Exhibit
10.8


 


SUBSCRIPTION AGREEMENT


 


This Subscription Agreement
(this “Agreement”) is made as of October 20, 2010 by and between:


 


(1)                                  Xueda Education Group, an exempted company incorporated in the Cayman
Islands (the “Company”); and


 


(2)                                  WP X Investments IV Ltd., an exempted company incorporated in the Cayman
Islands (the “Purchaser”).  The
Purchaser and the Company are sometimes herein referred to each as a “Party,”
and collectively as the “Parties.”


 


W  I  T
N  E  S  S  E  T  H:


 


WHEREAS, the Company has filed a registration statement on
Form F-1 as of October 15, 2010 (the “Registration Statement”) with the
United States Securities and Exchange Commission (the “SEC”) in
connection with the initial public offering (the “Offering”) by the
Company of American Depositary Shares (“ADS”), each representing such
number of ordinary shares (“Ordinary Shares”) of the Company as
specified in the Registration Statement; and


 


WHEREAS, the Purchaser wishes to invest in the Company by
acquiring Ordinary Shares in the Company in a transaction exempt from
registration pursuant to Regulation S of the U.S. Securities Act of 1933, as
amended (“Regulation S” and the “Securities Act,” respectively);


 


NOW,
THEREFORE, in
consideration of the foregoing recitals and the mutual promises hereinafter set
forth, the Parties hereto agree as follows:


 


ARTICLE I


 


PURCHASE AND SALE


 


Section
1.1            Issuance, Sale and Purchase of Ordinary Shares. Upon the terms and subject to the conditions of this Agreement, at the
Closing (as defined below), the Purchaser hereby agrees to purchase, and the
Company hereby agrees to issue, sell and deliver to the Purchaser, subject to
and concurrent with the Offering, at a purchase price (the “Purchase Price”)
equal to the Offer Price (as defined below), that certain number (as such
number is determined pursuant to Section 1.2 below) of Ordinary Shares
(the “Purchased Shares”), free and clear of all liens or encumbrances
(except for restrictions arising under the Securities Act or created by virtue
of this Agreement or the Lock-up Agreement (as defined below)).  The “Offer Price” means the price per
ADS set forth on the cover of the Company’s final prospectus in connection with
the Offering (the “Final


 

















 


Prospectus”) divided by the number of Ordinary Shares represented by one ADS.  All such sales shall be made (i) on the same
terms as the ADSs being offered in the Offering and (ii) pursuant to and in
reliance upon Regulation S.


 


Section
1.2            Closing.


 


(a)           Closing.  Subject to Section 1.3, the closing
(the “Closing”) of the sale and purchase of the Ordinary Shares pursuant
to Section 1.1 shall take place concurrently with the closing of the
offering of the underwritten ADSs representing Ordinary Shares (the “Firm
Share Offering”) at the same offices for the closing of the Firm Share
Offering or at such other place as the Company and the Purchaser may mutually
agree.  The total number of the Ordinary
Shares that the Purchaser shall purchase at the Closing shall be equal to the
difference of (i) 7% of the Company’s total outstanding Ordinary Shares on a
Fully-Diluted basis as of the consummation of (x) this Closing, (y) the closing
of the sale and purchase of ordinary shares of the Company by the Purchaser
from the Selling Shareholders (as defined below) pursuant to the Shares
Purchase Agreement (as defined below) (the “Secondary Shares”) and (z)
the closing of the Firm Share Offering, subtracted by (ii) the Secondary
Shares.  The date and time of the Closing
are referred to herein as the “Closing Date.”  For the purposes of this Section 1.2, “Fully-Diluted”
means all outstanding Ordinary Shares, all Ordinary Shares issuable in respect
of all outstanding securities convertible into or exchangeable for Ordinary
Shares and all Ordinary Shares issuable in respect of all outstanding options,
warrants and other rights to acquire Ordinary Shares, provided, however, that
if the Company grants the underwriters in the Offering (the “Underwriters”)
an over-allotment option to purchase additional ADSs representing Ordinary
Shares (the “Optional Shares”) and the Underwriters exercise such
option, the term Fully-Diluted shall not include any such Optional Shares.


 


(b)           Payment and Delivery.  At the Closing, the Purchaser shall pay and
deliver the total consideration to the Company in U.S. dollars by wire
transfer, or by such other method mutually agreeable to the parties, of
immediately available funds to such bank account designated in writing by the
Company, and the Company shall deliver one or more duly executed share
certificates in original form, registered in the name of the Purchaser,
together with a certified true copy of the register of the members of the
Company, evidencing the Ordinary Shares being issued and sold to the Purchaser.


