Table of Contents
(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐
☒
☐
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of event requiring this shell company report. . . . . . . . . . . . . . . . . . .
Commission file number: 001-38638
NIO Inc.
(Exact Name of Registrant as Specified in Its Charter)
N/A
(Translation of Registrant’s Name Into English)
Cayman Islands
(Jurisdiction of Incorporation or Organization)
Building 20, No. 56 AnTuo Road, Anting Town, Jiading District
Shanghai 201804, People’s Republic of China
(Address of Principal Executive Offices)
Wei Feng, Chief Financial Officer
Building 20, No. 56 AnTuo Road, Anting Town, Jiading District
Shanghai 201804, People’s Republic of China
Telephone: +86 21-6908 2018
E-mail: ir@nio.com
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Trading Symbol
NIO
Name of Each Exchange On Which Registered
New York Stock Exchange
Title of Each Class
American depositary shares (each representing
one Class A ordinary share,
par value US$0.00025 per share)
Class A ordinary shares, par value US$0.00025
per share*
*Not for trading, but only in connection with the
listing on the
New York Stock Exchange of American
depositary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Table of Contents
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered
by the annual report:
As of December 31, 2019, there were (i) 831,927,977 Class A ordinary shares outstanding, par value US$0.00025 per share,
(ii) 132,030,222 Class B ordinary shares outstanding, par value US$0.00025 per share and (iii) 148,500,000 Class C ordinary shares
outstanding, par value US$0.00025 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
⌧ Yes ☐ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ⌧ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. ⌧ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ⌧ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Non-accelerated filer
⌧
☐
Accelerated filer
Emerging growth company
☐
☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†
provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
⌧ U.S. GAAP
☐
International Financial Reporting Standards as issued by the
International Accounting Standards Board
☐
Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant
has elected to follow. ☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
Table of Contents
INTRODUCTION
FORWARD-LOOKING STATEMENTS
PART I.
TABLE OF CONTENTS
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
ITEM 4. INFORMATION ON THE COMPANY
ITEM 4.A. UNRESOLVED STAFF COMMENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8. FINANCIAL INFORMATION
ITEM 9. THE OFFER AND LISTING
ITEM 10. ADDITIONAL INFORMATION
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
ITEM 15. CONTROLS AND PROCEDURES
ITEM 16. A. AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16. B. CODE OF ETHICS
ITEM 16. C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16. D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16. E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16. F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16. G. CORPORATE GOVERNANCE
ITEM 16. H. MINE SAFETY DISCLOSURE
PART III.
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
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In this annual report on Form 20-F, or this annual report, except where the context otherwise requires and for purposes of this
annual report only:
INTRODUCTION
● “ADAS” refers to advanced driver assistance system;
● “ADRs” refer to the American depositary receipts that evidence the ADSs;
● “ADSs” refer to our American depositary shares, each of which represents one Class A ordinary share;
● “AI” refers to artificial intelligence;
● “BEVs” refer to battery electric passenger vehicles;
● “China” or the “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report only, Hong
Kong, Macau and Taiwan;
● “Class A ordinary shares” refer to our Class A ordinary shares, par value US$0.00025 per share;
● “Class B ordinary shares” refer to our Class B ordinary shares, par value US$0.00025 per share;
● “Class C ordinary shares” refer to our Class C ordinary shares, par value US$0.00025 per share;
● “EVs” refer to electric passenger vehicles;
● “FOTA” refers to firmware over-the-air;
● “ICE” refers to internal combustion engine;
● “NEVs” refer to new energy passenger vehicles;
● “NIO,” “we,” “us,” “our company,” and “our” refer to NIO Inc., our Cayman Islands holding company and its subsidiaries,
its consolidated variable interest entities and the subsidiaries of the consolidated variable interest entities;
● “Ordinary shares” refer to our Class A ordinary shares, Class B ordinary shares and Class C ordinary shares, each of par
value US$0.00025 per share;
● “RMB” or “Renminbi” refers to the legal currency of China; and
● “US$,” “dollars” or “U.S. dollars” refer to the legal currency of the United States.
Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report
are made at a rate of RMB6.9618 to US$1.00, the exchange rate in effect as of December 31, 2019 as set forth in the H.10 statistical
release of the Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all.
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FORWARD-LOOKING INFORMATION
This annual report contains forward-looking statements that reflect our current expectations and views of future events. These
forward looking statements are made under the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,”
may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-
looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from those expressed or implied by the forward-looking statements.
You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,”
“estimate,” “intend,” “plan,” “believe,” “likely to,” “potential,” “continue” or other similar expressions. We have based these forward-
looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are
not limited to, statements about:
● our goals and growth strategies;
● the outbreak of COVID-19.
● our future business development, financial condition and results of operations;
● the expected growth of the electric vehicles industry in China;
● our expectations regarding demand for and market acceptance of our products and services;
● our expectations regarding our relationships with customers, contract manufacturers, component suppliers, third-party
service providers, strategic partners and other stakeholders;
● competition in our industry;
● relevant government policies and regulations relating to our industry; and
● assumptions underlying or related to any of the foregoing.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed
in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be
materially different from our expectations. Other sections of this annual report include additional factors that could adversely impact our
business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from
time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all
factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. You should read thoroughly this annual report and the documents that we refer to
with the understanding that our actual future results may be materially different from, or worse than, what we expect. We qualify all of
our forward-looking statements by these cautionary statements.
This annual report contains certain data and information that we obtained from various government and private publications.
Statistical data in these publications also include projections based on a number of assumptions. The electric vehicles industry may not
grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material adverse effect
on our business and the market price of our ADSs. In addition, the rapidly evolving nature of the electric vehicles industry results in
significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore,
if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the
projections based on these assumptions. You should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this annual report relate only to events or information as of the date on which the
statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are
made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we refer to in this
annual report and exhibits to this annual report completely and with the understanding that our actual future results may be materially
different from what we expect.
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PART I.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. Selected Financial Data
Selected Consolidated Financial Data
The following selected consolidated statements of comprehensive loss data for the years ended December 31, 2017, 2018 and
2019, selected consolidated balance sheet data as of December 31, 2018 and 2019 and selected consolidated cash flow data for the years
ended December 31, 2017, 2018 and 2019 have been derived from our audited consolidated financial statements included elsewhere in
this annual report. The following selected consolidated statements of comprehensive loss data for the year ended December 31, 2016, the
selected consolidated balance sheet data as of December 31, 2016 and 2017, and the selected consolidated cash flow data for the year
ended December 31, 2016 have been derived from our audited consolidated financial statements that are not included in this annual
report. Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data
should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and
related notes and “Item 5. Operating and Financial Review and Prospects” below. Our consolidated financial statements are prepared and
presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.
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Selected Consolidated Statements of
Comprehensive Loss:
Revenues(1)
Vehicle sales
Other sales
Total revenues
Cost of sales:(2)
Vehicle sales
Other sales
Total cost of sales
Gross loss
Operating expenses:
Research and development(2)
Selling, general and administrative(2)
Total operating expenses
Loss from operations
Interest income
Interest expenses
Shares of losses of equity investee
Investment income
Other income/(loss), net
Loss before income tax expenses
Income tax expenses
Net loss
Accretion on convertible redeemable preferred value
Accretion on redeemable non-controlling interests to
redemption value
Net loss attributable to non-controlling interests
Net loss attributable to ordinary shareholders of
NIO Inc.
Net loss
Other comprehensive Income/ (loss)
Foreign currency translation adjustments, net of nil tax
Total other comprehensive income/ (loss)
Total comprehensive loss
Accretion on convertible redeemable preferred shares
to redemption value
Accretion on redeemable non-controlling interests to
redemption value
Net loss attributable to non-controlling interests
Comprehensive loss attributable to ordinary
shareholders of NIO Inc.
Weighted average number of ordinary shares used
in computing net loss per share
Basic and diluted
Net loss per share attributable to ordinary
shareholders
Basic and diluted
Notes:
(1,162,923)
(133,254)
(1,296,177)
(172,199)
(636,126)
(783,100)
(1,419,226)
(1,591,425)
23,023
(53,224)
(9,262)
—
9,503
(1,621,385)
(1,133)
(1,622,518)
—
For the Year Ended December 31,
2016
RMB
2017
RMB
2018
RMB
2019
RMB
US$
(in thousands, except for per share data)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,852,470
98,701
4,951,171
7,367,113
457,791
7,824,904
1,058,220
65,758
1,123,978
(4,930,135)
(276,912)
(5,207,047)
(255,876)
(8,096,035)
(927,691)
(9,023,726)
(1,198,822)
(1,465,353)
(1,137,187)
(2,602,540)
(2,602,540)
27,556
(55)
—
2,670
3,429
(2,568,940)
(4,314)
(2,573,254)
(981,233)
(2,602,889)
(2,350,707)
(4,953,596)
(4,953,596)
18,970
(18,084)
(5,375)
3,498
(58,681)
(5,013,268)
(7,906)
(5,021,174)
(2,576,935)
(3,997,942)
(5,341,790)
(9,339,732)
(9,595,608)
133,384
(123,643)
(9,722)
—
(21,346)
(9,616,935)
(22,044)
(9,638,979)
(13,667,291)
(4,428,580)
(5,451,787)
(9,880,367)
(11,079,189)
160,279
(370,536)
(64,478)
—
66,160
(11,287,764)
(7,888)
(11,295,652)
—
—
36,938
—
36,440
(63,297)
41,705
(126,590)
9,141
(18,184)
1,313
(3,517,549)
(2,573,254)
(7,561,669)
(5,021,174)
(23,327,862)
(9,638,979)
(11,413,101)
(11,295,652)
(1,639,389)
(1,622,518)
55,493
55,493
(2,517,761)
(124,374)
(124,374)
(5,145,548)
(20,786)
(20,786)
(9,659,765)
(168,340)
(168,340)
(11,463,922)
(24,181)
(24,181)
(1,646,699)
(981,233)
(2,576,935)
(13,667,291)
—
—
—
36,938
—
36,440
(63,297)
41,705
(126,590)
9,141
(18,184)
1,313
(3,462,056)
(7,686,043)
(23,348,648)
(11,581,441)
(1,663,570)
16,697,527
21,801,525
332,153,211
1,029,931,705
1,029,931,705
(210.66)
(346.84)
(70.23)
(11.08)
(1.59)
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(1) We began generating revenues in June 2018, when we began making deliveries and sales of the ES8. We currently generate
revenues from vehicle sales and other sales.
(2) Share-based compensation expenses were allocated in cost of sales and operating expenses as follows:
Cost of Sales
Research and development expenses
Selling, general and administrative expenses
Total
2016
RMB
—
14,484
62,200
76,684
For the Year Ended December 31,
2018
RMB
2017
RMB
RMB
2019
—
23,210
67,086
90,296
(in thousands)
9,289
109,124
561,055
679,468
9,763
82,680
241,052
333,495
US$
1,402
11,876
34,625
47,903
The following table presents our selected consolidated balance sheet data as of the dates indicated.
Selected Consolidated Balance Sheet Data:
Cash and cash equivalents
Restricted cash
Long-term restricted cash
Property, plant and equipment, net
Total assets
Total liabilities
Total mezzanine equity
Ordinary shares
Total shareholders’ (deficit)/equity
Total shares outstanding
2016
RMB
2017
RMB
2018
RMB
2019
RMB
US$
(in thousands, except for share data)
As of December 31,
581,296
—
15,335
833,004
1,770,478
825,264
4,861,574
52
(3,916,360)
17,773,459
7,505,954
10,606
14,293
1,911,013
10,468,034
2,402,028
19,657,786
60
(11,591,780)
23,850,343
3,133,847
57,012
33,528
4,853,157
18,842,552
10,692,210
1,329,197
1,809
6,821,145
1,050,799,032
862,839
82,507
44,523
5,533,064
14,582,029
19,403,841
1,455,787
1,827
(6,277,599)
1,064,472,660
123,939
11,851
6,395
794,775
2,094,577
2,787,187
209,111
262
(901,721)
1,064,472,660
The following table presents our selected consolidated cash flow data for the years indicated.
2016
RMB
For the Year Ended December 31,
2018
RMB
2017
RMB
RMB
2019
US$
(in thousands)
Selected Consolidated Cash Flow Data:
Net cash used in operating activities
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Effects of exchange rate changes on cash, cash equivalents and
restricted cash
Net increase/(decrease) in cash, cash equivalents and restricted
cash
Cash and cash equivalents and restricted cash at the beginning
of year
Cash and cash equivalents and restricted cash at the end of year
(2,201,564)
117,843
2,292,704
(4,574,719)
(1,190,273)
12,867,334
(7,911,768)
(7,940,843)
11,603,092
(8,721,706)
3,382,069
3,094,953
(1,252,795)
485,804
444,562
40,539
(168,120)
(56,947)
10,166
1,460
249,522
6,934,222
(4,306,466)
(2,234,518)
(320,969)
347,109
596,631
596,631
7,530,853
7,530,853
3,224,387
3,224,387
989,869
463,154
142,185
B. Capitalization and Indebtedness
Not applicable.
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C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Related to Our Business and Industry
Our ability to develop and manufacture a car of sufficient quality and appeal to customers on schedule and on a large scale is
still evolving.
Our future business depends in large part on our ability to execute on our plans to develop, manufacture, market and sell our
electric vehicles. We plan to manufacture our vehicles in higher volumes than our present production capabilities in strategic
collaboration with a Chinese manufacturer.
Our continued development and manufacturing of our manufactured vehicles, the ES8, the ES6 and the EC6, and our future
vehicles are and will be subject to risks, including with respect to:
● our ability to secure necessary funding;
● the equipment we use being able to accurately manufacture the vehicle within specified design tolerances;
● compliance with environmental, workplace safety and similar regulations;
● securing necessary components on acceptable terms and in a timely manner;
● delays in delivery of final component designs to our suppliers;
● our ability to attract, recruit, hire and train skilled employees;
● quality controls;
● delays or disruptions in our supply chain;
● our ability to maintain solid partnership with our manufacturing partners and suppliers; and
● other delays, backlog in manufacturing and research and development of new models, and cost overruns.
We began making deliveries of the seven-seater ES8 in June 2018, the six-seater ES8 in March 2019 and the ES6 in June 2019.
In December 2019, we launched our third volume manufactured electric vehicle, the EC6, and the all-new ES8 with more than 180
product improvements. We began making deliveries of the all-new ES8 in April 2020. We do not expect to deliver the EC6 until
September 2020. Our vehicles may not meet customer expectations and our future models may not be commercially viable.
Historically, automobile customers have expected car manufacturers to periodically introduce new and improved vehicle
models. In order to meet these expectations, we may be required to introduce new vehicle models and enhanced versions of existing
vehicle models. To date we have limited experience designing, testing, manufacturing, marketing and selling our electric vehicles and
therefore cannot assure you that we will be able to meet customer expectations.
Any of the foregoing could have a material adverse effect on our results of operations and growth prospects.
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We have negative cash flows from operation, have only recently started to generate revenues and have not been profitable, all of
which may continue in the future.
We have only recently started to generate revenues and have not been profitable since our inception. We incurred net losses of
RMB5,021.2 million, RMB9,639.0 million and RMB11,295.7 million (US$1,622.5 million) in 2017, 2018 and 2019, respectively. In
addition, we had negative cash flows from operating activities of RMB4,574.7 million, RMB7,911.8 million and RMB8,721.7 million
(US$1,252.8 million) in 2017, 2018 and 2019, respectively. We have made significant up-front investments in research and development,
service network, and sales and marketing to rapidly develop and expand our business. We expect to continue to invest significantly in
research and development and sales and marketing, to establish and expand our business, and these investments may not result in an
increase in revenue or positive cash flow on a timely basis, or at all.
We may not generate sufficient revenues or we may incur substantial losses for a number of reasons, including lack of demand
for our vehicles and services, increasing competition, challenging macro-economic environment due to the COVID-19 outbreak, as well
as other risks discussed herein, and we may incur unforeseen expenses, or encounter difficulties, complications and delays in generating
revenue or achieving profitability. If we are unable to achieve profitability, we may have to reduce the scale of our operations, which may
impact our business growth and adversely affect our financial condition and results of operations. In addition, our continuous operation
depends on our capability to obtain sufficient external equity or debt financing. If we do not succeed in doing so, we may need to curtail
our operations, which could adversely affect our business, results of operations, financial position and cash flows.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
Our business could be adversely affected by the effects of epidemics. In recent years, there have been outbreaks of epidemics in
China and globally. Our financial condition and results of operations for fiscal 2020 are expected to be adversely affected surfaced.
Subsequently, COVID-19 spread throughout China and worldwide. In late January 2020, in response to intensifying efforts to contain the
spread of the coronavirus, the Chinese government took a number of actions, which included extending the Chinese New Year holiday,
quarantining and otherwise treating individuals in China who had the coronavirus, asking China residents to remain at home and to avoid
gathering in public, and other actions. The novel strain of coronavirus has also resulted in temporary closure of many corporate offices,
retail stores, and manufacturing facilities and factories across China. While the events related to the outbreak of and response to the
coronavirus are expected to be temporary, our business has been and could continue to be adversely impacted by the effects of the
Coronavirus or other epidemics. We have a service center and vehicle delivery center in Wuhan and other major cities in China.
Consequently, we are susceptible to factors adversely affecting one or more of these locations. Our results of operations has been and
could continue to be adversely affected to the extent that Coronavirus or any other epidemic harms the Chinese economy in general. We
have experienced and may continue to experience impacts to certain of our customers and/or suppliers as a result of a health epidemic or
other outbreak occurring in one or more of these locations, which have materially and adversely affected our business, financial
condition, results of operations and cash flows. In addition, our operations have experienced and may continue to experience disruptions,
such as temporary closure of our offices and/or those of our customers or suppliers and suspension of services, resulting in a reduced of
vehicles manufactured and in turn fewer vehicles delivered, which have materially and adversely affected our business, financial
condition, results of operations and cash flow. Further, to the extent the COVID-19 pandemic adversely affects our business and financial
results, it has and may continue to have the effect of heightening many of the other risks described in this annual report, such as those
relating to our level of indebtedness, our need to generate sufficient cash flows to service our indebtedness and our ability to comply with
the covenants contained in the agreements that govern our indebtedness.
We are also vulnerable to natural disasters and other calamities. Although we have servers that are hosted in an offsite location,
our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server
failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons,
earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing
events may give rise to interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause
the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services on our
platform.
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We have a limited operating history and face significant challenges as a new entrant into our industry.
We were formed in 2014 and began making deliveries to the public of our first volume manufactured vehicle, the seven-seater
ES8, in June 2018. We began making deliveries of our second volume manufactured electric vehicle, the ES6, in June 2019. In December
2019, we launched our third volume manufactured electric vehicle, the EC6, and the all-new ES8 with more than 180 product
improvements. We began making deliveries of the all-new ES8 in April 2020, and plan to begin making deliveries the EC6 in September
2020.
You should consider our business and prospects in light of the risks and challenges we face as a new entrant into our industry,
including, among other things, with respect to our ability to:
● design and produce safe, reliable and quality vehicles on an ongoing basis;
● build a well-recognized and respected brand;
● establish and expand our customer base;
● successfully market not just our vehicles but also our other services, including our service package, energy package and
other services we provide;
● properly price our services, including our charging solutions and service package and successfully anticipate the take-rate
and usage of such services by users;
● improve and maintain our operational efficiency;
● maintain a reliable, secure, high-performance and scalable technology infrastructure;
● attract, retain and motivate talented employees;
● anticipate and adapt to changing market conditions, including technological developments and changes in competitive
landscape; and
● navigate an evolving and complex regulatory environment.
If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected.
We have limited experience to date in high volume manufacturing of our electric vehicles. We cannot assure you that we will be
able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supply that
will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes required to
successfully mass market the ES8, the ES6, the EC6 and future vehicles.
Furthermore, our vehicles are highly technical products that will require maintenance and support. If we were to cease or cut
back operations, even years from now, buyers of our vehicles from years earlier might encounter difficulties in maintaining their vehicles
and obtaining satisfactory support. We also believe that our service offerings, including user confidence in our ability to provide our
charging solutions and honor our obligations under our service package will be key factors in marketing our vehicles. As a result,
consumers will be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that our operations
will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing
business relationships with us if they are not convinced that our business will succeed.
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Manufacturing in collaboration with partners is subject to risks.
We have entered into an arrangement with Jianghuai Automobile Group Co., Ltd., or JAC, for manufacturing the ES8 for
five years. In April 2019 and March 2020, we entered manufacturing cooperation agreements with JAC for the manufacture of the ES6
and the EC6, respectively. The ES8 and ES6 are manufactured in partnership with JAC at its Hefei manufacturing plant. JAC is a major
state-owned automobile manufacturer in China and it constructed such Hefei manufacturing plant for the production of the ES8 (with a
modified production line for the ES6) and potentially other future vehicles with us. Pursuant to our arrangement with JAC with respect to
the ES8, ES6 and EC6, we pay JAC for each vehicle produced on a per-vehicle basis monthly for the first three years. Collaboration with
third parties for the manufacturing of vehicles is subject to risks with respect to operations that are outside our control. We could
experience delays to the extent our partners do not meet agreed upon timelines or experience capacity constraints. There is risk of
potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is
related to their collaboration with us. Our ability to successfully build a premium brand could also be adversely affected by perceptions
about the quality of our partners’ vehicles. In addition, although we are involved in each step of the supply chain and manufacturing
process, given that we also rely on our partners to meet our quality standards, there can be no assurance that we will successfully
maintain quality standards.
In addition, for the first 36 months after the start of production, which commenced on April 10, 2018, to the extent the Hefei
manufacturing plant incurs any operating losses, we have agreed to compensate JAC for such operating losses. Cooperation after the first
36 months will be subject to further negotiation between the parties. As of December 31, 2019, we had paid JAC a total of RMB604.4
million, including RMB333.1 million as compensation for losses incurred in 2018 and 2019 and RMB271.3 million for manufacturing
and processing fees. If we are obligated to compensate JAC for any losses, our results of operations and financial condition may be
materially and adversely affected, particularly if such losses are incurred as a result of lower than anticipated sales volume.
We may be unable to enter into new agreements or extend existing agreements with third-party manufacturing partners on terms
and conditions acceptable to us and therefore may need to contract with other third parties or significantly add to our own production
capacity. There can be no assurance that in such event we would be able to partner with other third parties or establish or expand our own
production capacity to meet our needs on acceptable terms or at all. The expense and time required to complete any transition, and to
assure that vehicles manufactured at facilities of new third-party partners comply with our quality standards and regulatory requirements,
may be greater than anticipated. Any of the foregoing could adversely affect our business, results of operations, financial condition and
prospects.
The unavailability, reduction or elimination of government and economic incentives or government policies which are favorable
for electric vehicles and domestically produced vehicles could have a material adverse effect on our business, financial condition,
operating results and prospects.
Our growth depends significantly on the availability and amounts of government subsidies, economic incentives and
government policies that support the growth of new energy vehicles generally and electric vehicles specifically. For example, each
qualified purchaser of the ES8 and the ES6 is entitled to receive subsidies from China’s central government. In addition, in certain cities,
quotas that limit the number of internal combustion engine, or ICE, vehicles do not apply to electric vehicles, making it easier for
customers to purchase electric vehicles.
On April 10, 2018, President Xi Jinping vowed to open China’s economy further and lower import tariffs on products, including
cars, in a speech during the Boao Forum. Beginning July 1, 2018, the tariff on imported passenger vehicles (other than those originating
in the United States of America) was reduced to 15%. As a result, our pricing advantage could be diminished. On June 28, 2018, the
National Development and Reform Commission, or NDRC, and the Ministry of Commerce, or the MOFCOM, promulgated the Special
Administrative Measures for Market Access of Foreign Investment (2018 Version), or the 2018 Negative List, which came into effect on
July 28, 2018. Pursuant to the 2018 Negative List, the limits on foreign ownership of auto manufacturers were lifted in 2018 for NEVs
and will be lifted by 2022 for ICE vehicles. The same changes were subsequently adopted in the Special Administrative Measures for
Market Access of Foreign Investment (2019 Version), or the 2019 Negative List. As a result, foreign EV competitors could build wholly-
owned facilities in China without the need for a domestic joint venture partner. For example, Tesla has started constructing a factory in
Shanghai without a joint venture partner. These changes could increase our competition and reduce our pricing advantage.
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China’s central government provides subsidies for purchasers of certain NEVs until 2022 and reviews and further adjusts the
subsidy standard on an annual basis. The 2019 subsidy standard, effective from March 26, 2019, reduced the amount of national
subsidies and canceled local subsidies, resulting in a significant reduction in the total subsidy amount applicable to the ES8 and ES6 as
compared to 2018. We believe that our sales performance of ES8 and ES6 in 2019 was negatively affected by the reduction in the
subsidy standard. The current 2020 subsidy standard, effective from April 23, 2020, (i) reduces the base subsidy amount in general by
10% for each NEV, (ii) sets subsidies for 2 million vehicles as the upper limit of annual subsidy scale; and (iii) provides that national
subsidy shall only apply to an NEV with the sale price under RMB300,000 or equipped with battery swapping module. Further, the 2021
and the 2022 subsidy standard are expected to be reduced by 20% and 30% respectively as compared to the standard of the immediate
preceding year.
We cannot guarantee that such negative influence and our undermined sales performance resulted therefrom will not continue.
Furthermore, China’s central government provides certain local governments with funds and subsidies to support the roll-out of a
charging infrastructure. See “Item 4. Information on the Company—B. Business Overview—Regulation—Favorable Government
Policies Relating to New Energy Vehicles in the PRC.” These policies are subject to change and beyond our control. We cannot assure
you that any changes would be favorable to our business. Furthermore, any reduction, elimination or discriminatory application of
government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the
perceived success of electric vehicles, fiscal tightening or other factors may result in the diminished competitiveness of the alternative
fuel vehicle industry generally or our electric vehicles in particular. Any of the foregoing could materially and adversely affect our
business, results of operations, financial condition and prospects.
Our vehicles may not perform in line with customer expectations.
Our vehicles, including the ES8, ES6 and EC6, may not perform in line with customers’ expectations. For example, our vehicles
may not have the durability or longevity of other vehicles in the market, and may not be as easy and convenient to repair as other
vehicles on the market. Any product defects or any other failure of our vehicles to perform as expected could harm our reputation and
result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and
significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results
and prospects.
In addition, the range of our vehicles on a single charge declines principally as a function of usage, time and charging patterns
as well as other factors. For example, a customer’s use of his or her electric vehicle as well as the frequency with which he or she charges
the battery can result in additional deterioration of the battery’s ability to hold a charge.
Furthermore, our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or
that may require repair. We have delivered our vehicles with certain features of our NIO Pilot ADAS system initially disabled, and
subsequently turned on some of these features. We activated most of the announced functions of the NIO pilot in 2019, and plan to
continue to explore more features of the NIO pilot system in 2020. We cannot assure you that our NIO Pilot system will ultimately
perform in line with expectations. Our vehicles use a substantial amount of software code to operate and software products are inherently
complex and often contain defects and errors when first introduced. While we have performed extensive internal testing on our vehicles’
software and hardware systems, we have a limited frame of reference by which to evaluate the long-term performance of our systems and
vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If
any of our vehicles fail to perform as expected, we may need to delay deliveries, initiate product recalls and provide servicing or updates
under warranty at our expense, which could adversely affect our brand in our target markets and could adversely affect our business,
prospects and results of operations.
Any delays in the manufacturing and launch of the commercial production vehicles in our pipeline could have a material
adverse effect on our business.
We launched our third volume manufactured electric vehicle, the EC6, to the public at our NIO Day event on December 28,
2019. EC6 is a smart premium electric coupe SUV. Its performance version is equipped with a 160-kW permanent magnet motor and a
240-kW induction motor, and is capable of accelerating from zero to 100 kph within 4.7 seconds. With the 100-kilowatt-hour battery
pack to be delivered in the fourth quarter of 2020, the EC6 performance version boasts an NEDC range of up to 615 km. Users can pre-
order the EC6 through the NIO App and we expect to begin making deliveries of the EC6 in September 2020. In March 2020, we entered
into a manufacturing cooperation agreements with JAC for the manufacture of the EC6. The EC6 must enter into an Announcement of
Vehicle Manufacturers and Products and obtain the China Compulsory Certification, or the CCC certification, prior to mass production.
If we encounter delays in any of these matters, we may consequently delay our deliveries of the EC6.
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We generally target to launch a new model every year in the near future as we ramp up our business. Automobile manufacturers
often experience delays in the design, manufacture and commercial release of new vehicle models. We are planning to target a broader
market with our future vehicles, and to the extent we need to delay the launch of our vehicles, our growth prospects could be adversely
affected as we may fail to grow our market share. We also plan to periodically perform facelifts or refresh existing models, which could
also be subject to delays. Furthermore, we rely on third party suppliers for the provision and development of many of the key
components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing
necessary components, we could experience delays in delivering on our timelines. Any delay in the manufacture or launch of the ES8,
the ES6, the EC6 or future models, including in the build out of the manufacturing facilities in China for these models or due to any other
factors, or in refreshing or performing facelifts to existing models, could subject us to customer complaints and materially and adversely
affect our reputation, demand for our vehicles, results of operations and growth prospects.
In addition, to the extent the Hefei manufacturing plant incurs any operating losses, we have agreed to compensate JAC for such
operating losses. As of December 31, 2019, we had paid JAC a total of RMB604.4 million, including RMB333.1 million as
compensation for losses incurred in 2018 and 2019 and RMB271.3 million for manufacturing and processing fees. If we are obligated to
compensate JAC for any losses, our results of operations and financial condition may be materially and adversely affected, particularly if
such losses are incurred as a result of lower than anticipated sales volume. We expect that our sales volume and the ability of the Hefei
manufacturing plant to achieve profitability will be significantly affected by our ability to timely bring new vehicles to market.
We may face challenges providing our charging solutions.
We have marketed our ability to provide our users with comprehensive charging solutions conveniently accessible using our
mobile application. We install home chargers for users where practicable, and provide other solutions including battery swapping,
charging through publicly accessible charging infrastructure and charging using our fast charging trucks. Our users are able to use our
NIO Power one-click valet charging service where their vehicles are picked up, charged and then returned. We have very limited
experience in the actual provision of our charging solutions to users and providing these services is subject to challenges, which include
the logistics of rolling out our network and teams in appropriate areas, inadequate capacity or over capacity in certain areas, security risks
or risk of damage to vehicles during Power Express valet services and the potential for lack of user acceptance of our services. In
addition, although the Chinese government has supported the roll-out of a public charging network, the current number of charging
infrastructures is generally considered to be insufficient. We face significant challenges as we roll out our charging solutions, including
access to sufficient charging infrastructure, obtaining any required permits, land use rights and filings, and, to a certain extent, such roll-
out is subject to the risk that government support may discontinue.
In addition, given our limited experience in providing charging solutions, there could be unanticipated challenges which may
hinder our ability to provide our solutions or make the provision of our solutions costlier than anticipated. To the extent we are unable to
meet user expectations or experience difficulties in providing our charging solutions, our reputation and business may be materially and
adversely affected.
Our services may not be generally accepted by our users. If we are unable to provide good customer service, our business and
reputation may be materially and adversely affected.
We aim to provide users with a good customer service experience, including by providing our users with access to a full suite of
services conveniently through our mobile application and vehicle applications. In addition, we seek to engage with our users on an
ongoing basis using online and offline channels, in ways which are non-traditional for automakers. We cannot assure you that our
services, including our energy package and service package, or our efforts to engage with our users using both our online and offline
channels, will be successful, which could impact our revenues as well as our customer satisfaction and marketing.
Our servicing will primarily be carried out through third parties certified by us. Although such servicing partners may have
experience in servicing other vehicles, we and such partners have very limited experience in servicing our vehicles. Servicing electric
vehicles is different from servicing ICE vehicles and requires specialized skills, including high voltage training and servicing techniques.
There can be no assurance that our service arrangements will adequately address the service requirements of our users to their
satisfaction, or that we and our partners will have sufficient resources to meet these service requirements in a timely manner as the
volume of vehicles we deliver increases.
In addition, if we are unable to roll out and establish a widespread service network, user satisfaction could be adversely affected,
which in turn could materially and adversely affect our sales, results of operations and prospects.
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We have received only a limited number of reservations for the ES8, the ES6 and the EC6, all of which are subject to
cancellation.
Intention orders and reservations for our vehicles are subject to cancellation by the customer until delivery of the vehicle. We
have experienced cancellations in the past. Notwithstanding the non-refundable deposits we charge for the reservations, our users may
still cancel their reservations for many reasons outside of our control, in certain cases even after they have paid deposits with such
reservations. The potentially long wait from the time a reservation is made until the time the vehicle is delivered could also impact user
decisions on whether to ultimately make a purchase, due to potential changes in preferences, competitive developments and other factors.
If we encounter delays in the introduction of the ES8, ES6, EC6 or future vehicles, we believe that a significant number of reservations
may be cancelled. As a result, no assurance can be made that reservations will not be cancelled and will ultimately result in the final
purchase, delivery, and sale of the vehicle. Such cancellations could harm our financial condition, business, prospects and operating
results.
The automotive market is highly competitive, and we may not be successful in competing in this industry.
The China automotive market is highly competitive. We have strategically entered into this market in the premium EV segment
and we expect this segment will become more competitive in the future as additional players enter into this segment. We compete with
international competitors, including Tesla. Our vehicles also compete with ICE vehicles in the premium segment. Many of our current
and potential competitors, particularly international competitors, have significantly greater financial, technical, manufacturing, marketing
and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution,
promotion, sale and support of their products. We expect competition in our industry to intensify in the future in light of increased
demand and regulatory push for alternative fuel vehicles, continuing globalization and consolidation in the worldwide automotive
industry. Factors affecting competition include, among others, product quality and features, innovation and development time, pricing,
reliability, safety, fuel economy, customer service and financing terms. Increased competition may lead to lower vehicle unit sales and
increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating
results and prospects. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new
markets and our market share. There can be no assurance that we will be able to compete successfully in our markets. If our competitors
introduce new cars or services that successfully compete with or surpass the quality or performance of our cars or services at more
competitive prices, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us
to generate attractive rates of return on our investment.
Furthermore, our competitive advantage as the company with the first-to-market and leading premium EV volume-
manufactured domestically in China will be severely compromised if our competitors begin making deliveries earlier than expected, or
offer more favorable price than we do.
We may also be affected by the growth of the overall China automotive market. While sales of electric vehicles in China
increased in 2019, overall automobile sales in China declined 9.3% during the year. If demand for automobiles in China continues to
decrease, our business, results of operations and financial condition could be materially adversely affected.
Our industry and its technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative
technologies or improvements in the internal combustion engine may materially and adversely affect the demand for our electric
vehicles.
We operate in China’s electric vehicle market, which is rapidly evolving and may not develop as we anticipate. The regulatory
framework governing the industry is currently uncertain and may remain uncertain for the foreseeable future. As our industry and our
business develop, we may need to modify our business model or change our services and solutions. These changes may not achieve
expected results, which could have a material adverse effect on our results of operations and prospects.
Furthermore, we may be unable to keep up with changes in electric vehicle technology and, as a result, our competitiveness may
suffer. Our research and development efforts may not be sufficient to adapt to changes in electric vehicle technology. As technologies
change, we plan to upgrade or adapt our vehicles and introduce new models in order to provide vehicles with the latest technology, in
particular battery cell technology, which could involve substantial costs and lower our return on investment for existing vehicles. There
can be no assurance that we will be able to compete effectively with alternative vehicles or source and integrate the latest technology into
our vehicles, against the backdrop of our rapidly evolving industry. Even if we are able to keep pace with changes in technology and
develop new models, our prior models could become obsolete more quickly than expected, potentially reducing our return on investment.
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Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or
improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in
ways we do not currently anticipate. For example, fuel which is abundant and relatively inexpensive in China, such as compressed
natural gas, may emerge as consumers’ preferred alternative to petroleum based propulsion. Any failure by us to successfully react to
changes in existing technologies could materially harm our competitive position and growth prospects.
We may be unable to adequately control the costs associated with our operations.
We have required significant capital to develop and grow our business, including developing the ES8, the ES6 and the EC6, as
well as building our brand. We expect to incur significant costs which will impact our profitability, including research and development
expenses as we roll out new models and improve existing models, raw material procurement costs and selling and distribution expenses
as we build our brand and market our vehicles. In addition, we may incur significant costs in connection with our services, including
providing charging solutions and honoring our commitments under our service package. Our ability to become profitable in the future
will not only depend on our ability to successfully market our vehicles and other products and services but also to control our costs. If we
are unable to cost efficiently design, manufacture, market, sell and distribute and service our vehicles and services, our margins,
profitability and prospects will be materially and adversely affected.
We could experience cost increases or disruptions in supply of raw materials or other components used in our vehicles.
We incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. We use various
raw materials in our vehicles including aluminum, steel, carbon fiber, non-ferrous metals such as copper, lithium, nickel as well as cobalt.
The prices for these raw materials fluctuate depending on factors beyond our control, including market conditions and global demand for
these materials, and could adversely affect our business and operating results. Our business also depends on the continued supply of
battery cells for our vehicles. Battery cell manufacturers may refuse to supply electric vehicle manufacturers to the extent they determine
that the vehicles are not sufficiently safe. We are exposed to multiple risks relating to availability and pricing of quality lithium-ion
battery cells. These risks include:
● the inability or unwillingness of current battery cell manufacturers to build or operate battery cell manufacturing plants to
supply the numbers of lithium-ion cells required to support the growth of the electric or plug-in hybrid vehicle industry as
demand for such cells increases;
● disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and
● an increase in the cost of raw materials, such as lithium, nickel and cobalt, used in lithium-ion cells.
Furthermore, currency fluctuations, tariffs or shortages in petroleum and other economic or political conditions may result in
significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components
would increase our operating costs, and could reduce our margins. In addition, a growth in popularity of electric vehicles without a
significant expansion in battery cell production capacity could result in shortages which would result in increased costs in raw materials
to us or impact of prospects.
We are dependent on our suppliers, many of whom are our single source suppliers for the components they supply.
The ES8, ES6 and EC6 each uses over 1,500 purchased parts which we source from over 190 suppliers, many of whom are
currently our single source suppliers for these components, and we expect that this will be similar for any future vehicle we may produce.
The supply chain exposes us to multiple potential sources of delivery failure or component shortages. While we obtain components from
multiple sources whenever possible, similar to other automobile manufacturers, many of the components used in our vehicles are
purchased by us from a single source. To date, we have not qualified alternative sources for most of the single sourced components used
in our vehicles and we generally do not maintain long-term agreements with our single source suppliers. For example, while several
sources of the battery cell we have selected for the ES8 are available, we have fully qualified only one supplier for these cells.
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Furthermore, qualifying alternative suppliers or developing our own replacements for certain highly customized components of
the ES8, the ES6 and the EC6, such as the air suspension system and the steering system, may be time-consuming and costly. Any
disruption in the supply of components, whether or not from a single source supplier, could temporarily disrupt production of our
vehicles until an alternative supplier is fully qualified by us or is otherwise able to supply us the required material. There can be no
assurance that we would be able to successfully retain alternative suppliers or supplies on a timely basis, on acceptable terms or at all.
Changes in business conditions, force majeure, governmental changes and other factors beyond our control or which we do not presently
anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially
and adversely affect our results of operations, financial condition and prospects.
Our business and prospects depend significantly on our ability to build our NIO brand. We may not succeed in continuing to
establish, maintain and strengthen the NIO brand, and our brand and reputation could be harmed by negative publicity
regarding our company or products.
Our business and prospects are heavily dependent on our ability to develop, maintain and strengthen the “NIO” brand. If we do
not continue to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers.
Promoting and positioning our brand will likely depend significantly on our ability to provide high quality vehicles and services and
engage with our customers as intended and we have limited experience in these areas. In addition, we expect that our ability to develop,
maintain and strengthen the NIO brand will depend heavily on the success of our user development and branding efforts. Such efforts
mainly include building a community of online and offline users engaged with us through our mobile application, NIO Houses, NIO
Spaces as well as other branding initiatives such as our annual NIO Day, NIO Formula E Team, or Formula E team, and other automotive
shows and events. Such efforts may be non-traditional and may not achieve the desired results. To promote our brand, we may be
required to change our user development and branding practices, which could result in substantially increased expenses, including the
need to use traditional media such as television, radio and print. If we do not develop and maintain a strong brand, our business,
prospects, financial condition and operating results will be materially and adversely impacted.
In addition, if incidents occur or are perceived to have occurred, whether or not such incidents are our fault, we could be subject
to adverse publicity. In particular, given the popularity of social media, including WeChat/Weixin in China, any negative publicity,
whether true or not, could quickly proliferate and harm consumer perceptions and confidence in our brand. Furthermore, there is the risk
of potential adverse publicity related to our manufacturing or other partners, whether or not such publicity related to their collaboration
with us. Our ability to successfully position our brand could also be adversely affected by perceptions about the quality of our partners’
vehicles.
In addition, from time to time, our vehicles are evaluated and reviewed by third parties. Any negative reviews or reviews which
compare us unfavorably to competitors could adversely affect consumer perception about our vehicles.
Our business depends substantially on the continuing efforts of our executive officers, key employees and qualified personnel,
and our operations may be severely disrupted if we lose their services.
Our success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our
executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them
easily, in a timely manner, or at all. As we build our brand and become more well-known, the risk that competitors or other companies
may poach our talent increases. Our industry is characterized by high demand and intense competition for talent and therefore we cannot
assure you that we will be able to attract or retain qualified staff or other highly skilled employees. In addition, because our electric
vehicles are based on a different technology platform than traditional ICE vehicles, individuals with sufficient training in electric vehicles
may not be available to hire, and we will need to expend significant time and expense training the employees we hire. We also require
sufficient talent in areas such as software development. Furthermore, as our company is relatively young, our ability to train and integrate
new employees into our operations may not meet the growing demands of our business, which may materially and adversely affect our
ability to grow our business and our results of operations.
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If any of our executive officers and key employees terminates his or her services with us, our business may be severely
disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional
expenses to recruit, train and retain qualified personnel. We have not obtained any “key person” insurance on our key personnel. If any of
our executive officers or key employees joins a competitor or forms a competing company, we may lose customers, know-how and key
professionals and staff members. To the extent permitted by laws, each of our executive officers and key employees has entered into an
employment agreement and a non-compete agreement with us. However, if any dispute arises between our executive officers or key
employees and us, the non-competition provisions contained in their non-compete agreements may not be enforceable, especially in
China, where these executive officers reside, on the ground that we have not provided adequate compensation to them for their non-
competition obligations, which is required under relevant PRC laws.
Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.
Demand for automobile sales depends to a large extent on general, economic, political and social conditions in a given market
and the introduction of new vehicles and technologies. As our business grows, economic conditions and trends will impact our business,
prospects and operating results as well.
Demand for our electric vehicles may also be affected by factors directly impacting automobile prices or the cost of purchasing
and operating automobiles, such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and
governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales,
which may result in further downward price pressure and adversely affect our business, prospects, financial condition and operating
results.
In addition, the demand for our vehicles and services will highly depend upon the adoption by consumers of new energy
vehicles in general and electric vehicles in particular. The market for new energy vehicles is still rapidly evolving, characterized by
rapidly changing technologies, competitive pricing and competitive factors, evolving government regulation and industry standards and
changing consumer demands and behaviors.
Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:
● perceptions about electric vehicle quality, safety, design, performance and cost, especially if adverse events or accidents
occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other
manufacturers;
● perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced
technology, including electric vehicle and regenerative braking systems;
● the limited range over which electric vehicles may be driven on a single battery charge and the speed at which batteries can
be recharged;
● the decline of an electric vehicle’s range resulting from deterioration over time in the battery’s ability to hold a charge;
● concerns about electric grid capacity and reliability;
● the availability of new energy vehicles, including plug-in hybrid electric vehicles;
● improvements in the fuel economy of the internal combustion engine;
● the availability of service for electric vehicles;
● the environmental consciousness of consumers;
● access to charging stations, standardization of electric vehicle charging systems and consumers’ perceptions about
convenience and cost to charge an electric vehicle;
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● the availability of tax and other governmental incentives to purchase and operate electric vehicles or future regulation
requiring increased use of nonpolluting vehicles;
● perceptions about and the actual cost of alternative fuel; and
● macroeconomic factors.
Any of the factors described above may cause current or potential customers not to purchase our electric vehicles and use our
services. If the market for electric vehicles does not develop as we expect or develops more slowly than we expect, our business,
prospects, financial condition and operating results will be affected.
We depend on revenue generated from a limited number of models and in the foreseeable future will be significantly dependent
on a limited number of models.
Our business currently depends substantially on the sales and success of a limited number of models that we have launched.
