Document:

Exhibit 10.23

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (this “Agreement”) is made as of May 27, 2016 by and among:

 

(1)                                 China Online Education Group, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”); and

 

(2)                                 SCC Growth I Holdco A, Ltd., an exempted company duly formed and validly existing under the laws of the Cayman Islands (the “Purchaser”). The Purchaser on the one hand, and the Company on the other hand, are sometimes herein referred to each as a “Party,” and collectively as the “Parties.”

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, the Company has filed a registration statement on Form F-1 on May 12, 2016 (as may be amended from time to time, the “Registration Statement”) with the United States Securities and Exchange Commission (the “SEC”) in connection with the initial public offering (the “Offering”) by the Company of American depositary shares (“ADS”) representing Class A ordinary shares (“Ordinary Shares”) of the Company as specified in the Registration Statement; and

 

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

 

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

 

ARTICLE I

 

PURCHASE AND SALE

 

Section 1.1                                   Issuance, Sale and Purchase of Ordinary Shares. Upon the terms and subject to the conditions of this Agreement, the Purchaser hereby agrees to purchase, and the Company hereby agrees to issue, sell and deliver to the Purchaser, at the Closing (as defined below), the number of Ordinary Shares determined pursuant to Section 1.2 (the “Purchased Shares”) at a price per Ordinary Share equal to the Offer Price (as defined below), free and clear of all liens or encumbrances (except for restrictions arising under the Securities Act or created by virtue of this Agreement or the Lock-up Letter (as defined below)). The “Offer Price” means the price per ADS set forth on the cover of the Company’s final prospectus in connection with the Offering (the “Final Prospectus”) divided by the number of Ordinary Shares represented by one ADS. The purchase, issuance, sale and delivery of the Purchased Shares shall be made pursuant to and in reliance upon Regulation S.

 

 

Section 1.2                                   Closing.

 

(a)                                 Closing. Subject to Section 1.3, the closing (the “Closing”) of the sale and purchase of the Purchase Shares pursuant to Section 1.1 shall take place concurrently with the closing of the Offering at the same offices for the closing of the Offering or at such other place as the Company and the Purchaser may mutually agree. The total number of the Ordinary Shares that the Purchaser shall purchase as Purchased Shares at the Closing shall be equal to the quotient of US$5,000,000 (as adjusted pursuant to clause (iii) below, the “Purchase Price”) divided by the Offer Price; provided, however, that (i) no fractional shares of Ordinary Shares will be issued as Purchased Shares, (ii) any fractions shall be rounded down to the nearest whole number of Ordinary Shares, and (iii) the Purchase Price will be reduced by the value of any such fractional share (as calculated on the basis of the Offer Price). The date and time of the Closing is referred to herein as the “Closing Date.”

 

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

 

(c)                                  Restrictive Legend. Each certificate representing Purchased Shares shall be endorsed with the following legend:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE “ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS SECURITY MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (2) AN EXEMPTION OR QUALIFICATION UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS OR (3) DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED; AND (B) WITHIN THE UNITED STATES OR TO ANY U.S. PERSON, AS EACH OF THOSE TERMS IS DEFINED IN REGULATION S UNDER THE ACT, DURING THE 40 DAYS FOLLOWING CLOSING OF THE PURCHASE. ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS SHALL BE VOID.

 

Section 1.3                                   Closing Conditions.

 

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

 

(i)                                     All corporate and other actions required to be taken by the Company in connection with the issuance, sale and delivery of the Purchased Shares

 

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(including registration of such issuance of the Purchased Shares in the register of the members of the Company) shall have been completed.

 

(ii)                                  The representations and warranties of the Company to the Purchaser contained in Section 2.1 of this Agreement shall have been true and correct in all material respects on the date of this Agreement and on and as of the Closing Date; and the Company shall have performed and complied in all material respects with all, and not be in breach or default in any material respects under any, agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or before the Closing Date.

 

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

 

(iv)                              The Offering shall have been, or shall concurrently with the Closing be, completed.

 

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

 

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

 

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

 

(i)                                     The Lock-up Letter shall have been executed and delivered by the Purchaser to the representatives of the underwriters for the Offering.

 

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

 

(iii)                               The representations and warranties of the Purchaser contained in Section 2.2 of this Agreement shall have been true and correct in all material respects on the date of this Agreement and on and as of the Closing Date; and the Purchaser shall

 

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have performed and complied in all material respects with all, and not be in breach or default in any material respect under any, agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or before the Closing Date.

 

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

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

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

 

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

 

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(d)                                 Capitalization.