 


(c)           Restrictive Legend. Each
certificate representing the Purchased Shares shall be endorsed with the
following legend (in addition to any legend required under applicable state
securities laws):


 


THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE “ACT”) OR


 


2

















 


UNDER THE SECURITIES LAWS OF
ANY STATE. THIS SECURITY MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED: (A) IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (2) AN EXEMPTION OR QUALIFICATION UNDER APPLICABLE
SECURITIES LAWS OR (3) DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED;
AND (B) WITHIN THE UNITED STATES OR TO ANY U.S. PERSON, AS EACH OF THOSE TERMS
IS DEFINED IN REGULATION S UNDER THE ACT, DURING THE 40 DAYS FOLLOWING CLOSING
OF THE PURCHASE. ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS
SECURITY IN VIOLATION OF THESE RESTRICTIONS SHALL BE VOID.


 


(d)           No Representation, Warranty or
Undertaking as to Offering.  The
Purchaser acknowledges that the Company makes no representation and gives no
warranty or undertaking that the Offering will proceed or be completed (within
any particular period of time, or at all) and will be under no liability
whatsoever to the Purchaser in the event either the Offering does not proceed
or is not completed for any reason.


 


Section
1.3            Closing Conditions.


 


(a)           Conditions of the Purchaser for
the Closing. The obligation of the Purchaser to purchase and pay for the
Purchased Shares as contemplated by this Agreement is subject to the
satisfaction, on or before the Closing Date, of the following conditions, any
of which may be waived by the Purchaser in its sole discretion:


 


(i)            The Investor and Registration Rights
Agreement between the Company and the Purchaser substantially in the form
attached as Exhibit A hereto (the “Investor and Registration Rights
Agreement”), shall have been executed and delivered to the Purchaser.


 


(ii)           All corporate and other actions
required to be taken by the Company in connection with the issuance and sale of
the Purchased Shares shall have been completed.


 


(iii)          Each of the conditions set forth in Section
6.1 (other than that set forth in Section 6.1(i) thereof) of the
Shares Purchase Agreement dated as of the


 


3

















 


date hereof between the Selling
Shareholders (as defined therein) and the Purchaser shall have been
satisfied or waived.


 


(iv)          The Company’s Cayman counsel shall
have provided to the Purchaser a legal opinion dated as of the Closing Date
substantially in the form of the opinion to be delivered the Underwriters in
connection with the Firm Share Offering.


 


(v)           The Company’s United States counsel
shall have provided to the Purchaser a “no registration” legal opinion dated as
of the Closing Date substantially in the form attached as Exhibit B.


 


(vi)          The Company PRC counsel shall have
provided to the Purchaser a legal opinion dated as of the Closing Date
substantially in the form of the opinion to be delivered the Underwriters in
connection with the Firm Share Offering.


 


(vii)         The representations and warranties of
the Company contained in Section 2.1 of this Agreement shall have been
true and correct on the date of this Agreement and on and as of the Closing
Date; provided, however, that for purposes of the representations and
warranties in Section 2.1 as of the Closing Date, the term Registration
Statement shall mean the registration statement as declared effective by the
SEC prior to the Closing Date.  The
Company shall have performed and complied in all material respects with all,
and not be in breach or default under any, agreements, covenants, conditions
and obligations contained in this Agreement that are required to be performed
or complied with on or before the Closing Date.


 


(viii)        No governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law (whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins, prevents, prohibits, imposes any damages or penalties that are
substantial in relation to the Company, or otherwise makes illegal the
consummation of the transactions contemplated by this Agreement; and no action,
suit, proceeding or investigation shall have been instituted by a governmental
authority of competent jurisdiction or threatened that seeks to restrain,
enjoin, prevent, prohibit, impose any damages or penalties that are substantial
in relation to the Company, or otherwise makes illegal the consummation of the
transactions contemplated by this Agreement.


 


(ix)           The Offering shall have been
successfully completed by no later than December 31, 2010.


 


4

















 


(x)            The ADSs shall have been listed on
the New York Stock Exchange subject to official notice of issuance.


 


(xi)           The underwriting agreement relating
to the Offering shall have been entered into and have become effective.


 


(b)           Conditions of the Company. The
obligation of the Company to issue and sell the Purchased Shares to be sold to
and purchased by the Purchaser as contemplated by this Agreement are subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions, any of which may be waived in writing by the Company in its sole
discretion:


 


(i)            The Investor and Registration Rights
Agreement shall have been executed and delivered by the Purchaser.


 


(ii)           All corporate and other actions
required to be taken by the Purchaser in connection with the purchase of the Purchased
Shares shall have been completed.


 


(iii)          Each of the conditions set forth in Section
6.2 of the Shares Purchase Agreement (other than that set forth in Section
6.2(i) thereof) has been satisfied or waived.