Historically, automobile customers have come to expect a variety of vehicle models offered in a manufacturer’s fleet and new and
improved vehicle models to be introduced frequently. In order to meet these expectations, we plan in the future to introduce on a regular
basis new vehicle models as well as enhance versions of existing vehicle models. To the extent our product variety and cycles do not
meet consumer expectations, or cannot be produced on our projected timelines and cost and volume targets, our future sales may be
adversely affected. Given that for the foreseeable future our business will depend on a single or limited number of models, to the extent a
particular model is not well-received by the market, our sales volume could be materially and adversely affected. This could have a
material adverse effect on our business, prospects, financial condition and operating results.
We are subject to risks related to customer credit.
We currently provide our users with the option of a battery payment arrangement, where users can make battery payments in
installments. For the ES8 ordered before January 15, 2019, there is an RMB100,000 reduction in the purchase price and users adopting
this arrangement pay RMB1,280 per month, payable over 78 months. For the ES8 and ES6 ordered after January 16, 2019, there is an
RMB100,000 reduction in the purchase price and users adopting this arrangement pay RMB1,660 per month, payable over 60 months.
We are exposed to the creditworthiness of our users since we expect them to make monthly payments for vehicle batteries under the
battery payment arrangement. To the extent our users fail to make payments on-time, our results of operations may be adversely affected.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to
successfully defend or insure against such claims.
We may become subject to product liability claims, which could harm our business, prospects, operating results and financial
condition. The automotive industry experiences significant product liability claims and we face inherent risk of exposure to claims in the
event our vehicles do not perform as expected or malfunction resulting in property damage, personal injury or death. Our risks in this
area are particularly pronounced given we have limited field experience of our vehicles. A successful product liability claim against us
could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity
about our vehicles and business and inhibit or prevent commercialization of our future vehicle candidates which would have a material
adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all
potential product liability claims. Any lawsuit seeking significant monetary damages may have a material adverse effect on our
reputation, business and financial condition.
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Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a
material adverse effect on our business and operating results.
All vehicles sold must comply with various standards of the market where the vehicles were sold. In China vehicles must meet
or exceed all mandated safety standards. Rigorous testing and the use of approved materials and equipment are among the requirements
for achieving such standards. Vehicles must pass various tests and undergo a certification process and be affixed with the CCC
certification, before receiving delivery from the factory, being sold, or being used in any commercial activity, and such certification is
also subject to periodic renewal. The seven-seater ES8 and the six-seater ES8 received the CCC certification in December 2017 and
January 2019, separately. The ES6 received the CCC certification in April 2019. The new ES8 received the CCC certification in
December 2019. The EC6 has not yet undergone the CCC certification but must be certified in the future prior to mass production. The
process of obtaining the CCC certification typically requires four to five months. We plan to complete this process and obtain the CCC
certification for the EC6 by September 2020. Furthermore, the government carries out the supervision and scheduled and unscheduled
inspection of certified vehicles on a regular basis. In the event that our certification fails to be renewed upon expiry, a certified vehicle
has a defect resulting in quality or safety accidents, or consistent failure of certified vehicles to comply with certification requirements is
discovered during follow-up inspections, the CCC may be suspended or even revoked. With effect from the date of revocation or during
suspension of the CCC, any vehicle that fails to satisfy the requirements for certification may not continue to be delivered, sold, imported
or used in any commercial activity. Failure by us to have the ES8, the ES6, the EC6 or any future model electric vehicle satisfy motor
vehicle standards would have a material adverse effect on our business and operating results.
We may be subject to risks associated with autonomous driving technology.
Through NIO Pilot, we provide enhanced Level 2 autonomous driving functionalities, and through our research and
development, we continuously update and improve our autonomous driving technology. Autonomous driving technologies are subject to
risks and from time to time there have been accidents associated with such technologies. The safety of such technologies depends in part
on user interaction and users may not be accustomed to using such technologies. To the extent accidents associated with our autonomous
driving systems occur, we could be subject to liability, government scrutiny and further regulation. Any of the foregoing could materially
and adversely affect our results of operations, financial condition and growth prospects.
We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and
financial performance.
Recalls of our vehicles can cause adverse publicity, damage to our brand and liability for costs. In June 2019, we identified
problems with certain battery packs on ES8 vehicles following safety incidents occurred in Shanghai and other locations in China. We
then voluntarily recalled 4,803 ES8s, and replaced the batteries in the NIO battery swap network equipped with the malfunctioned
modules. We undertook to compensate all users who had incurred property losses as a result of incidents caused by battery quality issues.
In the future, we may at various times, voluntarily or involuntarily, initiate a recall if any of our vehicles, including any systems or parts
sourced from our suppliers, prove to be defective or non-compliant with applicable laws and regulations. Such recalls, whether voluntary
or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could involve significant expense
and could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of
operations.
Our distribution model is different from the predominant current distribution model for automobile manufacturers, which makes
evaluating our business, operating results and future prospects difficult.
Our distribution model is not common in the automotive industry today, particularly in China. We plan to conduct vehicle sales
directly to users rather than through dealerships, primarily through our mobile application, NIO Houses and NIO Spaces. Furthermore,
generally all vehicles are made to order. This model of vehicle distribution is relatively new and unproven, especially in China, and
subjects us to substantial risk as it requires, in the aggregate, significant expenditures and provides for slower expansion of our
distribution and sales systems than may be possible by utilizing the traditional dealer franchise system. For example, we will not be able
to utilize long established sales channels developed through a franchise system to increase our sales volume. Moreover, we will be
competing with companies with well established distribution channels. Our success will depend in large part on our ability to effectively
develop our own sales channels and marketing strategies. Implementing our business model is subject to numerous significant
challenges, including obtaining permits and approvals from government authorities, and we may not be successful in addressing these
challenges.
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The lead time in fulfilling our orders could lead to cancelled orders. Our aim for the fulfilling speed is 21 to 28 days from the
order placement date to delivery to users. If we are unable to achieve this target, our customer satisfaction could be adversely affected,
harming our business and reputation.
Our financial results may vary significantly from period-to-period due to the seasonality of our business and fluctuations in our
operating costs.
Our operating results may vary significantly from period-to-period due to many factors, including seasonal factors that may
have an effect on the demand for our electric vehicles. Demand for new cars in the automotive industry in general typically declines over
the summer season, while sales are generally higher in the fourth quarter and spring time, especially from October to December and from
March to April each year. Our limited operating history makes it difficult for us to judge the exact nature or extent of the seasonality of
our business. Also, any unusually severe weather conditions in some markets may impact demand for our vehicles. Our operating results
could also suffer if we do not achieve revenue consistent with our expectations for this seasonal demand because many of our expenses
are based on anticipated levels of annual revenue.
We also expect our period-to-period operating results to vary based on our operating costs which we anticipate will increase
significantly in future periods as we, among other things, design, develop and manufacture our electric vehicles and electric powertrain
components, build and equip new manufacturing facilities to produce such components, open new NIO Houses and NIO Spaces, increase
our sales and marketing activities, and increase our general and administrative functions to support our growing operations.
As a result of these factors, we believe that period-to-period comparisons of our operating results are not necessarily meaningful
and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our operating results may not meet
expectations of equity research analysts or investors. If this occurs, the trading price of our ADSs could fall substantially either suddenly
or over time.
If our vehicle owners customize our vehicles or change the charging infrastructure with aftermarket products, the vehicle may
not operate properly, which may create negative publicity and could harm our business.
Automobile enthusiasts may seek to “hack” our vehicles to modify their performance which could compromise vehicle safety
systems. Also, customers may customize their vehicles with after-market parts that can compromise driver safety. We do not test, nor do
we endorse, such changes or products. In addition, the use of improper external cabling or unsafe charging outlets can expose our
customers to injury from high voltage electricity. Such unauthorized modifications could reduce the safety of our vehicles and any
injuries resulting from such modifications could result in adverse publicity which would negatively affect our brand and harm our
business, prospects, financial condition and operating results.
We are subject to risks related to the investment in NIO China.
On April 29, 2020, we entered into definitive agreements for investments with a group of investors, which we refer to as the
Hefei Strategic Investors in this annual report. The Hefei Strategic Investors will invest an aggregate of RMB7 billion in cash into NIO
(Anhui) Holding Co., Ltd., or NIO Anhui, the legal entity of NIO China wholly owned by us pre-investment. We will inject our core
businesses and assets in China, including vehicle research and development, supply chain, sales and services and NIO Power, or together
as the Asset Consideration, valued at RMB17.77 billion in total, into NIO China, and invest RMB4.26 billion in cash into NIO China.
Pursuant to the definitive agreements, NIO China will establish its headquarters in the Hefei Economic and Technological
Development Area, or the HETA, where our main manufacturing hub is located, for its business operation, research and development,
sales and services, supply chain and manufacturing functions. We will collaborate with the Hefei Strategic Investors and HETA to
develop NIO China’s business and to support the accelerated development of the smart electric vehicle sectors in Hefei in the future. Our
collaboration with the Hefei Strategic Investors and HETA and our investment in NIO China are subject to a number of risks, many of
which are beyond our control. If any of the risks materialize, the business of NIO China will be adversely affected, and will in turn affect
our business, results of operations and financial condition.
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In connection with this investment, NIO Anhui granted certain minority shareholders’ rights to the Hefei Strategic Investors,
including, among others, the right of first refusal, co-sale right, preemptive right, anti-dilution right, redemption right, liquidation
preference and conditional drag-along right. See “Item 4—Information on the Company—B. Business Overview—Certain Other
Cooperation Arrangements—Hefei Strategic Investors.” In particular, the Hefei Strategic Investors may require us to redeem the shares
of NIO Anhui they hold under various circumstances, including, among others, (i) NIO Anhui fails to complete a qualified initial public
offering within sixty (60) months after NIO Anhui receives all initial investment from the Hefei Strategic Investors; (ii) NIO Anhui fails
to submit an application for a qualified initial public offering within forty-eight (48) months after NIO Anhui receives all initial
investment from the Hefei Strategic Investors; (iii) shareholders of our company require us or our controlling person to redeem shares of
our company and result in a change of control of our company or NIO Anhui; (iv) we fail to inject the Asset Consideration into NIO
Anhui within one year after the closing of this investment, due to willful misconduct or negligence, or inject capital into NIO Anhui
before March 31, 2021; and (v) vehicles sales of NIO Anhui fall below 20,000 units for two consecutive years after NIO Anhui obtains
all initial investment from the Hefei Strategic Investors. If any of the triggering events of redemption occur, we will need substantial
capital to repurchase the shares of NIO Anhui held by the Hefei Strategic Investors. If we do not have adequate cash available or cannot
obtain additional financing, or our use of cash is restricted by applicable law, regulations or agreements governing our current or future
indebtedness, we may not be able to redeem shares of NIO Anhui when required under the Shareholders’ Agreement, which would
constitute an event of default under the Shareholders’ Agreement and subject us to liabilities. In addition, if the Hefei Strategic Investors
exercise their conditional drag-along rights and require us to sell our shares in NIO Anhui together with them to a third-party purchaser,
we may lose control in NIO Anhui, which will materially and adversely affect our operations in China. Furthermore, the Hefei Strategic
Investors have voting rights with respect to various significant corporate matters of NIO Anhui and its controlled entities, such as change
in NIO Anhui’s corporate structure, change of its core business and amendment to its articles of association, which may significantly
limit our ability to make certain major corporate decisions with regard to NIO Anhui.
Our business plans require a significant amount of capital. In addition, our future capital needs may require us to sell additional
equity or debt securities that may dilute our shareholders or introduce covenants that may restrict our operations or our ability to
pay dividends.
We will need significant capital to, among other things, conduct research and development and expand our production capacity
as well as roll out our charging and servicing network and our NIO Houses and NIO Spaces. As we ramp up our production capacity and
operations we may also require significant capital to maintain our property, plant and equipment and such costs may be greater than
anticipated. We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business, and that
our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a
limited operating history means we have limited historical data on the demand for our products and services. As a result, our future
capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We plan to
seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely
manner or on terms that are acceptable, or at all.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general
market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of
such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our
spending, delay or cancel our planned activities or substantially change our corporate structure. We might not be able to obtain any
funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be
forced to curtail or discontinue our operations.
In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or
obtain a credit facility. The sale of additional equity or equity-linked securities could dilute our shareholders. The incurrence of
indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict
our operations or our ability to pay dividends to our shareholders.
We retain certain information about our users and may be subject to various privacy and consumer protection laws.
We use our vehicles’ electronic systems to log information about each vehicle’s use, such as charge time, battery usage, mileage
and driving behavior, in order to aid us in vehicle diagnostics, repair and maintenance, as well as to help us customize and optimize the
driving and riding experience. Our users may object to the use of this data, which may harm our business. Possession and use of our
user’s driving behavior and data in conducting our business may subject us to legislative and regulatory burdens in China and other
jurisdictions that could require notification of any data breach, restrict our use of such information and hinder our ability to acquire new
customers or market to existing customers. If users allege that we have improperly released or disclosed their personal information, we
could face legal claims and reputational damage. We may incur significant expenses to comply with privacy, consumer protection and
security standards and protocols imposed by laws, regulations, industry standards or contractual obligations. If third parties improperly
obtain and use the personal information of our users, we may be required to expend significant resources to resolve these problems.
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Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm
our business and results of operations.
We face significant challenges with respect to information security and privacy, including the storage, transmission and sharing
of confidential information. We transmit and store confidential and private information of our car buyers, such as personal information,
including names, accounts, user IDs and passwords, and payment or transaction related information.
We are required by PRC law to ensure the confidentiality, integrity, availability and authenticity of the information of our users,
customers and distributors, which is also essential to maintaining their confidence in our vehicles and services. We have adopted strict
information security policies and deployed advanced measures to implement the policies, including, among others, advanced encryption
technologies. However, advances in technology, an increased level of sophistication and diversity of our products and services, an
increased level of expertise of hackers, new discoveries in the field of cryptography or others can still result in a compromise or breach
of the measures that we use. If we are unable to protect our systems, and hence the information stored in our systems, from unauthorized
access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to our
liabilities to the owners of confidential information or even subject us to fines and penalties. In addition, complying with various laws
and regulations could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a
manner adverse to our business.
In addition, we may need to comply with increasingly complex and rigorous regulatory standards enacted to protect business
and personal data in the U.S., Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation,
or the GDPR, which became effective on May 25, 2018. The GDPR imposes additional obligations on companies regarding the handling
of personal data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and
recently enacted laws (including implementation of the privacy and process enhancements called for under GDPR) and regulations can
be costly; any failure to comply with these regulatory standards could subject us to legal and reputational risks.
We generally comply with industry standards and are subject to the terms of our own privacy policies. Compliance with any
additional laws could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with
our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and
misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against
us by governmental entities or others, damage to our reputation and credibility and could have a negative impact on revenues and profits.
Significant capital and other resources may be required to protect against information security breaches or to alleviate problems
caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase
over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly
evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-
related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable
information or other customer data, could cause our customers to lose trust in us and could expose us to legal claims. Any perception by
the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could
inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.
Our warranty reserves may be insufficient to cover future warranty claims which could adversely affect our financial
performance.
For the initial owner of the ES8 and the ES6, we provide an extended warranty, subject to certain conditions. As required under
the relevant PRC law, we also provide (i) a bumper to bumper three-year or 120,000 kilometer warranty, (ii) for critical EV components
(battery pack, electrical motors, power electrical unit and vehicle control unit) an eight-year or 120,000 kilometer warranty, and (iii) a
two-year or 50,000 kilometer warranty covering vehicle repair, replacement and refund. Our warranty program is similar to other vehicle
manufacturer’s warranty programs intended to cover all parts and labor to repair defects in material or workmanship in the body, chassis,
suspension, interior, electric systems, battery, powertrain and brake system. We plan to record and adjust warranty reserves based on
changes in estimated costs and actual warranty costs. However, because we did not start making deliveries of the ES8 until June 2018
and of the ES6 until June 2019, we have little experience with warranty claims regarding our vehicles or with estimating warranty
reserves. As of December 31, 2019, we had warranty reserves in respect of our vehicles of RMB412 million (US$59.2 million). We
cannot assure you that such reserves will be sufficient to cover future claims. We could, in the future, become subject to a significant and
unexpected warranty claims, resulting in significant expenses, which would in turn materially and adversely affect our results of
operations, financial condition and prospects.
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We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would
cause us to incur substantial costs.
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary
rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our vehicles or components, which
could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents
or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging
infringement of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating
to our design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In
addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of
the following:
● cease selling, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use
the challenged intellectual property;
● pay substantial damages;
● seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable
terms or at all;
● redesign our vehicles or other goods or services; or
● establish and maintain alternative branding for our products and services.
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed
technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and
adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and
diversion of resources and management attention.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and
competitive position.
We regard our trademarks, service marks, patents, domain names, trade secrets, proprietary technologies and similar intellectual
property as critical to our success. We rely on trademark and patent law, trade secret protection and confidentiality and license
agreements with our employees and others to protect our proprietary rights.
We have invested significant resources to develop our own intellectual property. Failure to maintain or protect these rights could
harm our business. In addition, any unauthorized use of our intellectual property by third parties may adversely affect our current and
future revenues and our reputation.
Implementation and enforcement of PRC intellectual property-related laws have historically been deficient and ineffective.
Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries with
more developed intellectual property laws. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive.
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual
property rights. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our
intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized
use of our intellectual property is difficult and costly, and we cannot assure you that the steps we have taken or will take will prevent
misappropriation of our intellectual property. From time to time, we may have to resort to litigation to enforce our intellectual property
rights, which could result in substantial costs and diversion of our resources.
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As our patents may expire and may not be extended, our patent applications may not be granted and our patent rights may be
contested, circumvented, invalidated or limited in scope, our patent rights may not protect us effectively. In particular, we may not
be able to prevent others from developing or exploiting competing technologies, which could have a material and adverse effect
on our business operations, financial condition and results of operations.
As of December 31, 2019, we had 2,304 issued patents and 1,955 patent applications pending. For our pending application, we
cannot assure you that we will be granted patents pursuant to our pending applications. Even if our patent applications succeed and we
are issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented or invalidated in the
future. In addition, the rights granted under any issued patents may not provide us with meaningful protection or competitive advantages.
The claims under any patents that issue from our patent applications may not be broad enough to prevent others from developing
technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from
licensing and exploiting any patents that issue from our pending applications. Numerous patents and pending patent applications owned
by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might
have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may
claim priority, any of our existing or pending patents may also be challenged by others on the basis that they are otherwise invalid or
unenforceable.
We have limited insurance coverage, which could expose us to significant costs and business disruption.
We have limited liability insurance coverage for our products and business operations. A successful liability claim against us
due to injuries suffered by our users could materially and adversely affect our financial condition, results of operations and reputation. In
addition, we do not have any business disruption insurance. Any business disruption event could result in substantial cost to us and
diversion of our resources.
We have a significant amount of debt, including our convertible senior notes, that are senior in capital structure and cash flow,
respectively, to our shareholders. Satisfying the obligations relating to our debt could adversely affect the amount or timing of
distributions to our shareholders or result in dilution.
As of December 31, 2019, we had approximately US$1,027.7 million in total long-term borrowings outstanding, consisting
primarily of (i) our 4.50% convertible senior notes due 2024, or the 2024 Notes; (ii) our convertible senior notes issued in September
2019 to an affiliate of Tencent Holdings Limited and Mr. Bin Li, our chairman of the board of directors and chief executive officer, or the
Affiliate Notes; and (iii) our long-term bank debt. In February and March 2020, we issued and sold convertible notes in an aggregate
principal amount of US$435 million due 2021, or the 2021 Notes, to several unaffiliated Asia based investment funds. See “Item 4.
Information on the Company—A. History and Development of the Company.”
The 2024 Notes are unsecured debt and are not redeemable by us prior to the maturity date except for certain changes in tax law.
In accordance with the indenture governing the 2024 Notes, or the 2024 Notes Indenture, holders of the 2024 Notes may require us to
purchase all or any portion of their notes on February 1, 2022 at a repurchase price equal to 100% of the principal amount of the 2024
Notes to be repurchased, plus accrued and unpaid interest. Holders of the 2024 Notes may also require us, upon a fundamental change (as
defined in the 2024 Notes Indenture), to repurchase for cash all or part of their 2024 Notes at a fundamental change repurchase price
equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest.
Each of an affiliate of Tencent Holdings Limited and Mr. Bin Li, our chairman of the board of directors and chief executive
officer, subscribed for US$100 million principal amount of the Affiliate Notes, each in two equally split tranches. The Affiliate Notes
issued in the first tranche will mature in 360 days, bear no interest, and require us to pay a premium at 2% of the principal amount at
maturity. The Affiliate Notes issued in the second tranche will mature in three years, bear no interest, and require us to pay a premium at
6% of the principal amount at maturity. The 360-day Affiliate Notes will be convertible into our Class A ordinary shares (or ADSs) at a
conversion price of US$2.98 per ADS at the holder's option from the 15th day immediately prior to maturity, and the three-year
convertible notes will be convertible into our Class A ordinary shares (or ADSs) at a conversion price of US$3.12 per ADS at the
holder's option from the first anniversary of the issuance date. The holders of the three-year Affiliate Notes will have the right to require
us to repurchase for cash all of the convertible notes or any portion thereof on February 1, 2022.
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The 2021 Notes bear zero interest and will mature in the first quarter of 2021. Prior to maturity, the holders of the 2021 Notes
have the right to convert either all or part of the principal amount of the 2021 Notes into Class A ordinary shares (or ADSs) of our
company pursuant to conversion price and conditions as set forth in the respective convertible notes purchase agreements. In accordance
with the indenture governing the 2021 Notes, or the 2021 Notes Indenture, holders of the 2021 Notes may require us, upon a fundamental
change (as defined in the 2021 Notes Indenture), to repurchase for cash all or part of their 2021 Notes at a fundamental change
repurchase price equal to 100% of the principal amount of the 2021 Notes to be repurchased.
Satisfying the obligations of all these long-term liabilities could adversely affect the amount or timing of any distributions to our
shareholders. We may choose to satisfy, repurchase, or refinance any of these long-term liabilities through public or private equity or debt
financings if we deem such financings available on favorable terms. If we do not have adequate cash available or cannot obtain
additional financing, or our use of cash is restricted by applicable law, regulations or agreements governing our current or future
indebtedness, we may not be able to repurchase any of these notes when required under the respective transaction documents, which
would constitute an event of default under the respective transaction documents. An event of default could also lead to a default under
other agreements governing our current and future indebtedness, and if the repayment of such other indebtedness were accelerated, we
may not have sufficient funds to repay the indebtedness and repurchase any of these notes or make cash payments upon conversion of
any of these notes. In addition, the holders of any of these notes may convert their notes to a number of our ADSs in accordance with the
respective transaction documents. Any conversion will result in immediate dilution to the ownership interests of existing shareholders
and such dilution could be material.
We may seek to obtain future financing through the issuance of debt or equity, which may have an adverse effect on our
shareholders or may otherwise adversely affect our business.
If we raise funds through the issuance of additional equity or debt, including convertible debt or debt secured by some or all of
our assets, holders of any debt securities or preferred shares issued will have rights, preferences and privileges senior to those of holders
of our ordinary shares in the event of liquidation. The terms of the convertible notes we issued do not restrict our ability to issue
additional debt. If additional debt is issued, there is a possibility that once all senior claims are settled, there may be no assets remaining
to pay out to the holders of ordinary shares. In addition, if we raise funds through the issuance of additional equity, whether through
private placements or public offerings, such an issuance would dilute ownership of our current shareholders that do not participate in the
issuance. If we are unable to obtain any needed additional funding, we may be required to reduce the scope of, delay, or eliminate some
or all of, our planned research, development, manufacturing and marketing activities, any of which could materially harm our business.
Furthermore, the terms of any additional debt securities we may issue in the future may impose restrictions on our operations,
which may include limiting our ability to incur additional indebtedness, pay dividends on or repurchase our share capital, or make certain
acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios, and our
ability to satisfy such covenants may be affected by events outside of our control.
The terms of the convertible notes we issued could delay or prevent an attempt to take over our company.
The terms of the 2024 Notes, Affiliate Notes and 2021 Notes require us to repurchase the respective Notes in the event of a
fundamental change. A takeover of our company would constitute a fundamental change. This could have the effect of delaying or
preventing a takeover of our company that may otherwise be beneficial to our shareholders.
We are or may be subject to risks associated with strategic alliances or acquisitions.
We have entered into and may in the future enter into strategic alliances, including joint ventures or minority equity
investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of
risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in
establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to
monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm
to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our
association with any such third party.
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In addition, although we have no current acquisition plans, if appropriate opportunities arise, we may acquire additional assets,
products, technologies or businesses that are complementary to our existing business. In addition to possible shareholder approval, we
may have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable
PRC laws and regulations, which could result in increased delay and costs, and may derail our business strategy if we fail to do so.
Furthermore, past and future acquisitions and the subsequent integration of new assets and businesses into our own require significant
attention from our management and could result in a diversion of resources from our existing business, which in turn could have an
adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could
result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill
impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired
business. Moreover, the costs of identifying and consummating acquisitions may be significant.
If we fail to manage our growth effectively, we may not be able to market and sell our vehicles successfully.
We have expanded our operations, and as we ramp up our production, further significant expansion will be required, especially
in connection with potential increased sales, providing our users with high-quality servicing, providing charging solutions, expansion of
our NIO House and NIO Space network and managing different models of vehicles. Our future operating results depend to a large extent
on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this expansion include, among others:
● managing a larger organization with a greater number of employees in different divisions;
● controlling expenses and investments in anticipation of expanded operations;
● establishing or expanding design, manufacturing, sales and service facilities;
● implementing and enhancing administrative infrastructure, systems and processes; and
● addressing new markets and potentially unforeseen challenges as they arise.
Any failure to manage our growth effectively could materially and adversely affect our business, prospects, results of operations
and financial condition.
We have granted, and may continue to grant options and other types of awards under our share incentive plan, which may result
in increased share-based compensation expenses.
We adopted share incentive plans in 2015, 2016, 2017 and 2018, which we refer to as the 2015 Plan, the 2016 Plan, the 2017
Plan and the 2018 Plan, respectively, in this annual report, for the purpose of granting share-based compensation awards to employees,
directors and consultants to incentivize their performance and align their interests with ours. The 2018 Plan became effective as of
January 1, 2019. We recognize expenses in our consolidated statement of income in accordance with U.S. GAAP. Under our share
incentive plans, we are authorized to grant options and other types of awards. Under the 2015 Plan, the 2016 Plan and the 2017 Plan, the
maximum numbers of Class A ordinary shares which may be issued pursuant to all awards are 46,264,378, 18,000,000 and 33,000,000,
respectively. Under the 2018 Plan, a maximum number of 23,000,000 Class A ordinary shares may be issued pursuant to all awards. This
amount should automatically increase each year by the number of shares representing 1.5% of the then total issued and outstanding share
capital of our company as of the end of each preceding year. As of December 31, 2019, awards to purchase an aggregate amount of
88,843,972 Class A ordinary shares under the 2015 Plan, the 2016 Plan, the 2017 Plan and the 2018 Plan had been granted and were
outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates. As of December 31, 2019, our unrecognized
share-based compensation expenses amounted to RMB359.3 million (US$51.6 million).
We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and
employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with
share-based compensation may increase, which may have an adverse effect on our results of operations.
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Furthermore, perspective candidates and existing employees often consider the value of the equity awards they receive in
connection with their employment. Thus, our ability to attract or retain highly skilled employees may be adversely affected by declines in
the perceived value of our equity or equity awards. Furthermore, there are no assurances that the number of shares reserved for issuance
under our share incentive plans will be sufficient to grant equity awards adequate to recruit new employees and to compensate existing
employees.
If we do not appropriately maintain effective internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, we may be unable to accurately report our financial results and the market price of our ADSs may
be adversely affected.
We are subject to reporting obligations under the U.S. securities laws. The SEC, as required under Section 404 of the Sarbanes-
Oxley Act of 2002, adopted rules requiring every public company to include a management report on such company’s internal control
over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal
control over financial reporting. We were subject to such requirement starting from fiscal year 2019. In addition, an independent
registered public accounting firm must attest to and report on the effectiveness of the company’s internal control over financial reporting.
Our internal controls relating to financial reporting have not kept pace with the expansion of our business. Our financial
reporting function and system of internal controls are less developed in certain respects than those of similar companies that operate in
fewer or more developed markets and may not provide our management with as much or as accurate or timely information. The U.S.
Public Company Accounting Oversight Board, or the PCAOB, has defined a material weakness as “a deficiency, or a combination of
deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the
annual or interim statements will not be prevented or detected on a timely basis.”
In connection with the preparation and external audit of our consolidated financial statements as of and for the year ended
December 31, 2019, we and our independent registered public accounting firm identified one material weakness in our internal control
over financial reporting and concluded that our internal control over financial reporting was ineffective as of December 31, 2019. The
material weakness identified was that we do not have sufficient competent financial reporting and accounting personnel with an
appropriate understanding of U.S. GAAP to (i) design and implement formal period-end financial reporting policies and procedures to
address complex U.S. GAAP technical accounting issues and (ii) prepare and review our consolidated financial statements and related
disclosures in accordance with U.S. GAAP and the financial reporting requirements set forth by the Securities and Exchange
Commission, or the SEC.
As a result of the identification of this material weakness, we have been taking measures to remedy this control deficiency.
However, we can give no assurance that the implementation of these measures will be sufficient to eliminate such material weakness or
that material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future. Our
failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that
could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose
confidence in our reported financial information, which may result in volatility in and a decline in the market price of the ADSs.
If our suppliers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be
harmed due to negative publicity.
Our core values, which include developing high quality electric vehicles while operating with integrity, are an important
component of our brand image, which makes our reputation sensitive to allegations of unethical business practices. We do not control our
independent suppliers or their business practices. Accordingly, we cannot guarantee their compliance with ethical business practices,
such as environmental responsibilities, fair wage practices, and compliance with child labor laws, among others. A lack of demonstrated
compliance could lead us to seek alternative suppliers, which could increase our costs and result in delayed delivery of our products,
product shortages or other disruptions of our operations.
Violation of labor or other laws by our suppliers or the divergence of an independent supplier’s labor or other practices from
those generally accepted as ethical in the markets in which we do business could also attract negative publicity for us and our brand. This
could diminish the value of our brand image and reduce demand for our electric vehicles if, as a result of such violation, we were to
attract negative publicity. If we, or other manufacturers in our industry, encounter similar problems in the future, it could harm our brand
image, business, prospects, results of operations and financial condition.
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If we update our manufacturing equipment more quickly than expected, we may have to shorten the useful lives of any
equipment to be retired as a result of any such update, and the resulting acceleration in our depreciation could negatively affect
our financial results.
We and JAC have invested and expect to continue to invest significantly in what we believe is state of the art tooling, machinery
and other manufacturing equipment for the product lines where the vehicles are manufactured, and we depreciate the cost of such
equipment over their expected useful lives. However, manufacturing technology may evolve rapidly, and we or JAC may decide to
update our manufacturing process with cutting-edge equipment more quickly than expected. Moreover, as our engineering and
manufacturing expertise and efficiency increase, we or JAC may be able to manufacture our products using less of our installed
equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such
equipment to be accelerated, and to the extent we own such equipment, our results of operations could be negatively impacted.
The construction and operation of our manufacturing facilities are subject to regulatory approvals or filings and may be subject
to changes, delays, cost overruns or may not produce expected benefits.
In 2017, we signed a framework agreement with the Shanghai Jiading government and its authorized investment entity to build
and develop our own manufacturing facility in Jiading, Shanghai. In 2019, we agreed with the related contractual parties to cease
construction of this planned manufacturing facility and terminate this development project, due to government policies that allow
collaborative manufacturing between traditional automotive manufacturers and companies with a focus on research, development and
design of new energy vehicles.
In February 2020, we entered into a collaboration framework agreement with the municipal government of Hefei, Anhui
province, where our main manufacturing hub is located. On April 29, 2020, we entered into definitive agreements for investments in NIO
China with the Hefei Strategic Investors. Pursuant to the definitive agreements, we will collaborate with the Hefei Strategic Investors and
HETA to develop NIO China's business and to support the accelerated development of the smart electric vehicle sectors in Hefei in the
future.
Under PRC law, construction projects are subject to broad and strict government supervision and approval procedures, including
but not limited to project approvals and filings, construction land and project planning approvals, environment protection approvals,
pollution discharge permits, work safety approvals, fire protection approvals, and the completion of inspection and acceptance by
relevant authorities. Some of the construction projects being carried out by us are undergoing necessary approval procedures as required
by law. As a result, the relevant entities operating such construction projects may be subject to administrative uncertainty, and
construction projects in question may be subject to fines or the suspension of use of such projects. Failure to complete the construction
projects on schedule and within budget, and failure to obtain necessary approvals or any incompliance with relevant government
supervision could have a material adverse impact on our operations, and we may not be able to find commercially reasonable
alternatives.
Our vehicles make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.
The battery packs that we produce make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the
energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. In June
2019, certain safety incidents resulting from the battery packs on ES8 vehicles occurred in Shanghai and other locations in China. We
then voluntarily recalled 4,803 ES8s, and replaced the batteries in the NIO battery swap network equipped with the malfunctioned
modules. While we have designed the battery pack to passively contain any single cell’s release of energy without spreading to
neighboring cells, and have taken measures to enhance the safety of our battery designs, a field or testing failure of our vehicles or other
battery packs that we produce could occur in the future, which could subject us to lawsuits, product recalls, or redesign efforts, all of
which would be time-consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for
automotive applications or any future incident involving lithium-ion cells such as a vehicle or other fire, even if such incident does not
involve our vehicles, could seriously harm our business.
In addition, we store a significant number of lithium-ion cells at our facilities. Any mishandling of battery cells may cause
disruption to the operation of our facilities. While we have implemented safety procedures related to the handling of the cells, a safety
issue or fire related to the cells could disrupt our operations. Such damage or injury could lead to adverse publicity and potentially a
safety recall. Moreover, any failure of a competitor’s electric vehicle or energy storage product may cause indirect adverse publicity for
us and our products. Such adverse publicity could negatively affect our brand and harm our business, prospects, financial condition and
operating results.
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Interruption or failure of our information technology and communications systems could impact our ability to effectively provide
our services.
We aim to provide our users with an innovative suite of services through our mobile application. In addition, our in-car services
depend, to a certain extent, on connectivity. The availability and effectiveness of our services depend on the continued operation of our
information technology and communications systems. Our systems are vulnerable to damage or interruption from, among other adverse
effects, fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service
attacks or other attempts to harm our systems. Our data centers are also subject to break-ins, sabotage, and intentional acts of vandalism,
and to potential disruptions. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all
eventualities. Any problems at our data centers could result in lengthy interruptions in our service. In addition, our products and services
are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our services or the
failure of our systems.
We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and
non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences,
remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition
and reputation.
We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and
regulations in various jurisdictions in which we conduct activities, including the U.S. Foreign Corrupt Practices Act, or FCPA, the U.K.
Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit us and our officers,
directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or
providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or
otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that
accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K.
Bribery Act also prohibits non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or
regulations could adversely affect our business, results of operations, financial condition and reputation.
We have direct or indirect interactions with officials and employees of government agencies and state-owned affiliated entities
in the ordinary course of business. We have also entered into joint ventures and/or other business partnerships with government agencies
and state-owned or affiliated entities. These interactions subject us to an increased level of compliance-related concerns. We are in the
process of implementing policies and procedures designed to ensure compliance by us and our directors, officers, employees,
representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial
and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient and our directors,
officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be
held responsible.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could
subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions,
collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of
operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our
business and investments in our shares.
Any unauthorized control or manipulation of our vehicles’ systems could result in loss of confidence in us and our vehicles and
harm our business.
Our vehicles contain complex information technology systems. For example, our vehicles are designed with built-in data
connectivity to accept and install periodic remote updates from us to improve or update the functionality of our vehicles. We have
designed, implemented and tested security measures intended to prevent unauthorized access to our information technology networks,
our vehicles and their systems. However, hackers may attempt in the future, to gain unauthorized access to modify, alter and use such
networks, vehicles and systems to gain control of, or to change, our vehicles’ functionality, user interface and performance
characteristics, or to gain access to data stored in or generated by the vehicle. Vulnerabilities could be identified in the future and our
remediation efforts may not be successful. Any unauthorized access to or control of our vehicles or their systems or any loss of data
could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, their
systems or data, as well as other factors that may result in the perception that our vehicles, their systems or data are capable of being
“hacked”, could negatively affect our brand and harm our business, prospects, financial condition and operating results.
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Our revenues and financial results may be adversely affected by any economic slowdown in China as well as globally.
The success of our business ultimately depends on consumer spending. We derive substantially all of our revenues from China.
As a result, our revenues and financial results are impacted to a significant extent by economic conditions in China and globally. The
global macroeconomic environment is facing numerous challenges. The growth rate of the Chinese economy has gradually slowed since
2010 and the trend may continue. Any slowdown could significantly reduce domestic commerce in China, including through the internet
generally and through us. In addition, there is considerable uncertainty over the long-term effects of the expansionary monetary and
fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United
States and China. Unrest, terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility
across the globe. There have also been concerns about the relationship between China and other countries, including the surrounding
Asian countries, which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship
between the United States and China with respect to trade policies, treaties, government regulations and tariffs. In addition, the COVID-
19 pandemic has negatively impacted the economies of China, the United States and numerous other countries around the world, and is
expected to result in a severe global recession. Economic conditions in China are sensitive to global economic conditions, as well as
changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or
prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and
financial condition.
Sales of high-end and luxury consumer products, such as our performance electric vehicles, depend in part on discretionary
consumer spending and are even more exposed to adverse changes in general economic conditions. In response to their perceived
uncertainty in economic conditions, consumers might delay, reduce or cancel purchases of our electric vehicles and our results of
operations may be materially and adversely affected.
Shutdowns of the U.S. federal government could materially impair our business and financial condition.
Development of our product candidates and/or regulatory approval may be delayed for reasons beyond our control. For
example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the SEC,
have had to furlough critical SEC and other government employees and stop critical activities. In our operations as a public company,
future government shutdowns could impact our ability to access the public markets, such as through delaying the declaration of
effectiveness of registration statements, and obtain necessary capital in order to properly capitalize and continue our operations.
Changes in U.S. and international trade policies, particularly with regard to China, may adversely impact our business and
operating results.
The U.S. government has made statements and taken certain actions that may lead to potential changes to U.S. and international
trade policies towards China. In January 2020, the “Phase One” agreement was signed between the United States and China on trade
matters. However, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to
international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, or
other trade matters. While we intend to sell our vehicles only in China in the near future, tariffs could potentially impact our raw material
prices. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular,
if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse
effect on our business, financial condition and results of operations.
Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital.
In recent years, the United States and global economies suffered dramatic downturns as the result of a deterioration in the credit
markets and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security
prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others.
The United States and certain foreign governments have taken unprecedented actions in an attempt to address and rectify these extreme
market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments
are not successful, the return of adverse economic conditions may cause a significant impact on our ability to raise capital, if needed, on
a timely basis and on acceptable terms or at all.
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There are uncertainties relating to our users trust arrangement involving a portion of our chairman’s shareholding in our
company.
Mr. Bin Li, our chairman and chief executive officer, has transferred 189,253 Class A ordinary shares and 49,810,747 Class C
ordinary shares to a trust after the completion of the initial public offering of our ADSs on the New York Stock Exchange in
September 2018. After such share transfer, he continues to retain the voting rights of these shares, but plans to let NIO users discuss
and propose how to use the economic interests of these shares at certain points in the future, through certain mechanisms still to be
implemented. Mr. Li hopes this trust arrangement will help deepen our relationship with users. However, we are still exploring the
appropriate mechanisms for letting NIO users discuss the use of the economic interests of the shares. There is no assurance that such
mechanisms will be adopted to our users’ satisfaction, or at all. Furthermore, depending on the proposed use of the economic
interests of the shares in the future, there could be accounting implications to us, which implications we cannot presently ascertain.
We and certain of our directors and officers have been named as defendants in several shareholder class action lawsuits, which
could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.
Several putative shareholder class action lawsuits have been filed against us and certain of our directors and officers. See
“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings” for more details.
Additional complaints related to these claims may be filed in the coming months. We are currently unable to estimate the potential loss, if
any, associated with the resolution of such lawsuits, if they proceed. We anticipate that we will continue to be a target for lawsuits in the
future, including putative class action lawsuits brought by shareholders. There can be no assurance that we will be able to prevail in our
defense or reverse any unfavorable judgment on appeal, and we may decide to settle lawsuits on unfavorable terms. Any adverse
outcome of these cases, including any plaintiffs’ appeal of the judgment in these cases, could result in payments of substantial monetary
damages or fines, or changes to our business practices, and thus have a material adverse effect on our business, financial condition,
results of operation, cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of
the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of our cash
resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We
also may be subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims
may have on our business or financial results.
Risks Related to Our Corporate Structure
If the PRC government deems that our contractual arrangements with our variable interest entities do not comply with PRC
regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing
regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those
operations.
According to the Guidance Catalogue of Industries for Foreign Investment promulgated in 2017, or the Catalogue, promulgated
by the MOFCOM and the NDRC, foreign ownership of certain areas of businesses is subject to restrictions under current PRC laws and
regulations. For example, under the Catalogue, foreign investors are not allowed to own more than 50% of the equity interests in a value-
added telecommunication service provider (except e-commerce) or in a vehicle manufacturer which manufactures the whole vehicle. The
Catalogue was amended by the 2018 Negative List, which came into effect on July 28, 2018, and was further replaced by the 2019
Negative List, which came into effect on July 30, 2019 and contains the same lifting of restrictions on foreign investment in NEVs
manufacturers as the 2018 Negative List.
We are a Cayman Islands company and our PRC subsidiaries are considered foreign-invested enterprises. To comply with the
Catalogue before it is amended by the 2018 Negative List, we had planned to conduct certain operations that were then subject to
restrictions on foreign investment under the Catalogue in China through Shanghai NIO Energy Automobile Co., Ltd., or NIO New
Energy. NIO Co., Ltd. Owns 50% equity interests in NIO New Energy. Our founders Bin Li and Lihong Qin, through holding equity
interests in Shanghai Anbin Technology Co., Ltd. Indirectly own 40% and 10%, respectively, of the equity interests in NIO New Energy.
With respect to the 50% equity interests of NIO New Energy indirectly held by the founders, we have entered into a series of contractual
arrangements with Shanghai Anbin Technology Co., Ltd., or Shanghai Anbin, and its shareholders, which enable us to (i) ultimately
exercise effective control over such 50% equity interests of NIO New Energy, (ii) receive 50% of substantially all of the economic
benefits and bear the obligation to absorb 50% of substantially all of the losses of NIO New Energy, and (iii) have an exclusive option to
purchase all or part of the equity interests in Shanghai Anbin when and to the extent permitted by PRC laws, as a result of which we will
indirectly own all or part of such 50% equity interests in NIO New Energy. Because of the ownership of 50% equity interests of NIO
New Energy and these contractual arrangements, we are the primary beneficiary of NIO New Energy and hence consolidate its
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financial results as our variable interest entity under U.S. GAAP. In addition, to comply with the Catalogue (as amended by the 2018
Negative List), we have also entered into a series of contractual arrangements with Beijing NIO Network Technology Co., Ltd., or
Beijing NIO, and its shareholders that enable us to hold all the required Internet content provision service, or the ICP, and related licenses
in China. For a detailed description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational
Structure—Contractual Agreements with the VIEs and their respective shareholders.”
In the opinion of Han Kun Law Offices, our PRC legal counsel, (i) the ownership structures of NIO Co., Ltd. And our variable
interest entities in China do not result in any violation of PRC laws and regulations currently in effect; and (ii) the contractual
arrangements between our wholly-owned subsidiary NIO Co., Ltd., our variable interest entities and their respective shareholders
governed by PRC laws will not result in any violation of PRC laws or regulations currently in effect. However, we have been advised by
our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws,
regulations and rules, and there can be no assurance that the PRC regulatory authorities will take a view that is consistent with the
opinion of our PRC legal counsel. See “Item 4. Information on the Company—B. Business Overview—Regulation—PRC Regulations—
Foreign Investment Law” and “—Regulation—Regulations on Foreign Investment in China” and “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—Our business may be significantly affected by the Foreign Investment Law.” It is
uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they
would provide.
If the ownership structure, contractual arrangements and businesses of our PRC subsidiaries or our variable interest entities are
found to be in violation of any existing or future PRC laws or regulations, or our PRC subsidiaries or our variable interest entities fail to
obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take
action in dealing with such violations or failures, including:
● revoking the business licenses and/or operating licenses of such entities;
● shutting down our servers or blocking our website, or discontinuing or placing restrictions or onerous conditions on our
operation through any transactions between our PRC subsidiaries and variable interest entities;
● imposing fines, confiscating the income from our PRC subsidiaries or our variable interest entities, or imposing other
requirements with which we or our variable interest entities may not be able to comply;
● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with
our variable interest entities and deregistering the equity pledge of our variable interest entities, which in turn would affect
our ability to consolidate, derive economic interests from, or exert effective control over our variable interest entities; or
● restricting or prohibiting our use of the proceeds of any financing outside China to finance our business and operations in
China, and taking other regulatory or enforcement actions that could be harmful to our business.
Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which
would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences
results in our inability to direct the activities of our variable interest entities that most significantly impact their economic performance,
and/or our failure to receive the economic benefits from our variable interest entities, we may not be able to consolidate the entities in
our consolidated financial statements in accordance with U.S. GAAP.
We rely on contractual arrangements with our variable interest entities and their shareholders to exercise control over our
business, which may not be as effective as direct ownership in providing operational control.
We have relied and expect to continue to rely on contractual arrangements with Shanghai Anbin and Beijing NIO and their
respective shareholders to conduct a portion of our operations in China. For a description of these contractual arrangements, see “Item 4.
Information on the Company—C. Organizational Structure—Contractual Agreements with the VIEs and their respective shareholders.”
The respective shareholders of Shanghai Anbin and Beijing NIO may not act in the best interests of our company or may not perform
their obligations under these contracts. If we had direct ownership of our variable interest entities, or VIEs, we would be able to exercise
our rights as a shareholder to control our VIEs to exercise rights of shareholders to effect changes in the board of directors of our VIEs,
which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.
However, under the contractual arrangements, we would rely on legal remedies under PRC law for breach of contract in the event that
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Shanghai Anbin and Beijing NIO and their respective shareholders did not perform their obligations under the contracts. These legal
remedies may not be as effective as direct ownership in providing us with control over Shanghai Anbin and Beijing NIO.
If Shanghai Anbin or Beijing NIO or their respective shareholders fail to perform their obligations under the contractual
arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements, and rely on legal
remedies under PRC laws, including contractual remedies, which may not be sufficient or effective. All of the agreements under our
contractual arrangements are governed by and interpreted in accordance with PRC laws, and disputes arising from these contractual
arrangements will be resolved through arbitration in China. However, the legal framework and system in China, in particularly those
relating to arbitration proceedings, are not as developed as in some other jurisdictions, such as the United States. As a result,
uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few
precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted
or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action
become necessary. In addition, under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and
if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the
arbitration awards in the PRC courts through arbitration award recognition proceedings, which would require additional expenses and
delay. If we are unable to enforce these contractual arrangements, or if we suffer significant delay or face other obstacles in the process of
enforcing these contractual arrangements, we may not be able to exert effective control over our variable interest entities, and our ability
to conduct our business may be negatively affected. See “Item 3. Key Information——D. Risk Factors—Risks Related to Doing
Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections
available to you and us.”
Our ability to enforce the equity pledge agreements between us and our PRC variable interest entities’ shareholders may be
subject to limitations based on PRC laws and regulations.
Pursuant to the equity interest pledge agreements between Shanghai Anbin and Beijing NIO, our variable interest entities, and
NIO Co., Ltd., our wholly-owned PRC subsidiary, and the respective shareholders of Shanghai Anbin and Beijing NIO, each shareholder
of Shanghai Anbin and Beijing NIO agrees to pledge its equity interests in Shanghai Anbin and Beijing NIO to our subsidiary to secure
Shanghai Anbin and Beijing NIO’s performance of its obligations under the relevant contractual arrangements. The equity interest
pledges of shareholders of each of Beijing NIO and Shanghai Anbin under its equity interests pledge agreement have been registered
with the relevant local branch of State Administration for Market Regulation, or the SAMR. In addition, in the registration forms of the
local branch of the SAMR for the pledges over the equity interests under the equity interest pledge agreements, the aggregate amount of
registered equity interests pledged to NIO Co., Ltd. Represents 100% of the registered capital of Shanghai Anbin and Beijing NIO. The
equity interest pledge agreements with our variable interest entities’ shareholders provide that the pledged equity interests shall constitute
continuing security for any and all of the indebtedness, obligations and liabilities under all of the principal service agreements and the
scope of pledge shall not be limited by the amount of the registered capital of that variable interest entity. However, a PRC court may
take the position that the amount listed on the equity pledge registration forms represents the full amount of the collateral that has been
registered and perfected. If this is the case, the obligations that are supposed to be secured in the equity interest pledge agreements in
excess of the amount listed on the equity pledge registration forms could be determined by the PRC court as unsecured debt, which
typically takes last priority among creditors.
The shareholders of our variable interest entities may have potential conflicts of interest with us, which may materially and
adversely affect our business and financial condition.
Our founders, Bin Li and Lihong Qin, own 80% and 20%, respectively, of the equity interests in our variable interest entities,
Shanghai Anbin and Beijing NIO. As shareholders of Shanghai Anbin and Beijing NIO, they may have potential conflicts of interest
with us. These shareholders may breach, or cause our variable interest entities to breach, or refuse to renew, the existing contractual
arrangements we have with them and our variable interest entities, which would have a material and adverse effect on our ability to
effectively control our variable interest entities and receive economic benefits from them. For example, the shareholders may be able to
cause our agreements with Shanghai Anbin and Beijing NIO to be performed in a manner adverse to us by, among other things, failing to
remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest
arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.
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Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our
company. Each of Bin Li and Lihong Qin is also a director and executive officer of our company. We rely on Bin Li and Lihong Qin to
abide by the laws of the Cayman Islands and China, which provide that directors owe a fiduciary duty to the company that requires them
to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gain. There
is currently no specific and clear guidance under PRC laws that addresses any conflict between PRC laws and the laws of Cayman
Islands in respect of any conflict relating to corporate governance. If we cannot resolve any conflict of interest or dispute between us and
the shareholders of Shanghai Anbin and Beijing NIO, we would have to rely on legal proceedings, which could result in disruption of our
business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
Our contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities and they
may determine that we or our variable interest entities owe additional taxes, which could negatively affect our financial
condition.
Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or
challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC Enterprise
Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on
transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if
they have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse
tax consequences if the PRC tax authorities determine that the contractual arrangements between NIO Co., Ltd., our wholly-owned
subsidiary in China, Shanghai Anbin and Beijing NIO, our variable interest entities in China, and Shanghai Anbin and Beijing NIO’s
shareholders were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under
applicable PRC laws, rules and regulations, and adjust Shanghai Anbin and Beijing NIO’s income in the form of a transfer pricing
adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by Shanghai
Anbin and Beijing NIO for PRC tax purposes, which could in turn increase their tax liabilities without reducing NIO Co., Ltd.’s tax
expenses. In addition, if NIO Co., Ltd. Requests the shareholders of Shanghai Anbin and Beijing NIO to transfer their equity interests in
NIO Co., Ltd. At nominal or no value pursuant to the contractual agreements, such transfer could be viewed as a gift and subject NIO
Co., Ltd. To PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on Shanghai Anbin
and Beijing NIO for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and
adversely affected if either of our variable interest entities’ tax liabilities increase or if either is required to pay late payment fees and
other penalties.
We may lose the ability to use and benefit from assets held by our variable interest entities that are material to the operation of
our business if either of our variable interest entities goes bankrupt or becomes subject to dissolution or liquidation proceedings.
As part of our contractual arrangements with our variable interest entities, these entities may in the future hold certain assets that
are material to the operation of our business. If either of our variable interest entities goes bankrupt and all or part of their assets become
subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could
materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, our
variable interest entities may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the
business without our prior consent. If either of our variable interest entities undergoes voluntary or involuntary liquidation proceedings,
unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which
could materially and adversely affect our business, financial condition and results of operations.
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Risks Related to Doing Business in China
Changes in China’s political or social conditions or government policies could have a material and adverse effect on our business
and results of operations.
Substantially all of our revenues are expected to be derived in China in the near future and most of our operations, including all
of our manufacturing, is conducted in China. Accordingly, our results of operations, financial condition and prospects are influenced by
economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many
respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. The PRC government exercises significant control over China’s economic growth through
strategically allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and
providing preferential treatment to particular industries or companies. While the PRC economy has experienced significant growth over
the past decades, that growth has been uneven across different regions and between economic sectors and may not continue, as evidenced
by the slowing of the growth of the Chinese economy since 2012. Any adverse changes in economic conditions in China, in the policies
of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth
of China. Such developments could adversely affect our business and operating results, leading to reduction in demand for our services
and solutions and adversely affect our competitive position.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to
you and us.
The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may
be cited for reference but have limited precedential value.
Our PRC subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign-invested
enterprises as well as various Chinese laws and regulations generally applicable to companies incorporated in China. However, since
these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws,
regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since
PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it
may be more difficult to evaluate the outcome of administrative and court proceedings and the level of protection we enjoy than in more
developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which
are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we may not be aware of our violation of
any of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of
our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory
environment in China could materially and adversely affect our business and impede our ability to continue our operations.
Our business may be significantly affected by the newly enacted Foreign Investment Law.
On March 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which has become effective on
January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the PRC Equity Joint Venture Law,
the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and
ancillary regulations. Since the Foreign Investment Law is newly enacted, uncertainties still exist in relation to its interpretation and
implementation. The Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled via
contractual arrangements would be deemed as foreign invested enterprises if they are ultimately “controlled” by foreign investors.
However, it has a catch-all provision under definition of “foreign investment” to include investments made by foreign investors in China
through means stipulated by laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves
leeway for future laws, administrative regulations or provisions to provide for contractual arrangements as a form of foreign investment.
There can be no assurance that our contractual arrangements will not be deemed to be in violation of the market access requirements for
foreign investment under the PRC laws and regulations.
The Foreign Investment Law grants national treatment to foreign invested entities, except for those foreign invested entities that
operate in industries deemed to be either “restricted” or “prohibited” in the “negative list” to be published. Because the “negative list”
has yet been published, it is unclear as to whether it will differ from the 2019 Negative List currently in effect. The Foreign Investment
Law provides that only foreign invested entities operating in foreign restricted or prohibited industries will require entry
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clearance and other approvals that are not required by PRC domestic entities or foreign invested entities operating in other industries. In
the event that our variable interest entities through which we operate our business are not treated as domestic investment and our
operations carried out through such variable interest entities are classified in the “restricted” or “prohibited” industry in the “negative
list” under the Foreign Investment Law, such contractual arrangements may be deemed as invalid and illegal, and we may be required to
unwind such contractual arrangements and/or dispose of such business.
Furthermore, if future laws, administrative regulations or provisions mandate further actions to be taken by companies with
respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a
timely manner, or at all. In addition, the Foreign Investment Law provides that existing foreign invested enterprises established according
to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the
implementation of the Foreign Investment Law, which means that we may be required to adjust the structure and corporate governance of
certain of our PRC entities then. Failure to take timely and appropriate measures to cope with any of these or similar regulatory
compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business
operations.
We may be adversely affected by the complexity, uncertainties and changes in PRC regulations on internet-related business,
automotive businesses and other business carried out by our PRC subsidiaries.
We operate in the automotive and internet industry, both of which are extensively regulated by the PRC government. For
example, the PRC government imposes foreign ownership restrictions and licensing and permit requirements for companies in the
internet industry. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Investment
in China” and “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Value-added
Telecommunications Services.” The MOFCOM and the NDRC promulgated the 2018 Negative List and the 2019 Negative List, both of
which lift restrictions on foreign investment on the production of new energy vehicles, effective on July 28, 2018 and July 30, 2019,
respectively; and the NDRC promulgated the Provisions on Administration of Investment in Automobile Industry, which became
effective on January 10, 2019, to set certain requisite criteria for newly-established pure electric vehicle automakers. See “Item 4.
Information on the Company—B. Business Overview—Regulation—Regulations and Approvals Covering the Manufacturing of Pure
Electric Passenger Vehicles.” These laws and regulations are relatively new and evolving, and their interpretation and enforcement
involve significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be
deemed to be in violation of applicable laws and regulations and furthermore, we cannot assure you that we have complied or will be
able to comply with all applicable laws at all times. Consequently, we could face the risks of being subject to governmental
investigations, orders by the competent authorities for rectification, administrative penalties or other legal proceedings.
Currently we rely on the contractual arrangements with Beijing NIO, one of our variable interest entities, to hold an ICP license,
and separately own the relevant domain names and trademarks in connection with our internet services and operate our website and
mobile application through NIO Co., Ltd. Our internet services may be treated as a value-added telecommunications business. If so, we
may be required to transfer the domain names, trademark and the operations of the internet services from NIO Co., Ltd. To Beijing NIO,
and we may also be subject to administrative penalties. Further, any challenge to the validity of these arrangements may significantly
disrupt our business, subject us to sanctions, compromise enforceability of our contractual arrangements, or have other harmful effects on
us. It is uncertain if Beijing NIO or NIO Co., Ltd. Will be required to obtain a separate operating license for certain services carried out
by us through our mobile application in addition to the valued-added telecommunications business operating licenses for internet content
provision services, and if Beijing NIO will be required to supplement our current ICP license in the future.
In addition, our mobile applications are also regulated by the Administrative Provisions on Mobile Internet Applications
Information Services, or the APP Provisions, promulgated by the Cyberspace Administration of China, or the CAC, on June 28, 2016 and
effective on August 1, 2016. According to the APP Provisions, the providers of mobile applications shall not create, copy, publish or
distribute information and content that is prohibited by laws and regulations. However, we cannot assure that all the information or
content displayed on, retrieved from or linked to our mobile applications complies with the requirements of the APP Provisions at all
times. If our mobile applications were found to be violating the APP Provisions, we may be subject to administrative penalties, including
warning, service suspension or removal of our mobile applications from the relevant mobile application store, which may materially and
adversely affect our business and operating results.
The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations or policies
relating to the internet industry, particularly the policies relating to value-added telecommunications services, have created substantial
uncertainties regarding the legality of existing and future foreign investments in the businesses and activities of internet businesses in
China, including our business.
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Several PRC regulatory authorities, such as the SAMR, the NDRC, the Ministry of Industry and Information Technology, or the
MIIT, and the MOFCOM, oversee different aspects of our operations, and we are required to obtain a wide range of government
approvals, licenses, permits and registrations in connection with our operations. For example, certain filings must be made by automobile
dealers through the information system for the national automobile circulation operated by the relevant commerce department within
90 days after the receipt of a business license. Furthermore, the NEV industry is relatively new in China, and the PRC government has
not adopted a clear regulatory framework to regulate the industry. As some of the laws, rules and regulations that we may be subject to
were primarily enacted with a view toward application to ICE vehicles, or are relatively new, there is significant uncertainty regarding
their interpretation and application with respect to our business. For example, it remains unclear under PRC laws whether our charging
trucks need to be registered with related local traffic management authorities or obtain transportation operation licenses for their services,
and whether we would be required to obtain any particular permit or license to be qualified to provide our charging services in
cooperation with third party charging stations. In addition, the PRC government may enact new laws and regulations that require
additional licenses, permits, approvals and/or registrations for the operation of any of our existing or future business. As a result. We
cannot assure you that we have all the permits, licenses, registrations, approvals and/or business license covering the sufficient scope of
business required for our business or that we will be able to obtain, maintain or renew permits, licenses, registrations, approvals and/or
business license covering sufficient scope of business in a timely manner or at all.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing
requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a
material and adverse effect on our ability to conduct our business.
We are a holding company, and we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our
cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and
service any debt we may incur. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their
accumulated after-tax profits upon satisfaction of relevant statutory conditions and procedures, if any, determined in accordance with
Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-
tax profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. As of
December 31, 2019, our variable interest entities had not made appropriations to statutory reserves as our PRC subsidiaries and our
variable interest entities reported accumulated loss. For a detailed discussion of applicable PRC regulations governing distribution of
dividends, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Dividend Distribution.”
Additionally, if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their
ability to pay dividends or make other distributions to us. Furthermore, the PRC tax authorities may require our subsidiaries to adjust
their taxable income under the contractual arrangements they currently have in place with our variable interest entities in a manner that
would materially and adversely affect their ability to pay dividends and other distributions to us. See “—Risks Related to Our Corporate
Structure—Our contractual arrangements with our variable interest entities may be subject to scrutiny by the PRC tax authorities and
they may determine that we or our variable interest entities owe additional taxes, which could negatively affect our financial condition.”
In addition, the incurrence of indebtedness by our PRC subsidiaries could result in operating and financing covenants and undertakings
to creditors that would restrict the ability of our PRC subsidiaries to pay dividends to us.
Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and
adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise
fund and conduct our business. See “—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification
could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.”
Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and
our profitability.
China’s overall economy and the average wage in China have increased in recent years and are expected to grow. The average
wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and employee benefits,
will increase. Unless we are able to pass on these increased labor costs to those who pay for our services, our profitability and results of
operations may be materially and adversely affected.
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In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our
employees, limitation with respect to utilization of labor dispatching, applying for foreigner work permits, labor protection and labor
condition and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury
insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees.
Pursuant to the PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing
labor contracts, minimum wages, paying remuneration, determining the term of employee’s probation and unilaterally terminating labor
contracts. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the
PRC Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective
manner, which could adversely affect our business and results of operations.
In October 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law, which
came into effect on July 1, 2011. On April 3, 1999, the State Council promulgated the Regulations on the Administration of Housing
Funds, which was amended on March 24, 2002. Companies registered and operating in China are required under the Social Insurance
Law and the Regulations on the Administration of Housing Funds to, apply for social insurance registration and housing fund deposit
registration within 30 days of their establishment, and to pay for their employees different social insurance including pension insurance,
medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to the extent required by law.
However, certain of our PRC subsidiaries and VIEs that do not hire any employees and are not a party to any employment agreement,
have not applied for and obtained such registration, and instead of paying the social insurance payment on their own for their employees,
certain of our PRC subsidiaries and VIEs use third-party agencies to pay in the name of such agency. We could be subject to orders by
the competent labor authorities for rectification and failure to comply with the orders may further subject us to administrative fines.
As the interpretation and implementation of labor-related laws and regulations are still evolving, our employment practices may
violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. We cannot
assure you that we have complied or will be able to comply with all labor-related law and regulations including those relating to
obligations to make social insurance payments and contribute to the housing provident funds. If we are deemed to have violated relevant
labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial
condition and results of operations will be adversely affected.
Furthermore, in order to control labor cost, we conducted a series of organizational restructuring to cut headcounts in 2019,
which we believe has negatively affected our reputation, brand image and our ability to retain the remaining qualified staff and skilled
employees. We cannot guarantee that there will not be such organizational restructuring again in the future, the occurrence of which will
pose negative implications on our competitive position, cost us qualified employees and subject us to potential employment lawsuits.
Any of the above would negatively affect our business, financial condition and results of operations.
Fluctuations in exchange rates could have a material and adverse effect on our results of operations.
The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The
RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of RMB against the U.S. dollar and other
currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other
things. We cannot assure you that RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is
difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between RMB and the U.S. dollar
in the future.
Any significant appreciation or depreciation of RMB may materially and adversely affect our revenues, earnings and financial
position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert
U.S. dollars we receive into RMB to pay our operating expenses, appreciation of RMB against the U.S. dollar would have an adverse
effect on the RMB amount we would receive from the conversion. Conversely, a significant depreciation of RMB against the U.S. dollar
may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not
entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to
enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to
adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control
regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material
adverse effect on your investment.
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PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of
currency conversion may delay or prevent us from using the proceeds of our offshore equity offerings to make loans to or make
additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability
to fund and expand our business.
Under PRC laws and regulations, we are permitted to utilize the proceeds of any financing outside China to fund our PRC
subsidiaries by making loans to or additional capital contributions to our PRC subsidiaries, subject to applicable government registration,
statutory limitations on amount and approval requirements. For more details, see “Item 4. Information on the Company—B. Business
Overview—Regulation—Regulations on Foreign Exchange.” These PRC laws and regulations may significantly limit our ability to use
Renminbi converted from the net proceeds of any financing outside China to fund the establishment of new entities in China by our PRC
subsidiaries, to invest in or acquire any other PRC companies through our PRC subsidiaries, or to establish new variable interest entities
in China. Moreover, we cannot assure you that we will be able to complete the necessary registrations or obtain the necessary
government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us
to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received or
expect to receive from our offshore offerings and to capitalize or otherwise fund our PRC operations may be negatively affected, which
could materially and adversely affect our liquidity and our ability to fund and expand our business.
On December 26, 2017, the NDRC issued the Management Rules for Overseas Investment by Enterprises, or Order 11. On
February 11, 2018, the Catalog on Overseas Investment in Sensitive Industries (2018 Edition), or the Sensitive Industries List was
promulgated. Overseas investment governed by Order 11 refers to the investment activities conducted by an enterprise located in the
territory of China either directly or via an overseas enterprise under its control through making investment with assets and equities or
providing financing or guarantees in order to obtain overseas ownership, control, management rights and other related interests, and
overseas investment by a PRC individual through overseas enterprises under his/her control is also subject to Order 11. According to
Order 11, before being conducted, any overseas investment in a sensitive industry or any direct investment by a Chinese enterprise in a
non-sensitive industry but with an investment amount over US$300 million requires approval from, or filing with, the NDRC, and for
those non-sensitive investments indirectly by Chinese investors (including PRC individuals) with investment amounts over US$300
million need to be reported. However uncertainties remain with respect to the interpretation and application of Order 11, we are not sure
whether our using of proceeds will be subject to Order 11. If we fail to obtain the approval, complete the filing or report our overseas
investment with our proceeds (as the case may be) in a timely manner provided that Order 11 is applicable, we may be forced to suspend
or cease our investment, or be subject to penalties or other liabilities, which could materially and adversely affect our business, financial
condition and prospects.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively.
The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the
remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, such as profit
distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from
the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from or
registration with appropriate governmental authorities is required where Renminbi is to be converted into a foreign currency and remitted
out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies. See “Item 4. Information on the
Company—B. Business Overview—Regulation—Regulations on Foreign Exchange.”
Since 2016, the PRC government has tightened its foreign exchange policies again and stepped up scrutiny of major outbound
capital movement. More restrictions and a substantial vetting process have been put in place by SAFE to regulate cross-border
transactions falling under the capital account. The PRC government may also restrict access in the future to foreign currencies for current
account transactions, at its discretion. We receive substantially all of our revenues in RMB. If the foreign exchange control system
prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in
foreign currencies to our shareholders, including holders of our ADSs.
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PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase
their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and
penalties under PRC law.
SAFE requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or
control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities
must update their SAFE registrations when the offshore special purpose vehicle undergoes certain material events. See “Item 4.
Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange—Offshore Investment.”
If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC
subsidiaries may be prohibited from distributing their profits and any proceeds from any reduction in capital, share transfer or liquidation
to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with
SAFE registration requirements could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.
However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interests in our
company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you
that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or
obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to
comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to
fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make
distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.
China’s M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of PRC companies
by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.
A number of PRC laws and regulations have established procedures and requirements that could make merger and acquisition
activities in China by foreign investors more time-consuming and complex. In addition to the Anti-Monopoly Law itself, these include
the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC governmental and
regulatory agencies in 2006, and the Rules of the Ministry of Commerce on Implementation of Security Review System of Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors, or the Security Review Rules, promulgated in 2011. These laws and
regulations impose requirements in some instances that the MOFCOM be notified in advance of any change-of-control transaction in
which a foreign investor takes control of a PRC domestic enterprise. In addition, the Anti-Monopoly Law requires that the MOFCOM be
notified in advance of any concentration of undertaking if certain thresholds are triggered. Moreover, the Security Review Rules specify
that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions
through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject
to strict review by the MOFCOM, and prohibit any attempt to bypass a security review, including by structuring the transaction through a
proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying
with the requirements of the relevant regulations to complete such transactions could be time-consuming, and any required approval
processes, including approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our
ability to expand our business or maintain our market share.
Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may
subject the PRC plan participants or us to fines and other legal or administrative sanctions.
Under SAFE regulations, PRC residents who participate in a stock incentive plan in an overseas publicly listed company are
required to register with SAFE or its local branches and complete certain other procedures. See “Item 4. Information on the Company—
B. Business Overview—Regulation—Regulations on Employment and Social Welfare—Employee Stock Incentive Plan.” We and our
PRC resident employees who participate in our share incentive plans are subject to these regulations since we became a public company
listed in the United States. If we or any of these PRC resident employees fail to comply with these regulations, we or such employees
may be subject to fines and other legal or administrative sanctions. We also face regulatory uncertainties that could restrict our ability to
adopt additional incentive plans for our directors, executive officers and employees under PRC law.
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Discontinuation of any of the preferential tax treatments and government subsidies or imposition of any additional taxes and
surcharges could adversely affect our financial condition and results of operations.
Our PRC subsidiaries currently benefit from a number of preferential tax treatments. For example, our subsidiary, NIO
Co., Ltd., is entitled to enjoy, after completing certain application formalities, a 15% preferential enterprise income tax from 2018 as it
has been qualified as a “High New Technology Enterprise” under the PRC Enterprise Income Tax Law and related regulations. The
discontinuation of any of the preferential income tax treatment that we currently enjoy could have a material and adverse effect on our
result of operations and financial condition. We cannot assure you that we will be able to maintain or lower our current effective tax rate
in the future.
In addition, our PRC subsidiaries have received various financial subsidies from PRC local government authorities. The
financial subsidies result from discretionary incentives and policies adopted by PRC local government authorities. For example, our
subsidiary, XPT (Nanjing) E-Powertrain Technology Co., Ltd., has received subsidies of an aggregate of RMB33.1 million for the phase
I construction of the Nanjing Advanced Manufacturing Engineering Center as of December 31, 2019. Local governments may decide to
change or discontinue such financial subsidies at any time. The discontinuation of such financial subsidies or imposition of any
additional taxes could adversely affect our financial condition and results of operations.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax
consequences to us and our non-PRC shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a
“de facto management body” within the PRC is considered a PRC resident enterprise. The implementation rules define the term “de facto
management body” as the body that exercises full and substantial control over and overall management of the business, productions,
personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation issued a circular, known as Circular 82,
which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is
incorporated offshore is located in China. Although Circular 82 only applies to offshore enterprises controlled by PRC enterprises or
PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the
State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax
resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or
a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be
subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the
day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are
made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and
records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting
board members or senior executives habitually reside in the PRC.
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We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax
resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the
interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for
enterprise income tax purposes, we will be subject to the enterprise income tax on our global income at the rate of 25% and we will be
required to comply with PRC enterprise income tax reporting obligations. In addition, we may be required to withhold a 10%
withholding tax from interest or dividends we pay to our shareholders that are non-resident enterprises, including the holders of our
ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to PRC tax at a rate of 10% on gains
realized on the sale or other disposition of our ADSs or ordinary shares, if such income is treated as sourced from within the PRC.
Furthermore, if PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, interest or
dividends paid to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of the ADSs or
ordinary shares by such holders may be subject to PRC tax at a rate of 20% (which, in the case of interest or dividends, may be withheld
at source by us), if such gains are deemed to be from PRC sources. These rates may be reduced by an applicable tax treaty, but it is
unclear whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their country of tax residence
and the PRC in the event that we are treated as a PRC resident enterprise.
We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through
our Hong Kong subsidiary.
We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other
distributions on equity from our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the PRC Enterprise Income
Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise
investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax
treatment. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of
Double Taxation and Tax Evasion on Income, such withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise owns
no less than 25% of a PRC enterprise. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments
under Tax Treaties, which became effective in August 2015, require non-resident enterprises to determine whether they are qualified to
enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. There are also
other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10.
Additional Information—E. Taxation—People’s Republic of China Taxation.” As of December 31, 2019, our subsidiaries and variable
interest entities located in the PRC reported accumulated loss and therefore they had no retained earnings for offshore distribution. In the
future, we intend to re-invest all earnings, if any, generated from our PRC subsidiaries for the operation and expansion of our business in
China. Should our tax policy change to allow for offshore distribution of our earnings, we would be subject to a significant withholding
tax. Our determination regarding our qualification to enjoy the preferential tax treatment could be challenged by the relevant tax
authority and we may not be able to complete the necessary filings with the relevant tax authority and enjoy the preferential withholding
tax rate of 5% under the arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiary.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding
companies.
In February 2015, the State Administration of Taxation, or the SAT, issued the Circular on Issues of Enterprise Income Tax on
Indirect Transfers of Assets by Non-PRC Resident Enterprises, or Circular 7. Circular 7 extends its tax jurisdiction to not only indirect
transfers but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding
company. In addition, Circular 7 provides certain criteria on how to assess reasonable commercial purposes and has introduced safe
harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also brings
challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets.
Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity
interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which
directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle,
the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was
established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be
subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold
the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. On October 17, 2017, the
SAT issued Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or Circular 37, which came into
effect on December 1, 2017. Circular 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income
tax.
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We face uncertainties on the reporting and consequences of future private equity financing transactions, share exchanges or
other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax
authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligations,
and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at
risk of being subject to filing obligations or being taxed under Circular 7 and Circular 37, and may be required to expend valuable
resources to comply with them or to establish that we and our non-resident enterprises should not be taxed under these regulations, which
may have a material adverse effect on our financial condition and results of operations.
If the custodians or authorized users of controlling non-tangible assets of our company, including our corporate chops and seals,
fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and
adversely affected.
Under PRC law, legal documents for corporate transactions are executed using the chops or seal of the signing entity or with the
signature of a legal representative whose designation is registered and filed with the relevant branch of the SAMR.
Although we usually utilize chops to enter into contracts, the designated legal representatives of each of our PRC subsidiaries,
variable interest entities and their subsidiaries have the apparent authority to enter into contracts on behalf of such entities without chops
and bind such entities. All designated legal representatives of our PRC subsidiaries, variable interest entities and their subsidiaries are
members of our senior management team who have signed employment agreements with us or our PRC subsidiaries, variable interest
entities and their subsidiaries under which they agree to abide by various duties they owe to us. In order to maintain the physical security
of our chops and chops of our PRC entities, we generally store these items in secured locations accessible only by the authorized
personnel in the legal or finance department of each of our subsidiaries, variable interest entities and their subsidiaries. Although we
monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. Accordingly,
if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could encounter difficulties in maintaining
control over the relevant entities and experience significant disruption to our operations. If a designated legal representative obtains
control of the chops in an effort to obtain control over any of our PRC subsidiaries, variable interest entities or their subsidiaries, we or
our PRC subsidiaries, variable interest entities and their subsidiaries would need to pass a new shareholders or board resolution to
designate a new legal representative and we would need to take legal action to seek the return of the chops, apply for new chops with the
relevant authorities, or otherwise seek legal redress for the violation of the representative’s fiduciary duties to us, which could involve
significant time and resources and divert management attention away from our regular business. In addition, the affected entity may not
be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation if a transferee
relies on the apparent authority of the representative and acts in good faith.
Our leased property interest or entitlement to other facilities or assets may be defective or subject to lien and our right to lease,
own or use the properties affected by such defects or lien challenged, which could cause significant disruption to our business.
Under PRC laws, all lease agreements are required to be registered with the local housing authorities. We presently lease several
premises in China, some of which have not completed the registration of the ownership rights or the registration of our leases with the
relevant authorities. Failure to complete these required registrations may expose our landlords, lessors and us to potential monetary fines.
If these registrations are not obtained in a timely manner or at all, we may be subject to monetary fines or may have to relocate our
offices and incur the associated losses.
Some of the ownership certificates or other similar proof of certain leased properties have not been provided to us by the
relevant lessors. Therefore, we cannot assure you that such lessors are entitled to lease the relevant real properties to us. If the lessors are
not entitled to lease the real properties to us and the owners of such real properties decline to ratify the lease agreements between us and
the respective lessors, we may not be able to enforce our rights to lease such properties under the respective lease agreements against the
owners. If our lease agreements are claimed as null and void by third parties who are the real owners of such leased real properties, we
could be required to vacate the properties, in the event of which we could only initiate the claim against the lessors under relevant lease
agreements for indemnities for their breach of the relevant leasing agreements. We cannot assure you that suitable alternative locations
are readily available on commercially reasonable terms, or at all, and if we are unable to relocate our operations in a timely manner, our
operations may be adversely affected.
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Some of our PRC subsidiaries have incurred or will incur indebtedness and may, in connection therewith, create mortgage,
pledge or other lien over substantive operating assets, facilities or equity interests of certain PRC subsidiaries as guarantee to their
repayment of indebtedness or as counter guarantee to third-party guarantors which provide guarantee to our PRC subsidiaries’ repayment
of indebtedness. In the event that the relevant PRC subsidiaries fail to perform their repayment obligations or such guarantors perform
their guarantee obligations, claims may be raised to our substantive operating assets, facilities or equity interests of the PRC subsidiaries
in question. If we cannot continue to own or use such assets, facilities or equity interests, our operation may be adversely affected.
The audit report included in this annual report is prepared by an auditor who is not inspected by the Public Company
Accounting Oversight Board and, as such, our investors are deprived of the benefits of such inspection.
Our independent registered public accounting firm that issues the audit report included in this annual report, as auditors of
companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States to
pursuant to which the PCAOB conducts regular inspections to assess its compliance with professional standards. Because our auditors
are located in China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the PRC
authorities, our auditors are not currently inspected by the PCAOB.
Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit
procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This
lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control
procedures. As a result, investors may be deprived of the benefits of PCAOB inspections. On December 7, 2018, the SEC and the
PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement
audits of U.S.-listed companies with significant operations in China. On April 21, 2020, the SEC and the PCAOB issued another joint
statement reiterating the greater risk that disclosures will be insufficient in many emerging markets, including China, compared to those
made by U.S. domestic companies. In discussing the specific issues related to the greater risk, the statement again highlights the
PCAOB's inability to inspect audit work paper and practices of accounting firms in China, with respect to their audit work of U.S.
reporting companies. However, it remains unclear what further actions the SEC and the PCAOB will take to address the problem.
The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of
our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB
inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial
statements.
Proceedings instituted by the SEC against the “big four” PRC-based accounting firms, including our independent registered
public accounting firm, could result in financial statements being determined to not be in compliance with the requirements of
the Exchange Act.
the Chinese affiliates of
In late 2012, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the
Sarbanes-Oxley Act against
the “big four” accounting firms (including our auditors). The
Rule 102(e) proceedings initiated by the SEC relate to these firms’ inability to produce documents, including audit work papers, in
response to the request of the SEC pursuant to Section 106 of the Sarbanes-Oxley Act, as the auditors located in the PRC are not in a
position lawfully to produce documents directly to the SEC because of restrictions under PRC law and specific directives issued by the
China Securities Regulatory Commission, or the CSRC. The issues raised by the proceedings are not specific to our auditors or to us, but
affect equally all audit firms based in China and all China-based businesses with securities listed in the United States.
In January 2014, the administrative judge reached an initial decision, or the Initial Decision, that the Chinese affiliates of “big
four” accounting firms should be barred from practicing before the SEC for six months. Thereafter, the accounting firms filed a petition
for review of the Initial Decision, prompting the SEC commissioners to review the Initial Decision, determine whether there had been
any violation and, if so, determine the appropriate remedy to be placed on these audit firms.
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In February 2015, the Chinese affiliates of the “big four” accounting firms (including our auditors) each agreed to censure and
pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S. listed
companies. The settlement requires the firms to follow detailed procedures and to seek to provide the SEC with access to the Chinese
firms’ audit documents via the CSRC. If they failed to meet the specified criteria during a period of four years starting from the
settlement date, the SEC retained authority to impose a variety of additional remedial measures on the firms depending on the nature of
the failure. Under the terms of the settlement, the underlying proceeding against the four China-based accounting firms was deemed
dismissed with prejudice four years after entry of the settlement. The four-year mark occurred on February 6, 2019. While we cannot
predict if the SEC will further challenge the four China-based accounting firms’ compliance with U.S. law in connection with U.S.
regulatory requests for audit work papers or if the results of such a challenge would result in the SEC imposing penalties such as
suspensions. If additional remedial measures are imposed on the Chinese affiliates of the “big four” accounting firms, we could be unable
to timely file future financial statements in compliance with the requirements of the Exchange Act.
In the event the Chinese affiliates of the “big four” become subject to additional legal challenges by the SEC or PCAOB,
depending upon the final outcome, listed companies in the United States with major PRC operations may find it difficult or impossible to
retain auditors in respect of their operations in the PRC, which could result in financial statements being determined to not be in
compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, and could result
in delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding
China-based, United States-listed companies and the market price of our shares may be adversely affected. If our independent registered
public accounting firm was denied, temporarily, the ability to practice before the SEC and we were unable to timely find another
registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined
to not be in compliance with the requirements of the Exchange Act.
Risks Related to Our ADSs and Trading Market
The trading prices of our ADSs have fluctuated and may be volatile, which could result in substantial losses to investors.
The trading price of our ADSs has been volatile and has ranged from a low of US$1.32 to a high of US$10.16 in 2019. The
market price for our ADSs may continue to be volatile and subject to wide fluctuations in response to factors including, but not limited
to, the following:
● actual or anticipated fluctuations in our quarterly results of operations;
● changes in financial estimates by securities research analysts;
● conditions in automotive markets;
● changes in the operating performance or market valuations of other automotive companies;
● announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital
commitments;
● addition or departure of key personnel;
● fluctuations of exchange rates between RMB and the U.S. dollar;
● litigation, government investigation or other legal or regulatory proceeding;
● release of lock-up and other transfer restrictions on our ADSs or any ordinary shares or sales of additional ADSs;
● any actual or alleged illegal acts of our shareholders or management;
● any share repurchase program; and
● general economic or political conditions in China or elsewhere in the world.
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Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.
In addition, the stock market in general, and the market prices for companies with operations in China in particular, have
experienced volatility that often has been unrelated to the operating performance of such companies. The securities of some China-based
companies that have listed their securities in the United States have experienced significant volatility since their initial public offerings in
recent years, including, in some cases, substantial declines in the trading prices of their securities. The trading performances of these
companies’ securities after their offerings may affect the attitudes of investors towards Chinese companies listed in the United States in
general, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In
addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure
or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general,
including us, regardless of whether we have engaged in any inappropriate activities. In particular, the global financial crisis and the
ensuing economic recessions in many countries have contributed and may continue to contribute to extreme volatility in the global stock
markets. These broad market and industry fluctuations may adversely affect the market price of our ADSs. Volatility or a lack of positive
performance in our ADS price may also adversely affect our ability to retain key employees, most of whom have been granted options or
other equity incentives.
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their
recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our
business. If one or more analysts who cover us downgrade our ADSs, the market price for our ADSs would likely decline. If one or more
of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in
turn could cause the market price or trading volume for our ADSs to decline.
Our triple-class voting structure will limit the holders of our Class A ordinary shares and ADSs to influence corporate matters,
provide certain shareholders of ours with substantial influence and could discourage others from pursuing any change of control
transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
We have adopted a triple-class voting structure such that our ordinary shares consist of Class A ordinary shares, Class B
ordinary shares and Class C ordinary shares. Holders of Class A ordinary shares, Class B ordinary shares and Class C ordinary shares
have the same rights other than voting and conversion rights. Each holder of our Class A ordinary shares is entitled to one vote per share,
each holder of our Class B ordinary shares is entitled to four votes per share and each holder of our Class C ordinary shares is entitled to
eight votes per share on all matters submitted to them for a vote. Our Class A ordinary shares, Class B ordinary shares and Class C
ordinary shares vote together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required
by law. Each Class B ordinary share or Class C ordinary share is convertible into one Class A ordinary share, whereas Class A ordinary
shares are not convertible into Class B ordinary shares or Class C ordinary shares under any circumstances. Upon any transfer of Class B
ordinary shares or Class C ordinary shares by a holder thereof to any person or entity which is not an affiliate of such holder, such
Class B ordinary shares or Class C ordinary shares are automatically and immediately converted into the equal number of Class A
ordinary shares.
As of the date of this annual report, Mr. Bin Li, our chairman and chief executive officer, together with his affiliates,
beneficially own all of our issued Class C ordinary shares. The Tencent entities beneficially owned all of our issued Class B ordinary
shares. Due to the disparate voting powers associated with our triple classes of ordinary shares, Mr. Li has considerable influence over
important corporate matters. As of March 31, 2020, Mr. Li beneficially owns 47.0% of the aggregate voting power of our company
through mobike Global Ltd. and Originalwish Limited, companies wholly owned by Mr. Li, and through NIO Users Limited, a holding
company ultimately controlled by Mr. Li, whereas Tencent entities beneficially own 21.1% of the aggregate voting power of our
company through Mount Putuo Investment Limited, Image Frame Investment (HK) Limited and TPP Follow-on I Holding D Limited.
Mr. Li has considerable influence over matters requiring shareholder approval, including electing directors and approving material
mergers, acquisitions or other business combination transactions. This concentrated control will limit the ability of the holders of our
Class A ordinary shares and ADSs to influence corporate matters and could also discourage others from pursuing any potential merger,
takeover or other change of control transaction, which could have the effect of depriving the holders of our Class A ordinary shares and
our ADSs of the opportunity to sell their shares at a premium over the prevailing market price. Moreover, Mr. Li may increase the
concentration of his voting power and/or share ownership in the future, which may, among other consequences, decrease the liquidity in
our ADSs.
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The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely
affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We
cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the
availability of these securities for future sale will have on the market price of our ADSs. In addition, certain holders of our existing
shareholders are entitled to certain registration rights, including demand registration rights, piggyback registration rights, and Form F-3
or Form S-3 registration rights. Registration of these shares under the Securities Act of 1933, or the Securities Act, would result in these
shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales
of these registered shares in the public market, or the perception that such sales could occur, could cause the price of our ADSs to
decline.
Because we do not expect to pay dividends in the foreseeable future, the holders of our ADSs must rely on price appreciation of
our ADSs for return on their investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth
of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an
investment in our ADSs as a source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to
declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and
cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial
condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return to ADS holders
will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value
or even maintain the price at which ADS holders purchased the ADSs. Our ADS holders may not realize a return on their investment in
our ADSs and they may even lose their entire investment in our ADSs.
There can be no assurance that we will not be classified as a passive foreign investment company, or PFIC, for U.S. federal
income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of
our ADSs or Class A ordinary shares.
A non-U.S. corporation will be classified as a passive foreign investment company, or PFIC, for any taxable year if either (1)
75% or more of its gross income for such year consists of certain types of “passive” income; or (2) 50% or more of the value of its assets
(generally determined on the basis of a quarterly average) during such year is attributable to assets that produce passive income or are
held for the production of passive income (the “asset test”). Based on our current and expected income and assets (taking into account
our current market capitalization), we do not believe that we were a PFIC for our taxable year ended December 31, 2019 and we do not
expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the
determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon
the nature and composition of our income and assets. Fluctuations in the market price of our ADSs may cause us to become a PFIC for
the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to
the market price of our ADSs, which may be volatile. The nature and composition of our income and assets may also be affected by how,
and how quickly, we use our liquid assets.
Although the law in this regard is not entirely clear, we treat our consolidated VIEs as being owned by us for U.S. federal
income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits
associated with these entities. As a result, we consolidated their results of operations in our consolidated U.S. GAAP financial
statements. If it were determined, however, that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we
may be treated as a PFIC for the current taxable year and any subsequent taxable year.
If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10—Additional
Information—E. Taxation––United States Federal Income Taxation”) holds our ADSs or Class A ordinary shares, certain adverse U.S.
federal income tax consequences could apply to such U.S. Holder. See “Item 10—Additional Information––E. Taxation––United States
Federal Income Taxation.”
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Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the
rights of holders of our Class A ordinary shares and ADSs.
Our eleventh amended and restated memorandum and articles of association contain provisions that have the potential to limit
the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could
have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by
discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our board of directors
has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations,
powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions,
including dividend rights, conversion rights, voting rights, rights and terms of redemption and liquidation preferences, any or all of which
may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued
quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If
our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of
our Class A ordinary shares and ADSs may be materially and adversely affected.
The capped call and zero-strike call transactions may affect the value of our ADSs.
On January 30, 2019, in connection with the pricing of the 2024 Notes, we entered into capped call transactions with one or
more of the initial purchasers and/or their respective affiliates and/or other financial institutions, or the Capped Call Option
Counterparties. We entered into additional capped call transactions with the Capped Call Option Counterparties on February 15, 2019
and February 26, 2019, respectively. We used a portion of the net proceeds of the 2024 Notes to pay the cost of such transactions. The
cap price of these capped call transactions is initially US$14.92 per ADS, representing a premium of approximately 100% to the closing
price on the New York Stock Exchange, or NYSE, of our ADSs on January 30, 2019, which was US$7.46 per ADS, and is subject to
adjustment under the terms of the capped call transactions. As part of establishing their initial hedges of the capped call transactions, the
Capped Call Option Counterparties or their respective affiliates expect to trade the ADSs and/or enter into various derivative transactions
with respect to our ADSs concurrently with, or shortly after, the pricing of the 2024 Notes. This activity could increase (or reduce the
size of any decrease in) the market price of the ADSs or the 2024 Notes at that time. However, if any such capped call transactions fail to
become effective, the Capped Call Option Counterparties may unwind their hedge positions with respect to the ADSs, which could
adversely affect the market price of the ADSs. In addition, the Capped Call Option Counterparties or their respective affiliates may
modify their hedge positions by entering into or unwinding various derivative transactions with respect to the ADSs, the 2024 Notes or
our other securities and/or by purchasing or selling the ADSs, the 2024 Notes or our other securities in secondary market transactions
following the pricing of the 2024 Notes and prior to the maturity of the 2024 Notes (and are likely to do so following any conversion of
the 2024 Notes, if we exercise the relevant election under the capped call transactions, or repurchase of the 2024 Notes by us). This
activity could also cause or avoid an increase or a decrease in the market price of our ADSs.
