject or by which the Company or any of its Subsidiaries is bound that are required to be described in the Company Reports or to be filed as exhibits to the Company Reports that are not described therein or filed as required. Neither the Company nor any of its Subsidiaries, nor any director or officer thereof, is or has been the subject of any legal or governmental proceedings, actions, suits or claims of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. For purposes of this Agreement, Knowledge means the actual knowledge (after due inquiry) of the executive officers (as defined in Exchange Act Rule 3b-7) of the Company or any of its Subsidiaries, as applicable.
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Section 4.13 Regulatory Permits. The Company and each of its Subsidiaries have conducted their respective businesses in compliance with all applicable laws, except for noncompliance, if any, disclosed in the Company Reports filed prior to the date hereof or which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries possesses or has applied for all certificates, authorizations, licenses, franchises, permits, orders and approvals issued or granted by the appropriate governmental or regulatory authorities, agencies, courts, commissions or other entities, whether federal, state, local or foreign, or applicable self-regulatory organizations necessary to conduct its business as currently conducted, except (i) where the failure to possess such certificates, authorizations, licenses, franchises, permits, orders and approval, individually or in the aggregate, has not and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (Material Permits) and (ii) as accurately described in all material respects in the Company Reports, and neither the Company nor any of its Subsidiaries has received any written notice of proceedings relating to the revocation or material adverse modification of any such Material Permits (except as accurately described in all material respects in the Company Reports), and to the Companys Knowledge, there are no facts or circumstances that would give rise to the revocation, termination or material adverse modifications of any Material Permits.
Section 4.14 Material Contracts. Except for the Material Contracts, the Notes and the Other CBs, neither the Company nor any of its Subsidiaries is a party to any agreements, contracts or commitments that are material to the business, financial condition, assets or operations of the Company and its Subsidiaries or that would be required to be filed pursuant to Item 19 and the Instructions as to Exhibits of Form 20-F. Neither the Company nor any of its Subsidiaries is in material default under, or in material violation of, nor has received written notice of termination or default under any Material Contract. For purposes of this Agreement, Material Contract means any contract of the Company that was filed as an exhibit to the Company Reports pursuant to Item 19 and the Instructions as to Exhibits of Form 20-F.
Section 4.15 Investment Company Act. Neither the Company nor any of its Subsidiaries is or, after giving effect to the issuance and sale of the Notes and the application of the proceeds thereof, will become an investment company within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.
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Section 4.16 No Price Stabilization. Neither the Company, its Subsidiaries nor any of the Companys or its Subsidiaries officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which would in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.
Section 4.17 Title to Property. The Company and its Subsidiaries have good and marketable title to all real and personal property owned by them which is material to the business of the Company and its Subsidiaries, taken as a whole, in each case free and clear of any Encumbrance except such as are described in the Company Reports or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries; and any real property and buildings held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries, in each case except as described in the Company Reports.
Section 4.18 No Labor Disputes. No strike, labor dispute, slowdown or stoppage is pending or, to the Knowledge of the Company or the Subsidiaries, threatened against the Company or any of its Subsidiaries, except any labor dispute that would not have, individually or in the aggregate, a Material Adverse Effect, and no union representation dispute currently is existing concerning the employees of the Company or any of its Subsidiaries. To the Knowledge of the Company and its Subsidiaries, no union organizing activities are currently taking place concerning the employees of the Company or any of its Subsidiaries and there has been no violation of any United States federal, state, local or foreign law or collective bargaining agreement relating to discrimination in the hiring, promotion or pay of employees, any applicable wage or hour laws or retirement benefits, or any provision of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder concerning the employees of the Company or any of its Subsidiaries.
Section 4.19 Taxes. The Company (a) has filed all necessary national, regional, local and other tax returns (or timely filed applicable extensions therefore) that have been required to be filed, (b) is not in default or arrears in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any which the Company is contesting in good faith and for which adequate reserves have been provided and reflected in the financial statements included in the Company Reports, and (c) does not have any tax deficiency that has been or, to the Companys Knowledge, is reasonably likely to be asserted or threatened against it, except, in each case, for any failure to pay tax or file a tax return or any deficiencies that, individually or in the aggregate, would not have a Material Adverse Effect.
Section 4.20 Compliance with Environmental Laws. Except as disclosed in the Company Reports, neither the Company nor any of its Subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, Environmental Laws), or, to the Companys Knowledge, operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would or would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.
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Section 4.21 Intellectual Property Rights. The Company and its Subsidiaries own or possess, or have the right to use, adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, Intellectual Property Rights) necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights, except such as would not and would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
Section 4.22 Compliance with Anti-Corruption Laws. Neither the Company nor any of its Subsidiaries, nor any director or officer thereof nor, to the Companys Knowledge, any employee, agent, affiliate or representative of the Company or of any of its Subsidiaries, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment, giving or receipt of money, property, gifts or anything else of value, directly or indirectly, to any government official (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) to induce such government official to do or omit to do any act in violation of his or her lawful duties, influence official action or secure, obtain or retain business or any other improper advantage; (iii) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit; or (iv) will use, directly or indirectly, the proceeds of the sale of the Note in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, the Anti-Unfair Competition Law of the PRC, the Criminal Law of the PRC or any applicable anti-corruption laws (collectively, the Anti-Corruption Laws); and the Company and its Subsidiaries have conducted their businesses in compliance with Anti-Corruption Laws and have instituted, maintained and implemented, and will continue to maintain and implement, policies and procedures reasonably designed to promote and achieve compliance with such laws and with the representations and warranties contained herein.
Section 4.23 OFAC and Similar Laws. Neither the Company nor any of its Subsidiaries or, to the Companys Knowledge, any director, officer, agent, employee, affiliate or representative thereof, is the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasurys Office of Foreign Assets Control (OFAC), the United Nations Security Council, the European Union, Her Majestys Treasury or other relevant sanctions authority (collectively, Sanctions), nor is the Company or any of its Subsidiaries located, organized or resident in a country or territory that is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the issuance of the Note, or lend, contribute or otherwise make available such proceeds to any of its Subsidiaries, joint venture partners or other Person, to knowingly fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
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Section 4.24 Compliance with Anti-Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Anti-Money Laundering Law of the PRC, the Currency and Foreign Transactions Reporting Act of 1970, as amended, the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of all jurisdictions where the Company and its Subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the Anti-Money Laundering Laws), and no investigation, action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the Companys Knowledge, threatened.
Section 4.25 Disclosure Controls and Procedures. Except as disclosed in the Company Reports, the Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company, including any consolidated Subsidiaries, is made known to its chief executive officer and chief financial officer by others within those entities. The Companys certifying officers have evaluated the effectiveness of the Companys controls and procedures as of the end of the period covered by the most recently filed annual report under the Exchange Act (such date, the Evaluation Date). The Company presented in its most recently filed annual report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date and except as disclosed in the Company Reports, there have been no material changes in the Companys internal controls (as such term is defined in the rules of the SEC under the Exchange Act) or, to the Companys Knowledge, in other factors that could affect the Companys internal controls.
Section 4.26 Accounting Controls. The Company and its Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with managements general or specific authorization and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Since the end of the Companys most recent audited fiscal year, there has been (A) no material weakness in the Companys internal control over financial reporting (whether or not remediated) and (B) no change in the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
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Section 4.27 Absence of Material Changes. Since December 31, 2019, except as may be otherwise disclosed in such Company Reports, there has not been (a) any Material Adverse Effect, (b) any transaction which is material to the Company, (c) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company, which is material to the Company, (d) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, (e) any change in the capital stock (other than a change in the number of outstanding Ordinary Shares or ADSs due to grants of share under the Companys Share Incentive Plans existing on the date hereof or the issuance of shares upon the exercise of outstanding options or warrants), or (f) any issuance of options, warrants, convertible securities or other rights to purchase the capital share (other than grants of share options under the Companys Share Incentive Plans existing on the date hereof) of the Company.
Section 4.28 Brokers Fees. Neither the Company nor any of its Subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Purchaser for a brokerage commission, finders fee or like payment in connection with the offering and issuance of any Note or any transaction contemplated by the Transaction Documents.
Section 4.29 Listing and Maintenance Requirements. The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, as applicable. The ADSs are registered pursuant to Section 12(b) of the Exchange Act and are listed on the New York Stock Exchange, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the ADSs under the Exchange Act or delisting the ADSs from the New York Stock Exchange, nor has the Company received any notification that either the SEC or the New York Stock Exchange is contemplating terminating such registration or listing. The Conversion Securities will be duly authorized for listing on the New York Stock Exchange immediately upon their issuance.
Section 4.30 Sarbanes-Oxley Act. The Company is in compliance in all material respects with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated thereunder or implementing provisions thereof that are then in effect.
Section 4.31 New York Stock Exchange Approval Rules. No further approval of the shareholders of the Company under the rules and regulations of the New York Stock Exchange is required for the Company to issue and deliver the Note to Purchaser or the Conversion Securities upon conversion of the Note.
Section 4.32 Offering. Subject to the accuracy of the representations and warranties of the Purchaser in Article III, the offer, sale and issuance of the Notes are exempt from the registration requirements of the Securities Act. Without limiting the generality of the foregoing, neither the Company or any of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D promulgated under the Securities Act) in connection with the offering or issuance of any Note, including but not limited to the methods described in Rule 502(c) under the Securities Act.
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Section 4.33 No Integration. Neither the Company or any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, offered or sold or will, directly or indirectly, offer or sell any securities of the same or similar class as the Note, or take any other action, so as to cause the offer and issuance of the Note to fail to be entitled to the exemption from registration requirements of the Securities Act.
Section 4.34 PFIC Status. Each of the Company and its Subsidiaries was not a passive foreign investment company (PFIC) within the meaning of Section 1297 of the United States Internal Revenue Code of 1986, as amended, as of the end of its most recent taxable year and, based on the expected composition of its income and the value of its assets, does not expect to be a PFIC for the current taxable year.
Section 4.35 No Transaction or Other Taxes. No transaction, stamp, capital or other documentary, issuance, registration, transaction, transfer, withholding or other similar taxes or duties are payable by or on behalf of the Purchaser to the government of the PRC, Hong Kong or Cayman Islands or any political subdivision or taxing authority thereof in connection with the execution, delivery or performance of this Agreement, the Registration Rights Agreement or the Note.
Section 4.36 Absence of Accounting Issues. The Company has not received any notice, oral or written, from the board of directors stating that it is reviewing or investigating, and neither the Companys independent auditors nor its internal auditors have recommended that the board of directors review or investigate, (i) adding to, deleting, changing the application of, or changing the Companys disclosure with respect to any of the Companys material accounting policies; or (ii) any matter which could result in a restatement of the Companys financial statements for any annual or interim period during the current or prior two fiscal years.
Section 4.37 Payment of Dividends. All Conversion Securities shall be entitled to rights to participate in all dividends and other distributions the record dates of which fall after the date such Conversion Securities are issued.
Section 4.38 Foreign Private Issuer. The Company is a foreign private issuer within the meaning of Rule 405 under the Securities Act.
Section 4.39 No Immunity. Neither the Company or any of its Subsidiaries, nor any of their respective properties, assets or revenues, has any right of immunity, under the laws of the Cayman Islands, Hong Kong, the PRC, the State of New York or the United States, from any legal action, suit or proceeding, the giving of any relief in any such legal action, suit or proceeding, set-off or counterclaim, the jurisdiction of any Cayman Islands, Hong Kong, PRC, the State of New York or United States federal court, service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Agreement, the Note, the Registration Rights Agreement or the Deposit Agreement; and, to the extent that the Company, any of its Subsidiaries or any of their respective properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings may at any time be commenced, each of the Company and its Subsidiaries waives or will waive such right to the extent permitted by law.
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Section 4.40 No Undisclosed Liabilities. The Company and its Subsidiaries do not have any liabilities or obligations other than those (i) reflected on, reserved against, or disclosed in the Financial Statements or in the notes thereto, (ii) incurred in the ordinary course of business, (iii) that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, or (iv) arising under the Transaction Documents. There are no unconsolidated Subsidiaries of the Company or any off-balance sheet arrangements of any type that have not been so described in the Company Reports or the Financial Statements nor any obligations to enter into any such arrangements.
Section 4.41 Information. The information, documents, and materials provided by the Company and its representatives to the Purchaser or its Affiliates on or before the date of this Agreement in connection with the Purchaser or its Affiliates due diligence and the preparation and negotiation of the Transaction Documents, including any financial statements and financial information, and the Other CB Documents, are true, accurate and not misleading in all material respects. The Purchaser acknowledges that neither the Company nor any of its officers, directors or representatives is making any representation or warranty with respect to any projections or forecasts, including the reasonableness of the assumptions underlying such projections or forecasts, provided by the Company or any of its officers, directors or representatives to the Purchaser.
ARTICLE V
OTHER AGREEMENTS
Section 5.1 Depositary. As more fully described in the Notes, upon conversion of all or any portion of a Note in accordance with the terms thereof, the Company shall cause the Depositary to promptly deliver Conversion Securities to the relevant Note holder in accordance with the provisions of the Deposit Agreement, provided that the Purchaser shall reasonably cooperate with the Company and the Depositary in connection therewith.
Section 5.2 Supplemental Listing Application. On the date of this Agreement, the Company shall file a supplemental listing application with the New York Stock Exchange reflecting the transactions contemplated by the Transaction Documents.
Section 5.3 Listing of Shares; Certificates. The Company covenants that all Conversion Securities shall, at all times that any Note is convertible, be duly approved for listing subject to official notice of issuance on the New York Stock Exchange. The Company covenants that the certificates, if any, representing the ADRs to be issued to evidence any Conversion Securities issued upon conversion of Notes shall comply with applicable law.
Section 5.4 SAFE Rules and Regulations. To the extent practicable, the Company shall, on a continuous basis, use its reasonable efforts to cause each of the Companys direct or indirect shareholders who are a domestic resident (as defined in Circular 37), and cause one of its Subsidiaries in the PRC to work with each of the participants of the Share Incentive Plans, who is a domestic resident (as defined in Circular 7) and directly or indirectly holds Restricted Shares of the Company, who is a domestic resident (as defined in Circular 7), to duly complete, obtain and keep current the foreign exchange registrations with the competent local branch of the SAFE in accordance with the requirements of the SAFE Rules and Regulations.
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Section 5.5 Confidentiality. Each Party agrees not to disclose the other Partys identity and not to permit such disclosure by any of its Subsidiaries and affiliates unless such disclosure is required, in the good faith determination by qualified legal counsel, by applicable law or regulation (including any rules or regulations of any securities exchange). In the case that disclosure is so required, the Company will provide Purchaser with a draft of the proposed disclosure at least ten days prior to its release, publication or filing and will accept reasonable comments on such disclosure.