 

(i)                                     The authorized share capital of the Company and the number of issued and outstanding shares of capital stock of the Company (including ordinary shares and each series of convertible redeemable participating preferred shares (the “Preferred Shares”)), as of the date hereof, are as set forth in Schedule I of this Agreement. Except as described in the Registration Statement, the Company shall not effect any split, combination, or other restructuring with respect to the ordinary shares of the Company after the date hereof and at or prior to the Closing. All issued and outstanding ordinary shares of the Company and all issued and outstanding Preferred Shares are validly issued, fully paid and non-assessable.

 

(ii)                                  All outstanding shares of capital stock of the Company and all outstanding shares of capital stock of each of the Company’s subsidiaries and consolidated affiliates (each a “Subsidiary” and collectively “Subsidiaries”) have been issued and granted in compliance with (x) all applicable Securities Laws and other applicable laws and (y) all requirements set forth in applicable plans or contracts, without violation of any preemptive rights, rights of first refusal or other similar rights. “Securities Laws” means the Securities Act, the Securities Exchange Act of 1934, as amended, the listing rules of, or any listing agreement with the New York Stock Exchange and any other applicable law regulating securities or takeover matters.

 

(iii)                               The rights of the Ordinary Shares to be issued to the Purchaser as Purchased Shares are as stated in the Amended and Restated Memorandum and Articles of Association of the Company as set out in Exhibit 3.2 of the Registration Statement.

 

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

 

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

 

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

 

(h)                                 Compliance with Laws. The business of the Company or its Subsidiaries is not being conducted in violation of any law or government order applicable to the Company except for violations which do not and would not have a Material Adverse Effect. As used herein, “Material Adverse Effect” shall mean any event, fact, circumstance or occurrence that, individually or in the aggregate with any other events, facts, circumstances or occurrences, results in or would reasonably be expected to result in a material adverse change in or a material adverse effect on any of (i) the financial condition, assets, liabilities, results of operations, business, or operations of the Company or its Subsidiaries taken as a whole, except to the extent that any such Material Adverse Effect results from (x) changes in generally accepted accounting principles that are generally applicable to comparable companies or (y) changes in general economic and market conditions; or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement and to timely perform its obligations under the Agreement.

 

(i)                                     SEC Filings. Prior to the Closing, the Registration Statement, as supplemented or amended, shall have been declared effective by the SEC. The Registration Statement, including the prospectus therein, conforms and will conform, in all material respects to the requirements of the Securities Act and the rules and regulations of the SEC thereunder and does not, as of the date hereof, and will not, as of the applicable effective date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Except for pricing information for the Offering, the Registration Statement, in the form in which it is declared effective by the SEC, will not contain any information that describes a fact, event, occurrence or result that is materially adverse to the Company and that is not described in the drafts of the Registration Statement filed with the SEC on or prior to the date hereof.

 

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

 

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

 

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(l)                                     Events Subsequent to Most Recent Fiscal Period. Since March 31, 2016 until the date hereof and to the Closing Date, there has not been any event, fact, circumstance or occurrence that has had or would reasonably be expected to have a Material Adverse Effect..

 

(m)                             Litigation. There are no actions by or against the Company or its Subsidiaries or affecting the business or any of the assets of the Company or its Subsidiaries pending before any governmental authority, or, to the Company’s knowledge, threatened to be brought by or before any governmental authority, that has had or would reasonably be expected to have a Material Adverse Effect.

 

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

 

(a)                                 Due Formation. The Purchaser is duly formed, validly existing and in good standing in the jurisdiction of its organization. The Purchaser has all requisite power and authority to carry on its business as it is currently being conducted.

 

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

 

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

 

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

 

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

 

(f)                                   Status and Investment Intent.

 

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

 

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

 

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

 

(iv)                              Information. The Purchaser has been furnished access to all materials and information the Purchaser has requested relating to the Company and its Subsidiaries and other due diligence documents in order to evaluate the transactions contemplated by this Agreement. The Purchaser has consulted to the extent deemed appropriate by the Purchaser with the Purchaser’s own advisers as to the financial, tax, legal and related matters concerning an investment in the Purchased Shares.

 

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

 

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

 

ARTICLE III

 

COVENANTS

 

Section 3.1                                   Lock-up. The Purchaser shall, concurrently with the execution of this Agreement, enter into a lock-up letter (the “Lock-up Letter”) in the form attached hereto as Exhibit A.

 

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Section 3.2                                   Distribution Compliance Period. The Purchaser agrees not to resell, pledge or transfer any Purchased Shares within the United States or to any U.S. Person, as each of those terms is defined in Regulation S, during the 40 days following the Closing Date.