On January 30, 2019, in connection with the pricing of the 2024 Notes, NIO also entered into privately negotiated zero-strike
call option transactions with one or more of the initial purchasers or their respective affiliates, or the Zero-Strike Call Option
Counterparties, and used a portion of the net proceeds of the 2024 Notes to pay the aggregate premium under such transactions. Pursuant
to the zero-strike call option transactions, we purchased, in the aggregate, approximately 26.8 million ADSs, with delivery thereof
(subject to adjustment) by the respective Zero-Strike Call Option Counterparties at settlement shortly after the scheduled maturity date of
the 2024 Notes, subject to the ability of each Zero-Strike Call Option Counterparty to elect to settle all or a portion of the respective zero-
strike option transaction early. Facilitating investors’ hedge positions by entering into the zero-strike call option transactions, particularly
if investors purchase the ADSs on or around the day of the pricing of the 2024 Notes, could increase (or reduce the size of any decrease
in) the market price of the ADSs. However, if any zero-strike call option transactions fail to become effective, the respective Zero-Strike
Call Option Counterparties may unwind their hedge positions with respect to the ADSs, which could adversely affect the market price of
the ADSs. In addition, the Zero-Strike Call Option Counterparties or their respective affiliates may modify their respective hedge
positions by entering into or unwinding one or more derivative transactions with respect to the ADSs, the 2024 Notes or our other
securities and/or by purchasing or selling the ADSs, the 2024 Notes or our other securities in secondary market transactions at any time,
including following the pricing of the 2024 Notes and prior to the maturity of the 2024 Notes. This activity could also cause or avoid an
increase or a decrease in the market price of the ADSs.
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Our shareholders may face difficulties in protecting their interests, and ability to protect their rights through U.S. courts may be
limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our
eleventh amended and restated memorandum and articles of association, the Companies Law (2020 Revision) of the Cayman Islands and
the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders
and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of
the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the
Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not
binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under
Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the
United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states,
such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition,
Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect
corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of
association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are
not obliged to make them available to our shareholders. This may make it more difficult for our shareholders to obtain the information
needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy
contest.
As a Cayman Islands company listed on the New York Stock Exchange, we are subject to the NYSE corporate governance
listing standards. However, the NYSE corporate governance listing standards permit a foreign private issuer like us to follow the
corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home
country, may differ significantly from the NYSE corporate governance listing standards.
Pursuant to Sections 303A.01, 303A.04, 303A.05 and 303A.07 of the New York Stock Exchange Listed Company Manual, a
company listed on the New York Stock Exchange must have a majority of independent directors, a nominating and corporate governance
committee composed entirely of independent directors, a compensation committee composed entirely of independent directors and an
audit committee with a minimum of three members. We currently follow our home country practice in lieu of these requirements. We
may also continue to rely on these and other exemptions available to foreign private issuers in the future, and to the extent that we choose
to do so in the future, our shareholders may be afforded less protection than they otherwise would under the NYSE corporate governance
listing standards applicable to U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which
would be made available to you, were you investing in a United States domestic issuer.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreements, which could result in
less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement and the deposit agreement for restricted securities governing the ADSs representing our Class A ordinary
shares provide that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City
of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreements and in that regard, to the
fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising
out of or relating to our Class A ordinary shares, the ADSs or the deposit agreements, including any claim under the U.S. federal
securities laws.
If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was
enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge,
the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not
been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver
provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreements. In
determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party
knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit
agreements and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.
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If any of the holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising
under the deposit agreements or the ADSs, including claims under federal securities laws, such holder or beneficial owner may not be
entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the
depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreements, it may be heard only by a judge or
justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different
outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the
terms of the deposit agreements with a jury trial. No condition, stipulation or provision of the deposit agreements or ADSs serves as a
waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S.
federal securities laws and the rules and regulations promulgated thereunder.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands company and the majority of our assets are located outside of the United States. The most significant
portion of our operations are conducted in China. In addition, a majority of our current directors and officers are nationals and residents
of countries other than the United States. Substantially all of the assets of these persons may be located outside the United States. As a
result, it may be difficult or impossible for our shareholders to bring an action against us or against these individuals in the United States
in the event that such shareholders believe that their rights have been infringed under the U.S. federal securities laws or otherwise. Even
if such shareholders are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render them
unable to enforce a judgment against our assets or the assets of our directors and officers.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain
provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities
rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K
with the SEC;
● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security
registered under the Exchange Act;
● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and
liability for insiders who profit from trades made in a short period of time; and
● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend
to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the New York Stock
Exchange. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the
information we are required to file with or furnish to the SEC will be less extensive and less timely than that required to be filed with the
SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to
you were you investing in a U.S. domestic issuer.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and they may not be able to exercise their
right to vote their Class A ordinary shares.
Holders of our ADSs will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in
accordance with the provisions of the deposit agreements. Under the deposit agreement, ADS holders must vote by giving voting
instructions to the depositary. If we ask for instructions of ADS holders, then upon receipt of such voting instructions, the depositary will
try to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for
instructions of ADS holders, the depositary may still vote in accordance with instructions given by holders of ADSs, but it is not required
to do so. ADS holders will not be able to directly exercise their right to vote with respect to the underlying shares unless they withdraw
the shares. When a general meeting is convened, an ADS holder may not receive sufficient advance notice to withdraw the shares
underlying his or her ADSs to allow such holder to vote with respect to any specific matter. If we ask for instructions of holders of ADSs,
the depositary will notify ADS holders of the upcoming vote and will arrange to deliver our voting materials to ADS holders. We have
agreed to give the depositary at least 30 days’ prior notice of shareholders’ meetings. Nevertheless, we cannot assure you that ADS
holders will receive the voting materials in time to ensure that ADS holders can instruct the depositary to vote their shares. In addition,
the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out ADS
holders’ voting instructions. This means that an ADS holder may not be able to exercise the right to vote and may have no legal remedy
if the shares underlying his or her ADSs are not voted as such holder requested.
The depositary for our ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying the ADSs if the
holders of such ADSs do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect the
interests of our ADS holders.
Under the deposit agreements for the ADSs, if any holder of the ADSs does not vote, the depositary will give us a discretionary
proxy to vote our Class A ordinary shares underlying such ADSs at shareholders’ meetings unless:
● we have failed to timely provide the depositary with notice of meeting and related voting materials;
● we have instructed the depositary that we do not wish a discretionary proxy to be given;
● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
● a matter to be voted on at the meeting would have a material adverse impact on shareholders; or
● the voting at the meeting is to be made on a show of hands.
The effect of this discretionary proxy is that if any such holder of the ADSs does not vote at shareholders’ meetings, such holder
cannot prevent our Class A ordinary shares underlying such ADSs from being voted, except under the circumstances described above.
This may make it more difficult for shareholders to influence the management of our company. Holders of our Class A ordinary shares
are not subject to this discretionary proxy.
An ADS holder’s right to pursue claims against the depositary are limited by the terms of the deposit agreements.
Under the deposit agreements, any action or proceeding against or involving the depositary, arising out of or based upon the
deposit agreements or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal
court in New York, New York, and a holder of our ADSs, will have irrevocably waived any objection which such holder may have to the
laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or
proceeding.
The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the
deposit agreements be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreements,
although the arbitration provisions do not preclude a ADS holder from pursuing claims under federal securities laws in federal courts.
Furthermore, if a ADS holder is unsuccessful in such arbitration, such holder may be responsible for the fees of the arbitrator and other
costs incurred by the parties in connection with such arbitration pursuant to the deposit agreements. Also, we may amend or terminate the
deposit agreements without the consent of any ADS holder. If a ADS holder continues to hold its ADSs after an amendment to the
deposit agreements, such holder agrees to be bound by the deposit agreements as amended.
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Our ADS holders may not receive dividends or other distributions on our Class A ordinary shares and the ADS holders may not
receive any value for them, if it is illegal or impractical to make them available to the ADS holders.
The depositary of our ADSs has agreed to pay the ADS holders the cash dividends or other distributions it or the custodian
receives on Class A ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. Our ADS
holders will receive these distributions in proportion to the number of Class A ordinary shares the underlying ADSs represent. However,
the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs.
For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the
Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may
also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be
less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to
register under U.S. securities laws any ADSs, Class A ordinary shares, rights or other securities received through such distributions. We
also have no obligation to take any other action to permit the distribution of ADSs, Class A ordinary shares, rights or anything else to
holders of ADSs. This means that our ADS holders may not receive distributions we make on our Class A ordinary shares or any value
for them if it is illegal or impractical for us to make them available to the ADS holders. These restrictions may cause a material decline in
the value of our ADSs.
Our ADS holders may experience dilution of their holdings due to inability to participate in rights offerings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit
agreements, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to
which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered
under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third
parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we
are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a
registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may
experience dilution of their holdings as a result.
We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to
our shareholders, and the incurrence of additional indebtedness could increase our debt service obligations.
We may require additional cash resources due to changed business conditions, strategic acquisitions or other future
developments. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities
or obtain additional credit facilities. The sale of additional equity and equity-linked securities could result in additional dilution to our
shareholders. The sale of substantial amounts of our ADSs (including upon conversion of the notes) could dilute the interests of our
shareholders and ADS holders and adversely impact the market price of our ADSs. The incurrence of indebtedness would result in
increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot
assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Future sales or issuances, or perceived future sales or issuances, of substantial amounts of our ordinary shares or ADSs could
adversely affect the price of our ADS.
If our existing shareholders sell, or are perceived as intending to sell, substantial amounts of our ordinary shares or ADSs,
including those issued upon the exercise of our outstanding stock options, the market price of our ADSs could fall. Such sales, or
perceived potential sales, by our existing shareholders might make it more difficult for us to issue new equity or equity-related securities
in the future at a time and place we deem appropriate. Shares held by our existing shareholders may be sold in the public market in the
future subject to the restrictions contained in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. If
any existing shareholder or shareholders sell a substantial amount of ordinary shares after the expiration of the applicable lock-up
periods, the prevailing market price for our ADSs could be adversely affected.
In addition, certain of our shareholders or their transferees and assignees will have the right to cause us to register the sale of
their shares under the Securities Act upon the occurrence of certain circumstances. Registration of these shares under the Securities Act
would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of
the registration.
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Our ADS holders may be subject to limitations on transfer of their ADSs.
Our ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time
to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time
for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs
to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies,
and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our
share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of
any requirement of law or of any government or governmental body, or under any provision of the deposit agreements, or for any other
reason.
We incur increased costs as a result of being a public company.
As a public company, we incur significant accounting, legal and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, have detailed
requirements concerning corporate governance practices of public companies, including Section 404 of the Sarbanes-Oxley Act relating
to internal controls over financial reporting. We expect these rules and regulations applicable to public companies to increase our
accounting, legal and financial compliance costs and to make certain corporate activities more time-consuming and costly. Our
management will be required to devote substantial time and attention to our public company reporting obligations and other compliance
matters. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or
estimate the amount of additional costs we may incur or the timing of such costs. Our reporting and other compliance obligations as a
public company may place a strain on our management, operational and financial resources and systems for the foreseeable future.
In the past, shareholders of a public company often brought securities class action suits against the company following periods
of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant
amount of our management’s attention and other resources from our business and operations, which could harm our results of operations
and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required
to pay significant damages, which could have a material and adverse effect on our financial condition and results of operations.
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
We were founded in November 2014, as Nextev Inc., which was changed to our current name NIO Inc. in July 2017. Significant
milestones in our development in 2019 and 2020 include the following:
2019
● In February 2019, we issued $750 million aggregate principal amount of 4.50% convertible senior notes due 2024, or the
2024 Notes. The 2024 Notes are unsecured debt and are not redeemable by us prior to the maturity date except for certain
changes in tax law. The holders of the 2024 Notes may convert their notes to a number of our ADSs at their option at any
time prior to the close of business on the second business day immediately preceding the maturity date pursuant to the 2024
Notes indenture, at a conversion rate of 105.1359 ADSs per US$1,000 principal amount of the 2024 Notes. The 2024 Notes
that are converted in connection with a make-whole fundamental change (as defined in the 2024 Notes Indenture) may be
entitled to an increase in the conversion rate for such 2024 Notes. In connection with the issuance of the 2024 Notes, we
entered into capped call transactions and zero-strike call option transactions.
● In March 2019, we agreed with the related contractual parties to cease construction of our planned manufacturing facility in
Jiading, Shanghai and terminate this development project.
● In April 2019, we entered into a manufacturing cooperation agreement with JAC, for the manufacture of the ES6, which is
a supplement to the agreement that Company entered into with JAC in May 2016. Pursuant to these agreements, we pay
JAC manufacturing fees on a per-vehicle basis monthly and compensates JAC for its operating losses for the initial three-
year period after the start of production of the ES8 from April 10, 2018. We may fund additional investments in equipment
in the Hefei manufacturing plant of JAC for the production of the ES6.
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● In July 2019, NIO Nextev Limited entered into a share purchase agreement with a buyer incorporated in Hong Kong,
pursuant to which the buyer, subject to certain closing conditions, agreed to purchase the entire issued share capital of NIO
Nextev (UK) Limited at a consideration of US$15,000,000. In fulfilling the share purchase agreement, we established NIO
Performance Engineering Limited to acquire the business and assets operated by NIO Nextev (UK) Limited other than the
Formula E related business, including computer aided engineering and advanced concept engineering, the operation of a
performance program in relation to the EP9 Electric Vehicles and any performance related initiatives of EP9, and all
headquarters operations, central management functions, administrative, accounting, finance, tax and legal operations of
NIO Nextev (UK) Limited as of the date of the share purchase agreement. Upon the consummation of the transaction, NIO
Nextev Limited no longer holds any equity interest in NIO Nextev (UK) Limited. We became a primary sponsor of
Formula E team.
● In September 2019, we issued and sold convertible notes in an aggregate principal amount of US$200 million to an affiliate
of Tencent Holdings Limited and Mr. Bin Li, our chairman of the board of directors and chief executive officers. The
affiliate of Tencent Holdings and Mr. Bin Li each subscribed for US$100 million principal amount of the convertible notes,
each in two equally split tranches. The convertible notes issued in the first tranche will mature in 360 days, bear no interest,
and require us to pay a premium at 2% of the principal amount at maturity. The convertible notes issued in the second
tranche will mature in three years, bear no interest, and require us to pay a premium at 6% of the principal amount at
maturity. The 360-day convertible notes will be convertible into our Class A ordinary shares (or ADSs) at a conversion
price of US$2.98 per ADS at the holder’s option from the 15th day immediately prior to maturity, and the three-year
convertible notes will be convertible into our Class A ordinary shares (or ADSs) at a conversion price of US$3.12 per ADS
at the holder’s option from the first anniversary of the issuance date. The holders of the three-year convertible notes will
have the right to require us to repurchase for cash all of the convertible notes or any portion thereof on February 1, 2022.
● In August 2019, we opened our first NIO Space in Shanghai, a showroom for our brand, vehicles and services that is
smaller in scale and more delicate and sales-focused compared with NIO Houses.
2020
● In February and March 2020, we issued and sold convertible notes in an aggregate principal amount of US$435
million due 2021, or the 2021 Notes, to several unaffiliated Asia based investment funds. The 2021 Notes bear zero
interest. The holders of the 2021 Notes issued in February 2020 have the right to convert either all or part of the
principal amount of the 2021 Notes into Class A ordinary shares (or ADSs) of our company, prior to maturity, (a)
from the date that is six months after the issuance date, at a conversion price of US$3.07 per ADS, or (b) upon the
completion of a bona fide issuance of equity securities of our company for fundraising purposes, at the conversion
price derived from such equity financing. The holders of the 2021 Notes issued in March 2020 have the right to
convert either all or part of the principal amount of the 2021 Notes into Class A ordinary shares (or ADSs) of our
company, prior to maturity and from September 5, 2020, at a conversion price of US$3.50 per ADS, subject to certain
adjustments. We may not redeem the 2021 Notes prior to maturity.
● In February 2020, we entered into a collaboration framework agreement with the municipal government of Hefei,
Anhui province, where our main manufacturing hub is located. On April 29, 2020, we entered into definitive
agreements for investments with a group of investors led by Hefei City Construction and Investment Holding (Group)
Co., Ltd., CMG-SDIC Capital Co., Ltd., and Anhui Provincial Emerging Industry Investment Co., Ltd., or together as
the Hefei Strategic Investors. Under the definitive agreements, the Hefei Strategic Investors will invest an aggregate of
RMB7 billion in cash into NIO Anhui, the legal entity of NIO China wholly owned by us pre-investment. We will
inject our core businesses and assets in China, including vehicle research and development, supply chain, sales and
services and NIO Power, valued at RMB17.77 billion in total, into NIO China. Further, we will invest RMB4.26
billion in cash into NIO China. We will collaborate with the Hefei Strategic Investors and HETA to develop NIO
China’s business and to support the accelerated development of the smart electric vehicle sectors in Hefei in the future.
Upon the completion of the investments, we will hold 75.9% of controlling equity interests in NIO China, and the
Hefei Strategic Investors will collectively hold the remaining 24.1%.
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● In March 2020, we entered into a manufacturing cooperating agreement with JAC for the manufacture of EC6.
Pursuant to the agreement, we pay JAC manufacturing fees on a per-vehicle basis monthly. The Company is
responsible for investment in new technical equipment and ancillary facilities necessary for satisfactory production of
the EC6 in the new energy automobile manufacturing plant established by JAC. If such manufacturing plant incurs any
loss, we will make up such loss to JAC on a monthly basis.
Our principal executive offices are located at Building 20, No. 56 Antuo Road, Jiading District, Shanghai 201804, PRC. Our
telephone number at this address is +86-21-6908-2018. Our registered office in the Cayman Islands is located at the offices of Maples
Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of process
in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.
B. Business Overview
We are a pioneer in China’s premium electric vehicle market. We design, jointly manufacture, and sell smart and connected
premium electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial
intelligence. Redefining user experience, we aim to provide users with comprehensive, convenient and innovative charging solutions and
other user-centric service offerings. Our Chinese name, Weilai (蔚来), which means Blue Sky Coming, reflects our commitment to a
more environmentally friendly future.
The first model we developed was the EP9 supercar, introduced in 2016. The EP9 set a world record as the then fastest all-
electric car on the track at the Nürburgring Nordschleife “Green Hell” track in Germany in May 2017, finishing a lap in 6 minutes and
45.90 seconds. Combined with an attractive design and strong driving performance, the EP9 delivers extraordinary acceleration and best-
in-class electric powertrain technology, helping position us as a premium brand.
We launched our first volume manufactured electric vehicle, the seven-seater ES8, to the public at our NIO Day event on
December 16, 2017 and began making deliveries to users on June 28, 2018. In December 2018, we launched its variant, the six-seater
ES8, with delivery beginning in March 2019. The ES8 is an all-aluminum alloy body, premium electric SUV that offers exceptional
performance, functionality and mobility lifestyle. It is equipped with our proprietary e-propulsion system, which is capable of
accelerating from zero to 100 kilometers (km) per hour (kph) in 4.4 seconds and delivering a New European Driving Cycle, or NEDC,
driving range of up to 355 km and a maximum range of up to 500 kilometers and equipped with a 70-kilowatt-hour battery pack. On
December 28, 2019, during the third NIO Day held in Shenzhen, China, we released the all-new ES8, the flagship smart premium
electric SUV. The all-new ES8 boasts more than 180 product improvements and comes with better performance, longer driving range and
a more sophisticated and high-tech design. With the 100-kilowatt-hour battery pack newly released during the third NIO Day and to be
delivered in the fourth quarter of 2020, the all-new ES8 has an NEDC range of up to 580 km, a major improvement in its range
performance. We began making deliveries of the all-new ES8 in April 2020. In July 2019, NIO ranked the highest in quality among all
electric vehicle brands, and the ES8 ranked the highest in quality among all mid-large electric vehicles, in the JD Power's 2019 New
Energy Vehicle Experience Index Study. As of December 31, 2019, we had delivered 20,480 ES8s to customers in more than 270 cities.
We launched our second volume manufactured electric vehicle, the ES6, to the public at our NIO Day event on December 15,
2018 and began making deliveries to users in June 2019. The ES6 is a five-seater high-performance long-range premium electric SUV.
The ES6 is smaller but more affordable than the ES8, allowing us to target a broader market in the premium SUV segment. Its
performance version is equipped with a 160-kW permanent magnet motor and a 240-kW induction motor, and is capable of accelerating
from zero to 100 kph within 4.7 seconds. With the 100-kilowatt-hour battery pack to be delivered in the fourth quarter of 2020, the ES6
performance version boasts an NEDC range of up to 610 km. As of December 31, 2019, we had delivered 11,433 ES6s to customers in
more than 250 cities.
We launched our third volume manufactured electric vehicle, the EC6, to the public at our NIO Day event on December 28,
2019. EC6 is a smart premium electric coupe SUV. EC6 has an agile coupe design with drag coefficient at only 0.27Cd. It is dynamically
shaped and equipped with a 2.1 square meter vault glass roof. With the 100-kilowatt-hour battery pack to be delivered in the fourth
quarter of 2020, the EC6 boasts an NEDC range of up to 615 km. Users can pre-order the EC6 through the NIO App and we expect to
begin making deliveries of the EC6 in September 2020.
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We aim to create the most worry-free experience for our users, online or offline, at home or on-the-go. In response to common
concerns over the accessibility and convenience of EV charging, we offer a comprehensive, convenient and innovative suite of charging
solutions. These solutions, which we call our NIO Power solutions, include Power Home, our home charging solution; Power Swap, our
innovative battery swapping service; Power Mobile, our mobile charging service through charging trucks; Public Charger, our public fast
charging solution; and Power Express, our 24-hour on-demand pick-up and drop-off charging service. In addition, our vehicles are
compatible with China’s national charging standards and have access to a nationwide publicly accessible charging network of
approximately 258,000 charging piles. Beyond charging solutions, we offer comprehensive value-added services to our users, such as
statutory and third-party liability insurance and vehicle damage insurance through third-party insurers, repair and routine maintenance
services, courtesy car during lengthy repairs and maintenance, nationwide roadside assistance, as well as an enhanced data package. We
believe these solutions and services, together, will create a holistic user experience throughout the vehicle lifecycle.
The electric powertrain technologies we developed for the EP9 set the technological foundation for the development of our
vehicles, from the ES8 to the ES6 and the EC6 and to other future models. Our e-propulsion system consists of three key sub-systems: an
electric drive system, or EDS, an energy storage system, or ESS, and a vehicle intelligence control system, or VIS. Our electric
powertrain reflects our cutting-edge proprietary technologies and visionary engineering in our EV design.
We are a pioneer in automotive smart connectivity and enhanced Level 2 autonomous driving. NOMI, which we believe is one
of the most advanced in-car AI assistants developed by a Chinese company, is a voice activated AI digital companion that personalizes
the user’s driving experience. NIO Pilot, our proprietary enhanced Level 2 advanced driver assistance system, or ADAS, is enabled by 23
sensors and equipped with the Mobileye EyeQ®4 ADAS processor, which is eight times more powerful than its predecessor.
We have significant in-house capabilities in the design and engineering of electric vehicles, electric vehicle components and
software systems. We have strategically located our teams in locations where we believe we have access to the best talent. Our strong
design, engineering and research and development capabilities enable us to launch smart and connected premium electric vehicles that
are customized for, and thus appealing to, Chinese consumers. In addition, our research and development efforts also have resulted in an
extensive intellectual property portfolio that we believe differentiates us from our competitors.
We adopt an innovative sales model compared to incumbent automobile manufacturers. We sell our vehicles through our own
sales network, including NIO Houses, NIO Spaces and our mobile application. NIO Spaces are showrooms for our brand, vehicles and
services. NIO Houses not only function as showrooms, but also clubhouses for our users with multiple social functions. Prospective users
can place orders using our mobile application and more importantly, our mobile application fosters a dynamic and interactive online
platform. We believe our online and offline integrated community which is developing from our NIO Houses, NIO Spaces and mobile
application will retain user engagement and cultivate loyalty to our brand, along with other successful branding activities, such as our
annual NIO Day and our Drivers’ Championship winning Formula E team.
Reservations, Production and Delivery
We began making deliveries to users of our first volume manufactured vehicle, the seven-seater ES8, on June 28, 2018, and its
variant, the six-seater ES8 in March 2019. The table below sets forth certain operating data relating to the ES8 (for both types) in 2019.
January February March
April
May June July August September October November December
2019
2019
2019 2019 2019 2019 2019 2019
2019
2019
2019
2019
ES8s produced for the
period
ES8s delivered for the
period
Cumulative ES8s delivered
1,791
654
1,356
1,508
935
434
436
460
288
139
78
63
1,805
13,153
811
13,964
1,373
15,337
1,124
16,461
1,089
17,550
927
18,477
164
18,641
146
18,787
293
19,080
306
19,386
461
19,847
633
20,480
We began making deliveries of our second volume manufactured vehicle, the five-seater ES6, to users on June 18, 2019. The
table below sets forth certain operating data relating to the ES6 up to December 31, 2019.
ES6s produced for the period
ES6s delivered for the period
Cumulative ES6s delivered
June
2019
658
413
413
July
2019
1,066
673
1,086
August
September October November December
2019
2,336
1,797
2,883
2019
2,190
1,726
4,609
2019
1,880
2,220
6,829
2019
1,407
2,067
8,896
2019
2,292
2,537
11,433
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In December 2019, we launched (i) the all-new ES8 with more than 180 product improvements, with delivery beginning in
April 2020, and (ii) our third volume manufactured electric vehicle, the EC6, with delivery expected to begin in September 2020.
Our Vehicles
We design, jointly manufacture and sell our vehicles in China’s premium electric vehicle segment. We began making deliveries
to the public of our first volume manufactured car, the seven-seater ES8 on June 28, 2018. In December 2018, we launched its variant,
the six-seater ES8, with delivery beginning in March 2019. In addition, we launched our second volume manufactured electric vehicle,
the ES6, to the public at our NIO Day event on December 15, 2018. The ES6 is a five-seater high-performance long-range premium
electric SUV. The ES6 is smaller but more affordable than the ES8, allowing us to target a broader market in the premium SUV segment.
The ES6 currently offers the Standard, Performance and Premier versions with pre-subsidy starting prices of RMB358,000, RMB398,000
and RMB498,000, respectively. We began making deliveries of the ES6 to users on in June 2019. In December 2019, we launched the
all-new ES8 with more than 180 product improvements. The all-new ES8 comes with better performance, longer driving range and a
more sophisticated and high-tech design, with delivery beginning in April 2020. In addition, in December 2019, we launched our third
volume manufactured electric vehicle, the EC6. EC6 is a smart premium electric coupe SUV with a dynamic shape design. Users can
pre-order the EC6 through the NIO App and we expect to begin making deliveries of the EC6 in September 2020. In addition, we
launched the 100-kilowatt-hour battery pack, which boasts the driving rage of the all-new ES8, ES6 and EC6’s to up to 580km, 610km
and 615km, respectively. We plan to leverage the platform technologies from the ES8, the ES6 and EC6 to build our future models.
Our goal is to launch a new vehicle model each year for the near future as we plan to offer our users more choices to suit their
preferences and target different segments within the premium electric vehicle market in China. We plan to mainly sell our vehicles in
China for the near future.
ES8
The ES8, our first volume manufactured vehicle, is a spacious six or seven-seater high-performance premium electric SUV. The
ES8 was officially launched at our NIO Day event on December 16, 2017, following which we began taking reservations. We started
making deliveries to the public of the seven-seater ES8 on June 28, 2018 and have ramped up deliveries since launch. In December 2018,
we launched its variant, the six-seater ES8, with delivery beginning in March 2019.
With both front and rear motors (240 kilowatt (kW) each), the ES8 delivers 480 kW of power and 840 units or Newton meters
(Nm) of torque to all four wheels. The ES8’s e-propulsion system enables the ES8 to accelerate from zero to 100 kph in just 4.4 seconds.
The ES8 is initially equipped with a 70-kilowatt-hour liquid-cooled battery pack comprised of cutting-edge square cell batteries, and we
began delivering the ES8 with an 84-kilowatt-hour battery pack, extending its NEDC driving range to 430 kilometers, in September
2019. The battery pack features an energy density of 135 watt hours per kilogram (wh/kg) and provides an approximately 1,200-charge-
discharge lifecycle with an 87% capacity retention. The ES8 achieves a NEDC driving range of 355 kilometers.
With 21 active safety features, the ES8 is designed to meet five-star Chinese New Car Assessment Program safety standards
developed by the China Automotive Technology Research Center. In addition to standard safety features for a vehicle in its class, ES8
also features or will feature, driver drowsiness detection, lane departure warning, lane change assistance, automatic emergency braking,
side door opening warning, and 360-degree high definition surround vision, among other advanced safety measures. The ES8 is also
designed to include safety features, such as electric stability program, electric traction control, cornering brake control, hill descent
control, hill start assist, rear view camera, front and rear parking sensors, side distance indication system, direct-tire pressure monitoring
system, blind spot detection, dynamic wheel torque by brake and roll stability control. In addition, the braking distance of the ES8 from
100 kph to a complete stop is 33.8 meters.
The ES8 is the first car in China to have an all-aluminum alloy body and chassis featuring aerospace grade 7003 series
aluminum alloy, enabling torsional stiffness of 44,140 Nm/Deg, and also features the highest amount of aluminum for any mass
production car yet. The active air suspension on the ES8 creates, we believe, a comfortable riding experience. The ES8 has a 3,010
millimeter long wheelbase, to create a truly mobile living space. The three-row, seven-seat layout makes full use of the interior space.
The innovative “lounge seat” and “child-care mode”, together with the nappa leather wrap, create, we believe, a comfortable atmosphere,
redefining the riding experience. The smart air quality system includes an activated carbon and high-efficiency particulate air, or HEPA,
filter and negative ion generator.
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Together with the launch of the ES8 in 2017, we launched our NIO Pilot system. We have activated most of the features on our
NIO Pilot system by December 2019. Our NIO Pilot ADAS, with comprehensive enhanced Level 2 autonomous driving features, is
enabled by 23 sensors, including a trifocal front-facing camera, four surround exterior cameras, five millimeter-wave radars, 12
ultrasonic sensors and a driver monitor camera. The ES8 comes equipped with the Mobileye EyeQ®4 ADAS chip which has a
computation capacity eight-times more powerful than its predecessor, the Mobileye EyeQ®3.
In addition, the ES8’s sophisticated 4G support and software and hardware suite enables subscribers to enjoy upgraded services
through FOTA updates. Each vehicle comes standard with eight gigabytes per month of data. Our remote updates are driven by our
centralized connected vehicle gateway which controls all electric control units, or ECUs. The ES8 provides high-speed parallel over-the-
air updates, allowing the ES8 to acquire new features from time to time while minimizing downtime.
Together with the launch of the ES8, we launched our NOMI system, an optional feature, which we believe is one of the most
advanced in-car AI assistants developed by a Chinese company. Our goal is to provide users with a more natural interaction with the in-
car AI system and enhanced safety by further removing the need for users to keep looking at the screen while driving. NOMI combines
the ES8’s intelligence and car connectivity functionalities to turn the ES8 into an intuitive companion that can listen to, talk with, and
help drivers and passengers along the way. Through NOMI, users are able to use shortcuts and voice control to make phone calls, play
music and control systems, including navigation, air-conditioning, opening and closing windows, climate control, controlling the seat
massage function, operating in-car media and controlling the in-car camera (including taking pictures), among others. We intend to
improve the system and add additional functions through FOTA upgrades.
In December 2019, we launched the all-new ES8 with more than 180 product improvements. With a combination of the
permanent magnet motor of 160kW and the induction motor of 240 kW, the all-new ES8 with a 70-kilowatt battery pack reaches a
driving range of up to 415 kilometers. It can accelerate from zero to 100 kph in just 4.9 seconds. The new ES8 with a 100-kilowatt
battery pack reaches a drive range of up to 580 kilometers. The all-new ES8 features 3,010mm wheelbase, the longest in its class,
boasting a spacious and flexible seating layout. The 9.8 inch instrument cluster with ultra-slim frame and 11.3 inch second-generation
multi-touch center screen comes as standard. The optional NOMI Mate 2.0 is fitted with the world’s first auto-grade AMOLED full-
circular display. The design of the all-new ES8 is more streamlined and dynamic with its front face, side and tail all adorned with chrome
accents. With the better performance, longer driving range and the more sophisticated and high-tech design, the all-new ES8 redefines
our smart electric flagship SUV.
The seven-seater ES8 and the six-seater ES8 have pre-subsidy starting prices of RMB468,000 and RMB476,000, respectively.
Purchasers can purchase additional options that come with the ES8, including nappa luxury interior package (consisting of nappa leather
perforated seats, a nappa leather interior wrap and front massage seats), all-season comfort package (heated steering wheel, second row
heated seats, and front row ventilated seat), a premium audio system, an enhanced head unit display and additional NIO Pilot functions,
different wheel styles, certain exterior colors, NIO Pilot and NOMI, among others. The ES8 also comes equipped with a wireless
charging board. We currently provide our users with the option of a battery payment arrangement, where users can make battery
payments in installments. For the ES8 ordered before January 15, 2019, there is an RMB100,000 reduction in the purchase price and
users adopting this arrangement pay RMB1,280 per month, payable over 78 months. For the ES8 and ES6 ordered after January 16,
2019, there is an RMB100,000 reduction in the purchase price and users adopting this arrangement pay RMB1,660 per month, payable
over 60 months. To purchase an ES8, a customer is first required to pay a refundable deposit reserving the car, which for the ES8 is
RMB2,000, and prior to the user’s ES8 entering into production, a non-refundable deposit of RMB20,000 must be made (which can
include the initial RMB2,000 reservation deposit) and is applied towards the purchase price of the vehicle.
ES6
The ES6 is a five-seater high-performance electric premium SUV launched in December 2018. We started making deliveries to
the public of the ES6 in June 2019 and have ramped up deliveries since launch. The ES6 is smaller but more affordable than the ES8,
allowing us to target a broader market in the premium SUV segment. The ES6 currently offers the Sporty, Performance and Premier
versions with pre-subsidy starting prices of RMB358,000, RMB398,000, and RMB498,000, respectively. Users can pre-order the ES6
through the NIO App.
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The ES6 is the world’s first SUV equipped with a combination of the permanent magnet motor (160 kW) and the induction
motor (240 kW). The ES6 delivers 400 kW of power and 725 Newton meters of torque to all four wheels with an energy conversion rate
of 97%. The ES6 can accelerate from zero to 100 kph in 4.7 seconds. The braking distance of the ES6 from 100 kph to a complete stop is
33.9 meters. The ES6 is initially equipped with a 70-kilowatt-hour liquid-cooled battery pack, and we began delivering the ES6 with an
84-kilowatt-hour battery pack, extending its NEDC driving range to 510 kilometers, in September 2019. With the 100-kilowatt-hour
battery pack to be delivered in the fourth quarter of 2020, the ES6 boasts an NEDC range of up to 610 km. The ES6 is the first car in
China with a hybrid structure of aluminum alloy (91%) and carbon fiber (9%), featuring aircraft grade 7 series aluminum alloy, enabling
torsional stiffness of 44,930 Nm/Deg, the highest among any mass production SUV globally. The use of high-strength carbon fiber
makes the ES6 lighter but more solid. It features the independent suspension, Continuous Damping Control (CDC) and the intelligent
electric all-wheel-drive system. Users have the option of installing the active air suspension and switching between driving modes,
creating a more comfortable riding experience.
The ES6 is equipped with Lion, a high-performance intelligent gateway enabling data exchange and remote upgrading via
FOTA. Additionally, the ES6’s Dragon security architecture offers a matrix-like firewall to enhance data security and protect user
privacy. In addition, the speech-based interactive NOMI system with a voice-based interactive feature is built into the ES6. The ES6 also
has an upgraded head-up display, a digital instrument cluster and an 11.3 inch second-generation multi-touch screen. Moreover, the ES6
has a pre-installed NIO Pilot system with a Mobileye EyeQ®4 and 23 sensors.
EC6
The EC6 is a smart premium electric coupe SUV launched in December 2019. EC6 has an agile coupe design with drag
coefficient at only 0.27Cd. It’s dynamically shaped and equipped with a 2.1 square meter vault glass roof. The EC6 is equipped with a
160-kW permanent magnet motor and a 240-kW induction motor and is capable of accelerating from zero to 100 kph in just 4.7 seconds.
With the 100-kilowatt-hour battery pack to be delivered in the fourth quarter of 2020, the EC6 boasts an NEDC range of up to 615 km.
Users can pre-order the EC6 through the NIO App. We expect to begin making deliveries of the EC6 in September 2020.
Our Power Solutions
Through our NIO Power solutions, we offer a comprehensive and innovative suite of power solutions to address the battery
charging needs of our users. We aim to provide power services in most major cities in China, with our solutions being easily accessible
through our mobile application. We also offer our users our valet service where we pick up, charge and then return the vehicle. Our goal
is to provide the most convenient power solutions to our users. Using our mobile application, our users will be able to monitor battery
levels and charging status. The charging status of batteries and the charging solutions available to users are all connected through our
cloud, enabling us to assist users in finding the most convenient charging solution available in a given area.
Home Charging (NIO Power Home)
Through NIO Power Home, we install chargers at our customers' homes after the purchase of a new vehicle based on customer
request where installation at the customer's home is feasible. Given the convenience of having a home charger installed, we aim to install
a home charger for our users whenever practicable. Our home charger is expected to be the first to have an auto-identification function
which enables a vehicle to automatically pair with its exclusively compatible home charger. Charging takes place by simply inserting the
charging gun into the vehicle's charging port. The first NIO Power Home device and basic installation are initially included in the price
of the vehicle though there may be charges in certain circumstances. Any user has the option of postponing such installation if
installation is not feasible at his or her residence at the time of purchase. Any subsequent installation is subject to charge on a case-by-
case basis. Installation is performed by professional third-party contractors engaged by us. Our charging pile design won the "best of
best" reddot award in 2018. Under normal temperatures and battery conditions, the 84-kilowatt-hour battery of the ES8 and the ES6
would be charged from approximately 20% to 90% power level in seven to eight hours using our home charger.
Power Express and Other Power Solutions
We have tailored our charging solutions to serve the needs of Chinese users. We anticipate that many of our users are likely to
live in condominiums or apartment buildings where they are unable to install a home charger. We aim to provide such users with a level
of convenience and service with our other power solutions so that they can enjoy a similar level of convenience as our users with home
chargers installed. We are also committed to ensuring the high standard of quality and performance of our charging solutions.
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To that end, we offer our users our Power Express valet service and other charging solutions, including access to public
charging, access to our Power Mobile, charging trucks, battery swapping and Power Charges.
Using our mobile application, a user is able to arrange to have our team pick up his or her vehicle at the user’s designated
parking location. The vehicle is driven to a nearby battery charging station or battery swap station or a charging truck is driven to the
parking location. The vehicle is returned to the user once battery charging or swapping is completed. Users are able to select “immediate
service” which provides the fastest charging option to meet a more urgent charging demand or “reservation service” for scheduled
charging services. We also plan to provide “idle charging” which allows users to set an anticipated start time and end time when their
vehicle is expected to remain idle, such as overnight, and the threshold of the vehicle’s cruising range when the service will be triggered,
as well as a specific location where the vehicle is parked during specific periods. Our one-click charging service will be automatically
triggered when the vehicle is idle and parked at the specified location during the specified period. Users are able to monitor their vehicle
charging status in real time using our mobile application. We aim to provide users with the fastest charging experience, optimizing
convenience to users by identifying the most appropriate charging solution based on the user’s travel habits through cloud-based smart
scheduling.
We offer our users our energy package, which provides them with access to our Power Express services and charging solutions,
including public charging, access to our Power Mobile charging trucks, and battery swapping for a fixed monthly fee, which is initially
set at RMB980 per month if paid monthly, or RMB10,800 annually, for up to 15 charges per month. We currently anticipate that our
energy package and Power Express services will primarily be utilized by users without home chargers installed. However, users who do
not purchase our energy package are able to access our Power Express services and charging solutions on a pay-per-use basis. The initial
price for such services is set at RMB180 per charge for NIO users and RMB280 per charge for others. The price for our mobile charging
service to non-NIO users is RMB380 per charge for charging using NIO Power Mobile trucks.
Access to Public Charging
Our users have access to a network of public chargers, which as of December 31, 2019 consisted of approximately 258,000
publicly accessible charging piles. These chargers have been installed by both public and private sectors, including state-owned
electricity companies and automotive original equipment manufacturers, or OEMs. Data from over 179,000 public chargers as of
December 31, 2019, installed by the third parties, including the State Grid, are synchronized to our cloud so that users can access real-
time information on the availability and location of these chargers. These chargers are provided by 29 operators, 11 of which we have
achieved real-time connections with. We plan to increase the number of chargers with data synchronized to our cloud. The Chinese
government has also set a target of more than 4.8 million charging piles in 2020. Access to these chargers is included in our energy
package or can be provided on a pay-per-use basis. Under normal temperatures and battery conditions, the 84-kilowatt-hour battery of
the ES8 and the ES6 would be charged from approximately 20% to 90% power (or battery) level in seven to eight hours using a normal
charger or in approximately 70 minutes using a supercharger.
In addition, we have entered into a framework agreement with the State Grid Corporation of China with the aim of expanding
the network of publicly accessible charging piles through technology and business model innovations in a collaborative way. Pursuant to
the framework agreement, the parties have agreed to cooperate in the following areas: (i) building systematic solutions for electric cars,
charging piles and grid network by leveraging each party’s own resources and standardizing electric vehicle charging and battery swap
technology; (ii) application of smart vehicle connectivity technology to practice; (iii) innovation in electric vehicle charging and battery
swap technology; (iv) the construction and operation of electric vehicle charging and battery swap infrastructure, and (v) the sales,
leasing and insurance of or for electric vehicles. While this framework agreement sets forth certain long-term strategic cooperation
principles for cooperation between the State Grid Corporation of China and us, the actual implementation of such principles would likely
require the parties to enter into supplemental agreements covering specific areas of cooperation.
Fast Charging Trucks (Power Mobile)
Through NIO Power Mobile, we provide charging through charging trucks. We plan to use these charging trucks to supplement
our charging network. Users are able to book NIO Power Mobile services in advance conveniently through our mobile application. We
own fast charging trucks, which are equipped with our proprietary fast-charging technology.
As of December 31, 2019, we had approximately 386 NIO Power Mobile trucks in operation. We have deployed these trucks in
major cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Hangzhou, Nanjing and Suzhou, among others. We plan to
enhance the efficiency of these NIO Power Mobile trucks to cater to user demand.
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Battery Swapping (Power Swap)
Through Power Swap, we offer our users the ability to arrange for a battery swap for the ES8, ES6 and EC6. Our swap stations
are compact stations located in parking lots and other locations. The typical size of a swap station is approximately three parking spaces,
or 45 square meters. Swap stations are designed to be fully automated, but for the first and second years of operation we plan to have one
staff member at each location to ensure reliability for the initial roll-out. Once a vehicle is parked in the swap station and the driver
activates the swap function, battery swapping will take place automatically. Charging of the batteries at swap stations takes place while
the batteries are stored at the swap station and their charging status information is sent to our cloud. Our battery swap stations were
developed in-house and use chassis replacement technology and apply more than 300 patented technologies to provide precise
positioning, rapid disassembly, compact integration, and flexible deployment, allowing battery replacement within minutes.
As of December 31, 2019, we had battery swap stations in 51 cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hefei,
Chengdu, Nanjing, Suzhou and Hangzhou. We had 36 battery swap stations in total along the three major highways and four other
highways in China. The three major highways are G2 highway that connects Beijing and Shenzhen, G4 highway that connects Beijing
and Shanghai, and G15 highway that connects Shanghai and Guangzhou. We believe the battery swap service we provide effectively
addresses consumers’ concern on charging convenience of electric vehicles, and has become an unduplicated competitive advantage of
ours. We plan to further enhance the efficiency of the battery swap stations and to strategically deploy more swap stations in selected
geographical areas as the number of our vehicles sold grows to ensure continuous optimal battery swap experience for our users.
Fast Charging Piles (Power Charger)
Through NIO Power Charger, we provide our users a fast and reliable charging solution using our fast charging piles. We plan to
expand these charging piles as a supplement to our charging network. Users are able to locate, use and pay for the charging through our
mobile application. Our Power Chargers are of a slim design and are located in parking lots and other locations easily accessed by our
users, with maximum output power of 105 kilowatt and 250 ampere.
