exv4w6







Exhibit 4.6




Execution Version




HISOFT TECHNOLOGY INTERNATIONAL LIMITED
 SECOND
AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT




     This SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is
entered into as of August 17, 2007, among:



     HiSoft
Technology International Limited, a Cayman Islands exempted
company (the “Company”),



     the
persons listed on the Schedule of Restricted Parties attached hereto
as Schedule 1 (each a “Restricted Party,” and
collectively, the “Restricted Parties”) on the one hand,



     and
the following entities (each an “Investor and together, the
“Investors”) on the other:



     JAFCO
Asia Technology Fund II, a Cayman Islands company (“JAFCO”).



     Intel Capital (Cayman) Corporation (formerly Known as Intel Capital Corporation), a Cayman
Islands company (“Intel”),



     Granite Global Ventures (Q.P) L.P., a Delaware (U.S.A) limited partnership (“Granite QP”),



     Granite Global Ventures L.P., a Delaware (U.S.A) limited partnership (“Granite”),



     Granite Global Ventures II L.P., a Delaware (U.S.A.) limited partnership (“Granite II”),



     GGVII Entrepreneurs Fund L.P., a Delaware (U.S.A) limited partnership (“GGVII”),



     Sumitomo Corporation Equity Asia Limited, a company incorporated in Hong Kong (“Sumitomo’’)



     International Finance Corporation, an International organization established by the
Articles of Agreement among its member countries, including the PRC (“IFC”),



     The Greater China Trust, a trust duly organized and existing under the laws of the Cayman
Islands, managed by Mitsubishi UFJ Securities (HK) Capital, Limited (“Mitsubishi”),



     Draper Fisher Jurvetson ePlanet Ventures L.P. a limited partnership organized and
existing under the taws of the Cayman Islands (“DFJLP”),



     Draper Fisher Jurvetson ePlanet Ventures GmbH & Co., KG, a company organized under the
laws of Germany (“DFJ GmbH”),



     Draper Fisher Jurvetson ePlanet Partners Fund, L.L.C, a limited liability company organized
under the laws of the State of California (“DFJ
Partners,” together with DFJLP and DFJ GmbH,
“DFJ”), and



     GE Capital Equity Investments Ltd, a company organized under the laws of Cayman islands
(“GE”),



     Kornhill Consulting LTD, a company Incorporated under the laws of British Virgin
Islands (“Kornhill”) and



     Laoniu Investment Company Limited, a company organized under
the laws of Mauritius (‘Laoniu’)







 









 





RECITALS



     This Agreement is the “Investors’ Rights Agreement’ defined in and referenced In the Series C
Share Purchase Agreement (as defined below) and shall take effect subject to and immediately
following the Closing, as defined in Section 3.1 of the Series C Share Purchase Agreement
(the ‘Effective Date”) Certain of the Investors have previously purchased from the Company, and the
Company has sold to such Investors, Series A Preferred Shares and certain warrants to purchase
additional Series A Preferred Shares and Series A-1 Preferred Shares, and/or Series B Preferred
Shares of the Company on the terms and conditions set forth in that certain Series A Preferred
Share Purchase Agreement dated as of July 28, 2004 (the “Series A Share Purchase Agreement”) among
the Company, HiSoft. Dalian, Halhui Dalian, certain of the Investors and certain other entities and
individuals, and that certain Series B Preferred Share Purchase Agreement dated as of June 30, 2006,
as amended and restated as of April 30, 2007 (the “Series B Share Purchase Agreement”) among the
Company, HiSoft Dalian, Haihui Dalian, certain of the Investors and certain other entities and
individuals



     In
conjunction with the consummation of the transactions contemplated by the Series A Share
Purchase Agreement and the Series B Share Purchase Agreement, the parties thereto entered into
that certain Investors’ Rights Agreement, dated as of July 28, 2004, as amended by the Accession
Agreement, dated as of October 18, 2004, by and among the Company, the Series A Investors, and
certain other entities and individuals and as further amended and restated by that certain Amended
and Restated Investors’ Rights Agreement, dated as of June 30, 2006, by and among the Company, the
Series A Investors the Series B Investors and certain other entities and individuals (the “Prior
Investors’ Rights Agreement”)



     In accordance with Section 10.14 of the Prior Investors’ Rights Agreement the parties
thereto desire to amend and restate the Prior Investors’ Rights Agreement as set forth herein.



     Certain of the Investors have purchased shares of the Company’s Series C Preferred Shares
pursuant to a Preferred Share Purchase Agreement, dated as of even date herewith (the “Series C
Share Purchase Agreement”)



     The obligations in the Series C Purchase Agreement are conditioned upon the execution and
delivery of this Agreement



     NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter
set forth and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged the parties hereto agree that the Prior Investors’ Rights Agreement shall be
amended and restated in its entirety as follows:



1. DEFINITIONS.




     1.1 Certain Defined Terms As used in this Agreement, the following terms shall have
the following respective meanings:



     “Affiliate” of a Person shall mean any company, corporation, or other entity that controls,
is controlled by, or is under common control with, the specified Person within the meaning of Rule
144 of the Securities Act



     “Agreed M&A” shall mean the Fourth Amended and Restated Memorandum and Articles of
Association of the Company.



     “Board” shall mean the Board of Directors of the Company.



     “Business Day” shall mean any day that is not a Saturday, Sunday, legal holiday or other
day on which commercial banks are required or authorized by law to be closed in the PRC,
Singapore, Hong Kong or New York



     “BVI Subsidiaries” shall mean each of HiSoft BJ BVI and HiSoft Systems BVI



     “Closing” shall mean the date on which the Company first issues Series C Preferred Shares to
the Investors



     “Common Share Equivalents” shall mean, with respect to any shareholder of the Company, Common
Shares owned by such shareholder together with Common Shares into or for which any issued and
outstanding Preferred Shares or any other issued and outstanding convertible securities (excluding
for the avoidance of doubt unexercised options or warrants) owned by such shareholder shall be
convertible



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     “Common Shares” shall mean common shares of the Company, par value US$0 0001 par share




     “Conversion Shares” shall mean Common Shares issuable upon conversion of the Warrant Shares,
the Series A Preferred Shares issued and sold under the Series A. Share Purchase Agreement, the
Series B Preferred Shares issued and sold under the Series B Share Purchase Agreement, or the
Series C Preferred Shares issued and sold under the Series C Share Purchase Agreement.



     “Exchange Act” shall mean the U.S Securities and Exchange Act of 1934, and the rules and
regulations promulgated thereunder, as amended from time to time



     “Exchange Act Registration” shall mean registration of a company under Section 12 of the
Exchange Act or when a company becomes subject to Exchange Act reporting requirements under Section
15(d) of the Securities Act or otherwise



     “Group Companies” shall mean the Company the PRC Subsidiaries, the Japan Subsidiary, the US
Subsidiaries, the BVI Subsidiaries, HiSoft Singapore and HiSoft Hong Kong, and any other direct or
indirect Subsidiary of a Group Company, if any (each a “Group Company”) Notwithstanding the
foregoing provision, for the purpose of the Transaction Agreements, the term “Group Companies” or
“Group Company” shall not include Hualu BVI Haihui Dalian, Japan JV or Haihui Dalian Training
Center



     “HiSoft Beijing” shall mean HiSoft Services (Beijing) Limited , a wholly foreign-owned
enterprise organized under the laws of the PRC



     “HiSoft BJ BVI” shall mean HiSoft Holdings Limited, an international business company
organized under the laws of the British Virgin Islands.



     “HiSoft Chengdu” shall mean HiSoft Software (Chengdu) Co Ltd. , a wholly foreign-owned
enterprise established under the laws of the PRC



     “HiSoft Dalian” shall mean HiSoft Technology (Dalian) Co., Ltd. , a wholly-foreign owned
enterprise established by the Company under the laws of the PRC



     “HiSoft Envisage” shall mean HiSoft Envisage Inc., a company established under the laws of
the State of Delaware, USA



     “HiSoft Hong Kong” shall mean HiSoft Systems Hong Kong Limited  a limited liability company
established under the laws of Hong Kong Special Administrative Region.



     “HiSoft Shenzhen” shall mean HiSoft (Shenzhen) Limited  a wholly foreign-owned enterprise
organized under the laws of the PRC.



     “HiSoft Singapore” shall mean HiSoft Technology (Singapore) Pte. Ltd a wholly owned
subsidiary of the Company established under the laws of Singapore



     “HiSoft Systems BVI” shall mean HiSoft Systems Holdings Limited, an international business
company organized under the laws of the British Virgin Islands.



     “Hualu BVI” shall mean Hualu Corporation (BVI) Ltd. a British Virgin Islands company.



     “Investment Securities” shall mean the Series A Preferred Shares the Series B Preferred
Shares, the Series C Preferred Shares the Warrant Securities and the Conversion Shares



     “JAFCO Warrant” shall mean the warrant for the purchase of up to 2,000,000 Series A Preferred
Shares Issued to JAFCO on June 28, 2004



     “Japan Subsidiary” shall mean Haihui Sci-Tech Japan Co., Ltd.  a company established under
the laws of Japan and a wholly owned Subsidiary of Haihui Datian



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     “Joinder Agreement” shall mean an agreement in such form and on such terms as approved
by all the Investors and the Company which a Person is required to enter into with or in favour of
all the parties pursuant to Sections 5 and 7.7



     “Person” or “person” shall be construed as broadly as possible and shall Include an
individual, a partnership, a limited liability company, a company, an association a trust, a
joint venture or unincorporated organization and any government organization or authority..



     “PRC” shall mean, for the purpose of this Agreement, the Peoples’ Republic of China
excluding the Hong Kong Special Administrative Region, Macau Special Administrative Region and
Taiwan



     “PRC Subsidiaries” shall mean HiSoft Dalian, HiSoft Chengdu, HiSoft Beijing and HiSoft
Shenzhen



     “Preferred Shares” shall mean the Company’s Series A Preferred Shares, Series A-1 Preferred
Shares, Series B Preferred Shares and Series C Preferred Shares, collectively, along with any
other class or series of preferred shares issued by the Company in substitution or replacement
therefor



     “Qualified IPO” shall mean a firm commitment public offering of Common Shares in the United
States that has been registered under the Securities Act resulting in a minimum market
capitalization of US$350 million, and with gross proceeds to the Company of at least US$50
million, or in a similar public offering of Common Shares in a jurisdiction and on a recognized
securities exchange outside of the United States, including without limitation the Hong Kong Stock
Exchange, provided such public offering is equivalent to the aforementioned in terms of price
offering proceeds and regulatory approval



     “ROFR Agreement” shall mean the Second Amended and Restated Right of First Refusal and
Co-Sale Agreement among the Investors and the Company and the other parties named therein dated as
of the date of this Agreement.



     “Rule 144” shall mean Rule 144 promulgated under the Securities Act, as amended from
time to time 

     “SEC” shall mean the U S Securities and Exchange Commission, as
constituted from time to time



     “Securities Act” shall mean the U S Securities Act of 1933 and the rules and regulations
promulgated thereunder, as amended from time to time



     “Series A Preferred Shares” shall mean the Company’s Series A Preferred Shares, US$0 0001 par
value per share



     “Series A-1 Preferred Shares” shall mean the Company’s Series A-1 Preferred Shares, US$0 0001
par value per share



     “Series A/A-1 Preferred Shares” shall mean the Series A Preferred Shares and the Series A-1
Preferred Shares together as a single class



     “Series A-1 Preferred Warrants” shall mean the warrants for the purchase of up to
36,000,000 shares of Series A-1 Preferred Shares issued to certain of the Investors on June 28,
2004 and October 16, 2004



     “Series B Preferred Shares” shall mean the Company’s Series B Preferred Shares, U S $0 0001
par value per share



     “Series C Preferred Shares” shall mean the Company’s Series C Preferred Shares, U.S $0 0001
par value per share



     “Subsidiary” shall mean, with respect to any subject entity (the “subject entity”), (i) any
company, partnership or other entity (x) more than 50% of whose shares or other interests entitled
to vote in the election of directors or (y) more than 50% interest In whose profits or capital are
owned or controlled directly or indirectly by the subject entity or through one or more
Subsidiaries of the subject entity, (ii) any entity whose assets, or portions thereof, are
consolidated with the net earnings of the subject entity and are recorded on the books of the
subject entity for financial reporting purposes in accordance with US GAAP, or (iii) any entity in
respect to which the subject entity has the power to otherwise direct the business and policies of
that entity directly or indirectly through another Subsidiary. Notwithstanding the above, for the
purpose of the Transaction Agreements as applied to the Company



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the term “Subsidiary” shall not include Hualu BVI, Haihui Dalian, JBDK Co., Ltd or Dalian Haihui
Software Training Center, and each of their respective Subsidiaries, if any





     “Transaction Agreements” shall mean this Agreement the Series C Share Purchase Agreement, and
the ROFR Agreement.