 

Section 3.3                                   Further Assurances. From the date of this Agreement until the Closing Date, the Company and the Purchaser shall use their reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to the consummation of the transactions contemplated hereby.

 

ARTICLE IV

 

INDEMNIFICATION

 

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

 

Section 4.2                                   Third Party Claims.

 

(a)                                 If any third party shall notify any Indemnified Party in writing with respect to any matter involving a claim by such third party (a “Third Party Claim”) which such Indemnified Party believes would give rise to a claim for indemnification against the Indemnifying Party under this Article IV, then the Indemnified Party shall promptly (i) notify the Indemnifying Party thereof in writing within thirty (30) days of receipt of notice of such claim and (ii) transmit to the Indemnifying Party a written notice (“Claim Notice”) describing in reasonable detail the nature of the Third Party Claim, a copy of all papers served with respect to such claim (if any), and the basis of the Indemnified Party’s request for indemnification under this Agreement.

 

(b)                                 Upon receipt of a Claim Notice with respect to a Third Party Claim, the Indemnifying Party shall have the right to assume the defense of any Third Party Claim by, within (30) days of receipt of the Claim Notice, notifying the Indemnified Party in writing that the Indemnifying Party elects to assume the defense of such Third Party Claim, and upon delivery of such notice by the Indemnifying Party, the Indemnifying Party shall have the right to fully control and settle the proceeding, provided, that, any such settlement or compromise shall be permitted hereunder only with the written consent of the Indemnified Party.

 

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(c)                                  If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to contest, including the making of any related counterclaim against the person asserting the Third Party Claim or any cross complaint against any person. The Indemnified Party shall have the right to receive copies of all pleadings, notices and communications with respect to any Third Party Claim, other than any privileged communications between the Indemnifying Party and its counsel, and shall be entitled, at its sole cost and expense, to retain separate co-counsel and participate in, but not control, any defense or settlement of any Third Party Claim assumed by the Indemnifying Party pursuant to Section 4.2(b).

 

(d)                                 In the event of a Third Party Claim for which the Indemnifying Party elects not to assume the defense or fails to make such an election within the 30 days of the Claim Notice, the Indemnified Party may, at its option, defend, settle, compromise or pay such action or claim at the expense of the Indemnifying Party; provided, that, any such settlement or compromise shall be permitted hereunder only with the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

 

Section 4.3                                   Other Claims. In the event any Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a Third Party Claim, the Indemnified Party shall promptly transmit to the Indemnifying Party a written notice (the “Indemnity Notice”) describing in reasonable detail the nature of the claim, the Indemnified Party’s best estimate of the amount of Losses attributable to such claim and the basis of the Indemnified Party’s request for indemnification under this Agreement. If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days from its receipt of the Indemnity Notice that the Indemnifying Party disputes such claim, the Indemnifying Party shall be deemed to have accepted and agreed with such claim.

 

Section 4.4                                                                                   Cap. Notwithstanding the foregoing, the Indemnifying Party shall have no liability (for indemnification or otherwise) with respect to any Losses in excess of the applicable Purchase Price.

 

ARTICLE V

 

MISCELLANEOUS

 

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

 

Section 5.2                                   Governing Law; Arbitration. This Agreement shall be governed and interpreted in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof. Any dispute arising out of or relating to this Agreement,

 

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including any question regarding its existence, validity or termination (“Dispute”) shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules then in force. There shall be three arbitrators. Each Party has the right to appoint one arbitrator and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre. The language to be used in the arbitration proceedings shall be English. Each of the Parties irrevocably waives any immunity to jurisdiction to which it may be entitled or become entitled (including without limitation sovereign immunity, immunity to pre-award attachment, post-award attachment or otherwise) in any arbitration proceedings and/or enforcement proceedings against it arising out of or based on this Agreement or the transactions contemplated hereby.

 

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

 

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

 

Section 5.5                                   Assignment. Neither this Agreement nor any of the rights, duties or obligations hereunder may be assigned by the Company or the Purchaser without the express written consent of the other Party, except that the Purchaser may assign all or any part of its rights and obligations hereunder to any affiliate of the Purchaser without the consent of the Company, provided that no such assignment shall relieve the Purchaser of its obligations hereunder if such assignee does not perform such obligations. Any purported assignment in violation of the foregoing sentence shall be null and void.

 

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

 

	
If to the Company, at:
    	
 
    	
China Online Education Group
    
	
 
    	
 
    	
6th Floor Deshi   Building North
    
	
 
    	
 
    	
Shangdi Street, Haidian District
    
	
 
    	
 
    	
Beijing 100085
    
	
 
    	
 
    	
People’s Republic of China
    
	
 
    	
 
    	
Tel: +86 10 5692-8909
    
	
 
    	
 
    	
Attn: Jimmy Lai
    
	
 
    	
 
    	
 
    
	
with a copy to (which shall not constitute notice)
    	
 
    	
Julie Z. Gao, Esq.
    