Section 5.6 Consent Rights. From and after the Closing Date, the Company shall not, without the prior written consent of the Purchaser, make any acquisition of or investment in any Person (whether for minority or majority stakes) or securities (whether listed or unlisted), any capital expenditure or any acquisition (whether through purchase, sale, spin-off, lease, merger, consolidation, share exchange, business combination or otherwise) that is not within the Principal Business with a value or payment exceeding RMB50,000,000 (in a single transaction or a series of related transactions).
Section 5.7 Most Favorable Terms and Treatment . For so long as the Purchaser (collectively with its Affiliates) beneficially owns 100% of the Note (including in the form of Conversion Securities):
(a) The Company shall not, without the prior written consent of the Purchaser, issue any Securities (excluding any options or equity awards under the share incentive plans adopted by the Company) (i) convertible, exercisable or exchangeable for or deriving from any equity interest in the Company, and (ii) entitled or subject to repayment, redemption or repurchase by the Company, if such Securities have a maturity date or final repayment, redemption or repurchase date (as applicable) that falls on or before the Maturity Date (as defined in the Note) or any date of early redemption or repurchase that falls on or before the Repurchase Date (as defined in the Note);
(b) if the Company shall offer or issue to any Person any Securities (i) convertible, exercisable or exchangeable for or deriving from any equity interest in the Company, and (ii) entitled or subject to repayment, redemption or repurchase by the Company, that are guaranteed by the Company or any of its Affiliates or secured by any mortgage, pledge, lien, charge or security interest on any assets or property of the Company or any of its Affiliates, the Parties shall take all necessary actions, including amending the terms and conditions of the Transaction Documents, to cause the Note to be so guaranteed or secured, unless otherwise waived by the Purchaser in writing; and
(c) if the Company shall offer or issue to any Person any Securities (i) convertible, exercisable or exchangeable for or deriving from any equity interest in the Company, and (ii) entitled or subject to repayment, redemption or repurchase by the Company, that rank senior or in priority to any Note in right of payment, the Parties shall take all necessary actions, including amending the terms and conditions of the Transaction Documents, to cause the Note to rank at least pari passu in right of payment with such Securities, unless otherwise waived by the Purchaser in writing.
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Section 5.8 Reservation of Shares. At any time when any portion of the Notes is outstanding, the Company shall maintain a reserve from its duly authorized but unissued shares, sufficient Ordinary Shares to enable the Company to comply with its obligations to issue the Conversion Securities upon the conversion of the Notes in accordance with the terms and conditions of the Notes.
Section 5.9 Pre-Closing Covenants. Except as contemplated under the Transaction Documents, from the date hereof until the Closing Date, the Company shall, and shall cause each of its Subsidiaries to (a) conduct its business and affairs in the ordinary course of business, and (b) not take any action, or omit to take any action, that would reasonably be expected to make (i) any of its representations and warranties in the Transaction Documents untrue as of the Closing Date, or (ii) any of the conditions precedent set forth in Sections 6.1 not to be satisfied on or prior to the Closing Date.
Section 5.10 Certain Actions. The Company and the Purchaser shall reasonably cooperate with each other and use (and shall cause their respective affiliates to use) reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement, applicable law and stock exchange listing standards to consummate the transactions contemplated by this Agreement as soon as practicable.
Section 5.11 Legends. To the extent reasonably necessary under applicable law, any certificate, book-entry or ADR representing Conversion Securities shall have endorsed until no longer required, to the extent appropriate, upon its face the following words:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM REGISTRATION UNDER SUCH ACT, OR APPLICABLE STATE SECURITIES LAW, RELATING TO THE DISPOSITION OF SECURITIES, INCLUDING RULE 144.
Section 5.12 Legend Removal. Upon the request of the Purchaser or any transferee or proposed transferee thereof, the Company shall instruct the Depositary to remove the legend contemplated by Section 5.11 (and shall revoke any related stop transfer or similar instructions to its registrar and transfer agent), if the Conversion Securities are covered by an effective registration statement under the Securities Act or if such person provides reasonable evidence to the effect that a sale, transfer or assignment of such Conversion Securities may be made without registration under the Securities Act or that such Conversion Securities are eligible for resale pursuant to Rule 144 under the Securities Act.
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to the Purchasers Obligations. The obligations of the Purchaser to consummate the transactions contemplated under this Agreement are subject to the satisfaction of the following conditions, any of which may be waived in writing by the Purchaser in its sole discretion:
(a) each of the representations and warranties of the Company contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;
(b) the Company shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing;
(c) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof;
(d) the issuance of the Other CBs shall have closed in accordance with the terms of the Other CB Documents;
(e) There shall not exist or have occurred any event, circumstance, development or change that, individually or in the aggregate, has or would reasonably be expected to have a Material Adverse Effect.
Section 6.2 Conditions to the Companys Obligations. The obligations of the Company to consummate the transactions contemplated under this Agreement are subject to the satisfaction of the following conditions, any of which may be waived in writing by the Company in its sole discretion:
(a) each of the representations and warranties of Purchaser contained in this Agreement shall be true and correct as of the Closing Date, with the same effect as though those representations and warranties had been made on and as of the Closing Date, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty need only be true and correct as of such date;
(b) Purchaser shall have duly performed and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or before the Closing; and
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(c) no court or other governmental or regulatory authorities, agencies, commissions or other entities, whether federal, state, local or foreign, shall have enacted, issued, promulgated, enforced or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement, and there shall not be pending by or before any such entity any suit, action or proceeding in respect thereof.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the transactions contemplated by this Agreement abandoned at any time prior to the Closing:
(a) by mutual written agreement of the Parties;
(b) by either Party if any law or final, non-appealable injunction or order shall have been enacted or issued which has the effect of prohibiting the transactions contemplated hereunder; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b) shall not be available to any Party if the issuance of such law, injunction or order was initiated by, or primarily due to a breach by, such Party of this Agreement;
(c) by either Party if the Closing shall not have occurred by June 30, 2021; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(c) shall not be available to any Party if the failure of the Closing to occur on or prior to such date was primarily due to a breach by such Party of this Agreement;
(d) by the Purchaser if there is a material breach by the Company of any of its representations, warranties, covenants, obligations or agreement hereunder that would give rise to failure of the conditions set forth in Section 6.1 to be satisfied; or
(e) by the Company if there is a material breach by the Purchaser of any of its representations, warranties, covenants, obligations or agreement hereunder that would give rise to failure of the conditions set forth in Section 6.2 to be satisfied.
Section 7.2 Effect of Termination. If this Agreement is terminated pursuant to Section 7.1, it shall become null and void and of no further force and effect, except that the provisions of this Section 7.2 and Article VIII shall remain in full force and effect; provided that nothing herein shall relieve any Party from liability for any breach of this Agreement that occurred prior to such termination.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival. Other than the representations and warranties set forth in Sections 3.1, 3.2, 4.2, 4.3, 4.4 and 4.5 (collectively, the Fundamental Representations), which shall survive the Closing indefinitely, the representations and warranties of the Parties set forth in Articles III and IV shall survive the Closing until the date that is eighteen (18) months after the Closing. All of the covenants, obligations and agreements of the Parties contained in this Agreement shall survive the Closing until fully performed in accordance with their terms.
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Section 8.2 Indemnification.
(a) From and after the Closing, each Party (the Indemnitor) shall indemnify, defend and hold harmless the other Party, its Affiliates and their respective officers, directors, employees and agents (collectively, the Indemnitees) from and against any and all suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith, including reasonable attorneys fees and disbursements (collectively, the Indemnified Liabilities), incurred by any Indemnitee as a result of or arising out of the breach by the Indemnitor of any of its representations, warranties, covenants, obligations or agreement contained in the Transaction Documents.
(b) No Indemnitee shall be entitled to recover from the Indemnitor more than once in respect of the same Indemnified Liabilities suffered.
(c) The maximum aggregate amount of Indemnified Liabilities that the Indemnitees will be entitled to recover, other than with respect to breaches of any Fundamental Representations, shall be limited to US$10,000,000. The maximum aggregate amount of Indemnified Liabilities that the Indemnitees will be entitled to recover for breaches of Fundamental Representations (inclusive and not in duplication of the amounts referred to in the preceding sentence) shall be limited to US$20,000,000.
Section 8.3 Costs and Expenses. The Company shall bear, pay and reimburse the Purchaser for all costs, fees and expenses incurred by the Purchaser in connection with the due diligence for the transactions thereunder, up to an amount of US$30,000.
Section 8.4 Entire Agreement. The Transaction Documents and all documents, instruments and certificates delivered in connection therewith constitute and contain the entire agreement and understanding of the Parties with respect to the subject matter thereof and supersede all prior and contemporaneous oral or written agreements, representations, warranties, contracts, correspondence, conversations, memoranda and understandings between or among the Parties or any of their agents, representatives or affiliates relative to such subject matter, including, without limitation, any term sheets, emails or draft documents.
Section 8.5 Governing Law; Arbitration. This Agreement shall in all respects be construed in accordance with and governed by Hong Kong laws, without reference to its choice of law rules. Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination (Dispute) shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the UNCITRAL Arbitration Rules then in force. In the case of any Dispute, there shall be three arbitrators. The claimant(s) shall have the right to appoint one arbitrator, the respondent(s) shall have the right to appoint another arbitrator, and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. The law of this arbitration clause shall be Hong Kong law. The seat of arbitration shall be Hong Kong. It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from courts of competent jurisdiction before the constitution of the arbitral tribunal.
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Section 8.6 Notices. All notices and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given: (a) upon receipt, when delivered personally; (b) one Business Day after deposit with an internationally recognized overnight courier service; or (c) when sent by confirmed electronic mail if sent during normal business hours of the recipient, or if not, then on the next Business Day, in each case properly addressed to the Party to receive the same. The addresses of the Parties for such communications are:
If to the Company:
Puxin Limited
5/F, Building 4, Dingjun Building
75 Suzhou Street, Haidian District
Beijing 100080
Peoples Republic of China
E-mail: wangpeng6@pxjy.com
Attn: Mr. Peng Wang
If to the Purchaser:
Shine Honour Opportunity VI Limited
Address: 33/F, Three Pacific Place
1 Queens Road East, Hong Kong
Email: jlewis@pagasia.com
Attention: Jon Lewis
with a copy (which shall not constitute notice) to:
Fenwick & West LLP
Address: Unit 908, Kerry Parkside Office
No. 1155 Fang Dian Road
Pudong, Shanghai 201204, China
Email: niping.wu@fenwick.com
Attention: Niping Wu
A Party may change or supplement the addresses given above by giving the other Party written notice thereof in the manner set forth above.
Section 8.7 Assignment. Neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any Party without the prior written consent of the other Party.
Section 8.8 No Third Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the Parties and their respective successors and permitted assigns. Except as expressly provided in this Agreement, nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever.
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Section 8.9 Specific Performance. The Parties acknowledge and agree that irreparable harm would occur for which money damages would not be an adequate remedy if any provision of this Agreement was not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that, in addition to any other remedies at law or in equity, each Party shall be entitled to injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement without posting any bond or other undertaking.
Section 8.10 Amendment; Waiver.
(a) This Agreement may be amended, modified or supplemented only by a written instrument duly executed by all the Parties.
(b) The observance of any provision in this Agreement may be waived only by the written consent of the Party against whom such waiver is to be effective. No failure or delay on the part of any Party to exercise any right hereunder shall operate as waiver thereof, nor shall any single or partial exercise by any Party of any right preclude any other or future exercise thereof or the exercise of any other right.
Section 8.11 Severability. If any provision of this Agreement is found to be invalid or unenforceable, then such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to provide for the consummation of the transactions contemplated hereby on substantially the same terms as originally set forth herein, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement, which shall remain in full force and effect unless the severed provision is essential to the rights or benefits intended by the Parties. In such event, the Parties shall use commercially reasonable efforts to negotiate, in good faith, a substitute, valid and enforceable provision or agreement, which most nearly effects the Parties intent in entering into this Agreement.
Section 8.12 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above.
PUXIN LIMITED | ||
By: |
/s/ Yunlong Sha |
|
Name: | Yunlong Sha | |
Title: | Chairman and Chief Executive Officer |
[Signature Page to Convertible Note Purchase Agreement]
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above.
SHINE HONOUR OPPORTUNITY VI LIMITED | ||
By: | /s/ JON ROBERT LEWIS | |
Name: | JON ROBERT LEWIS | |
Title: | Authorised Signatory |
[Signature Page to Convertible Note Purchase Agreement]
EXHIBIT A
FORM OF NOTE
A - 1
THE SECURITY REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT). ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
PUXIN LIMITED
CONVERTIBLE PROMISSORY NOTE
No. [●]
[●], 2021 US$[●]
Subject to the terms and conditions of this Convertible Promissory Note (this Note), Puxin Limited, a Cayman Islands exempted company with limited liability (the Company), for good and valuable consideration received, hereby promises to pay to the order of [●] (such person and any permitted transferee thereof, the Holder), the principal amount of US$[], together with interest thereon pursuant to the terms of this Note. This Note is being issued pursuant to a Convertible Note Purchase Agreement, dated as of March [●], 2021 (the Purchase Agreement), between the Company and [●]. The Purchase Agreement contains terms governing the rights of the Holder, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Unless otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement.
ARTICLE I
DEFINED TERMS
The terms defined in this Article I (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Note shall have the respective meanings specified in this Article I.
Additional Amounts shall have the meaning specified in Section 6.1(a).
ADS means American Depositary Shares, each representing two Ordinary Shares as of the date hereof.
Board of Directors shall have the meaning specified in Section 5.4(a).
Business Day means any day that is not a Saturday, a Sunday or another day on which banks are required or authorized by law to be closed in New York City.
close of business means 5:00 p.m. (New York City time).
Closing Sale Price of any securities on any date means the closing sale price per security (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the New York Stock Exchange (or the principal U.S. national or regional securities exchange on which such securities are traded). If such securities are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the Closing Sale Price shall be the last quoted bid price for such securities in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If such securities are not so quoted, the Closing Sale Price shall be the average of the midpoint of the last bid and ask prices for such securities on the relevant date from each of at least three nationally recognized independent investment banking firms reasonably selected by the Company for this purpose. If there is no bid price or no ask price for such securities on the relevant date, then the Closing Sale Price shall be the value per security of such securities as of the close of business on the relevant date as determined by a nationally recognized independent investment banking firm retained by the Company for such purpose as most accurately reflecting the per security price that a fully informed buyer, acting on its own accord, would pay to a fully informed seller, acting on its own accord in an arms-length transaction, for one such security. For so long as the Ordinary Shares are represented by ADSs, the Closing Sale Price of the Ordinary Shares on any date shall be the Closing Sale Price of the ADSs on that date, divided by the number of Ordinary Shares then represented by one ADS.
Company shall have the meaning specified in the preamble.
Conversion Date shall have the meaning specified in Section 5.2(b).