 


(iv)          The representations and warranties of
the Purchaser contained in Section 2.2 of this Agreement shall have been
true and correct on the date of this Agreement and on and as of the Closing
Date; and the Purchaser shall have performed and complied in all material
respects with all, and not be in breach or default in any material respect
under any, agreements, covenants, conditions and obligations contained in this
Agreement that are required to be performed or complied with on or before the
Closing Date.


 


(v)           No governmental authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins, prevents, prohibits, imposes any damages or penalties that
are substantial in relation to the Company, or otherwise makes illegal the
consummation of the transactions contemplated by this Agreement; and no action,
suit, proceeding or investigation shall have been instituted by a governmental
authority of competent jurisdiction or threatened that seeks to restrain,
enjoin, prevent, prohibit, impose any damages


 


5

















 


or penalties that are
substantial in relation to the Company, or otherwise makes illegal the
consummation of the transactions contemplated by this Agreement.


 


ARTICLE II


 


REPRESENTATIONS AND WARRANTIES


 


Section
2.1           Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchaser, as of the
date hereof and as of the Closing Date, as follows:


 


(a)           Organization and Authority.


 


(i)            The Company is a company duly
incorporated as an exempted company with limited liability, validly existing
and in good standing under the laws of the Cayman Islands.  The Company has all requisite power and
authority to carry on its business as it is currently being conducted.


 


(ii)           The Company has all necessary
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company of this
Agreement and the performance of its obligations hereunder have been duly
authorized by all requisite action on the part of the Company and its
shareholders. This Agreement constitutes the valid and legally binding
obligations of the Company, enforceable in accordance with its respective terms
and conditions, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors’ rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.


 


(b)           Capitalization.


 


(i)            The authorized share capital, option
plans and issuance and warrant issuance of the Company shall be as set forth in
the Registration Statement. All issued and outstanding Ordinary Shares of the
Company are validly issued, fully paid and non-assessable.


 


(ii)           All outstanding Ordinary Shares and
all outstanding awards under the Company’s stock option plans and all
outstanding shares of capital stock of each of the Company’s subsidiaries and
consolidated affiliates (each a


 


6

















 


“Subsidiary” and
collectively “Subsidiaries”) have been issued and granted in compliance
with (i) all applicable Securities Laws and other applicable laws and (ii) all
requirements set forth in applicable contracts, without violation of the
preemptive rights, rights of first refusal or other similar rights. Except as
set forth in the Registration Statement, no equity securities of the Company
are or may become required to be issued by reason of any notes, bonds or other
debt securities, or any option, warrant or other agreements to which the
Company is a party. “Securities Laws” means the United States Securities
Act of 1933, as amended (the “Securities Act”), the Exchange Act, the
listing rules of, or any listing agreement with New York Stock Exchange and any
other applicable law regulating securities or takeover matters.


 


(c)           Due Issuance of the Purchased
Shares. The Purchased Shares have been duly authorized and, when issued and
delivered to and paid for by the Purchaser pursuant to this Agreement, will be
validly issued, fully paid and non-assessable and free and clear of any pledge,
mortgage, security interest, encumbrance, lien, charge, assessment, right of
first refusal, right of pre-emption, third party right or interest, claim or
restriction of any kind or nature, except for restrictions arising under the
Securities Act or created by virtue of this Agreement or the Lock-up Agreement
and upon delivery and entry into the register of members of the Company will
transfer to the Purchaser good and valid title to the Purchased Shares.


 


(d)           Noncontravention. Neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any provision of the
memorandum and articles of association of the Company or other constitutional
documents of the Company or its subsidiaries as currently in effect or violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
entity or court to which the Company or its subsidiaries is subject, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of or creation of an encumbrance under, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice under,
any agreement, contract, lease, license, instrument, or other arrangement to
which the Company or its subsidiaries is a party or by which the Company or its
subsidiaries is bound or to which any of the Company’s or its subsidiaries’
assets are subject. There is no action, suit or proceeding pending or, to the
knowledge of the Company, threatened against the Company or its subsidiaries
that challenges the validity of this Agreement or the right of the Company to
enter into this Agreement or to consummate the transactions contemplated
hereby.


 


(e)           Consents
and Approvals. Neither the execution
and delivery by the Company of this Agreement, nor the consummation by the
Company of any of the transactions contemplated hereby, nor the performance by
the Company of this Agreement in accordance with its terms requires the
consent, approval, order or


 


7

















 


authorization of, or
registration with, or the giving notice to, any governmental or public body or
authority or any third party, except such as have been obtained, made or given.