	
 
    	
 
    	
Will H. Cai, Esq.
    
	
 
    	
 
    	
42/F, Edinburgh Tower, The Landmark
    

 

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15 Queen’s Road Central
    
	
 
    	
 
    	
Hong Kong
    
	
 
    	
 
    	
Fax: +852 3910-4863/+852 3910-4891
    
	
 
    	
 
    	
 
    
	
If to the Purchaser, at:
    	
 
    	
SCC Growth I Holdco A, Ltd
    
	
 
    	
 
    	
Suite 3613,36/F, Two Pacific Place,
   88 Queensway, Hong Kong

Attn: Xing Liu
   Fax:+852 2501 5249
   E-mail: liu@sequoiacap.com
    

 

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

 

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

 

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

 

Section 5.9                                   Fees and Expenses. Except as otherwise provided in this Agreement, the Company and the Purchaser will bear their respective expenses incurred in connection with the negotiation, preparation and execution of this Agreement and the transactions contemplated hereby, including fees and expenses of attorneys, accountants, consultants and financial advisors.

 

Section 5.10                            Confidentiality. Each Party hereto shall keep in confidence, and shall not use (except for the purposes of the transactions contemplated hereby) or disclose, any non-public information disclosed to it or its affiliates, representatives or agents in connection with this Agreement or the transactions contemplated hereby, except for disclosure required by applicable law or regulation. Each Party hereto shall ensure that its affiliates, representatives and agents keep in confidence, and do not use (except for the purposes of the transactions contemplated hereby) or disclose, any such non-public information, except for disclosure required by applicable law or regulation.

 

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

 

12

 

Section 5.12                            Termination. In the event that the Closings shall not have occurred by September 30, 2016, this Agreement shall be terminated with no further force or effect, except for the provisions of Section 5.10, which shall survive any termination under this Section 5.12.

 

Section 5.13                            Description of the Purchaser.

 

(a)                                 The Company shall afford the Purchaser a reasonable opportunity in which to review and comment on any description of the Purchaser and/or the transactions contemplated by this Agreement with respect to the Purchaser that is to be included in the Registration Statement filed after the date hereof, and the Company shall take into account such comments from the Purchaser.

 

(b)                                 The Purchaser hereby consents and undertakes to promptly provide a description of its organization and business activities to the Company (the “Purchaser Description”) to be used solely in the Registration Statement and the prospectus therein, and hereby represents that the Purchaser Description will be true and accurate in all material respects and will not be misleading in any material respect. Additionally, the Purchaser hereby consents to the filing of this Agreement as an exhibit to the Registration Statement. Other than Purchaser Descriptions, the Company shall not include in the Registration Statement or the prospectus therein any information regarding the Purchaser without the Purchaser’s prior written consent.

 

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

 

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

 

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

 

[signature pages follow]

 

13

 

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

 

	
 
    	
CHINA ONLINE EDUCATION GROUP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jack Jiajia Huang
    
	
 
    	
Name:
    	
Jack Jiajia Huang
    
	
 
    	
Title:
    	
Chairman and Chief Executive Officer
    
				

 

[Signature Page to the Subscription Agreement]

 

 

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

 

	
 
    	
SCC   Growth I Holdco A, Ltd.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kok Wai Yee
    
	
 
    	
Name:
    	
Kok Wai Yee
    
	
 
    	
Title:
    	
Authorized Signatory
    
				

 

[Signature Page to the Subscription Agreement]

 

 

Schedule I

 

Total Issued and Outstanding as of May 27, 2016

 

	
Series A Preferred Shares
    	
 
    	
30,000,000
    
	
 
    	
 
    	
 
    
	
Series B Preferred Shares
    	
 
    	
48,233,710
    
	
 
    	
 
    	
 
    
	
Series C Preferred Shares
    	
 
    	
71,200,613
    
	
 
    	
 
    	
 
    
	
Series D Preferred Shares
    	
 
    	
21,494,316
    
	
 
    	
 
    	
 
    
	
Ordinary Shares
    	
 
    	
72,267,532
    

 

Authorized Share Capital as of May 27, 2016

 

	
Ordinary Shares
    	
 
    	
329,071,361
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Preferred Shares
    	
 
    	
170,928,639
    	
 
    	
consisting of:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Series A: 30,000,000
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Series B: 48,233,710
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Series C: 71,200,613
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Series D: 21,494,316
    

 

Incentive Shares

 

In May 2016, the Company adopted the 2016 share incentive plan (the “2016 Plan”), pursuant to which a maximum aggregate of 3,647,943 Class A ordinary shares may be issued pursuant to all awards granted thereunder. Beginning in 2017, the number of shares reserved for future issuances under the 2016 Plan will be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately preceding calendar year, or such lesser number of Class A ordinary shares as determined by the board of directors of the Company, during the term of the 2016 Plan.

