Exhibit 4.4


 


Shareholders
Agreement


 


 


March 31, 2010


 


 


In respect
of


 


China New
Borun Corporation


 


 


Between


 


 


(1) China
New Borun Corporation


 


(2) King
River Holding Limited


 


(3) Star
Elite Enterprises Limited


 


(4) Earnstar
Holdings Limited


 


(5) TDR
Advisors Inc.


 

















 


This Shareholders’ Agreement (this “Agreement”) is made this 31st  day of March,
2010


 


Between:


 


(1)                                China New Borun Corporation, an exempted company incorporated in the Cayman
Islands, the registered office of which is at PO Box 309, Ugland House, Grand
Cayman, KY1-1104, Cayman Islands (the “Company”);


 


(2)                                King River Holding Limited, a company incorporated in the British Virgin
Islands, the registered office of which is at Kingston Chambers, PO Box 173,
Road Town, Tortola, British Virgin Islands which is 100% owned by Mrs. Shan Junqin (the “Ordinary Shareholder”);


 


(3)                            Star Elite Enterprises Limited, a company incorporated in the British Virgin Islands,
the registered office of which is at OMC CHAMBERS, WICKHAMS CAY
1, ROAD TOWN, TORTOLA, BRITISH VIRGIN ISLANDS (the “Class A Shareholder”);


 


(4)                                Earnstar Holdings Limited, a company incorporated in the British Virgin Islands,
the registered office of which is at Trident Trust Company
(B.V.I.) Limited, Trident Chambers, P.O. Box 146, Road Town, Tortola,
British Virgin Islands (the “Class B
Shareholder”); and


 


(5)                                TDR Advisors Inc., a company incorporated in the British Virgin Islands, the registered
office of which is at Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands (the “Class C Shareholder”).


 


Whereas:


 


(A)                            As at the date
of this Agreement, the issued share capital of the Company consists of
14,847,811 Ordinary Shares held by the Ordinary Shareholder.


 


(B)                              Upon Completion
(as defined below), the Company will issue and allot Preference Shares to the
Investors.


 


(C)                              The purpose of this Agreement is for the parties to
record their agreement in relation to the Shareholders’ rights and obligations
as shareholders of the Company.


 


IT IS HEREBY AGREED:


 


1                                         DEFINITIONS AND INTERPRETATION


 


1.1                               In this Agreement the following words and expressions shall (except
where the context otherwise requires) have the following meanings:-


 


	
  “Articles”

  	
  the Company’s memorandum
  and articles of association, as amended from time to time;

  
	
   

  	
   

  
	
  “Auditors”

  	
  the auditors of the
  Company as may from time to time be appointed in accordance with this
  Agreement;

  
	
   

  	
   

  
	
  “Board”

  	
  the board of Directors
  from time to time of the Company;

  



 


1

















 


	
  “Business Days”

  	
  any day (excluding
  Saturdays, Sundays and public holidays in Hong Kong and New York) on which
  banks generally are open for business in Hong Kong and New York;

  
	
   

  	
   

  
	
  “China High”

  	
  China High Enterprises
  Limited, a company incorporated in Hong Kong under registration number 1256980 and with its registered office at Room 904, Harvest
  Building, 29-35 Wing Kut Street, Central, Hong Kong;

  
	
   

  	
   

  
	
  “Class A
  Director”

  	
  a Director from time to
  time appointed by the Class A Shareholder pursuant to Clause 3.2;

  
	
   

  	
   

  
	
  “Class B
  Director”

  	
  a Director from time to
  time appointed by the Class B Shareholder pursuant to Clause 3.2;

  
	
   

  	
   

  
	
  “Class C
  Director”

  	
  a Director from time to
  time appointed by the Class C Shareholder pursuant to Clause 3.2;

  
	
   

  	
   

  
	
  “Completion”

  	
  completion by the
  performance of all the obligations of the parties hereto under Clause 2;

  
	
   

  	
   

  
	
  “Director”

  	
  any director for the time being of the Company, including where
  applicable any alternate director;

  
	
   

  	
   

  
	
  “Exchange Act”

  	
  the Securities Exchange Act of 1934, as amended;

  
	
   

  	
   

  
	
  “Golden Direction”

  	
  Golden Direction Limited,
  a company incorporated in the British Virgin Islands under registration
  number 1472637 and with its registered office at ILS Fiduciary (B.V.I.)
  Limited, Mill Mall, Suite 6, Wickhams Cay 1, P.O. Box 3085, Road
  Town, Tortola, British Virgin Islands;

  
	
   

  	
   

  
	
  “Group”

  	
  the Company and each of its subsidiaries
  which, after Completion, shall include, without limitation, the following:

   

  (i)                                   Golden Direction;

   

  (ii)                                China High;

   

  (iii)                             Weifang Great Chemical Inc., a company organised
  under the laws of the PRC which is wholly owned by China High (“Weifang”);

   

  (iv)                            Shandong Borun Industrial Co., Ltd., a company
  organised under the laws of the PRC which is wholly owned by Weifang (“Shandong Borun”) and

   

  (v)                               Daqing Borun Biotechnology Co., Ltd., a company
  organised under the laws of the PRC which is wholly owned by Shandong Borun
  (“Daqing Borun”),

  



 


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  and “Group
  Company” means any member of the Group;

  
	
   

  	
   

  
	
  “Holder”

  	
  any
  person owning or having the rights to acquire Registrable Securities or any
  permitted assignee of record of such Registrable Securities to whom rights
  under Section 13.1 in this Agreement and in Exhibit C have
  been duly assigned in accordance with this Agreement;

  
	
   

  	
   

  
	
  “Investors”

  	
  the Class A Shareholder,
  the Class B Shareholder and the Class C Shareholder (and each, an “Investor”);

  
	
   

  	
   

  
	
  “Liquidation Event”

  	
  any consolidation, amalgamation or merger of the Company with or into
  any Person, or any other corporate reorganization, including a sale or acquisition
  of equity securities of the Company, in which the shareholders of the Company
  immediately before such transaction own less than 50% of the Company’s voting
  power immediately after such transaction (excluding any transaction effected
  solely for tax purposes or to change the Company’s domicile); or a sale of
  all or substantially all of the assets of the Company;

  
	
   

  	
   

  
	
  “majority
  of the Investors”

  	
  holders of at least a majority of the outstanding Class A
  Preference Shares, Class B Preference Shares and Class C Preference
  Shares (voting separately as a single class and on an as converted to
  Ordinary Shares basis) from time to time;

  
	
   

  	
   

  
	
  “Ordinary
  Resolution”

  	
  means a resolution passed by a simple majority of the Shareholders
  as, being entitled to do so, vote in person or, where proxies are allowed, by
  proxy at a general meeting, and includes a unanimous written resolution. In
  computing the majority when a poll is demanded regard shall be had to the
  number of votes to which each Shareholder is entitled by the Articles;

  
	
   

  	
   

  
	
  “Ordinary Shares”

  	
  an ordinary share with a
  par value of US$[0.001] per share in the capital of the Company having the
  rights attaching to it as set out herein;

  
	
   

  	
   

  
	
  “Original Issue Price”

  	
  in the case of each
  Class A Preference Share, US$[0.001], in the case of each
  Class B Preference Share, US$[0.001], and in the case of
  each Class C Preference Share, US$[0.001];

  
	
   

  	
   

  
	
  “Preference Shares”

  	
  a Preference share of any series with a par value of US$[0.001] per share in the capital of the
  Company having the rights, preference and privileges attaching to it set out
  herein, and includes the Class A Preference Shares, the Class B
  Preference Shares and the Class C Preference Shares.

  



 


3

















 


	
  “Qualified Public Offering”

  	
  a firm commitment underwritten public offering of Ordinary Shares of
  the Company made pursuant to an effective registration statement under the
  United States Securities Act of 1933 (the “Securities
  Act”), as amended, on the New York Stock Exchange or the Nasdaq
  Global Market, or an offering or listing substantially equivalent to the
  foregoing on another stock exchange.The P/E ratio of each share of the
  Company should be not lower than nine (9) times calculated pursuant to
  its net profits in the fiscal year of 2009 and the market capitalization of
  all its shares or relevant secu rities should be not less than two hundred
  million US dollars (USD 200, 000, 000).

  
	
   

  	
   

  
	
  “Registrable Securities”

  	
  (1) any Ordinary Shares of the Company issued or issuable pursuant
  to conversion of any Preference Shares, (2) any Ordinary Shares of the
  Company issued (or issuable upon the conversion or exercise of any warrant,
  right or other security which is issued) as a dividend or other distribution
  with respect to, or in exchange for or in replacement of, any Preference
  Shares, and (3) any other Ordinary Shares owned or hereafter acquired by
  the Investor. Notwithstanding the foregoing, “Registrable Securities” shall
  exclude any Registrable Securities sold by a person in a transaction in which
  rights under Exhibit C are not assigned in accordance with this
  Agreement and any Registrable Securities which are sold in a registered
  public offering under the Securities Act or analogous statute of another
  jurisdiction, or sold pursuant to Rule 144 promulgated under the
  Securities Act or analogous rule of another jurisdiction;

  
	
   

  	
   

  
	
  “SEC”

  	
  the U.S. Securities and Exchange Commission;

  
	
   

  	
   

  
	
  “Selling Expenses”

  	
  all underwriting discounts and selling commissions applicable to the
  sale of Registrable Securities pursuant to Section 2 of Exhibit C.

  
	
   

  	
   

  
	
  “Share Exchange Agreement”

  	
  the share exchange
  agreement entered into on February 28, 2010, by and between the Company, Golden Direction Limited, China
  High and the Investors;

  
	
   

  	
   

  
	
  “Shareholders”

  	
  the members of the
  Company, including the Ordinary Shareholder and each of the Investors, and
  any person or persons to whom they may properly transfer their Shares
  pursuant to the provisions of this Agreement and the Articles (and each, a “Shareholder”);

  
	
   

  	
   

  
	
  “Shares”

  	
  a share or shares in the capital of the Company, including the
  Ordinary Shares and the Preference Shares, and includes a fraction of a
  share;

  
	
   

  	
   

  
	
  “Special Resolution”

  	
  a resolution which has been (a) passed by a majority of not less
  than two-thirds of such Shareholders as, being 

  



 


4

















 


	
   

  	
  entitled to do so, vote in person or, where proxies are allowed, by
  proxy at a general meeting of which notice specifying the intention to
  propose the resolution as a special resolution has been duly given, or
  (b) approved in writing by all of the Shareholders entitled to vote at a
  general meeting of the Company in one or more instruments each signed by one
  or more of the Shareholders aforesaid.