As of December 31, 2019, we had approximately 184 NIO Power Charger piles in operation, covering major cities including
Beijing, among others, Shanghai, Guangzhou, Shenzhen, Chengdu, Hangzhou, Suzhou and Xi’an. We plan to enhance the efficiency of
these NIO Power Charger piles to cater to user demand.
Our Other Value-Added Service Offerings
Through one click using our mobile application, our users can access a full suite of innovative services, as part of our strategy of
redefining the user experience. In addition to our NIO Power solutions described above, we offer our users our NIO Service, comprised
of other value-added services provided primarily through our service package, which can be ordered conveniently through our mobile
application.
Service Package
We offer our users a service package, which, at a price initially set at RMB12,800 to RMB14,800 per year, provides statutory
and third-party liability and vehicle damage insurance through third-party insurers, repair and routine maintenance services, courtesy car
during repair and maintenance lasting more than 24 hours, roadside assistance and an enhanced data package, among other services. As
of December 31, 2019, approximately 89% of our individual users had a subscription for our service package.
Through our service package, we aim to provide users with a “worry free” vehicle ownership experience. Using our mobile
application, users are able to arrange for vehicle service with a few clicks. At a user’s request, we pick up the car, arrange for
maintenance and repair services, and then return the car to users once the services are done. As long as the maintenance and repair is
covered under our service package, no additional fee will be invoiced to the service package subscriber. If the user has a car accident, we
will also assist the user in engaging with the insurance company and providing necessary repairs.
We provide users who subscribe to this service package with an enhanced Internet data package with an additional 7GB of data
per month. We also have agreements with China Taiping Insurance and People’s Insurance Company of China Group, pursuant to which
we will procure basic mandatory automobile insurance and vehicle damage insurance for our users as part of the service package. Users
are also able to supplement this basic insurance coverage with China Taiping Insurance and People’s Insurance Company of China Group
at an additional cost, which will be paid to the insurance provider.
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In addition to the regular service package, we started to offer an extra insurance worry-free package on March 1, 2020 at
RMB1,680 per year. The extra insurance worry-free package provides competitive maintenance and paint-repair services, curtesy
vehicles during repair and maintenance lasting for over 24 hours, roadside assistance, an enhanced data package and other additional
services.
Battery Payment Arrangement
We currently provide our users with the option of a battery payment arrangement, where users can make battery payments in
installments. For the ES8 ordered before January 15, 2019, there is an RMB100,000 reduction in the purchase price and users adopting
this arrangement pay RMB1,280 per month, payable over 78 months. For the ES8 and ES6 ordered after January 16, 2019, there is an
RMB100,000 reduction in the purchase price and users adopting this arrangement pay RMB1,660 per month, payable over 60 months.
Vehicle Financing and License Plate Registration
We currently have agreements with Bank of China, China Merchants Bank, Ping An Bank, China Industrial Bank and Great
China Finance Leasing Co., Ltd. pursuant to which we assist users across China in procuring financing when they purchase our vehicles
we assist our users in their application for financing, making the buying process easier. We also cooperate with China Construction Bank
and Agricultural Bank of China to assist users from certain geographical scope in their application for financing. Through our
arrangements with our partner banks, we believe we are able to assist our users in procuring financing on attractive terms. We also apply
for license plate registration on behalf of our users at the time of purchase.
Vehicle Engineering and Design
We have significant in-house vehicle engineering capabilities, which cover all major areas of vehicle engineering starting from
concept to completion. Our vehicle engineering group consists of: (i) four design groups, namely, body and exterior; chassis; interior,
heating and cooling; and electrical and electronics; (ii) two integration groups, namely, mechanical and electrical, which are together
responsible for integrating components and systems into a complete vehicle and work with the design groups; and (iii) two advanced
engineering groups, namely, vehicle concepts and system concepts, which focus on future products and longer term innovation. We aim
to implement industry best practices throughout the engineering and design process.
We have strategically located our vehicle engineering teams based on where we believe the right talent is located. As of
December 31, 2019, our vehicle engineering group had 619 employees worldwide, with 559 located in Shanghai and 60 located in Hefei
and Nanjing of China, Oxford of the United Kingdom and San Jose of the United States. We have significant engineering capabilities at
our Shanghai headquarters, which was selected due to its status as a global automotive hub, providing us with a significant talent pool.
Our international offices provide us with deeper capabilities in certain areas. Our San Jose and Oxford teams focus on advanced
development work with our Oxford team also working on complex computer-aided engineering, and our Munich team focuses on light-
weight material development and vehicle design. In addition, our engineering teams in Munich focus on lightweight and e-powertrain
engineering and work on the challenges of energy and resource efficiency and design our vehicles, including the interior and exterior.
Our Technology
We believe one of our core technology competencies is our proprietary e-propulsion system. It also has a modular design,
allowing future models to incorporate a significant portion of this technology. Our technologies, including battery management system,
electric driving system, vehicle control system, and autonomous driving, among others, are cutting-edge and differentiates us from our
competitors. The ES8, the ES6 and the EC6 integrate many of these industry-leading technology modules, including our proprietary e-
propulsion system, digital cockpit, enhanced level 2 ADAS system, smart data router, security architecture and cloud data platform, to
create a comprehensive interactive system for the optimal user experience.
Electric Powertrain (E-propulsion System)
We have developed our own e-propulsion system. The e-propulsion system consists primarily of an electric drive system, or
EDS, an energy storage system, or ESS, and a vehicle intelligence control system, or VIS.
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We have developed two integrated EDS systems—the 240kW induction motor, or the 240kW IM EDS, and the 160kW
permanent magnet motor, or the 160kW PM EDS. The 240kW IM EDS has a copper rotor induction motor, a motor controller with a
unique topology design, and a high-torque gearbox. The combination of high-power and high-torque is expected to provide users with
powerful driving force. We possess dual technologies for induction motors and permanent magnet motors. Our 160kW IM EDS was
developed in-house. It has higher power density and higher efficiency due to permanent magnet motor applied, providing both longer
driving range and strong acceleration boost when paired with the 240kW PM EDS. Our first volume manufactured vehicle, the ES8, is
equipped with the 240kW IM EDS, delivering 480 kW of power. Our second volume manufactured vehicle, the ES6, is the world’s first
SUV equipped with a combination of the 240kW IM EDS and the 160kW PM EDS, delivering 400 kW of power.
Our lightweight ESS uses high-energy density battery cells and high-strength housing. The ES8 is initially equipped with our
proprietary 70-kilowatt-hour liquid-cooled battery pack developed and packaged in-house, bringing a high energy density of 135wh/kg.
In October 2019, we began delivering the ES8 and the ES6 with an 84-kilowatt-hour battery pack, extending their NEDC driving range
to 430 and 510 kilometers, respectively. We are currently developing a new 100-kilowatt-hour battery pack with advanced technology
and a 24-hour safety monitoring device to ensure battery safety, and plan to deliver it in the fourth quarter of 2020. The 100-kilowatt-
hour battery pack will extend the NEDC range of the new ES8, ES6 and EC6 to 580, 610 and 610 kilometers, respectively. Our ESS is
high-capacity and has industry-leading thermal management technology and a safety structure design. In addition, our ESS is equipped
with a state-of-the-art battery management system, a high-efficiency liquid-cooled design and swapping technology to achieve long-
lasting, stable and new energy solutions. In particular, our battery management system provides real-time monitoring of the vehicle
insulation status, a comprehensive fault diagnosis mechanism to ensure the safety and reliability of battery pack use. We are able to
upgrade the software of our battery management units and cell supervising circuits and switch-boxes through FOTA updates. We conduct
extensive testing to ensure safety, performance, durability and reliability. We also possess the module capability of prismatic, pouch and
cylindrical cells, with a planned annual production capacity of over seven gigawatts per hour.
Our advanced VIS includes a vehicle control unit, or VCU, electric vehicle controller and ADAS system. A VCU is an
intelligent controller, which can control the torque output according to different driver behavior and control region torque according to
best energy recovery. It provides optimal torque split between front and rear EDS based on motor efficiency, driver mode selection and
vehicle dynamics, and offers the best vehicle drivability with the active damping function to compensate the driveline vibration. The
vehicle control system’s network architecture also takes into account functional safety and network security. The intelligent high- and
low-voltage energy management system can monitor and adjust the optimized pure electric cruising range in real time and the adaptive
cruise control system, or ACC, automatic parking and other functions can meet the requirements of automatic assisted driving. The
intelligent thermal management system regulates water coolant system to maintain optimal operating temperature of HV components.
The intelligent AC charging controller provides remote charging function safely and conveniently. Our VCUs and ADAS have passed
software testing and vehicle calibration and verification, thus bringing a new experience of smart and safe driving.
Immersive Experiences Powered by Artificial Intelligence
Our digital cockpit is an AI driven, scalable and flexible architecture that presents the user with an intelligent and immersive
interface which provides, we believe, an industry leading integrated user experience. Each of the ES8, ES6 and EC6 uses NVIDIA
DRIVETM for its in-car digital cockpit. It adopts a single highly advanced proprietary controller, supporting a flexible multiple-
operating system environment running Android, QNX, and Linux. This in-cabin technology enables a unified user experience across all
four interior displays and advanced user interaction through our AI connected assistant, NOMI.
NOMI is designed to be one of the most advanced AI systems in a production vehicle and through NOMI we aim to
revolutionize the relationship between users and their vehicles. NOMI learns users’ habits and interests through deep learning algorithms
in order to meet their individual needs under different circumstances. We have built flexibility into our system which will allow for new
functions and applications to be added through future software updates.
Vehicle Control and Connectivity
Our vehicles are equipped with our proprietary software and hardware, enabling us to control the vehicles’ ECU and BCU
modules, including core electric powertrain control software, which allows for an integrated and optimized control over vehicle
performance.
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We are one of the first automobile manufacturers in China that have both the FOTA and the software over-the-air capabilities.
Our FOTA firmware management technology will allow the operating firmware of ECUs in vehicles to be wirelessly updated and
upgraded. The vehicle will be connected to our information cloud at all times, and when there is a firmware or software update available,
our cloud will push an update message to the vehicle which triggers an update. Upgrades will be wirelessly downloaded to the vehicle,
installed, and launched, including updates for firmware, software, operating systems and applications. FOTA updates will enable us to
upgrade the operating firmware down to the individual programmable ECU level across the vehicle’s core systems, such as powertrain
and ADAS. Since we began to make deliveries of the seven-seater ES8 in June 2018, we have completed 14 FOTA updates, delivering
more than 70 new features and optimizing more than 200 features.
We expect this technology will allow us to fix bugs and remotely install new features and services after a vehicle has already
been delivered to customers. As a result, we expect to be able to reduce the cost and time of marketing new feature roll-outs.
Our proprietary software leverages Linux, QNX and Android systems and control systems such as the central digital cockpit,
connected gateway, ADAS and cyber security systems. We believe our highly-integrated design allows us to reduce the development
time and cost of new technologies and creates an upgradable and flexible system for our next generation of products. The ES8, ES6 and
the EC6’s smart data router, or SDR, has, we believe, industry leading connectivity and remote service capabilities with a comprehensive
end-to-end security framework. The SDR enables a superior driver experience by tracking vehicle settings, user preferences and offering
instant remote vehicle diagnostics with respect to faults, alerts and logs to our service and maintenance team. The SDR also offers a
completely integrated vehicle security system enabled by a firewall, an intrusion detection system and machine learning for continuous
improvement.
Autonomous Driving
The ES8, ES6 and EC6’s ADAS system is built for advanced processing and learning capabilities.
Our ES8, ES6 and EC6 are equipped with NIO Pilot, a comprehensive enhanced Level 2 ADAS system that will update with
new features over time through high-speed FOTA updates. The ES8 is the world’s first vehicle to come equipped with the Mobileye’s
EyeQ®4 ADAS processor. The NIO Pilot hardware consists of 23 sensors, including a front-facing trifocal camera, four exterior
surround cameras, five millimeter-wave radars, 12 ultrasonic sensors, and an interior driver monitor camera. Our multi-sensor ADAS
solution has a reaction time that is many times faster than the average human reaction time.
NIO Pilot also has a built-in algorithm that we expect to source driving data across the entire vehicle fleet of the ES8s, ES6s and
EC6s. This allows us to accelerate the enhancement of autonomous driving solutions, without materially impacting driver safety or
vehicle operation, before activating these features for users. Our autonomous and assisted driving algorithm development is accelerated
by our smart data management system which flags and uploads unusual events (false positives and negative events as well as corner
cases) for in-house analysis. We anticipate that as we increase the scale of business and more of our vehicles are on the road, this
functionality will enable us to validate algorithms against millions of miles of empirical data in a short period of time.
We rolled out various ADAS features through FOTA updates after undergoing a rigorous and thorough testing of the features. In
2019, we successfully realized and applied various features for NIO Pilot, including front collision warning and automatic emergency
braking, park assist, automatic high-beam control, lane changing assistance, lane departure warning, blind spot detection, rear cross-
traffic alert, door opening warning. In addition, we rolled out the following new NIO Pilot features through FOTA updates in 2019: (i)
active ADAS features, such as adaptive cruise control, traffic jam pilot, and highway autopilot for lateral and longitudinal support in
certain conditions; (ii) driving support, including automatic lane keeping assistance, automatic lane change, automatic park assistance,
and traffic sign recognition; and (iii) alerts and warnings, including front cross-traffic alerts and side distance indication. We plan to roll
out functions of the navigation on NIO Pilot in 2020.
We have established autonomous driving research and development centers in Shanghai and San Jose. As of December 31,
2019, we had 270 full-time specialized engineers carrying out smart driving system technology projects, such as custom production
hardware and sensors, environment awareness, data fusion, route planning, vehicle control, deep learning and car networking, with the
aim of developing an intelligent driving system for electric vehicles.
In July 2016, our self-driving car completed a start-function test at the National Autonomous Vehicle Testing Center in
Shanghai. The test was intended to improve reliability, detection accuracy, and application scenarios through the deployment of a sensor
configuration scheme suitable for mass production, multi-sensor data fusion and target detection tracking technology.
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In December 2016, we established a cross-functional team for ADAS system management with core members from project
management, autonomous driving development, supply chain, product quality, product planning, manufacturing, logistics and finance.
Our ADAS system management team is committed to deploying technology to products tailored for the Chinese market. It collaborates
closely with vehicle integration, electric architecture and other engineering teams to ensure successful product rollout.
In February 2017, we set a world record by completing the fastest autonomous lap at the Circuit of the Americas Race Track in
Austin, Texas. The NIO EP9 drove autonomously without any interventions, recording a time of two minutes 40.33 seconds at a top
speed of 160 mph.
In March 2018, we were in the first batch of companies to obtain a Shanghai Intelligent Connected Vehicle Test Permit to test
seventeen items including, among others, obstacles identification and response and automatic emergency braking on the testing roads,
traffic sign recognition and lane keeping systems in the testing roads. In April 2018, we were in the first batch of companies to obtain a
Beijing Autonomous Driving Test License, to test various items including, among others, perception and compliance with traffic
regulations, emergency reaction and manual intervention and integrated driving ability on testing roads.
Cloud Data Platform and Integrated Vehicle Security Solution
Our cloud data platform stores vehicle, sensor and user data in a single data lake to minimize data duplication and cost. We can
easily access fleet level data and analytics for diagnostic purposes and autonomous driving development. The NIO cloud data platform is
designed to enable rapid development and deployment of new applications across fleet and users.
While other OEMs must use multiple vendors to build their security solutions, we have one comprehensive end-to-end security
framework. Our integrated security framework protects vehicle data from end-of-assembly to end-of-life. All external and critical
internal communications are protected by on-the-fly encryption. Our cloud-based developer suite for maintenance and analytics enables
us to continue improving our security and stay ahead of future threats.
Worldwide Research and Development Footprint
We have strategically located our teams in locations where we believe we will have access to the best talent. Our global
engineering office is located at our Shanghai, China headquarters. Our vehicle design headquarters is in Munich, Germany and our
software and autonomous driving technology is designed and developed at our North American headquarters in San Jose in the United
States.
Shanghai
Our engineering research and development headquarters is in Shanghai, where we had a team of 2,176 research and
development personnel as of December 31, 2019. Our team in Shanghai coordinates between each of our other research and development
teams globally while also focusing on vehicle integration, electrical engineering and integration, body and interior engineering, chassis
engineering and engineering quality and support. In Shanghai we have an advanced research and development center, which provides
comprehensive testing and research and development services related to electric and smart vehicles, including vehicle integration,
electric engineering and integration, battery, motor, and electrical control, power management and charging devices, customer service
and spare parts management. More than half of the patents obtained globally by us originated from our team in Shanghai.
Beijing
We had 180 research and development personnel in Beijing as of December 31, 2019. Our team in Beijing coordinates with
other research and development teams globally to deliver world-class in-vehicle AI product, NOMI and award-winning IVI systems in
NIO products. The focus of our Beijing research and development team is on full stack AI technologies to power NOMI and design and
engineering effort to enable continuous upgrade of digital experience through FOTA. The team is also responsible for the Internet of
Vehicles including design, implementation, maintenance and support of the system.
Silicon Valley
Our San Jose office, located in the heart of Silicon Valley, is our North American headquarters and global advanced technology
center. As of December 31, 2019, the San Jose team consisted of 377 employees. Our teams in San Jose focus on innovation in the areas
of autonomous driving, digital cockpit, and digital systems and architecture, including digital security.
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Munich
Our Munich office is primarily responsible for our product and brand design. As of December 31, 2019, in Munich we had a
team with approximately 128 employees, focusing on vehicle interior and exterior design, user interface design, and brand design.
United Kingdom
Our computer-aided engineering and advanced concept engineering teams are based in Oxford, U.K. We had 38 employees
focused on vehicle engineering in the U.K. as of December 31, 2019.
Vehicle Servicing and Warranty Terms
Service, Service Centers and Service Vans
We currently provide servicing both through authorized third party service centers and NIO service centers, both of which
provide repair, maintenance and bodywork services. For our NIO service centers, we hire qualified employees to provide customer
services of high quality. We conduct professional training and tests to our employees. We typically lease the premises used for our NIO
service centers. As of December 31, 2019, we had 23 NIO service centers across 20 cities, including Beijing, Shanghai, Guangzhou,
Shenzhen, Nanjing, Suzhou, Chengdu, Xi’an, Shijiazhuang, Tianjin, Wuhan, Qingdao, Ningbo, Hangzhou, Zhengzhou, Xiamen,
Chongqing, Changsha, Foshan and Hefei.
For authorized third party service centers, we have a network management team to carefully select and bring authorized service
centers into our network. Our team selects service centers based on the following criteria: (i) capability of repairing the aluminum alloy
body of our vehicles; (ii) experience with servicing high-end branded vehicles, as these typically have more complex features requiring
more technical training which would also be useful in servicing our vehicles; and (iii) service-related operational capabilities as
determined by our field team during on-site inspections. We enter into agreements with the service centers, pursuant to which a service
center first becomes a candidate. Following the purchase of certain required equipment by the candidate service center, including
diagnostic equipment and tools and training by our staff, we conduct a review and provided that the review is successful, we certify the
service center as an authorized center which will be available to our users through our mobile application. As of December 31, 2019, we
had 146 authorized service centers across 114 cities, including Beijing, Shanghai, Shenzhen, Chengdu, Hefei, Hangzhou, Wuhan,
Nanjing, Suzhou and Guangzhou.
In addition to our service centers, by December 31, 2019, we have deployed 218 service vans covering 84 cities which we
selected based on user demand. We may selectively expand our service vans coverage in the future. Through our NIO service centers,
third party authorized service centers and service vans, we have built a complete chain of process of parts warehousing and logistics. We
believe our service capability is among the core competitiveness we possess.
New Vehicle Limited Warranty Policy
For the initial owner of the ES8 and ES6, we are providing an extended warranty subject to certain conditions, including, among
others, that the extended warranty only applies for the original owner of the vehicle and not for any subsequent buyers of the vehicle; the
user must service the vehicle only with us or one of our authorized service centers; and the vehicle must not have experienced any major
accident. As required under relevant PRC law, we also provide (i) a bumper to bumper three-year or 120,000-km warranty, (ii) for critical
EV components (battery pack, electrical motors, power electrical unit and vehicle control unit), an eight-year or 120,000-km warranty,
and (iii) a two-year or 50,000-km warranty covering vehicle repair, replacement and refund. See “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business and Industry—Our warranty reserves may be insufficient to cover future warranty claims which
could adversely affect our financial performance.”
User Development and Branding
User Development
We aim to engage with users and create an environment conducive for user interaction both online and offline. Our mobile
application had approximately 1.2 million registered users as of December 31, 2019 and over 168,000 daily active users on peak days in
2019.
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Mobile Application
Our mobile application, the NIO App, is designed to be a portal not only for selling cars where users can make reservations for
the ES8, ES6, EC6 and, in the future, our other vehicles, but also for accessing our other services, including those under our energy
package and service package.
The layout of products offered on our mobile application is designed to be intuitive and easy to use. Our mobile application
allows customers to order an ES8, ES6 or EC6 and easily check the latest status of an order. Users can also use our mobile application to
find charging stations or arrange for charging or battery swap services through NIO Power. Users are also able to monitor battery and
charging status using our mobile application.
In order to foster community building, our mobile application allows our users to engage with other users through moment
sharing and users can shop for our merchandise and earn NIO Credits (as described below). We also notify users of our events through
our mobile application.
Our mobile application also has our product information and information on locations of NIO Houses. Customers can also shop
in our online shop for items, such as NIO apparel, accessories, games and children’s items. Using the friend function, our customers can
connect with other NIO customers. Our mobile application also keeps our users updated on our latest announcements and activities.
NIO House and NIO Space
We aim to provide our users with experiences that go beyond the car with our NIO Houses and NIO Spaces. NIO Spaces are
showrooms for our brand, vehicles and services. NIO Houses not only have showroom functions, but also serve as a living space for our
customers and their friends. Potential users can browse our cars and products and go for test drives and interact with our team of user
development specialists at NIO Houses and NIO Spaces. If a new user decides to purchase a car, our team walks them through the
process and assists the user in completing his or her order through our mobile application.
In November 2017, we opened our first NIO House in Beijing, and as of December 31, 2019, we had 22 NIO Houses in total,
three in Shanghai, two in Beijing, and one in each of Nanjing, Guangzhou, Shenzhen, Hangzhou, Suzhou, Chengdu, Xi’an, Hefei,
Dongguan, Nantong, Wuxi, Wenzhou, Wuhan, Zhengzhou, Tianjin, Shijiazhuang and Chongqing. The first NIO House, which occupies
over 32,000 square feet, has two floors and seven main areas and is Beijing’s largest brand experience center. The features and design of
each NIO House may vary based on what we believe to be user preferences in the relevant city or area and we may include larger
flagship NIO Houses as well as NIO House in smaller cities. Each NIO House features a gallery showcasing our brand and products, and
may also feature a lounge for our users to relax and socialize, forums which consist of a theater and which we intend to be a place for
gatherings, meetings or presentations, “labs” which are bookable meeting rooms and workspaces, a library, an open kitchen and a kids
joy camp. Although we charge (through cash or NIO Credits) small amounts for the use of certain services at NIO Houses or for certain
items, we mainly intend to use NIO Houses to support our vehicle sales and user development activities.
Compared with NIO Houses, NIO Spaces are generally smaller in scale, more delicate and more sales-focused. We opened our
first NIO Space in Shanghai in August 2019. We also converted some of the former pop-up NIO Houses to NIO Spaces in 2019. As of
December 31, 2019, we had 48 NIO Spaces in 41 cities. Through NIO Spaces, we are able to cost-effectively and meaningfully reach
potential users in a wider geographical scope, which in turn helps drive new orders. The introduction of NIO Spaces in 2019 allows more
potential users to see, touch, and feel our vehicles, and truly enjoy the superior driving experience our products offer.
Branding
We focus on promoting awareness of our brand generally and in particular as a premium brand with high-quality vehicles and
services in China. We aim to engage in cost-effective branding activities taking advantage of social media and to build an online and
offline ecosystem of users that will promote awareness of our brand. To a lesser extent, we engage in limited mass-marketing, such as
through billboard advertising in airports. Our branding efforts include the following:
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NIO Day
We held our first “NIO Day” in December 2017 at the Beijing Wukesong Arena, where we introduced the seven-seater ES8. We
launched our second volume manufactured electric vehicle, the ES6, to the public on our second “NIO Day” in December 2018. Our first
two NIO Days consisted of presentations by our Chief Executive Officer, Bin Li, who introduced our ES8 and ES6, respectively. The
second NIO Day had 150 million views and produced a significant increase in our social media followers, as well as over 5,500 Chinese
media reports. The third NIO Day was held in December 2019 in Shenzhen, where we launched our third volume manufactured electric
vehicle, the EC6, and the new ES8 to the public. Our users played main roles during the event and we believe the user enterprise concept
was well perceived. We plan to hold NIO Day each year on which we introduce our new vehicles and products to users. We believe that
NIO Day gives us an opportunity to interact with our current and prospective users while providing us with more publicity and brand
awareness.
Formula E
We had in the past operated the Formula E team, which is a racing team that competes in the Fédération Internationale de
l’Automobile, or FIA, Formula E championship electric racing series. In 2019, we sold the business related to Formula E team to
Brilliant In Excellence Co., Ltd., a Hong Kong based buyer, and became a sponsor of the team. In September 2019, 333 Racing, a British
motorsport racing team, partnered with Formula E team. The Formula E team was renamed as NIO 333 Formula E team thereafter. NIO
333 Formula E team is currently managed and operated by professional motorsport management personnel in China, and will compete in
the 2019/2020 racing season with our company as its primary sponsor.
EP9
Our development of the EP9 was part of our brand-building efforts. Through its achievements it brings attention to our
capabilities and to our brand. The EP9 is an electric two-seat sports car developed by us. The EP9 has four high-performance inboard
motors and four individual gearboxes, the EP9 delivers 1 megawatt of power, equivalent to 1,360PS. The EP9 accelerates from zero to
200 kph in 7.1 seconds and has a top speed of 313 kph. With an interchangeable battery system, the EP9 is designed to be charged in 45
minutes. The EP9 achieved a new lap record at the Nürburgring Nordschliefe where on October 12, 2016, the EP9 lapped the 20.8 km
‘Green Hell’ track in 7 minutes and 5.12 seconds, beating the previous electric vehicle lap record held, marking it out as one of the
fastest electric cars in the world. On May 12, 2017, the EP9 lapped the 20.8 km ‘Green Hell’ track in 6 minutes and 45.90 seconds,
breaking its own record. Previously, in November 2016, it had set a new electric vehicle record at Circuit Paul Ricard in France,
recording a time of 1 minute 52.78 seconds, surpassing the previous record of 2 minutes and 40 seconds. We believe these achievements,
along with the media attention we have received, have boosted our reputation and awareness of our brand.
Other Branding Activities
We also participate in events, including displaying our cars and technology at automotive shows, such as Shanghai’s 17th
International Automobile Industry Exhibition, where we unveiled the ES8 and showcased the EP9 as well as our vision concept car, the
NIO EVE. We also showcased the NIO EVE at the South by Southwest festival in Austin, Texas. We also conduct many other smaller
events at our NIO Houses and NIO Spaces. In April 2019, we participated in the 18th Shanghai International Automobile Industry
Exhibition, demonstrated our swap station on the booth for the first time, and attracted over 285,000 viewers. In November 2019, we
participated in the 17th Guangzhou International Automobile Exhibition.
We also have NIO Life, which includes an online store where users, accessing our mobile application, can purchase NIO
merchandise, including NIO sweaters, miniature cars, phone cases, tote bags and calendars, among others. Since we launched our online
store in December, 2016, over 1,720,000 pieces of merchandise have been sold or awarded to our users online and offline. We also
provide users with NIO Credits to encourage user engagement and for certain positive behavior, including a clean safety record for the
year. NIO Credits are earned, among other things, through frequent sign-ins to our mobile application, sharing articles from our mobile
application on users’ own social media, through a welcome package upon the purchase of a vehicle, and referrals of test drives and new
vehicle purchasers. NIO Credits can be used both at our online store and at our NIO Houses and some of the NIO Spaces to purchase
merchandise.
Manufacturing, Supply Chain and Quality Control
We view the manufacturers and suppliers we work with as key partners in our vehicle development process. We aim to leverage
our partners’ industry expertise to ensure that each vehicle we produce meets our strict quality standards.
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Manufacturing
Nanjing Advanced Manufacturing Engineering Center
Our Nanjing Advanced Manufacturing Technology and Engineering Center, or Nanjing AMTEC, houses our trial production, or
pilot line, which is mainly used to test engineering prototypes and is also used by our research and development department to develop
and verify new processes, materials and products. We believe that our use of this line advances production time by six months to eight
months. All of our new models are first tested at the Nanjing AMTEC. Nanjing AMTEC pilot line covers the three processes of
bodywork, painting and general assembly.
We also use Nanjing AMTEC to train employees for the JAC-NIO manufacturing base.
Partnership with JAC
We entered into an arrangement with Jianghuai Automobile Group Co., Ltd., or JAC, a major state-owned automobile
manufacturer in China, for manufacturing the ES8 for five years starting from May 2016, which may be renewed as agreed by JAC and
us. In April 2019, we entered into a manufacturing cooperating agreement with JAC for the manufacture of ES6, which is a supplement
to the arrangement we entered into with JAC in May 2016. In March 2020, we entered into a manufacturing cooperating agreement with
JAC for the manufacture of EC6.
JAC has a 50-year history of automotive manufacturing and annual sales of nearly 420,000 vehicles, including passenger and
commercial vehicles. JAC has in-house development, manufacturing, and testing systems for new energy vehicles, and is an established
player in China’s new energy vehicle market. In addition, JAC has a joint venture partnership with Volkswagen for the manufacturing of
electric cars. We also expect our partnership with JAC will allow us to bring our vehicles to the market at an accelerated pace by taking
advantage of JAC’s capacity and through its capital investment and support. JAC has invested more than RMB2.2 billion to the
construction of a brand-new world-class factory for the production of the ES8, ES6 and EC6, and potentially other future vehicles with
us. This factory has the capability of conducting stamping, body in white assembly, painting and general assembly, and is equipped with
testing tracks, a quality inspection center and a utility power and sewage treatment center. Given its advances in new energy vehicle
manufacturing, JAC has contributed to our ability to bring the ES8 and ES6 to the market more quickly and helps us to meet our
production requirements.
We exercise significant control in the manufacturing partnership with JAC to ensure high quality standards. We conduct product
development, provide supply chain systems, set production technique standards, and put in place quality management systems. We
developed a manufacturing process development platform for digital process lifecycle to reduce defect in process development to the
extent possible. We apply NIO lean manufacturing system in JAC-NIO plant to improve execution efficiency and quality. We take a
number of steps throughout the entire manufacturing process to ensure that our vehicles are manufactured in accordance with our
standards. These steps include: (x) at the procurement stage, our being responsible for procuring all third-party components for our
vehicles and applying our quality assurance procedures with respect to suppliers; and (y) at the manufacturing stage, our taking
additional measures, including: (i) processing and owning the key tooling equipment, including stamping dye, body jointing equipment,
body connection equipment and inspection tools at the factory; and (ii) our training certain key supervisory personnel at Nanjing
AMTEC. We have implemented operational policies and guidelines as well as quality inspection measures, conducting inspections of
both parts and completed vehicles.
Pursuant to our agreements with JAC, we pay JAC on a per-vehicle basis monthly for the first three years, which allows us
greater cost flexibility as we ramp up our operations. The factory covers an area of 138 acres. The factory has a high-speed, fully
automated and five-sequence pressing machine line. It uses fully automated assembly, real-time monitoring and alarm connection
parameters to ensure reliable connection quality, while a total body online vision system is also equipped on the line to monitor the
dimensional accuracy of the vehicle body. The factory has state-of-the-art production facilities and techniques, and also applies
environmentally friendly techniques and uses renewable energy. Photovoltaic panels on top of the factory are expected to be installed to
make use of solar energy and ground-source heat pumps have been used in the assembly area to provide a temperate working
environment. In addition, we and JAC have put together a high-quality workforce, consisting of experienced management and
supervisors from us and JAC and thousands of front-line employees selected from JAC. Our employees at the factory take on key
management and supervisory roles in production, quality control and training. We believe that the manpower is sufficient for an annual
production capacity of 120,000 vehicles based on running three shifts per day.
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Powertrain and Battery Pack
We manufacture our powertrain, or e-propulsion system, our battery pack and electric drive system. We established AMTEC, in
Nanjing for pilot production, motors, e-propulsion system and energy storage systems, and in Changshu for energy storage systems.
Nanjing AMTEC is located in the Nanjing Economic and Technological Development Zone. Nanjing AMTEC Phase I was
completed in August 2016, and Phase II was competed in 2019. The plant and ancillary facilities of Nanjing AMTEC Phase I have a
building area of 64,000 square meters and mainly produce motor and electric driving products with a planned capacity to make up to
300,000 motors annually. It is equipped with an intelligent information management system which is able to trace real-time performance
of labor, equipment and materials, and technique parameters, quality and final products. Nanjing AMTEC has advanced equipment
sourced from reputable international suppliers, including ABB, DMG, and TRUMF. The Nanjing AMTEC Phase II has a building area of
42,800 square meters and production facilities for both electric drive system and energy storage system. Its production lines are highly
automated and highly flexible with advanced MES systems and AGVs, and were put into operation in June 2019. The joint venture we
established with Nanjing Punch Powertrain Automatic Transmission Co., Ltd. has started production of the gearbox of our 160kW
electric drive system.
Meanwhile, Nanjing AMTEC has passed the ISO 16949 audit, which audit is used to certify as to technical specification aimed
at the development of a quality management system prepared by the International Automotive Task Force and the “Technical
Committee” of the International Organization for Standardization.
In Changshu, we have a joint venture with Zhengli Investment Co., Ltd. for the production of pure electric automobile energy
storage systems for the ES8 and ES6.
Our Suppliers
We have a “global brand, locally build” strategy where, to the extent practicable, we seek to partner with reputable international
brands which have operations in China. The ES8, ES6 and EC6 each uses over 1,500 purchased parts which we source from over 190
suppliers. The majority of our supply base is located in China (including a significant portion of our suppliers which are global suppliers
with a Chinese footprint), which we believe is beneficial as it enables us to acquire supplies more quickly and reduces risk of delays
related to shipping and importing. We expect that as our scale increases we will be able to better take advantage of economies of scale
with respect to pricing.
We have developed close relationships with several key suppliers. These include: Mobileye B.V., which provides its Mobileye
EyeQ®4 ADAS processor used in the ES8, ES6 and EC6; CATL, which provides battery cells used in the battery pack of the ES8, ES6
and EC6; Continental, which provides its air suspension system; Bosch, which provides its iBooster (vacuum-independent
electromechanical brake booster, a key component for electromobility and driver assistance systems) and ADAS hardware (sensors and
radars) used in the ES8, ES6 and EC6; Brembo, which provides four-piston all-aluminum brake calipers used in the ES8, ES6 and EC6;
and Novelis, which provides aluminum coils used in the aluminum body panel of the ES8, ES6 and EC6. Our electric driving systems
and energy storage systems are developed in-house. We believe we have strong relationships with our suppliers. Despite our limited
operating history, many of our suppliers have been willing to support our business. For example, we believe we are one of the first
brands using the Bosch iBooster braking system in China.
We obtain systems, components, raw materials, parts, manufacturing equipment and other supplies and services from suppliers
which we believe to be reputable and reliable. Similar to other global major automobile manufacturers, we follow our internal process to
source suppliers taking into account quality, cost and timing. We have a parts quality management team which is responsible for
managing and ensuring that supplies meet quality standards. Our quality standards are guided by industry standards, including AIAG
(Automotive Industry Action Group) APQP (Advanced Product Quality Planning) and PPAP (Production Part Approval Process)
procedures, which were developed by the U.S. automotive industry.
Our method for sourcing suppliers depends on the nature of the supplies needed. For general parts which are widely available,
we seek proposals from multiple suppliers and choose based on quality and price competitiveness, among other factors. For parts
requiring special designs, we solicit design proposals and choose largely based on design-related factors. However, in certain cases we
have limited choices given our scale, such as for aluminum and battery cell packages, so in such circumstances we typically partner with
suppliers that we believe to be well-positioned to meet our needs.
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We enter into strategic framework agreements with key suppliers. These agreements typically cover the life cycle of a particular
model of vehicle. We use various raw materials in our business, including aluminum, steel, carbon fiber, other non-ferrous metals such as
copper, as well as cobalt. The prices for these raw materials fluctuate depending on market conditions and global demand for these
materials. For certain raw materials, such as aluminum, our pricing is set within pricing bands which shift with respect to market prices.
While we obtain components from multiple sources whenever possible, similar to other automobile manufacturers, many of the
components used in our vehicles are purchased by us from a single source. Eventually we plan to implement a multi-source volume
purchasing strategy in order to reduce our reliance on sole source suppliers. We believe that will also help us to increase our ability to
obtain quality components with better cost competitiveness.
Quality Assurance
We aim to deliver high-quality products and services to our users in line with our core values and commitments. We believe that
our quality assurance systems are the key to ensuring the delivery of high-quality products and services, and to minimize waste and to
maximize efficiency. We strongly emphasize quality management across all business functions, including product development,
manufacturing, supplier quality management, procurement, charging solutions, user experience, servicing and logistics. Our quality
management groups are responsible for our overall quality strategy, quality systems and processes, quality culture, and general quality
management implementation.
During product development, many phases of testing vehicles are built to verify our design and production processes. For
example, we built more than 250 ES8 and 210 ES6 testing vehicles in order to conduct a wide range of function and durability tests. The
durability test runs for more than an aggregate of three million kilometers for each ES8 and ES6 model.
The ES8 and ES6 are manufactured at a new plant which is operated jointly by JAC and us with quality standards implemented
by our team. All lines including stamping, body, painting, and general assembly are developed in accordance with industry standards
with a high degree of automation. The manufacturing process failure mode effect analysis, control plans, and standard operation sheet are
developed and audited carefully by us. We apply advanced product quality planning (APQP), which is a framework of procedures and
techniques utilized in the global automotive industry, across all phases of product development and supplier quality management.
Through our factory automated system, we monitor manufacturing process parameters and parts information for process control and
traceability.
Other Partnerships
We have partnered with other strategic partners including Baidu for its iQIYI online video streaming and map data and
technology; Tencent for its Tencent Cloud and QQ music; and Keen Lab for NOMI text to speech function.
Certain Other Cooperation Arrangements
We have entered into arrangements with Guangzhou Automobile Group Co., Ltd, or GAC, and Chongqing Changan
Automobile Co Ltd, or Changan in order to take advantage of market opportunities in the entry and mid-range segments of the Chinese
EV market, reduce supply chain costs through potential joint procurement and jointly conduct research and development activities. Any
vehicles developed and sold under these arrangements will be marketed and sold using GAC’s, Changan’s, or other jointly developed
brands.
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GAC
In April 2018, (i) we, (ii) an entity associated with our founder Bin Li, Hubei Changjiang Weilai New Energy Industry
Development Fund Partnership (Limited Partnership), or NIO Capital, (iii) Guangqi New Energy Automobile Co., Ltd., and (iv) GAC,
jointly established a joint venture company, GAC-NIO New Energy Vehicle Technology Co., Ltd., or GAC JV, to mainly engage in
electric vehicle and parts development, sales and services. On May 20, 2019, GAC JV announced its new brand, Hycan He Chuang.
GAC is a Chinese state-owned automaker headquartered in Guangzhou, Guangdong and listed on the Hong Kong Stock Exchange and
the Shanghai Stock Exchange. Pursuant to the joint venture agreement entered into on December 28, 2017, we have agreed to invest
22.5% of the registered capital of the joint venture and unless otherwise unanimously approved by the board of directors of GAC JV, no
dividend distribution will be made among shareholders prior to a qualified initial public offering of GAC JV. The joint venture agreement
is valid for 20 years and can be renewed as agreed by the joint venture parties. The total registered capital of the joint venture is RMB500
million. With respect to governance rights, the parties have agreed that the board of directors will have five directors, with one appointed
by each party and the remaining director appointed by all the parties together. On December 27, 2019, GAC JV released HYCAN 007, a
pure electric SUV expected to be officially launch and delivered in 2020.
Changan
In January 2018, we and Changan entered into a joint venture agreement and a supplemental agreement agreeing to set up a
joint venture, Changan NIO Renewable Automobile Co., Ltd., with a total registered capital of RMB98 million of which RMB49 million
will be contributed by us. Pursuant to the joint venture agreement, it is valid for 20 years and can be renewed as agreed by Changan and
us. In July 2018, Changan NIO Renewable Automobile Co., Ltd. was established. We expect to receive distribution of profits, if any,
after deducting required reserves under PRC law, in proportion to the respective actual capital contributions to be made by Changan and
us. Changan is a state-owned Chinese automaker headquartered in Chongqing, China and listed on the Shenzhen Stock Exchange. The
joint venture may provide services, such as design or development of vehicle or components, sales and after-sale service, sales of
automotive parts and EV-related technology services. Pursuant to the joint venture agreement, any vehicles produced by the joint venture
may use a Changan trademark and the joint venture will enter into a separate trademark license agreement with Changan. With respect to
governance rights, we and Changan have agreed that the board of directors will have five directors, with two appointed by each party and
the remaining director appointed by us and Changan together.
Mobileye
In November 2019, we entered into a strategic collaboration with Mobileye on the development of highly automated and
autonomous vehicles (AV) for consumer markets in China and other major territories. Pursuant to the collaboration arrangement, we
would engineer and manufacture a self-driving system designed by Mobileye, building on Mobileye’s level-4 (L4) AV kit. This self-
driving system will likely be the first of its kind, targeting consumer autonomy, engineered for automotive qualification standards,
quality, cost and scale. We would mass-produce the system for Mobileye and also integrate the technology into its electric vehicle lines
for consumer markets and for Mobileye’s driverless ride-hailing services in China and global markets.
Hefei Strategic Investors
On April 29, 2020, we entered into definitive agreements for investments with a group of investors led by Hefei City
Construction and Investment Holding (Group) Co., Ltd., CMG-SDIC Capital Co., Ltd., and Anhui Provincial Emerging Industry
Investment Co., Ltd., or together as the Hefei Strategic Investors.
Under the definitive agreements, the Hefei Strategic Investors will invest an aggregate of RMB7 billion in cash into NIO
(Anhui) Holding Co., Ltd., the legal entity of NIO China wholly owned by us pre-investment. NIO will inject its core businesses and
assets in China, including vehicle research and development, supply chain, sales and services and NIO Power, or together as the Asset
Consideration, into NIO China. The Asset Consideration is valued at RMB17.77 billion, as calculated based on 85% of the market value
of our company (calculated based on our average ADS trading price over the thirty public trading days preceding April 21, 2020).
Further, we will invest RMB4.26 billion in cash into NIO China. Upon the completion of the investments, we will hold 75.9% of
controlling equity interests in NIO China, and the Hefei Strategic Investors will collectively hold the remaining 24.1%.
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We expect the closing of the investments to take place in the second quarter of 2020, subject to the satisfaction of customary
closing conditions. The Hefei Strategic Investors and we will each inject cash into NIO China in five installments, namely (i) RMB3.5
billion and RMB1.278 billion respectively within five business days of the satisfaction of closing conditions, (ii) RMB1.5 billion and
RMB1.278 billion respectively on or prior to June 30, 2020, (iii) RMB1 billion and RMB0.852 billion respectively on or prior to
September 30, 2020, (iv) RMB0.5 billion and RMB0.426 billion respectively on or prior to December 31, 2020, and (v) RMB0.5 billion
and RMB0.426 billion respectively on or prior to March 31, 2021. Moreover, the Asset Consideration will be injected into NIO China in
several phases, with the last phase to be injected within one year of closing, subject to certain post-closing price adjustment mechanism.
NIO China will establish its headquarters in the Hefei Economic and Technological Development Area, or the HETA, where our
main manufacturing hub is located, for its business operation, research and development, sales and services, supply chain and
manufacturing functions. We will collaborate with the Hefei Strategic Investors and HETA to develop NIO China’s business and to
support the accelerated development of the smart electric vehicle sectors in Hefei in the future. In addition, NIO Anhui could enjoy a
series of subsidies and support from HETA, including rent subsidies, financial support and preferential tax treatment, when NIO Anhui
meets certain performance criteria, such as targets for manufacturing capacity, procurement amount and vehicle sales.