Conversion Rate shall have the meaning specified in Section 5.3.
Conversion Securities mean the Securities issuable upon conversion in whole or in part of the Note.
Default means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
Defaulted Amounts means any amounts on this Note (including principal, interest, any redemption or repurchase price) that are payable but are not punctually paid or duly provided for.
Deposit Agreement means Deposit Agreement dated as of June 14, 2018 among the Company, Deutsche Bank Trust Company Americas, as depositary, and the owners and holders from time to time of the ADSs issued thereunder, as it may be amended, restated, supplemented or otherwise modified from time to time.
Depositary means the depositary for the ADSs under the Deposit Agreement, being Deutsche Bank Trust Company Americas as of the date of this Note.
Dispute shall have the meaning specified in Section 9.2.
Distributed Assets shall have the meaning specified in Section 5.4(d).
Encumbrance means any security interest, pledge, mortgage, lien, charge, claim, hypothecation, title defect, right of first option or refusal, right of pre-emption, third-party right or interests, put or call right, adverse claim of ownership or use, or other encumbrance of any kind.
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Event of Default shall have the meaning specified in Section 4.1.
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Expiration Date shall have the meaning specified in Section 5.4(f).
Expiration Time shall have the meaning specified in Section 5.4(f).
Fundamental Change means the occurrence of any of the following:
(a) (A) a person or group within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Subsidiaries, the employee benefit plans of the Company and its Subsidiaries and any Permitted Holder, files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of the Companys ordinary share capital (including ordinary share capital held in the form of ADSs) representing more than 50% of the voting power of the Companys ordinary share capital, or (B) a person or group within the meaning of Section 13(d) of the Exchange Act files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct or indirect beneficial owner, as defined in Rule 13d-3 under the Exchange Act, of more than 50% of the Companys then outstanding Ordinary Shares (including Ordinary Shares held in the form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Ordinary Shares or the ADSs (other than changes resulting from a subdivision or combination) as a result of which the Ordinary Shares or the ADSs would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation, merger or scheme of arrangement of the Company or any similar transaction pursuant to which the Ordinary Shares or the ADSs will be converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Subsidiaries, taken as a whole, to any Person other than one of the Companys Subsidiaries; provided, however, that a transaction described in clause (B) in which the holders of all classes of the Companys ordinary share capital immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of ordinary share capital of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-à-vis each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or Ordinary Shares or other common equity then underlying the Note) cease to be listed or quoted on The New York Stock Exchange (or its successors); or
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(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official application thereof (a Change in Law) that results in (x) the Company and its Subsidiaries (collectively, the Company Group) (as in existence immediately subsequent to such Change in Law), as a whole, being legally prohibited from operating substantially all of the business operations conducted by the Company Group (as in existence immediately prior to such Change in Law) as of the last date of the period described in the Companys consolidated financial statements for the most recent fiscal quarter, or (y) the Company being unable to continue to derive substantially all of the economic benefits from the business operations conducted by the Company Group (as in existence immediately prior to such Change in Law) in the same manner as reflected in the Companys consolidated financial statements for the most recent fiscal quarter.
Fundamental Change Repurchase Notice shall have the meaning specified in Section 6.3(a).
Holder shall have the meaning specified in the preamble.
Interest Payment Date shall have the meaning specified in Section 2.1.
Make Whole Fundamental Change means the occurrence of any Fundamental Change contemplated by clauses (a), (b) (determined without regard to the proviso in clause (b)), (d), or (e) of the definition thereof.
Make Whole Fundamental Change Premium means the product of the then applicable Conversion Rate multiplied by 1.20.
Maturity Date shall have the meaning specified in Section 3.1.
Merger Event shall have the meaning specified in Section 5.5(a).
Note shall have the meaning specified in the preamble.
Ordinary Shares means the ordinary shares, par value US$0.00005 per share, of the Company.
Permitted Equity Awards means (a) options, restricted shares, restricted share units or other equity awards of the Company granted pursuant to the Share Incentive Plans, in an aggregate amount not to exceed 22,422,584 Ordinary Shares (directly or in the form of ADSs), or (b) options, restricted shares, restricted share units or other equity awards of the Company to be granted pursuant to any equity incentive plan of the Company after [●], being the second anniversary of the date of the issuance of the Note.
Permitted Holders means Mr. Yunlong Sha, together with any other respective person or group subject to aggregation of ordinary share capital of the Company (including ordinary share capital held in the form of ADSs) with Mr. Yunlong Sha under Section 13(d) of the Exchange Act.
Person means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization.
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PFIC shall have the meaning specified in Section 6.12.
Purchase Agreement shall have the meaning specified in the preamble.
Record Date means, with respect to any dividend, distribution or other transaction or event in which the holders of the Ordinary Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other property or in which the Ordinary Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
Reference Price shall have the meaning specified in Section 5.3.
Reference Property shall have the meaning specified in Section 5.5(a).
Related Business means the business of providing K-12 tutoring services, study-abroad test preparation services and study-abroad consulting services.
Relevant Securities shall have the meaning specified in Section 5.4(g).
Relevant Jurisdiction shall have the meaning specified in Section 6.1(a).
Relevant Taxing Jurisdiction shall have the meaning specified in Section 6.1(a).
Repurchase Date shall have the meaning specified in Section 6.6.
Securities means any Ordinary Shares (including in the form of ADSs) or any equity interest in, or shares of any class in the share capital (ordinary, preferred or otherwise) of, the Company, or any securities convertible, exercisable or exchangeable for or deriving from any Ordinary Shares or such equity interest or shares of any class in the share capital of the Company, or any rights to participate in the profits of the Company, or any options, warrants or rights to acquire any of the above.
Securities Act shall have the meaning specified in the legend above.
Spin-Off shall have the meaning specified in Section 5.4(d).
Spin-Off Valuation Period shall have the meaning specified in Section 5.4(d).
Successor Company shall have the meaning specified in Section 11.1(a).
Trigger Event shall have the meaning specified in Section 5.4(d).
Underlying Shares shall have the meaning specified in Section 5.2(b)(i).
US$ or $ refers to United States dollars, the lawful currency of the United States.
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ARTICLE II
PAYMENT OF INTEREST
Section 2.1 Interest Payments. Interest shall accrue on the principal amount of the Note (in each case computed on the basis of a 365/366-day year and the actual number of days elapsed in any year) at a simple rate equal to 3.00% per annum. The Company shall pay to the Holder all accrued interest in cash semiannually on each March [●] and September [●]1 of each year (each, an Interest Payment Date), commencing on September [●], 2021 and including the Maturity Date. Interest shall accrue on any principal payment due under this Note until such time as payment therefor is actually delivered to the Holder; provided that if any portion of the principal amount is duly converted into ADSs pursuant to and in accordance with the Note, interest shall cease to accrue on the portion of the principal amount being converted upon completion of such conversion in accordance with Section 5.2.
Section 2.2 Payment of Interest Upon Conversion. Accrued and unpaid interest that would have been payable on the next Interest Payment Date will not be payable with respect to any portion of the Note submitted for conversion prior to such Interest Payment Date except for (i) a Note submitted for conversion after [●] (the last Interest Payment Date prior to the Maturity Date); (ii) if a Fundamental Change has occurred and the Note is submitted for conversion prior to the last day that the Note may be submitted for repurchase pursuant to Section 6.3; or (iii) to the extent of any Defaulted Amount, if any Defaulted Amount exists at the time of conversion with respect to the Note.
ARTICLE III
PAYMENT OF PRINCIPAL ON NOTE
Section 3.1 Scheduled Payment. Unless converted, redeemed or repurchased in full in accordance with the terms of this Note, the principal amount (including any accrued and unpaid interest) of this Note shall be due and payable on [●]2 (the Maturity Date).
Section 3.2 Payment. All amounts payable on or in respect of this Note or the indebtedness evidenced hereby shall be paid to the account designated by the Holder in U.S. dollars, in immediately available funds on the date that any principal, interest or other payment is due and payable hereunder. If any such payment date falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day. The Company shall not have the right to pre-pay the outstanding principal of any Note without the prior written consent of the Holder.
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES ON DEFAULT
Section 4.1 Event of Default. An Event of Default shall exist if any of the following conditions or events shall occur, whatever the reason or cause for such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any governmental authority or otherwise:
1 |
Interest payment dates to be each anniversary date of Closing and each date that is six months thereafter. |
2 |
Insert the date that is the fifth anniversary of the date of the Note. |
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(a) the Company defaults in the payment of principal on the Note, or any redemption or repurchase price with respect to the Note, when the same becomes due and payable, whether at maturity or at a date fixed for payment or prepayment, or by declaration or otherwise;
(b) the Company defaults in the payment of interest on the Note when the same becomes due and payable, whether at maturity, on an Interest Payment Date or at a date fixed for payment or prepayment, or by declaration or otherwise, and such failure to pay is not cured within three (3) Business Days after the occurrence thereof;
(c) the Company fails to perform and comply with its obligation to convert all or a portion of the Note in accordance with Article V upon the exercise by the Holder of its conversion rights, and such failure continues for a period of five (5) Business Days;
(d) the Company fails to provide a notice of a Make Whole Fundamental Change in accordance with Section 6.2, or a notice of a Fundamental Change in accordance with Section 6.3, in each case when such notice is due, and such failure continues for a period of five (5) Business Days;
(e) the Company fails to comply with the provisions of Article XI;
(f) the Company fails to comply with any other provisions of this Note or any other Transaction Document, and such failure is not remedied within thirty (30) days after the Company receives written notice thereof from the Holder;
(g) the Company, any Subsidiary of the Company or any of their respective affiliates fails to pay principal, interest, repurchase or redemption price when due (whether at stated maturity or otherwise) or an uncured default exists that results in the acceleration of maturity of any indebtedness for borrowed money of the Company, any subsidiary of the Company or any of their respective affiliates in an aggregate amount in excess of US$10,000,000 (or its foreign currency equivalent), unless such indebtedness is discharged, or such acceleration is rescinded, stayed or annulled, within any applicable cure period (not to exceed thirty (30) days) set forth in the relevant agreement or instrument;
(h) one or more final non-appealable judgments for the payment of money in any aggregate amount in excess of US$10,000,000 shall be rendered against the Company, any Subsidiary of the Company or any of their respective affiliates and the same shall remain undischarged for a period of sixty (60) days, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Company, any Subsidiary of the Company or any of their respective affiliates to enforce any such judgment;
(i) the Company (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or winding-up or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property or (v) is adjudicated as insolvent or to be liquidated; or
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(j) a court or governmental authority of competent jurisdiction enters an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, or any such petition shall be filed against the Company and such petition shall not be dismissed within sixty (60) days.
Section 4.2 Acceleration.
(a) The Company shall promptly deliver a written notice to the Holder upon the occurrence of an Event of Default.
(b) If any Event of Default specified in Section 4.1(i) or (j) has occurred, 100% of the outstanding principal of, and accrued and unpaid interest on, the Note shall automatically become immediately due and payable without any action on the part of the Holder.
(c) If any other Event of Default has occurred and is continuing, the Holder may at any time at his, her or its option, by notice to the Company, declare the Note to be immediately due and payable, and upon any such declaration the Note (including any accrued and unpaid interest thereon) shall be immediately due and payable.
(d) Upon the Note becoming due and payable under this Section 4.2, whether automatically or by declaration, the Note will forthwith mature and the entire unpaid principal amount (including any accrued and unpaid interest) shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived.
Section 4.3 Other Remedies.
(a) If any Event of Default has occurred and is continuing, and irrespective of whether the Note has become or has been declared immediately due and payable under Section 4.2, the Holder may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, for an injunction against a violation of any of the terms hereof or thereof or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
Section 4.4 No Waivers or Election of Remedies; Expenses. No course of dealing and no delay on the part of the Holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holders rights, powers or remedies. The Company shall pay the principal amount (including any accrued and unpaid interest) of the Note without any deduction for any setoff or counterclaim. No right, power or remedy conferred by the Purchase Agreement or by the Note upon the Holder shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. The Company will pay to the Holder on demand such further amount as shall be sufficient to cover all reasonable costs and expenses of the Holder incurred in any enforcement or collection under this Article IV, including, without limitation, reasonable attorneys fees, expenses and disbursements.
Section 4.5 Default Interest. Any Defaulted Amounts shall accrue interest at the rate per annum borne by the Note plus 2%, from and including the relevant due date until the date of actual payment, and such Defaulted Amounts together with such interest thereon shall be paid by the Company to the Holder immediately on demand.
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ARTICLE V
CONVERSION
Section 5.1 Conversion by Holder. At any time prior to the close of business on the Business Day immediately preceding the Maturity Date, the Holder shall have the right to, from time to time and at the Holders option, convert all or any portion of the outstanding principal amount (including any accrued and unpaid interest) of this Note to fully paid ADSs at the applicable Conversion Rate, in accordance with the provisions of this Article V. For the avoidance of doubt, any reference in this Note to the conversion of the Note into ADSs shall mean the issuance of ADSs following conversion of the Note in accordance with the procedure set forth in Section 5.2.
Section 5.2 Conversion Procedure.
(a) Subject to Section 5.2(b), this Note shall be deemed to have been converted immediately prior to the close of business on the date (the Conversion Date) that the Holder has delivered, by electronic mail, courier or any other method of delivery permitted under Section 12.3, a written notice of conversion and the Note for cancellation to the Company. Following the close of business on the Conversion Date, the rights of the Holder as holder of this Note to the extent of the conversion shall cease, and the Person or Persons in whose name or names the ADSs are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the ADSs represented thereby.
(b) As soon as possible upon each conversion, and in any event within five (5) Business Days after the relevant Conversion Date, the Company shall:
(i) (A) issue the number of Ordinary Shares represented by the ADSs to be issued upon conversion (the Underlying Shares) in the name of the Depositary (or, if applicable, the custodian designated by the Depositary) in the Companys share transfer registry, (B) cause the share certificate(s) evidencing such Ordinary Shares to be executed and delivered to the Depositary (or, if applicable, the custodian designated by the Depositary), and (C) deposit such Underlying Shares with the Depositary (or, if applicable, the custodian designated by the Depositary), in the name and on behalf of the Holder;
(ii) cause the Depositary to issue and deliver to the securities account designated by the Holder certificates or a book-entry transfer for the number of ADSs to which the Holder shall be entitled to upon such conversion pursuant to Section 5.1 in accordance with the Deposit Agreement; and
(iii) deliver to the Holder a new Note representing any portion of the principal amount that was represented by the Note surrendered to the Company in connection with such conversion, but which was not converted or which could not be converted because it would have required the issuance of a fractional ADS.
The converting Holder shall cooperate with the Company and the Depositary to facilitate the process outlined above.
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(c) If a fractional ADS would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional ADS, shall in the event the conversion is being consummated in connection with repayment in full of the Note, pay in cash an amount equal to the market price of such fractional share based on the Closing Sale Price of the ADSs on the Conversion Date.