  
	
   

  	
   

  
	
  “Statute”

  	
  the Companies Law (2009 Revision) of the Cayman Islands as amended
  and every statutory modification or re-enactment thereof for the time being
  in effect.

  



 


1.2                               In this
Agreement, unless the context otherwise requires, any reference to a “Clause”
or a “Schedule” is a reference to a clause or a schedule of this Agreement and,
unless otherwise indicated, includes all the sub-clauses of that clause.  The Schedules form an integral part of this
Agreement.


 


1.3                               In this
Agreement, words importing the singular include the plural and vice versa,
words importing gender or the neuter include both genders and the neuter and
references to persons include bodies corporate or unincorporate.


 


1.4                               The clause
headings in this Agreement are for convenience only and shall not affect its
interpretation.


 


1.5                               References
herein to statutory provisions shall be construed as references to those
provisions as respectively amended or re-enacted (whether before or after the
date hereof) from time to time and shall include any provision of which they
are re-enactments (whether with or without modification) and any subordinate
legislation made pursuant thereto.


 


1.6                               Where any
obligation in this Agreement is expressed to be made, undertaken or given by
two or more parties, they shall be jointly and severally responsible in respect
of it.


 


1.7                               References to
persons shall include bodies corporate, unincorporated associations and
partnerships and references to “the parties” or “a party” shall mean the
parties or a party (as the case may be) to this Agreement.


 


2                                         COMPLETION


 


2.1                               Completion
shall occur on the Closing Date (as defined in the Share Exchange Agreement),
when each of the following matters shall be effected:


 


(a)                                  each of the Investors shall transfer to Golden
Direction its entire interest in the shareholding of China High (representing
approximately 25.76% of the entire issued share capital of China High), as
follows:


 


	
   

  	
  Transferor

  	
   

  	
  Shares to be transferred to

  Golden Direction

  	
   

  	
  Percentage of China

  High Shares

  
	
   

  	
  Class A Shareholder

  	
   

  	
  2,000 preference shares of China High

  	
   

  	
  Approximately 18.56%

  
	
   

  	
  Class B Shareholder

  	
   

  	
  574 preference shares of China High

  	
   

  	
  Approximately 5.33%

  
	
   

  	
  Class C Shareholder

  	
   

  	
  202 preference shares of China High

  	
   

  	
  Approximately 1.87%

  



 


5

















 


(b)                                 the Company shall issue and allot Preference Shares to
the Investors, credited as fully paid, so that immediately following the
Closing Date, the Investors shall hold the following Preference Shares
(representing approximately 25.76% of the entire issued share capital of the
Company  calculated on a fully-diluted basis):


 


	
   

  	
  Investors

  	
   

  	
  Number of

  Preference

  Shares to be

  Issued

  	
   

  	
  Number of Ordinary

  Shares Into Which

  Preference Shares are

  Convertible

  	
   

  	
  Percentage of New

  Borun Shares,

  Calculated on a Fully-

  Diluted Basis,

  Immediately After

  Issuance

  	
   

  
	
   

  	
  Class A Shareholder

  	
   

  	
  3,711.952 Class A Shares

  	
   

  	
  3,711,952 Ordinary Shares (subject to
  adjustment in accordance with this Agreement)

  	
   

  	
  Approximately 18.56%

  	
   

  
	
   

  	
  Class B Shareholder

  	
   

  	
  1,065.330 Class B Shares

  	
   

  	
  1,065,330 Ordinary Shares (subject to
  adjustment in accordance with this Agreement)

  	
   

  	
  Approximately 5.33%

  	
   

  
	
   

  	
  Class C Shareholder

  	
   

  	
  374.907 Class C Shares

  	
   

  	
  374,907 Ordinary Shares (subject to
  adjustment in accordance with this Agreement)

  	
   

  	
  Approximately 1.87%

  	
   

  



 


For the avoidance of doubt, attached hereto as Exhibit A
is an Equity Ownership Table which sets forth the equity ownership of the
Investors in China High immediately prior to the Closing Date, and the equity
ownership of the Investors in New Borun immediately after the Closing Date.


 


(c)                                  each of the persons nominated pursuant to Clause 3
below shall be appointed as a Director.


 


2.2                               Each of the matters set out in Clause 2.1 shall occur
simultaneously, and shall be conditional upon each other such matter occurring
simultaneously therewith.


 


3                                         BOARD OF DIRECTORS; BOARD COMMITTEES


 


3.1                               Until the
closing of a Qualified Public Offering, the Board shall consist of 9 Directors,
each of whom shall serve a one year term until his or her successor is elected
at an annual or special meeting of the shareholders of the Company called for
the purpose of electing Directors, and shall meet at least twice a year and once every half a year, after which
the Board may determine the number of Directors, term limits and the frequency
of Board meetings at the sole discretion of the Board in accordance with the
Articles and applicable law.


 


6

















 


3.2                               Subject to
Clause 3.5, each Investor shall have the right to appoint a Director at an
annual or special meeting of the shareholders of the Company called for the
purpose of electing Directors (the “Appointment
Right”) as follows:


 


(a)                                  If the Company has seven or
more directors, the Class A Shareholder shall be entitled to appoint 2
Directors (each, a “Class A Director”)
and to remove or substitute any such Class A Director so appointed; if the
Company has less than 7 directors, the Class A Shareholder shall be
entitled to appoint 1 Class A Director and
to remove or substitute such Class A Director so
appointed;


 


(b)                                 the Class B Shareholder
shall be entitled to appoint 1 Director (the “Class B Director”), and to
remove or substitute any Class B Director so
appointed; and


 


(c)                                  the Class C Shareholder
shall be entitled to appoint 1 Director (the “Class C Director”), and to
remove or substitute any Class A Director so
appointed.


 


The
first Class A Director shall be Mr. Rong Chen, the first Class B Director shall be Mr. Yibin
Wei and the first Class C
Director shall be Ruiping Wang,
each of whom shall be appointed upon the Closing Date in accordance with Clause
2.1(c).


 


Thereafter,
each Investor’s Appointment Right shall be exercised by the relevant Investor
delivering a written notice to the Company, and any such appointment, removal
or substitution of the Director as specified therein shall be effective
(without the requirement for any further approval or action on the part of the
Shareholders or the Board) forthwith upon delivery of such written notice to
the Company.


 


3.3                               The remaining
Directors of the Board (the “Ordinary
Directors”) shall be appointed and may be removed by an Ordinary
Resolution of the Company.


 


3.4                               The quorum for
the transaction of business at any meeting of the Board of Directors shall
include at least 1 Class A Director, 1 Class B Director and 1 Class C Director being present at
the time when the relevant business is transacted.  A
person who holds office as an alternate Director shall, if such person’s
appointor is not present, be counted in the quorum.  A Director who also acts as an alternate
Director shall, if such Director’s appointor is not present, count twice
towards the quorum.


 


3.5                               Each Investor’s
Appointment Right shall terminate upon the closing of a Qualified Public
Offering.  Thereafter, the Class A
Director, the Class B Director and the Class C Director shall serve
until the next annual meeting of the shareholders when their successors are
duly elected and qualified.


 


3.6                               Upon the
termination of the Appointment Right of each Investor, such Investor shall have
the right to nominate one Director candidate at the next annual meeting of the
shareholders of the Company in accordance with the election procedures set
forth in the Articles.  Such nominating
right does not guarantee that such Director candidate will be elected to serve
as a Director of the Company.


 


3.7                               If the Company sets up a compensation committee of the
Board, each of the Investors shall have the right to designate persons to
become members of such compensation committee and to examine, approve and
formulate the share equity policy of the Company (including employee stock
ownership plans) and to examine and approve the compensation of the Company’s
senior management (including, without limitation, the Company’s Chief Executive
Officer, Chief Operating Officer, Chief Technology Officer and Chief Financial
Officer).


 


7

















 


3.8                               If the Company
sets up a financial committee, an execution committee, an audit committee or a
listing committee of the Board, each of the Investors shall have the right to
designate persons to become members of such committees.


 


3.9                               All reasonable
expenses incurred by the Class C Director in its capacity as the Class C
Director, including, without limitation, expenses relating to the attendance by
the Class C Director of all Board meetings, shall be borne by the Company.


 


3.10                         With the
exception of Clauses 3.1, 3.5 and 3.6, the rights set forth in this Clause 3
shall terminate upon the closing of a Qualified Public Offering.


 


4                                         ADJUSTMENT TO INVESTORS’ SHARE PROPORTIONS; ANTI-DILUTION


 


4.1                               Adjustments to Investors’ Share Proportions


 


(a)                                  If the audited net profit of the Group for the fiscal
year ended December 31, 2009 is less than RMB110,000,000, then the Class A
Shareholder’s Share proportion in the Company (calculated on a fully diluted
basis) shall be increased to such percentage which is equal to RMB110,000,000
divided by the audited net profit for the fiscal year ended December 31,
2009, multiplied by the Class A Shareholder’s current Share
proportion.  In the event that the Class A
Shareholder is entitled to increase its Share proportion in accordance with
this Clause 4.1(a), the Ordinary Shareholder shall transfer to the Class A
Shareholder without consideration that number of its Ordinary Shares equal to the
difference between the Class A Shareholder’s existing Share proportion and
such increased percentage calculated in accordance with this Clause 4.1(a) (such
increased percentage is referred to in this Clause 4.1 as the “2010 Adjustment Percentage”) within three
Business Days of the issuance of the Auditor’s audit report for the fiscal year
ended December 31, 2009.


