Exhibit 10.3

 

EXECUTION VERSION

 

UNDERTAKING

 

THIS UNDERTAKING (this “Undertaking”), dated as of November 29, 2019, is made by
each of Ruili Group Co., Ltd. (“Ruili Group”), Ruili International Inc., a
Delaware corporation (“Parent”), Ruili International Merger Sub Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Merger Sub”), Mr. Xiaoping
Zhang, Ms. Shuping Chi and Mr. Xiaofeng Zhang (each, an “Undertaking Person”
and, collectively, the “Undertaking Persons”) in favor of (i) SORL Auto Parts,
Inc., a Delaware corporation (the “Company”), (ii) Fairford Holdings Limited, a
Hong Kong company and wholly owned subsidiary of the Company (“Fairford”), and
(iii) Ruili Group Ruian Auto Parts Co., Ltd., a Sino-foreign joint venture
between Ruili Group and Fairford (“Ruian”) (each of the Company, Fairford and
Ruian, a “Beneficiary” and, collectively, the “Beneficiaries”). Reference is
made to that certain merger agreement (the “Merger Agreement”), dated as of the
date hereof, by and among the Company, Parent, and Merger Sub. Capitalized terms
used but not defined herein shall have the respective meaning set forth in the
Merger Agreement.

 

WHEREAS, pursuant to the terms of the Merger Agreement, Ruili Group, prior to or
concurrently with the execution and delivery of the Merger Agreement, shall
deposit, or cause to be deposited, an amount of 7,914,300.38 in RMB equal to the
Parent Termination Fee (the “Deposit”), with Ruian at a RMB bank account of
Ruian as designated by the Company to serve as the Deposit Amount under the
Merger Agreement; and

 

WHEREAS, the parties hereto desire that the Deposit held by Ruian upon the terms
and conditions hereinafter set forth.

 

NOW THEREFORE, as a condition and inducement to the Company’s willingness to
enter into the Merger Agreement, each of the Undertaking Persons undertakes to
each of the Company, Fairford and Ruian as follows:

 

1.Undertaking.

 

a)Ruian shall have the sole and exclusive control over the Deposit from the date
hereof until the earlier of the occurrence, if any, of (i) the Closing and (ii)
the date on which the Company is required to return the Deposit to Ruili Group
pursuant to the terms of the Merger Agreement (the “Undertaking Period”). During
the Undertaking Period, none of the Undertaking Persons or their Affiliates
(other than the Beneficiaries) shall receive or be entitled to any portion of
the Deposit or, directly or indirectly, cause Ruian to distribute, convey,
transfer, assign or otherwise, whether by way of dividend, distribution of
capital or other distribution or upon the liquidation or dissolution of Ruian or
otherwise, any portion of the Deposit to any Undertaking Persons or their
Affiliates (other than the Beneficiaries).

 

b)Ruili Group hereby absolutely, unconditionally and irrevocably guarantees to
the Beneficiaries the due and punctual payment and discharge as and when due of
the payment obligations of Parent with respect to the payment of the Parent
Termination Fee pursuant to Section 9.3(b) of the Merger Agreement, which
payment obligations shall be satisfied out of the Deposit Amount.

 

 

 

 

c)Subject to Section 1(d), on and following the termination of the Merger
Agreement in circumstances in which the Company is entitled to receive the
Parent Termination Fee pursuant to its terms, (i) Ruian shall be entitled to
retain the Deposit for the benefit of the Company as full satisfaction of
Parent’s obligation to pay the Parent Termination Fee, (ii) the Undertaking
Persons shall not, and shall cause their respective Affiliates not to, cause the
Company or any of its Affiliates (including Ruian and Fairford) to distribute,
whether by way of dividend, distribution of capital or other distribution or
upon the liquidation or dissolution of Ruian or otherwise, all or any portion of
the Deposit Amount to any of the Undertaking Persons or their Affiliates (other
than the Beneficiaries); and (iii) in the event that Ruian makes distributions,
whether by way of dividend, distribution of capital or other distribution or
upon the liquidation or dissolution of Ruian or otherwise, to its equity holders
up to a cumulative amount equal to the Parent Termination Fee, the Undertaking
Persons and their Affiliates (other than the Company and Fairford) (x) shall
have no right to any such distributions; and (y) hereby irrevocably and
permanently convey, transfer and assign to Fairford all of its and their rights
(whether arising under contracts or otherwise at Law, in equity or otherwise) to
receive any portion of such distribution.