(d) The issuance of the Underlying Shares and ADSs upon conversion of this Note shall be made without charge to the holder hereof for any issuance tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of Underlying Shares and ADSs, unless the tax is due because the holder requests such Underlying Shares and ADSs to be issued in a name other than the holders name, in which case the holder shall pay such tax. Upon conversion of this Note, the Company shall take all such actions and execute and deliver all such documents as are necessary or reasonably requested by the Holder in order to ensure that the Ordinary Shares and ADSs issuable with respect to such conversion shall be validly issued in accordance with Section 5.2(b), fully paid and nonassessable.
(e) The Company shall not close its books against the transfer of Ordinary Shares or ADSs issued or issuable upon conversion of this Note in any manner which interferes with the timely conversion of this Note.
Section 5.3 Conversion Rate. The initial Conversion Rate shall be 125.0000 ADSs (subject to adjustment as provided in this Article V, the Conversion Rate) per US$1,000 principal amount of the Note, representing a conversion price of US$8.00 per ADS (as appropriately adjusted to reflect any adjustment to the Conversion Rate, the Reference Price). The Conversion Rate shall be subject to adjustment from time to time pursuant to Section 5.4 or 5.5, and shall also be subject to adjustment upon the occurrence of certain Make Whole Fundamental Changes pursuant to Section 6.2.
Section 5.4 Adjustments to Conversion Rate. If the number of Ordinary Shares represented by each ADS is changed, after the date of this Note, for any reason other than one or more of the events described in this Section 5.4, the Company shall make an appropriate adjustment to the Conversion Rate such that the number of Ordinary Shares represented by the ADSs upon which conversion of the Note is based remains the same. In addition, the Conversion Rate shall be adjusted from time to time by the Company as follows:
(a) In case the Company shall, at any time or from time to time while the Note is outstanding, pay a dividend in Ordinary Shares (directly or in the form of ADSs) or make a distribution in Ordinary Shares to all or substantially all holders of Ordinary Shares, then the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such dividend or distribution; | ||
CR1 | = | the Conversion Rate in effect on the Record Date for such dividend or distribution; | ||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such dividend or distribution; and | ||
OS1 | = | the number of Ordinary Shares that would be outstanding immediately after, and solely as a result of, such dividend or distribution. |
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Any adjustment made pursuant to this Section 5.4(a) shall become effective immediately prior to 9:00 a.m., New York City time, on the Record Date for such dividend or distribution. If any dividend or distribution that is the subject of this Section 5.4(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors of the Company (the Board of Directors) publicly announces its decision not to pay or make such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. For purposes of this Section 5.4(a), the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such dividend or distribution shall not include Ordinary Shares held in treasury, if any. The Company shall not pay any dividend or make any distribution on Ordinary Shares held in treasury, if any.
(b) In case outstanding Ordinary Shares (directly or in the form of ADSs) shall be subdivided or split into a greater number of Ordinary Shares or combined or reverse split into a smaller number of Ordinary Shares (in each case, other than as a result of a transaction for which appropriate adjustment has been made in accordance with Section 5.5), the Conversion Rate shall be adjusted based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the effective date of such subdivision, split, reverse split or combination; | ||||||||
CR1 | = | the Conversion Rate in effect on the effective date of such subdivision, split, reverse split or combination; | ||||||||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the effective date of such subdivision, split, reverse split or combination; and | ||||||||
OS1 | = | the number of Ordinary Shares that would be outstanding immediately after, and solely as a result of, such subdivision, split, reverse split or combination. |
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Any adjustment made pursuant to this Section 5.4(b) shall become effective immediately prior to 9:00 a.m., New York City time, on the effective date of such subdivision, split, reverse split or combination.
(c) In case the Company shall issue rights (other than rights issued pursuant to a shareholders rights plan or a dividend or distribution in Ordinary Shares as set forth in (a) above), options or warrants to all or substantially all holders of Ordinary Shares (directly or in the form of ADSs), other than an issuance as a result of a transaction for which appropriate adjustment has been made in accordance with Section 5.5, entitling them to purchase, for a period expiring within forty-five (45) calendar days of the date of issuance, Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share less than the average of the Closing Sale Prices of Ordinary Shares during the ten (10) consecutive trading day period ending on the trading day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such issuance; | ||
CR1 | = | the Conversion Rate in effect on the Record Date for such issuance; | ||
OS0 | = | the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such issuance; | ||
X | = | the total number of Ordinary Shares issuable (directly or in the form of ADSs) pursuant to such rights, options or warrants; and | ||
Y | = | the number of Ordinary Shares equal to the quotient of (x) aggregate price payable to exercise such rights, options or warrants, divided by (y) the average of the Closing Sale Prices of Ordinary Shares during the ten (10) consecutive trading day period ending on the trading day immediately preceding the date of announcement of such issuance. |
Any adjustment made pursuant to this Section 5.4(c) shall become effective immediately prior to 9:00 a.m., New York City time, on the Record Date for such issuance. If any rights, options or warrants described in this Section 5.4(c) are not so issued, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to issue such rights, options or warrants, to the Conversion Rate that would then be in effect if such issuance had not been declared. To the extent that such rights, options or warrants are not exercised prior to their expiration or Ordinary Shares are otherwise not delivered pursuant to such rights, options or warrants upon the exercise of such rights, options or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights, options or warrants been made on the basis of delivery of only the number of Ordinary Shares actually delivered (directly or in the form of ADSs). In determining the aggregate price payable to exercise such rights, options and warrants, there shall be taken into account any consideration received by the Company for such rights, options or warrants and the value of such consideration (if other than cash, to be determined in good faith by the Board of Directors). For purposes of this Section 5.4(c), the number of Ordinary Shares outstanding at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such issuance shall not include Ordinary Shares held in treasury, if any. The Company shall not issue any such rights, options or warrants in respect of Ordinary Shares held in treasury, if any.
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(d) In case the Company shall, by dividend or otherwise, distribute to all or substantially all holders of Ordinary Shares (directly or in the form of ADSs) any class of capital stock of the Company or evidences of its indebtedness or assets (including securities, but excluding (i) any dividends or distributions referred to in Section 5.4(a), (ii) any rights, options or warrants referred to in Section 5.4(c), (iii) any dividends or distributions of exclusively cash referred to in Section 5.4(e), (iv) any dividends or distributions as a result of a transaction for which appropriate adjustment has been made in accordance with Section 5.5, or (v) any Spin-Offs to which the provisions set forth below in this Section 5.4(d) applies) (any of such class of capital stock, evidences of indebtedness or assets, including those subject to any Spin-Off, the Distributed Assets), then, in each such case, the Conversion Rate shall be increased based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such distribution; | ||
CR1 | = | the Conversion Rate in effect on the Record Date for such distribution; | ||
SP0 | = | the average of the Closing Sale Prices of Ordinary Shares during the ten (10) consecutive trading day period ending on the trading day immediately preceding the Record Date for such distribution; and | ||
FMV | = | the fair market value on the Record Date for such distribution of the Distributed Assets applicable to one (1) Ordinary Share, as determined in good faith by the Board of Directors. |
In the event where there has been a payment of a dividend or other distribution on the Ordinary Shares (directly or in the form of ADSs) or shares of capital stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company (a Spin-Off) that are, or when issued, will be, traded, listed or admitted for trading or listing on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or any other U.S. national securities exchange or market, then the Conversion Rate shall instead be increased based on the following formula:
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where
CR0 | = | the Conversion Rate in effect immediately prior to the end of the Spin-Off Valuation Period (as defined below); | ||
CR1 | = | the Conversion Rate in effect immediately after the end of the Spin-Off Valuation Period; | ||
FMV0 | = | the average of the Closing Sale Prices of the Distributed Assets during the ten consecutive trading day period commencing on and including the effective date of the Spin-Off (the Spin-Off Valuation Period) applicable to one (1) Ordinary Share; and | ||
MP0 | = | the average of the Closing Sale Prices of Ordinary Shares during the Spin-Off Valuation Period. |
In respect of any conversion during the Spin-Off Valuation Period, references in the portion of this Section 5.4(d) related to Spin-Offs to ten trading days shall be deemed to be replaced with such lesser number of trading days as have elapsed from, and including, the effective date of such Spin-Off to, and including, the Conversion Date in determining the Conversion Rate for such conversion.
Any adjustment made pursuant to this Section 5.4(d) shall become effective immediately prior to 9:00 a.m., New York City time, on the Record Date for such distribution, or, in the case of a Spin-Off, immediately after the end of the Spin-Off Valuation Period. If any dividend or distribution of the type described in this Section 5.4(d) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
Notwithstanding the foregoing, in connection with any dividend or distribution referred to in this Section 5.4(d), the Holder may elect to receive, in lieu of the foregoing adjustments, in respect of each US$1,000 principal amount of the Note, at the same time and upon the same terms as holders of Ordinary Shares or ADSs receive the Distributed Assets, the amount and kind of Distributed Assets the Holder would have received if such holder had converted such principal amount of the Note into a number of ADSs at the Conversion Rate as in effect immediately prior to the Record Date for the distribution.
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Rights or warrants distributed by the Company to all holders of Ordinary Shares (whether direct or in the form of ADSs) entitling the holders thereof to subscribe for or purchase shares of the Companys capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events (Trigger Event): (i) are deemed to be transferred with such Ordinary Shares; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Ordinary Shares, shall be deemed not to have been distributed for purposes of this Section 5.4 (and no adjustment to the Conversion Rate under this Section 5.4 will be required) until the occurrence of the earliest Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 5.4(d). If any such right or warrant, including any such existing rights or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights or warrants with such rights. In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Trigger Event or other event (of the type described in the preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 5.4 was made, (A) in the case of any such rights or warrants that shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Rate shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Ordinary Shares with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Ordinary Shares as of the date of such redemption or repurchase and (B) in the case of such rights or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights and warrants had not been issued.
(e) In case the Company shall pay a dividend or otherwise distribute to all or substantially all holders of its Ordinary Shares (direct or in the form of ADSs) a dividend or other distribution of exclusively cash, then the Conversion Rate shall be increased based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the trading day immediately preceding the Record Date for such dividend or distribution; | ||
CR1 | = | the Conversion Rate in effect on the Record Date for such dividend or distribution; | ||
SP0 | = | the average of the Closing Sale Prices of Ordinary Shares during the ten (10) consecutive trading day period ending on the trading day immediately preceding the Record Date for such dividend or distribution; and | ||
DIV | = | the amount in cash per Ordinary Share the Company distributes to holders of its Ordinary Shares (direct or in the form of ADSs). |
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Any adjustment made pursuant to this Section 5.4(e) shall become effective immediately prior to 9:00 a.m., New York City time, on the Record Date for such dividend or distribution. If any dividend or distribution of the type described in this Section 5.4(e) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
Notwithstanding the foregoing, in connection with any dividend or distribution referred to in this Section 5.4(e), the Holder may elect to receive, in lieu of the foregoing adjustments, in respect of each US$1,000 principal amount of the Note, at the same time and upon the same terms as holders of Ordinary Shares or ADSs receive such dividend or distribution, the amount of such dividend or distribution in cash the Holder would have received if the such holder had converted such principal amount of the Note into a number of ADSs at the Conversion Rate as in effect immediately prior to the Record Date for the distribution.
(f) In case of purchases of the Ordinary Shares (directly or in the form of ADSs) pursuant to a tender offer or exchange offer made by the Company or any Subsidiary of the Company for all or any portion of the Ordinary Shares (directly or indirectly in the form of ADSs), to the extent that the amount of cash and the fair market value, as determined in good faith by the Board of Directors as of the Expiration Date, of any other consideration included in the payment per Ordinary Share (or equivalent payment per Ordinary Share represented by the ADSs) exceeds the average of the Closing Sale Prices of the Ordinary Shares during the ten (10) consecutive trading days commencing on the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender offer or exchange offer (as it may be amended) (the Expiration Date), the Conversion Rate shall be increased based on the following formula:
where
CR0 | = | the Conversion Rate in effect at 5:00 p.m., New York City time, on the 10th trading day immediately following the trading day next succeeding the Expiration Date; | ||
CR1 | = | the Conversion Rate in effect immediately after 5:00 p.m., New York City time, on the 10th trading day immediately following the trading day next succeeding the Expiration Date; | ||
FMV | = | the aggregate amount of cash and fair market value (as determined in good faith by the Board of Directors as of the Expiration Date) of all other consideration, paid or payable for Ordinary Shares (directly or in the formof ADSs) validly tendered or exchanged and not validly withdrawn in such tender or exchange offer; | ||
OS1 | = | the number of Ordinary Shares outstanding immediately after the last time tenders or exchanges may be made pursuant to such tender offer or exchange offer (the Expiration Time), after giving effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender or exchange offer; | ||
OS0 | = | the number of Ordinary Shares outstanding immediately before the Expiration Time; and | ||
SP1 | = | the average of the Closing Sale Prices of Ordinary Shares during the ten (10) consecutive trading day period commencing on the trading day next succeeding the Expiration Date. |
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In respect of any conversion during such ten (10) consecutive trading day period, references in this Section 5.4(f) to such ten (10) trading day period shall be deemed to be replaced with such lesser number of trading days as have elapsed from, and including, the trading day next succeeding the Expiration Date in determining the Conversion Rate for such conversion.
Any adjustment made pursuant to this Section 5.4(f) shall become effective immediately after 5:00 p.m., New York City time, on the 10th trading day immediately following the trading day next succeeding the Expiration Date. If the Company, or one of its Subsidiaries, is obligated to purchase Ordinary Shares (directly or indirectly in the form of ADSs) pursuant to any such tender or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable law from effecting all such purchases or all such purchases are rescinded, the Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such tender or exchange offer had not been made. Except as set forth in the preceding sentence, if the application of this Section 5.4(f) to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this Section 5.4(f).
(g) If and whenever the Company shall issue any Ordinary Shares or ADSs or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs (other than any issuance pursuant to this Note, any other convertible note issued pursuant to the Purchase Agreement or the Other CBs, or upon the grant, vesting or exercise of any Permitted Equity Awards) (the Relevant Securities), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each ADS) which is less than the Reference Price per ADS, the Conversion Rate shall be increased based on the following formula:
where:
CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A = the number of issued and outstanding Ordinary Shares immediately before the issue of the Relevant Securities;
B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would purchase at the price equal to (x) the Reference Price divided by (y) the applicable number of Ordinary Shares then represented by each ADS; and
C = the number of issued and outstanding Ordinary Shares immediately after the issue of the Relevant Securities;
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provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights.