 


(b)                                 If the audited net profit of the Group for the fiscal
year ended December 31, 2010 is less than RMB170,000,000, then the Class A
Shareholder’s Share proportion in the Company (calculated on a fully diluted
basis) shall be increased to such percentage which is equal to RMB170,000,000
divided by the audited net profit for the fiscal year ended December 31,
2010, multiplied by the 2010 Adjustment Percentage.  In the event that the Class A
Shareholder is entitled to increase its Share proportion in accordance with
this Clause 4.1(b), the Ordinary Shareholder shall transfer to the Class A
Shareholder without consideration that number of its Ordinary Shares equal to
the difference between the 2010 Adjustment Percentage and such increased
percentage calculated in accordance with this Clause 4.1(b) (such
increased percentage is referred to in this Clause 4.1 as the “2011 Adjustment Percentage”) within three
Business Days of the issuance of the Auditor’s audit report for the fiscal year
ended December 31, 2010.


 


(c)                                  Regardless of any adjustments made to the Class A
Shareholder’s Share proportions as contemplated by Clauses 4.1(a) and (b) above:
(i) after the adjustment contemplated by Clause 4.1(a) above, the
Company shall ensure that the net profit of the Group attributable to the Class A
Shareholder is not less than RMB22,000,000 (20% of Shares upon investment by
the Class A Shareholder multiplied by RMB110,000,000 for the fiscal year
ended December 31, 2009), and if it is below RMB22,000,000, then the Class A
Shareholder’s Share proportion shall be increased to ensure that the net profit
of the Group attributable to the Class A Shareholder is not less than
RMB22,000,000 and (ii) after the adjustment contemplated by Clause 4.1(b) above,
the Company shall ensure that the net profit of the Group attributable to the Class A
Shareholder is not less than RMB34,000,000 (20% of Shares upon investment by
the Class A Shareholder multiplied by RMB170,000,000 for the fiscal year
ended December 31, 2010), and if it is below RMB34,000,000, then the Class A
Shareholder’s Share proportion shall be increased to ensure that the net profit
of the Group attributable to the Class A Shareholder is not less than
RMB34,000,000.  Any increases in the Class A
Shareholder’s Share proportion in


 


8

















 


accordance with this Clause 4.1(c) shall
be effected through the transfer of Ordinary Shares held by the Ordinary
Shareholder in the same manner as set forth in Clauses 4.1(a) and (b) above.


 


(d)                                 If the audited net profit of the Group for the fiscal
year ended December 31, 2009 is less than RMB150,000,000, then the
valuation basis of the Shares held by the Class B and  Class C Shareholders shall be adjusted to each be
equal to the audited net profit for the fiscal year ended December 31,
2009 divided by RMB150,000,000, multiplied by RMB750,000,000 (the “2010 Adjusted Valuation”).  The Ordinary Shareholder shall, within three
Business Days of the issuance of the Auditor’s audit report for the fiscal year
ended December 31, 2009, transfer to each of the Class B and Class C
Shareholders without consideration that number of its Ordinary Shares equal to:
that number of Ordinary Shares to which such Investors’ Preference Shares are
convertible into (referred to hereinafter as such Investor’s “Target Shares”) divided by that figure
equal to the 2010 Adjusted Valuation divided by RMB750,000,000, minus the
number of such Investor’s Target Shares.


 


(e)                                  If the audited net profit of the Group for the fiscal
year ended December 31, 2010 is less than RMB220,000,000, then the
valuation basis of the Shares held by the Class B and Class C
Shareholders shall be adjusted to each be equal to (a) the audited net
profit for the fiscal year ended December 31, 2009 divided by
RMB150,000,000, multiplied by RMB750,000,000 or (b) the audited net profit
for the fiscal year ended December 31, 2010 divided by RMB220,000,000, multiplied
by RMB750,000,000, whichever is lower (the “2011
Adjusted Valuation”).  The
Ordinary Shareholder shall, within three Business Days of the issuance of the
Auditor’s audit report for the fiscal year ended December 31, 2010,
transfer to each of the Class B and Class C Shareholders without
consideration that number of its Ordinary Shares equal to: that number of such
Investor’s Target Shares divided by that figure equal to the 2011 Adjusted
Valuation divided by RMB750,000,000, minus the number of such Investor’s Target
Shares.


 


(f)                                    If the audited net profit of the Group records a loss
in either the fiscal year ended December 31, 2009 or in the fiscal year
ending December 31, 2010, then the aggregate Share proportion (calculated
on a fully diluted basis) held by the Investors in the Company shall be
increased to 45%, and the proportion of the number of Shares held by each
Investor in the Company after such increase shall remain the same.  Under no circumstances would an Investor’s
Share proportion (calculated on a fully diluted basis) be decreased as a result
of the terms of this provision.  The
Ordinary Shareholder shall, within three Business Days of the issuance of the
Auditor’s audit report for the applicable fiscal year, transfer to each
Investor that number of its Ordinary Shares required in order to effect the
increase contemplated by this Clause 4.1(f).


 


(g)                                 If the Investors are entitled to an increase in their
Share proportions in accordance with the terms of this Clause 4.1 one year
prior to the closing of a Qualified Public Offering and the adjustment has not
been made, then the Investors shall still have the right to adjust its Share
proportion after the closing of a Qualified Public Offering.


 


(h)                                 The Company shall ensure to the Class C Shareholder
that the Group’s valuation prior to any Qualified Public Offering (and
excluding any funds generated by such Qualified Public Offering) will not be
lower than RMB1,500,000,000.  In the
event that the Group’s valuation is below RMB1,500,000,000, then the Ordinary
Shareholder shall be obligated to compensate the Class C Shareholder with
an amount equal to the difference between such valuations in the form of cash
or in Ordinary Shares at the option of the Class C Shareholder.


 


9














 


4.2           Anti-Dilution Rights


 


(a)           In the event that the Company issues any New
Securities (as defined below), each Investor shall have the right to receive
from the Company that number Shares for no consideration that would cause such
Investor to continue to hold, after any such issuance(s), the same Share
proportion held by such Investor immediately prior to any such
issuance(s).  In the event that the
Company is prohibited by law to issue such new Shares to the Investors in
accordance with this Clause 4.2(a), then the Ordinary Shareholder shall be
obligated to transfer that number its Ordinary Shares to the Investors so as to
give effect the rights set forth in this Clause 4.2(a).


 


“New Securities” means any Shares, whether now authorized or
not, and rights, options or warrants to purchase securities of any type
whatsoever that are, or may become, convertible or exchangeable into Shares,
excluding:


 


(i)            Shares issued upon the conversion of the Preference
Shares held by any Investor;


 


(ii)           The issuance of shares under the
employee stock ownership plan, or under the other incentive stock mechanism
approved by the board of directors and investors ;


 


(iii)          Shares issuable pursuant to and/or in accordance with the terms of this Agreement; and


 


(iv)          Shares issuable to any new investor as contemplated by
Clause 4.2(b) herein below.


 


(b) In the event that the Company enters
into any subsequent equity financings whereby the Company issues Shares to any
new investor: (i) the Class B and Class C Shareholders shall
each be entitled to acquire that number of Shares which would cause such
Investor to continue to hold, after the issuance of Shares to such new
investor, the same Share proportion (calculated on a fully diluted basis) held
by such Investor immediately prior to any such issuance(s); such Investors
shall be entitled to acquire such new Shares from the Company at the same price
per Share which had been offered to and purchased by such new investor, (ii) the
Class A Shareholder’s Share proportion (calculated on a fully diluted
basis) shall be diluted in proportion to the Ordinary Shareholder’s Share
proportion (calculated on a fully diluted basis) and (iii) the Investors
shall have the right to demand that the Company and the Ordinary Shareholder
amend this Agreement to include any terms granted to any new investor that are
more favourable than those provided in this Agreement.


 


4.3           The provisions
set out in this Clause 4 shall terminate upon the closing of a Qualified Public
Offering.


 


5              INFORMATION AND INSPECTION
RIGHTS


 


5.1           Each of the Shareholders undertakes to the others
and to the Company that it shall exercise all its powers in relation to the
Company so as to procure (insofar as it is able) that, and the Company
undertakes to each of the Investors (insofar as it is legally able so to do)
that, for so long as any Investor holds any Shares, the Company will deliver to
that Investor:


 


(a)           audited annual
consolidated financial statements, prepared in accordance with generally
accepted accounting principles and audited by an accounting firm mutually
agreed upon by the Company and the Investors, within 90 days after the end of
each financial year;


 


10

















 


(b)           unaudited
monthly consolidated financial statements and management reports, prepared in
accordance with generally accepted accounting principles, within 21 days of the
end of each month;


 


(c)           annual budget
plan for the following financial year as approved by the Company’s Board,
within 30 days prior to the end of each financial year; and


 


(d)           copies of all
other documents which have been delivered to any other shareholder, within 14
days of delivering such documents to such other shareholder.


 


5.2           Each of the Shareholders undertakes to the others
and to the Company that it shall exercise all its powers in relation to the
Company so as to procure (insofar as it is able) that, and the Company
undertakes to each of the Investors (insofar as it is legally able so to do)
that, for so long as any Investor holds any Shares, that Investor and its
authorized representatives shall have the right to inspect the facilities,
sites and other premises owned or used by the Company and each other Group
Company, at any time during regular working hours on reasonable prior notice to
the respective Group Company.


 


5.3           The provisions set out in this Clause 5 shall
terminate upon the closing of a Qualified Public Offering.


 


6              PROTECTIVE PROVISIONS;
RESTRICTIVE COVENANTS


 


6.1           Each of the Shareholders undertakes to the others
and to the Company that it shall exercise all its powers in relation to the
Company so as to procure (insofar as it is able) that, and the Company
undertakes to each of the Shareholders (insofar as it is legally able so to do)
that, for so long as any Preference Share remains outstanding, none of the matters set out below in relation to the
Company or any other Group Company shall take place (whether by
merger, amalgamation, consolidation, scheme of arrangement, amendment or
otherwise and whether in a single transaction or in a series of related
transactions), and no obligation or
liability in connection therewith shall be entered into or accepted by or on
behalf of the Company or any other Group Company and no other step in relation
thereto is taken, without the same having first been approved by the unanimous approval (by vote or by written resolution)
of all the Directors:


 


(a)           any
authorization, creation (by newly characterization or by other means), issue of
the Company’s securities or undertaking any liabilities of issuing any
securities of the Company, or increase of the registered capital of the
subsidiaries of the Company;


 


(b)           increase
or decrease of the total shares owned by investors;


 


(c)           amend,
delete or create any clauses in the Company’s Memorandum or the Articles of
Association or other basic files and/or documents;


 


(d)           declare
or pay dividends of the Company;


 


(e)           increase
the number of the Board of Directors in any companies;


 


(f)            involve
in any liquidation, merge or sale or purchase of substantial assets of the
Company and/or its related companies, or change in the controlling power within
the Company and/or its related companies;


 


(g)           increase
the number of issued shares in respect of the Employee Share Option Plan or
similar plan;


 


11

















 


(h)           employ
any senior management personnel whose annual remuneration is more than
HK$400,000.00. Increase the annual remuneration of the Company’s senior
management whose annual remuneration is more than HK$400,000.00 or the equivalent
amount of RMB with over 50% increment;


 


(i)            allow
or by other means transfer any of the Company’s patents, copyrights, trademarks
or other intellectual properties other than in the normal course of the
business.