 

d)For the avoidance of doubt, nothing contained in this Undertaking shall
prohibit (i) the Company from declaring any dividends, distributions of capital
or other distributions on its capital that are pro rata to its stockholders, or
(ii) the Company or any of its Subsidiaries from entering into any agreement
with or making payments to the Undertaking Persons or their respective
Affiliates in the ordinary course of business consistent with past practice and
duly approved by the Company’s Audit Committee or the board of directors of the
relevant Subsidiaries on an arm’s length basis of similar types with
unaffiliated third parties (including with respect to any contracts or
arrangements relating to service as an officer, director, employee or consultant
or indemnification agreements or obligations relating to any of the foregoing).

 

e)If requested by any Beneficiary, the Undertaking Persons and their respective
Affiliates shall execute all documents and take all actions necessary, required
or desirable to give effect to this Section 1.

 

2. Entire Agreement. This Undertaking and the Merger Agreement constitute the
entire agreement with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the Undertaking
Persons, the Beneficiaries, or any of them, with respect to the subject matter
hereof.

 

3. Special Committee Approval. Subject to the requirements of applicable Law,
any amendment, consent, waiver, termination or other determination to be made,
or action to be taken (including pursuing any Legal Proceeding against the
Undertaking Persons in relation to or arising out of this Undertaking), by any
Beneficiary under or with respect to this Undertaking shall be made or taken at
the direction and upon the approval of, and only at the direction and upon the
approval of, the Special Committee.

 

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4. Assignment. Subject to Section 3 hereof, neither this Undertaking nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of Law or otherwise) without the prior
written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding sentence, this
Undertaking will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective permitted successors and assigns.

 

5. Confidentiality. The confidentiality provisions set forth in the Merger
Agreement are hereby incorporated by reference into, and shall be deemed to
apply mutatis mutandis to, this Undertaking and any actions undertaken
hereunder.

 

6. Severability. If any term or other provision of this Undertaking is invalid,
illegal or incapable of being enforced by any Law or public policy, all other
terms and provisions of this Undertaking shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Undertaking so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.

 

7. Specific Performance. The parties hereto acknowledge and agree irreparable
harm may occur for which money damages may not be an adequate remedy in the
event that any of the provisions of this Undertaking were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that, in addition to any other remedies at Law or in equity,
the parties hereto shall be entitled to injunction to prevent breaches of this
Undertaking and to enforce specifically the terms and provisions of this
Undertaking.

 

8. Governing Law. This Undertaking shall be governed by and construed in
accordance with the Laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof or of any other jurisdiction.

 

9. Counterparts. This Undertaking may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which together shall
be deemed to be one and the same instrument.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed and delivered this Undertaking
as of the date first above written.

 

  Undertaking Persons:         Ruili Group Co., Ltd.         By: /s/ Xiaoping
Zhang     Name: Xiaoping Zhang     Title: Legal Representative         Ruili
International Inc.         By: /s/ Xiaoping Zhang     Name: Xiaoping Zhang    
Title: Director         Ruili International Merger Sub Inc.         By: /s/
Xiaoping Zhang     Name: Xiaoping Zhang     Title: Director         By: /s/
Xiaoping Zhang     Xiaoping Zhang         By: /s/ Shuping Chi     Shuping Chi  
      By: /s/ Xiaofeng Zhang     Xiaofeng Zhang

 

[SORL - Signature page to Undertaking]

 

 

 

 

Accepted and Agreed to

as of the date written above

 

Beneficiaries:

 

SORL Auto Parts, Inc.

 

By: /s/ Xiao Lin     Name: Xiao Lin     Title: Director           Fairford
Holdings Limited           By: /s/ Jinrui Yu     Name: Jinrui Yu     Title:
Authorized Signatory           Ruili Group Ruian Auto Parts Co., Ltd.          
By: /s/ Jinrui Yu     Name: Jinrui Yu     Title: Authorized Signatory  

 

[SORL - Signature page to Undertaking]