 


(f)            SEC Filings; Financial Statements.  Prior to the Closing, the Registration
Statement, as supplemented or amended, shall have been declared effective by
the SEC.  The Registration Statement,
including the prospectus therein, conforms and will conform, in all material
respects to the requirements of the Securities Act and the rules and
regulations of the SEC thereunder and (except for the absence of pricing
related information) does not, as of the date hereof, and will not, as of the
applicable effective date, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.


 


(g)           Investment Company.  The Company is not and, after giving effect to
the offering and sale of the Company Shares, the consummation of the Offering
and the application of the proceeds hereof and thereof, will not be an “investment
company,” as such term is defined in the U.S. Investment Company Act of 1940,
as amended.


 


(h)           Regulation S.  No directed selling efforts (as defined in
Rule 902 of Regulation S under the Securities Act) have been made by any of the
Company, any of its affiliates or any person acting on its behalf with respect
to any Purchased Shares that are not registered under the Securities Act; and
none of such persons has taken any actions that would result in the sale of the
Purchased Shares to the Purchaser under this Agreement requiring registration
under the Securities Act; and the Company is a “foreign issuer” (as defined in
Regulation S).


 


Section
2.2            Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as of the
date hereof and as of the Closing Date, as follows:


 


(a)           Due Formation. The Purchaser is
a company duly incorporated as an exempted company with limited liability,
validly existing and in good standing under the laws of the Cayman Islands,
with full power and authority to own and operate and to carry on its business
in the places and in the manner as currently conducted.


 


(b)           Authority. The Purchaser has
full power and authority to enter into, execute and deliver this Agreement and
each agreement, certificate, document and instrument to be executed and
delivered by the Purchaser pursuant to this Agreement and to perform its
obligations hereunder. The execution and delivery by the Purchaser of this
Agreement and the performance by the Purchaser of its obligations hereunder
have been duly authorized by all requisite actions on its part.


 


8

















 


(c)           Valid Agreement. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
the legal, valid and binding obligation of the Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally, and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.


 


(d)           Consents and Approvals.
Neither the execution and delivery by the Purchaser of this Agreement, nor the
consummation by the Purchaser of any of the transactions contemplated hereby,
nor the performance by the Purchaser of this Agreement in accordance with its
terms requires the consent, approval, order or authorization of, or
registration with, or the giving notice to, any governmental or public body or
authority or any third party, except such as have been obtained, made or given.


 


(e)           Status and Investment Intent.


 


(i)            Experience. The Purchaser has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the
Purchased Shares. The Purchaser is capable of bearing the economic risks of
such investment, including a complete loss of its investment.


 


(ii)           Purchase Entirely for Own Account.
The Purchaser is acquiring the Purchased Shares that it is purchasing pursuant
to this Agreement for investment for its own account for investment purposes
only and not with the view to, or with any intention of, resale, distribution
or other disposition thereof. The Purchaser does not have any direct or
indirect arrangement, or understanding with any other persons to distribute, or
regarding the distribution of the Purchased Shares in violation of the
Securities Act or any other applicable state securities law.


 


(iii)          Solicitation. The Purchaser (x)
was not identified or contacted through the marketing of the Offering and (y)
did not contact the Company as a result of any general solicitation.


 


(iv)          Restricted Securities. The
Purchaser acknowledges that the Purchased Shares are “restricted securities”
that have not been registered under the Securities Act or any applicable state
securities law. The Purchaser further acknowledges that, absent an effective
registration under the Securities Act, the Purchased Shares may only be
offered, sold or otherwise transferred (x) to the Company, (y) outside the
United States in accordance with Rule 904 of


 


9

















 


Regulation S under the
Securities Act or (z) pursuant to an exemption from registration under the
Securities Act.


 


(v)           Information. The Purchaser has
received all the information that it considers necessary and appropriate to
decide whether to acquire the Purchased Shares hereunder.  The Purchaser is not relying on any
statements or representations made in connection with the transactions contemplated
hereby other than the representations and warranties contained in this
Agreement.  The Purchaser is relying
solely on Purchaser’s own advisers as to the financial, tax, legal and related
matters concerning an investment in the Purchased Securities and not on any
statements or representations of any of the Company, the Underwriters, or its
or their agents, written or oral, other than the representations made by the
Company in this Agreement and made by the Selling Shareholders in the Shares
Purchase Agreement. Neither any inquiries nor any other investigation conducted
by or on behalf of such Purchaser or by its representatives or counsel shall
modify, amend or affect such Purchaser’s right to rely on the truth, accuracy
and completeness of the representations and warranties or disclosure materials
provided by the Company under this Agreement and provided by the Selling
Shareholders under the Shares Purchase Agreement.


 


(vi)          Not U.S. Person. The Purchaser
is not a “U.S. person” as defined in Rule 902 of Regulation S.