 

 

As of the date hereof, options to purchase a total of 29,035,000 ordinary shares were issued and outstanding under the share incentive plan adopted in 2013 (the “2013 Plan”) and the share incentive plan adopted in 2014 (the “2014 Plan”). Upon the completion of the Offering, an option to purchase ordinary shares of the Company granted under the 2013 Plan or the 2014 Plan prior to the Offering will entitle the holder to purchase an equivalent number of Ordinary Shares. The Company has not granted any awards under the 2016 Plan as of the date hereof.

 

 

Exhibit A

 

Form of Lock-up LetterExhibit 10.37

 

Amendment # 2 to Master Professional Services Agreement

 

	
Country   Specific Addendum:
    	
 
    	
Australia &   New Zealand
    
	
Effective   Date:
    	
 
    	
01-March-2016
    

 

	
Party:
    	
SERVICE PROVIDER
    	
CITI
    
	
Name:
    	
Polaris Consulting & Services Limited
    	
Citigroup Technology, Inc.
    
	
Address:
    	
“Polaris House”, 244 Anna Salai, 
    	
111 Wall Street, 7th Floor
    
	
 
    	
Chennai – 600006, Tamilnadu, India
    	
New York, NY 10005
    
	
Incorporation:
    	
India
    	
Delaware
    

 

THIS AMENDMENT #2 is entered into by and between the Service Provider and Client Designated above (“The Parties”), for the purpose of amending the provisions of the Master Professional Services Agreement entered into as of July 1st, 2015 by and between Polaris Consulting & Services Ltd and Citigroup Technology, Inc. (“The Agreement”). The Parties further acknowledge and agree that the provisions of the Agreement, as such documents have been or may hereafter be amended by the Parties, are hereby incorporated by reference and shall apply to this Asia pacific Addendum as though set forth herein in their entirety.

 

IN CONDIDERATION of the mutual covenants and undertakings contained in the agreement and in this Amendment, and intending to be legally bound, Service Provider and Citi agree as follows:

 

1.              AMENDMENT

 

1.1       The Parties agree that the country addenda for Australia which was added to Appendix 3.3.1, Schedule A of the Agreement shall be deleted and replaced in their entirely by the revised country addenda for Australia in the attached Exhibit 1 of this Amendment.

 

1.2       The Parties agree that the country addenda for New Zealand which was added to Appendix 3.3.1, Schedule A of the Agreement shall be deleted and replaced in their entirely by the revised country addenda for New Zealand in the attached Exhibit 2 of this Amendment.

 

1.3       The Parties further agree that the revised country addenda may be further revised from time to time by Citi on notice to the Service Provider as Citi deems necessary to comply with any changes or addition to applicable local country laws and/or regulations.

 

2.              EFFECT

 

2.1       The Parties agree that this Amendment shall apply with effect from the Effective Date of this Amendment.

 

3.              NO OTHER CHANGES

 

3.1       Other than the amendment expressly set forth herein, all other provisions of the Agreement shall remain unmodified and shall continue to be valid and fully binding and enforceable as they exist as of the date hereof.

 

 

This Amendment and the Agreement constitute the entire agreement between the Parties in connection with the subject matter of this Amendment and supersede all prior and contemporaneous agreement, understandings, negotiations and discussions, whether oral or written, of the Parties related to the subject-matter hereof. Except as expressly modified pursuant to this Amendment, all terms and conditions of the Agreement shall remain in full force and effect. In the event of a conflict or inconsistency between the provisions of the Agreement and the provisions of this Amendment, the provisions of this Amendment shall control.

 

IN WITHNESS WHEREOF, the Parties hereto, through their duly authorized officers, have executed this Amendment as of the Effective Date designated above.