Pursuant to the Shareholders’ Agreement we entered into with the Hefei Strategic Investors, shareholders of NIO Anhui have
certain shareholder rights, including, among others, the right of first refusal, co-sale right, preemptive right, anti-dilution right,
redemption right, liquidation preference and conditional drag-along right. For more details of such provisions, please see exhibit 4.36 of
this annual report on Form 20-F. In particular, the following rights, among others, directly relate to obligations of Nio Inc.:
Redemption right. The Hefei Strategic Investors may require us or our Hong Kong holding vehicles to redeem all or a portion of
the shares of NIO Anhui held by the Hefei Strategic Investors at a redemption price of the total amount of the investment price of the
Hefei Strategic Investors plus an investment income calculated at a compound rate of 8.5% per annum if, among others: (i) NIO Anhui
fails to complete a qualified initial public offering within sixty (60) months after NIO Anhui receives all initial investment from the Hefei
Strategic Investors; (ii) NIO Anhui fails to submit an application for a qualified initial public offering within forty-eight (48) months after
NIO Anhui receives all initial investment from the Hefei Strategic Investors; (iii) shareholders of our company require us or our
controlling person to redeem shares of our company and result in a change of control of our company or NIO Anhui; (iv) we fail to inject
the Asset Consideration into NIO Anhui within one year after the closing of this investment, due to willful misconduct or negligence or
inject capital into NIO Anhui before March 31, 2021; and (v) vehicle sales of NIO Anhui fall below 20,000 units for two consecutive
years after NIO Anhui obtains all initial investment from the Hefei Strategic Investors.
In addition, before the reorganization of NIO Anhui prior to its potential qualified initial public offering, we and/or our
designated third party have the right to redeem half of the shares Hefei Construction Investment Holdings (Group) Co., Ltd. acquired
through this investment, at a mutually agreed redemption price. A qualified initial public offering refers to an initial public offering
approved, registered or filed with the China Securities Regulatory Commission, Shanghai Stock Exchange, Shenzhen Stock Exchange or
other overseas securities issuance review agencies jointly approved by all shareholders of NIO Anhui, and NIO Anhui’s shares are issued
and listed on the stock exchange market recognized by all shareholders of NIO Anhui. Furthermore, from the execution date of the
Shareholders’ Agreement to December 31, 2021, we or our designated affiliate have the right to subscribe for newly issued shares of
NIO Anhui at the price of this investment for an aggregate of no more than US$600 million, while the Hefei Strategic Investors
unconditionally and irrevocably waive their respective preemptive right with regard to investment in such newly issued shares.
Share transfer restriction. Before NIO Anhui completes its potential qualified initial public offering, without the prior written
consent of the Hefei Strategic Investors, we may not directly or indirectly transfer, pledge or otherwise dispose of NIO Anhui’s shares to
a third party that may result in our shareholding in NIO Anhui fall below 60%. Without the prior written consent of the Hefei Strategic
Investors, we have the right to directly or indirectly transfer, pledge or otherwise dispose of no more than 15% of NIO Anhui’s shares.
Sales and Delivery of Vehicles
We directly sell our vehicles to users, which we believe allows us to provide a more consistent, differentiated and compelling
user experience, compared to the traditional franchised distribution model used by our competitors in China. Vehicle purchases are
placed through our mobile application, which provides an easy to follow and interactive vehicle shopping experience to our users. This
also provides us with real-time information on demand for our vehicles, allowing us to plan our production more efficiently and reducing
inventory needs. At our NIO Houses and NIO Spaces, users are able to purchase vehicles using our mobile application, assisted by our
sales representatives. Users purchasing outside of our NIO Houses and NIO Spaces typically purchase through our mobile application
and use our hotline for assistance with the purchase. We believe that our online and offline direct sales model is more cost-efficient by
cutting out franchised distribution costs as well as lowering the number of physical locations required and also allows us to expand our
sales network effectively and efficiently in China.
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We have set up a vehicle delivery center in cities including Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Nanjing,
Suzhou, Wuhan, Xi’an, Shijiazhuang, Tianjin, Qingdao, Zhengzhou, Hefei, Hangzhou, Ningbo, Chongqing, Changsha, Foshan and
Xiamen. Vehicles will be delivered to users at such centers.
Competition
Competition in the automotive industry is intense and evolving. We believe the impact of new regulatory requirements for
occupant safety and vehicle emissions, technological advances in powertrain and consumer electronic components, and shifting customer
needs and expectations are causing the industry to evolve in the direction of electric-based vehicles. We believe the primary competitive
factors in our markets are:
● pricing;
● technological innovation;
● vehicle performance, quality and safety;
● service and charging options;
● user experience;
● design and styling; and
● manufacturing efficiency.
The China automotive market is generally competitive. We have strategically entered into this market in the premium EV
segment in which there is limited competition relative to other segments. However, we expect this segment will become more
competitive in the future. We also expect that we will compete with international competitors, including Tesla. Our vehicles also compete
with ICE vehicles in the premium segment. Given the quality and performance of the ES8, the ES6 and the EC6, and their attractive
pricing, we believe that we are strategically positioned in China’s premium electric vehicle market.
Intellectual Property
We have significant capabilities in the areas of vehicle engineering, development and design. As a result, we have developed a
number of proprietary systems and technologies. As a result, our success depends, at least in part, on our ability to protect our core
technology and intellectual property. To accomplish this, we rely on a combination of patents, patent applications and trade secrets,
including employee and third-party nondisclosure agreements, copyright laws, trademarks, intellectual property licenses and other
contractual rights to establish and protect our proprietary rights in our technology. As of December 31, 2019, we had 2,304 issued patents
and 1,955 pending patent applications, 2,886 registered trademarks and 1,105 pending trademark applications in the United States,
China, Europe and other jurisdictions. As of December 31, 2019, we also held or otherwise had the legal right to use 77 registered
copyrights for software or works of art and 414 registered domain names, including www.nio.io. We intend to continue to file additional
patent applications with respect to our technology.
Regulation
This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.
Regulations and Approvals Covering the Manufacturing of Pure Electric Passenger Vehicles
The NDRC promulgated the Provisions on Administration of Investment in Automobile Industry, or the Investment Provisions,
which became effective on January 10, 2019. According to the Investment Provisions, enterprises are encouraged to, through equity
investment and cooperation in production capacity, enter into strategic cooperation relationship, carry out joint research and development
of products, organize manufacturing activities jointly and increase industrial concentration. The advantageous resources in production,
high learning, research, application and other areas shall be integrated and core enterprises in automobile industry shall be propelled to
form industrial alliance and industrial consortium.
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According to the Regulations on the Administration of Newly Established Pure Electric Passenger Vehicle Enterprises, or the
New Electric Passenger Vehicle Enterprise Regulations, which became effective on July 10, 2015, before our vehicles (including our
current vehicles manufactured in cooperation with JAC) can be added to the Announcement of Vehicle Manufacturers and Products, or
the Manufacturers and Products Announcement, issued by the MIIT, a procedure that is required in order for our vehicles to be approved
for manufacture and sale in China, our vehicles must meet the applicable requirements set forth in relevant laws and regulations. Such
relevant laws and regulations include, among others, the Administrative Rules on the Admission of New Energy Vehicle Manufacturers
and Products, or the MIIT Admission Rules, which became effective on July 1, 2017, and the Administrative Rules on the Admission of
Passenger Vehicles Manufacturer and Products, which became effective on January 1, 2012, and pass the review by the MIIT. Pure
electric passenger vehicles that have entered into the Manufacturers and Products Announcement are required to undergo regular
inspection every three years by the MIIT so that the MIIT may determine whether the vehicles remain qualified to stay in the
Manufacturers and Products Announcement.
According to the MIIT Admission Rules, in order for our vehicles to enter into the Manufacturers and Products Announcement,
our vehicles must satisfy certain conditions, including, among others, meeting certain standards set out therein, meeting other safety and
technical requirements specified by the MIIT, and passing inspections conducted by a state-recognized testing institution. Once such
conditions for vehicles are met and the application has been approved by the MIIT, the qualified vehicles are published in the
Manufacturers and Products Announcement by the MIIT. Where any new energy vehicle manufacturer manufactures or sells any model
of a new energy vehicle without the prior approval of the competent authorities, including being published in the Manufacturers and
Products Announcement by the MIIT, it may be subject to penalties, including fines, forfeiture of any illegally manufactured and sold
vehicles and spare parts and revocation of its business licenses.
Regulations on Compulsory Product Certification
Under the Administrative Regulations on Compulsory Product Certification which was promulgated by the General
Administration of Quality Supervision, Inspection and Quarantine, or the QSIQ, on July 3, 2009 and became effective on September 1,
2009 and the List of the First Batch of Products Subject to Compulsory Product Certification which was promulgated by the QSIQ in
association with the State Certification and Accreditation Administration Committee on December 3, 2001 and became effective on May
1, 2002, the QSIQ is responsible for the regulation and quality certification of automobiles. Automobiles and parts and components must
not be sold, exported or used in operating activities until they are certified by designated certification authorities of the PRC as qualified
products and granted certification marks.
Regulations on Electric Vehicle Charging Infrastructure
Pursuant to the Guidance Opinions of the General Office of the State Council on Accelerating the Promotion and Application of
the New Energy Vehicles, which became effective on July 14, 2014, the Guidance Opinions of the General Office of the State Council on
Accelerating the Development of Charging Infrastructures of the Electric Vehicle, which became effective on September 29, 2015 and
the Guidance on the Development of Electric Vehicle Charging Infrastructure (2015-2020), which became effective on October 9, 2015,
the PRC government encourages the construction and development of charging infrastructure for electric vehicles, such as charging
stations and battery swap stations, and only centralized charging and battery replacement power stations are required to obtain approvals
for construction, permits from the relevant authorities. The Circular on Accelerating the Development of Electrical Vehicle Charging
Infrastructures in Residential Areas promulgated on July 25, 2016 further provides that the operators of electrical vehicle charging and
battery swap infrastructure are required to be covered under liability insurance policies to protect the purchasers of electric vehicles,
covering the safety of electric vehicle charging.
Regulations on Automobile Sales
Pursuant to the Administrative Measures on Automobile Sales promulgated by the MOFCOM, April 5, 2017, which became
effective on July 1, 2017, automobile suppliers and dealers are required to file with relevant authorities through the information system
for the national automobile circulation operated by the competent commerce department within 90 days after the receipt of a business
license. Where there is any change to the information concerned, automobile suppliers and dealers must update such information within
30 days after such change.
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Regulations on the Recall of Defective Automobiles
On October 22, 2012, the State Council promulgated the Administrative Provisions on Defective Automotive Product Recalls,
which became effective on January 1, 2013 and were amended on March 3, 2019. The product quality supervision department of the
State Council is responsible for the supervision and administration of recalls of defective automotive products nationwide. Pursuant to
the administrative provisions, manufacturers of automobile products are required to take measures to eliminate defects in products they
sell. A manufacturer must recall all defective automobile products. Failure to recall such products may result in an order to recall the
defective products from the quality supervisory authority of the State Council. If any operator conducting sales, leasing, or repair of
vehicles discovers any defect in automobile products, it must cease to sell, lease or use the defective products and must assist
manufacturers in the recall of those products. Manufacturers must recall their products through publicly available channels and publicly
announce the defects. Manufacturers must take measures to eliminate or cure defects, including rectification, identification, modification,
replacement or return of the products. Manufacturers that attempt to conceal defects or do not recall defective automobile products in
accordance with relevant regulations will be subject to penalties, including fines, forfeiture of any income earned in violation of law and
revocation of licenses.
Pursuant to the Implementation Rules on the Administrative Provisions on Defective Automotive Product Recalls, which was
promulgated by the QSIQ on November 27, 2015 and became effective on January 1, 2016, if a manufacturer is aware of any potential
defect in its automobiles, it must investigate in a timely manner and report the results of such investigation to the QSIQ. Where any
defect is found during the investigations, the manufacturer must cease to manufacture, sell, or import the relevant automobile products
and recall such products in accordance with applicable laws and regulations.
Regulations on Product Liability
Pursuant to the Product Quality Law of the PRC, promulgated on February 22, 1993 and amended on July 8, 2000, August 27,
2009 and December 29, 2018, a manufacturer is prohibited from producing or selling products that do not meet applicable standards and
requirements for safeguarding human health and ensuring human and property safety. Products must be free from unreasonable dangers
threatening human and property safety. Where a defective product causes physical injury to a person or property damage, the aggrieved
party may make a claim for compensation from the producer or the seller of the product. Producers and sellers of non-compliant products
may be ordered to cease the production or sale of the products and could be subject to confiscation of the products and/or fines. Earnings
from sales in contravention of such standards or requirements may also be confiscated, and in severe cases, an offender’s business license
may be revoked.
Favorable Government Policies Relating to New Energy Vehicles in the PRC
Government Subsidies for Purchasers of New Energy Vehicles
On April 22, 2015, the Ministry of Finance, or the MOF, the Ministry of Science and Technology, or the MOST, the MIIT and
the NDRC jointly issued the Circular on the Financial Support Policies on the Promotion and Application of New Energy Vehicles in
2016-2020, or the Financial Support Circular, which took effect on the same day. The Financial Support Circular provides that those who
purchase new energy vehicles specified in the Catalogue of Recommended New Energy Vehicle Models for Promotion and Application
by the MIIT, or the Recommended NEV Catalogue, may obtain subsidies from the PRC national government. Pursuant to the Financial
Support Circular, a purchaser may purchase a new energy vehicle from a seller by paying the original price minus the subsidy amount,
and the seller may obtain the subsidy amount from the government after such new energy vehicle is sold to the purchaser. The ES8 is
eligible for such subsidies, and the ES6 will be eligible for such subsidies after being added into the Recommended NEV Catalogue. The
Financial Support Circular also provided a preliminary phase-out schedule for the provision of subsidies.
On December 29, 2016, the MOF, the MOST, the MIIT and the NDRC jointly issued the Circular on Adjusting the Subsidy
Policy for the Promotion and Application of New Energy Vehicles, or the Circular on Adjusting the Subsidy Policy, which took effect on
January 1, 2017, to adjust the existing subsidy standard for purchasers of new energy vehicles. The Circular on Adjusting the Subsidy
Policy capped the local subsidies at 50% of the national subsidy amount, and further specified that national subsidies for purchasers
purchasing certain new energy vehicles (except for fuel cell vehicles) from 2019 to 2020 will be reduced by 20% as compared to 2017
subsidy standards.
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The subsidy standard is reviewed and updated on an annual basis. The 2019 subsidy standard as provided in the Circular on
Further Improving the Subsidy Policies for the Promotion and Application of New Energy Vehicles, which was jointly promulgated by
the MOF, the MOST, the MIIT and the NDRC on March 26, 2019, reduced the amount of national subsidies and canceled local subsidies,
resulting in a significant reduction in the total subsidy amount applicable to the ES8 and the ES6 as compared to 2018.
The current 2020 subsidy standard, effective from April 23, 2020, was provided in the Circular on Improving the Subsidy
Policies for the Promotion and Application of New Energy Vehicles jointly promulgated by the MOF, the MOST, the MIIT and the
NDRC on the same day. The current 2020 subsidy standard (i) reduces the base subsidy amount by 10% for each NEV, (ii) sets subsidies
for 2 million vehicles as the upper limit of annual subsidy scale; and (iii) provides that national subsidy shall only apply to an NEV with
the sale price under RMB300,000 or equipped with battery swapping module. Further, the 2021 and the 2022 subsidy standard are
expected to be reduced by 20% and 30% respectively as compared to the standard of the immediate preceding year.
Exemption of Vehicle Purchase Tax
On December 26, 2017, the MOF, the SAT, the MIIT and the MOST jointly issued the Announcement on Exemption of Vehicle
Purchase Tax for New Energy Vehicle, or the Announcement on Exemption of Vehicle Purchase Tax. On June 28, 2019, the MOF and the
SAT jointly issued the Renewal of Preferential Policies on Vehicle Purchase Tax, or the Renewal Announcement. Pursuant to the two
announcements, from January 1, 2018 to December 31, 2020, the vehicle purchase tax which is applicable for ICE vehicles is not
imposed on purchases of qualified new energy vehicles listed in the Catalogue of New Energy Vehicle Models Exempt from Vehicle
Purchase Tax, or the NEV Catalogue, issued by the MIIT. Such announcement provides that the policy on exemption of vehicle purchase
tax is also applicable to new energy vehicles added to the Catalogue prior to December 31, 2017. The ES8 was added into the NEV
Catalogue (15th batch) on December 19, 2017, and the ES6 was added into the NEV Catalogue (26th batch) on December 9, 2019.
Therefore, purchasers of ES8 and ES6 may enjoy such tax exemption. On April 16, 2020, the MOF, the SAT and the MIIT jointly issued
the Announcement on Exemption of Vehicle Purchase Tax for New Energy Vehicle, with effect from January 1, 2021, which extends the
vehicle purchase tax exemption period provided under the above two announcements till December 31, 2022.
Non-imposition of Vehicle and Vessel Tax
The Preferential Vehicle and Vessel Tax Policies for Energy-saving and New Energy Vehicles and Vessels, which was jointly
promulgated by the MOF, the Ministry of Transport, the SAT and the MIIT on July 10, 2018, clarifies that pure electric passenger
vehicles are not subject to vehicle and vessel tax.
New Energy Vehicle License Plate
In recent years, in order to control the number of motor vehicles on the road, certain local governments have issued restrictions
on the issuance of vehicle license plates. These restrictions generally do not apply to the issuance of license plates for new energy
vehicles, which makes it easier for purchasers of new energy vehicles to obtain automobile license plates. For example, pursuant to the
Implementation Measures on Encouraging Purchase and Use of New Energy Vehicles in Shanghai, local authorities will issue new
automobile license plates to qualified purchasers of new energy vehicles without requiring such qualified purchasers to go through
certain license-plate bidding processes and to pay license-plate purchase fees as compared with purchasers of ICE vehicles.
Policies Relating to Incentives for Electric Vehicle Charging Infrastructure
On January 11, 2016, the MOF, the MOST, the MIIT, the NDRC and the National Energy Administration, or the NEA, jointly
promulgated the Circular on Incentive Policies on the Charging Infrastructures of New Energy Vehicles and Strengthening the Promotion
and Application of New Energy Vehicles during the 13th Five-year Plan Period, which became effective on January 1, 2016. Pursuant to
such circular, the central finance department is expected to provide certain local governments with funds and subsidies for the
construction and operation of charging facilities and other relevant charging infrastructure.
Certain local governments have also implemented incentive policies for the construction and operation of charging
infrastructure. For example, pursuant to the Supporting Measures on Encouraging the Development of Charging Infrastructures of the
Electric Vehicles in Shanghai, which took effect on May 5, 2016, builders of certain non-self-use charging infrastructure may be eligible
for subsidies for up to 30% of their investment cost, and the operator of certain non-self-use charging infrastructure may be eligible for
subsidies calculated based on electricity output.
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All the above incentives are expected to facilitate acceleration of development of public charging infrastructure, which will
consequently offer more accessible and convenient EV charging solutions to purchasers of electric vehicles.
Incentives in Certain Major Cities
Government incentives to purchase electric vehicles exist at both the national and local level in China. As an example, the table
below sets forth a summary of preferential policies in eight cities.
Beijing
✓
Shanghai
✓
Guangzhou
✓
Shenzhen Chengdu Nanjing
Hangzhou Wuhan
✓
✓
60,000(1)
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Restrictions on
ICE vehicles
purchases
Quantity of NEV
car plates
Subsidies and
Preferential
Policies to NEVs
All NEVs
have
specific
pool of
license
plates and
have no
traffic
restrictions
Subsidies and
preferential
electricity rate
for public
charging
facilities
Subsidies for
construction cost
and preferential
electricity rate for
public charging
facilities in 2019
and 2020
Subsidies for
construction
cost of
qualified
operators of
public
charging
facilities
Subsidies
and
preferential
electricity
rate for
public and
self-use
charging
facilities
Subsidies
for
construction
cost of
qualified
operators of
public
charging
facilities
and
preferential
electricity
rate for
public
charging
facilities
No
restriction
on NEVs.
Non-local
ICE light
vehicles are
not allowed
to pass
through the
tunnel of
Yangtze
River
Preferential
electricity
rate for NEV
charging
facilities,
peak time
rates and off-
peak time
rates are
applied
Subsidies
for public
charging
facilities at
30% of total
investment
from June
26, 2019 to
December
31, 2020
and
subsidies
for public
and self-use
charging
facilities
No
restriction
on NEVs.
ICE
vehicles are
restricted by
the last digit
of the car
plate from
7am to 9am
and from
4:30pm to
6:30pm on
workdays
No restriction
on NEVs.
ICE vehicles
are restricted
on designated
bridges and
tunnels from
7am to 10pm
everyday by
odd / even
number of
the car
license plate
Favorable
Policies on
driving
restrictions to
NEVs
No
restriction
on BEVs.
ICE
vehicles,
PHEVs and
HEVs are
restricted by
the last digit
of the car
plate on
workdays
No restriction on
NEVs. Non-local
ICE vehicles are
not allowed to
pass through
main
viaducts(2) from
7am to 10am,
and from 3pm to
8pm on
workdays
No restriction on
NEVs. Non-local
ICE vehicles are not
permitted to drive
in the city center for
over four
consecutive days,
and shall wait
four days before
entering the city
center again
Non-local
ICE trucks
are not
allowed to
enter the city
from 7am to
10am and
from 3pm to
8pm on
workdays. No
restriction on
non-local
NEV trucks
No
restriction on
NEVs. ICE
vehicles are
not
permitted to
drive in the
city center
from 7:30am
to 8pm on
workdays by
the last digit
of the car
plate
* References in this table to (i) HEVs are to hybrid electric vehicles and (ii) PHEVs are to plug-in hybrid electric vehicles.
(1) The number of NEV licenses issued by the Beijing local government for 2019 is 60,000 while total new car licenses in Beijing for
2019 is 100,000. The number of NEV licenses issued by the Beijing local government for 2020 is 60,000 while total new car
licenses in Beijing for 2020 is 100,000.
(2) Including nine viaducts, two bridges and one tunnel.
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Regulations on Value-added Telecommunications Services
In 2000, the State Council promulgated the Telecommunications Regulations of the PRC, or the Telecommunications
Regulations, which was most recently amended in February 2016 and provides a regulatory framework for telecommunications services
providers in the PRC. The Telecommunications Regulations categorize all telecommunications businesses in China as either basic or
value-added. Value-added telecommunications services are defined as telecommunications and information services provided through
public network infrastructure. Pursuant to the Classified Catalogue of Telecommunications Services, an attachment to the
Telecommunications Regulations, which was most recently updated in December 2015 by the MIIT, internet information services, or ICP
services, are classified as value-added telecommunications services. Under the Telecommunications Regulations and relevant
administrative measures, commercial operators of value-added telecommunications services must first obtain a license for conducting
Internet content provision services, or an ICP license, from the MIIT or its provincial level counterparts. Otherwise, such operator might
be subject to sanctions, including corrective orders and warnings, imposition of fines and confiscation of illegal gains and, in the case of
significant infringement, orders to close the website.
Pursuant to the Administrative Measures on Internet Information Services, promulgated by the State Council in 2000 and
amended in 2011, “internet information services” refer to the provision of information through the internet to online users, and are
divided into “commercial internet information services” and “non-commercial internet information services.” A commercial ICP service
operator must obtain an ICP license before engaging in any commercial ICP service within China, while the ICP license is not required if
the operator will only provide internet information on a non-commercial basis.
In addition to the regulations and measures above, the provision of commercial internet information services on mobile internet
applications are regulated by the Administrative Provisions on Information Services of Mobile Internet Applications, promulgated by the
State Internet Information Office in June 2016. Information services providers of mobile internet applications are subject to these
provisions, including acquiring relevant qualifications and being responsible for management of information security.
Regulations on Consumer Rights Protection
Our business is subject to a variety of consumer protection laws, including the PRC Consumer Rights and Interests Protection
Law, as amended in 2013 and became effective on March 15, 2014, which imposes stringent requirements and obligations on business
operators. Failure to comply with these consumer protection laws could subject us to administrative sanctions, such as the issuance of a
warning, confiscation of illegal income, imposition of fines, an order to cease business operations, revocation of business licenses, as
well as potential civil or criminal liabilities.
Regulations on Internet Information Security and Privacy Protection
In November 2016, the Standing Committee of the National People’s Congress, or the SCNPC, promulgated the Cyber Security
Law of the PRC, or the Cyber Security Law, which became effective on June 1, 2017. The Cyber Security Law requires that a network
operator, which includes, among others, internet information services providers, take technical measures and other necessary measures in
accordance with applicable laws and regulations and the compulsory requirements of the national and industrial standards to safeguard
the safe and stable operation of its networks. We are subject to such requirements as we are operating a website and mobile application
and providing certain internet services mainly through our mobile application. The Cyber Security Law further requires internet
information services providers to formulate contingency plans for network security incidents, report to the competent departments
immediately upon the occurrence of any incident endangering cyber security and take corresponding remedial measures.
Internet information services providers are also required to maintain the integrity, confidentiality and availability of network
data. The Cyber Security Law reaffirms the basic principles and requirements specified in other existing laws and regulations on personal
data protection, such as the requirements on the collection, use, processing, storage and disclosure of personal data, and internet
information services providers being required to take technical and other necessary measures to ensure the security of the personal
information they have collected and prevent the personal information from being divulged, damaged or lost. Any violation of the Cyber
Security Law may subject the internet information services provider to warnings, fines, confiscation of illegal gains, revocation of
licenses, cancellation of filings, shutdown of websites or criminal liabilities.
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Regulations on E-commerce
On August 31, 2018, the SCNPC promulgated the E- Commerce Law of the People’s Republic of China, or the E-Commerce
Law, which became effective as of January 1, 2019. The E-Commerce Law establishes the regulatory framework for the e-commerce
sector in the PRC for the first time by laying out certain requirements on e-commerce platform operators. According to the E-Commerce
Law, the e-commerce platform operators shall prepare a contingency plan for cybersecurity events and take technological measures and
other measures to prevent online illegal and criminal activities. The E-Commerce Law also expressly requires e-commerce platform
operators to take necessary actions to ensure fair dealing on their platforms to safeguard the legitimate rights and interests of consumers,
including to prepare platform service agreements and transaction information record-keeping and transaction rules, to prominently
display such documents on the platform’s website, and to keep such information for no less than three years following the completion of
a transaction. Where the e-commerce platform operators conduct self-operated business on their platforms, they shall distinguish and
mark their self-operated business from the businesses of the business operators using the platform in a prominent manner, and shall not
mislead consumers. The e-commerce platform operators shall bear civil liability of a commodity seller or service provider for the
business marked as self-operated, pursuant to the law.
Regulations on Land and the Development of Construction Projects
Regulations on Land Grants
Under the Interim Regulations on Assignment and Transfer of the Rights to the Use of the State-owned Urban Land,
promulgated by the State Council on May 19, 1990, a system of assignment and transfer of the right to use state-owned land was
adopted. A land user must pay land premiums to the state as consideration for the assignment of the right to use a land site within a
certain term, and the land user who obtained the right to use the land may transfer, lease out, mortgage or otherwise commercially exploit
the land within the term of use. Under the Interim Regulations on Assignment and Transfer of the Rights to the Use of the State-owned
Urban Land and the Law of the PRC on Urban Real Estate Administration, the local land administration authority may enter into an
assignment contract with the land user for the assignment of land use rights. The land user is required to pay the land premium as
provided in the assignment contract. After the full payment of the land premium, the land user must register with the land administration
authority and obtain a land use rights certificate which evidences the acquisition of land use rights.
Regulations on Planning of a Construction Project
Pursuant to the Regulations on Planning Administration regarding Assignment and Transfer of the Rights to Use of the State-
Owned Land in Urban Area promulgated by the Ministry of Construction in December 1992 and amended in January 2011, a
construction land planning permit shall be obtained from the municipal planning authority with respect to the planning and use of land.
According to the Urban and Rural Planning Law of the PRC promulgated by the SCNPC on October 28, 2007 and amended on April 24,
2015, a construction work planning permit must be obtained from the competent urban and rural planning government authority for the
construction of any structure, fixture, road, pipeline or other engineering project within an urban or rural planning area.
After obtaining a construction work planning permit, subject to certain exceptions, a construction enterprise must apply for a
construction work commencement permit from the construction authority under the local people’s government at the county level or
above in accordance with the Administrative Provisions on Construction Permit of Construction Projects promulgated by the Ministry of
Housing and Urban-Rural Development, or the MOHURD, on June 25, 2014 and implemented on October 25, 2014 and amended on
September 19, 2018.
Pursuant to the Administrative Measures for Reporting Details Regarding Acceptance Examination upon Completion of
Buildings and Municipal Infrastructure promulgated by the Ministry of Construction on April 4, 2000 and amended on October 19, 2009
and the Provisions on Acceptance Examination upon Completion of Buildings and Municipal Infrastructure promulgated and
implemented by the MOHURD on December 2, 2013, upon the completion of a construction project, the construction enterprise must
submit an application to the competent department in the people’s government at or above county level where the project is located, for
examination upon completion of building and for filing purpose; and to obtain the filing form for acceptance and examination upon
completion of construction project.
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Regulations on Environmental Protection and Work Safety
Regulations on Environmental Protection
Pursuant to the Environmental Protection Law of the PRC promulgated by the SCNPC, on December 26, 1989, amended on
April 24, 2014 and effective on January 1, 2015, any entity which discharges or will discharge pollutants during the course of operations
or other activities must implement effective environmental protection safeguards and procedures to control and properly treat waste gas,
waste water, waste residue, dust, malodorous gases, radioactive substances, noise vibrations, electromagnetic radiation and other hazards
produced during such activities.
Environmental protection authorities impose various administrative penalties on persons or enterprises in violation of the
Environmental Protection Law. Such penalties include warnings, fines, orders to rectify within the prescribed period, orders to cease
construction, orders to restrict or suspend production, orders to make recovery, orders to disclose relevant information or make an
announcement, imposition of administrative action against relevant responsible persons, and orders to shut down enterprises. Any person
or entity that pollutes the environment resulting in damage could also be held liable under the Tort Law of the PRC. In addition,
environmental organizations may also bring lawsuits against any entity that discharges pollutants detrimental to the public welfare.
Regulations on Work Safety
Under relevant construction safety laws and regulations, including the Work Safety Law of the PRC which was promulgated by
the SCNPC on June 29, 2002, amended on August 27, 2009, August 31, 2014, and effective as of December 1, 2014, production and
operating business entities must establish objectives and measures for work safety and improve the working environment and conditions
for workers in a planned and systematic way. A work safety protection scheme must also be set up to implement the work safety job
responsibility system. In addition, production and operating business entities must arrange work safety training and provide the
employees with protective equipment that meets the national standards or industrial standards. Automobile and components
manufacturers are subject to the above-mentioned environment protection and work safety requirements.
Regulations on Fire Control
Pursuant to the Fire Safety Law of the PRC promulgated by the SCNPC on April 29, 1998, amended on October 28, 2008 and
which became effective on May 1, 2009 and the Provisions on Supervision and Administration of Fire Protection of Construction
Projects promulgated by the Ministry of Public Security of the PRC on April 30, 2009, implemented on May 1, 2009 and later amended
on July 17, 2012, which became effective on November 1, 2012, the construction entity of a large-scale crowded venue (including the
construction of a manufacturing factory that is over 2,500 square meters) and other special construction projects must apply for fire
prevention design review with fire control authorities, and complete fire assessment inspection and acceptance procedures after the
construction project is completed. The construction entity of other construction projects must complete the filing for fire prevention
design and the fire safety completion inspection and acceptance procedures within seven business days after obtaining the construction
work permit and passing the construction completion inspection and acceptance. If the construction entity fails to pass the fire safety
inspection before such venue is put into use, or fails to conform to the fire safety requirements after such inspection, it shall be subject to
(i) orders to suspend the construction of projects, use of such projects or operation of relevant business; and (ii) a fine ranging between
RMB30,000 and RMB300,000.
Regulations on Intellectual Property Rights
Patent Law
According to the Patent Law of the PRC (Revised in 2008), the State Intellectual Property Office is responsible for
administering patent law in the PRC. The patent administration departments of provincial, autonomous region or municipal governments
are responsible for administering patent law within their respective jurisdictions. The Chinese patent system adopts a first-to-
file principle, which means that when more than one person files different patent applications for the same invention, only the person
who files the application first is entitled to obtain a patent of the invention. To be patentable, an invention or a utility model must meet
three criteria: novelty, inventiveness and practicability. A patent is valid for twenty years in the case of an invention and ten years in the
case of utility models and designs.
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Regulations on Copyright
The Copyright Law of the PRC, or the Copyright Law, which took effect on June 1, 1991 and was amended in 2001 and in 2010,
provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, own copyright in their copyrightable
works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer
software. Copyright owners enjoy certain legal rights, including right of publication, right of authorship and right of reproduction. The
Copyright Law as revised in 2010 extends copyright protection to Internet activities, products disseminated over the Internet and
software products. In addition, the Copyright Law provides for a voluntary registration system administered by the China Copyright
Protection Center, or the CPCC. According to the Copyright Law, an infringer of the copyrights shall be subject to various civil
liabilities, which include ceasing infringement activities, apologizing to the copyright owners and compensating the loss of the copyright
owner. Infringers of a copyright may also be subject to fines and/or administrative or criminal liabilities in severe situations.
Pursuant to the Computer Software Copyright Protection Regulations promulgated by the State Council on December 20, 2001
and amended on January 30, 2013, the software copyright owner may go through the registration formalities with a software registration
authority recognized by the State Council’s copyright administrative department. The software copyright owner may authorize others to
exercise that copyright, and is entitled to receive remuneration.
Trademark Law
Trademarks are protected by the Trademark Law of the PRC which was adopted on August 23, 1982 and subsequently amended
in 1993, 2001 and 2013, respectively, as well as by the Implementation Regulations of the PRC Trademark Law adopted by the State
Council in 2002 and as most recently amended on April 29, 2014. The Trademark Office under the State Administration for Industry and
Commerce, handles trademark registrations. The Trademark Office grants a ten-year term to registered trademarks and the term may be
renewed for another ten-year period upon request by the trademark owner. A trademark registrant may license its registered trademarks
to another party by entering into trademark license agreements, which must be filed with the Trademark Office for its record. As with
patents, the Trademark Law has adopted a first-to-file principle with respect to trademark registration. If a trademark applied for is
identical or similar to another trademark which has already been registered or subject to a preliminary examination and approval for use
on the same or similar kinds of products or services, such trademark application may be rejected. Any person applying for the
registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a
trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s
use.
Regulations on Domain Names
The MIIT promulgated the Measures on Administration of Internet Domain Names, or the Domain Name Measures, on
August 24, 2017, which took effect on November 1, 2017 and replaced the Administrative Measures on China Internet Domain
Name promulgated by the MIIT on November 5, 2004. According to the Domain Name Measures, the MIIT is in charge of the
administration of PRC internet domain names. The domain name registration follows a first-to-file principle. Applicants for registration
of domain names must provide the true, accurate and complete information of their identities to domain name registration service
institutions. The applicants will become the holder of such domain names upon the completion of the registration procedure.
Regulations on Foreign Investment in China
Guidance Catalogue of Industries for Foreign Investment
Investments in the PRC by foreign investors and foreign-invested enterprises were regulated by the Guidance Catalogue of
Industries for Foreign Investment, or the Foreign Investment Catalogue, jointly promulgated by the MOFCOM and NDRC on June 28,
1995 and amended from time to time. The Foreign Investment Catalogue was last repealed by the Special Management Measures
(Negative List) for the Access of Foreign Investment (2019 Version), or the 2019 Negative List, and the Catalogue of Industries for
Encouraging Foreign Investment (2019 Version), or the 2019 Encouraging Catalogue, both of which were jointly promulgated by the
MOFCOM and the NDRC on June 30, 2019 and became effective on July 30, 2019. The 2019 Encouraging Catalogue and the 2019
Negative List set out the industries and economic activities in which foreign investment in the PRC is encouraged, restricted or
prohibited. Pursuant to the 2019 Encouraging Catalogue and the 2019 Negative List, the manufacture of the NEVs fall within the
permitted catalogue, and the manufacture and the development of key parts and components of NEVs fall within the encouraged
catalogue. However, the 2019 Negative List also provides that foreign investors shall hold no more than 50% of the equity interest in a
service provider operating certain value-added telecommunications services (other than for e-commerce).
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The establishment, operation and management of corporate entities in the PRC is governed by the PRC Company Law, which
was initially promulgated by the SCNPC on December 29, 1993 and came into effect on July 1, 1994, and was subsequently amended on
December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26, 2018. The latest amended PRC Company
Law became effective on October 26, 2018. The PRC Company Law generally governs two types of companies—limited liability
companies and joint stock limited companies. The PRC Company Law shall also apply to foreign-invested companies. Where laws on
foreign investment have other stipulations, such stipulations shall prevail. The establishment procedures, approval or record-filing
procedures, registered capital requirements, foreign exchange matters, accounting practices, taxation and labor matters of a wholly
foreign-owned enterprise are regulated by the Foreign Investment Law, which became effective on January 1, 2020 and replaced three
existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and
the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
Foreign Investment Law
On March 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which has become effective on
January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC
Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary
regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory
regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign
and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the
promotion, protection and administration of foreign investments in view of investment protection and fair competition.
According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted
by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign
investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively
with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares,
shares in assets, or other similar rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively
with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative
regulations, or the State Council.
According to the Foreign Investment Law, the State Council will publish or approve to publish a catalogue for special
administrative measures, or the “negative list.” The Foreign Investment Law grants national treatment to foreign invested entities, except
for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list.”
Because the “negative list” has yet been published, it is unclear whether it will differ from the current 2019 Negative List. The Foreign
Investment Law provides that foreign invested entities operating in foreign restricted or prohibited industries will require market entry
clearance and other approvals from relevant PRC governmental authorities.
Furthermore, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws
regulating foreign investment may maintain their structure and corporate governance within five years after the implementation of the
Foreign Investment Law.
In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their
investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors;
foreign-invested enterprises are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory
procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the
investment of foreign investors is prohibited; mandatory technology transfer is prohibited; and the capital contributions, profits, capital
gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or
proceeds received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign
currency. Also, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investment
information in accordance with the requirements.
On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law,
effective on January 1, 2020, which further requires that foreign-invested enterprises and domestic enterprises shall be treated equally
with respect to policy making and implementation. Pursuant to the Implementation Regulations on the Foreign Investment Law, if the
existing foreign-invested enterprises fail to change their original forms as of January 1, 2025, the relevant market regulation departments
will not process other registration matters for the enterprises, and may disclose their relevant information to the public.
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On December 30, 2019, the MOFCOM and the SAMR jointly issued the Measures for Reporting of Foreign Investment
Information, or the Foreign Investment Information Measures, which became effective on January 1, 2020 and replaced the Interim
Administrative Measures for the Record-filing of the Establishment and Modification of Foreign-invested Enterprises. Since January 1,
2020, for foreign investors carrying out investment activities directly or indirectly in the PRC, foreign investors or foreign-invested
enterprises shall submit investment information through the Enterprise Registration System and the National Enterprise Credit
Information Publicity System operated by the State Administration for Market Regulation. Foreign investors or foreign-invested
enterprises shall disclose their investment information by submitting reports for their establishments, modifications and cancellations and
their annual reports in accordance with the Foreign Investment Information Measures. If a foreign-invested enterprise investing in the
PRC has finished submitting its reports for its establishment, modifications and cancellation and its annual reports, the relevant
information will be shared by the competent market regulation department to the competent commercial department, and such foreign-
invested enterprise is not required to submit the reports to the two departments separately.
Regulations on Foreign Exchange
General Administration of Foreign Exchange
Under the PRC Foreign Currency Administration Rules promulgated on January 29, 1996 and most recently amended on
August 5, 2008 and various regulations issued by the State Administration of Foreign Exchange of the PRC, or the SAFE, and other
relevant PRC government authorities, Renminbi is convertible into other currencies for current account items, such as trade-related
receipts and payments and payment of interest and dividends. The conversion of Renminbi into other currencies and remittance of the
converted foreign currency outside the PRC of capital account items, such as direct equity investments, loans and repatriation of
investment, requires the prior approval from the SAFE or its local office.
Payments for transactions that take place within the PRC must be made in Renminbi. Unless otherwise approved, PRC
companies may not repatriate foreign currency payments received from abroad or retain the same abroad. Foreign-invested enterprises
may retain foreign exchange in accounts with designated foreign exchange banks under the current account items subject to a cap set by
the SAFE or its local branch. Foreign exchange proceeds under the current accounts may be either retained or sold to a financial
institution engaged in settlement and sale of foreign exchange pursuant to relevant SAFE rules and regulations. For foreign exchange
proceeds under the capital accounts, approval from the SAFE is generally required for the retention or sale of such proceeds to a financial
institution engaged in settlement and sale of foreign exchange.
Pursuant to the Circular of the SAFE on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct
Investment, or the SAFE Circular No. 59, promulgated by SAFE on November 19, 2012, which became effective on December 17, 2012
and was further amended on May 4, 2015 and October 10, 2018, approval of SAFE is not required for opening a foreign exchange
account and depositing foreign exchange into the accounts relating to the direct investments. The SAFE Circular No. 59 also simplified
foreign exchange-related registration required for the foreign investors to acquire the equity interests of Chinese companies and further
improve the administration on foreign exchange settlement for foreign-invested enterprises.
The Circular on Further Simplifying and Improving the Foreign Currency Management Policy on Direct Investment, or SAFE
Circular No. 13, effective from June 1, 2015, cancels the administrative approvals of foreign exchange registration of direct domestic
investment and direct overseas investment and simplifies the procedure of foreign exchange-related registration. Pursuant to SAFE
Circular No. 13, the investors shall register with banks for direct domestic investment and direct overseas investment.
The Circular on Reforming the Management Approach regarding the Settlement of Foreign Capital of Foreign-invested
Enterprise, or SAFE Circular No. 19, which was promulgated by the SAFE on March 30, 2015 and became effective on June 1, 2015,
provides that a foreign-invested enterprise may, according to its actual business needs, settle with a bank the portion of the foreign
exchange capital in its capital account for which the relevant foreign exchange administration has confirmed monetary capital
contribution rights and interests (or for which the bank has registered the injection of the monetary capital contribution into the account).
Pursuant to SAFE Circular No. 19, for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange
capital on a discretionary basis; a foreign-invested enterprise shall truthfully use its capital for its own operational purposes within the
scope of business; where an ordinary foreign-invested enterprise makes domestic equity investment with the amount of foreign
exchanges settled, the foreign-invested enterprise must first go through domestic re-investment registration and open a corresponding
account for foreign exchange settlement pending payment with the foreign exchange administration or the bank at the place where it is
registered.
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The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or
SAFE Circular No. 16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered
in the PRC may also convert their foreign debts from foreign currency into Renminbi on a self-discretionary basis. SAFE Circular No. 16
also provides an integrated standard for conversion of foreign exchange under capital account items (including, but not limited to, foreign
currency capital and foreign debts) on a self-discretionary basis, which applies to all enterprises registered in the PRC.
According to the Administrative Rules on the Company Registration, which were promulgated by the State Council on June 24,
1994, became effective on July 1, 1994 and were amended on February 6, 2016, and other laws and regulations governing the foreign-
invested enterprises and company registrations, the establishment of a foreign-invested enterprise and any capital increase and other
major changes in a foreign-invested enterprise shall be registered with the SAMR or its local counterparts, and shall be filed via the
foreign investment comprehensive administrative system, or the FICMIS, if such foreign-invested enterprise does not involve special
access administrative measures prescribed by the PRC government.
Pursuant to SAFE Circular No. 13 and other laws and regulations relating to foreign exchange, when setting up a new foreign-
invested enterprise, the foreign-invested enterprise shall register with the bank located at its registered place after obtaining the business
license, and if there is any change in capital or other changes relating to the basic information of the foreign-invested enterprise,
including, without limitation, any increase in its registered capital or total investment, the foreign-invested enterprise must register such
changes with the bank located at its registered place after obtaining approval from or completing the filing with competent authorities.
Pursuant to the relevant foreign exchange laws and regulations, the above-mentioned foreign exchange registration with the banks will
typically take less than four weeks upon the acceptance of the registration application.
Based on the foregoing, if we intend to provide funding to our wholly foreign-owned subsidiaries through capital injection at or
after their establishment, we must register the establishment of and any follow-on capital increase in our wholly foreign-owned
subsidiaries with the SAMR or its local counterparts, file such via the FICMIS and register such with the local banks for the foreign
exchange related matters.
Loans by the Foreign Companies to their PRC Subsidiaries
A loan made by foreign investors as shareholders in a foreign-invested enterprise is considered to be foreign debt in China and
is regulated by various laws and regulations, including the Regulation of the People’s Republic of China on Foreign Exchange
Administration, the Interim Provisions on the Management of Foreign Debts, the Statistical Monitoring of Foreign Debts Tentative
Provisions, the Detailed Rules for the Implementation of Provisional Regulations on Statistics and Supervision of External Debt, and
the Administrative Measures for Registration of Foreign Debts. Under these rules and regulations, a shareholder loan in the form of
foreign debt made to a PRC entity does not require the prior approval of the SAFE. However, such foreign debt must be registered with
and recorded by the SAFE or its local branches within fifteen (15) business days after entering into the foreign debt contract. Pursuant to
these rules and regulations, the balance of the foreign debts of a foreign-invested enterprise shall not exceed the difference between the
total investment and the registered capital of the foreign-invested enterprise, or Total Investment and Registered Capital Balance.