     “US GAAP” shad mean accounting principles generally accepted in the United States of America,
as in effect from time to time.



     “US Subsidiaries” shall mean DMK International Inc, a corporation organized under the laws of
the State of Delaware, U.S.A, and HiSoft Envisage.



     “Warrant Securities” shall mean the Series A-1 Preferred Warrants and the Warrant Shares.



     “Warrant Shares” shall mean the Series A-1 Preferred Shares issuable or issued upon exercise
of the Series A-1 Preferred Warrants.


Capitalized terms used herein but not otherwise defined in this Agreement shall have the meanings
given to them in the Series C Share Purchase Agreement.




2 INFORMATION AND INSPECTION RIGHTS




     2.1 Information and Inspection Rights (Pre-Qualified IPO)



          (a) Information Rights. The Company hereby covenants and agrees that, commencing on
the date of this Agreement, and for so long as any Investor holds at least 10,000,000 Preferred
Shares, the Company will deliver to such investor the following with respect to Itself and their
respective Subsidiaries:




               (i) audited annual consolidated financial statements within one hundred and
twenty (120) days after the end of each fiscal year, including an audited balance sheet as
of the end of such year and a consolidated statement of operation and a consolidated statement of
cash flows far such fiscal year, setting forth in comparative form the figures from the Company’s
previous fiscal year, and audited by a “Big 4” accounting firm approved by the Investors;



               (ii) unaudited quarterly consolidated financial statements within thirty (30) days of
the end of each fiscal quarter, including an unaudited balance sheet as of the end of such
quarter, and an unaudited statement of operations and an unaudited statement of cash flows of the
Company, for such quarter, together with a comparison to the Company’s operating plan and budget
by the Chief Financial Officer of the Company explaining any significant differences in the
statements from the Company’s operating plan and budget for the period and stating that such
statements fairly present the consolidated financial position and consolidated financial result of
the Company for the fiscal quarter covered;



               (iii) unaudited monthly consolidated financial statements within thirty (30) days of
the end of each month, including an unaudited balance sheet as of the end of each such month and
an unaudited statement of operations and an unaudited statement of cash flows for such month;



               (iv) an annual consolidated budget for the following fiscal year within forty-five (45)
days prior to the end of each fiscal year;



               (v) copies of the entity’s annual reports to shareholders and any quarterly, interim,
annual, extraordinary or other reports (including reports on Forms 20-F, 6-K, 10-K, 10-Q and/or
8-K, as applicable) promptly after such documents are filed with the appropriate securities exchange or regulatory authority;



               (vi) copies of all documents or other information sent to all other shareholders as
such; and



               (vii) upon the written request by the Investor, such other information as the Investor
shall reasonably request


All financial statements to be provided to the Investors pursuant to this Section 2.1 and
pursuant to any other Transaction Agreements, including any in the Agreed M&A, shall be prepared
in the English language in




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conformance with US GAAP, as amended and interpreted from time to time, and in the case of the
financial statements of the Company, if requested by an Investor, shall consolidate all of the
consolidated financial results of the Group Companies.




          (b) Inspection Rights. The Company covenants and agrees that, commencing on the date
of this Agreement, and for so long as any investor holds at least 10,000,000 Preferred Shares, such
Investor shall have reasonable standard inspection rights, including without limitation, the right
to inspect the facilities, records and books of the Company and any of its Subsidiaries, and to
discuss the business, operations and conditions of the Company and its Subsidiaries with their
respective directors, officers, employees, accounts, legal counsel and investment bankers.




          (c) Termination of Rights. Except as set forth in Section 2.2 below, the
foregoing information and inspection rights shall terminate upon the closing of a Qualified IPO or
Exchange Act Registration.




     2.2 Information Rights (Post-Qualified IPO). The Company covenants and agrees that,
for a period of three (3) years following the closing of a Qualified IPO or an Exchange Act
Registration and for so long as any Investor holds at least 10,000,000 Common Shares, the Company
will deliver to such Investor (i) copies of any quarterly interim, annual extraordinary, or other
reports, if any (including reports on Forms 20-F, 6-K, 10-K, 10-Q and/or 8-K, as applicable) filed
by the Company promptly after such documents are filed by the Company with the SEC or any other
relevant securities exchange, regulatory authority or government agency, provided, however, that
the Investors shall not be provided with such documents before they are also generally available
to the other shareholders of the Company, and (ii) copies of any annual reports to shareholders or
other materials delivered to all other shareholders as such.



3. REGISTRATION RIGHTS




     3.1 Applicability of Rights. The Holders (as defined in Section 3.2(d) below) shall be
entitled to the
following rights with respect to any potential public offering of Common Shares in the United
States, and to any analogous or equivalent rights with respect to any other offering of shares in
any other jurisdiction pursuant to which the Company undertakes to publicly offer or list such
securities for trading on a recognized securities exchange.



     3.2 Definitions. For purposes of this Section 3;



          (a) Registration. The terms “register” “registered” and “registration” refer to a
registration effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of effectiveness of such registration statement.




          (b) Registrable Securities. The term “Registrable Securities’ means: (1) any Common
Shares of the Company issued or to be issued upon conversion of Series A Preferred Shares and
Series A-1 Preferred Shares issued (A) pursuant to the Series A Share Purchase Agreement, the JAFCO
Warrant or the Series A-1 Preferred Warrants, and (B) pursuant to the Right of Participation
(defined in Section 4.1 hereof); (2) any Common Shares of the Company issued or to be
issued upon conversion of Series B Preferred Shares issued (A) pursuant to the Series B Share
Purchase Agreement or (B) pursuant to the Right of Participation; (3) any Common Shares of the
Company Issued or to be issued upon conversion of Series C Preferred Shares Issued (A) pursuant to
the Series C Share Purchase Agreement or (B) pursuant to the Right of Participation; (4) any Common
Share of the Company issued as (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 of the foregoing; (5) any other Common Shares owned or
hereafter acquired by any Investor, including, without limitation, any Common Shares Issued in
respect of the Common Shares described in (1)(4) of this subsection 3.2(b) upon any share split,
share dividend recapitalization or a similar event; and (6) any depositary receipts issued by an
institutional depositary upon deposit of any of the foregoing. Notwithstanding the foregoing,
“Registrable Securities” shall not include any Registrable Securities sold by a person in a
transaction in which rights under this Section 3 are not assigned in accordance with this
Agreement or any Registrable Securities sold in a public offering whether sold pursuant to Rule
144, or in a registered offering, or otherwise.




          (c) Registrable Securities Then Outstanding. The  number of shares of
“Registrable Securities then outstanding” shall mean the number of Common Shares of the Company
that are Registrable Securities and are then issued and outstanding or would be outstanding
assuming full conversion of all Registrable Securities which are convertible into Common Shares.




          (d) Holder. For purposes of this Section 3, the term “Holder” means any person who holds
Registrable Securities of record, whether such Registrable Securities were acquired directly from
the Company or




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from another Holder in a permitted transfer, to whom rights under this Section 3 have been
duly assigned in accordance with this Agreement; provided, however, that for purposes of this
Agreement, a record holder of Series A Preferred Shares, Series A-1 Preferred Shares, Series B
Preferred Shares or Series C Preferred Shares convertible into such Registrable Securities shall be
deemed to be the Holder of such Registrable Securities; and provided, further, that (i) the Company
shall in no event be obligated to register Series A Preferred Shares, Series A-1 Preferred Shares,
Series B Preferred Shares or Series C Preferred Shares, and that (ii) Holders of Registrars
Securities will not be required to convert their Series A Preferred Shares, Series A-1 Preferred
Shares, Series B Preferred Shares or Series C Preferred Shares into Common Shares in order to
exercise the registration rights granted hereunder, until just prior to the declaration of
effectiveness of the registration statement for the offering to which the registration relates.




          (e) Form F-3. The term “Form F-3” means such form under the Securities Act as is in
effect on the date hereof or any successor or comparable registration form under the Securities
Act subsequently adopted by the SEC, which permits inclusion or incorporation of substantial
Information by reference to other documents filed by the Company with the SEC. In the event the
Company at any time is not a ‘foreign private Issuer” for purposes of Rule 3b-4 under the Exchange
Act, the term “Form F-3” shall be read to include Form S-3 under the Securities Act or any
successor or comparable form.




     3.3 Demand Registration.



          (a) Request by Holders. If the Company shall at any time not earlier than six (6)
months after an initial underwritten public offering of its Common Shares, receive a written
request from the Holders of at least ten percent (10%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities pursuant to this Section 3.3, then the Company
shall, within ten (10) Business Days of the receipt of such written request, give written notice of
such request (“Request Notice”) to all Holders, and use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable Securities that Holders
request to be registered and included in such registration by written notice given by such Holders
to the Company within twenty (20) days after their receipt of the Request Notice, subject only to
the limitations of this Section 3.3; provided that the Company shall not be obligated to
effect any such registration. If the Company has, within the six (6) month period preceding the date
of such request, already effected a registration under the Securities Act pursuant to this
Section 3.3 or Section 3.5, or in which the Holders had an opportunity to
participate pursuant to the provisions of Section 3.4, 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) pursuant to the
provisions of Section 3.4(a); provided, further, that no Holder may register more than fifty
percent (50%) of the aggregate number of Registrable Securities held by such Holder in any one or
more registrations that are initiated pursuant to this Section 3.3 prior to the twelve (12)
month anniversary of the initial underwritten public offering of the Company’s Common Shares;
provided, that for any Holder that is a  partnership, the Holder and the partners and retired
partners of such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons, and for any Holder that is
a corporation, the Holder and all corporations that are affiliates of such Holder shall be deemed
to be a single “Holder” for purposes of this sentence.




          (b) Underwriting. If the Holders initiating the registration request under this
Section 3.3 ( Initiating Holders”) intend to distribute the Registrable Securities covered
by their request by means of an underwriting, then they shall so advise the Company as a part of
their request made pursuant to this Section 3.3 and the Company shall include such
Information in the Request Notice referred to in subsection 3.3(a). In the event of an
underwritten offering, the right of any Holder to include Its Registrable Securities in such
registration shall be conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority In interest of the initiating Holders and such Holder) to the extent provided
herein. All Holders proposing to distribute their securities through such underwriting shall
enter into art underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and reasonably acceptable to the Holders
of a majority of the Registrable Securities being registered. Notwithstanding any other
provision of this Section 3.3. If the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be underwritten, then the
Company shall so advise all Holders of Registrable Securities which would otherwise be registered
and underwritten pursuant hereto, and the number of Registrable Securities that may be included in
the underwriting shall be reduced as required by the underwriter(s) and allocated among the Holders
of Registrable Securities on a pro rata basis according to the number of Registrable Securities
then outstanding held by each Holder requesting registration (including the initiating Holders);
provided, however, that the number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all other securities are first entirely
excluded from the underwriting and registration including, without limitation, all shares that are
not Registrable Securities and are held by any other person, including, without limitation, any
person who is an employee, officer or director of the Company (or any Subsidiary of the Company).
If any Holder disapproves of the




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terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective
date of the registration statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any Holder that is a
partnership, the Holder and the partners and retired partners of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons, and for any Holder that is a corporation, the Holder and all corporations
that are affiliates of such Holder shall be deemed to be a single “Holder,” and any pro rata
reduction with respect to such “Holder” shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such “Holder,” as defined in this
sentence




          (c) Maximum Number of Demand Registrations. The Company shall have no obligation to
effect more than three (3) registrations pursuant to this Section 3.3




          (d) Deferral. Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to this Section 3.3, a
certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgment of the Board, it
would be materially detrimental to the Company and its shareholders for such registration
statement to be filed, then the Company shall have the right to defer such filing for a period of
not more than ninety (90) days after receipt of the request of the initiating Holders; provided,
however, that the Company may not utilize this right more than once in any twelve (12) month
period; provided further that during such ninety (90) day period the Company shall not file any
registration statement pertaining to the public offering of any securities of the Company




          (e) Expenses. The Company shall pay all expenses (excluding only underwriters’
discounts and commissions relating to the Registrable Securities sold by the Holders) incurred in
connection with any registration pursuant to this Section 3.3, including without limitation
all U.S. federal, “blue sky,” and all foreign registration, filing and qualification fees,
printer’s and accounting fees, and reasonable fees and expenses (including disbursements) of one
(1) outside counsel for the Holders Each Holder participating in a registration pursuant to this
Section 3.3 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 discounts, and
commissions 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 this Section 3.3 if the
registration request is subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, unless the Holders of a majority of the Registrable
Securities then outstanding agree that such registration constitutes the use by the Holders of one
(1) demand registration pursuant to this Section 3.3 (in which case such registration shall
also constitute the use by all Holders of Registrable Securities of one (1) such demand
registration); 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 due to the failure of the Company to
provide accurate or complete information to the Holders pursuant to this Agreement 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 and such
registration shall not constitute the use of a demand registration pursuant to this Section
3.3.