 


(j)            incur
any liabilities exceeding HK$5,000,000 or the equivalent amount of RMB by
borrowing or other means, or incur any liabilities with the Company’s patents,
copyrights, trademarks or other intellectual properties as collateral;


 


(k             issue of any loans exceeding HK$1,000,000.00 or the
equivalent in RMB to any directors, company’s management or employees or
related parties; or issue any loans or loan guarantees exceeding HK$300,000.00
or the equivalent in RMB to any related parties;


 


(l)            purchase
of any real properties exceeding HK$5,000,000.00 or the equivalent in RMB;


 


(m)          involve
in any single transactions or series of transactions exceeding the aggregate
value of HK$5,000,000.00 or the equivalent amount of RMB other than in the
normal course of the Company;


 


(n)           approve
the annual budget of the Company;


 


(o)           appoint
or reappoint the companies general manager, assistant general manager and chief
financial officer;


 


(p)           appoint
or reappoint the Company’s auditors;


 


(q)           change
the nature and structure(including the shareholding structure) of the Company
and its subsidiaries; and


 


(r)            involve
in any behaviour adversely affect the ownership rights, preferential rights or
any other privileges entitled to and received by the investors, where such
adverse effect is reasonably foreseeable.


 


6.2           The rights attached to any class of Preference Shares
may, whether or not the Company is being wound up, be varied only with the
consent in writing of the holders of not less than two-thirds of the issued
Preference Shares of that class, or with the sanction of a resolution passed by
a majority of not less than two-thirds of the votes cast at a separate meeting
of the holders of the Preference Shares of that class.


 


6.3           In the event that the Company adopts an employee stock
ownership plan, the total number of Shares issuable under such plan shall not
exceed 2% of the issued and outstanding Shares then outstanding of the Company
without the prior written consent of each of the Investors.


 


6.4           Mrs. Shan Junqin shall be prohibited from
directly or indirectly assigning or transferring any of her shares in the
Ordinary Shareholder without the prior written consent of the Class B and
the Class C Shareholders.


 


6.5           The provisions set out in this Clause 6 shall
terminate upon the closing of a Qualified Public Offering.


 


12

















 


7              RETAINED PROFITS; DIVIDENDS


 


7.1           The retained profits of the Company should be
enjoyed by all the Shareholders in proportion to their respective Share
proportions (calculated on a fully-diluted basis).


 


7.2           The parties
shall procure that the Auditors shall, at the expense of the Company, be
instructed to certify the amount of the profits for each financial year which
are available for distribution by the Company at the same time as they sign
their report on the audited accounts of the Company for the financial year in
question.


 


7.3           The parties shall procure that in respect of each
financial year (insofar as is lawful), unless otherwise agreed unanimously by
the Investors, the Group’s profits available for distribution shall be
distributed to the Shareholders by way of dividend, subject to such reasonable
and proper reserves being retained for working capital requirements and other
liabilities of the Group as the Board may consider appropriate, as follows:


 


(a)           Each Investor shall be entitled to receive
cash dividends pro rata to their Share holdings in the Company calculated on an
as-converted basis, prior and in preference to any dividends payable to any
other holders of Shares.


 


(b)           After all dividends payable
to the Investors under sub-clause (a) above have been paid in full, the
balance of the dividends payable to any other holders of Shares, whether in cash, property or authorized Shares, shall then be
paid to all other holders of Shares, pro-rata to their holdings in the Company
(on an as-converted basis, if applicable).


 


7.4           The parties hereto hereby agree that so long as the
closing of a Qualified Public Offering occurs prior to September 30, 2010,
no dividends shall be paid in respect of the Group’s profits prior to September 30,
2010.


 


7.5           Except for Clause 7.4 above, the provisions set out
in this Clause 7 shall terminate upon the closing of a Qualified Public
Offering.


 


8              RIGHT OF FIRST REFUSAL;
INVESTORS’ CO-SALE RIGHTS


 


8.1           Each Shareholder (each a “Selling Shareholder”) agrees not to, directly or indirectly,
transfer, sell, pledge or otherwise dispose of any Shares or any interest
therein (“Transfer”) except in
compliance with this Clause 8.


 


8.2           If any Selling Shareholder proposes a Transfer, then
such Selling Shareholder shall give each of the Company and each other
Shareholder a written notice of such Selling Shareholder’s intention to make
such Transfer (the “Transfer Notice”),
which Transfer Notice shall include (i) a description of the Shares to be
transferred (the “Offered Shares”),
(ii) the identity of the prospective transferee(s), and (iii) the
consideration and the material terms and conditions upon which the proposed
Transfer is to be made. The Transfer Notice shall certify that such Selling
Shareholder has received a firm offer from the prospective transferee(s) and
in good faith believes a binding agreement for the Transfer is obtainable on
the terms set forth in the Transfer Notice. The Transfer Notice shall also
include a copy of any written proposal, term sheet or letter of intent or other
agreement relating to the proposed Transfer.


 


8.3           Right of First Refusal


 


Each
Shareholder entitled to receive a Transfer Notice (a “ROFR Holder”) who notifies such Selling
Shareholder and the Company in writing within 20 Business Days after receipt of
the Transfer Notice (the “First Refusal
Period”) shall have the right, 


 


13

















 


exercisable
upon such written notice to the Selling Shareholder (the “Purchase Notice”), to purchase up to its
ROFR Pro Rata Share (as defined below) of the Offered Shares on the same terms
and conditions as set forth in the Transfer Notice (each a “Purchasing Holder”).  “ROFR Pro
Rata Share” shall mean the ratio of (a) the number of Ordinary
Shares (calculated on an as-converted to Ordinary Shares basis) held by the
relevant ROFR Holder, to (b) the total number of Ordinary Shares
(calculated on an as-converted to Ordinary Shares basis) held by all ROFR
Holders on the date of the Transfer Notice. The Purchase Notice shall state (i) whether
the Purchasing Holder desires to purchase up to its ROFR Pro Rata Share of the
Offered Shares, and (ii) whether the Purchasing Holder desires to purchase
the maximum amount of the Offered Shares available including its ROFR Pro Rata
Share of amounts not purchased by other ROFR Holders. A ROFR Holder who either
does not deliver a Purchase Notice within the First Refusal Period or indicates
in the Purchase Notice that such ROFR Holder elects not to purchase any of the
Offered Shares shall be referred to herein as a “Non-Purchasing Holder”. To the extent that any Purchasing
Holder does not exercise its right of first refusal to the full extent of its
ROFR Pro Rata Share of the Offered Shares, the Selling Shareholder and the
remaining Purchasing Holders shall, within 10 Business Days after the end of
the First Refusal Period, make such adjustments to each exercising Purchasing
Holder’s pro rata share of the Offered Shares so that any remaining Offered Shares
may be allocated to the remaining Purchasing Holders on a pro rata basis. Each
Purchasing Holder who sets forth in the Purchase Notice a desire to purchase
the maximum amount of Offered Shares available shall be entitled to purchase
his, her or its pro rata share of each Non-Purchasing Holder’s ROFR Pro Rata
Share of the Offered Shares.


 


8.4           Investors’ Co-Sale Rights


 


If
the Selling Shareholder is the Ordinary Shareholder, then:


 


(a)           The Ordinary Shareholder
shall not be entitled to transfer any Shares in the  Company without the prior
written consent of the Class B and the Class C  Shareholders.


 


(b)           Each Investor entitled to
receive the Transfer Notice (a “Co-Sale Right
Holder”) may, by giving written notice to the Selling Shareholder
(the “Co-Sale Notice”) within 20
Business Days after its receipt of the Transfer Notice, notify the Selling
Shareholder that such Co-Sale Right Holder wishes to sell a portion of its
Shares and the number of such Shares to be sold. Such Co-Sale Right Holder who
notifies such Selling Shareholder (a “Co-Sale
Participant”) shall therefore have the right to participate in the
sale of Offered Shares, to the extent the ROFR Holders do not exercise their
respective rights of first refusal as to all of the Offered Shares pursuant to
Clause 8.3 (the “Remaining Shares”),
on the same terms and conditions as specified in the Transfer Notice.


 


(c)           Each Co-Sale Participant may
sell all or any part of that number of Ordinary Shares (issuable upon
conversion of its Preference Shares) equal to the product obtained by
multiplying (i) the Remaining Shares, by (ii) a fraction, the
numerator of which shall be the number of Shares owned by such Co-Sale
Participant and the denominator of which shall be the total number of Shares
held by all the Co-Sale Right Holders and the Selling Shareholder on the date
of the Transfer Notice on an as-converted to Ordinary Shares basis. To the
extent one or more Co-Sale Participants exercise their right under this Clause
8.4, the number of Remaining Shares that the Selling Shareholder may sell in
the transaction shall be correspondingly reduced.


 


(d)           Each Co-Sale Participant
shall effect its participation in the sale by promptly delivering to the
Selling Shareholder instruments of transfer in favour of the 


 


14

















 


prospective
purchaser (together with the relevant share certificates, if any have been
issued), in respect of:


 


(1)           the type and number of the Shares which such Co-Sale
Participant elects to sell; or


 


(2)           the number of the Preference Shares which are at
such time convertible into the number of Ordinary Shares which such Co-Sale
Participant elects to sell; provided, however, that if the prospective third
party purchaser objects to the transfer of such Preference Shares in lieu of
Ordinary Shares, such Co-Sale Participant shall first convert such Preference
Shares into Ordinary Shares and transfer Ordinary Shares as provided in this
Clause 8.4. The Company agrees to make any such conversion concurrent with the
actual transfer of such Preference Shares or Ordinary Shares to the purchaser
and contingent upon such transfer.