 

	
Service   Provider:
    	
 
    	
Citi:
    
	
 
    	
 
    	
 
    
	
Polaris   Consulting & Services Limited
    	
 
    	
Citigroup   Technology, Inc.
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Sanjeev Gulat
    	
 
    	
By:
    	
/s/ John G. Taylor
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Sanjeev Gulat
    	
 
    	
Name:
    	
John G. Taylor
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
EVP
    	
 
    	
Title:
    	
Director Citi   Procurement Services 212-657-1161
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
4/4/2016
    	
 
    	
Date:
    	
5/10/2016
    

 

	
Service   Provider:
    	
 
    
	
 
    	
 
    
	
Virtusa   Corporation
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ Paul D. Tutun
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
Paul D. Tutun
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
EVP: General Counsel
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
3/30/16
    	
 
    

 

 

EXHIBIT 1 - SCHEDULE A — AUSTRALIA LAW REOUIREMENTS

(Version 3 — revalidated 23 January 2015)

 

A. CONTINGENCY PLAN/CONTINUITY OF BUSINESS

 

The Supplier must maintain a Business Continuity Plan. The Business Continuity Plan must enable the Supplier to provide the Services and comply with the terms of the Agreement, notwithstanding an event that disrupts, impairs or prevents the Supplier from otherwise providing the Services or complying with its obligations thereunder.

 

The Business Continuity Plan must include procedures to ensure that the Supplier is able to provide the Services and otherwise comply with its obligations under the Agreement, notwithstanding that an agent, consultant or contractor of the Supplier is incapable of providing the Services to the Supplier. The Business Continuity Plan must be: (a) based upon a formal assessment of the applicable risks; (b) reviewed and updated on a regular basis and at least annually, (c) tested at least annually; and (d) subject to quality assurance review at least annually.

 

B. APRA

 

Where Citi is supervised by the Australian Prudential Regulation Authority (“APRA”), APRA may require information from Citi or the Supplier about the Services, the Supplier or the Agreement.

 

Subject to applicable law or authority in the country in which it is based, the Supplier will give APRA any information relating to the Agreement as soon as possible after Citi or APRA asks the Supplier to do so. Unless prohibited by relevant law or legal authority, the Supplier will promptly inform Citi as soon as practicable after APRA asks the Supplier to provide information under this Section.

 

The Supplier will permit APRA to conduct any on-site visit of the Supplier’s premises that is necessary to APRA’s role as prudential supervisor of Citi. If APRA notifies Citi of its intention to conduct an on-site visit of the Supplier’s premises, Citi will promptly notify the Supplier. Where APRA conducts an on-site visit of the Supplier’s premises, the Supplier must not disclose or advertise that APRA has conducted such a visit without the prior written consent of Citi.

 

The Supplier will use its best endeavours to satisfy APRA about any questions or concerns it may raise about the Services.

 

The Supplier agrees that the existence of, and any information relating to, any investigation, question or concern raised by APRA about the services provided by the Supplier to Citi or in relation to Citi, is Confidential Information.

 

C. DO NOT CALL REGISTER ACT AND TELECOMMUNICATIONS ACT OBLIGATIONS

 

Where telemarketing call services make up any part of the Services provided by the Supplier to Citi under the Agreement, the Supplier must comply with the: (i) Do Not Call Register Act 2006 (Cth); and Part 6 of the Telecommunications Act 1997 (Cth), and take all reasonable steps to ensure that its employees, agents and subcontractors comply with these Acts.

 

Where fax marketing services make up any part of the Services provided by you to Citigroup under the Agreement, you must comply with Part 6 of the Telecommunications Act 1997 (Cth), and take all reasonable steps to ensure that your Personnel comply with that Act.

 

D. PRIVACY

 

The parties acknowledge and agree that:

 

(a)         Citi is subject to the Privacy Act 1988 (Cth) including the Australian Privacy Principles (“APPs”);

 

(b)         the APPs require that Citi shall ensure that any recipient of Personal Information (defined below) handles such Personal Information in accordance with the APPs;

 

 

(c)          the Supplier must:-

 

a.              only collect, use and disclose Personal Information strictly for the purpose for which that Personal Information was disclosed to it;

b.              unless otherwise instructed by Citi, only store Personal Information for the period necessary to fulfil that purpose and must destroy that information when it is no longer required and upon request from Citi;

c.               comply with any of Citi’s reasonable requests or directions in respect to the Personal Information;

d.              protect Personal Information it holds from misuse, interference and loss, as well as maintain/implement systems and processes to ensure the security of personal information;

e.               reasonably assist Citi to resolve any request for access, correction or a complaint in relation to Personal Information;

f.                provide individuals with the right to access and seek correction of Personal Information;

g.               promptly notify Citi if it is aware of any misuse, interference and loss, unauthorised access, modification or disclosure by itself or its personnel;

h.              only disclose Personal Information to others in compliance with these requirements after obtaining Citi’s consent and in accordance with any conditions Citi reasonably deems fit to impose;

i.                  allow Citi or any applicable regulatory body to audit the Supplier’s compliance of these requirements and any records the Supplier holds containing the Personal Information, subject to the Supplier’s obligations of confidentiality to other parties and any other law or authority with jurisdiction over Supplier; and

j.                 comply with any additional reasonable requirements notified to it by Citi from time to time in respect of Personal Information.