     3.4 Piggyback Registrations. The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to filing any registration statement under
the Securities Act for purposes of effecting a public offering of securities of the Company
(including, but not limited to, registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements relating to any registration
under Section 3.3 or Section 3.5 of this Agreement or to any employee benefit plan
or a corporate reorganization) and will afford each such Holder an opportunity to include in such
registration statement all or any part of the Registrable Securities then held by such Holder.
Each Holder desiring to include in any such registration statement all or any part of the
Registrable Securities held by such Holder shall within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and in such notice
shall inform the Company of the number of Registrable Securities such Holder wishes to include in
such registration statement. If a Holder decides not to include all of its Registrable Securities
in any registration statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to Include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect to offerings of
its securities, all upon the terms and conditions set forth herein.



          (a) Underwriting. If a registration statement under which the Company gives notice
under this Section 3.4. is for an underwritten offering, then the Company shall so advise
the Holders of Registrable Securities. In such event, the right of any such Holder’s Registrable
Securities to be included in a registration pursuant to this Section 3.4 shall be
conditioned upon such Holder’s participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute




8









 




their
Registrable Securities through such underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters selected by the Company for such
underwriting. Notwithstanding any other provision of this Agreement,
if the managing underwriter(s)
determine(s) in good faith that marketing factors require a limitation of the number of shares to
be underwritten, then the managing underwriter(s) may exclude shares from the registration and the
underwriting, and the number of shares that may be included in the registration and the
underwriting shall be allocated, first to the Company, and second, to each of the Holders
requesting inclusion of their Registrable Securities in such registration statement on a pro rata
basis based on the total number of Registrable Securities then held by each such Holder; provided,
however, that the right of the underwriter(s) to exclude shares (including Registrable Securities)
from the registration and underwriting as described above shall be
restricted so that (i) the
number of Registrable Securities included in any such registration is not reduced below twenty-five
percent (25%) of the aggregate number of Registrable Securities for which inclusion has been
requested, even if this will cause the Company to reduce the number of shares it wishes to offer,
and (ii) all shares that are not Registrable Securities and are held
by any other person,
including, without limitation, any person who is an employee, officer or director of the Company
(or any Subsidiary of the Company) shall first be excluded from such registration and underwriting
before any Registrable Securities are so excluded If any Holder disapproves of the terms of any
such underwriting such Holder may elect to withdraw therefrom by written notice to the Company and
the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the
registration statement Any Registrable Securities excluded or withdrawn from such underwriting
shall be excluded and withdrawn from the registration. For any Holder that is a partnership, the
Holder and the partners and retired partners of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of the foregoing
persons and for any Holder that is a corporation, the Holder and all corporations that are
affiliates of such Holder, shall be deemed to be a single “Holder,” and any pro rata reduction with
respect to such “Holder” shall be based upon the aggregate amount of Registrable Securities
carrying registration rights owned by all entities and individuals included in such “Holder,” as
defined in this sentence.




          (b)
Expenses. The Company shall pay all expenses (excluding only underwriters’ and
brokers’ discounts and commissions relating to shares sold by the Holders) incurred in connection
with a registration pursuant to this Section 3.4.
Including, without limitation all U.S
federal, “blue sky” and all foreign registration, filing and qualification fees, printers’ and
accounting fees, and reasonable fees and expenses (including disbursements) of one (1) outside
counsel for the Holders




          (c)
Not Demand Registration. Registration pursuant to this Section 3.4 shall
not be deemed to be a demand registration as described in Section 3.3 above. 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 3.4.




     3.5 Form F-3 Registration. After its initial public offering, the Company shall use
its best efforts to qualify for registration on Form F-3 or any comparable or successor form as
early as possible and use best efforts to maintain such qualification thereafter If the Company is
qualified to use Form F-3, any Holder or Holders shall have a right to request at any time from
time to time (such request shall be in writing) that the Company effect a registration on either
Form F-3 and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, and upon receipt of each such request, the
Company will:



          (a)
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




          (b)
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 3.5 (a);
provided, however, that the Company shall not be obligated to effect any such registration,
qualification or
compliance pursuant to this Section 3.5:




               (i) if Form F-3 becomes unavailable for such offering by the Holders;



               (ii) 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$1 000.000;



               (iii) 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



9









 




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) pursuant to the provisions of
Section 3.4(a); or




               (iv) 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.



          (c) Expenses. The Company shall pay all expenses (excluding only underwriters’ or
brokers’ discounts and commissions relating to shares sold by the Holders) incurred in connection
with each registration requested pursuant to this Section 3.5, including without limitation
all U. S. federal, “blue sky” and all foreign registration, filing and qualification fees, printers’
and accounting fees, and reasonable fees and expenses (including disbursements) of one (1) outside
counsel for the Holders.




          (d) Maximum Frequency. 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 3.5; provided, that the Company shall not be required to effect more than two (2)
registrations pursuant to this Section 3.5 in any twelve
(12) month period.




          (e) Deferral. Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting the filing of a registration statement pursuant to this Section 3.5, a
certificate signed by the President or Chief Executive Officer of the Company stating that in the
good faith judgment of the Board, it would be materially detrimental to the Company and its
shareholders for such Form F-3 registration statement to be filed, then the Company shall have the
right to defer such filing for a period of not more than ninety (90) days after receipt of the
request of the initiating Holders; provided, however, that the Company may not utilize this right
more than once in any twelve (12) month period; provided
further that during such ninety (90) day
period, the Company shall not file any registration statement pertaining to the public offering of
any securities of the Company.




          (f)
Not Demand Registration. Form F-3 registrations shall not be deemed to be demand
registrations as described in Section 3.3 above




          (g)
Underwriting. If the requested registration under this Section 3.5 is
for an underwritten offering the provisions of Section 3.3(b) shall apply




          If the Company fails to perform any of the Company’s obligations set forth above in this
Section 3.5 relating to a demand registration made pursuant to Section 3.3 such
registration shall not constitute the use of a demand registration
under Section 3.3.




     3.6 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:




          (a)
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 keep any such registration statement effective for a period of
one hundred twenty (120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto whichever
occurs first.




          (b) Amendments and Supplements. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration statement.




          (c) Prospectuses. Furnish to the Holders such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities Act and such other
documents as they may reasonably request in order to facilitate the
disposition of the Registrable
Securities owned by them that are included in such registration.




          (d) Blue Sky. Use its 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




10









 





          (e)
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 Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.




          (f) Notification. Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of which the prospectus included
in such registration statement as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.




          (g) Opinion and Comfort Letter. Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable Securities are delivered
to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and reasonably satisfactory to
a majority in interest of the Holders requesting registration, addressed to the underwriters, if
any, and to the Holders requesting registration of Registrable Securities and (ii) a “comfort”
letter dated as of such date 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.




     3.7 Furnish Information. It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Sections 3.3, 3.4 or 3.5 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 reasonably necessary
or advisable to timely effect the Registration or other qualification of their Registrable
Securities.



     3.8
Indemnification. In the event any Registrable Securities are included in a
registration statement under Sections 3.3, 3.4 or 3.5:



          (a)
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
determined 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 applicable 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”):




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



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



               (iii) any violation or alleged violation of the Securities Act, the Exchange Act, any
federal or state securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or other applicable 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 subsection
3.8(a) 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, underwriter or
controlling person of such Holder.




11









 





          (b) By Selling Holders. To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its officers who have
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 applicable law, insofar as such lasses, 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 subsection 3.8(b) 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 the total amounts payable in indemnity by a Holder
under this Section 3.8(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation arises.




          (c)
Notice. Promptly after receipt by an indemnified party under this Section
3.8 of notice of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 3.8, deliver to the indemnifying party a written notice of the
commencement thereof (a “Claim Notice”) 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, (i) during
the period from the delivery of a Claim Notice until retention or
counsel by the indemnifying
party; and (ii) 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 3.8 to the extent the indemnifying party is prejudiced
as a result thereof, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party otherwise than under
this Section 3.8.




          (d) Defect Eliminated in Final Prospectus. The foregoing indemnity agreements of
the Company and Holders are subject to the condition that, insofar as they relate to any Violation
made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with
the SEC at the time the registration statement in question becomes, effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the “Final Prospectus”), such indemnity
agreement shall not inure to the benefit of any person if a copy of the Final Prospectus was timely
furnished to the indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is
required by the Securities Act.




          (e) 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 Holder exercising rights
under this Agreement, or any controlling person of any such Holder makes a claim for
indemnification pursuant to this Section 3.8 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 3.8 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances for which indemnification is
provided under this Section 3.8; then, and in each such case, the Company and such Holder
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 such Holder 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; provided, however, that, in any such
case: (A) no such Holder will be required to contribute any amount in excess of the public offering
price 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.





12











 





          (f)
Survival. The obligations of the Company and Holders under this
Section 3.8 shall survive
until the fifth (5th) anniversary of 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.




     3.9
Rule 144 Reporting. With a view to making available to the Holders the benefits of
certain rules and regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration the Company agrees to use its best efforts to:



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




          (b) File with the SEC, in a timely manner, all reports and other documents required of the
Company under the Securities Act or the Exchange Act, at all times after the effective date of the
first registration under the Securities Act filed by the Company;




          (c) So long as a Holder owns any Registrable Securities, furnish to such Holder forthwith
upon request, (i) a written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it
has become subject to such reporting requirements, (ii) a copy of the most recent annual, interim,
quarterly or other report of the Company and, (iii) such other reports and documents as a Holder
may reasonably request availing itself of any rule or regulation of the SEC allowing it to sell
any such securities without registration.




     3.10
Termination of the Company’s Obligations. Notwithstanding the foregoing, the
Company shall have no obligations pursuant to Sections 3.3, 3.4 or 3.5 with
respect to any Registrable Securities proposed to be sold by a Holder in a registered public
offering (i) five (5) years after the consummation of a Qualified IPO, or (ii) if, in the opinion
of counsel to the Company, all such Registrable Securities proposed to be sold by a Holder may
then be sold under Rule 144 during a three (3) month period without exceeding the volume
limitations thereunder.



     3.11 No Registration Rights to Third Parties. Without the prior written consent of
the Holders of not less than sixty-seven percent (67%) 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 described in this Section
3, or otherwise) relating to any shares or other securities of the Company, other than rights
that are subordinate to the rights of the Holders hereunder.



     3.12 “Market Stand-Off” Agreement. Each Holder hereby agrees that, if and to the
extent requested by the lead underwriter of securities of the Company in connection with a
registration relating to a specific proposed public offering (other than a registration on Form
S-8 or a related or successor form relating solely to an employee benefit plan or a registration
on Form S-4 or a related or successor form relating solely to a transaction under SEC Rule 145),
such Holder will, subject to the following conditions, enter into a lock-up or standoff agreement
in customary form (subject to the following conditions) under which such Holder agrees not to sell
or otherwise transfer or dispose of any Registrable Securities or other shares of the Company
owned by such Holder as of the date of such registration seven (7) days prior to, and for up to
one hundred eighty (180) days following the effective date of
the related registration statement. The obligations of each Holder under this Section 3.12 are subject to the following
conditions: (i) the lockup or standoff agreement applies only to the First registration statement
of the Company which covers securities to be sold on its behalf to the public in an underwritten
offering but not to Registrable. Securities actually sold pursuant to such registration statement;
(ii) such Holder is reasonably satisfied that all directors, officers, and holders of 1% or more
of any class of securities of the Company are bound by substantially identical restrictions; (iii)
the lockup or standoff agreement provides that if any securities of the Company are to be excluded
or released in whole or port from such restrictions, the underwriter shall so notify each Holder
and each Holder shall be excluded or released, in proportionate amounts to the extent of the
exclusion or release, prior to any other holder of the Company’s securities, including directors,
officers, or holders of 1% or more of any class of securities of the Company subject to such
restrictions; and (iv) the lockup or standoff agreement by its terms permits transfers of
Registrable Securities by any Holder to any Affiliate of such Holder during the restricted period,
provided that such Affiliate executes a lock-up or standoff agreement substantively identical to
that signed by the transferring Holder. The Company may impose a stop-transfer instruction with
respect to Registrable Securities subject to any such lockup or standoff agreement but shall
remove such instruction immediately upon expiration of the underlying restrictions.