 


(e)           The Shares which the Co-Sale
Participant elects to sell shall be transferred to the prospective purchaser in
consummation of the sale of the Offered Shares upon the terms and conditions
specified in the Transfer Notice, and such Selling Shareholder shall
concurrently therewith remit to such Co-Sale Participant that portion of the
sale proceeds to which such Co-Sale Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase Shares
from a Co-Sale Participant exercising its rights of co-sale hereunder, such
Selling Shareholder shall not sell to such prospective purchaser or purchasers
any Shares unless and until, simultaneously with such sale, such Selling
Shareholder shall purchase such Shares from such Co-Sale Participant for the
same consideration and on the same terms and conditions as the proposed
Transfer described in the Transfer Notice.


 


8.5           Non-Exercise of Rights


 


To
the extent that the ROFR Holders and the Co-Sale Right Holders have not
exercised their rights to purchase the Offered Shares or their rights to
participate in the sale of the Offered Shares, the Selling Shareholder shall
have a period of 45 Business Days from the expiration of such rights to sell
any remaining Offered Shares, upon terms and conditions (including the purchase
price) no more favorable to the purchaser than those specified in the Transfer
Notice, to the third-party transferee(s) identified in the Transfer
Notice. The third-party transferee(s) shall, as a condition to the
effectiveness of transfer of the Offered Shares, furnish the Company, the ROFR
Holders and the Co-Sale Right Holders with a deed of adherence (the “Deed of Adherence”) in the form of Exhibit B
attached hereto agreeing to be bound by and comply with this Agreement. In the
event a Selling Shareholder does not consummate the sale or disposition of the
Offered Shares within the 45 Business Day period from the expiration of these
rights, the ROFR Holders’ right of first refusal and the Co-Sale Right Holders’
co-sale rights hereunder shall continue to be applicable to any subsequent
disposition of the Shares by such Selling Shareholder. Furthermore, the
exercise or non-exercise to purchase Shares from a Selling Shareholder or
participate in the sale of Equity Securities by a Selling Shareholder shall not
adversely affect the ROFR Holders’ rights to make subsequent purchases from any
Selling Shareholder of Shares or the Co-Sale Right Holders’ subsequent
participation in sales of Shares by any Selling Shareholder hereunder. Any
proposed Transfer on terms and conditions different than those described in the
Transfer Notice, as well as any subsequent proposed Transfer of any of the
Selling Shareholders’ Equity Securities shall again be subject to the first
refusal and co-sale rights hereunder and shall require compliance by the
relevant Selling Shareholder with the procedures described in this Clause 8.


 


15

















 


8.6           The provisions set out in this Clause 8 shall
terminate upon the closing of a Qualified Public Offering.


 


9.             PARTICIPATION RIGHTS


 


9.1           Each Investor shall have the right (a “Participation Right”) to purchase such
Investor’s Pro Rata Share (as defined below) of all of the New Securities that
the Company may from time to time issue with the exception of any securities
(including, but not limited to, options and shares) issuable to employees,
consultants, officers or directors of the Company pursuant to any stock option,
share purchase, share bonus or other equity incentive plans, agreements or
arrangements of the Company, each as approved by the Board.


 


9.2           For the purposes of this Agreement:


 


(a)           “Pro Rata Share” means, for the purposes of an Investor’s
Participation Right, the ratio of (a) the number of Equity Securities (as
defined below) (calculated on an as-converted to Ordinary Shares basis) held by
such Investor, to (b) the total number of all Equity Securities
(calculated on an as-converted to Ordinary Shares, fully-diluted basis) issued
and outstanding immediately prior to the issuance of New Securities giving rise
to the Participation Rights; and


 


(b)           “Equity Securities” means, with respect to any given
Shareholder or Investor, all Ordinary Shares of the Company or securities
convertible into or exercisable for Ordinary Shares of the Company now owned or
subsequently acquired by such Shareholder or Investor from time to time.


 


9.3           In the event that the Company proposes to undertake
an issuance of New Securities (in a single transaction or a series of related
transactions), it shall give to each Investor written notice of its intention
to issue New Securities (the “Participation
Notice”), describing the amount and type of New Securities, the
price and the general terms upon which the Company proposes to issue such New
Securities. Each Investor shall have 20 Business Days from the date of receipt
of the Participation Notice (the “Participation
Period”) to give written notice to the Company that it agrees to
purchase all or any portion of such Investor’s Pro Rata Share of such New
Securities for the price and upon the terms and conditions specified in the
Participation Notice. If any Investor fails to give such written notice to the
Company within the Participation Period, then such Investor shall forfeit its
Participation Right hereunder.


 


9.4           If any Investor fails or declines to exercise all or
any portion of its Participation Right within the Participation Period, the
Company shall promptly give notice (the “Second
Participation Notice”) to all the other Investors who exercised all
or any portion of their Participation Rights (the “Rights Participants”), setting forth (A) the additional
number of New Securities which have not been subscribed for by the other
Investors (“Additional Shares”)
and (B) the Rights Participant’s pro rata entitlement to such Additional
Shares (the “Oversubscription Share”),
which shall be the quotient of (1) the number of Equity Securities
(calculated on an as-converted to Ordinary Shares basis) held by such Rights
Participant, divided by (b) the total number of Equity Securities
(calculated on an as-converted to Ordinary Shares basis) held by all Rights
Participants immediately prior to the issuance of New Securities giving rise to
the Participation Rights. Each Rights Participant shall have 10 Business Days
from the date of the Second Participation Notice (the “Second Participation Period”) to give a
written notice to the Company of the number of Additional Shares that it
proposes to buy which shall not exceed such Rights Participant’s
Oversubscription Share (the “Additional
Number”). If any Rights Participant fails to give such written
notice to the Company within the 


 


16

















 


Second
Participation Period, then such Rights Participant shall forfeit its right to
purchase any of the Additional Shares.


 


9.5           Upon the expiration of the Second Participation
Period, or in the event no Investor exercises its Participation Rights within
the Participation Period following the issuance of the Participation Notice,
the Company shall have 45 Business Days thereafter to sell the New Securities
described in the Participation Notice (with respect to which Participation
Rights hereunder were not exercised) at the same or higher price and otherwise
upon terms not materially more favorable to the purchasers thereof than
specified in the Participation Notice. In the event that the Company has not
issued and sold such New Securities within such 45 Business Day period, then
the Company shall not thereafter issue or sell any New Securities without again
first offering such New Securities to the Investors pursuant to this Clause 9.


 


9.6           The provisions set out in this Clause 9 shall
terminate upon the closing of a Qualified Public Offering


 


10           CONVERSION RIGHTS


 


10.1         Upon
the closing of a Qualified Public Offering, 100% of the Preference Shares held
by the Investors (representing approximately 25.76% of the entire issued share
capital of the Company as set forth in Clause 2.1 above) shall automatically
convert into Ordinary Shares as contemplated by Clause 2.1(b) above and in
the manner and subject to any applicable adjustments set forth in the
applicable subsections of Clauses 10.2 and 10.3 below.


 


10.2         Subject to the
Statute, any Preference Share may, at the option of the holder thereof, be
converted at any time prior to the closing of a Qualified Public Offering,
without the payment of any additional consideration, into fully-paid and
non-assessable Ordinary Shares in the manner set out in this Clause 10:


 


(a)           The number of Ordinary
Shares to which a holder shall be entitled upon conversion of any Preference
Share shall be determined by dividing the applicable Original Issue Price for
such Preference Share by the applicable Conversion Price for such Preference
Share (the “Conversion Ratio”),
determined as hereafter provided, in effect on the date the Conversion
Notice.  The initial Conversion Price for
any Preference Share shall be the Original Issue Price applicable to such
Preference Share multiplied by 0.001, such that the initial Conversion Ratio
shall be 1:1,000 (to the intent and effect that each Preference Share shall be
converted into 1,000 Ordinary Shares), provided however that the Conversion
Price shall be subject to adjustment as set forth in this Clause.


 


(b)           A holder of any Preference
Shares shall be entitled to exercise its right to convert such Preference
Shares prior to the closing of a Qualified Public Offering by delivering a
written notice to the Company that such holder has elected to convert such
Preference Shares, stating the number and Class of Preference Shares being
converted (a “Conversion Notice”),
together with the related share certificates and such other evidence (if any)
as the Directors may reasonably require to prove the title of the person
exercising the right to convert. A Conversion Notice once given may not be
withdrawn without the consent in writing of the Company.


 


(c)           Conversion of the Preference
Shares in respect of which the right to convert shall have been duly exercised
and which are due to be converted (the “Relevant



 


17

















 


Shares”) shall be effected by way
of redemption of the Relevant Shares and the issue of the applicable number of
new Ordinary Shares.


 


(d)           Fractions of Ordinary Shares
arising on conversion will not be issued upon conversion of any Preference Shares,
provided that all Ordinary Shares (including fractions thereof) issuable upon
conversion of more than 1 Preference Share held by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share.  In
lieu of any fractional shares to which the holder would otherwise be entitled,
the Company shall at the discretion of the Board either (i) pay cash equal
to such fraction multiplied by the applicable Conversion Price for the Preference
Shares, or (ii) issue one whole Ordinary Share for each fractional share
to which the holder would otherwise be entitled.


 


(e)           The conversion shall take
effect, and all necessary allotments of Ordinary Shares arising therefrom shall
be made, not later than 5 Business Days after the date of receipt by the
Company of the relevant duly executed Conversion Notice and the original
certificates in respect of the Relevant Shares (or, in the case of a conversion
upon the closing of a
Qualified Public Offering pursuant to Clause 10.1, simultaneously with the
closing of the Qualified Public Offering). The Company shall not
later than the 20 Business Days following the date of such conversion send to
each holder a definitive share certificate for the Ordinary Shares resulting
from conversion and, if appropriate, certificates for any unconverted
Preference Shares comprised in the certificate surrendered by him.