 


(vii)         Offshore Transaction. The
Purchaser has been advised and acknowledges that in issuing the Purchased
Shares to the Purchaser pursuant hereto, the Company is relying upon the
exemption from registration provided by Regulation S.  The Purchaser is acquiring the Purchased
Shares in an offshore transaction in reliance upon the exemption from
registration provided by Regulation S.


 


ARTICLE III


 


COVENANTS


 


Section
3.1            Market Stand-off.  The Purchaser shall, concurrently with the
execution of this Agreement, enter into a lock-up agreement (the “Lock-up
Agreement”) with the lead underwriters of the Offering (the “Lead
Underwriters”), substantially in the form set forth in Exhibit C
hereto; provided that, nothing in this Section 3.1 shall prevent the
Purchaser from transferring any Purchased Shares to an affiliate of the
Purchaser so long as such affiliate enters into an agreement with the Lead
Underwriters substantially in the form of the Lock-up Agreement. The foregoing
provisions of this Section 3.1 shall only apply to the Purchaser if each
officer and director of the Company and all other


 


10

















 


shareholders of the
Company enter into Lock-Up Agreements, and if the Company or any underwriter
releases any other shareholder from his, her or its sale restrictions so
undertaken, then the Purchaser shall be notified prior to such release and
shall itself be simultaneously released to the same proportional extent.


 


Section
3.2            Purchaser Description.


 


(a)           The Company shall afford the
Purchaser a reasonable opportunity in which to review and comment on any
description of the Purchaser and/or the transactions contemplated by this
Agreement that is to be included in any amendment to the Registration Statement
or in any free writing prospectus or marketing materials used in connection
with the Offering.


 


(b)           The Purchaser hereby consents and
undertakes to promptly provide a description of the beneficial ownership of any
shares of the Company that it is acquiring hereunder to the Company (the “Purchaser
Description”), and hereby represents that the Purchaser Description will
not, as of the applicable effective date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, as may be reasonably
required by the Company for the purpose of satisfying any disclosure
requirements in connection with the Registration Statement and the prospectus
therein under applicable laws, regulations and the listing rules of the New
York Stock Exchange. The Purchaser also consents to the inclusion of the
Purchaser Description, the Purchaser’s name as well as the matters relating to
the Purchaser’s subscription of the Purchased Shares in the Registration
Statement and the prospectus therein, and in press releases and other marketing
materials for the Offering. 
Additionally, the Purchaser hereby consents to the filing of this
Agreement and the Investor and Registration Rights Agreement as an exhibit to
the Registration Statement.


 


(c)           The Purchaser acknowledges that the
Company and others will rely upon the truth and accuracy of the Purchaser
Description, and it agrees to notify the Company promptly in writing if any of
the content contained in the Purchaser Description ceases to be accurate and
complete or becomes misleading.


 


Section
3.3            Representation Letter.  The Purchaser shall, concurrently with the
execution of this Agreement, execute and deliver a representation letter dated
the date hereof for the benefit of Goldman Sachs (Asia) L.L.C. reasonably
acceptable by the parties thereto.


 


Section
3.4            Securities Filings.  The Company shall (a) provide to the
Purchaser, promptly after the filing thereof, copies of any registration statement,
preliminary prospectus, final prospectus, application for listing or other
document filed with any securities regulatory authority or securities exchange
in any jurisdiction (“Securities


 


11














 


Filing”), and (b) prior to the completion of Firm Share Offering, provide the
Purchaser with a draft of any proposed Securities Filing reasonably in advance
of the due date of such Securities Filing, subject to compliance with
applicable law.


 


Section
3.5            Distribution Compliance Period.  The Purchaser agrees not to resell, pledge or
transfer any Purchased Shares within the United States or to any U.S. Person,
as each of those terms is defined in Regulation S, during the 40 days following
the Closing Date.


 


ARTICLE IV


 


INDEMNIFICATION


 


Section
4.1            Indemnification.  Each
of the Warrantors (each, an “Indemnifying Party”) shall, jointly and
severally, indemnify and hold the Purchaser and its directors, officers and
agents (each, an “Indemnified Party”) harmless from and against any
losses, claims, damages, liabilities, judgments, fines, obligations, expenses
and liabilities of any kind or nature whatsoever, including but not limited to
any investigative, legal and other expenses incurred in connection with, and any
amounts paid in settlement of, any pending or threatened legal action or
proceeding, and (ii) any taxes or levies that may be payable by such person by
reason of the indemnification of any indemnifiable loss hereunder
(collectively, “Losses”) resulting from or arising out of: (i) the
breach of any representation or warranty of such Indemnifying Party contained
in this Agreement or in any schedule or exhibit hereto; or (ii) the violation
or nonperformance, partial or total, of any covenant or agreement of such
Indemnifying Party contained in this Agreement for reasons other than gross
negligence or willful misconduct of such Indemnified Party.  In calculating the amount of any Losses of an
Indemnified Party hereunder, there shall be subtracted the amount of any
insurance proceeds and third-party payments received by the Indemnified Party
with respect to such Losses, if any.