13









 




4 RIGHT OF PARTICIPATION.




     4.1
General. Each of the Investors and each Affiliate of any Investor to which
rights under this Section 4 have bean duly assigned in accordance with Section 5.1 (each Investor and each such
assignee being hereinafter referred to as a “Participation Rights Holder”) shall have the right of
first refusal to purchase such Participation Rights Holder’s Pro Rata Share (as defined below), of
fifty percent (50%) of any New Securities (as defined in
Section 4.3) that the Company may
from time to time issue after the date of this Agreement (the
“Right of Participation”).



     4.2
Pro Rata Share. A Participation Rights Holder’s “Pro Rata Share” for purposes
of the Right of Participation is the ratio of (a) the number of Common Share Equivalents then held by such
Participation Rights Holder, to (b) the total number of Common Share Equivalents then outstanding
immediately prior to the issuance of New Securities giving rise to
the Right of Participation.



     4.3 New Securities. “New Securities” shall mean any Series A Preferred
Shares, any Series A-1
Preferred Shares, any Series B Preferred Shares, any Series C Preferred Shares, any other
shares of the Company
designated as “preferred shares,” Common Shares or other voting shares of the Company,
whether now authorized
or not, and rights, options or warrants to purchase such Series A Preferred Shares, Series
A-1 Preferred Shares,
Series B Preferred Shares, Series C Preferred Shares or other preferred shares, Common Shares
and securities of
any type whatsoever that are, or may become, convertible or exchangeable into such Series A
Preferred Shares,
Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, other
preferred shares
Common Shares or other voting shares, provided, however, that the term “New Securities” shall
not include:



          (a) in
the aggregate up to 68,150,000 Common Shares (and/or options or warrants therefore)
issued to employees, officers, directors, contractors, advisors or consultants of the Company
pursuant to incentive agreements or incentive plans adopted by the Company;




          (b) any Warrant Shares, Conversion Shares or Series A Preferred Shares issued
under and in accordance with the Series A Share Purchase Agreement;




          (c) any Conversion Shares or Series B Preferred Shares issued under and in accordance with
the Series B Share Purchase Agreement;




          (d) any Conversion Shares or Series C Preferred Shares issued under and in accordance with
the Series C Share Purchase Agreement;




          (e) any
securities issued in connection with any share split, share dividend or other similar
event which shall have been approved in accordance with Section 6 below;




          (f) any securities issued upon the exercise, conversion or exchange of any outstanding
securities if such outstanding security constituted a New Security provided that the initial
issuance of such New Security shall have complied with the terms of this Section 4 and
have been approved in accordance with Section 6 below;




          (g) any securities issued pursuant to the acquisition of another corporation or entity by the
Company (in a bona-fide non-financing transaction) by consolidation, merger, purchase of assets,
or other reorganization in which the Company acquires, in a single transaction or series of
related transactions, a majority of the assets, voting power, or equity ownership of such other
corporation or entity which shall have been approved in accordance with Section 6 below;
or




          (h) any securities offered in a Qualified IPO




     4.4
Procedures.



          (a)
First Participation Notice. 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 Participation Rights Holder written notice of its intention to issue New Securities
(the “First Participation Notice”), describing the amount and the type of New Securities and the
price and the terms upon which the Company proposes to issue such New Securities Each
Participation Rights Holder shall have thirty (30) days from the date of receipt of any such First
Participation Notice to agree in writing to purchase up to all of such Participation Rights
Holder’s Pro Rata Share of fifty percent (50%) of such New Securities for the price and upon the
terms and conditions specified in the First Participation Notice by giving written notice to the
Company and stating therein the quantity of




14









 





New
Securities to be purchased (not to exceed such Participation Rights Holder’s Pro Rata Share of
fifty percent (50%) of such New Securities). If any Participation Rights Holder falls to so agree
in writing within such thirty (30) day period to purchase such Participation Rights Holder’s full
Pro Rata Share of an offering of fifty percent (50%) such New Securities, then such Participation
Rights Holder shall forfeit the right hereunder to purchase that part
of its Pro Rata Share of fifty
percent (50%) of such New Securities that it did not so agree to
purchase.




          (b) Second Participation Notice: Oversubscription. If any Participating Rights Holder
fails to exercise its Right of Participation in accordance with subsection (a) above, the
Company shall promptly give notice (the “Second Participation Notice”) to other Participating
Rights Holders who have exercised their Right of Participation (the “Exercising Holders”) in
accordance with subsection (a) above Each Exercising Holder
shall have ten (10) days from the
date of receipt of the Second Participation Notice (the
“Second Participation Period”) to notify the
Company of its desire to purchase more than its Pro Rata Share of fifty percent (50%) of the New
Securities, stating the number of the additional New Securities it proposes to buy Such notice may
be made by telephone if confirmed in writing within two (2) Business Days thereafter. If as a result
thereof, such oversubscription exceeds the total number of the remaining New Securities available
for purchase, the oversubscribing Exercising Holders will be cut back by the Company with respect
to their oversubscriptions to that number of remaining New Securities equal to the product obtained
by multiplying (i) the number of the remaining New Securities available for subscription by (ii) a
fraction the numerator of which is the number of Common Share
Equivalents held by each
oversubscribing Exercising Holder notified and the denominator of which is the total number of
Common Share Equivalents held by all the oversubscribing Exercising Holders Each oversubscribing
Exercising Holder shall be obligated to buy such number of additional New Securities as determined
by the Company pursuant to this subsection (b) and the Company shall so notify the
Exercising Holders within fifteen (15) Business Days of the date
of the Second Participation Notice.




     4.5 Failure to Exercise. Upon the expiration of the Second Participation Period, or in
the event no Participation Rights Holder exercises the Right of Participation, after thirty (30)
days following the delivery of the First Participation Notice, the Company shall have ninety (90)
days thereafter to sell the fifty percent (50%) of the New Securities described in the First
Participation Notice (with respect to which the Participation Rights
Holders’ Right of Participation
hereunder was not exercised) at the same or higher price and upon non-price terms not more
favorable to the purchasers thereof than specified in the First Participation Notice In the event
that the Company has not issued and sold such New Securities within such ninety (90) day period then
the Company shall not thereafter issue or sell any New Securities without again first offering fifty
percent (50%) of such New Securities to the Participation Rights Holders pursuant to this
Section 4.



     4.6 Termination. The Right of Participation for the Investors and each other
Participation Rights Holder shall terminate upon completion of a Qualified IPO or Exchange Act
Registration.


5. ASSIGNMENT Notwithstanding anything herein to the contrary:




     5.1 Information Rights. The rights of each Investor under Sections 2.1 and 2.2
are transferable prior to a Qualified IPO to any person who holds or is acquiring Investment
Securities in a permitted transfer; provided, however, that Company is given written notice at the
time of such assignment stating the name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being assigned; and provided further, that
any such assignee shall receive such assigned rights subject to all the terms and conditions of
this Agreement, including without limitation the provisions of this
Section 5, and agree to
abide by this Agreement by executing a Joinder Agreement.



     5.2 Registration Rights. The registration rights of the Holders under Section 3
are fully assignable to any person who holds or is acquiring
Registrable Securities in a permitted transfer; provided,
however, that the Company is given written notice at the time of such assignment stating the name
and address of the assignee and identifying the securities of the Company as to which the rights in
question are being assigned; and, provided further, that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement, including without
limitation the provisions of this Section 5, and agree to abide by this Agreement by
executing a Joinder Agreement.



     5.3 Rights of Participation. The Rights of Participation of the Investors under
Section 4 hereof are fully assignable to any person who holds or is acquiring Investment
Securities in a permitted transfer; provided, however, that the Company is given written notice at
the time of such assignment stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are
being assigned; and, provided
further, that any such assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of this Section
5, and agree to abide by this Agreement by executing a Joinder Agreement.



15









 




6 PROTECTIVE PROVISIONS.




     6.1 Acts of the Company Requiring a Majority of Preferred Share Approval. Any action
(whether by amendment of the Company’s Memorandum and/or Articles of Association or otherwise, and
whether in a single transaction or a series of related transactions) that effects or approves any
of the following transactions involving the Company or any of its Subsidiaries shall require the
written approval of, in addition to a Board resolution duly passed holder(s) of not less than a
majority of the Preferred Shares then outstanding (voting together as a class, on an as-converted
basis) and in the context of such matters set forth in this Section 6.1 which are by the
Statute required to be determined by the members of the Company, the consent of the holders of the
Preferred Shares shall be deemed obtained if the matter is approved at a general meeting of the
Company with the affirmative vote of not less than a majority of the Preferred Shares (voting
together as a class, on an as-cortverted basis) or by way of a written resolution signed by all
holders of the Preferred Shares:



          (a) Cease to conduct or carry on the business of the Company and/or its Subsidiaries
substantially as now conducted or, in the case of a Subsidiary, as conducted at the time it became
a Subsidiary of the Company or change any part of its business activities;




          (b) Sell or dispose of the whole or a substantial part of the undertaking goodwill or the
assets of the Company and/or any of its Subsidiaries;




          (c) Make any distribution of profits amongst the shareholders by way of dividend, (interim
and final) capitalization of reserves or otherwise;




          (d) Appoint, hire, terminate, or settle the terms of appointment of any managing director,
general manager, chairman, financial controller, Chief Financial Officer (CFO), Chief Executive
Officer (CEO), Chief Operating Officer (COO) Chief Technical Officer (CTO), or any other employee
with a rank of Senior Vice President or higher;




          (e) Settle or alter the terms of any bonus (other than as approved in the annual budget) or
profit sharing scheme or any employee share option or share participation scheme;




          (f) Adopt the annual accounts or budgets of the Company and/or any of its Subsidiaries or
amendment of the accounting policies previously adopted or change the financial year of the
Company or any of its Subsidiaries;




          (g) Acquire any investment or incur any commitment in excess of US$1.5 million at any time in
respect of any one transaction or in excess of US$5 million at any time in related transactions in
any financial year of the Company and/or any of its Subsidiaries;




          (h) Borrow any money or obtain any financial facilities (including but not limited to
factoring, facility letters, undertakings, guarantees, indemnities, comfort letters, etc,) except
pursuant to trade facilities obtained from banks or other financial institutions not exceeding
US$500,000 at any time in respect of any one trade facility and not exceeding US$2 million in the
aggregate in any financial year of the Company and any of its Subsidiaries;




          (i) Create, allow to arise or issue any debenture constituting a pledge, lien or
charge
(whether by way of fixed or floating charge, mortgage encumbrance or other security) on all or any
of the undertaking, assets or rights of the Company and/or any of its Subsidiaries except for the
purpose of securing borrowings from banks or other financial institutions in the ordinary course
of business not exceeding US$500,000 or in excess of US$2 million at any time in any financial
year;




          (j) Appoint or change the auditors of the Company and/or any of its Subsidiaries;




          (k) Sell, transfer, license, charge, encumber or otherwise dispose of any
trademarks, patents
or other intellectual property owned by the Company and/or any of its Subsidiaries;




          (l) Pass any resolution for the winding up of the Company and/or any of its
Subsidiaries or
undertake any merger, reconstruction or liquidation exercise concerning the Company and/or any of
its Subsidiaries or apply for the appointment of a receiver, manager or judicial manager or like
officer;




          (m) Approve or make adjustments or modifications to terms of transactions involving the
interest of any director or shareholder of the Company and/or its Subsidiaries, including but not
limited to the making




16









 




of any loans or advances whether directly or indirectly, or the provision of any guarantee,
indemnity or security for or in connection with any indebtedness of liabilities of any director or
shareholder of the Company and/or its Subsidiaries;




          (n) Acquire any share capital or other securities of any body corporate or the
establishment of
any branches;




          (o) Dispose of or dilute the Company’s interest, directly or indirectly, in
any of its Subsidiaries;




          (p) Approve any transfer of shares in the Company or any of its Subsidiaries;




          (q) Enter into any joint-venture agreements or the formation of any Subsidiaries;




          (r) Enter into arrangements for any public offering of the Company’s or any of its
Subsidiaries’
securities including the selection of any underwriter/manager or arranger for such offering;




          (s) Make any advances or other credits involving more than US$10,000 in a single
transaction or more than US$50,000 in the aggregate in any financial year to any parson or
guarantee, indemnity, act as surety for, or otherwise secure or accept or assume any direct or
indirect liability for the liabilities of or obligations of any person except as security for
facilities or loans granted to the Company and any of its Subsidiaries;




          (t) After, amend, or otherwise modify any terms of any financing or lending
agreements or
arrangements to which the Company and/or any of its Subsidiaries is a party;




          (u) Approve or amend any quarterly and annual budget, business plan and operating
plan
(including any capital expenditure budget, operating budget and financing plan); or