 


(f)            The dividends on Preference
Shares which are converted shall cease to accrue with effect from the date of
conversion. The Ordinary Shares resulting from conversion shall carry the right
to receive all dividends and other distributions declared made or paid in
respect of Ordinary Shares in the Company by reference to a record date on or
after the relevant date of conversion and shall rank pari passu in all other respects and form one class with the
Ordinary Shares in the Company then in issue and fully paid.


 


10.3         Adjustments to Conversion
Price


 


(a)           Adjustment
for Share Splits and Combinations


 


If
the Company shall at any time, or from time to time, effect a subdivision of
the outstanding Ordinary Shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately decreased. Conversely, if
the Company shall at any time, or from time to time, consolidate the
outstanding Ordinary Shares into a smaller number of shares, the Conversion
Price in effect immediately prior to the consolidation shall be proportionately
increased. Any adjustment under this sub-clause shall become effective at the
close of business on the date the subdivision or consolidation becomes
effective.


 


(b)           Adjustments
for Dividends


 


If
the Company at any time, or from time to time, makes a dividend or other
distribution payable in shares of the Company other than Ordinary Shares, then,
and in each such event, provision shall be made so that, upon conversion of any
Preference Share thereafter, the holder of such Preference Shares shall
receive, in addition to the number of Ordinary Shares issuable thereon, the amount
of shares of the Company which the holder of such Preference Share would have
received had the Preference Shares been converted into Ordinary Shares
immediately prior to such event, all subject to further adjustment as provided
herein.


 


18














 


(c)           Sale
of Shares below the Conversion Price


 


If
the Company shall issue additional shares for a consideration per share (the “Future Issuance Price”) less than the
Conversion Price in effect on the date of, and immediately prior to, such
issuance, then and in such event, the Conversion Price shall be reduced
concurrently with such issuance to a price equal to the Future Issuance Price.


 


(d)                                 Other
Dilutive Events


 


In
case any event shall occur as to which the other provisions of this Clause 10.3
are not strictly applicable, but the failure to make any adjustment to the
Conversion Price would not fairly protect the conversion rights of the
applicable Class of Preference Shares in accordance with the essential
intent and principles hereof, then, in each such case, the Company, in good
faith, shall determine the appropriate adjustment to be made, on a basis
consistent with the essential intent and principles established in this Clause
10.3, necessary to preserve, without dilution, the conversion rights of such
series of Preference Shares.


 


10.4                           In the case of any
adjustment or readjustment of the Applicable Conversion Price, the Company, at
its sole expense, shall compute such adjustment or readjustment in accordance
with the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall deliver such certificate to each registered holder of
the Preference Shares at the holder’s address as shown in the Company’s
Register of Members (or such other address as such holder of Preference Shares
may have provided to the Company).  The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or deemed to be received by
the Company for any Ordinary Shares issued or sold or deemed to have been
issued or sold, (ii) the number of Ordinary Shares issued or sold or
deemed to be issued or sold, (iii) the Conversion Price in effect before
and after such adjustment or readjustment, and (iv) the number of Ordinary
Shares and the type and amount, if any, of other property which would be
received upon conversion of the Preference Shares after such adjustment or
readjustment.


 


11                                  VOTING RIGHTS


 


111                              Subject to any provisions to
the contrary in this Agreement or in the Articles, or as required by the
Statute, at all general meetings of the Company:


 


(a)                                  the holder of each Ordinary
Share issued and outstanding shall have one vote in respect of each Ordinary
Share held; and


 


(b)                                 the holder of each
Preference Share shall be entitled to such number of votes as equals the whole
number of Ordinary Shares into which such holder’s collective Preference Shares
are convertible immediately after the close of business on the record date of
the determination of the Shareholders entitled to vote or, if no such record
date is established, at the date such vote is taken or any written consent of
the Shareholders is first solicited. Fractional votes shall not, however, be
permitted and any fractional voting rights available on an as converted basis
(after aggregating all shares into which the Preference Shares held by each
holder could be converted) shall be rounded down to the nearest whole number.


 


11.2                           Subject to any provisions to
the contrary in this Agreement or in the Articles, or as required by the
Statute, the holders of Preference Shares shall vote together with the holders
of Ordinary Shares (on an as-converted to Ordinary Shares basis), and not as a 


 


19

















 


separate
class or series, on all matters put before the Shareholders, and shall be
entitled to the notice of any shareholders’ meeting.


 


12                                  REGISTRATION RIGHTS; RESTRICTIONS ON SALE OF SHARES


 


12.1                           The registrations rights of
the Class B and Class C Shareholders with respect to the Company and
the rights and obligations of the parties with respect to registration of the
Company’s Ordinary Shares are set forth on Exhibit C attached
hereto.  The rights set forth in Exhibit C
shall terminate upon the earlier of: (a) the date of the completion of a
Liquidation Event, (b) as to any Holder, when all Registrable Securities
held by such Holder (together with any affiliate of such Holder with whom such
Holder must aggregate its sales under SEC Rule 144) could be sold without
restriction under SEC Rule 144 within a ninety (90) day period and (c) the
date that is five (5) years following the closing of a Qualified Public
Offering.


 


12.2                           Each Investor hereby agrees
to be bound by the six month Lock-Up Agreement in the form of Exhibit C to
the Share Exchange Agreement.


 


13           SUCCESSORS AND ASSIGNMENT


 


Except
as expressly provided herein, this Agreement shall be binding upon and enure
for the benefit of the successors in title and permitted assignees of the
parties hereto. None of the Shareholders shall assign or transfer or purport to
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the other Shareholders.


 


14                                  WAIVER AND FORBEARANCE


 


No
failure to exercise or delay in exercising any right or remedy under this
Agreement shall constitute a waiver thereof and no waiver by either Shareholder
of any breach or non-fulfilment by the other Shareholder of any provision of
this Agreement shall be deemed to be a waiver of any subsequent or other breach
of that or any other provision hereof and no single or partial exercise of any
right or remedy under this Agreement shall preclude or restrict the further
exercise of any such right or remedy. 
The rights and remedies of the Shareholders provided in this Agreement
are cumulative and not exclusive of any rights and remedies provided by law.


 


15                                  VARIATION


 


No
variation of this Agreement shall be valid unless it is in writing and signed
by or on behalf of each of the parties hereto.


 


16                                  SEVERANCE


 


16.1                           If any provision of this
Agreement shall be found by any court or administrative body of competent
jurisdiction to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the other provisions of this Agreement which
shall remain in full force and effect.


 


16.2                           If any provision of this
Agreement is so found to be invalid or unenforceable but would be valid or
enforceable if some part of the provision were deleted, the provision in
question shall apply with such modification(s) as may be necessary to make
it valid.


 


20

















 


17                                  ENTIRE AGREEMENT


 


This
Agreement, and the documents referred to in it, constitutes the entire
agreement and understanding of the parties and supersedes any previous
agreement between the parties relating to the subject matter of this Agreement.


 


18                                  ANNOUNCEMENTS


 


18.1                           Subject to Clauses 18.2 and
18.3, none of the parties shall issue any press release or other public
document containing, or make any public statement containing, or otherwise
disclose to any person who is not a party, information which relates to or is
connected with or arises out of this Agreement or the matters contained in it,
without the prior written approval of the other parties as to its content and
the manner and extent of its publication. 
The parties shall consult together upon the form of any such press
release, document or statement and the other party shall promptly provide such
information and comment as the party issuing such press release, document or
statement may from time to time reasonably request.


 


18.2                           The provisions of Clause
18.1 shall not apply to disclosure of matters required to be made:


 


(a)           by virtue of the regulations of any
stock exchange;


 


(a)                                  by any court or governmental
or administrative authority competent to require the same; or


 


(c)                                  by any applicable law or
regulation (including securities laws or regulations).


 


18.3                           Notwithstanding Clause 18.1,
any party may disclose matters relating to, connected with or arising out of
this Agreement or the matters contained in it to its professional advisers to
the extent necessary for such advisers properly to provide their services to
that party Provided that such disclosure is on terms that it is confidential
and gives notice of the provisions of this clause.  Not later than the time when any disclosure
permitted hereunder is made, the party making such disclosure shall give
written notice thereof to the other party, including details of the information
disclosed and the identity of the person to whom the disclosure is made.


 


19                                  COUNTERPARTS


 


This
Agreement may be executed in any number of counterparts each of which when
executed by one or more parties hereto shall constitute an original document
but all of which shall together constitute one and the same instrument.


 


20                                  NOTICES


 


20.1                           Any notice or other
communication given under this Agreement shall be in writing and may be served
by delivering it personally or sending it by pre-paid recorded delivery or
registered post (or registered airmail in the case of an address for service
outside the Cayman Islands) or fax or e-mail to the address and for the
attention of the relevant party set out in Clause 20.2 (or as otherwise
notified by that party hereunder).  Any
such notice shall be deemed to have been received:


 


(a)                                  if delivered personally, at
the time of delivery;


 


(b)                                 in the case of pre-paid
recorded delivery or registered post, 48 hours from the date of posting;


 


(c)                                  in the case of registered
airmail, five days from the date of posting;


 


21

















 


(d)                                 in the case of fax, at the
time of transmission; and


 


(e)                                  at the time of receipt which
means at the time the e-mail enters the receiving party’s information processing
system.


 


20.2                           The addresses, fax numbers
and e-mail addresses of the parties for the purposes of Clause 20.1 are:


 


CHINA NEW BORUN CORPORATION


Address:
Bohai Industrial Park (Yangkou Town), Shouguang, Shandong 262715, The
People’s Republic of China


For
the attention of: WANG Jinmiao


Fax
number: +86-536-5451199


email
address: jinmiao.wang@chinanewborun.com


 


KING RIVER HOLDING LIMITED


Address:
Bohai Industrial Park (Yangkou Town), Shouguang, Shandong 262715, The
People’s Republic of China


For
the attention of: WANG Jinmiao


Fax
number: +86-536-5451199


email
address: jinmiao.wang@chinanewborun.com


 


STAR ELITE ENTERPRISES LIMITED


Address:
Floor 5, No. 832 Huamu Road, Pudong New Area,, Shanghai 201204, The People’s
Republic of China


For
the attention of: WU Kezhong, LU Jun


Fax
number: +86-21-50453554


email
address: kwu@preipo.cn


 


EARNSTAR HOLDINGS LIMITED


Address:
Room 4006A, China Resources Building No. 26, Harbor Road,
Wanchai, Hong Kong


For
the attention of: WEI Yi Bin


Fax
number: 00852-25118818


email
address: weiyibin@hotmail.com


 


TDR ADVISORS INC.