 


Section
4.2            Notice of Claims; Procedures.
If an Indemnified Party makes any claim against an Indemnifying Party for
indemnification, the claim shall be in writing and shall state in general terms
the facts upon which such Indemnified Party makes the claim. In the event of
any claim or demand asserted against an Indemnified Party by a third party upon
which the Indemnified Party may claim indemnification, the Indemnifying Party
shall give written notice to the Indemnified Party within 30 days after receipt
from the Indemnified Party of the claim referred to above, indicating whether
such Indemnifying Party intends to assume the defense of the claim or demand.
If an Indemnifying Party assumes the defense, such Indemnifying Party shall
have the right to fully control and settle the proceeding, provided, that, any
such settlement or compromise shall be permitted hereunder only with the written
consent of the Indemnified Party. If the Indemnifying Party elects not to
assume the defense, fails to make such an election within the 30-day period or
fails to actively and diligently conduct the defense, the Indemnified Party
may, at its option, defend, settle, compromise or pay such action or claim at
the expense of the Indemnifying Party; provided, that, any such settlement or


 


12

















 


compromise shall be
permitted hereunder only with the written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed.


 


Section
4.3            Cap. Notwithstanding the
foregoing, the Indemnifying Party shall have no liability (for indemnification
or otherwise) with respect to any Losses in excess of the aggregate total of
the Purchase Price.


 


Section
4.4            Third Party Claims.


 


(a)           If any third party shall notify any
Indemnified Party in writing with respect to any matter involving a claim by
such third party (a “Third Party Claim”) which such Indemnified Party
believes would give rise to a claim for indemnification against the
Indemnifying Party under this Article IV, then the Indemnified Party
shall promptly (i) notify the Indemnifying Party thereof in writing within
thirty (30) days of receipt of notice of such claim and (ii) transmit to the
Indemnifying Party a written notice (“Claim Notice”) describing in
reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to such claim (if any), and the basis of the Indemnified
Party’s request for indemnification under this Agreement; provided, however,
that no delay on the part of the Indemnified Party in so notifying the Company
shall relieve the Company of any obligation under Section 4.1 with
respect thereto unless (and then solely to the extent) the Company is
prejudiced thereby.


 


(b)           Subject to Section 4.4(d)
below, upon receipt of a Claim Notice with respect to a Third Party Claim, the
Indemnifying Party shall have the right to assume the defense of any Third Party
Claim by notifying the Indemnified Party in writing that the Indemnifying Party
elects to assume the defense of such Third Party Claim, and upon delivery of
such notice by the Indemnifying Party, the Indemnifying Party shall have the
right to defend such Third Party Claim with counsel, selected by it, who is
reasonably satisfactory to the Indemnified Party, by all appropriate
proceedings, which proceedings shall be prosecuted actively and diligently by
the Indemnifying Party to a final conclusion or settled. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to consent to the entry
of a judgment or enter into any compromise or settlement with respect to such
Third Party Claim without the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld).


 


(c)           If requested by the Indemnifying
Party, the Indemnified Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim which the Indemnifying Party elects to
contest, including the making of any related counterclaim against the person
asserting the Third Party Claim or any cross complaint against any person. The
Indemnified Party shall have the right to receive copies of all pleadings,
notices and communications with respect to any Third Party Claim, other than
any privileged


 


13

















 


communications between
the Indemnifying Party and its counsel, and shall be entitled, at its sole cost
and expense, to retain separate co-counsel and participate in, but not control,
any defense or settlement of any Third Party Claim assumed by the Indemnifying
Party pursuant to Section 4.4(b); provided, however, if,
based on written advice of counsel, the Indemnified Party concludes that there
is a reasonable likelihood of a conflict of interest between the Indemnifying
Party and the Indemnified Party with respect to such Third Party Claim, the
Indemnifying Party shall bear the reasonable costs and expenses of counsel
retained by the Indemnified Party in connection with such defense.