          (v) Increase the authorized number of directors




     6.2 Acts of the Company Requiring a Majority of Series A Preferred Share Approval.
Any action
(whether by amendment of the Company’s Memorandum and/or Articles of Association or otherwise, and
whether in a single transaction or a series of related transactions) that effects or approves any
of the following transactions involving the Company or any of its Subsidiaries, shall require the
written approval, in addition to a Board resolution duly passed, of holder(s) of not less than a
majority of the Series A Preferred Shares arid Series A-1 Preferred Shares (voting together as a
class, on an as-converted basis), provided, however, that none of the holders of Series A
Preferred Shares or Series A-1 Preferred Shares shall unreasonably withhold or delay its consent
and provided further, that each holder of Series A Preferred Shares and Series A-1 Preferred
Shares (including its assignees) shall respond with its decision within fifteen (15) Business Days
upon receipt of any written request by the Company, duly issued in accordance with the notice
provisions herein, for such consent, failing which it is deemed a delay, and in the context of
such matters set forth in this Section 6.2 which are by the Statute required to be
determined by the members of the Company, the consent of the holders of the Series A Preferred
Shares and Series A-1 Preferred Shares shall be deemed obtained if the matter is approved at a
general meeting of the Company with the affirmative vote of not less than a majority of the Series
A Preferred Shares and Series A-1 Preferred Shares (voting together as a class, on an as-converted
basis) or by way of a written resolution signed by all holders of the Series A Preferred Shares
and Series A-1 Preferred Shares;



          (a) Adversely amend or change the rights, preferences, privileges or powers of, or the
restrictions provided for the benefit of the holders of Series A Preferred Shares or Series A-1
Preferred Shares;




          (b) Take any action that authorizes, creates or issuee shares of any class or series having
preferences superior to or on parity with the Series A Preferred Shares or the Series A-1
Preferred Shares; or




          (c) Take any action that reclassifies any outstanding securities of the Company into
securities having preferences or priority as to dividends or assets senior to or on parity with
the preferences reserved for the Series A Preferred Shares or the Series A-1 Preferred Shares;




     6.3 Acts of the Company Requiring a Majority of Series B Preferred Share Approval.
Any action
(whether by amendment of the Company’s Memorandum and/or Articles of Association or otherwise, and
whether in a single transaction or a series of related transactions) that effects or approves any
of the following transactions involving the Company or any of its Subsidiaries, shall require the
written approval, in addition to a Board resolution duly passed of holder(s) of not less than a
majority of the Series B Preferred Shares (voting together as a class, on



17









 





an as-converted basis), provided, however, that none of the holders of Series B Preferred
Shares shall unreasonably withhold or delay its consent and provided further, that each holder of
Series B Preferred Shares (including its assignees) shall respond with its decision within fifteen
(15) Business Days upon receipt of any written request by the Company, duly issued in accordance
with the notice provisions herein, for such consent, failing which it is deemed a delay, and in the
context of such matters set forth in this Section 6.3 which are by the Statute required to
be determined by the members of the Company, the consent of the holders of the Series B Preferred
Shares shall be deemed obtained if the matter is approved at a general meeting of the Company with
the affirmative vote of not less than a majority of the Series B Preferred Shares (voting together
as a class, on an as-converted basis) or by way of a written resolution signed by all holders of
the Series B Preferred Shares;




          (a) Adversely amend or change the rights, preferences privileges or powers of or the
restrictions provided for the benefit of the holders of Series B Preferred Shares;




          (b) Take any action that authorizes, creates or issues shares of any class or series having
preferences superior to or on parity with the Series B Preferred Shares; or




          (c) Take any action that reclassifies any outstanding securities of the Company into
securities having preferences or priority as to dividends or assets senior to or on parity with
the preferences reserved for the Series B Preferred Shares




     6.4 Acts of the Company Requiring a Majority of Series C Preferred Share Approval.
Any action (whether by amendment of the Company’s Memorandum and/or Articles of Association or
otherwise, and whether in a single transaction or a series of related transactions) that effects
or approves any of the following transactions involving the Company or any of its Subsidiaries,
that materially and adversely affects the rights of holders of Series C Preferred Shares and does
not materially and adversely affect the rights of holders of all other Preferred Shares in the
same manner, shall require the written approval, in addition to a Board resolution duly passed, of
holder(s) of not less than a majority of the Series C Preferred Shares (voting together as a
class, on an as-converted basis), provided, however, that none of the holders of Series C
Preferred Shares shall unreasonably withhold or delay its consent and provided further, that each
holder of Series C Preferred Shares (including its assignees) shall respond with its decision
within fifteen (15) Business Days upon receipt of any written request by the Company, duly issued
in accordance with the notice provisions herein, for such consent, failing which it is deemed a
delay, and in the context of such matters set forth in this Section 6.4 which are by the
Statute required to be determined by the members of the Company the consent of the holders of the
Series B Preferred Shares shall be deemed obtained if the matter is approved at a general meeting
of the Company with the affirmative vote of not less than a majority of the Series C Preferred
Shares (voting together as a class, on an as-converted basis) or by way of a written resolution
signed by all holders of the Series C Preferred Shares;



          (a) Increase, reduce or cancel the authorized or issued share capital of the Company and/or
any of its Subsidiaries or issue, allot, purchase or redeem any shares or securities convertible
into or carrying a right of subscription in respect of shares or any share warrants or grant or
issue any options, rights or warrants or which may require the issue of shares in the future or do
any act which has the effect of diluting or reducing the effective shareholding of the holders of
the Series C Preferred Shares or the Conversion Shares in the Company, except for the redemption
of the Preferred Shares in accordance with the terms of their issue and same for the issue of
Conversion Shares;




          (b) Make any alteration or amendment to the Memorandum and/or Articles of Association or any
other charter documents of the Company or any of its Subsidiaries;




          (c) Amend or change the rights, preferences, privileges or powers of or the restrictions
provided for the benefit of the holders of Series C Preferred Shares;




          (d) Take any action that authorizes, creates or issues shares of any class or series having
preferences superior to or on parity with the Series C Preferred Shares; or




          (e) Take any action that reclassifies any outstanding securities of the Company into
securities having preferences or priority as to dividends or assets senior to or on parity with
the preferences reserved for the Series C Preferred Shares



7. BOARD REPRESENTATION RIGHTS; CERTAIN INVESTORS RIGHTS




     7.1 Board of Directors



18









 






          (a) Prior to Qualified IPO. The Company’s Articles of Association shall, upon
consummation of the Closing, provide for a Board initially consisting of a minimum of five (5) but
a maximum of seven (7) directors, with any increase in the number of Directors from seven (7)
requiring the unanimous approval of the Board. As soon as practical after the Closing, the Company
shall identify two (2) individuals who shall have agreed to serve as independent directors of the
Company, and upon the acceptance of such individuals by the holders of a majority of the Common
Shares then outstanding (calculated on an as-converted and fully-diluted basis), the Company and
the Investors shall take all necessary steps, including without limitation procuring the
resignation of certain members of the then current Board, to cause the Board to be reconstituted to
consist of: (A) two (2) directors (each, a ‘Preferred Shareholder Director,’ and collectively, the
“Preferred Shareholder Directors”), to be nominated and elected by holders of the largest and
second largest number, respectively, of all Preferred Shares then outstanding and entitled to vote
calculated on an as-converted and fully diluted basis; provided, however, in the event that the
investor holding the largest number of all Preferred Shares and/or the investor holding the second
largest number of all Preferred Shares elects not to nominate a Preferred Shareholder Director,
then the Investor holding the next largest number of all Preferred Shares shall be entitled to
nominate such Preferred Shareholder Director, provided, further, that no investor holding less than
10,000,000 Preferred Shares shall be entitled lo nominate and elect a Preferred Shareholder
Director; (B) two (2) and up to four (4) independent Directors nominated by any shareholder and
elected by holders of a majority of all Common Shares then outstanding and entitled to vote,
calculated on an as-converted and fully diluted basis; and (C) the then incumbent Chief Executive
Officer of the Company




          (b) Upon Qualified IPO. Immediately prior to the consummation of a Qualified IPO, the
Investors and the Company shall take all necessary steps, including effecting any necessary
amendments to the Company’s Articles of Association, to restructure the composition of the Board
to ensure that the Board shall include at least three (3) Independent Directors (as defined by SEC
rules or the applicable listing exchange)




          (c) Notwithstanding any provision to the contrary in this Agreement if a Qualified IPO shall
not be consummated as of December 31, 2008, or upon any earlier date on which the Board in good
faith determines to terminate efforts to effect a Qualified IPO, the Investors and the Company
shall take all necessary steps, including effecting any necessary amendments to the Company’s
Articles of Association, to cause the Board to be recomposed as reasonably agreed upon by the
Company and investors holding at least a majority of all Preferred Shares then outstanding (voting
as a class and on an as-converted basis); provided, however, that in no event shall the number of
the Directors of the so reconstituted Board exceed nine (9)




     7.2 Board Committees



          (a) Compensation Committee. The Company shall set up a compensation committee (the
“Compensation Committee”) as soon as reasonably practicable after the Closing with at least three
(3) members, including one (1) Preferred Shareholder Director and two (2) independent Directors.
The Compensation Committee shall be responsible for evaluating and recommending to the Board for
action all matters related to the Group Companies’ annual compensation and/or bonus plan, share
option plan, and employee related compensation matters, including the appointment of the chairman
of the finance and Compensation Committee. Any recommendation to be made to the Board shall
require the approval by the majority of the members of the Compensation Committee. The membership
of the Compensation Committee may be changed upon a determination of the Board in connection with
the preparation for or consummation of a Qualified IPO




          (b)
Audit Committee. The Company shall set up an Audit committee
(the “Audit
Committee”) as soon as reasonably practicable after the Closing with at least three (3) members,
including two (2) Directors nominated by the Investors and one (1) Director nominated by the
holders of a majority of Common Shares. The Audit Committee shall be responsible for the
appointment, compensation and oversight of the Company’s auditors. Any recommendation to be made
to the Board shall require approval by the majority of the members of the Audit Committee. The
membership of the Audit Committee may be changed upon a determination of the Board in connection
with the preparation for or consummation of a Qualified IPO.




     7.3 Board; Quorum; Meetings, Etc. The Company’s Articles of Association shall
provide for a quorum
(which shall exist at the time of the voting as well as the attendance of the Board meeting) of
the Board of three (3) Directors, including at least one (1) Director elected by holders of
Preferred Shares, and one (1) independent Director, provided, however, that if such quorum cannot
be obtained for a Board meeting after one (1) notice of Board meeting has been sent by the Company
with such notice providing not less than fourteen (14) days of prior notice, then the attendance
of any three (3) Directors shall constitute a quorum. Notices and agendas of Board meetings as
well as copies of all board papers shall be sent to all investors at least fourteen (14) working
days prior to the relevant Board meeting. Minutes of Board meetings shall be sent to investors
within thirty (30) days after the relevant meeting. The Company shall hold Board meetings at least
once per month in each of the first six (6) months after the Closing and at least once per quarter
thereafter



19









 





     7.4 Board Observers.



          (a) For so long as any Investor holds at least 10,000,000 then outstanding Preferred Shares
(the calculation of which shall Include Series C Preferred Shares actually purchased at the
Closing), and provided that such investor has not designated any member of the then current Board,
such Investor shall have the right to designate one observer (each, an “investor Observer”) to
attend and speak at all meetings of the Board and all committees thereof (whether in person, by
telephonic or other means) in a non-voting, observer capacity and the Company shall provide to each
of the Investor Observers, concurrently with the members of the Board, and in the same manner,
notice of such meeting and a copy of all materials provided lo such members, provided, however,
that each of the Investor Observers shall execute a Confidentiality and Non-Disclosure Agreement
upon his or her designation bs an Investor Observers in form and substance reasonably
satisfactory to the Company and the Investor Observer (except that any Investor Observer designated
by Intel shall be governed by the Corporate Non Disclosure Agreement as referred to below in
Subsection 10.11(e)): provided. Further, that the right of any Investor to designate an
Investor Observer shall cease to exist immediately upon the closing of a Qualified IPO.




          (b) Notwithstanding any provision to the contrary in this Agreement, if a Qualified IPO shall
not be consummated on or prior to December 31, 2008, or upon any earlier date on which the Board in
good faith determines to terminate efforts to effect a Qualified IPO, the Investors and the Company
shall take all necessary steps, including effecting any necessary amendments to the Company’s
Articles of Association, to cause the right of any Investor to designate an Investor Observer in
accordance with the provisions of Section 7.4(a) to be reinstated.