 

(d)         For the avoidance of doubt, Personal Information is a form of “Confidential Information” as defined in the Agreement;

 

(e)          For the purposes of this section D, “Personal Information” means information or an opinion about an identified individual, or an individual who is reasonably identifiable:

 

(a)         whether the information or opinion is true or not; and

 

(b)         whether the information or opinion is recorded in a material form or not.

 

E. TAXES

 

Other than as specified below, the Supplier will be responsible for all taxes of any kind in connection with the provision of Services under the Agreement. For the purposes of this clause, “Consideration”, “Creditable Acquisition”, “GST”, “Input Tax Credit”. “Recipient’, “Supply”, “Tax Invoice” and “Taxable Supply” have the same meaning as in the GST Act.

 

1.                                      This clause applies if one party (the supplier) makes a Taxable Supply to another party (the Recipient) and the Consideration for that Supply (apart from any payable under this clause) is not expressed to be inclusive of GST.

 

2.                                      If this clause applies, the Recipient must pay the supplier an additional amount on account of GST.

 

3.                                      The additional amount payable on account of GST is, generally, equal to the Consideration for that Supply (apart from any payable under this clause) multiplied by the prevailing GST rate.

 

4.                                      To the extent that the Consideration for the Supply (other than that payable under this clause) is payable as a reimbursement for an expense incurred by the supplier as a result of a Creditable Acquisition it makes, the additional amount will be calculated by:

 

(i)                                     first reducing the Consideration for that Creditable Acquisition by any Input Tax Credit to which the supplier is entitled on making the Creditable Acquisition; and

 

(ii)                                  then applying the prevailing GST rate to that reduced amount.

 

 

5.                                      The additional amount is to be paid when the Recipient pays or provides any of the Consideration for the Supply, provided always that such amount will only be payable if a Tax Invoice for the Supply is provided to the Recipient.

 

F. LEGALLY REQUIRED DISCLOSURES

 

Where the Supplier is required to disclose Citi’s Confidential Information under any applicable law, regulation or an order from a court, regulatory agency or other governmental authority having competent jurisdiction, and is further required to notify Citi of the order, the Supplier must promptly send a copy of the order and accompanying documentation by facsimile transmission to the General Counsel, Citigroup Pty Limited, +612 8225 5238.

 

G. ADDITIONAL TERMINATION RIGHTS

 

In addition to any right available to Citi under the Agreement, Citi may terminate the Work Order immediately upon the occurrence of an “Event of Default” by the Supplier. Any right of termination will not limit Citi from exercising any other rights or remedies it may have at law or in equity.

 

For the purposes of this clause F, “Event of Default” means the occurrence of any one of the following:

 

(i)                                     a representation or warranty of the Supplier is false or misleading in any material respect when it was made;

 

(ii)                                  the Supplier:

 

a.                                      suspends payment of its debts generally;

 

b.                                      becomes insolvent within the meaning of the Corporations Act 2001;

 

c.                                       enters into or resolve to enter into any arrangement, composition or compromise with, or assignment for the benefit of, its creditors or any class of them;

 

d.                                      has a receiver, receiver and manager, controller, managing controller, administrator, official manager, trustee of provisional or official liquidator appointed over its assets and/or undertakings; or

 

e.                                       is the subject of an application that is filed or an order that is made or a resolution that is passed for its winding up or dissolution other than for the purposes of reconstruction or amalgamation.

 

H. SCOPE OF SERVICES

 

Unless expressly stated in the Work Order, the Supplier agrees that:

 

(i)                                     the Agreement and/or Work Order is not an exclusive arrangement between Citi and the Supplier;

 

(ii)                                  Citi may purchase services similar to the Services from other suppliers; and

 

(iii)                               Citi does not commit to purchase any volume or dollar amount of Services.

 

I. GOVERNING LAW AND JURISDICTION

 

Notwithstanding any term to the contrary in the Agreement and/or Addendum, the governing law and jurisdiction clause as it applies to Work Orders entered into by Affiliates and branches of Citibank, NA located in Australia, is varied as follows: “The validity of this Agreement as it applies to the Work Order, the construction and enforcement of its terms, and the interpretation of the rights and duties of the parties to the Work Order shall be governed by the laws of New South Wales, Australia. The Parties to the Work Order submit to the non-exclusive jurisdiction of the courts of New South Wales and of the Commonwealth of Australia.”