Address:
Room 1601, Fuchun Dongfang Building, No. 7006 Shennan
Road, Futian District, Shenzhen, The People’s Republic of China


For
the attention of: GUO Xun


Fax
number: +86-755-3337 1191


email
address:  henry.guo@tdrcap.com


 


or
such other address, fax number or email address as may be notified in writing
from time to time by the relevant party to the other parties.


 


20.3                           In proving such service it
shall be sufficient to prove that the envelope containing such notice was
addressed to the address of the relevant party set out in Clause 20.2 (or as
otherwise notified by that party hereunder) and delivered either to that
address or into the custody of the postal authorities as a pre-paid recorded
delivery, registered post or airmail letter, or that the notice was transmitted
by fax to the fax number of the relevant party set out in Cause 20.2 (or as
otherwise notified by that party hereunder), or any e-


 


22

















 


mail
to the e-mail address of the relevant party set out in Clause 20.2 (or as
otherwise notified by that party hereunder).


 


21                                  GOVERNING LAW


 


This
Agreement shall be governed by, enforced, and construed under and in accordance
with the laws of the United States of America and, with respect to matters of
State law, with the laws of the State of New York.  Venue for all matters shall be in the City of
New York, New York, without giving effect to principles of conflicts of law
thereunder.  Each of the parties
irrevocably consents and agrees that any legal or equitable action or
proceedings arising under or in connection with this Agreement shall be brought
exclusively in the federal courts of the United States sitting in New York
City, New York.  By execution and
delivery of this Agreement, each party hereto irrevocably submits to and
accepts, with respect to any such action or proceeding, generally and
unconditionally, the jurisdiction of the aforesaid court, and irrevocably
waives any and all rights such party may now or hereafter have to object to
such jurisdiction.  EACH PARTY (ON BEHALF OF ITSELF AND, TO THE FULLEST
EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS) HEREBY
WAIVES ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.


 


23

















 


As witness the hands of the parties or their duly authorised
representatives the day and year first above written


 


COMPANY:


 


 


	
  SIGNED by Shan Junqin

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  CHINA NEW BORUN CORPORATION

  	
  )

  	
  /s/ Shan Junqin

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  



 


24

















 


As witness the hands of the parties or their duly authorised
representatives the day and year first above written


 


 


	
  ORDINARY SHAREHOLDER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of Shan Junqin

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  KING RIVER HOLDING LIMITED

  	
  )

  	
  /s/ Shan Junqin

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  



 

















 


As witness the hands of the parties or their duly authorised
representatives the day and year first above written


 


 


	
  CLASS A SHAREHOLDER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of Chen Ping

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  STAR ELITE ENTERPRISES LIMITED

  	
  )

  	
  /s/ Chen Ping

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  



 

















 


As witness the hands of the parties or their duly authorised
representatives the day and year first above written


 


 


	
  CLASS B SHAREHOLDER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of Wei Yibin

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  EARNSTAR HOLDINGS LIMITED

  	
  )

  	
  /s/ Wei Yibin

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  



 

















 


As witness the hands of the parties or their duly authorised
representatives the day and year first above written


 


 


	
  CLASS C SHAREHOLDER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  for and on behalf of Wang Ruiping

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  TDR ADVISORS INC.

  	
  )

  	
  /s/ Wang Ruiping

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  



 















 


EXHIBIT A


EQUITY
OWNERSHIP TABLE


 


	
  Stockholder

  	
   

  	
  Shares Held in

  China High (Pre-

  Exchange)

  	
   

  	
  Percentage of

  Total Equity in

  China High (Pre-

  Exchange)

  	
   

  	
  Exact Number of

  New Borun

  Ordinary Shares

  Each

  Stockholder is

  Entitled To Be

  Issued (Post-

  Exchange/IPO)

  	
   

  	
  Number/Type of

  New Borun

  Shares To Be

  Issued Post-

  Exchange

  (Actual)

  	
   

  	
  Number of

  Ordinary

  Shares Into

  Which

  Preference

  Shares are

  Convertible

  Post

  Exchange/IPO

  (Actual)

  	
   

  	
  Percentage of Total

  Equity in New Borun

  (Post-Exchange)

  	
   

  
	
  Ordinary Shareholder (King
  River Holding Limited, which is 100% owned by Mrs. Shan Junqin)

  	
   

  	
  8,000 (ordinary shares)

  	
   

  	
  74.23904974016%

  	
   

  	
  14,847,809.948032

  	
   

  	
  14,847,811 (ordinary
  shares)

  	
   

  	
  N/A

  	
   

  	
  74.239055%

  	
   

  
	
  Class A Shareholder
  (Star Elite)

  	
   

  	
  2,000 (preference shares)

  	
   

  	
  18.55976243504%

  	
   

  	
  3,711,952.487008

  	
   

  	
  3,711.952 (class A
  convertible preference shares)

  	
   

  	
  3,711,952

  	
   

  	
  18.55976%

  	
   

  
	
  Class B Shareholder
  (Earnstar)

  	
   

  	
  574 (preference shares)

  	
   

  	
  5.32665181885%

  	
   

  	
  1,065,330.36377

  	
   

  	
  1,065.330 (class B
  convertible preference shares)

  	
   

  	
  1,065,330

  	
   

  	
  5.32665%

  	
   

  
	
  Class C Shareholder
  (TDR Advisors)

  	
   

  	
  202 (preference shares)

  	
   

  	
  1.87453600593%

  	
   

  	
  374,907.201186

  	
   

  	
  374.907 (class C
  convertible preference shares)

  	
   

  	
  374,907

  	
   

  	
  1.874535%

  	
   

  
	
  Total:

  	
   

  	
  10,776 (total shares)

  	
   

  	
  100%

  	
   

  	
  20,000,000

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  100%

  	
   

  



 














 


EXHIBIT B


 


FORM OF
DEED OF ADHERENCE


 


THIS DEED OF ADHERENCE is made on
[                    ]


 


BY:


 


[                ],
a [citizen of
[                  ]
with [                  ]
passport No. [                  ]
and [his] residential address at [                  ]
/ company incorporated under the laws of
[                  ]
with its registered address at
[                  ]
(the “New Shareholder”)


 


IN FAVOUR OF:


 


Each
of the parties to the shareholders agreement dated March 31, 2010 (the “Shareholders
Agreement”), by and between, amongst others, China New Borun
Corporation, the Ordinary Shareholder (as defined therein), the Investors (as
defined therein) and other parties thereto, and their respective successors and
permitted assignees (together, the “Existing
Parties”, and each an “Existing
Party”);


 


WHEREAS:


 


(A)          On March 31, 2010, the Existing Parties entered into the
Shareholders Agreement.


 


(B)                                [                ]
(the “Transferor”) intends to
transfer
[                ]
Ordinary / Series [      ] Preference Shares
of the Company, par value US$0.001 per share (the “Transferred Shares”), to the New Shareholder (the “Transfer”).


 


(C)                                In accordance with the terms
of the Shareholders Agreement, the New Shareholder has agreed to enter into
this Deed upon the completion of the Transfer.


 


NOW THIS DEED WITNESSES as follows:-


 


1.                          Interpretation


 


In this Deed, except as the context may otherwise require, all words
and expressions defined in the Shareholders Agreement shall have the same
meanings when used herein.


 


2.                          Adherence


 


2.1                       The New
Shareholder hereby covenants to each Existing Party to observe, adhere to,
perform and be fully bound by all duties, burdens and obligations of the
Transferee as a holder of the Transferred Shares imposed pursuant to the provisions
of the Shareholders Agreement and all documents expressed in writing to be
supplemental or ancillary thereto as if such New Shareholder had been an
original party to the Shareholders Agreement since the date thereof.


 


2.2                       The New
Shareholder shall be entitled to all rights, benefits and interests of the
Transferee as a holder of the Transferred Shares granted pursuant to the
provisions of the Shareholders Agreement and all documents expressed in writing
to be supplemental or ancillary thereto as if such New Shareholder had been an
original party to the Shareholders Agreement since the date thereof.


 

















 


3.                          Enforceability


 


Each Existing Party shall be entitled to enforce the Shareholders
Agreement, as amended from time to time, against the New Shareholder as if the
New Shareholder had been an original party to the Shareholders Agreement since
the date thereof.


 


4.                          Same Agreement


 


This Deed shall be read as one with the
Shareholders Agreement so that any reference in either Transaction Agreement to
“this Agreement” and similar expressions shall include this Deed.


 


5.                          Notice


 


The New Shareholder’s
address for notices, demands and all other communications under the
Shareholders Agreement is as follows:


 


[Insert the New Shareholder’s name]


 


Address:


For the attention of:


Fax number:


e-mail address:


 


6.                          Governing Law


 


This
Deed shall be governed by, enforced, and construed under and in accordance with
the laws of the United States of America and, with respect to matters of State
law, with the laws of the State of New York.


 


In witness whereof this document has been executed and delivered as a
Deed the day and year first above written


 


	
  EXECUTED as a Deed by

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  [                ]

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
  acting by [name of director] and

  	
  )

  	
  Director

  
	
   

  	
   

  	
   

  
	
  [name of director or secretary]

  	
  )

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Directory/Secretary

  



 

















 


EXHIBIT C


 


REGISTRATION RIGHTS


 


1.                                      Applicability of Rights; Non-U.S. Registrations.


 


1.1                                 The Holders
shall be entitled to the following rights with respect to any potential public
offering of the Company’s Ordinary Shares in the United States and shall be
entitled to reasonably analogous or equivalent rights with respect to any other
offering of Company securities in any other jurisdiction pursuant to which the
Company undertakes to publicly offer or list such securities for trading on a
recognized securities exchange.