     7.5 Waiver. The Company acknowledges that each Investor will likely have, from
time to time,
information that may be of interest to the Company or its Subsidiaries (“Information”) regarding a
wide variety of matters including, by way of example only, (1) an Investors technologies, plans and
services, and plans and strategies relating thereto, (2) current and future  investments an
Investor has made, may make, may consider or may become aware of with respect to other companies
and other technologies, products and services, including, without limitation, technologies,
products and services that may be competitive with those of the Company or its Subsidiaries, and
(3) developments with respect to the technologies, products and services, and plans and strategies
relating thereto, of other companies, including, without limitation, companies that may be
competitive with the Company or any of its Subsidiaries. The Company recognizes that a portion of
such Information may be of interest to the Company or any of its Subsidiaries. Such Information may
or may not be known by the director representing the Investor (“Investor Director”) or Investor
Observer. The Company, as a material part of the consideration for this Agreement, agrees that
neither any Investor Observer nor any Investor Director shall have any duty to disclose any
Information to the Company or its Subsidiaries, or permit the Company or any of its Subsidiaries lo
participate in any projects or investments baaed on any Information, or to otherwise take advantage
of any opportunity that may be of interest to the Company or any of its Subsidiaries if it were
aware of such Information, and hereby waives, to the extent permitted by law, any claim based on
the corporate opportunity doctrine or otherwise that could limit any Investor’s ability to pursue
opportunities based on such Information or that would require any Investor, any Investor Director
or the Investor Observer to disclose any such Information to the Company or any of its Subsidiaries
or offer any opportunity relating thereto to the Company or any of its Subsidiaries. The Investors
and the Company hereby irrevocably agree that as the Preferred Shareholder Directors are the
nominees of holders of the largest and second largest number respectively, of all Preferred Shares
(on an as-converted basis) and each Investor Observer is a nominee of an Investor, such Preferred
Shareholder Directors and each Investor Observer shall be entitled to, and the holders of the
largest and second largest number of all Preferred Shares (on an as-converted basis), and each
Investor can require its nominee (whether the Preferred Shareholder Directors or an Investor
Observer, as the case may be) to. report all matters concerning the Company and its Subsidiaries,
including but not limited to, matters discussed at any meeting of the Board, such nominee’s
nominating Investor and such persons to whom the holders of the largest and the second largest
number or all Preferred Shares (on an as-converted basis) and such Investor may disclose
information pursuant to Section 10.11 and that the Preferred Shareholder Directors and
investor Observers may take advice and obtain instructions from his/her nominating Investor.



     7.6 Assignment and Termination. The rights of the Investors set forth in this
Section 7 are fully assignable to arty person who holds or is acquiring Series A Preferred
Shares, Series A-1 Preferred Shares. Series B Preferred Shares, and/or Series C Preferred Shares
in a permitted transfer and thereafter will hold sufficient equity securities to obtain the rights
set forth in this Section 7: provided, however that the Company is given written notice at
the time of such assignment stating the name and address of the assignee and identifying the
securities of the Company as to which the rights in question are being assigned; and provided
further that any such assignee shall receive such assigned rights subject lo all the terms and
conditions of this Agreement, including without limitation the provisions of this Section
7. and agree to abide by this Agreement by executing a Joinder Agreement. The rights of the
Investors in this Section 7 shall terminate upon completion of a Qualified IPO




20












 






     7.7 Subsidiaries’ Boards. It is further agreed that the board of directors of
the Subsidiaries of the Company (including in the event that the Company shall form or acquire any
new Subsidiaries) shall be determined by the Board of Directors of the Company in accordance with
applicable law.



     7.8 Insurance and Indemnification. The Company will provide customary director
insurance coverage for the Board members as approved by the Investors holding a majority of the
Preferred Shares (voting as a class and on an as-converted basis) Notwithstanding any other
provision in this Agreement or in the Agreed M&A, the Company shall, and shall procure the Group
Companies to, jointly and severally, indemnify to the fullest extent permitted by applicable law
any director made or threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he is or was a director or
officer of the Company or any predecessor of the Company, or any other Group Company or serves or
served at any other enterprise as a director or officer at the request of the Company or any
predecessor to the Company



     7.9 Director Expenses. The Company shall reimburse any non-local Investor Directors
for all reasonable out of pocket travel and related expenses incurred in connection with Board
duties and meetings up to US$2,000 per calendar year (per Investor group, in case of Investor
Directors) The reimbursement to be paid to the independent Directors shall be determined by the
Board



8 GOING PUBLIC: SALE OF THE COMPANY




     8.1 Qualified IPO: Company Sale. The Company undertakes to use its best efforts to
(i) conduct a Qualified IPO of the Company on the NASDAQ or Hong Kong Stock Exchange (Main Board or
GEM) or any other stock exchange consented to by the Investors pursuant to Section 6.1 or
(ii) sell the Company in a bona fide transaction through a merger or consolidation with another
company where the Company is not the surviving entity, by capitalization, or through a sale of all
or substantially all of the outstanding equity securities or the assets of the Company or otherwise
(a “Company Sale”), in each case on or prior to December 31, 2010 The Company shall
issue a maximum of thirty percent (30%) of its enlarged share capital in connection with a
Qualified IPO subject to any applicable stock exchange requirements for maximum and minimum
offering sizes



     8.2 Qualified IPO: Non-US Offerings.



          (a) Participation Rights. If the Company s Common Shares are offered to the public
in an underwritten public offering (whether or not such underwritten public offering constitutes a
Qualified IPO) in any jurisdiction other than the United States (a Non-US Offering”) and such
offering includes outstanding Common Shares of any one or more selling shareholders, then each
Investor shall have the right to include its IPO Pro Rata Share (as defined in the next sentence)
in such offering on terms and conditions no less favorable to the Investors than to any other
selling shareholder For purposes of this Section 8.2. ‘IPO Pro Rata Share” shall mean the
ratio of (a) the number of Common Share Equivalents then held by such Investor, to (b) the total
number of Common Share Equivalents then outstanding immediately prior to the Qualified IPO




          (b) Expenses. The Company shall pay all expenses (excluding only underwriters’
discounts and commissions) incurred in connection with any Non-US Offering pursuant to this
Section 8.2. including without limitation all foreign registration, filing and
qualification fees, printer’s and accounting fees, and reasonable fees and expenses (including
disbursements) of outside counsel for the Selling Shareholders. Each Selling Shareholder
participating in an offering pursuant to this Section 8.2 shall bear such Selling
Shareholder’s proportionate share (based on the total number of shares sold in such offering other
than for the account of the Company) of all discounts and commissions or other amounts payable to
underwriter(s) or brokers in connection with such offering by the Selling Shareholders.




9 UNDERTAKINGS OF THE COMPANY AND RESTRICTED PARTIES




     9 1 No Share Transfers



          (a) Except as exempted under subsection. 9.1(b) below, notwithstanding any provision
to the contrary in any Transaction Agreement, no Restricted Party shall transfer any of its shares
in the Company for a period of one (1) year following the Closing without the prior written
consent of the investors representing at least sixty-seven percent (67%) of the Preferred Shares
then outstanding (voting as a class and on an as-converted basis) For the avoidance of doubt after
the expiration of such one (1) year period, all transfers of shares in the Company by the
Restricted Parties shall remain subject to the obligations set forth in Section 2 of the
ROFR Agreement The share transfer restrictions imposed by this Section 9.1 shall terminate
automatically if the Investors sell or transfer to third parties in the aggregate more than fifty
percent (50%) of Preferred Shares held by the Investors.




21









 





          (b) Any transfer by any natural Person of any issued and outstanding shares in
the Company shall be exempt from the transfer restrictions under any Transaction
Agreements, including any right of first refusal and co-sale rights, so long as the
transfer is (i) to a legal representative of such transferor upon the death of such
transferor or after such transferor becomes incapacitated; (ii) by will, intestacy laws
or the laws of descent or survivorship; or (iii) pursuant to a court order upon the
termination of a marital relationship of such transferor.




     9.2 Company Charter Documents; Agreed M&A. The Company will ensure that no
alteration or amendment is made to the Agreed M&A or any charter documents of any of
the Group Companies except in accordance with the Transaction Agreements. Without
limiting the foregoing, the Company will abide by and act in accordance with the Agreed
M&A, as duty amended from time to time, including without limitation, the articles
therein relating to the anti-dilution rights, redemption rights, and liquidation
preference and compulsory dividend rights reserved for the holders of the Series A
Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares and Series C
Preferred Shares. The Agreed M&A Is hereby incorporated Into this Agreement by this
reference.



     9 3 Performance of Agreements. The Company will, and cause each of the
Group Companies to, abide by and perform all of the obligations of the Company and such
Group Company (as the case may be) set forth in the Transaction Agreements,.



     9.4 Invention Assignment and Confidentiality Agreement. Every key employee
(employees with a rank of Senior Vice President or higher) of the Company or any Group
Company will enter into an Intellectual Properly Rights and Confidentiality Agreement in
a form as determined by the Board of the Company and reasonably acceptable to the
Investor



     9.5 Compliance with Restructuring Agreements The Company hereby
undertakes to comply with, and to cause Haihui Dalian and the Group Companies to comply
with, all the terms of the Restructuring Agreements (as defined in Section 1.1
of the Series C Share Purchase Agreement) to which Haihui Dalian or any Group Company is
a party



10 GENERAL PROVISIONS




     10.1 Notices Except as may be otherwise provided herein, all notices
requests, waivers and other communications made pursuant to this Agreement shall be in
writing and in English and shall be conclusively deemed to have been duly given (a)
when hand delivered to the other party; (b) when sent by facsimile at the number set
forth below upon successful transmission report being generated by the sender’s
machine; or (c) three (3) Business Days after deposit with an international overnight
delivery service, postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives a
confirmation of delivery from the delivery service provider.



	 	 	 

	To the Company:

	 	To a Restricted Party:
	 
	 	 
	No. 35 Qixianling Industrial Base, Hi-tech Zone Dalian

	 	The addresses set forth next to each Restricted Party
	P.R.C.

	 	on Schedule 1 (Schedule of Restricted Parties)
	Attn: Linda Kou
	 	 
	 
	 	 
	Fax Number: 86-411-84791350
	 	 
	Tel Number: 86-411-84791666-8252
	 	 
	 
	 	 
	With a copy to:
	 	 
	 
	 	 
	O Melveny & Myers LLP
	 	 
	37th Floor, Plaza 66, 1266 Nanjing Road West
	 	 
	Shanghai 200040, P R C
	 	 
	Attn: Kurt Berny, Esq
	 	 
	 
	 	 
	Fax Number: 86-21-23077300
	 	 
	Tel Number: 86-21-23077000
	 	 
	 
	 	 
	To an Investor:
	 	 
	 
	 	 
	The addresses set forth next to each Investor on
	 	 
	Schedule 2 (Schedule of Investors)
	 	 






22









 






     Each person making a communication hereunder by facsimile shall promptly confirm by
telephone to the person to whom such communication was addressed each
communication made by it by
facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any
such communication A party may change or supplement the addresses given above, or designate
additional addresses, for purposes of this Section 10.1 by giving the other party written
notice of the new address in the manner set forth above



     10.2 Entire Agreement; Conflicts This Agreement, together with all the exhibits
hereto, constitutes and contains the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting the subject matter
hereof. In the event of any conflicts with the Agreed M&A the provisions of this Agreement shall
prevail.



     10.3 Governing Law. This Agreement shall be governed by and construed exclusively in
accordance with the laws of the Stale of New York, without regard to
conflict of law principles.



     10.4 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law than such provision(s) shall be excluded from this Agreement and
the balance of this Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.



     10.5 Third Parties Nothing in this Agreement, express or implied, is intended to
confer upon any person, other than the parties hereto and their permitted successors and assigns,
any rights or remedies under or by reason of this Agreement.



     10.6 Successors and Assigns. Subject to the provisions of Section 5.1 and
Section 7.6, the provisions of this Agreement shall inure to the benefit of, and shall be
binding upon, the successors and permitted assigns of the parties
hereto. Except as expressly
stated otherwise, the rights of the Investors set forth in this Agreement are fully assignable to
arty person who holds or is acquiring Series A Preferred Shares,
Series A-1 Preferred Shares,
Series B Preferred Shares, and/or Series C Preferred Shares
through a permitted transfer.



     10.7
Interpretation; Captions. This Agreement shall be construed according to its fair
language The rule of construction to the effect that ambiguities are to be resolved against the
drafting party shall not be employed in Interpreting this Agreement. The captions to sections of
this Agreement have been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.



     10.8 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the same instrument.



     10.9 Adjustments for Share Splits, Etc. Wherever in this Agreement there is a
reference to a specific number or percentage of the Preferred Shares and/or Common Shares, then,
upon the occurrence of any share subdivision, share split, combination, reclassification, merger,
consolidation, reorganization, recapitalization or share dividend of Preferred Shares or Common
Shares, as applicable, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of share by such event.