(h) To the extent that the Company has a shareholder rights plan in effect upon any conversion of the Note, each ADS delivered upon such conversion shall be entitled to receive (either directly or in respect of the Ordinary Shares underlying such ADSs) the appropriate number of rights, if any, and the certificates representing the ADSs delivered upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any such shareholder rights plan, as the same may be amended from time to time. However, if, prior to any conversion, the rights have separated from the Ordinary Shares or ADSs pursuant to the provisions of the applicable shareholder rights plan, the Conversion Rate shall be adjusted at the time of separation as if the Company had made a distribution as provided in Section 5.4(d), subject to readjustment in the event of the expiration, termination or redemption of such rights.
(i) In addition to those adjustments required by clauses (a)-(h) of this Section 5.4, and to the extent permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on which any of the Companys securities are then listed, the Company from time to time may increase the Conversion Rate by any amount for a period of at least twenty (20) Business Days if the Board of Directors determines that such increase would be in the Companys best interest, and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the Ordinary Shares or the ADSs or rights to purchase Ordinary Shares or ADSs in connection with a dividend or distribution of Ordinary Shares or ADSs (or rights to acquire Ordinary Shares or ADSs) or similar event.
(j) All calculations under this Article V shall be made in good faith by the Company in accordance with this Article V, and shall be made to the nearest cent or to the nearest one-ten thousandth (1/10,000) of an Ordinary Share, as the case may be. The Company shall certify to the Holder that all calculations are made in compliance with this Article V, and shall show the Holder in detail the facts upon which such calculations and adjustments were made.
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(k) For purposes of this Section 5.4, the number of Ordinary Shares at any time outstanding shall not include Ordinary Shares held in the treasury of the Company but shall include Ordinary Shares issuable in respect of scrip certificates issued in lieu of fractions of Ordinary Shares. The Company shall not pay any dividend or make any distribution on Ordinary Shares held in the treasury of the Company.
(l) Notwithstanding any of the foregoing clauses in this Section 5.4, the applicable Conversion Rate will not be adjusted pursuant to this Section 5.4, (i) if and to the extent that the Holder participates in the transaction that would otherwise give rise to adjustment pursuant to this Section 5.4 on an as-converted basis or (ii) solely by reason of the issuance or conversion of any other Note pursuant to the Purchase Agreement.
Section 5.5 Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the ADSs or Ordinary Shares (other than changes resulting from a subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Companys Subsidiaries substantially as an entirety or
(iv) any statutory share exchange,
in each case, as a result of which the ADS or the Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event, a Merger Event), then, prior to or at the effective time of such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute an amendment to the Note providing that, at and after the effective time of such Merger Event, the right to convert each US$1,000 principal amount of the Note shall be changed into a right to convert such principal amount of Note into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the Reference Property, with each unit of Reference Property meaning the kind and amount of Reference Property that a holder of one ADS is entitled to receive) upon such Merger Event; provided, however, that any ADSs that the Company would have been required to deliver upon conversion of the Note shall instead be deliverable in the amount and type of Reference Property that a holder of that number of ADSs would have been entitled to receive in such Merger Event.
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If the Merger Event causes the ADSs or Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Note will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the holders of ADSs, and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration referred to in clause (i) attributable to one ADS. If the holders of the ADSs or Ordinary Shares receive only cash in such Merger Event, then for all conversions for which the relevant Conversion Date occurs after the effective date of such Merger Event the consideration due upon conversion of each US$1,000 principal amount of Notes shall be solely cash in an amount equal to the Conversion Rate in effect on the Conversion Date, multiplied by the price paid per ADS or Ordinary Share, as applicable, in such Merger Event.
Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article V (it being understood that no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of equity securities (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute such amendment and such amendment shall contain such additional provisions to protect the interests of the Holder.
(b) The Company shall not become a party to any Merger Event unless its terms are consistent with this Section 5.5. None of the foregoing provisions shall affect the right of the Holder to convert the Note pursuant to the terms of the Note.
(c) The above provisions of this Section 5.5 shall similarly apply to successive Merger Events.
Section 5.6 Notices.
(a) Immediately upon any adjustment of the Conversion Rate, the Company shall send written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall send written notice to the Holder at least twenty (20) days prior to the date on which the Company closes its books or takes a record (i) with respect to any dividend or distribution upon Ordinary Shares (whether direct or in the form of ADSs), any subdivision, stock split, reverse stock split or combination, or any tender offer or exchange offer, (ii) with respect to any pro rata subscription offer to holders of Ordinary Shares (whether direct or in the form of ADSs) or (iii) for determining rights to vote with respect to any Fundamental Change, dissolution or liquidation.
(c) The Company shall also give at least twenty (20) days prior written notice to the Holder of the date on which any dissolution or liquidation shall take place.
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ARTICLE VI
CERTAIN COVENANTS
Section 6.1 Additional Amounts.
(a) All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or with respect the Note, including payments of principal, payments of interest, payments of any redemption or repurchase price, and payments of cash and/or deliveries of ADSs (together with payments of cash for any fractional ADS) upon conversion of the Note, shall be made free from any restriction or condition without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business (each, as applicable, a Relevant Taxing Jurisdiction) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a Relevant Jurisdiction, and in each case, any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding or deduction is so required, the Company or any successor to the Company shall pay to the Holder such additional amounts (Additional Amounts) as may be necessary to ensure that the net amount received by the Holder after such withholding or deduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received by the Holder had no such withholding or deduction been required; provided that no Additional Amounts shall be payable for or on account of
(i) any tax, duty, assessment or other governmental charge that would not have been imposed but for:
(1) |
the existence of any present or former connection between the Holder and the Relevant Jurisdiction, other than merely holding the Note or the receipt of payments thereunder, including the Holder or beneficial owner being or having been a national, domiciliary or resident of such Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in a trade or business therein or having or having had a permanent establishment therein; |
(2) |
the failure of the Holder to comply with a timely request from the Company or any successor of the Company, addressed to the Holder, to provide certification, information, documents or other evidence concerning the Holders or nationality, residence, identity or connection with the Relevant Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if and to the extent that due and timely compliance with such request is required by statute, regulation or administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or deduction as to which Additional Amounts would have otherwise been payable; or |
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(3) |
the presentation of the Note (in cases in which presentation is required) for payment in the Relevant Jurisdiction, unless the Note could not have been presented for payment elsewhere; |
(ii) |
any estate, inheritance, gift, sale, transfer, excise, personal property or similar tax, assessment or other governmental charge; or |
(iii) |
any tax, duty, assessment or other governmental charge that is payable otherwise than by withholding, deducting or any collection at source from payments or deliveries under or with respect to the Note. |
(b) In addition to the foregoing, the Company will also pay and indemnify each holder and beneficial owner of the Note for any present or future stamp, issue, registration, value added, court or documentary taxes, or any other excise or property taxes, charges or similar levies or taxes (including penalties, interest and any other reasonable expenses related thereto) which are levied by any Relevant Jurisdiction (and in the case of enforcement, any jurisdiction) on the execution, delivery, registration or enforcement of any of the Notes or any document or instrument referred to herein.
(c) If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with respect to the Note, it shall deliver to the Holder official tax receipts evidencing the remittance to the relevant tax authorities of the amounts so withheld or deducted.
Section 6.2 Increase in Conversion Rate Upon a Make Whole Fundamental Change
(a) The Company shall provide written notice to the Holder of any Make Whole Fundamental Change as promptly as practicable and in any event within ten (10) Business Days following the earlier of (i) the date of the announcement by the Company of the event giving rise to the Make Whole Fundamental Change and (ii) the effective date of such Make Whole Fundamental Change.
(b) Upon the occurrence of a Make Whole Fundamental Change, the Conversion Rate will be adjusted to be the Make Whole Fundamental Change Premium with respect to any conversion requests made by the Holder from the earlier of (i) the date of the announcement by the Company of the event giving rise to the Make Whole Fundamental Change and (ii) the effective date of such Make Whole Fundamental Change, until twenty (20) Business Days after effective date of such Make Whole Fundamental Change.
(c) Nothing in this Section 6.2 shall prevent an adjustment to the Conversion Rate pursuant to Section 5.4 or 5.5.
Section 6.3 Repurchase of the Note Upon a Fundamental Change.
(a) Upon the occurrence of a Fundamental Change, the Holder shall have the right, at its option, to require the Company to repurchase for cash all or any portion of the Note at a repurchase price equal to 100% of the principal amount plus all accrued and unpaid interest, calculated to but excluding the date of repurchase, by delivering to the Company, by electronic mail, courier or any other method of delivery permitted under Section 12.3, a written notice (the Fundamental Change Repurchase Notice) and the Note for cancellation at any time prior to the twentieth (20th) Business Day following the effective date of the Fundamental Change.
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(b) No later than ten (10) Business Days after the occurrence of the effective date of a Fundamental Change, the Company shall provide to the Holder a written notice specifying, among others: (i) the events causing the Fundamental Change; (ii) the effective date of the Fundamental Change; (iii) the last date on which the Holder may exercise the repurchase right pursuant to this Section 6.3; (iv) the then outstanding principal amount of the Note and the accrued and unpaid interest thereon; and (v) the then effective Conversion Rate and any adjustments to the Conversion Rate. No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders repurchase rights or affect the validity of the proceedings for the repurchase of the Note pursuant to this Section 6.3.
(c) The payment of the repurchase price contemplated by Section 6.3(a) shall be made by the Company to the Holder within ten (10) Business Days following the delivery of such Fundamental Change Repurchase Notice.
(d) If the Fundamental Change giving rise to the repurchase obligation pursuant to this Section 6.3 is also a Make Whole Fundamental Change, then the Company will permit the Holder to present the Note for repurchase pursuant to this Section 6.3 for as long as the Note may also be converted at the Make Whole Fundamental Change Premium, as contemplated by Section 6.2.
Section 6.4 Certain ADS Matters.
(a) The Company covenants that all ADSs delivered upon conversion of the Note, and all Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from any Encumbrance, tax or charge.
(b) The Company covenants that, if any ADSs to be provided for the purpose of conversion of the Note hereunder, or any Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or state law before such ADSs may be validly issued upon conversion, the Company shall, to the extent then permitted by applicable laws, secure such registration or approval, as the case may be.
(c) The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated quotation system, any ADSs deliverable upon conversion of the Note.
(d) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the conversion of the Note into ADSs and the issuance, and deposit into the ADS facility, of the Ordinary Shares represented by such ADSs. The Company also undertakes to maintain, as long as the Note is outstanding, the effectiveness of a registration statement on Form F-6 relating to the ADSs and an adequate number of ADSs available for issuance thereunder such that ADSs can be delivered in accordance with the terms of the Note and the Deposit Agreement upon conversion of the Note. The Company further covenants to provide the Holder with a reasonably detailed description of the mechanics for the delivery of ADSs upon any conversion of this Note upon request and to reserve, free from preemptive rights, out of its authorized but unissued Ordinary Shares, a number of Ordinary Shares that is greater than or equal to the number of Ordinary Shares corresponding to the number of ADSs due upon full conversion of the Note from time to time.
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(e) If the Ordinary Shares cease to be represented by ADSs issued under a depositary receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a reference to the number of Ordinary Shares (and other property, if any) represented by the ADSs on the last day on which the ADSs represented the Ordinary Shares and as if the Ordinary Shares and the other property had been distributed to holders of the ADSs on that day. In addition, all appropriate adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination will apply. The Company shall provide written notice to the Holder upon the occurrence of the foregoing.
Section 6.5 Resale of Conversion Securities.
(a) The Company shall use its reasonable best efforts to assist the Holder in the sale or disposition of any Conversion Securities, if the Conversion Securities are covered by an effective registration statement under the Securities Act or if such person provides reasonable evidence to the effect that a sale, transfer or assignment of such Conversion Securities may be made without registration under the Securities Act or that such Conversion Securities are eligible for resale pursuant to Rule 144 under the Securities Act, and upon request of the Holder:
(i) |
promptly deliver applicable instruction letters to the Companys transfer agent or the Depositary (as applicable) to remove restrictive legends to the extent permitted by applicable securities laws; and |
(ii) |
with respect to ADSs listed or traded on any exchange or inter-dealer quotation system, promptly deliver instruction letters to the Companys share registrar and depositary agent to convert any Ordinary Shares to depositary receipts or similar instruments, to cancel any depositary receipts or similar instruments in exchange for Ordinary Shares represented thereby, and/or to deposit any ADSs in the brokerage account(s) designated by the Holder. |
Section 6.6 Repurchase at Holders Option. The Holder shall have the right, at its option, to require the Company to repurchase for cash all or part of the Note, on [●], being the third anniversary of the date of the issuance of the Note (the Repurchase Date), at a repurchase price equal to 100% of the principal amount of the Note then outstanding and to be repurchased plus all accrued and unpaid interest, calculated to but excluding the Repurchase Date. Such right shall be exercisable by the Holder by delivering a written notice of repurchase no later than ten (10) Business Days prior to the Repurchase Date.
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Section 6.7 Transfers of the Note.
(a) The Holder or any subsequent holder of the Note may transfer all or a portion of the Note, in a single transaction or multiple transactions, to (i) any Person that is not engaged in the Related Business, (ii) any Financial Investor, or (iii) any existing owner of any Securities, so long as such transfer complies with applicable securities laws. For purposes of this Section 6.7(a), Financial Investor means any of the following:
(1) |
any bank, including any commercial bank or private bank; |
(2) |
any financial institution, including any investment bank, non-banking financial company, core investment company, stock broker, merchant banker, insurance company, or other financial intermediary that is regulated by a financial services regulator in the relevant jurisdiction; |
(3) |
any investment fund, including any mutual fund, venture capital fund, hedge fund, bond fund, balanced fund, private equity fund, sovereign wealth fund, pension fund, endowment fund, fund of funds, family office, or other pooled investment vehicle; |
(4) |
any investment adviser or fund manager; |
(5) |
any high net-worth individual engaged in financial investment, other than any founder, director or officer of any Person engaged in the Related Business; or |
(6) |
any special purpose vehicle or investment company Controlled directly or indirectly by any of the above. |
(b) Any holder of the Note seeking to transfer all or a portion of the Note will deliver notice of such intended transfer to the Company. Subject to the provisions in Section 6.7(a), the Company will promptly take all action necessary to effect such transfer, including promptly issuing one or more new Notes to such transferees. Prior to presentation of this Note for registration of transfer, the Company shall treat the holder of the Note as the owner and holder of the Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever.
(c) In the event that all or a portion of the Note has been transferred to multiple holders, references in the Note to the singular form of Note and holder shall instead refer to the plural form of such words, mutatis mutandis.
Section 6.8 Equity Incentive Plans. The Company covenants that it shall not issue or grant any options, restricted shares, restricted share units or other equity awards of the Company, except for Permitted Equity Awards.
Section 6.9 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such Law had been enacted.
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Section 6.10 New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts within ten (10) Business Days; provided that the existing note instrument of this Note shall be returned to the Company for cancellation.