 


1.2                                 For purposes of this Exhibit C
and the Agreement to which this Exhibit C is made a part, reference
to registration of securities under the Securities Act and the Exchange Act
shall be deemed to mean the equivalent registration in a jurisdiction other
than the United States as designated by such Holders, it being understood and
agreed that in each such case all references in this Agreement to the
Securities Act, the Exchange Act and rules, forms of registration statements
and registration of securities thereunder, U.S. law and the SEC, shall be
deemed to refer, to the equivalent statutes, rules, forms of registration
statements, registration of securities and laws of and equivalent government authority
in the applicable non-U.S. jurisdiction.


 


2.                                      Form F-3 Registration.


 


In
case the Company shall receive from any Holder or Holders of a majority of all
Registrable Securities then outstanding a written request or requests that the
Company effect a registration on Form F-3 (or an equivalent registration
in a jurisdiction outside of the United States) and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, then the Company will:


 


2.1                                 Notice.


 


Promptly
give written notice of the proposed registration and the Holder’s or Holders’
request therefor, and any related qualification or compliance, to all other
Holders of Registrable Securities; and


 


2.2                                 Registration.


 


As
soon as practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holders or Holders’ Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as are specified in a written request given within twenty (20) days
after the Company provides the notice contemplated by Section 2.1 herein
above; provided, however, that the Company shall not be obligated to effect any
such registration, qualification or compliance pursuant to this Section 2:


 


(a)                                  if Form F-3
is not available for such offering by the Holders;


 


(b)                                 if the Holders, together
with the holders of any other securities of the Company entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than
US$10,000,000;


 


(c)                                  if the Company shall furnish
to the Holders a certificate signed by the President or Chief Executive Officer
of the Company stating that in the good faith judgment 


 

















 


of
the Board of Directors of the Company, it would be materially detrimental to
the Company and its shareholders for such Form F-3 Registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form F-3 registration statement no more than once during
any twelve (12) month period for a period of not more than sixty (60) days
after receipt of the request of the Holder or Holders under this Section 2;
provided that the Company shall not register any of its other shares during
such sixty (60) day period.


 


(d)                                 if the Company has, within
the six (6) month period preceding the date of such request, already
effected a registration under the Securities Act other than a registration from
which the Registrable Securities of Holders have been excluded (with respect to
all or any portion of the Registrable Securities the Holders requested be
included in such registration); or


 


(e)                                  in any particular
jurisdiction in which the Company would be required to qualify to do business
or to execute a general consent to service of process in effecting such registration,
qualification or compliance.


 


2.3                                 Not a Demand
Registration.


 


Form F-3
registrations shall not be deemed to be demand registrations.  Except as otherwise provided herein, there
shall be no limit on the number of times the Holders may request registration
of Registrable Securities under this Section 2.


 


3.                                      Expenses.


 


All
registration expenses incurred in connection with any registration pursuant to Section 2
(but excluding Selling Expenses) shall be borne by the Company.  Each Holder participating in a registration
pursuant to Section 2, shall bear such Holder’s proportionate share (based
on the total number of shares sold in such registration other than for the
account of the Company) of all Selling Expenses or other amounts payable to
underwriter(s) or brokers, in connection with such offering by the
Holders.  Notwithstanding the foregoing,
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered; provided, however, that if at the time
of such withdrawal, the Holders have learned of a material adverse change in
the condition, business, or prospects of the Company not known to the Holders
at the time of their request for such registration and have withdrawn their
request for registration with reasonable promptness after learning of such
material adverse change, then the Holders shall not be required to pay any of
such expenses.


 


4.                                      Obligations of the Company.


 


Whenever
required to effect the registration of any Registrable Securities under this
Agreement the Company shall, as expeditiously as reasonably possible:


 


4.1                                 Registration
Statement.


 


Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for a period of up to ninety (90) days or, in the case of Registrable
Securities registered under Form F-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 (a) 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 (b) in the case of
any registration of Registrable Securities on Form F-3 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.


 


4.2                                 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 securities covered by such
registration statement.


 


4.3                                 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.


 


4.4                                 Blue Sky.


 


Use
its 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 in such jurisdiction and except as may be required by the
Securities Act.


 


4.5                                 Underwriting.


 


In
the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement in usual and customary form, with
the managing underwriter(s) of such offering.


 


4.6                                 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 (a) the issuance of any stop order by the SEC in
respect of such registration statement, or (b) 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.


 


4.7                                 Opinion and
Comfort Letter.


 


Furnish,
at the request of any Holder requesting registration of 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, (a) an
opinion, 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 (b) letters dated as of (i) the effective
date of the registration statement covering such Registrable Securities and (ii) 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.


 


5.                                      Furnish Information.


 


It
shall be a condition precedent to the obligations of the Company to take any
action pursuant to Sections 2 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.


 


6.                                      Indemnification.


 


In
the event any Registrable Securities are included in a registration statement
under Section 2:


 


6.1                                 By the Company.


 


To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, its partners, officers, directors, legal counsel, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other United States federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a “Violation”):


 


(a)                                  any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto;


 


(b)                                 the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or


 


(c)                                  any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any United
States federal or state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any United States
federal or state securities law in connection with the offering covered by such
registration statement;


 


and
the Company will reimburse each such Holder, its partner, officer, director,
legal counsel, underwriter or controlling person for any legal or other
expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 6.1
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection 


 

















 


with
such registration by such Holder or any partner, officer, director, counsel,
underwriter or controlling person of such Holder.


 


6.2                                 By Selling
Holders.


 


To
the extent permitted by law, each selling Holder will, if Registrable
Securities held by Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter and any other
Holder selling securities under such registration statement or any of such
other Holder’s partners, directors, officers, legal counsel or any person who
controls such Holder within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, legal counsel, controlling
person, underwriter or other such Holder, partner or director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other United States federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such
director, officer, controlling person, underwriter or other Holder, partner,
officer, director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 6.2
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; and provided further,
that in no event shall any indemnity under this Section 6.2 exceed the net
proceeds received by such Holder in the registered offering out of which the
applicable Violation arises.


 


6.3                                 Notice.


 


Promptly
after receipt by an indemnified party under this Section 6 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnified party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the indemnifying party,
if representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflict
of interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of liability to the indemnified
party under this Section 6 to the extent the indemnifying party is
prejudiced as a result thereof, but the omission to so deliver written notice
to the indemnifying party will not relieve it of any liability that it may have
to any indemnified party otherwise than under this Section 6.


 


6.4                                 Contribution.


 


In
order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which either (i) any indemnified party
makes a claim for 


 

















 


indemnification
pursuant to this Section 6 but it is judicially determined (by the entry
of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 6 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any indemnified party
in circumstances for which indemnification is provided under this Section 6;
then, and in each such case, the indemnified party and the indemnifying party
will contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such proportion
so that a Holder (together with its related persons) is responsible for the
portion represented by the percentage that the public offering price of its
Registrable Securities offered by and sold under the registration statement
bears to the public offering price of all securities offered by and sold under
such registration statement, and the Company and other selling Holders are
responsible for the remaining portion. The relative fault of the indemnifying
Party and of the indemnified Party shall be determined by a court of law by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying Party or by the indemnified Party
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
that, in any such case: (a) no Holder will be required to contribute any
amount in excess of the net proceeds to such Holder from the sale of all such
Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (b) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.


 


6.5                                 Survival.


 


The obligations of the Company and Holders under
this Section 6 shall survive the completion of any offering of Registrable
Securities in a registration statement, regardless of the expiration of any
statutes of limitation or extensions of such statutes.  No indemnifying party, in the defense of any
such claim or litigation, shall, except with the consent of each indemnified
party, 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.


 


7.                                      No Registration Rights to Third Parties.


 


Without the prior written consent of the Holders of
a majority in interest of the 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 or entity any registration rights of any
kind (whether similar to the demand, “piggyback” or Form F-3 registration
rights or otherwise) relating to any securities of the Company which are senior
to, or on a parity with, those granted to the Holders of Registrable Securities.


 


8.                                      Rule 144 Reporting.


 


With
a view to making available the benefits of certain rules and regulations
of the SEC which may at any time permit the sale of the Registrable Securities
to the public without registration or pursuant to a registration on Form F-3,
after such time as a public market exists for the Ordinary Shares, the Company
agrees to:


 


8.1                                 Make and keep
public information available, as those terms are understood and defined in Rule 144
under the Securities Act, at all times after the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;


 

















 


8.2                                 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


 


8.3                                 So long as a Holder owns any
Registrable Securities, to furnish to such Holder forthwith upon request (a) a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time after ninety (90) days after the
effective date of the Company’s initial public offering), the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements), or its qualification as a registrant whose securities may be
resold pursuant to Form F-3 (at any time after it so qualifies), (b) a
copy of the most recent annual or quarterly report of the Company, and (c) 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.


 


9.                                      Market Stand-Off.


 


Each Shareholder agrees that, so long as it holds
any voting securities of the Company, upon request by the Company or the
underwriters managing the initial public offering of the Company’s securities,
it will not sell or otherwise transfer or dispose of any securities of the Company
(other than those permitted to be included in the registration and other
transfers to Affiliates permitted by law) without the prior written consent of
the Company or such underwriters, as the case may be, for a period of time
specified by the representative of the underwriters not to exceed one hundred
and eighty (180) days from the effective date of the registration statement
covering such initial public offering or the pricing date of such offering as
may be requested by the underwriters. 
The foregoing provision of this Section 9 shall not apply to the
sale of any securities of the Company to an underwriter pursuant to any
underwriting agreement, and shall only be applicable to the Holders if all
officers, directors and holders of one percent (1%) or more of the Company’s
outstanding share capital enter into similar agreements, and if the Company or
any underwriter releases any officer, director or holder of one percent (1%) or
more of the Company’s outstanding share capital from his or her sale restrictions
so undertaken, then each Holder shall be notified prior to such release and
shall itself be simultaneously released to the same proportional extent.  The Company shall require all future
acquirers of the Company’s securities holding at least one percent (1%) of the
then outstanding share capital of the Company to execute prior to a Qualified
Public Offering a market stand-off agreement containing substantially similar
provisions as those contained in this Section 9.