     10.10
Dispute Resolution



          (a) Negotiation Between Parties; Mediations The parties agree to negotiate in good
faith to resolve any dispute between them regarding this Agreement. If the negotiations do not
resolve the dispute to the reasonable satisfaction of both parties, then each party that is a
company shall nominate one authorized senior officer as its representative. The parties or their
representatives, as the case may be, shall, within thirty (30) days of a written request by either
party to call such a meeting meet in person and alone (except for one assistant for each party) and
shall attempt in good faith to resolve the dispute If the dispute cannot be resolved by such
senior managers in such meeting, the parties agree that they shall, if requested in writing by
either party, meet within thirty (30) days after such written notification for one day with an
impartial mediator and consider dispute resolution alternatives other than formal arbitration. If
an alternative method of dispute resolution is not agreed upon within thirty (30) days after the
one day mediation, either party may begin formal arbitration proceedings to be conducted in
accordance with subsection (b) below. This procedure shall be a prerequisite before
taking any additional action hereunder.




          (b) Arbitration. In the event the parties are unable to settle a dispute between them
regarding this Agreement in accordance with subsection (a) above, such dispute shall be
referred to and finally settled by




23









 








arbitration at the Hong Kong International Arbitration Centre
(HKIAC) in accordance with the
UNCITRAL Arbitration Rules (“UNCITRAL Rules”) in effect, which rules are deemed to be incorporated
by reference into this subsection (b) subject to the following: The arbitration tribunal
shall consist of one arbitrator to be appointed according to the UNCITRAL. Rules by HKIAC. The
language of the arbitration shall be English. Notwithstanding anything in this Agreement or in the
UNCITRAL Rules or otherwise, the arbitration tribunal shall not have the power to award injunctive
relief or any other equitable remedy of any kind against any investor unless such award both (i) is
expressly appealable to and subject to de novo review by the courts of Hong Kong, and (ii) would
not, if upheld, have the effect of impairing, restricting, or imposing any conditions on the right
or ability of such investor or its affiliates to conduct its respective business operations or to
make or dispose of any other investments. The prevailing party shall be entitled to reasonable
attorney’s fees costs and necessary disbursements in addition to any other relief to which such
party may be entitled.




          IFC’s submission to arbitration in accordance with the provisions of this Clause 10.10(b)
does not constitute a waiver of any of its immunities under its Articles of Agreement, the
International Organizations Immunities Act the International Finance Corporation Act or any other
applicable law.




     10.11 Confidentiality and Non-Disclosure



          (a) Disclosure of Terms. Each party hereto acknowledges that the terms and
conditions (collectively, the “Financing Terms”) of this Agreement, the Series C Share Purchase
Agreement, the other Transaction Agreements, and all exhibits restatements and amendments thereto
(collectively, the “Financing Agreements”), including their existence, shall be considered
confidential information and shall not be disclosed by it to any third party except in accordance
with the provisions set forth below Save for Intel, which shall be separately bound by its
Corporate Non Disclosure Agreement as referred to below in subsection 10.11(e) each Investor
agrees with the Company that it will keep confidential and will not disclose or divulge, any
information which such Investor obtains from the Company, pursuant to financial statements,
reports, and other materials provided by the Company to such Investor, or pursuant to information
rights granted under this Agreement or any other related documents, unless the information is
known, or until the information becomes known, to the public through no fault of such Investor, or
unless the Company gives its written consent to such Investor’s release of the information.




          (b) Press Releases. Within sixty (60) days of the Closing, the Company may issue a
press release disclosing that Investors have invested in the Company provided that (1) the release
does not disclose any of the Financing Terms, (2) the press release discloses only the entire
amount invested in the investment round, without disclosing the amount invested by any particular
Investor, and (3) the final form of the press release is approved in advance in writing by each
Investor mentioned therein, which approval shall not be unreasonably withheld.




          (c) Permitted Disclosures. Notwithstanding the foregoing or anything to the
contrary,





     (1) the Company may disclose any of the Financing Terms to its current or bona
fide prospective investors, employees, investment bankers, lenders, accountants and
attorneys in each case only where such persons or entities are under appropriate
nondisclosure obligations;




     (2) each investor may, without disclosing the identifies of the other Investors
or the Financing Terms of their respective investments in the Company without their
consent, disclose such Investor’s investment in the Company and the Financing Terms
of its investment to third parties or to the public at its sole discretion and in
relation thereto may use the Company’s logo and trademark, and may include links to
the Company’s website (without requiring the Company’s
further consent). If the Investor does so, the other parties shall have the right to
disclose to third parties any such information disclosed in a press release or
other public announcement by such Investor;




     (3) each Investor shall have the right to disclose:





     (i) any information to such Investor’s Affiliates., such Investor’s
and/or its
Affiliates legal counsel auditor, insurer, accountant, consultant or to an
officer director general partner limited partner, shareholder, investment
counselor or advisor or employee of such Investor and/or its Affiliate;
provided, however that any counsel, auditor, insurer, accountant consultant,
officer, director, general partner, limited partner shareholder, investment
counselor or advisor, or employee shall be advised of the confidential nature
of the information or are under appropriate non-disclosure obligations
imposed by professional ethics law or otherwise;



24









 






     (ii) any information for fund and inter-fund reporting
purposes;




     (iii) any information as required by law, government
authorities, exchanges and/or regulatory bodies, including by the SEC (or
equivalent for other venues);




     (iv) any information to bona fide prospective
purchasers/investors of any share, security or other interests in the
Company; and/or




     (v) any information contained in press releases or public announcements of
the Company pursuant to subsection 10.11(b) above




     (4) the confidentiality obligations set out in this Section
10.11 do not apply to:




     (i) information which was in the public domain or otherwise known to
the
relevant party before it was furnished to it by another party hereto or,
after it was furnished to that party, entered the public domain otherwise
than as a result of (1) a breach by that party of this Section 10.11
or (2) a breach of a confidentiality obligation by the discloser where the
breach was known to that party;




     (ii) information the disclosure of which is necessary in order
to comply with any applicable law, the order of any court, the requirements
of a stock exchange or to obtain tax or other clearances or consents from
any relevant authority; or




     (iii) information disclosed by any director of the Company to
its appointer or any of its affiliates or otherwise in accordance with the
foregoing provisions of this subsection 10.11(c)



          (d) Legally Compelled Disclosure. In the event that any party is requested or becomes
legally compelled (including without limitation, pursuant to securities laws and regulations) to
disclose the existence of this Agreement or any Financing Terms in contravention of the provisions
of this Section 10.11, such party (the “Disclosing Party”) shall, if and to the extent that
it can lawfully do so, provide the other parties (the “Non- Disclosing Parties”) with prompt
written notice of that fact so that the appropriate party may seek (with the cooperation and
reasonable efforts of the other parties) a protective order confidential treatment or other
appropriate remedy. In such event, the Disclosing Party shall furnish only that portion of the
information that is legally required and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information to the extent reasonably
requested by any Non-Disclosing Party.




          (e) The provisions of this Section 10.11 shall be in addition to, and not in
substitution for, the provisions of the separate nondisclosure agreements executed by the Company
with Intel with respect to the transaction contemplated herein Additional disclosures and
exchange of confidential information between the Company and Intel (including without limitation,
any exchanges of information with any board observer designated by Intel) shall be governed
exclusively by the terms of the corporate Non-Disclosure Agreement No. 9517991 dated 12 July 2004
executed by the Company and Intel.




     10.12 Investor Rights.



          (a) Any rights of JAFCO under this Agreement may, without prejudice to the rights of JAFCO to
exercise any such rights, be exercised by JAFCO Investment (Asia Pacific) Ltd. (“JIAP’) or any
other fund manager of JAFCO or their nominees (“JAFCO Manager”), unless JAFCO has (i) given notice
to the other parties that any such rights cannot be exercised by JIAP or a JAFCO Manager; and (ii)
not given notice to the other parties that such notice which is given under this Section
10.12 has been revoked.




          (b) Any rights of Granite under this Agreement may, without prejudice to the rights of Granite
to exercise any such rights, be exercised by any fund manager of Granite or its nominees (“Granite
Manager”), unless Granite has (i) given notice to the other parties that any such rights cannot be
exercised by a Granite Manager; and (ii) not given notice to the
other parties that such notice
which is given under this Section 10.12 has been revoked.




          (c) Any rights of IFC under this Agreement may, without prejudice to the rights of IFC to
exercise any such rights, be exercised by a fund manager of IFC or its nominees (“IFC Manager”)
unless IFC has (i)



25









 






given notice to the other parties that any such rights cannot be exercised by an IFC Manager; and
(ii) not given notice to the other parties that such notice which is given under this Section
10.12 has been revoked.




          (d) Any rights of Sumitomo under this Agreement may, without prejudice to the rights of
Sumitomo to exercise any such rights, be exercised by any fund manager of Sumitomo or its nominees
(“Sumitomo Manager”), unless Sumitomo has (i) given notice to the other parties that any such
rights cannot be exercised by a Sumitomo Manager; and (ii) not given notice to the other parties
that such notice which is given under this Section 10.12
has been revoked.




          (e) Any
rights of Mitsubishi under this Agreement may, without prejudice to the rights of
Mitsubishi to exercise any such rights, be exercised by any fund
manager of Mitsubishi or its
nominees (“Mitsubishi Manager”), unless Mitsubishi has (i) given notice to the other parties that
any such rights cannot be exercised by a Mitsubishi Manager; and (ii) not given notice to the other
parties that such notice which is given under this Section
10.12 has been revoked.




          (f) Any rights of DFJ under this Agreement may, without prejudice to the rights of DFJ to
exercise any such rights, be exercised by any fund manager of DFJ or its nominees (“DFJ Manager”),
unless DFJ has (i) given notice to the other parties that any such rights cannot be exercised by a
DFJ Manager; and (ii) not given notice to the other parties that such notice which is given under
this Section 10.12 has been revoked.




          (g) Any rights of Laoniu under this Agreement may, without prejudice to the rights of Laoniu
to exercise any such rights, be exercised by any fund manager of Laoniu or its nominees (“Laoniu
Manager”), unless Laoniu has (i) given notice to the other parties that any such rights cannot be
exercised by a Laoniu Manager; and (ii) not given notice to the other parties that such notice which
is given under this Section 10.12 has been revoked.




     10.13
Language. This Agreement and all other Transaction Agreements are entered into
in English only Any Chinese translation of the Transaction Agreements is for reference only and
shall not be a legally binding document. Accordingly, the English version will prevail in the
event of any inconsistency between the English and any Chinese
translations thereof. The Company
acknowledges that it has consulted with legal counsel with respect to the English version of this
Agreement and that it fully understands its terms.



     10.14
Amendment of Rights. Any provision of this Agreement may be amended (either
generally or in a particular instance and either retroactively or prospectively) only with the
written consents of the Company the Restricted Parties holding not less than fifty percent (50%) of
the Common Shares held by all Restricted Parties, and the investors holding not less than fifty
percent (50%) of the Preferred Shares (voting as a class and on an
as-converted basis); provided,
however, that no amendment shall be effective or enforceable in respect of investors of any
particular class of Preferred Shares of the Company if such amendment (i) materially and adversely
affects the rights of such class of Preferred Shares and does not materially and adversely affect
the rights of all other classes of Preferred Shares of the Company in the same manner, and (ii) is
not consented to in writing by investors holding not less than fifty percent (50%) of such affected
class of Preferred Shares of the Company. Notwithstanding the foregoing, in the case of an
amendment (i) of any provision of Section 3 hereof, any such amendment may be made only with the
written consents of the Company and the investors holding not less than fifty percent (50%) of the
Preferred Shares (voting as a class and on an as-converted basis) entitled to the registration
rights set forth in Section 3 hereof; (ii) with respect to the information and inspection
Rights under Section 2 and the Right of Participation
under Section 4, only with
the written consents of the Company and the investors holding not less than fifty percent (50%) of
the Preferred Shares (voting as a class and on an as-converted basis); (iii) with respect to any
provisions set forth in Sections 9.1 to 9.4. only with the written consents of the
Investors holding not less than fifty percent (50%) of the Preferred Shares (voting as a class and
on an as-converted basis), and the holders of a majority of the outstanding Common Shares. Any
amendment effected in accordance with this Section 10.14 shall be binding upon the Company,
the Restricted Parties and each investor, and their respective
successors in interest.