Section 6.11 Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of indemnity from the Holder reasonably acceptable to the Company, or in the case of mutilation, upon surrender and cancellation thereof), the Company shall within ten (10) Business Days execute and deliver to the Holder, in lieu thereof, a new Note, dated and bearing interest from the date hereof.
Section 6.12 PFIC Disclosure. The Company shall use its reasonable efforts to avoid the Company or any of its Subsidiaries being classified as a passive foreign investment company (a PFIC) within the meaning of section 1297 of the U.S. Internal Revenue Code of 1986, as amended, for the current and any future taxable year. Within seventy-five (75) days from the end of each taxable year of the Company, the Company shall determine whether the Company or any of its Subsidiaries was a PFIC in such taxable year. If the Company determines that the Company or, if applicable, any of its Subsidiaries was a PFIC in a taxable year (or if the U.S. Internal Revenue Service or the Holder informs the Company that it has so determined), the Company shall, within one hundred and five (105) days from the end of such taxable year, inform the Holder of such determination and shall provide or cause to be provided to the Holder upon request a complete and accurate PFIC Annual Information Statement as described in section 1.1295-1(g)(1) of the U.S. Treasury Regulations for the Company or the applicable Subsidiary of the Company.
ARTICLE VII
AMENDMENT AND WAIVER
The amendment, modification or supplement to any term of the Note shall be effected by a written instrument executed by the Holder and the Company. The observance of any provision in the Note may be waived only by the written consent of the party against whom such waiver is to be effective.
ARTICLE VIII
CANCELLATION
After the entire principal amount (including any accrued and unpaid interest) at any time owed on this Note has been paid in full or this Note has been converted in full to ADSs or other property in accordance with the terms of this Note, this Note shall be surrendered to the Company for cancellation and shall not be reissued.
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ARTICLE IX
GOVERNING LAW AND DISPUTE RESOLUTION
Section 9.1 THIS NOTE AND ALL ISSUES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH HONG KONG LAWS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
Section 9.2 Any dispute arising out of or relating to this Note, including any question regarding its existence, validity or termination (Dispute) shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the UNCITRAL Arbitration Rules then in force. In the case of any Dispute, there shall be three arbitrators. The claimant(s) shall have the right to appoint one arbitrator, the respondent(s) shall have the right to appoint another arbitrator, and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. The law of this arbitration clause shall be Hong Kong law. The seat of arbitration shall be Hong Kong. It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from courts of competent jurisdiction before the constitution of the arbitral tribunal.
ARTICLE X
SENIORITY
This Note and the interest accrued under the Note are the senior obligations of the Company and will rank pari passu in right of payment with all other senior and unsubordinated obligations of the Company, including any other convertible note issued pursuant to the Purchase Agreement and the Other CBs.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.1 Company may Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 11.2, the Company shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person, unless:
(a) the resulting, surviving or transferee person (the Successor Company), if not the Company, shall be a corporation organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company) shall expressly assume, by amendment of the Note all of the obligations of the Company under the Note; and
(b) immediately after giving effect to such transaction, no Event of Default or Default shall have occurred and be continuing.
For purposes of this Section 11.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Company to another Person.
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Section 11.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company by amendment to the Note of the due and punctual payment of the principal of and accrued and unpaid interest on the Note, the due and punctual delivery or payment, as the case may be, of any consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of the Note to be performed by the Company, such Successor Company (if not the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Companys properties and assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part.
Section 11.3 Compliance. No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless the Holder shall receive certificate executed by an executive officer of the Company that any such consolidation, merger, sale, conveyance, transfer or lease and any such assumption complies with the provisions of this Article XI.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Provisions Binding on Companys Successors. All the covenants, stipulations, promises and agreements of the Company contained in the Note shall bind its successors and assigns whether so expressed or not.
Section 12.2 Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.
Section 12.3 Notices. All notices and other communications given under this Note shall be in writing and shall be deemed to have been duly given: (a) upon receipt, when delivered personally; (b) one Business Day after deposit with an internationally recognized overnight courier service; or (c) when sent by confirmed electronic mail if sent during normal business hours of the recipient, or if not, then on the next Business Day, in each case properly addressed to the party to receive the same. The addresses of the parties for such communications are:
If to the Company:
Puxin Limited
5/F, Building 4, Dingjun Building
75 Suzhou Street, Haidian District
Beijing 100080
Peoples Republic of China
E-mail: wangpeng6@pxjy.com
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Attn: Mr. Peng Wang
If to the Holder:
[PAG Entity]
Address: |
33/F, Three Pacific Place, |
1 Queens Road East, Hong Kong
Email: |
jlewis@pagasia.com |
Attention: |
Jon Lewis |
with a copy (which shall not constitute notice) to:
Fenwick & West LLP
Address: |
Unit 908, Kerry Parkside Office |
No. 1155 Fang Dian Road
Pudong, Shanghai 201204, China
Email: |
niping.wu@fenwick.com |
Attention: |
Niping Wu |
A party may change or supplement the addresses given above by giving the other party written notice thereof in the manner set forth above.
Section 12.4 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring
Section 12.5 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or its counsel.
Section 12.6 Rules of Construction. The headings contained in this Note are for reference purposes only and do not affect in any way the meaning or interpretation of this Note. In this Note, except as otherwise provided, (i) the terms include, includes and including shall be deemed to be followed by the words without limitation; (ii) where a reference is made herein to an Article, Section, Exhibit or Schedule, such reference is to an Article, Section, Exhibit or Schedule of this Note; (iii) the words hereof, herein and hereunder and words of similar import refer to this Note as a whole; (iv) any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders; (v) references to a Person are also to its successors and permitted assigns; and (vi) references to any legislation or to any provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued or related to such legislation.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has executed and delivered this Note on the date first written above.
PUXIN LIMITED | ||
By: |
|
|
Name: | ||
Title: |
[Signature Page to Convertible Promissory Note]
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
B - 1
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this Agreement) is entered into as of [●], 2021, by and among PUXIN LIMITED, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company), and the investor listed on the signature page hereto (the Purchaser). Capitalized terms used but not defined elsewhere herein are defined in Exhibit A. The Purchaser and any other party that may become a party hereto pursuant to Section 4.1 are referred to collectively as the Holders and individually each as a Holder.
WHEREAS, the Company and the Purchaser are parties to the Convertible Note Purchase Agreement, dated as of [●], 2021 (as amended from time to time, the Purchase Agreement), pursuant to which the Company is selling to the Purchaser, and the Purchaser is purchasing from the Company, an aggregate of $20,000,000 Convertible Notes (including any convertible note(s) issued in replacement thereof or in exchange therefor, the Convertible Notes), which are convertible into American Depositary Shares of the Company (ADSs) each representing two Ordinary Shares.
WHEREAS, as a condition to the obligations of the Purchaser under the Purchase Agreement, the Company and the Purchaser are entering into this Agreement for the purpose of granting certain registration and other rights to the Holders.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 Demand Registration.
(a) Request by Holders.(b) If the Company shall receive a written request from the Purchaser or any other Holder (or any of its successors, permitted assigns or transferees, each, an Initiating Holder) that the Company file a registration statement under the Securities Act (other than on Form F-3 or Form S-3) covering the registration of all or a portion of the Registrable Securities of such requesting Initiating Holder with an aggregate public offering price covering the amount requested of at least $10,000,000 pursuant to this Section 1.1, then the Company shall, within ten (10) Business Days of the receipt of such written request, give written notice of such request (the Request Notice) to all the Holders, and use its reasonably best efforts to effect, as soon as practicable, the registration under the Securities Act of all the Registrable Securities that the Holders request to be registered and included in such registration (including the Initiating Holder(s)) by written notice given by such Holders to the Company within ten (10) Business Days after receipt of the Request Notice.
(b) Underwritten Offering. If any Initiating Holder intends to distribute the Registrable Securities covered by its request by means of an underwritten offering, then it shall so advise the Company as a part of its request made pursuant to this Section 1.1 and the Company shall include such information in the Request Notice. 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 (unless otherwise mutually agreed by a majority in interest of the Initiating Holder(s) and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwritten offering shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting by the Holders of a majority of the Registrable Securities being registered and reasonably acceptable to the Company. Notwithstanding any other provision of this Section 1.1, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten, then the Company shall so advise all Holders of Registrable Securities which would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwritten offering shall be reduced as required by the underwriter(s) and allocated among the Holders on a pro rata basis according to the number of Registrable Securities then outstanding held by each Holder requesting registration (including the Initiating Holder(s)); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not Registrable Securities and are held by any other Person who is not a Holder, including, without limitation, any Person who is an employee, officer or director of the Company or any Subsidiary of the Company; provided further, that, in any event, at least fifty percent (50%) of shares of Registrable Securities requested by the Holders to be included in such underwriting and registration shall be so included. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company shall not be obligated to effect more than three (3) such demand registration requested by each Initiating Holder pursuant to this Section 1.1; provided that if the sale of all of the Registrable Securities sought to be included in a registration statement pursuant to this Section 1.1 is not consummated for any reason other than due to the action or inaction of the Holders including Registrable Securities in such registration statement, such registration shall not be deemed to constitute one of the registration rights granted pursuant to this Section 1.1.
(d) Deferral. Notwithstanding the foregoing, if the Company shall furnish to the Holders requesting registration pursuant to this Section 1.1, a certificate signed by the chief executive officer of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for a registration statement to be filed at such time, then the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holder(s); provided, however, that the Company may not utilize this right more than once in any twelve (12) month period; provided further, that the Company shall not register any other of its Ordinary Shares during such deferral period. A demand right shall not be deemed to have been exercised until such deferred registration shall have been effected.
Section 1.2 Piggyback Registration.
(a) Participation. Subject to the terms of this Agreement, if the Company proposes to register for its own account any of its equity securities in connection with a public offering of such securities, or if any registration of equity securities is requested by other current or future investors of the Company, the Company shall notify all the Holders of the Registrable Securities in writing at least thirty (30) Business Days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company (including, but not limited to, registration statements relating to any primary or secondary offering of securities of the Company, but excluding registration statements relating to any registration under Section 1.1 or Section 1.3 of this Agreement or to any employee benefit plan or a corporate reorganization), and shall afford each such Holder an opportunity to include in such registration statement all or any part of the Registrable Securities then held by such Holder. Each Holder desiring to include in any such registration statement all or any part of the Registrable Securities held by it shall within ten (10) Business Days after receipt of the above described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registrable Securities such Holder wishes to include in such registration statement. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company or any subsequent investors, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein. No shareholder of the Company shall hereafter be granted piggyback registration rights that are superior to those of the Holders without prior written consent of Holders who hold or would upon conversion of the Convertible Notes hold Registrable Securities representing at least sixty percent (60%) of the number of shares of Registrable Securities then outstanding.
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(b) Underwritten offering. If a registration statement under which the Company gives notice under this Section 1.2 is for an underwritten offering, then the Company shall so advise the Holders. In such event, the right of any such Holders Registrable Securities to be included in a registration pursuant to this Section 1.2 shall be conditioned upon such Holders participation in such underwritten offering and the inclusion of such Holders Registrable Securities in the underwriting to the extent provided herein. All the Holders proposing to distribute their Registrable Securities through such underwritten offering shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement but subject to Section 5.2, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the managing underwriter(s) may exclude shares from the registration and the underwritten offering, and the number of shares that may be included in the registration and the underwritten offering shall be allocated, first, to the Company, second, to each holder of Registrable Securities requesting inclusion of their Registrable Securities in such registration statement on a pro rata basis based on the respective percentages of the Registrable Securities requested to be included in such offering by such Holders, and third, to holders of other securities of the Company; provided, however, that the right of the underwriter(s) to exclude Ordinary Shares (including the Registrable Securities) from the registration and underwritten offering as described above shall be restricted so that (i) the number of the Registrable Securities included in any such registration is not reduced below thirty percent (30%) of the aggregate number of Ordinary Shares of the Registrable Securities, on a pro rata basis, for which inclusion has been requested; and (ii) all Ordinary Shares that are not Registrable Securities and are held by any other Person, including, without limitation, any Person who is an employee, officer or director of the Company (or any Subsidiary of the Company) shall first be excluded from such registration and underwritten offering before any Registrable Securities are so excluded. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwritten offering shall be excluded and withdrawn from the registration.
(c) Not Demand Registration. Registration pursuant to this Section 1.2 shall not be deemed to be a demand registration as described in Section 1.1 above. There shall be no limit on the number of times Holders may request registration of Registrable Securities under this Section 1.2.
Section 1.3 Form F-3 or Form S-3 Registration.
(a) Resale Shelf Registration Statement. Subject to the other applicable provisions of this Agreement, the Company shall use its commercially reasonable efforts to prepare and file, as soon as reasonably practicable after the Companys Form 20-F for the year ended December 31, 2021 is filed, a registration statement covering the sale or distribution from time to time by the Holders, on a delayed or continuous basis pursuant to Rule 415 of the Securities Act, of all of the Registrable Securities on Form F-3 or Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form F-3 or Form S-3, then such registration shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Holders in accordance with any reasonable method of distribution elected by the Holders) (the Resale Shelf Registration Statement) and shall use its commercially reasonable efforts to cause such Resale Shelf Registration Statement to be declared effective by the SEC as promptly as is reasonably practicable after the filing thereof (it being agreed that the Resale Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule 462(e) is then available to the Company).
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(b) Effectiveness Period. Once declared effective, the Company shall, subject to the other applicable provisions of this Agreement, use its commercially reasonable efforts to cause the Resale Shelf Registration Statement to be continuously effective and usable until such time as there are no longer any Registrable Securities (the Effectiveness Period).
(c) Subsequent Shelf Registration Statement. If any Shelf Registration Statement ceases to be effective under the Securities Act for any reason at any time during the Effectiveness Period, the Company shall use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf Registration Statement to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf Registration Statement), and shall use its commercially reasonable efforts to as promptly as is reasonably practicable amend such Shelf Registration Statement in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf Registration Statement or file an additional registration statement (a Subsequent Shelf Registration Statement) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by the holders thereof of all securities that are Registrable Securities as of the time of such filing. If a Subsequent Shelf Registration Statement is filed, the Company shall use its commercially reasonable efforts to (a) cause such Subsequent Shelf Registration Statement to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration Statement shall be an automatic shelf registration statement that shall become effective upon filing with the SEC pursuant to Rule 462(e) if Rule 462(e) is available to the Company) and (b) keep such Subsequent Shelf Registration Statement continuously effective and usable until the end of the Effectiveness Period. Any such Subsequent Shelf Registration Statement shall be a registration statement on Form F-3 or Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration Statement shall be on another appropriate form and shall provide for the registration of such Registrable Securities for resale by the Holders in accordance with any reasonable method of distribution elected by the Holders.
(d) Supplements and Amendments. The Company shall supplement and amend any Shelf Registration Statement if required by the Securities Act or the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement.