 


(d)           If (i) the Indemnifying Party fails
to notify the Indemnified Party within the thirty (30) days after receipt of
any Claim Notice that the Indemnifying Party elects to assume the defense of
any Third Party Claim pursuant to Section 4.4(b), (ii) the Indemnifying
Party elects to assume the defense of any Third Party Claim pursuant to Section
4.4(b) but fails to diligently prosecute or settle such Third Party Claim,
(iii) the Indemnifying Party and the Indemnified Party are parties to the same
proceeding (or, assuming the veracity of the facts alleged by the party
bringing the Third Party Claim, the Indemnifying Party and the Indemnified
Party may become parties to the same proceeding) and the Indemnified Party
determines in good faith that a conflict of interest exists between the
Indemnifying Party and the Indemnified Party, (iv) the Indemnified Party
determines in good faith that there is a reasonable possibility that it will be
prejudiced in any material respect beyond the ambit of such Third Party Claim
by the Indemnifying Party’s control of the defense and proceedings with respect
to any Third Party Claim, or (v) such Third Party Claim is a claim by a governmental
tax authority, then (A) the Indemnified Party shall have the right to assume
full control of the defense and proceedings with respect to such Third Party
Claim, and the Indemnified Party may compromise or settle such Third Party
Claim without consulting with, or obtaining consent from, the Indemnifying
Party in connection therewith (it being understood and agreed that the
Indemnifying Party shall not be bound by any such compromise or settlement
entered into without its consent) and (B) the Indemnifying Party shall
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including fees and disbursements of no
more than one counsel per jurisdiction (such counsel reasonably acceptable to the
Indemnifying Party) reasonably incurred in connection with such Third Party
Claim). The Indemnified Party shall have full control of such defense and
proceedings, although the Indemnifying Party shall be entitled to participate
in any defense or settlement controlled by the Indemnified Party pursuant to
this Section 4.4(d) at its sole expense. Any compromise or settlement of
a Third Party Claim effected by the Indemnified Party without the Indemnifying
Party’s consent shall not be dispositive of the amount of any Losses with
respect to such Third Party Claim.


 


(e)           In the event any Indemnified Party
should have a claim against the Indemnifying Party hereunder which does not
involve a Third Party Claim, the Indemnified Party shall promptly transmit to
the Indemnifying Party a written notice (the “Indemnity Notice”)
describing in reasonable detail the nature of the claim, the


 


14

















 


Indemnified Party’s best
estimate of the amount of Losses attributable to such claim and the basis of
the Indemnified Party’s request for indemnification under this Agreement;
provided that no delay on the part of the Indemnified Party in delivering the
Indemnity Notice pursuant to this Section 4.4(e) shall relieve the
Indemnifying Party of any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party is prejudiced thereby. If the Indemnifying Party
does not notify the Indemnified Party within thirty (30) days from its receipt
of the Indemnity Notice that the Indemnifying Party disputes such claim (the “Dispute
Notice”), the Indemnifying Party shall be deemed to have accepted and
agreed with such claim.


 


ARTICLE V


 


MISCELLANEOUS


 


Section
5.1            Survival of the Representations and Warranties. All representations and warranties made by any Party shall survive for
two years and shall terminate and be without further force or effect on the
second anniversary of the date hereof, except as to (i) any claims thereunder
which have been asserted in writing pursuant to Section 4.1 against the
Party making such representations and warranties on or prior to such second
anniversary, and (ii) the Company’s representations contained in Section
2.1(a), (b) and (c) hereof, each of which shall survive
indefinitely.


 


Section
5.2            Governing Law; Arbitration.  This Agreement shall be governed and
interpreted in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles thereof.  Any dispute arising out of or relating to
this Agreement, including any question regarding its existence, validity or
termination (“Dispute”) shall be referred to and finally resolved by
arbitration at the Hong Kong International Arbitration Centre in accordance
with the Hong Kong International Arbitration Centre Administered Arbitration
Rules then in force.  There shall be
three arbitrators.  The language to be
used in the arbitration proceedings shall be English.  Each of the parties hereto irrevocably waives
any immunity to jurisdiction to which it may be entitled or become entitled
(including without limitation sovereign immunity, immunity to pre-award
attachment, post-award attachment or otherwise) in any arbitration proceedings
and/or enforcement proceedings against it arising out of or based on this
Agreement or the transactions contemplated hereby.


 


Section
5.3            Amendment. This Agreement shall
not be amended, changed or modified, except by another agreement in writing
executed by the Parties hereto.


 


Section
5.4            Binding Effect. This Agreement
shall inure to the benefit of, and be binding upon, each of the Company and the
Purchaser and their respective heirs, successors and permitted assigns and
legal representatives.


 


Section
5.5            Assignment. Neither this Agreement
nor any of the rights, duties or obligations hereunder may be assigned by the
Company or the Purchaser without the


 


15

















 


express written consent
of the other Parties, except that the Purchaser may assign all or any of its
rights and obligations hereunder to any affiliate of Purchaser without the
consent of the other Parties, provided that no such assignment shall relieve
the Purchaser of its obligations hereunder if such assignee does not perform
such obligations and provided further that the Purchaser shall give the Company
prior written notice of such assignment. Any purported assignment in violation
of the foregoing sentence shall be null and void.