Notwithstanding anything to the contrary in this Section 10.14:




(A) no amendment to this Agreement shall be effective or enforceable against an investor
that does not consent to such amendment unless: (i) sufficient and adequate written notice
describing the proposed amendment has been provided to each Investor at least five (5)
Business Days prior to such amendment; and (ii) a copy of the final executed version of the
amendment has been provided to such Investor within twenty (20) Business Days after such
amendment; and




(B) an amendment to this Agreement shall not be effective or enforceable In respect of any
particular investor if such amendment: (i) materially and adversely affects the rights of
such investor and does not materially and adversely affect the rights of all other Investors
in the same manner; or (ii) imposes any



26









 







material obligation or liability on such investor; and provided further, that such
Investor delivers a duly issued written notice to each of the other Investors stating its
objection to the amendment within ten (10) Business Days after the date on which a copy of
the final executed version of the amendment is provided to such Investor.



     10.15 Aggregation of Rights All Preferred shares and Common Shares held or
acquired by any Investor and its Affiliate shall be aggregated for purposes of determining the
availability of any rights under this Agreement.



     10.16 Effective Date. This Agreement shall become automatically effective
immediately following the Closing, from and as of the date of the Closing.



[Signature Page Follows]




27









 






          IN WITNESS WHEREOF, the parties hereto have executed this Second Amended and Restated
Investors Rights Agreement as of the day and year herein above first written




	 	 	 	 	 

	THE COMPANY:	 	 
	 
	 	 	 	 
	HiSoft Technology International Limited	 	 
	 
	 	 	 	 
	By

Print Name:

	 	/s/ Loh Tiak Koon
 

Loh Tiak Koon
	 	 
	Title:

	 	CEO & Director	 	 






SIGNATURE PAGE FOR

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT





 











 






INVESTORS:




	 	 	 	 	 	 	 	 	 	 	 

	JAFCO Asia Technology Fund II	 	 	 	Granite Global Ventures (Q.P.) L.P.	 	 
	(as a Series A and Series B investor)	 	 	 	(as a Series A, Series B and Series C Investor)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Vincent Chan Chun Hung
 

	 	 
	 	By
	 	/s/ Thomas Ng
 

	 	 
	Print Name: Vincent Chan Chun Hung	 	 	 	Print Name: Thomas Ng	 	 
	Title: Attorney	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Intel Capital (Cayman) Corporation	 	 	 	Granite Global Ventures L.P.	 	 
	(as a Series A and Series B Investor)	 	 	 	(as a Series A, Series B and Series C Investor)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Michael J Scown
 

	 	 
	 	By
	 	/s/ Thomas Ng
 

	 	 
	Print Name: Michael J Scown	 	 	 	Print Name: Thomas Ng	 	 
	Title: Authorised Signatory	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Granite Global Ventures II L.P.	 	 	 	GGV II Entrepreneurs Fund L.P.	 	 
	(as a Series B and Series C Investor)	 	 	 	(as a Series B and Series C Investor)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Thomas Ng
 

	 	 
	 	By
	 	/s/ Thomas Ng
 

	 	 
	Print Name: Thomas Ng	 	 	 	Print Name: Thomas Ng	 	 
	Title:	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	International Finance Corporation	 	 	 	Sumitomo Corporation Equity Asia Limited	 	 
	(as a Series A, Series B and Series
C Investor)	 	 	 	(as a Series B and Series C Investor)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Kent E. Lupberger
 

Print Name: Kent E. Lupberger
	 	 
	 	By
	 	/s/ Tsuyoshi KONDA
 

Print Name: Tsuyoshi KONDA
	 	 
	 

	 	Title: Senior Manager
	 	 	 	 	 	Title: Managing Director	 	 






SIGNATURE PAGE FOR

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT














 






	 	 	 	 	 	 	 	 	 	 	 

	The Greater China Trust, managed by
Mitsubishi UFJ
Securities (HK) Capital, Ltd.

(as a Series B Investor only)

By. Butterfield Bank (Cayman) Limited,
solely as
trustee of The Greater China Trust	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	
 

	 	 	 	 	 	 	 	 
	Print Name:	 	 	 	 	 	 	 	 
	Title:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Draper Fisher Jurvetson ePlanet
Ventures L.P.	 	 	 	Draper Fisher Jurvetson ePlanet
Ventures GmbH & Co. KG	 	 
	(as a Series B and Series C Investor)	 	 	 	(as a Series B and Series C investor)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ John Fisher
 

	 	 
	 	By
	 	/s/ John Fisher
 

	 	 
	Print Name: John Fisher	 	 	 	Print Name: John Fisher	 	 
	Title: Managing Director	 	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Draper Fisher Jurvetson ePlanet 

Partners Fund, LLC	 	 	 	GE Capital Equity Investments Ltd.	 	 
	(as a Series B and Series C Investor)	 	 	 	(as a Series C investor only)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ John Fisher
 

	 	 
	 	By
	 	/s/ Mark Chen
 

	 	 
	Print Name: John Fisher	 	 	 	Print Name: Mark Chen	 	 
	Title: Managing Director	 	 	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Laonlu Investment Limited Co.	 	 	 	Komhill Consulting Ltd.	 	 
	(as a Series C Investor only)	 	 	 	(as a Series C Investor only)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Brendan Li Sign Executed on Aug 17, 2007
 

	 	 
	 	By
	 	/s/ Chan Leung Ngai
 

	 	 
	Print Name: Brendan Li	 	 	 	Print Name: CHAN LEUNG NGAI	 	 
	Title: Managing Director	 	 	 	Title: Director	 	 






SIGNATURE PAGE FOR

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT














 





RESTRICTED PARTIES:




	 	 	 	 	 	 	 	 	 	 	 

	Kaiki Inc.	 	 	 	Tian Hai International Limited	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	 
 

	 	 
	 	By
	 	/s/ Sun Kong Ji
 

	 	 
	Print Name:	 	 	 	Print Name: SUN KONG JI	 	 
	Title:	 	 	 	Title: Director	 	 
	 	 	 	 	 	 	2007-7-27	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	HSI Holdings LLC	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	
	 	 	 	 	 	 	 	 
	Print Name: 	 	 	 	 	 	 	 	 
	Title:	 	 	 	 	 	 	 	 






SIGNATURE PAGE FOR

HISOFT TECHNOLOGY INTERNATIONAL LIMITED

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT




30









 





Schedule 1




Schedule of Restricted Parties



	 	 	 
	Name of Founder	 	Address for Notices
	Kaiki lnc.

	 	C/O: HiSoft Technology (Dalian) Co. Ltd.
	 

	 	No. 35, Qixianling Industrial Base Hi-tech Zone
	 

	 	Dalian, Liaoning Province
	 

	 	P.R.C.
	 

	 	Attn: Linda Kou
	 
	 	 
	 

	 	Fax Number: 86-411-84791350
	 

	 	Tel Number: 86-411-84791666-8252
	 
	 	 
	Tian Hai International Limited

	 	C/O HiSoft Services (Beijing) Ltd.
	 

	 	1/F Dascom Building, No. 9 Sang Di East Road
	 

	 	Beijing 100085
	 

	 	P.R.C.
	 

	 	Attn:
	 
	 	 
	 

	 	Tel Number: 86-10-82782892
	 

	 	Fax Number: 86-10-82783467
	 
	 	 
	HSI Holdings LLC

	 	18300 Von Karman Ave. Ste 620
	 

	 	Irvine CA 92612
	 

	 	U.S.A.
	 

	 	Attn: George Wu
	 
	 	 
	 

	 	Tel Number: 001-949-250-7310
	 

	 	Fax Number: 001-949-250-7314






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Schedule 2




List of Investors and Addresses for Notices



	 	 	 
	Name of Investor	 	Address for Notices
	JAFCO Asia Technology Fund II

	 	c/o JAFCO Investment (Asia Pacific) Ltd.
	 

	 	6 Battery Road
	 

	 	#42-01 Singapore 049909
	 

	 	Fax Number: +65 6221-3690
	 

	 	Attn: The President
	 
	 	 
	 

	 	With a copy to:
	 

	 	JAFCO Investment (Hong Kong) Ltd.
	 

	 	30/F, Two International Finance Centre
	 

	 	8 Finance Street
	 

	 	Central Hong Kong
	 

	 	Fax Number: +852 2536-1979
	 

	 	Attn: General Manager
	 
	 	 
	Granite Global Ventures (Q P.) L.P., Granite Global Ventures
L.P., Granite Global Ventures II L.P., GGV II Entrepreneurs
Fund L P

	 	2494 Sand Hill Road, Suite 100

Menlo Park CA 94025

Attn: Stephen Hyndman

Fax Number: +1-650-475-2151
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Unit 3503, K. Web Center
	 

	 	1010 Huaihai Zhong Road
	 

	 	Shanghai 200031 PRC
	 

	 	Attn: Jenny Lee
	 

	 	Fax Number: +86-21-5404-7667
	 
	 	 
	Intel Capital (Cayman) Corporation (formerly known as Intel
Capital Corporation)

	 	Intel Capital (Cayman) Corporation

c/o Intel Semiconductor Ltd
	 

	 	32/F, Two Pacific Place
	 

	 	88 Queensway, Central, Hong Kong
	 

	 	Attn: APAC Portfolio Manager
	 

	 	Fax: +852 2240-3255
	 
	 	 
	 

	 	With an e-mail copy in pdf format to
	 

	 	apacportfolio@intel.com
	 
	 	 
	 

	 	With a further copy to:
	 
	 	 
	 

	 	2200 Mission College Blvd
	 

	 	Santa Clara, CA 95052
	 

	 	Attn: Intel Capital Portfolio Manager
	 

	 	Fax: 1-408-765-6038
	 

	 	Email: portfolio.manager@intel.com
	 
	 	 
	International Finance Corporation

	 	International Finance Corporation
	 

	 	2121 Pennsylvania Avenue, N.W.
	 

	 	Washington, D C 20433
	 

	 	U.S.A.
	 

	 	Fax Number:+1-202-522-7464
	 

	 	Attention: Director Global Information and
Communication Technologies Department
	 
	 	 
	The Greater China Trust, a trust duly organized and existing
under the laws of the Cayman Islands, managed by Mitsubishi
UFJ Securities (HK) Capital, Ltd.

	 	Butterfield Bank (Cayman) Limited

c/o RBC Dexia Trust Services Hong Kong Limited

51st Floor Central Plaza






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	Name of Investor	 	Address for Notices
	 

	 	18 Harbour Road, Wanchai, Hong Kong S.A.R
	 

	 	Fax Number: +852-2522-3785
	 

	 	Attn: Ms Anny Wong
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Mitsubishi UFJ Securities (HK) Capital, Limited
	 

	 	11/F, AIG Tower, 1 Connaught Road Central
	 

	 	Hong Kong S.A.R.
	 

	 	Fax Number: +852-2865-6214
	 

	 	Attn: Mr. Jun Otsuka
	 

	 	Email: otsuka@hk.sc.mufg.jp
	 
	 	 
	Sumitomo Corporation Equity Asia Limited

	 	Suite 602, 6th Floor
	 

	 	One International Finance Centre
	 

	 	One Harbour View Street
	 

	 	Central, Hong Kong
	 

	 	Fax Number: +852-2295-0600
	 
	 	 
	

Draper Fisher Jurvetson ePlanet
Ventures L.P., Draper Fisher Jurvetson
ePlanet Ventures GmbH & Co. KG, Draper
Fisher Jurvetson ePlanet Partners Fund
L.L.C

	 	2113, Tower 1, China World Trade Center

No 1 Jianguomenwal Avenue

Beijing 100004 PRC

Attn: Alvin Sun

Fax Number: +8610-6505-9395
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Draper Fisher Jurvetson
	 

	 	2882 Sand Hill Road
	 

	 	Suite 150
	 

	 	Menlo Park, CA 94025
	 

	 	Fax Number: 650-233-9233
	 

	 	Attn: Mr. Mark Greenstein
	 
	 	 
	GE Capital Equity Investments Ltd

	 	201 Merritt 7
	 

	 	Norwalk CT 06856
	 

	 	U.S.A.
	 

	 	Attn: General Counsel
	 

	 	With a copy to:
	 
	 	 
	 

	 	33/F, One Exchange Square
	 

	 	Central, Hong Kong
	 

	 	Attn: General Counsel
	 
	 	 
	Laoniu Investment Limited Co

	 	Chong’er Investment and Consultancy Co Ltd.
	 

	 	23/F, Tower 3, Xihuan Plaza
	 

	 	No 1, Xizhimenwal Street,
	 

	 	Xicheng District Beijing, 100044
	 

	 	P.R.C.
	 

	 	Attn: Brendan LI
	 
	 	 
	Kornhill Consulting LTD

	 	c/o HiSoft Technology International Limited
	 

	 	Suite 702, Block B,
	 

	 	Horizon International Tower
	 

	 	No. 6 Zhichun Road Haldian District
	 

	 	Beijing, P.R.C.
	 

	 	Fax Number: +86-10-8280-0505
	 

	 	Attn: Eddie Chan







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