Pursuant to the Interim Provisions of the State Administration for Industry and Commerce on the Ratio of the Registered Capital
to the Total Investment of a Sino-Foreign Equity Joint Venture Enterprise, promulgated by the SAMR and effective on February 17,
1987, with respect to a sino-foreign equity joint venture, the registered capital shall be (i) no less than 7/10 of its total investment, if the
total investment is US$3 million or under US$3 million; (ii) no less than 1/2 of its total investment, if the total investment is ranging
from US$3 million to US$10 million (including US$10 million), provided that the registered capital shall not be less than US$2.1 million
if the total investment is less than US$4.2 million; (iii) no less than 2/5 of its total investment, if the total investment is ranging from
US$10 million to US$30 million (including US$30 million), provided that the registered capital shall not be less than US$5 million if the
total investment is less than US$12.5 million; and (iv) no less than 1/3 of its total investment, if the total investment exceeds
US$30 million, provided that the registered capital shall not be less than US$12 million if the total investment is less than
US$36 million.
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On January 12, 2017, the People’s Bank of China, or the PBOC, promulgated the Notice of the People’s Bank of China on
Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or PBOC Notice No. 9. Pursuant to
PBOC Notice No. 9, within a transition period of one year from January 12, 2017, the foreign-invested enterprises may adopt the
currently valid foreign debt management mechanism, or Current Foreign Debt Mechanism, or the mechanism as provided in PBOC
Notice No. 9, or Notice No. 9 Foreign Debt Mechanism, at their own discretions. PBOC Notice No. 9 provides that enterprises may
conduct independent cross-border financing in RMB or foreign currencies as required. Pursuant to PBOC Notice No. 9, the outstanding
cross-border financing of an enterprise (the outstanding balance drawn, here and below) shall be calculated using a risk-weighted
approach, or Risk-Weighted Approach, and shall not exceed certain specified upper limits. PBOC Notice No. 9 further provides that the
upper limit of risk-weighted outstanding cross-border financing for enterprises shall be 200% of its net assets, or Net Asset Limits.
Enterprises shall file with the SAFE in its capital item information system after entering into the relevant cross-border financing contracts
and prior to three business days before drawing any money from the foreign debts.
Based on the foregoing, if we provide funding to our wholly foreign-owned subsidiaries through shareholder loans, the balance
of such loans shall not exceed the Total Investment and Registered Capital Balance and we will need to register such loans with the
SAFE or its local branches in the event that the Current Foreign Debt Mechanism applies, or the balance of such loans shall be subject to
the Risk-Weighted Approach and the Net Asset Limits and we will need to file the loans with the SAFE in its information system in the
event that the Notice No. 9 Foreign Debt Mechanism applies. According to PBOC Notice No. 9, after a transition period of one year
from January 11, 2017, the PBOC and the SAFE will determine the cross-border financing administration mechanism for the foreign-
invested enterprises after evaluating the overall implementation of PBOC Notice No. 9. As of the date hereof, neither the PBOC nor the
SAFE has promulgated and made public any further rules, regulations, notices or circulars in this regard. It is uncertain which
mechanism will be adopted by the PBOC and the SAFE in the future and what statutory limits will be imposed on us when providing
loans to our PRC subsidiaries.
Offshore Investment
Under the Circular of the State Administration of Foreign Exchange on Issues Concerning the Foreign Exchange
Administration over the Overseas Investment and Financing and Round-trip Investment by Domestic Residents via Special Purpose
Vehicles, or SAFE Circular 37, issued by the SAFE and effective on July 4, 2014, PRC residents are required to register with the local
SAFE branch prior to the establishment or control of an offshore special purpose vehicle, or SPV, which is defined as an offshore
enterprise directly established or indirectly controlled by PRC residents for investment and financing purposes, with the enterprise assets
or interests PRC residents hold in China or overseas. The term “control” means to obtain the operation rights, right to proceeds or
decision-making power of an SPV through acquisition, trust, holding shares on behalf of others, voting rights, repurchase, convertible
bonds or other means. An amendment to registration or subsequent filing with the local SAFE branch by such PRC resident is also
required if there is any change in basic information of the offshore company or any material change with respect to the capital of the
offshore company. At the same time, the SAFE has issued the Operation Guidance for the Issues Concerning Foreign Exchange
Administration over Round-trip Investment regarding the procedures for SAFE registration under SAFE Circular 37, which became
effective on July 4, 2014 as an attachment of Circular 37.
Under the relevant rules, failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in bans
on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its
offshore parent or affiliates, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration
regulations.
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Regulations on Dividend Distribution
The principal laws and regulations regulating the distribution of dividends by foreign-invested enterprises in the PRC include
the Company Law of the PRC, as amended in 2004, 2005, 2013 and 2018, the Wholly Foreign-owned Enterprise Law promulgated in
1986 and amended in 2000 and 2016 and its implementation regulations promulgated in 1990 and subsequently amended in 2001 and
2014, the Equity Joint Venture Law of the PRC promulgated in 1979 and subsequently amended in 1990, 2001 and 2016 and its
implementation regulations promulgated in 1983 and subsequently amended in 1986, 1987, 2001, 2011 and 2014, and the Cooperative
Joint Venture Law of the PRC promulgated in 1988 and amended in 2000 and 2017 and its implementation regulations promulgated in
1995 and amended in 2014 and 2017. Under the current regulatory regime in the PRC, foreign-invested enterprises in the PRC may pay
dividends only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. A PRC
company is required to set aside as statutory reserve funds at least 10% of its after-tax profit, until the cumulative amount of such reserve
funds reaches 50% of its registered capital unless laws regarding foreign investment provide otherwise. A PRC company shall not
distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed
together with distributable profits from the current fiscal year.
Regulations on Taxation
Enterprise Income Tax
On March 16, 2007, the SCNPC promulgated the PRC Enterprise Income Tax Law which was amended on February 24, 2017
and December 29, 2018. On December 6, 2007, the State Council enacted the Regulations for the Implementation of the Enterprise
Income Tax Law, or collectively, the EIT Law. The EIT Law came into effect on January 1, 2008. Under the EIT Law, both resident
enterprises and non-resident enterprises are subject to tax in the PRC. Resident enterprises are defined as enterprises that are established
in China in accordance with PRC laws, or that are established in accordance with the laws of foreign countries but are actually or in
effect controlled from within the PRC. Non-resident enterprises are defined as enterprises that are organized under the laws of foreign
countries and whose actual management is conducted outside the PRC, but have established institutions or premises in the PRC, or have
no such established institutions or premises but have income generated from inside the PRC. Under the EIT Law and relevant
implementing regulations, a uniform corporate income tax rate of 25% is applied. However, if non-resident enterprises have not formed
permanent establishments or premises in the PRC, or if they have formed permanent establishment or premises in the PRC but there is no
actual relationship between the relevant income derived in the PRC and the established institutions or premises set up by them, enterprise
income tax is set at the rate of 10% with respect to their income sourced from inside the PRC.
Value-added Tax
The Provisional Regulations of the PRC on Value-added Tax were promulgated by the State Council on December 13, 1993,
came into effect on January 1, 1994 and were subsequently amended from time to time; and the Detailed Rules for the Implementation of
the Provisional Regulations of the PRC on Value-added Tax (Revised in 2011) was promulgated by the MOF on December 25, 1993 and
subsequently amended on December 15, 2008 and October 28, 2011, or collectively, the VAT Law. On November 19, 2017, the State
Council promulgated the Decisions on Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional
Regulations of the PRC on Value-added Tax, or the Order 691. On March 21, 2019, the MOF, the SAT and the General Administration of
Customs jointly issued the Announcement on Relevant Policies on Deepen the Reform of Value-added Tax, or the Announcement 39.
According to the VAT Law and the Order 691, all enterprises and individuals engaged in the sale of goods, the provision of processing,
repair and replacement services, sales of services, intangible assets, real property and the importation of goods within the territory of the
PRC are the taxpayers of value-added tax, or VAT. According to the Announcement 39, the VAT tax rates generally applicable are
simplified as 13%, 9%, 6% and 0%, which will become effective on April 1, 2019, and the VAT tax rate applicable to the small-scale
taxpayers is 3%.
Dividend Withholding Tax
The EIT Law provides that since January 1, 2008, an income tax rate of 10% will normally be applicable to dividends declared
to non-PRC resident investors that do not have an establishment or place of business in the PRC, or that have such establishment or place
of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends
are derived from sources within the PRC.
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Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, or the Double
Taxation Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent
PRC tax authority to have satisfied the relevant conditions and requirements under such Double Taxation Avoidance Arrangement and
other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident
enterprise may be reduced to 5%. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend
Provisions in Tax Treaties, or SAT Circular 81, issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in
their discretions, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-
driven, such PRC tax authorities may adjust the preferential tax treatment. According to the Circular on Several Questions regarding the
“Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 by the SAT and took effect on April 1, 2018, when
determining the applicant’s status as the “beneficial owner” regarding tax treatments in connection with dividends, interests or royalties
in the tax treaties, several factors, including, without limitation, whether the applicant is obligated to pay more than 50% of his or her
income in twelve months to residents in third country or region, whether the business operated by the applicant constitutes the actual
business activities, and whether the counterparty country or region to the tax treaties does not levy any tax or grant any tax exemption on
relevant incomes or levy tax at an extremely low rate, will be taken into account, and such factors will be analyzed according to the
actual circumstances of the specific cases. This circular further provides that an applicant who intends to prove his or her status as the
“beneficial owner” shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the
Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements.
Tax on Indirect Transfer
On February 3, 2015, the SAT issued the Circular on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-
PRC Resident Enterprises, or Circular 7. Pursuant to Circular 7, an "indirect transfer" of assets, including equity interests in a PRC
resident enterprise, by non-PRC resident enterprises, may be recharacterized and treated as a direct transfer of PRC taxable assets, if such
arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise
income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. When determining
whether there is a "reasonable commercial purpose" of the transaction arrangement, features to be taken into consideration include, inter
alia, whether the main value of the equity interest of the relevant offshore enterprise derives directly or indirectly from PRC taxable
assets; whether the assets of the relevant offshore enterprise mainly consists of direct or indirect investment in China or if its income is
mainly derived from China; and whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets
have a real commercial nature which is evidenced by their actual function and risk exposure. According to Circular 7, where the payer
fails to withhold any or sufficient tax, the transferor shall declare and pay such tax to the tax authority by itself within the statutory time
limit. Late payment of applicable tax will subject the transferor to default interest. Circular 7 does not apply to transactions of sale of
shares by investors through a public stock exchange where such shares were acquired on a public stock exchange. On October 17, 2017,
the SAT issued the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or SAT Circular 37,
which was amended by the Announcement of the State Administration of Taxation on Revising Certain Taxation Normative Documents
issued on June 15, 2018 by the SAT. The SAT Circular 37 further elaborates the relevant implemental rules regarding the calculation,
reporting and payment obligations of the withholding tax by the non-resident enterprises. Nonetheless, there remain uncertainties as to
the interpretation and application of Circular 7. Circular 7 may be determined by the tax authorities to be applicable to our offshore
transactions or sale of our shares or those of our offshore subsidiaries where non-resident enterprises, being the transferors, were
involved.
Regulations on Employment and Social Welfare
Labor Contract Law
The Labor Contract Law of the PRC, or the Labor Contract Law, which was promulgated on January 1, 2008 and amended on
December 28, 2012, is primarily aimed at regulating rights and obligations of employer and employee relationships, including the
establishment, performance and termination of labor contracts. Pursuant to the Labor Contract Law, labor contracts shall be concluded in
writing if labor relationships are to be or have been established between employers and employees. Employers are prohibited from
forcing employees to work above certain time limits and employers shall pay employees for overtime work in accordance with national
regulations. In addition, employee wages shall be no lower than local standards on minimum wages and must be paid to employees in a
timely manner.
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Interim Provisions on Labor Dispatch
Pursuant to the Interim Provisions on Labor Dispatch promulgated by the Ministry of Human Resources and Social Security on
January 24, 2014, which became effective on March 1, 2014, dispatched workers are entitled to equal pay with full-time employees for
equal work. Employers are allowed to use dispatched workers for temporary, auxiliary or substitutive positions, and the number of
dispatched workers may not exceed 10% of the total number of employees.
Social Insurance and Housing Fund
As required under the Regulation of Insurance for Labor Injury implemented on January 1, 2004 and amended in 2010,
the Provisional Measures for Maternity Insurance of Employees of Corporations implemented on January 1, 1995, the Decisions on the
Establishment of a Unified Program for Old-Aged Pension Insurance of the State Council issued on July 16, 1997, the Decisions on the
Establishment of the Medical Insurance Program for Urban Workers of the State Council promulgated on December 14, 1998,
the Unemployment Insurance Measures promulgated on January 22, 1999 and the Social Insurance Law of the PRC implemented on
July 1, 2011 and amended on December 29, 2018, employers are required to provide their employees in the PRC with welfare benefits
covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance and medical insurance. These
payments are made to local administrative authorities. Any employer that fails to make social insurance contributions may be order to
rectify the non-compliance and pay the required contributions within a prescribed time limit and be subject to a late fee. If the employer
still fails to rectify the failure to make the relevant contributions within the prescribed time, it may be subject to a fine ranging from one
to three times the amount overdue.
In accordance with the Regulations on the Administration of Housing Funds which was promulgated by the State Council in
1999 and amended in 2002, employers must register at the designated administrative centers and open bank accounts for depositing
employees’ housing funds. Employer and employee are also required to pay and deposit housing funds, with an amount no less than 5%
of the monthly average salary of the employee in the preceding year in full and on time. See “Item 3. Key Information—D. Risk Factors
—Risks Related to Doing Business in China—Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC
may adversely affect our business and our profitability.”
Employee Stock Incentive Plan
Pursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock
Incentive Plan of Overseas Listed Company, which was issued by the SAFE on February 15, 2012, employees, directors, supervisors,
and other senior management who participate in any stock incentive plan of a publicly-listed overseas company and who are PRC
citizens or non-PRC citizens residing in China for a continuous period of no less than one year, subject to a few exceptions, are required
to register with the SAFE through a qualified domestic agent, which may be a PRC subsidiary of such overseas listed company, and
complete certain other procedures.
In addition, the SAT has issued certain circulars concerning employee stock options and restricted shares. Under these circulars,
employees working in the PRC who exercise stock options or are granted restricted shares will be subject to PRC individual income tax.
The PRC subsidiaries of an overseas listed company are required to file documents related to employee stock options and restricted
shares with relevant tax authorities and to withhold individual income taxes of employees who exercise their stock options or purchase
restricted shares. If the employees fail to pay or the PRC subsidiaries fail to withhold income tax in accordance with relevant laws and
regulations, , the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.
M&A Rules and Overseas Listing
On August 8, 2006, six PRC governmental and regulatory agencies, including the MOFCOM and the CSRC, promulgated
the Rules on Acquisition of Domestic Enterprises by Foreign Investors, or the M&A Rules, governing the mergers and acquisitions of
domestic enterprises by foreign investors that became effective on September 8, 2006 and was revised on June 22, 2009. The M&A
Rules, among other things, require that if an overseas company established or controlled by PRC companies or individuals, or PRC
Citizens, intends to acquire equity interests or assets of any other PRC domestic company affiliated with the PRC Citizens, such
acquisition must be submitted to the MOFCOM for approval. The M&A Rules also require that an offshore special vehicle, or a special
purpose vehicle formed for overseas listing purposes and controlled directly or indirectly by the PRC companies or individuals, shall
obtain the approval of the CSRC prior to overseas listing and trading of such special purpose vehicle’s securities on an overseas stock
exchange.
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C. Organizational Structure
The following diagram illustrates our current corporate structure, which includes our significant subsidiaries and consolidated
affiliated entities as of the date of this annual report:
Contractual Agreements with the VIEs and Their Respective Shareholders
Shanghai Anbin Technology Co., Ltd.
The following is a summary of the contractual agreements with NIO Co., Ltd., or NIO WFOE, and Shanghai Anbin Technology
Co., Ltd., or Shanghai Anbin.
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Agreements that provide us with effective control over Shanghai Anbin
Power of Attorney. On April 19, 2018, each shareholder of Shanghai Anbin, Shanghai Anbin and NIO WFOE entered into
powers of attorney. The terms contained in the respective powers of attorney are substantially similar. Pursuant to the powers of attorney,
each shareholder of Shanghai Anbin irrevocably authorized NIO WFOE to act on the behalf of such shareholder with respect to all
matters concerning the shareholding of the shares in Shanghai Anbin, including without limitation, attending shareholders’ meetings of
Shanghai Anbin, exercising all the shareholders’ rights and shareholders’ voting rights, and designating and appointing the legal
representative, directors, supervisors, chief executive officer and other senior management members of Shanghai Anbin.
Loan Agreement. On April 19, 2018, each shareholder of Shanghai Anbin, Shanghai Anbin and NIO WFOE entered into loan
agreements. The terms contained in the respective loan agreements are substantially similar. Pursuant to the loan agreements, NIO
WFOE should provide the shareholders of Shanghai Anbin with a loan in the aggregate amount of RMB30 million for the purpose of
contribution of the registered capital of Shanghai Anbin. The shareholders agree that the proceeds from the transfer of the equity interest
of the shareholders in Shanghai Anbin or increase of the working capital of Shanghai Anbin, pursuant to the exercise of the right to
acquire such equity interest by NIO WFOE under the exclusive option agreement, should be used by the shareholders to repay the loan to
the extent permissible. The loan agreements should become effective upon execution by the parties, and should expire upon the date of
full performance by the parties of their respective obligations under the loan agreements.
Equity Interest Pledge Agreement. On April 19, 2018, each shareholder of Shanghai Anbin, Shanghai Anbin, and NIO WFOE
entered into equity interest pledge agreements. The terms contained in the respective equity interest pledge agreements are substantially
similar. Pursuant to the equity interest pledge agreements, those shareholders should pledge 100% equity interest in Shanghai Anbin to
NIO WFOE to guarantee the performance by Shanghai Anbin and its shareholders of their obligations under the loan agreement, the
exclusive option agreement, the exclusive business cooperation agreement, and the power of attorney. If events of default defined therein
occur, upon giving written notice to the shareholders, as pledgee, NIO WFOE to the extent permitted by PRC laws may exercise the right
to enforce the pledge, unless the event of default has been successfully resolved to the satisfaction of NIO WFOE within twenty days
after the delivery of the written notice. Those shareholders agree that, without NIO WFOE’s prior written consent, during the term of the
equity interest pledge agreement, they will not place or permit the existence of any security interest or other encumbrance on the equity
interest in Shanghai Anbin or any portion thereof. We have completed registering the equity pledge with the relevant office of the SAMR
in accordance with the PRC Property Rights Law.
Agreements that allow us to receive economic benefits from Shanghai Anbin
Exclusive Business Cooperation Agreement. On April 19, 2018, Shanghai Anbin and NIO WFOE entered into an exclusive
business cooperation agreement. Pursuant to the exclusive business cooperation agreement, NIO WFOE has the exclusive right to
provide Shanghai Anbin with comprehensive technical support, consulting services and other services. Without prior written consent of
NIO WFOE, Shanghai Anbin should not directly or indirectly accept the same or any similar services provided by any third party
regarding the matters contemplated by this agreement. During the term of this agreement where necessary, Shanghai Anbin may enter
into further service agreements with NIO WFOE or any other party designated by NIO WFOE, which shall provide the specific contents,
methods, personnel, and fees for specific services. Shanghai Anbin should pay NIO WFOE service fees, which should be determined by
NIO WFOE after considering, among other things, the operation conditions of Shanghai Anbin, contents and value of the services
provided by NIO WFOE. NIO WFOE will have exclusive and proprietary ownership, rights and interests in any and all intellectual
property arising out of or developed during the performance of this agreement. Unless terminated in accordance with the provisions of
this agreement or terminated in writing by NIO WFOE, the agreement shall remain effective.
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Agreements that provide us with the option to purchase the equity interests in Shanghai Anbin
Exclusive Option Agreement. On April 19, 2018, each shareholder of Shanghai Anbin, Shanghai Anbin and NIO WFOE
entered into exclusive option agreements. The terms contained in the respective exclusive option agreements are substantially similar.
Pursuant to the exclusive option agreement, the shareholders of Shanghai Anbin irrevocably granted NIO WFOE an irrevocable and
exclusive right to purchase, or designate one or more persons to purchase the equity interests in Shanghai Anbin held by the shareholders
at a price equal to the amount of registered capital contributed by the shareholders in Shanghai Anbin or any portion thereof or at a price
mutually agreed by NIO WFOE and the shareholders. Those shareholders further undertake that, without the prior written consent of
NIO WFOE, Shanghai Anbin will not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in
Shanghai Anbin held by its shareholders, or allow the encumbrance thereon, except for the interest placed in accordance with the equity
interest pledge agreement, power of attorney and this agreement. Without the prior written consent of NIO WFOE, shareholders shall
cause the shareholders’ meeting or the directors (or the executive director) of Shanghai Anbin not to approve the merger or consolidation
with any person, or acquisition of or investment in any person. This agreement will remain effective until all equity interests held by
those shareholders in Shanghai Anbin have been transferred or assigned to NIO WFOE and/or any other person designated by NIO
WFOE in accordance with this agreement.
Beijing NIO Network Technology Co., Ltd.
The following is a summary of the contractual agreements with NIO WFOE and Beijing NIO Network Technology Co., Ltd. or
Beijing NIO.
Agreements that provide us with effective control over Beijing NIO
Power of Attorney. On April 19, 2018, each shareholder of Beijing NIO, Beijing NIO and NIO WFOE entered into powers of
attorney. The terms contained in the respective powers of attorney are substantially similar. Pursuant to the powers of attorney, each
shareholder of Beijing NIO irrevocably authorized NIO WFOE to act on the behalf of such shareholder with respect to all matters
concerning the shareholding of the shares in Beijing NIO, including without limitation, attending shareholders’ meetings of Beijing NIO,
exercising all the shareholders’ rights and shareholders’ voting rights, and designating and appointing the legal representative, directors,
supervisors, chief executive officer and other senior management members of Beijing NIO.
Loan Agreement. On April 19, 2018, each shareholder of Beijing NIO, Beijing NIO and NIO WFOE entered into loan
agreements. The terms contained in the respective loan agreements are substantially similar. Pursuant to the loan agreement, NIO WFOE
should provide the shareholders of Beijing NIO with a loan in aggregate amount of RMB10 million for the purpose of contribution of the
registered capital of Beijing NIO or increase of the working capital of Beijing NIO. The shareholders agree that the proceeds from the
transfer of the equity interest of the shareholders in Beijing NIO or for the working capital of Beijing NIO, pursuant to the exercise of the
right to acquire such equity interest under the exclusive option agreement, should be used by the shareholders to repay the loan to the
extent permissible. The loan agreements should become effective upon execution by the parties, and should expire upon the date of full
performance by the parties of their respective obligations under the loan agreements.
Equity Interest Pledge Agreement. On April 19, 2018, each shareholder of Beijing NIO, Beijing NIO, and NIO WFOE entered
into equity interest pledge agreements. The terms contained in the respective equity interest pledge agreements are substantially similar.
Pursuant to the equity interest pledge agreements, those shareholders should pledge 100% equity interest in Beijing NIO to NIO WFOE
to guarantee the performance by Beijing NIO and its shareholders of their obligations under the loan agreement, the exclusive option
agreement, the exclusive business cooperation agreement and the power of attorney. If events of default defined therein occur, upon
giving written notice to the shareholders, as pledgee, NIO WFOE to the extent permitted by PRC laws may exercise the right to enforce
the pledge, unless the event of default has been successfully resolved to the satisfaction of NIO WFOE within twenty days after the
delivery of the written notice. Those shareholders agree that, without NIO WFOE’s prior written consent, during the term of the equity
interest pledge agreement, they will not place or permit the existence of any security interest or other encumbrance on the equity interest
in Beijing NIO or any portion thereof. We have completed registering the equity pledge with the relevant office of the SAMR in
accordance with the PRC Property Rights Law.
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Agreements that allow us to receive economic benefits from Beijing NIO
Exclusive Business Cooperation Agreement. On April 19, 2018, Beijing NIO and NIO WFOE entered into an exclusive
business cooperation agreement. Pursuant to the exclusive business cooperation agreement, NIO WFOE has the exclusive right to
provide Beijing NIO with comprehensive technical support, consulting services and other services. Without prior written consent of NIO
WFOE, Beijing NIO should not directly or indirectly accept the same or any similar services provided by any third party regarding the
matters contemplated by this agreement. During the term of this agreement where necessary, Beijing NIO may enter into further service
agreements with NIO WFOE or any other party designated by NIO WFOE, which shall provide the specific contents, methods,
personnel, and fees for specific services. Beijing NIO should pay NIO WFOE service fees, which should be determined by NIO WFOE
after considering, among other things, the operation conditions of Beijing NIO, contents and value of the services provided by NIO
WFOE. NIO WFOE will have exclusive and proprietary ownership, rights and interests in any and all intellectual property arising out of
or developed during the performance of this agreement. Unless terminated in accordance with the provisions of this agreement or
terminated in writing by NIO WFOE, the agreement shall remain effective.
Agreements that provide us with the option to purchase the equity interests in Beijing NIO
Exclusive Option Agreement. On April 19, 2018, each shareholder of Beijing NIO, Beijing NIO and NIO WFOE entered into
exclusive option agreements. The terms contained in the respective exclusive option agreements are substantially similar. Pursuant to the
exclusive option agreement, the shareholders of Beijing NIO irrevocably granted NIO WFOE an irrevocable and exclusive right to
purchase, or designate one or more persons to purchase the equity interests in Beijing NIO held by the shareholders at a price equal to the
amount of registered capital contributed by the shareholders in Beijing NIO or any portion thereof, or at a price mutually agreed by NIO
WFOE and the shareholders. Those shareholders further undertake that, without the prior written consent of NIO WFOE, Beijing NIO
should not sell, transfer, mortgage or dispose of in any other manner any legal or equity interest in Beijing NIO held by its shareholders,
or allow the encumbrance thereon, except for the interest placed in accordance with the equity interest pledge agreement, power of
attorney and this agreement. Without the prior written consent of NIO WFOE, shareholders shall cause the shareholders’ meeting or the
directors (or the executive director) of Beijing NIO not to approve the merger or consolidation with any person, or acquisition of or
investment in any person. This agreement will remain effective until all equity interests held by those shareholders in Beijing NIO have
been transferred or assigned to NIO WFOE and/or any other person designated by NIO WFOE in accordance with this agreement.
In the opinion of Han Kun Law Offices, our PRC legal counsel:
● the ownership structures of our VIEs in China and NIO WFOE comply with all existing PRC laws and regulations; and
● the contractual arrangements between NIO WFOE, our VIEs and their respective shareholders governed by PRC laws are
valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws,
regulations and rules. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which has become
effective on January 1, 2020. Since the law is relatively new, uncertainties exist in relation to its interpretation and implementation. The
Foreign Investment Law does not explicitly classify whether variable interest entities that are controlled through contractual
arrangements would be deemed as foreign invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a
catch-all provision under definition of “foreign investment” that includes investments made by foreign investors in China through other
means as provided by laws, administrative regulations or the State Council. Therefore, it still leaves leeway for future laws,
administrative regulations or provisions of the State Council to provide for contractual arrangements as a form of foreign investment.
Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC counsel. If the
PRC government finds that the agreements that establish the structure for operating our business do not comply with PRC government
restrictions on foreign investment, we may be required to unwind such agreements and/or dispose of such business. For a description of
the risks related to our corporate structure, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate
Structure.”
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D. Property, Plants and Equipment
Currently, we own land use rights with respect to a parcel of land in Nanjing of approximately 325,289.51 square meters and the
ownership with respect to the plant thereon for a term ending on March 10, 2063, which are used for the manufacture of our e-propulsion
system, battery pack and engine driving system. We also leased a number of our facilities. The following table sets forth the location,
approximate size, primary use and lease term of our major leased facilities:
Location(1)
Shanghai, China
Shenzhen
Chengdu
Hangzhou
Nanjing
Suzhou
Beijing
Hefei
Kunming
Jinan
Zhuhai
Guangzhou
Wuhan
Xi’an
Chongqing
Ningbo
Approximate
Size (Building)
in Square
Meters/Feet(2)
69,671.69
9,070.9
24,566
577.33
444,60
227,60
529.25
3,982
438
1,221
132
5,405
172.5
355
8,631
135
3,165.91
18,324
35.27
1,003
45
1,416
500
53
454
55
429
6,331
1,327.7
393.52
4,631
204.73
7,566
40
8,326.13
400
4,666
210
Primary Use
Lease Expiration Date
Global headquarters and office
User center (sales, marketing, and customer service) March 14, 2022 – September 30, 2025
April 9, 2021 – June 19, 2025
Integrated vehicle research and development
Power management
Warehouse
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Warehouse
Power management
Power management
Sales, marketing, and customer service
Sales, marketing, and customer service
Office
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
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April 9, 2021 – June 19, 2025
October 31, 2020 –September 30, 2023
January 15, 2020 – March 31, 2024
April 30, 2022 – July 19, 2027
July 31, 2020 – October 31, 2023
January 25, 2021 – March 31, 2028
September 30, 2022 – June 30, 2025
June 30, 2023 – December 31, 2023
September 30, 2022 – August 31, 2023
March 31, 2023 – October 31, 2023
March 31, 2022 – August 31, 2023
May 31, 2021
April 30, 2024 – August 31, 2024
September 20, 2021 – August 30, 2022
July 31, 2020 – October 19, 2020
March 31, 2020 – June 30, 2027
October 14, 2020
February 28, 2020 –August 31, 2023
February 28, 2023
December 31, 2020
June 30, 2020
December 9, 2020
March 27, 2020 - February 28, 2021
November 30, 2021
October 31, 2020
December 31, 2020 - December 31, 2025
December 31, 2019 – September 30, 2023
November 14, 2020
October 31, 2020 - October 31 2028
November 14, 2020 - August 31, 2023
June 30, 2023 – February 28, 2029
April 30, 2025
July 15, 2019 –September 5, 2025
July 31, 2023 – November 30, 2023
August 15, 2020 – November 6, 2022
August 15, 2023 – December 14, 2023
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Location(1)
Wenzhou
Wuxi
Tianjin
Shijiazhuang
Changsha
Zhengzhou
Qingdao
Fuzhou
Lanzhou
Taiyuan
Nanchang
Dalian
Changzhou
Dongguan
Huangshan
Yiwu
Jiaxing
Yinchuan
Foshan
Xiamen
Haikou
Nantong
Yichang
Shantou
Xining
Location(1)
Yinchuan
San Jose, California
San Francisco, California
Munich, Germany
Air Street, London (UK)
Begbroke Science Park (Oxford, UK)
Building 6
Donington Park (UK)
Approximate
Size (Building)
in Square
Meters/Feet(2)
5,303
107.25
280
911
4,903
171
167.82
1,492.27
217
262.04
13,567
370
6762
154
182
5,670
48
909.2
100
78
98.51
529
153.6
278.8
356.76
55
1,392.53
54
25
161.41
410
41.25
264
137
188
3563
9,584.01
90
355
50
555
99
162.8
110
Approximate
Size (Building)
in Square
Meters/Feet(2)
187.58
85,017
99,424
12,250
3,679
2,960
4,875
7,458
Primary Use
Sales, marketing, and customer service
Power management
Power management
Sales, marketing, and customer service
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Office
Office
Sales, marketing, and customer service
Sales, marketing, and customer service
Office
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Power management
Office
Sales, marketing, and customer service
Power management
Office
Sales, marketing, and customer service
Office
Sales, marketing, and customer service
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Power management
Sales, marketing, and customer service
Office
Office
Office
Lease Expiration Date
October 20, 2020 - March 23, 2024
March 20, 2022 -September 17, 2026
December 31, 2021 - August 31, 2023
February 15, 2024
November 14, 2024 – September 30, 2028
January 3, 2020 – October 1, 2023
June 30, 2021
November 8, 2023
November 14, 2020 – September 24, 2023
July 24, 2021
August 9, 2020 – December 9, 2028
August 14, 2022 – November 30, 2023
February 28, 2021 – October 31, 2024
October 8, 2023 – October 31, 2024
January 13, 2022
December 31, 2023 – December 14, 2024
October 19, 2021
February 7, 2020 – December 9, 2020
December 20, 2023
July 31, 2020
July 31, 2020
February 28, 2021
August 31, 2021
December 31, 2021
July 14, 2022
July 31, 2023
September 30, 2024
June 30, 2023
September 7, 2021
November 25, 2020
December 31, 2022
September 27, 2023
November 30, 2020
December 31, 2020
January 24, 2020
October 23, 2020 - September 30, 2028
December 31, 2019- November 30, 2028
September 30, 2023 – October 31, 2023
March 31, 2020
December 31, 2023
April 30, 2024
March 31, 2020
January 31, 2020
April 16, 2020
Primary Use
Lease Expiration Date
Office
North American headquarters and global
software development center
Sales, marketing light assembly, research and
development
User experience/user interface team
Design headquarters
Management, finance, legal, sponsorship, UK
corporate HQ
Engineering function, HR, finance and IT
January 24, 2020
September 30, 2023
September 30, 2023
September 1, 2019
December 2020 – December 2021
January 2026, break option in January 2021
July 2022, break any-time after July 2020
EP9 Storage/Workshop
December 2023, break clause any time after
December 2020
(1) We also lease a number of facilities for our NIO House and NIO Space locations, office space, service and logistics centers and
small areas for battery swap stations in China.
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(2) Properties in China and Germany are presented in square meters. All others are presented in square feet.
We intend to add new facilities or expand our existing facilities as we add employees and expand our production organization.
We believe that suitable additional or alternative space will be available in the future on commercially reasonable terms to accommodate
our foreseeable future expansion.
ITEM 4.A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction
with our consolidated financial statements and their related notes included elsewhere in this annual report. This annual report contains
forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the
information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our
businesses and financial performance are subject to substantial risks and uncertainties.
A. Operating Results
Overview
We are a pioneer in China’s premium electric vehicle market. We design, jointly manufacture, and sell smart and connected
premium electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial
intelligence. Redefining user experience, we aim to provide users with comprehensive, convenient and innovative charging solutions and
other user-centric service offerings.
We launched our first volume manufactured electric vehicle, the seven-seater ES8, to the public at our NIO Day event on
December 16, 2017. In December 2018, we launched its variant, the six-seater ES8, with delivery beginning in March 2019. The ES8 is
an all-aluminum alloy body, premium electric SUV that offers exceptional performance, functionality and mobility lifestyle. As of
December 31, 2019, we had delivered 17,940 seven-seater ES8s and 2,540 six-seater ES8s to customers in more than 270 cities.
We launched our second volume manufactured electric vehicle, the ES6, to the public at our NIO Day event on December 15,
2018, with delivery beginning in June 2019. The ES6 is a five-seater high-performance long-range premium electric SUV. The ES6 is
smaller but more affordable than the ES8, allowing us to target a broader market in the premium SUV segment. As of December 31,
2019, we had delivered 11,433 ES6s to customers in more than 250 cities.
We launched our third volume manufactured electric vehicle, the EC6, to the public at our NIO Day event on December 28,
2019. EC6 is a smart premium electric coupe SUV. EC6 has an agile coupe design with drag coefficient at only 0.27Cd. It is dynamically
shaped and equipped with a 2.1 square meter vault glass roof. With the 100-kilowatt-hour battery pack to be delivered in the fourth
quarter of 2020, the EC6 boasts an NEDC range of up to 615 km. Users can pre-order the EC6 through the NIO App and we expect to
begin making deliveries of the EC6 in September 2020. At the NIO Day event on December 28, 2019, we also released the all-new ES8,
the flagship smart premium electric SUV. With the 100-kilowatt-hour battery pack to be delivered in the fourth quarter of 2020, the all-
new ES8 will be allowed an NEDC range of up to 580 km, a major improvement in its range performance. We began making deliveries
of the all-new ES8 in April 2020. The all-new ES8 boasts more than 180 product improvements with better performance, longer driving
range and a more sophisticated and high-tech design.
We began making deliveries to users of the seven-seater ES8 on June 28, 2018, the six-seater ES8 in March 2019 and the ES6 in
June 2019, and we recorded revenues of RMB7,824.9 million (US$1,124.0 million) for the year ended December 31, 2019, which
mainly consisted of revenues from the sales of our vehicles, revenue from a number of embedded products and services offered together
with the sale of vehicles, revenues from our services including charging solutions such as our energy package and one-off usage of our
Power Express services, as well as revenues from monthly fees, excluding those fees for statutory and third-party liability insurance and
vehicle damage insurance paid directly to third-party insurers, under our service package.
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The ES8 and the ES6 are manufactured in partnership with JAC at its Hefei manufacturing plant. Pursuant to our arrangement
with JAC, given JAC’s significant investment in this plant for the manufacturing of our vehicles, we have agreed to compensate JAC to
the extent the Hefei manufacturing plant incurs any operating losses for the first 36 months after the plant commences mass production,
which occurred on April 10, 2018. We expect that the Hefei manufacturing plant’s ability to achieve and/or maintain profitability will be
significantly affected by our sales volumes. If we are obligated to compensate JAC for any losses, our cash flows and financial position
could be materially impacted, particularly if such losses are incurred as a result of lower than anticipated sales volumes. See “Item 3. Key
Information—D. Risk Factors—Risks Related to Our Business and Industry—Manufacturing in collaboration with partners is subject to
risks.”
Impact of COVID-19 on Our Operations
The majority of our revenues are derived from sales of our vehicles in China. Our results of operations and financial condition
in 2020 has been and will continue to be affected by the spread of COVID-19. The COVID-19 has impact on China’s auto industry in
general and the production and delivery of vehicles of our company. The extent to which COVID-19 impacts our financial position,
results of operations and cash flows in 2020 will depend on the future developments of the outbreak, including new information
concerning the global severity of and actions taken to contain the outbreak, which are highly uncertain and unpredictable. In addition, our
financial position, results of operations and cash flows could be adversely affected to the extent that the outbreak harms the Chinese
economy in general.
In response to intensifying efforts to contain the spread of COVID-19, the Chinese government has taken a number of actions,
which included extending the Chinese New Year holiday, quarantining individuals infected with or suspected of having COVID-19,
prohibiting residents from free travel, encouraging employees of enterprises to work remotely from home and cancelling public
activities, among others. The COVID-19 has also resulted in temporary closure of many corporate offices, retail stores, manufacturing
facilities and factories across China. At the time of this filing, we have taken a series of measures in response to the outbreak, including,
among others, remote working arrangement for our employees. We have temporarily shut down some of our some of our premises and
facilities, and have followed and are continuing to follow all legal directions and safety guidelines with respect the remaining premises
and facilities in operations. These measures have reduced the capacity and efficiency of our operations, which in turn have negatively
affected our financial condition, results of operations and cash flows. We are working closely with JAC, the manufacturer of the ES8,
ES6 and EC6, to resume productions and minimize the impact of COVID-19 on our manufacturing capabilities. In addition, we strive to
expand our traffic channels, integrate our online and offline sales efforts and offer best services possible to bring business and operation
back to normal. We will pay close attention to the development of the COVID-19 outbreak, perform further assessment of its impact and
take relevant measures to minimize the impact. As a result of the COVID-19 outbreak, the total number of vehicles we delivered in the
first quarter of 2020 was 3,838, showing a decrease by 53.5% from 8,224 in the fourth quarter of 2019, and a decrease by 3.8% from
3,989 in the first quarter of 2019. We will continue to monitor and evaluate the financial impact to our financial condition, results of
operations and cash flows for the first quarter of 2020 and subsequent periods.
Key Line Items Affecting Our Results of Operations
Revenues
The following table presents our revenue components by amount and as a percentage of the total revenues for the years
indicated.
Revenues:
Vehicle sales
Other sales
Total revenues
2017
RMB
Year Ended December 31,
2018
RMB
RMB
(in thousands)
2019
US$
—
—
—
4,852,470
98,701
4,951,171
7,367,113
457,791
7,824,904
1,058,220
65,758
1,123,978
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We began generating revenues in June 2018, when we began making deliveries and sales of the ES8. We currently generate
revenues from (i) vehicle sales, which represent revenues from sales of the ES8 and the ES6, and (ii) other sales, which mainly consist of
revenues from sales of our energy package and service package, and a number of embedded products and services offered together with
vehicle sales. Embedded products and services include charging piles, vehicle internet connection service and extended lifetime
warranty. Revenue from sales of the ES8 and the ES6 and charging piles are recognized when the vehicles are delivered and charging
piles are installed. For vehicle internet connection services, we recognize revenue using a straight-line method. As for the extended
lifetime warranty, given our limited operating history and lack of historical data, we recognize revenue over time based on a straight-line
method initially, and will continue monitoring the cost pattern periodically and adjust the revenue recognition pattern to reflect the actual
cost pattern as it becomes available with more data. Revenues for our energy package or service package are recognized over time on a
monthly basis as our customers receive and consume the benefits of the related package.
In December 2019, we launched our third volume manufactured electric vehicle, the EC6, and the all-new ES8. Users can pre-
order the EC6 and the all-new ES8 through the NIO App and we expect to generate revenues from sales of the all-new ES8 starting from
April 2020 when we started making deliveries, and the EC6 as soon as we begin making deliveries, expected in September 2020.
Cost of Sales
The following table presents our cost of sales components by amount and as a percentage of our total cost of sales for the years
indicated.
Cost of Sales:
Vehicle sales
Other sales
Total cost of sales
2017
RMB
Year Ended December 31,
2018
RMB
RMB
(in thousands)
2019
US$
—
—
—
(4,930,135)
(276,912)
(5,207,047)
(8,096,035)
(927,691)
(9,023,726)
(1,162,923)
(133,254)
(1,296,177)
We incur cost of sales in relation to (i) vehicle sales, including, among others, purchases of raw materials and manufacturing
expenses, and (ii) other sales, including cost of sales relating to our energy package and service package, the installation of charging piles
and directly related staff costs. Cost of sales with respect to vehicle sales also includes compensation to JAC for actual losses incurred at
the Hefei manufacturing plant where the ES8 and the ES6 is manufactured.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of (i) design and development expenses, which include, among others,
consultation fees, outsourcing fees and expenses of testing materials and (ii) employee compensation, representing salaries, benefits and
bonuses as well as share-based compensation expenses for our research and development staff. Our research and development expenses
also include travel expenses, depreciation and amortization of equipment used in relation to our research and development activities,
rental and related expenses with respect to laboratories and offices for research and development teams and others, which primarily
consists of telecommunication expenses, office fees and freight charges.
Our research and development expenses are mainly driven by the number of our research and development employees, the stage
and scale of our vehicle development and development of technology.
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Selling, General and Administrative Expenses
Our selling, general and administrative expenses include (i) employee compensation, including salaries, benefits and bonuses as
well as share-based compensation expenses with respect to our employees other than research and development staff, (ii) marketing and
promotional expenses, which primarily consist of marketing and advertising costs, sponsorship fees and racing costs related to our
Formula E team, (iii) rental and related expenses, which primarily consist of rental for NIO Houses, NIO Spaces and offices,
(iv) professional service expenses, which consist of outsourcing fees primarily relating to human resources and IT functions, design fees
paid for NIO Houses and NIO Spaces and fees paid to auditors and legal counsel, (v) depreciation and amortization expenses, primarily
consisting of depreciation and amortization of leasehold improvements, IT equipment and software, among others, (vi) expenses of low
value consumables, primarily consisting of, among others, IT consumables, office supplies, sample fees and IT-system related licenses,
(vii) traveling expenses, and (viii) other expenses, which includes telecommunication expenses, utilities and other miscellaneous
expenses.
Our selling, general and administrative expenses are significantly affected by the number of our non-research and development
employees, marketing and promotion activities and the expansion of our sales and after-sales network, including NIO Houses, NIO
Spaces and other leased properties.
Interest Income
Interest income primarily consists of interest earned on cash deposits in banks. In 2016, interest income also consisted of late
payment penalties which we recorded as interest income related to a preferred shareholder having delayed its investment payment which
was due in 2016.
Interest Expense
Interest expense consists of interest expense with respect to our indebtedness.
Share of losses of Equity Investees
Share of losses of equity investees primarily consists of our share of the losses net of shares of gains of Suzhou Zenlead XPT
New Energy Technologies Co., Ltd., GAC JV, Changan NIO Renewable Automobile Co., Ltd., Hainan Weilai Xiqi Renewable
Automobile Technology Co., Ltd., Kunshan Siwopu Intelligent Equipment Co., Ltd., Nanjing Weibang Transmission Technology
Co., Ltd. and Nanjing Karui Innovation and Entrepreneurship Management Service Co., Ltd., in which, as of December 31, 2019, we
held a 22.5% to 51.0% equity interest. Our equity interest is accounted for using the equity method since we exercise significant
influence but do not own a majority equity interest in or control those investees.