 


Section
5.6            Notices. All notices, requests,
demands, and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of actual delivery if
delivered personally to the Party or Parties to whom notice is to be given, on
the date sent if sent by telecopier, tested telex or prepaid telegram, on the
next business day following delivery to Federal Express properly addressed or
on the day of attempted delivery by the U.S. Postal Service if mailed by
registered or certified mail, return receipt requested, postage paid, and
properly addressed as follows:


 


If to Purchaser, at:


 


WP X Investments IV Ltd.

c/o Warburg Pincus Asia Ltd

8th Floor, Newton Tower

Sir William Newton Street

Port Louis, Mauritius

Attention: Sharmila Baichoo


 


With copy to:


 


Maurice Hoo

Orrick, Herrington & Sutcliffe

43rd Floor, Gloucester Tower

The Landmark

15 Queen’s Road 

Central, Hong Kong


 


If to the Company, at:


 


Xueda Education Group

A-4 Xibahe Beili

Chaoyang District

Beijing 100028

P.R. China


 


16

















 


With copy to:


 


Leiming Chen

Simpson Thacher & Bartlett LLP

35th Floor, ICBC Tower

3 Garden Road

Central, Hong Kong


 


Any Party may change its
address for purposes of this Section 5.6 by giving the other Parties
hereto written notice of the new address in the manner set forth above.


 


Section
5.7            Entire Agreement. This Agreement
constitutes the entire understanding and agreement between the Parties hereto
with respect to the matters covered hereby, and all prior agreements and
understandings, oral or in writing, if any, between the Parties with respect to
the matters covered hereby are merged and superseded by this Agreement.


 


Section
5.8            Severability. If any provisions of
this Agreement shall be adjudicated to be illegal, invalid or unenforceable in
any action or proceeding whether in its entirety or in any portion, then such
provision shall be deemed amended, if possible, or deleted, as the case may be,
from the Agreement in order to render the remainder of the Agreement and any
provision thereof both valid and enforceable, and all other provisions hereof
shall be given effect separately therefrom and shall not be affected thereby.


 


Section
5.9            Fees and Expenses. Except as
otherwise provided in this Agreement, the Company and the Purchaser will bear
their respective expenses incurred in connection with the negotiation,
preparation and execution of this Agreement.


 


Section
5.10         Public Announcements.
None of the Parties to this Agreement shall make, or cause to be made, any
press release or public announcement in respect of this Agreement or the
transactions contemplated by this Agreement or otherwise communicate with any
news media without the prior written consent of the Purchaser and the Company
unless otherwise required by Securities Law or other applicable law, and the
Parties to this Agreement shall cooperate as to the timing and contents of any
such press release, public announcement or communication.


 


Section
5.11         Specific Performance.
The Parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.


 


Section
5.12         Termination.  In the event that the Closing shall not have
occurred by December 31, 2010, this Agreement shall be terminated unless the
Parties mutually agree by December 31, 2010 to renegotiate; except for the
provisions of Section 5.13 below, which shall survive any termination under
this Section 5.12.


 


17

















 


Section
5.13         Renegotiation.  In the event that the Offering shall not have
been successfully completed by December 31, 2010 and as a result the Closing
shall not have occurred by that date, the Parties shall, prior to March 31, 2011,
use their best efforts to renegotiate the purchase price and certain additional
rights, including but not limited to information and inspection rights with
respect to the Company’s periodic financial information, books and records and
annual budget and preemptive rights with respect to the Company’s new
securities issuances.


 


Section
5.14         Headings.  The headings of the various articles and
sections of this Agreement are inserted merely for the purpose of convenience
and do not expressly or by implication limit, define or extend the specific
terms of the section so designated.


 


Section
5.15         Execution in Counterparts.  For the convenience of the Parties and to
facilitate execution, this Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.


 


[SIGNATURE
PAGE FOLLOWS]


 


18

















 


IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed as of the day and year first
above written.


 


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  XUEDA EDUCATION GROUP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jun Wang

  
	
   

  	
   

  	
  Name:

  	
  Jun Wang

  
	
   

  	
   

  	
  Title:

  	
  Director and President

  



 


SIGNATURE
PAGE TO


SUBSCRIPTION
AGREEMENT


 

















 


IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed as of the day and year first
above written.


 


 


	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  WP X Investments IV Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sharmila Baichoo

  
	
   

  	
   

  	
  Name:

  	
  Sharmila Baichoo

  
	
   

  	
   

  	
  Title:

  	
  Authorized Representative

  



 


SIGNATURE
PAGE TO


SUBSCRIPTION
AGREEMENT


 

















 


Exhibit A


 


Investor and
Registration Rights Agreement


 

















 


Exhibit B


 


Form of US Legal Opinion


 

















 


Exhibit C


 


Form of Lock-up Agreement