(e) Subsequent Holder Notice. If a Person entitled to the benefits of this Agreement becomes a holder of Registrable Securities after a Shelf Registration Statement becomes effective under the Securities Act, the Company shall, as promptly as is reasonably practicable following delivery of written notice to the Company of such Person becoming a holder of Registrable Securities and requesting for its name to be included as a selling securityholder in the prospectus related to the Shelf Registration Statement (a Subsequent Holder Notice):
(i) if required and permitted by applicable law, file with the SEC a supplement to the related prospectus or a post-effective amendment to the Shelf Registration Statement so that such holder of Registrable Securities is named as a selling securityholder in the Shelf Registration Statement and the related prospectus in such a manner as to permit such holder of Registrable Securities to deliver a prospectus to purchasers of the Registrable Securities in accordance with applicable law; provided, however, that the Company shall not be required to file more than one (1) post-effective amendment or a supplement to the related prospectus for such purpose in any 30-day period;
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(ii) if, pursuant to Section 1.3(e)(i), the Company shall have filed a post-effective amendment to the Shelf Registration Statement that is not automatically effective, use its commercially reasonable efforts to cause such post-effective amendment to become effective under the Securities Act as promptly as is reasonably practicable; and
(iii) notify such holder of Registrable Securities as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to Section 1.3(e)(i).
(f) Underwritten offering.
(i) The Holders may, after the Resale Shelf Registration Statement becomes effective, deliver a written notice to the Company specifying that the sale of some or all of the Registrable Securities subject to the Shelf Registration Statement, is intended to be conducted through an underwritten offering; provided, however, that the Holders of Registrable Securities may not, without the Companys prior written consent, (i) launch an underwritten offering the anticipated gross proceeds of which shall be less than $30.0 million (unless such holders are proposing to sell all of their remaining Registrable Securities), (ii) launch more than one (1) underwritten offering at the request of such holders within any twelve (12) month-period.
(ii) In the event of an underwritten offering, the Holders shall select the managing underwriter(s) to administer the underwritten offering; provided that the choice of such managing underwriter(s) shall be subject to the consent of the Company, which is not to be unreasonably withheld. The Company, the holders of Registrable Securities and holders of any other securities of the Company participating in an underwritten offering will enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such offering.
(iii) The Company will not include in any underwritten offering pursuant to this Section 1.3(f) any securities that are not Registrable Securities without the prior written consent of the Holders. If the managing underwriter or underwriters advise the Company and the Holders in writing that in its or their good faith opinion the number of Registrable Securities (and, if permitted hereunder, other securities requested to be included in such offering) exceeds the number of securities which can be sold in such offering in light of market conditions or is such so as to adversely affect the success of such offering, the Company will include in such offering only such number of securities that can be sold without adversely affecting the marketability of the offering, which securities will be so included in the following order of priority: (i) first, the Registrable Securities of the Holders that have requested to participate in such underwritten offering, allocated pro rata among such Holders on the basis of the respective percentages of the Registrable Securities requested to be included in such offering by such Holders, and (ii) second, any other securities of the Company that have been requested to be so included. The Company shall use its commercially reasonable efforts to cooperate in a timely manner with any request of the Holders in respect of any underwritten block trade.
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(g) Take-Down Notice. Subject to the other applicable provisions of this Agreement, at any time that any Form F-3 or Form S-3 registration statement is effective, if any Holder delivers a notice to the Company stating its intention to effect a sale or distribution of all or part of its Registrable Securities on any Form F-3 or Form S-3 registration statement (a Shelf Offering) and stating the number of the Registrable Securities to be included in such Shelf Offering, then the Company shall amend, subject to the other applicable provisions of this Agreement, or supplement the Form F-3 or Form S-3 registration statement as may be necessary, in order to enable such Registrable Securities to be sold and distributed pursuant to the Shelf Offering, including pursuant to an underwritten offering.
(h) Not Demand Registration. Form F-3 or Form S-3 registrations shall not be deemed to be demand registrations as described in Section 1.1 above. Except as otherwise provided herein, there shall be no limit on the number of times the Holders may request registration of the Registrable Securities under this Section 1.3.
ARTICLE II
ADDITIONAL PROVISIONS REGARDING REGISTRATION RIGHTS
Section 2.1 Expenses. All Registration Expenses incurred in connection with any registration pursuant to Section 1.1, Section 1.2 or Section 1.3 (but excluding the Selling Expenses) shall be borne by the Company. Each Holder participating in a registration pursuant to Section 1.1, Section 1.2 or Section 1.3 shall bear such Holders proportionate share (based on the total number of shares sold in such registration other than for the account of the Company) of all the Selling Expenses, in connection with such offering by the Holders.
Section 2.2 Obligation of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, the Company shall, as expeditiously as reasonably possible:
(a) Registration Statement. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, and keep such registration statement effective for a period of up to ninety (90) days or, in the case of the Registrable Securities registered under Form F-3 or Form S-3 in accordance with Rule 415 under the Securities Act or a successor rule, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such ninety (90) day period shall be extended for a period of time equal to the period any Holder refrains from selling any securities included in such registration at the request of the underwriter(s), and (ii) in the case of any registration of the Registrable Securities which are intended to be offered on a continuous or delayed basis, such ninety (90) day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold.
(b) Amendments and Supplements. Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement.
(c) Prospectuses. Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such registration.
(d) Blue Sky. Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service of process in such jurisdiction and except as may be required by the Securities Act.
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(e) Underwriting. In the event of any underwritten public offering, participate in standard due diligence exercises and enter into and perform its obligations under an underwriting agreement in usual and customary form, in each case with the managing underwriter(s) of such offering.
(f) Notification. Notify each holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of (i) the issuance of any stop order by the SEC in respect of such registration statement, or (ii) the happening of any event as a result of which the prospectus included in such 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) Opinion and Comfort Letter. Furnish, at the request of any Holder requesting registration of the Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion and a negative assurance letter, each dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) comfort letters dated as of (x) the effective date of the registration statement covering such Registrable Securities and (y) the closing date of the offering, 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 and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.
(h) Compliance. Comply with all applicable rules and regulations of the SEC, and make available to the Companys security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the registration statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the registration statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) Listing. Cause all such Registrable Securities (in the form of ADSs or otherwise) to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided that the applicable listing requirements are satisfied.
(j) FINRA. Cooperate with the Holders and each underwriter or agent participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA, including the use of commercially reasonable efforts to obtain FINRAs pre-clearance or pre-approval of the registration statement and applicable prospectus upon filing with the SEC.
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(k) Updates. Keep Holders counsel advised in writing as to the initiation and progress of any registration under Section 1.1, Section 1.2 or Section 1.3 of this Agreement.
(l) Cooperation. Cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made.
(m) Marketing Efforts. In connection with an underwritten offering, cause its officers to use their commercially reasonable efforts to support the marketing of the Registrable Securities covered by such offering (including participation in roadshows or other similar marketing efforts).
(n) Other Reasonable Steps. Take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby.
Section 2.3 Other Obligations of the Company. So long as any Registrable Securities remain outstanding, the Company shall not terminate the Deposit Agreement and shall, if necessary, direct the Depositary to file, and cooperate with the Depositary in filing, amendments to the Form F-6 registering ADSs to increase the amount of ADSs registered thereunder to cover the total number of ADSs corresponding to the Registrable Securities then outstanding.
Section 2.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 1.1, Section 1.2 or Section 1.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to timely effect the registration of their Registrable Securities.
Section 2.5 Rule 144 Reporting. With a view to making available the benefits of Rule 144 to the Holders, the Company agrees that, for so long as a Holder owns Registrable Securities, the Company will use its commercially reasonable efforts to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times
(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or its qualification as a registrant whose securities may be resold pursuant to Form F-3 or Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as a Holder may reasonably request in availing itself of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form F-3 or Form S-3.
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Section 2.6 Re-sale Rights. The Company shall at its own cost use its reasonable best efforts to assist each Holder in the sale or disposition of, and to enable the Holder to sell under Rule 144 promulgated under the Securities Act, the maximum number of, its Registrable Securities, including without limitation (a) the prompt delivery of applicable instruction letters to the Companys transfer agent to remove legends from the Holders share certificates, (b) if legal opinions from the Companys counsel are specifically required by the transfer agent, causing the prompt delivery of such legal opinions in forms reasonably satisfactory to the transfer agent, (c) (i) the prompt delivery of instruction letters to the Companys share registrar and depositary agent to convert the Holders securities into depositary receipts or similar instruments to be deposited in the Holders brokerage account(s), and (ii) the prompt payment of all costs and fees related to such depositary facility, including maintenance fees and conversion fees for Registrable Securities held by the. The Company acknowledges that time is of the essence with respect to its obligations under this Section 2.6, and that any delay will cause the Holders irreparable harm and constitutes a material breach of its obligations under this Agreement.
ARTICLE III
INDEMNIFICATION
Section 3.1 Indemnification by Company. To the extent permitted by applicable law, the Company will, with respect to any Registrable Securities covered by a registration statement or prospectus, or as to which registration, qualification or compliance under applicable blue sky laws has been effected pursuant to this Agreement, indemnify and hold harmless each Holder, each Holders officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, and each Person controlling such Holder within the meaning of Section 15 of the Securities Act and such Persons officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, and each underwriter (as defined in the Securities Act) thereof, if any, and each Person who controls any such underwriter within the meaning of Section 15 of the Securities Act (collectively, the Company Indemnified Parties), from and against any and all expenses, claims, losses, damages, costs (including costs of preparation and reasonable attorneys fees and any legal or other fees or expenses actually incurred by such party in connection with any investigation or proceeding), judgments, fines, penalties, charges, amounts paid in settlement and other liabilities, joint or several, (or actions in respect thereof) (collectively, Losses) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, or issuer free writing prospectus (as such term is defined in Rule 433 under the Securities Act), in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, any other applicable securities laws or any rules or regulations thereunder applicable to the Company and (without limiting the preceding portions of this Section 3.1), the Company will reimburse each of the Company Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.1, settling any such Losses or action, as such expenses are incurred; provided that the Companys indemnification obligations shall not apply to amounts paid in settlement of any Losses or action if such settlement is effected without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable to a Holder in any such case for any such Losses or action to the extent that it arises out of or is based upon a violation or alleged violation of any state or federal law (including any claim arising out of or based on any untrue statement or alleged untrue statement or omission or alleged omission in the registration statement or prospectus) which occurs in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives expressly for use in connection with such registration by or on behalf of any Holder.
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Section 3.2 Indemnification by Holders. To the extent permitted by applicable law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which registration or qualification or compliance under applicable blue sky laws is being effected, indemnify, severally and not jointly with any other holders of Registrable Securities, the Company, each of its officers, directors, partners, members, managers, shareholders, accountants, attorneys, agents and employees, each Person who controls the Company within the meaning of Section 15 of the Securities Act (collectively, the Holder Indemnified Parties), against all Losses (or actions in respect thereof) to the extent arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular, issuer free writing prospectus or other document, in each case related to such registration statement, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and will reimburse each of the Holder Indemnified Parties for any reasonable and documented out-of-pocket legal expenses and any other reasonable and documented out-of-pocket expenses actually incurred in connection with investigating, defending or, subject to the last sentence of this Section 3.2, settling any such Losses or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular, issuer free writing prospectus or other document in reliance upon and in conformity with written information regarding such Holder furnished to the Company by such Holder or its authorized representatives and stated to be specifically for use therein; provided, however, that, except for liability for fraud or willful misrepresentation, in no event shall any indemnity under this Section 3.2 payable by the Holder exceed an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement. The indemnity agreement contained in this Section 3.2 shall not apply to amounts paid in settlement of any loss, claim, damage, liability or action if such settlement is effected without the prior written consent of the applicable Holder (which consent shall not be unreasonably withheld or delayed).
Section 3.3 Notification. If any Person shall be entitled to indemnification under this ARTICLE III (each, an Indemnified Party), such Indemnified Party shall give prompt written notice to the party required to provide indemnification (each, an Indemnifying Party) of any claim or of the commencement of any proceeding as to which indemnity is sought. The Indemnifying Party shall have the right, exercisable by giving written notice to the Indemnified Party as promptly as reasonably practicable after the receipt of written notice from such Indemnified Party of such claim or proceeding, to assume, at the Indemnifying Partys expense, the defense of any such claim or litigation, with counsel reasonably satisfactory to the Indemnified Party and, after notice from the Indemnifying Party to such Indemnified Party of its election to assume the defense thereof, the Indemnifying Party will not (so long as it shall continue to have the right to defend, contest, litigate and settle the matter in question in accordance with this paragraph) be liable to such Indemnified Party hereunder for any legal expenses and other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, that an Indemnified Party shall have the right to employ separate counsel in any such claim or litigation, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless the Indemnifying Party shall have failed within a reasonable period of time to assume such defense and the Indemnified Party is or would reasonably be expected to be materially prejudiced by such delay. The failure of any Indemnified Party to give notice as provided herein shall relieve an Indemnifying Party of its obligations under this ARTICLE III only to the extent that the failure to give such notice is materially prejudicial or harmful to such Indemnifying Partys ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the prior written consent of each Indemnified Party (which consent shall not be unreasonably withheld or delayed), consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The indemnity agreements contained in this ARTICLE III shall not apply to amounts paid in settlement of any claim, loss, damage, liability or action if such settlement is effected without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. The indemnification set forth in this ARTICLE III shall be in addition to any other indemnification rights or agreements that an Indemnified Party may have. An Indemnifying Party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such Indemnifying Party with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other Indemnified Parties with respect to such claim.
10
Section 3.4 Contribution. If the indemnification provided for in this ARTICLE III is held by a court of competent jurisdiction to be unavailable to an Indemnified Party, other than pursuant to its terms, with respect to any Losses or action referred to therein, then, subject to the limitations contained in this ARTICLE III, 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 Losses or action in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other, in connection with the actions, statements or omissions that resulted in such Losses or action, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made (or omitted) by, or relates to information supplied by such Indemnifying Party or such Indemnified Party, and the parties relative intent, knowledge, access to information and opportunity to correct or prevent any such action, statement or omission. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 3.4 was determined solely upon pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentence of this Section 3.4. Notwithstanding the foregoing, the amount each Holder will be obligated to contribute pursuant to this Section 3.4 will be limited to an amount equal to the net proceeds received by such Holder in respect of the Registrable Securities sold pursuant to the registration statement which gives rise to such obligation to contribute. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE IV
TRANSFER AND TERMINATION OF REGISTRATION RIGHTS
Section 4.1 Transfer of Registration Rights. Any rights of a Holder under this Agreement, including any right to cause the Company to register securities granted to a Holder under this Agreement, may be transferred or assigned by such Holder to another Person without the consent of any other Person in connection with a transfer of any Registrable Securities to such Person in a Transfer permitted by the Purchase Agreement and the terms of the Convertible Notes; provided, however, that (i) prior written notice of such assignment of rights is given to the Company and (ii) such Holder agrees in writing to be bound by, and subject to, this Agreement pursuant to a joinder agreement in the form attached hereto as Exhibit B.