 

 

EXHIBIT 2 — SCHEDULE M — NEW ZEALAND LAW REQUIREMENTS

(Version 1 — revalidated 23 January 2015)

 

A. PRIVACY

 

The Privacy Act (1993) of New Zealand as amended from time to time (“Privacy Act”) applies to the handling of all personal information collected or held by government agencies and most businesses. Coverage of the private sector includes sole traders, major New Zealand-owned businesses and the local arms of overseas-owned businesses. The legislation identifies ‘personal information’ as information about an identifiable living person, irrespective of whether it is on a computer or a paper file. All references to ‘personal information’ in this Schedule shall be read as references to ‘personal information’ as defined in the Privacy Act.

 

The parties and acknowledge and agree that:

 

(a)         each party to this Agreement that is resident in New Zealand (each, a “New Zealand Entity”) must: (i) comply with all applicable privacy laws, including the Privacy Act and any privacy principles prescribed thereunder (“Privacy Laws”); and (ii) ensure that personal information held, transferred or otherwise disclosed in connection with this Agreement does not breach any Privacy Laws;

 

(b)         each New Zealand Entity shall be responsible to obtain express or implied consent that the personal information can be used for (i) the transaction to which it relates; or (ii) those other purposes disclosed by the New Zealand Entity (“Purpose”);

 

(c)          where any party to this Agreement that is not resident in New Zealand (each, a “Non-New Zealand Entity”) holds personal information (i) solely as agent for the New Zealand Entity, or (ii) for the sole purpose of safe custody, or (iii) for the sole purpose of processing information on behalf of the New Zealand Entity, that Non-New Zealand Entity must comply the following conditions with respect to personal information disclosed to it by the New Zealand Entity:

 

A.            the Non-New Zealand Entity must ensure that the personal information is protected against (i) loss, (ii) unauthorised access, use, modification or disclosure, or (iii) other misuse, by implementing such security safeguards in respect of the personal information as is reasonable in the circumstances;

B.            the Non- New Zealand Entity must hold the personal information in such a way that it can readily be retrieved in the event that the New Zealand Entity (or the individual concerned) wishes to access or correct the personal information;

C.            the Non-New Zealand Entity must not keep the personal information for longer than is required for the Purpose;

D.            the personal information must only be used for the Purpose; and

E.             the personal information must not be disclosed to any other person or body by the Non-New Zealand Entity unless the Non-New Zealand Entity believes on reasonable grounds that:

 

I.                          the disclosure of the personal information is one of the Purpose for which the information was obtained or is directly related to the Purpose; or

 

II.                        the source of the personal information is a publicly available publication; or

 

III.                       the disclosure is to the individual concerned or authorised by the individual concerned; or

 

IV.                       the disclosure is necessary: (i) to avoid prejudice to the maintenance of the law by any public sector agency, including the prevention, detection, investigation, prosecution, and punishment of offences, or (ii) for the enforcement of a law imposing a pecuniary penalty, or (iii) for the protection of the public revenue, or (iv) for the conduct of proceedings before any court or tribunal (being proceedings that have been commenced or are reasonably in contemplation); or

 

 

V.                         the disclosure is necessary to prevent or lessen a serious threat to public health or public safety or the life or health of the individual concerned or another individual; or

 

VI.                          the disclosure is necessary to facilitate the sale or other disposition of a business as a going concern; or

 

VII.                         the information is to be used in a form in which the individual is not identified or is to be used for statistical or research purposes and will not be published in a form that could reasonably be expected to identify the individual concerned; or

 

VIII.                      the disclosure has been authorized by the New Zealand Privacy Commissioner under section 54 of the Privacy Act;

 

in all other circumstances, each Non-New Zealand Entity must hold personal information disclosed to it by the New Zealand Entity in the manner prescribed by the laws of the country in which it holds the personal information; and

 

(d)         if a Non-New Zealand Entity becomes aware of a breach of paragraph (c) above, that Non-New Zealand Entity shall promptly advise the New Zealand Entity of such breach.

 

B. UNSOLICITED ELECTRONIC MESSAGES ACT (2007)

 

The Unsolicited Electronic Messages Act (2007) applies to prohibit unsolicited commercial electronic messages with a New Zealand link from being sent. It requires the recipient to have consented (actual or implied) to receiving the electronic message and the electronic messages to include accurate information about the person who authorised the sending of the message and a functional unsubscribe facility in order to enable the recipient to instruct the sender that no further messages are to be sent to the recipient. The Supplier must take all reasonable steps to ensure that its employees, agents and subcontractors comply with that Act.

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