Section 4.2 Termination of Registration Rights. The rights of any particular Holder to cause the Company to register securities under ARTICLE I shall terminate with respect to such Holder upon the earlier of (i) the termination, liquidation, dissolution of the Company, or (ii) when such Holder no longer holds any Registrable Securities; provided, however, that such rights shall not terminate before the first anniversary of the date hereof.
11
ARTICLE V
MISCELLANEOUS
Section 5.1 Amendments and Waivers. Subject to compliance with applicable law, this Agreement may be amended or supplemented in any and all respects by written agreement of the Company and the Purchaser or if the Purchaser is no longer a Holder, by Holders holding a majority of the Registrable Securities.
Section 5.2 No Registration Rights to Third Parties. Without the prior written consent of the Holders of at least sixty percent (60%) of the number of Registrable Securities then outstanding, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any Person any registration rights of any kind (whether similar to the demand, piggyback or Form F-3 or Form S-3 registration rights described in this Agreement, or otherwise) relating to any securities of the Company which are senior to those granted to the holders of Registrable Securities. In any event, if the Company grants to any holder of the Companys security any registration right of any nature that are superior to the Holders, as determined in good faith by the Board, the Company shall grant such superior registration right to the Holders as well.
Section 5.3 Extension of Time, Waiver, Etc. The parties hereto may, subject to applicable law, (a) extend the time for the performance of any of the obligations or acts of the other party or (b) waive compliance by the other party with any of the agreements contained herein applicable to such party or, except as otherwise provided herein, waive any of such partys conditions. Notwithstanding the foregoing, no failure or delay by the parties hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 5.4 Assignment. Except as provided in Section 4.1, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties hereto without the prior written consent of the other party hereto.
Section 5.5 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
Section 5.6 Entire Agreement; No Third Party Beneficiary. This Agreement constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties and their affiliates, or any of them, with respect to the subject matter hereof and thereof. No provision of this Agreement shall confer upon any Person other than the parties hereto and their permitted assigns any rights or remedies hereunder.
12
Section 5.7 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed entirely within that State, regardless of the laws that might otherwise govern under any applicable conflict of laws principles.
(b) Any disputes, actions and proceedings against any party hereto or arising out of or in any way relating to this Agreement shall be submitted to the Hong Kong International Arbitration Centre (HKIAC) and resolved in accordance with the Arbitration Rules of HKIAC in force at the relevant time and as may be amended by this Section 5.7(b) (the Rules). The place of arbitration shall be Hong Kong. The official language of the arbitration shall be English and the tribunal shall consist of three arbitrators (each, an Arbitrator). The claimant(s), irrespective of number, shall nominate jointly one Arbitrator; the respondent(s), irrespective of number, shall nominate jointly one Arbitrator; and a third Arbitrator will be nominated jointly by the first two Arbitrators and shall serve as chairman of the arbitration tribunal. In the event the claimant(s) or respondent(s) or the first two Arbitrators shall fail to nominate or agree the joint nomination of an Arbitrator or the third Arbitrator within the time limits specified by the Rules, such Arbitrator shall be appointed promptly by the HKIAC. The arbitration tribunal shall have no authority to award punitive or other punitive-type damages. The award of the arbitration tribunal shall be final and binding upon the disputing parties. Any party to an award may apply to any court of competent jurisdiction for enforcement of such award and, for purposes of the enforcement of such award, the parties hereto irrevocably and unconditionally submit to the jurisdiction of any court of competent jurisdiction and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum.
(c) Each of the parties hereto irrevocably consents to service of process in the manner provided for notices in Section 5.9. Nothing in this Agreement will affect the right of any party to serve process in any other manner permitted by law.
Section 5.8 Specific Enforcement. The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to enforce specifically the terms and provisions hereof in the courts described in Section 5.7 without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of this Agreement and without that right, neither the Company nor the Purchaser would have entered into this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, and agree not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 5.8 shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 5.9 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
13
(a) If to the Company, to it at:
Puxin Limited
5/F, building 4, Dingjun building
75 Suzhou Street, Haidian District
Beijing 100080
Peoples Republic of China
E-mail: wangpeng6@pxjy.com
Attn: Mr. Peng Wang
(b) If to the Holders at:
[PAG Entity]
Address: 33/F, Three Pacific Place,
1 Queens Road East, Hong Kong
Email: jlewis@pagasia.com
Attention: Jon Lewis
with a copy (which shall not constitute notice) to:
Fenwick & West LLP
Address: Unit 908, Kerry Parkside Office
No. 1155 Fang Dian Road
Pudong, Shanghai 201204, China
Email: niping.wu@fenwick.com
Attention: Niping Wu
or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 5.10 Severability. If any term, condition or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term, condition or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law.
Section 5.11 Expenses. Except as provided in Section 2.1, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
[Signature pages follow]
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first above written.
COMPANY: | ||
PUXIN LIMITED | ||
By: |
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Name: | ||
Title: | ||
PURCHASER: | ||
[PAG Entity] | ||
By: |
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Name: | ||
Title: |
15
EXHIBIT A
DEFINED TERMS
1. The following capitalized terms have the meanings indicated:
Business Day means any day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized or required by law to be closed.
Ordinary Shares mean the ordinary shares of the Company, with a par value of $0.00005 each.
Exchange Act means the Securities Exchange Act of 1934, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
FINRA means the Financial Industry Regulatory Authority, Inc.
Form F-3 or Form S-3 means such respective form of registration statement under the Securities Act (including Form S-3 or Form F-3, as appropriate) or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
Person means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or any other entity, including a governmental authority.
register, registered and registration refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement or the automatic effectiveness of such registration statement, as applicable.
Registration Expenses means all expenses incurred by the Company in complying with Section 1.1, Section 1.2 and Section 1.3 hereof, including, without limitation, (i) SEC, stock exchange and FINRA registration and filing fees, (ii) all fees and expenses incurred in complying with securities or blue sky laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with blue sky qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and expenses of counsel to the Company and of its independent public accountants and any other accounting fees, charges and expenses incurred by the Company (including any expenses arising from any cold comfort letters or any special audits incident to or required by any registration or qualification), and (v) any liability insurance or other premiums for insurance obtained in connection with Section 1.1, Section 1.2 and Section 1.3 hereof, regardless of whether any registration statement is declared effective.
registration statements means, as the context requires, a Form F-3 or S-3 or a registration statement on Form F-1 or S-1 under the Securities Act (or any successor registration form under the Securities Act subsequently adopted by the SEC available to an issuer if a Form F-3 or S-3 is not available to such issuer).
A-1
Registrable Securities means, as of any date of determination, any Ordinary Shares owned by any Holder, including Ordinary Shares issued or issuable upon the conversion of the Convertible Notes, and Ordinary Shares issued or issuable in respect of such Ordinary Shares upon any share split, share dividend, share combination or consolidation, recapitalization, reclassification or other similar event in relation to the Ordinary Shares (including, in each case, as long as the ADSs remain listed on a national recognized securities market, Ordinary Shares in the form of ADSs (it being understood that while any offers and sales made under a registration statement contemplated by this Agreement will be of ADSs, the securities to be registered by any such registration statement under the Securities Act are Ordinary Shares, and the ADSs are registered under a separate Form F-6)). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) such securities are sold or otherwise transferred pursuant to an effective registration statement under the Securities Act, (ii) such securities shall have ceased to be outstanding, (iii) such securities have been transferred in a transaction in which the Holders rights under this Agreement are not assigned to the transferee of the securities, (iv) such securities are sold in a brokers transaction under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or (v) the stock certificates or evidences of book-entry registration relating to such securities have had all restrictive legends removed.
number of shares of Registrable Securities then outstanding means the number of Ordinary Shares that are Registrable Securities and are then issued and outstanding or would be outstanding assuming full conversion of the Convertible Notes then outstanding.
Rule 144 means Rule 144 promulgated under the Securities Act and any successor provision.
Rule 462(e) means Rule 462(e) promulgated under the Securities Act and any successor provision.
Selling Expenses means all underwriting discounts and commissions payable to underwriters applicable to the sale of Registrable Securities pursuant to Section 1.1, Section 1.2 or Section 1.3 hereof.
SEC means the U.S. Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.
Shelf Registration Statement means the Resale Shelf Registration Statement or a Subsequent Shelf Registration Statement, as applicable.
A-2
2. The following terms are defined in the Sections of the Agreement indicated:
INDEX OF TERMS
Term |
Section |
|
ADS |
Recitals | |
Agreement |
Preamble | |
Arbitrator |
Section 5.7(b) | |
Company |
Preamble | |
Company Indemnified Parties |
Section 3.1 | |
Convertible Notes |
Recitals | |
Effectiveness Period |
Section 1.4(b) | |
HKIAC |
Section 5.7(b) | |
Holder |
Preamble | |
Holder Indemnified Parties |
Section 3.2 | |
Indemnified Party |
Section 3.3 | |
Indemnifying Party |
Section 3.3 | |
Initiating Holder |
Section 1.1(a) | |
Losses |
Section 3.1 | |
Purchase Agreement |
Recitals | |
Purchaser |
Preamble | |
Request Notice |
Section 1.2(a) | |
Resale Shelf Registration Statement |
Section 1.3(a) | |
Rules |
Section 5.7(b) | |
Shelf Offering |
Section 1.3(g) | |
Subsequent Holder Notice |
Section 1.3(e) | |
Subsequent Shelf Registration Statement |
Section 1.3(c) |
A-3
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
JOINDER
The undersigned is executing and delivering this Joinder pursuant to the Registration Rights Agreement dated as of [●], 2021 (as the same may hereafter be amended, the Registration Rights Agreement), among PUXIN LIMITED, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the Company) and [●], among others. Capitalized terms used herein but not defined shall have the meanings given to them in the Registration Rights Agreement.
By executing and delivering this Joinder to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of the Registration Rights Agreement as a holder of Registrable Securities in the same manner as if the undersigned were an original signatory to the Registration Rights Agreement.
Accordingly, the undersigned has executed and delivered this Joinder as of the day of , .
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Signature of Shareholder | ||
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Print Name of Shareholder | ||
Address: |
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Agreed and Accepted as of |
||
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PUXIN LIMITED |
||
By: |
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Its: |
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B-1
Exhibit 8.1
List of Subsidiaries and Consolidated Variable Interest Entity of Puxin Limited
Subsidiaries |
Jurisdication of Incorporation |
Direct Parent Company of the Subsidiary and its
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Prepshine Holdings Co., Limited | Hong Kong | Puxin Limited (Cayman Islands) | ||
Beijing Global Education & Technology Co., Ltd. | PRC | Prepshine Holdings Co., Limited (Hong Kong) | ||
Purong (Beijing) Information Technology Co., Ltd. | PRC | Prepshine Holdings Co., Limited (Hong Kong) | ||
Consolidated Variable Interest Entity | ||||
Puxin Education Technology Group Co., Ltd.* | PRC |
* |
Puxin Education Technology Group Co., Ltd. had the following subsidiaries as of December 31, 2020, all of which are formed and operate in the PRC: (1) 138 schools which principally provide K-12 tutoring services, (2) 63 schools which principally provide study-abroad tutoring services, and (3) 59 subsidiaries acting as holding company or sponsor of training institutions that are private non-enterprise entities. Puxin Education Technology Group Co., Ltd. Wholly owned 259 subsidiaries and owned a majority equity interest of the remaining one subsidiary. |
Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Yunlong Sha, certify that:
1. |
I have reviewed this annual report on Form 20-F of Puxin Limited (the Company); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. |
The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
5. |
The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Date: |
April 30, 2021 |
|
By: |
/s/ Yunlong Sha |
|
Name: |
Yunlong Sha |
|
Title: |
Chief Executive Officer and Chairman |
Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peng Wang, certify that:
1. |
I have reviewed this annual report on Form 20-F of Puxin Limited (the Company); |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; |
4. |
The Companys other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) |
Evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) |
Disclosed in this report any change in the Companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and |
5. |
The Companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Companys auditors and the audit committee of the Companys board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize and report financial information; and |
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. |
Date: |
April 30, 2021 |
|
By: |
/s/ Peng Wang |
|
Name: |
Peng Wang |
|
Title: |
Chief Financial Officer |
Exhibit 13.1
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Puxin Limited (the Company) on Form 20-F for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Yunlong Sha, Chief Executive Officer and Chairman of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 30, 2021
By: |
/s/ Yunlong Sha |
|
Name: |
Yunlong Sha |
|
Title: |
Chief Executive Officer and Chairman |
Exhibit 13.2
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the annual report of Puxin Limited (the Company) on Form 20-F for the year ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Peng Wang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: April 30, 2021
By: |
/s/ Peng Wang |
|
Name: |
Peng Wang |
|
Title: |
Chief Financial Officer |
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-231115 and 333-226862 on Form S-8 of our report dated April 30, 2021, relating to the financial statements of Puxin Limited appearing in this Annual Report on Form 20-F for the year ended December 31, 2020.
/s/Deloitte Touche Tohmatsu Certified Public Accountants LLP
Beijing, the Peoples Republic of China
April 30, 2021
Exhibit 15.2
30 April 2021 |
Our Ref: JWYL/BLUI/P3059-H20553 | |
5/F, Building 4, Dingjun Building 75 Suzhou Street, Haidian District Beijing, 100080
Peoples Republic of China
|
Dear Sir or Madam
Puxin Limited
FORM 20-F
We consent to the reference to our firm under the heading Item 10.E. Additional InformationTaxation Cayman Islands Taxation in the Annual Report on Form 20-F of Puxin Limited for the year ended 31 December 2020 (the Annual Report), which will be filed with the U.S. Securities and Exchange Commission (the Commission) on 30 April 2021 under the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act).
We also consent to the filing with the Commission of this consent letter as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under the Exchange Act, or the Rules and Regulations of the Commission thereunder.
Yours faithfully
/s/Walkers (Hong Kong)
WALKERS (HONG KONG)
Exhibit 15.3
10/F, CPIC Plaza, No. 28 Fengsheng Lane, Xicheng District, Beijing 100032, China
Tel: 86 10 5776 3888 Fax: 86 10 5776 3777
April 30, 2021
Puxin Limited
5/F, Building 4, Dingjun Building
75 Suzhou Street, Haidian District
Beijing, 100080, the Peoples Republic of China
as the Company
Dear Sirs,
We consent to the references to our firm under the heading Item 4. Information on the CompanyC. Organizational StructureContractual Arrangements with Puxin Education in Puxin Limiteds Annual report on Form 20-F for the year ended December 31, 2020 (the Annual Report), which is filed with the Securities and Exchange Commission (the SEC) on April 30, 2021. We also consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Yours faithfully,
/s/Tian Yuan Law Firm
Tian Yuan Law Firm