Investment Income
Investment income primarily consists of gains on trading in short-term investment securities, primarily consisting of structured
bank deposits.
Other Income/(Loss), Net
Other losses and income primarily consist of gains or losses we incur based on movements between the U.S. dollar and the
Renminbi. We have historically held a significant portion of our cash and cash equivalents in U.S. dollars, while we have incurred a
significant portion of our expenses in RMB. Other income also includes (i) income we received with respect to one-off design and
research and development services we provided to certain parties and (ii) government grants.
Income Tax Expense
Income tax expense primarily consists of current income tax expense, mainly attributable to intra-group income earned by our
German, UK and Hong Kong subsidiaries which are eliminated upon consolidation but were subject to tax in accordance with applicable
tax law.
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Taxation
Cayman Islands
We are incorporated in the Cayman Islands. The Cayman Islands currently have no form of income, corporate or capital gains
tax and no estate duty, inheritance tax of gift tax. There are no other taxes likely to be material to us levied by the government of the
Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the
jurisdiction of the Cayman Islands.
PRC
Generally, our PRC subsidiaries are subject to enterprise income tax on their taxable income in China at a statutory rate of 25%.
The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards.
Our products and services are primarily subject to value-added tax at a rate of 13% on the vehicles and charging piles, repair
and maintenance services and charging services as well as 6% on services such as research and development services, in each case less
any deductible value-added tax we have already paid or born. We are also subject to surcharges on value-added tax payments in
accordance with PRC law.
Dividends paid by our PRC subsidiaries in China to our Hong Kong subsidiaries will be subject to a withholding tax rate of
10%, unless the relevant Hong Kong entity satisfies all the requirements under the Double Taxation Avoidance Arrangement and
receives approval from the relevant tax authority. If our Hong Kong subsidiaries satisfy all the requirements under the tax arrangement
and receive approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiaries would be subject to
withholding tax at the standard rate of 5%. Effective from November 1, 2015, the above-mentioned approval requirement has been
abolished, but a Hong Kong entity is still required to file application package with the relevant tax authority, and settle the overdue taxes
if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority.
If NIO Inc. or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise
Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.
Under the PRC Enterprise Income Tax Law, research and development expenses incurred by an enterprise in the course of
carrying out research and development activities that have not formed intangible assets and are included in the profit and loss account for
the current year. Besides deducting the actual amount of research and development expenses incurred, an enterprise is allowed an
additional 75% deduction of the amount in calculating its taxable income for the relevant year. For research and development expenses
that have formed intangible assets, the tax amortization is based on 175% of the costs of the intangible assets.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. Significant accounting policies
followed by us in the preparation of the accompanying consolidated financial statements are summarized below:
Revenue recognition
Revenue is recognized when or as the control of the goods or services is transferred to a customer. Depending on the terms of
the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time.
Control of the goods and services is transferred over time if our performance:
● provides all of the benefits received and consumed simultaneously by the customer;
● creates and enhances an asset that the customer controls as we perform; or
● does not create an asset with an alternative use to us and we have an enforceable right to payment for performance
completed to date.
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If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the
progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the
customer obtains control of the goods and services.
Contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each
performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the
prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or
adjusted market assessment approach, depending on the availability of observable information. Assumptions and estimations have been
made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these assumptions and
estimates may impact the revenue recognition.
When either party to a contract has performed, we present the contract in the statement of financial position as a contract asset
or a contract liability, depending on the relationship between our performance and the customer’s payment.
A contract asset is our right to consideration in exchange for goods and services that we have transferred to a customer. A
receivable is recorded when we have an unconditional right to consideration. A right to consideration is unconditional if only the passage
of time is required before payment of that consideration is due.
If a customer pays consideration or we have a right to an amount of consideration that is unconditional, before we transfer a
good or service to the customer, we present the contract liability when the payment is made or a receivable is recorded (whichever is
earlier). A contract liability is our obligation to transfer goods or services to a customer for which we have received consideration (or an
amount of consideration is due) from the customer. Our contract liabilities primarily resulted from the multiple performance obligations
identified in the vehicle sales contract and the sales of Energy and Service Packages, which are recorded as deferred revenue and advance
from customers. As of December 31, 2018 and 2019, the balances of contract liabilities from vehicle sales contracts were RMB99,128
and RMB96,827, respectively. As of December 31, 2018 and 2019, the balances of contract liabilities from the sales of Energy and
Service Packages were RMB32,226 and RMB65,361, respectively.
Vehicle sales
We generate revenue from sales of electric vehicles, currently the ES8 and ES6, together with a number of embedded products
and services through a series of contracts. We identify the users who purchase the vehicle as our customers. There are multiple distinct
performance obligations explicitly stated in a series of contracts, including sales of vehicles, charging piles, vehicle internet connection
services and extended lifetime warranty which are accounted for in accordance with Accounting Standards Codification (“ASC”) 606,
Revenue From Contracts With Customers, or ASC 606. The standard warranty provided by us is accounted for in accordance with ASC
460, Guarantees, and the estimated costs are recorded as a liability when we transfer the control of vehicle to a user.
Customers only pay the amount after deducting the government subsidies to which they are entitled for the purchase of electric
vehicles. The government subsidies are applied on their behalf and collected by us or JAC, from the government. We have concluded that
government subsidies should be considered as a part of the transaction price we charge customers for the electric vehicle, as the subsidy
is granted to the buyer of the electric vehicle and the buyer remains liable for such amount in the event the subsidies were not received by
us. For efficiency reason, we or JAC applies and collects the payments on behalf of customers. In the instance that an eligible customer
selects installment payment for battery, we believe such arrangement contains a significant financing component and as a result adjust the
amount considering the impact of time value on the transaction price using an appropriate discount rate (i.e., the interest rates of the loan
reflecting the credit risk of the borrower). The long-term receivable of installment payment for battery was recognized as non-current
assets. The difference between the gross receivable and the present value is recorded as unrealized finance income. Interest income
resulting from a significant financing component will be presented separately from revenue from contracts with customers as this is not
our ordinary business.
We use a cost plus margin approach to determine the estimated standalone selling price for each individual distinct performance
obligation identified, considering our pricing policies and practices, and the data utilized in making pricing decisions. The overall
contract price is then allocated to each distinct performance obligation based on the relative estimated standalone selling price in
accordance with ASC 606. The revenue for vehicle sales and charging piles are recognized at a point in time when the control of the
product is transferred to the customer. For the vehicle internet connection service and free battery swapping service, we recognize the
revenue using a straight-line method. As for the extended lifetime warranty, given our limited operating history and lack of historical
data, we decide to recognize the revenue over time based on a straight-line method initially, and will continue monitoring the cost pattern
periodically and adjust the revenue recognition pattern to reflect the actual cost pattern as it becomes available.
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As the consideration for the vehicle and all embedded services must be paid in advance, which means the payments received are
prior to the transfer of goods or services by us, we record a contract liability (deferred revenue) for the allocated amount regarding those
unperformed obligations.
Sales of Energy and Service Packages
We also sell our users two packages, Energy Package and Service Package, in exchange for consideration. The Energy Package
provides vehicle users with a comprehensive range of charging solutions (including charging and battery swapping). The energy service
is applied by users on our mobile application depending on their needs. We can decide the most appropriate service to offer according to
its available resource. Through the Service Package, we offer vehicle users with a “worry free” vehicle ownership experience (including
free repair service with certain limitations, routine maintenance service, enhanced data package, etc.), which can be applied by users via
our mobile application.
We identify the users who purchase Energy Package and Service Package to meet the definition of a customer. The agreements
for Energy Package and Service Package create legal enforceability to both parties on a monthly basis as the respective Energy or Service
Packages can be canceled at any time without any penalty. We conclude the energy or service provided in Energy Package or Service
Package respectively meets the stand-ready criteria and contains only one performance obligation within each package, the revenue is
recognized over time on a monthly basis as customer simultaneously receives and consumes the benefits provided and the term of legally
enforceable contract is only one month.
Incentives
We offer a self-managed customer loyalty program points, which can be used in our online store and at NIO Houses to redeem
NIO merchandise. We determine the value of each point based on estimated incremental cost. Customers and NIO fans and advocates
have a variety of ways to obtain the points. The major accounting policy for its points program is described as follows:
(1)
Sales of vehicles
We conclude the points offered linked to the purchase transactions of the vehicles are a material right and accordingly a separate
performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of the
vehicle sales. We also estimate the probability of points redemption when performing the allocation. Since historical information does
not yet exist for us to determine any potential points forfeitures and the fact that most merchandise can be redeemed without requiring a
significant amount of points compared with the amount of points provided to users, we believe it is reasonable to assume all points will
be redeemed and no forfeiture is estimated currently. The amount allocated to the points as a separate performance obligation is recorded
as contract liability (deferred revenue) and revenue should be recognized when future goods or services are transferred. We will continue
to monitor when and if forfeiture rate data becomes available and will apply and update the estimated forfeiture rate at each reporting
period.
(2)
Sales of Energy Package and Service Package
Energy Package—When the customers charge their vehicles without using our charging network, we will grant points based on
the actual cost the customers incur. We record the value of the points as a reduction of revenue from the Energy Package.
Service Package-We grant points to the customers with safe driving record during the effective period of the service package.
We record the value of the points as a reduction of revenue from the Service Package.
Since historical information is limited for us to determine any potential points forfeiture and most merchandise can be redeemed
without requiring a significant amount of points compared with the amount of points provided to our users, we have used an estimated
forfeiture rate of zero.
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(3) Other scenarios
Customers or users of our mobile application can also obtain points through any other ways, such as frequent sign-ins to our
mobile application and sharing articles from the application to users’ own social media. We believe these points are to encourage user
engagement and generate market awareness. As a result, we account for such points as selling and marketing expenses with a
corresponding liability recorded under other current liabilities of our consolidated balance sheets upon the points offering. We estimate
liabilities under the customer loyalty program based on cost of our merchandise that can be redeemed, and our estimate of probability of
redemption. At the time of redemption, we record a reduction of inventory and other current liabilities. In certain cases where
merchandise is sold for cash in addition to points, we record other revenue.
Similar to the reasons above, we estimate no points forfeiture currently and continue to assess when and if a forfeiture rate
should be applied.
For the years ended December 31, 2017, 2018 and 2019, the revenue portion allocated to the points as separate performance
obligation was nil, RMB47.3 million and RMB66.3 million (US$9.5 million), respectively, which is recorded as contract liability
(deferred revenue). For the years ended December 31, 2017, 2018 and 2019, the total points recorded as a reduction of revenue was nil,
RMB0.4 million and RMB25.4 million (US$3.6 million), respectively. For the years ended December 31, 2017, 2018 and 2019, the total
points recorded as selling and marketing expenses were RMB16.5 million, RMB153.1 million and RMB142.4 million (US$20.5
million), respectively.
As of December 31, 2018 and 2019, liabilities recorded related to unredeemed points were RMB143.9 million and RMB178.7
(US$25.7 million), respectively.
Practical expedients and exemptions
We follow the guidance on immaterial promises when identifying performance obligations in the vehicle sales contracts and
conclude that lifetime roadside assistance and out-of-town charging services are not performance obligations considering these two
services are value-added services to enhance user experience rather than critical items for vehicle driving and forecast that usage of these
two services will be very limited. We also perform an estimation on the stand-alone fair value of each promise, applying a cost plus
margin approach and conclude that the standalone fair value of roadside assistance and out-of-town charging services are insignificant
individually and in aggregate, representing less than 1% of the vehicle gross selling price and aggregate fair value of each individual
promise.
Considering the qualitative assessment and the result of the quantitative estimate, we have concluded not to assess whether
promises are performance obligations if they are immaterial in the context of the contract and the relative standalone fair value
individually and in aggregate is less than 3% of the contract price, namely the road-side assistance and out-of-town charging services.
Related costs are then accrued instead.
Cost of Sales
Vehicle
Cost of vehicle revenue includes direct parts, material, processing fee, loss compensation to JAC, labor costs, manufacturing
overhead (including depreciation of assets associated with the production) and reserves for estimated warranty expenses. Cost of vehicle
revenue also includes adjustments to warranty expense and charges to write down the carrying value of the inventory when it exceeds its
estimated net realizable value and to provide for on-hand inventory that is either obsolete or in excess of forecasted demand.
Service and Other
Cost of service and other revenue includes direct parts, material, labor costs, vehicle internet connectivity costs, and
depreciation of assets that are associated with sales of Energy and Service packages.
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Share-based compensation
We grant restricted shares and share options to eligible employees and non-employee consultants and account for share-based
compensation in accordance with ASC 718, Compensation—Stock Compensation and ASC 505-50, Equity-Based Payments to Non-
Employees. There were no new grants to non-employee consultants after the effectiveness of ASU 2018-07—Compensation—stock
compensation (Topic 718)—Improvements to nonemployee share-based payment accounting.
Employees’ share-based compensation awards are measured at the grant date fair value of the awards and recognized as
expenses (a) immediately at the grant date if no vesting conditions are required; (b) for share options or restricted shares granted with
only service conditions, using the straight-line vesting method, net of estimated forfeitures, over the vesting period; (c) for share options
granted with service conditions and the occurrence of an initial public offering as performance condition, cumulative share-based
compensation expenses for the options that have satisfied the service condition should be recorded upon the completion of the initial
public offering, using the graded vesting method. This performance condition was met upon completion of our initial public offering on
September 12, 2018 and the associated share-based compensation expense for awards vested as of that date were recognized, or (d) for
share options where the underlying share is liability within the scope of ASC 480, using the graded vesting method, net of estimated
forfeitures, over the vesting period, and re-measuring the fair value of the award at each reporting period end until the award is settled.
All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair
value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Share-based compensation expenses for share options and restricted shares granted to non-employees are measured at fair value
at the earlier of the performance commitment date or the date service is completed, and recognized over the period during which the
service is provided. We apply the guidance in ASC 505-50 to measure share options and restricted shares granted to non-employees
based on the then-current fair value at each reporting date.
Before the completion of our initial public offering, the fair value of the restricted shares were assessed using the income
approaches / market approaches, with a discount for lack of marketability given that the shares underlying the awards were not publicly
traded at the time of grant. This assessment required complex and subjective judgments regarding our projected financial and operating
results, our unique business risks, the liquidity of our ordinary shares and our operating history and prospects at the time the grants were
made. Upon the completion of our initial public offering, the fair value of the restricted shares is based on the market value of the
underlying ordinary shares on the date of grant. In addition, the binomial option-pricing model is used to measure the value of share
options. The determination of the fair value is affected by the fair value of the ordinary shares as well as assumptions, including the
expected share price volatility, actual and projected employee and non-employee share option exercise behavior, risk-free interest rates
and expected dividends. The fair value of these awards was determined taking into account independent valuation advice.
The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these
estimates involve inherent uncertainties and application of management judgment. If factors change or different assumptions are used,
the share-based compensation expenses could be materially different for any period. Moreover, the estimates of fair value of the awards
are not intended to predict actual future events or the value that ultimately will be realized by grantees who receive share-based awards,
and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by us for accounting purposes.
Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.
We use historical data to estimate pre-vesting options and record share-based compensation expenses only for those awards that are
expected to vest.
Earnings/(Loss) per share
Basic earnings/(loss) per share is computed by dividing net income/(loss) attributable to holders of ordinary shares, considering
the accretions to redemption value of the preferred shares, by the weighted average number of ordinary shares outstanding during the
period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating
securities based on their participating rights. Diluted earnings/(loss) per share is calculated by dividing net income/(loss) attributable to
ordinary shareholders, as adjusted for the accretion and allocation of net income related to the preferred shares, if any, by the weighted
average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of
shares issuable upon the conversion of the preferred shares using the if-converted method, unvested restricted shares, RSUs and ordinary
shares issuable upon the exercise of outstanding share options (using the treasury stock method). Ordinary equivalent shares are not
included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive.
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Segment reporting
ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about
operating segments, products, services, geographic areas, and major customers.
Based on the criteria established by ASC 280, our chief operating decision maker (“CODM”) has been identified as our Chief
Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the
company. As a whole and hence, we have only one reportable segment. We do not distinguish between markets or segments for the
purpose of internal reporting. As our long-lived assets are substantially located in the PRC, no geographical segments are presented.
Income taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. We account for income
taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities
are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the
financial statements and their respective tax basis, and operating loss carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive
loss in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is
considered more likely than not that amount of the deferred tax assets will not be realized.
We record liabilities related to uncertain tax positions when, despite our belief that our tax return positions are supportable, we
believe that it is more likely than not that those positions may not be fully sustained upon review by tax authorities. Accrued interest and
penalties related to unrecognized tax benefits are classified as income tax expense. We did not recognize uncertain tax positions as of
December 31, 2018 and 2019.
Recently issued accounting pronouncements
For a summary of recently issued accounting pronouncements, see Note 3 to the consolidated financial statements of NIO Inc.
and its subsidiaries pursuant to Item 17 of Part III of this annual report.
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Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated. This information
should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The
operating results in any year are not necessarily indicative of the results that may be expected for any future period.
Revenues: (1)
Vehicle sales
Other sales
Total revenues
Cost of sales:(2)
Vehicle sales
Other sales
Total cost of sales
Gross loss
Operating expenses:(2)
Research and development(2)
Selling, general and administrative(2)
Total operating expenses
Loss from operations
Interest income
Interest expenses
Share of losses of equity investee
Investment income
Other income/(loss), net
Loss before income tax expenses
Income tax expense
Net loss
2017
RMB
Year Ended December 31,
2018
RMB
RMB
(in thousands)
2019
US$
—
—
—
—
—
—
—
(2,602,889)
(2,350,707)
(4,953,596)
(4,953,596)
18,970
(18,084)
(5,375)
3,498
(58,681)
(5,013,268)
(7,906)
(5,021,174)
4,852,470
98,701
4,951,171
7,367,113
457,791
7,824,904
1,058,220
65,758
1,123,978
(4,930,135)
(276,912)
(5,207,047)
(255,876)
(3,997,942)
(5,341,790)
(9,339,732)
(9,595,608)
133,384
(123,643)
(9,722)
—
(21,346)
(9,616,935)
(22,044)
(9,638,979)
(8,096,035)
(927,691)
(9,023,726)
(1,198,822)
(4,428,580)
(5,451,787)
(9,880,367)
(11,079,189)
160,279
(370,536)
(64,478)
—
66,160
(11,287,764)
(7,888)
(11,295,652)
(1,162,923)
(133,254)
(1,296,177)
(172,199)
(636,126)
(783,100)
(1,419,226)
(1,591,425)
23,023
(53,224)
(9,262)
—
9,503
(1,621,385)
(1,133)
(1,622,518)
(1) We began generating revenues in June 2018, when we began making deliveries and sales of the ES8. We currently generate revenues
from vehicle sales and other sales.
(2) Share-based compensation expenses were allocated in cost of sales and operating expenses as follows:
Cost of Sales
Research and development expenses
Selling, general and administrative expenses
Total
Years Ended December 31, 2019 and 2018
Revenues
2017
RMB
—
23,210
67,086
90,296
Year Ended December 31,
2018
RMB
RMB
(in thousands)
2019
9,289
109,124
561,055
679,468
9,763
82,680
241,052
333,495
US$
1,402
11,876
34,625
47,903
Our revenues increased by 58.0% from RMB4,951.2 million in 2018 to RMB7,824.9 million (US$1,124.0 million) in 2019,
primarily attributable to (i) an increase in the number of vehicles sold in 2019, and (ii) an increase in the incremental revenue recognized
from user rights and service packages, which was in line with the growth of our vehicle sales.
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Cost of sales
Our cost of sales increased by 73.3% from RMB5,207.0 million in 2018 to RMB9,023.7 million (US$1,296.2 million) in 2019,
mainly due to (i) an increase in direct parts, materials and manufacturing overhead (including depreciation of assets associated with the
production) by RMB3,007.3 million; (ii) an increase in processing fee and compensation to JAC for its operating losses incurred in the
amount by RMB158.6 million; and (iii) an increase in labor costs that are associated with sales of energy and service packages by
RMB146.0 million.
Research and Development Expenses
Research and development expenses increased by 10.8% from RMB3,997.9 million in 2018 to RMB4,428.6 million (US$636.1
million) in 2019, primarily due to (i) an 11.7% increase in design and development expense, which increased from RMB1,828.0 million
in 2018 to RMB2,041.0 million (US$293.2 million) in 2019 primarily due to the incurrence of incremental design and development costs
for the ES6, EC6 and all-new ES8; and (ii) an 8.3% increase in employee compensation for our research and development employees,
which increased from RMB1,850.9 million in 2018 to RMB2,004.9 million (US$288.0 million) in 2019 primarily due to an increase in
the year-round average number of our research and development employees (including employees of our product and software
development teams).
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased slightly by 2.1% from RMB5,341.8 million in 2018 to RMB5,451.8
million (US$783.1 million) in 2019, primarily due to (i) a 63.9% increase in rental and related expenses, which increased from
RMB450.1 million in 2018 to RMB737.6 million (US$105.9 million) in 2019, due to the expansion of our network of NIO Houses and
NIO Spaces since the second half of 2018; (ii) an 83.1% increase in depreciation and amortization expenses, which increased from
RMB249.8 million in 2018 to RMB457.4 million (US$65.7 million) in 2019, primarily due to the increased depreciation expenses from
leasehold improvement of NIO Houses and office buildings; and (iii) a 32.0% increase in other expenses, which increased from
RMB284.0 million in 2018 to RMB375.0 million (US$53.9 million) in 2019 primarily due to the recognition of certain accrued
allowance against receivables in 2019, partially offset by a decrease in marketing and promotional expenses from RMB1,158.5 million in
2018 to RMB818.1 million (US$117.5 million) in 2019 in connection with reduced marketing and promotional activities.
Loss from Operations
As a result of the foregoing, we incurred a loss from operations of RMB11,079.2 million (US$1,591.4 million) in 2019, as
compared to a loss of RMB9,595.6 million in 2018.
Interest Income
In 2019, we recorded interest income of RMB160.3 million (US$23.0 million) as compared to RMB133.4 million in 2018,
primarily due to the interest income received on higher cash balances deposited with banks in 2018.
Interest Expense
In 2019, we recorded interest expense of RMB370.5 million (US$53.2 million), as compared to interest expense of RMB123.6
million in 2018, primarily due to an increase in our indebtedness (including the 2024 Notes, the Affiliate Notes and bank debt) in 2019.
Share of Losses of Equity Investees
We recorded share of losses of equity investees of RMB64.5 million (US$9.3 million) in 2019, as compared with share of losses
of equity investee of RMB9.7 million in 2018, primarily because most of our equity investees were loss-making start-up companies.
Other Income, Net
We recorded other income of RMB66.2 million (US$9.5 million) in 2019, as compared to other loss of RMB21.3 million in
2018, primarily due to the investment gains we recorded from the disposal of a subsidiary of NIO Capital.
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Income Tax Expense
In 2019, our income tax expense was RMB7.9 million (US$1.1 million), a decrease of 64.2% from RMB22.0 million in 2018,
which was primarily due to our reduced business scale in Germany and the United Kingdom.
Net Loss
As a result of the foregoing, we incurred a net loss of RMB11,295.7 million (US$1,622.5 million) in 2019, as compared to a net
loss of RMB9,639.0 million in 2018.
Years Ended December 31, 2018 and 2017
Revenues
We recorded revenues of RMB4,951.2 million for vehicle sales and other sales in 2018, as we began making deliveries of our
first volume manufactured electric vehicle, the ES8, on June 28, 2018 and delivered 11,348 vehicles by December 31, 2018. We did not
record any revenues in 2017.
Cost of sales
We recorded cost of sales of RMB5,207.0 million in 2018. Our cost of sales mainly consists of (i) direct parts, materials and
manufacturing overhead (including depreciation of assets associated with the production) of RMB4,527.5 million; (ii) processing fee and
compensation to JAC for its operating losses incurred during the same period in the amount of RMB222.9 million; and (iii) labor costs
that are associated with sales of energy and service packages of RMB102.6 million. We did not record any cost of sales in 2017.
Research and Development Expenses
Research and development expenses increased by 53.6% from RMB2,602.9 million in 2017 to RMB3,997.9 million in 2018,
primarily due to a 84.2% increase in employee compensation, which increased from RMB1,004.8 million in 2017 to RMB1,850.9
million in 2018, primarily due to (i) an increase in share-based compensation expenses recognized related to the stock options granted to
certain of our non-US employees after our initial public offering and (ii) an increase in the number of our research and development
employees (including employees of our product and software development teams) by approximately 75% from 2017 to 2018.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by 127.2% from RMB2,350.7 million in 2017 to RMB5,341.8 million in
2018, primarily due to, (i) a 142.6% increase in employee compensation with respect to our non-research and development employees,
which increased from RMB929.9 million in 2017 to RMB2,256.5 million in 2018, primarily due to (x) an increase in the number of non-
research and development employees by approximately 210% from 2017 to 2018, in line with the expansion of our business and (y) an
increase in share-based compensation expenses recognized related to the stock options granted to certain of our non-US employees after
our initial public offering; (ii) a 121.3% increase in marketing and promotional expenses, which increased from RMB523.5 million in
2017 to RMB1,158.5 million in 2018, as we increased our marketing and advertising expenses for the ES8 in 2018 and incurred expenses
relating to (x) an auto exhibition in Beijing in May 2018 and (y) a number of nationwide test-drive activities for customers in 2018, (iii) a
108.3% increase in rental and related expenses, which increased from RMB216.1 million in 2017 to RMB450.1 million in 2018, as we
continued to expand our network of NIO Houses and rented additional office space and (iv) a 142.3% increase in professional services
expenses, which increased from RMB238.7 million in 2017 to RMB578.5 million in 2018, as we incurred more (x) outsourcing fees
primarily related to human resources and IT functions that support business expansion, (y) design fees paid in connection with our NIO
Houses and (z) auditor fees and legal fees.
Loss from Operations
As a result of the foregoing, we incurred a loss from operations of RMB9,595.6 million in 2018, as compared to a loss of
RMB4,953.6 million in 2017.
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Interest Income
In 2018, we recorded interest income of RMB133.4 million as compared to RMB19.0 million in 2017, primarily due to the
interest income received on higher cash balances deposited with banks in 2018.
Interest Expense
In 2018, we recorded interest expense of RMB123.6 million, as compared to interest expense of RMB18.1 million in 2017,
primarily due to an increase in our indebtedness in 2018.
Share of Losses of Equity Investees
We recorded share of losses of equity investees of RMB9.7 million in 2018, as compared with share of losses of equity investee
of RMB5.4 million in 2017, primarily because most of our equity investees were loss-making start-up companies.
Investment Income
We recorded investment income RMB3.5 million in 2017, as compared to nil in 2018, we did not record any investment income,
as we invested in certain short-term wealth management products in 2017 and recorded investment income generated therefrom.
Other Loss, Net
We recorded other losses of RMB21.3 million in 2018, as compared to other loss of RMB58.7 million in 2017, primarily due to
the depreciation of RMB against the U.S. dollar in 2018. In 2018, we held a significant portion of our cash and cash equivalents in U.S.
dollars, while we incurred a significant portion of our expenses in RMB.
Income Tax Expense
In 2018, our income tax expense was RMB22.0 million, an increase of 178.8% from RMB7.9 million in 2017. It represented
income taxes paid and accrued with respect to transfer pricing compensation for our operations in Germany, UK and Hong Kong.
Net Loss
As a result of the foregoing, we incurred a net loss of RMB9,639.0 million in 2018, as compared to a net loss of RMB5,021.2
million in 2017.
B. Liquidity and Capital Resources
Cash Flows and Working Capital
We had net cash used in operating activities of RMB4,574.7 million, RMB7,911.8 million and RMB8,721.7 million
(US$1,252.8 million) in 2017, 2018 and 2019, respectively. Our principal sources of liquidity have been proceeds from issuances of
equity securities in our initial public offering and private placements, our notes offering, and our bank facilities.
As of December 31, 2019, we had a total of RMB989.9 million (US$142.2 million) in cash and cash equivalents and restricted
cash. As of December 31, 2019, 83.7% of our cash and cash equivalents and restricted were denominated in Renminbi and held in the
PRC, and the other cash and cash equivalents and restricted cash were mainly denominated in U.S. dollars or Hong Kong dollars and
held in the United States or Hong Kong. Our cash and cash equivalents consist primarily of cash on hand, time deposits and highly-liquid
investments placed with banks, which are unrestricted as to withdrawal and use, and which have original maturities of three months or
less.
As of December 31, 2019, the total size of our bank facilities was RMB2,860.0 million (US$410.8 million), of which
RMB1,105.6 million (US$158.8 million), RMB1,385.5 million (US$199.0 million) and RMB30.0 million (US$4.3 million) were utilized
for borrowing, letters of credit and bankers’ acceptance, respectively.
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As of December 31, 2019, we had approximately US$1,027.7 million in total long-term borrowings outstanding, consisting
primarily of the 2024 Notes, the Affiliate Notes and our long-term bank debt. In addition, in February and March 2020, we issued and
sold convertible notes in an aggregate principal amount of US$435 million due 2021, or the 2021 Notes, to several unaffiliated Asia
based investment funds. The 2021 Notes bear zero interest. Prior to maturity, the holders of the 2021 Notes have the right to convert
either all or part of the principal amount of the 2021 Notes into Class A ordinary shares (or ADSs) of our company pursuant to
conversion price and conditions as set forth in the respective convertible notes purchase agreements.
The 2024 Notes are unsecured debt and are not redeemable by us prior to the maturity date except for certain changes in tax law.
In accordance with the indenture governing the 2024 Notes, or the 2024 Notes Indenture, holders of the 2024 Notes may require us to
purchase all or any portion of their notes on February 1, 2022 at a repurchase price equal to 100% of the principal amount of the 2024
Notes to be repurchased, plus accrued and unpaid interest. Holders of the 2024 Notes may also require us, upon a fundamental change (as
defined in the 2024 Notes Indenture), to repurchase for cash all or part of their 2024 Notes at a fundamental change repurchase price
equal to 100% of the principal amount of the 2024 Notes to be repurchased, plus accrued and unpaid interest. Satisfying the obligations
of the 2024 Notes could adversely affect the amount or timing of any distributions to our shareholders. We may choose to satisfy,
repurchase, or refinance the 2024 Notes through public or private equity or debt financings if we deem such financings available on
favorable terms.
The Affiliate Notes issued in the first tranche will mature in 360 days, bear no interest, and require us to pay a premium at 2%
of the principal amount at maturity. The Affiliate Notes issued in the second tranche will mature in three years, bear no interest, and
require us to pay a premium at 6% of the principal amount at maturity. The 360-day Affiliate Notes will be convertible into our Class A
ordinary shares (or ADSs) at a conversion price of US$2.98 per ADS at the holder's option from the 15th day immediately prior to
maturity, and the three-year convertible notes will be convertible into our Class A ordinary shares (or ADSs) at a conversion price of
US$3.12 per ADS at the holder's option from the first anniversary of the issuance date. The holders of the three-year Affiliate Notes will
have the right to require us to repurchase for cash all of the convertible notes or any portion thereof on February 1, 2022.
The 2021 Notes bear zero interest and will mature in February 2021. Prior to maturity, the holders of the 2021 Notes have the
right to convert either all or part of the principal amount of the 2021 Notes into Class A ordinary shares (or ADSs) of our company
pursuant to conversion price and conditions as set forth in the respective convertible notes purchase agreements. In accordance with the
2021 Notes Indenture, holders of the 2021 Notes may require us, upon a fundamental change (as defined in the 2021 Notes Indenture), to
repurchase for cash all or part of their 2021 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the
2021 Notes to be repurchased. Satisfying the obligations of the 2021 Notes could adversely affect the amount or timing of any
distributions to our shareholders. We may choose to satisfy, repurchase, or refinance the 2021 Notes through public or private equity or
debt financings if we deem such financings available on favorable terms.
As of December 31, 2019, the current liabilities exceeded the current assets in the amount of RMB4.6 billion. Our working
capital and liquidity was not adequate for continuous operation in the 12 months from the date when this annual report is issued. Our
continuous operation depends on our capability to obtain sufficient external equity or debt financing. On April 29, 2020, we entered into
definitive agreements for investments in NIO China with Hefei Strategic Investors. The Hefei Strategic Investors will invest an aggregate
of RMB7 billion in cash into NIO Anhui. We will inject our core businesses and assets in China, including vehicle research and
development, supply chain, sales and services and NIO Power, valued at RMB17.77 billion in total, into NIO China, and invest
RMB4.26 billion in cash into NIO China. We expect the closing of the investments to take place in the second quarter of 2020, subject to
the satisfaction of customary closing conditions. Based on this evaluation, we believe that our current cash and cash equivalents, short-
term investment, available banking facilities, anticipated cash receipts from sales of vehicles and provision of services and proceeds from
the investments in NIO China by Hefei Strategic Investors, will be sufficient to meet our anticipated working capital requirements and
capital expenditures and we will be able to meet our payment obligations when liabilities fall due for the next 12 months from the date
when this annual report is issued. We may, however, decide to enhance our liquidity position or increase our cash reserve for future
investments or operations through additional capital and finance funding. The issuance and sale of additional equity would result in
further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in
operating covenants that would restrict our operations.
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The following table sets forth a summary of our cash flows for the years indicated.
Summary of Consolidated Cash Flow Data:
Net cash used in operating activities
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Effects of exchange rate changes on, cash equivalents and restricted
cash
Net increase/(decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of the year
Cash, cash equivalents and restricted cash at end of the year
Operating Activities
2017
RMB
Year Ended December 31,
2018
RMB
RMB
(in thousands)
2019
US$
(4,574,719)
(1,190,273)
12,867,334
(7,911,768)
(7,940,843)
11,603,092
(8,721,706)
3,382,069
3,094,953
(1,252,795)
485,804
444,562
(168,120)
6,934,222
596,631
7,530,853
(56,947)
(4,306,466)
7,530,853
3,224,387
10,166
(2,234,518)
3,224,387
989,869
1,460
(320,969)
463,154
142,185
Net cash used in operating activities was RMB8,721.7 million (US$1,252.8 million) in 2019, primarily attributable to a net loss
of RMB11,295.7 million (US$1,622.5 million), adjusted for (i) non-cash items of RMB2,137.2 million (US$307.0 million), which
primarily consisted of depreciation and amortization of RMB998.9 million (US$143.5 million) and share-based compensation expenses
of RMB333.5 million (US$47.9 million) and (ii) a net decrease in operating assets and liabilities by RMB436.8 million (US$62.7
million), which was primarily attributable to a decrease in inventory by RMB569.2 million (US$81.8 million), and an increase in
accruals and other liabilities by RMB848.4 million (US$121.9 million), consisting primarily of research and development services,
advance payments from ES8 and ES6 customers, salary and benefits payable and accounts payable in connection with marketing events.
Net cash used in operating activities was partially offset by, among others, an increase in trade receivables by RMB681.6 million
(US$97.9 million) primarily consisting of an increase in the government subsidies relating to our vehicle sales, and payment of operating
lease liabilities by RMB345.3 million (US$49.6 million).
Net cash used in operating activities was RMB7,911.8 million in 2018, primarily attributable to a net loss of RMB9,639.0
million, adjusted for (i) non-cash items of RMB1,221.6 million, which primarily consisted of share-based compensation expenses of
RMB679.5 million and depreciation and amortization of RMB474.2 million and (ii) a net decrease in operating assets and liabilities of
RMB505.6 million, which was primarily attributable to an increase in trade payables of RMB2,827.1 million consisting primarily of
accounts payable relating to the purchase of inventory; an increase in accruals and other liabilities of RMB1,348.6 million, consisting
primarily of research and development services, advance payments from ES8 customers, salary and benefits payable and accounts
payable in connection with marketing events; and an increase in other non-current liabilities of RMB291.1 million consisting primarily
of rental payables, partially offset by, among others, an increase in inventory of RMB1,375.9 million primarily related to purchase of raw
materials, works in progress and finished goods; an increase in prepayments and other current assets of RMB811.1 million consisting
primarily of deductible value-added tax and prepaid expenses; an increase in trade receivables of RMB756.5 million primarily consisting
of an increase in the government subsidies relating to our vehicle sales and an increase in long-term receivables of RMB574.7 million
primarily resulting from battery payment installment arrangement with customers, and an increase in other non-current assets of
RMB658.0 million.
Net cash used in operating activities was RMB4,574.7 million in 2017, primarily attributable to a net loss of RMB5,021.2
million, adjusted for (i) non-cash items of RMB315.7 million, which primarily consisted of depreciation and amortization of RMB167.9
million, foreign exchange losses of RMB49.5 million and share-based compensation expenses of RMB90.3 million and (ii) a net
decrease in operating assets and liabilities of RMB130.7 million, which was primarily attributable to an increase in accruals and other
liabilities of RMB603.4 million, consisting primarily of payables for research and development expenses, accrued expenses and salaries
and benefits payables, and an increase in other non-current liabilities of RMB78.6 million, consisting primarily of rental payables and
deferred government grants, offset partially by, among others, an increase in prepayment and other current assets of RMB404.8 million,
which primarily related to deductible value-added tax, prepaid expenses and deposits; an increase in inventories of RMB89.5 million,
primarily related to purchases of raw materials, works in progress and finished goods, as we began trial production of the ES8; and an
increase in other non-current assets of RMB66.7 million.
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Investing Activities
Net cash provided by investing activities was RMB3,382.1 million (US$485.8 million) in 2019, primarily attributable to (i)
proceeds from sale of short-term investments of RMB7,246.5 million (US$1,040.9 million), and (ii) proceeds from disposal of equity
investees of RMB76.7 million (US$11.0 million), partially offset by purchases of short-term investments of RMB2,202.8 million
(US$316.4 million), and (ii) purchase of property, plant and equipment and intangible assets of RMB1,706.8 million (US$245.2 million).
Net cash used in investing activities was RMB7,940.8 million in 2018, primarily attributable to (i) purchases of short-term
investments of RMB8,090.7 million, (ii) purchases of property, plant and equipment and intangible assets of RMB2,644.0 million and
(iii) acquisition of equity investees of RMB110.9 million, partially offset by the proceeds from sale of short-term investments of
RMB2,936.0 million.
Net cash used in investing activities was RMB1,190.3 million in 2017, which was primarily attributable to (i) purchases of
property, plant and equipment and intangible assets of RMB1,113.9 million, relating to the roll-out of our NIO House network and
strengthening of research and development capabilities and (ii) purchases of held for trading securities of RMB1,337.4 million,
consisting of certain short-term liquid investments, which were partially offset by proceeds from sales of securities held for trading of
RMB1,340.9 million.
Financing Activities
Net cash provided by financing activities was RMB3,095.0 million (US$444.6 million) in 2019, primarily attributable to (i)
proceeds from issuance of convertible promissory note of RMB4,322.5 million (US$620.9 million), and (ii) the proceeds from
borrowings of RMB1,376.6 million (US$197.7 million), partially offset by repayments of borrowings of RMB2,611.0 million (US$375.0
million).
Net cash provided by financing activities was RMB11,603.1 million in 2018, primarily attributable to (i) the proceeds from the
issuance of ordinary shares in our initial public offering of RMB7,531.0 million; (ii) the proceeds from the issuance of redeemable non-
controlling interests of RMB1,265.9 million in connection with the issuance by a wholly-owned subsidiary of us of redeemable preferred
shares to certain third party strategic investors and (iii) the proceeds from bank borrowings of RMB2,668.5 million.
Net cash provided by financing activities was RMB12,867.3 million in 2017, which was attributable to the net proceeds from
the issuance of our series A, series B, series C, and series D preferred shares, with a sum of RMB12,226.5 million, and, to a lesser extent,
the proceeds from borrowings of RMB633.7 million, and capital injections from non-controlling interests of RMB13.4 million.
Capital Expenditures
We made capital expenditures of RMB1,113.9 million, RMB2,644.0 million and RMB1,706.8 million (US$245.2 million) in
2017, 2018 and 2019, respectively. In these periods, our capital expenditures were mainly used for the acquisition of property, plant and
equipment and intangible assets which consisted primarily of mold and tooling, IT equipment, research and development equipment,
leasehold improvements, consisting primarily of office space, NIO Houses and laboratory improvements as well as the roll-out of our
power solutions. We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business, and
that our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a
limited operating history means we have limited historical data on the demand for our products and services. As a result, our future
capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. To the extent
the proceeds of the 2024 Notes, Affiliate Notes and 2021 Notes and cash flows from our business activities are insufficient to fund future
capital requirements, we may need to seek equity or debt financing. We will continue to make capital expenditures to support the
expected growth of our business.
Borrowings
As of December 31, 2019, our total borrowings, including current borrowings and non-current borrowings, were RMB8,362.9
million (US$1,201.3 million), primarily consisting of convertible notes of RMB 6,482.6 million (US$931.2 million), bank loans of
RMB1,400.6 million (US$201.2 million), bankers’ acceptance of RMB60.0 million (US$8.6 million) and loan from investors of
RMB419.7 million (US$60.3 million).
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Holding Company Structure
NIO Inc. is a holding company with no material operations of its own. We conduct a portion of our operations through our PRC
subsidiaries, and, to a lesser extent, our variable interest entities and their subsidiaries in China. As a result, our ability to pay dividends
depends significantly upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt
on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our
wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined
in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and our variable interest entities
and their subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory
reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our wholly foreign-owned subsidiaries in
China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds, staff bonuses and
welfare funds at its discretion, and each of our variable interest entities may allocate a portion of its after-tax profits based on PRC
accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not
distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by
the banks designated by the SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they
generate accumulated profits and meet the requirements for statutory reserve funds. Our VIEs did not have any material assets or
liabilities as of December 31, 2019. In the future we expect Beijing NIO to focus on value-added telecommunications services, including,
without limitation, performing internet services, operating our website and our mobile application as well as holding certain related
licenses.
C. Research and Development, Patents and Licenses, etc.
See “Item 4. Information on the Company—B. Business Overview—Our Technology—Worldwide Research and Development
Footprint” and “—Intellectual Property.”
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events for the period from January 1, 2019 to December 31, 2019 that are reasonably likely to have a material effect on our net revenues,
income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily
indicative of future operating results or financial conditions.
E. Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the
payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as
shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or
contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or
engages in leasing, hedging or product development services with us.
F. Tabular Disclosure of Contractual Obligations
The following table sets forth our contractual obligations as of December 31, 2019:
Capital commitments
Operating lease obligations
Finance lease obligations
Short-term and long-term borrowings
Interest on bank borrowings
Convertible notes with principal and interest
Total
620,234
2,550,709
142,734
1,880,250
112,231
7,742,710
13,048,868
111
Total
Less than 1 year
2-3 years
More than 3 years
Payment due by period
1-2 years
(in RMB thousands)
4,148
615,776
749,869
50,043
510,436
66,500
947,019
2,939,643
279
574,702
36,585
668,373
41,462
235,447
1,560,717
466,041
28,206
701,441
4,269
974,924
2,175,160
31
760,097
27,900
—
—
5,585,320
6,373,348
Table of Contents
Capital commitments are commitments in relation to the purchase of property and equipment including leasehold
improvements. Operating lease obligations consist of leases in relation to certain offices and buildings, NIO Houses and other property
for our sales and after-sales network.
Other than those shown above, we did not have any significant capital and other commitments, long-term obligations, or
guarantees as of December 31, 2019.
G. Safe Harbor
See “Forward-Looking Statements” on page 2 of this annual report.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Executive Officers
The following table sets forth information regarding our executive officers and directors as of the date of this annual report.
Directors and Executive Officers
Bin Li
Lihong Qin
Feng Shen
Xin Zhou
Wei Feng
Ganesh V. Iyer
Hai Wu
Denny Ting Bun Lee
James Gordon Mitchell
Age
45
46
56
50
40
52
51
52
46
Position/Title
Chairman and Chief Executive Officer
Director and President
Executive Vice President
Executive Vice President
Chief Financial Officer
Chief Information Officer
Independent Director
Independent Director
Director
Mr. Bin Li is our founder and has served as chairman of the board since our inception and our chief executive officer since
January 2018. Mr. Li currently also serves as chairman of the board of directors at Bitauto Holdings Limited, a NYSE-listed automobile
service company and a leading automobile service provider in China. In 2000, Mr. Li co-founded Beijing Bitauto E-Commerce Co., Ltd.
and served as its director and president until 2006. In 2002, Mr. Li co-founded Beijing Creative & Interactive Digital Technology Co.,
Ltd. and has served as its chairman of the board of directors and chief executive officer since its inception. In addition, Mr. Li currently
serves as vice-chairman of China Automobile Dealers Association, or CADA, and was recognized by CADA in 2008 as one of the top
10 most influential and distinguished people in China’s automobile dealer industry in the past 20 years. Mr. Li received his bachelor’s
degree in sociology from Peking University where he minored in Law.
Mr. Lihong Qin is our co-founder and has served as our director and our president since our inception. Prior to joining us, Mr.
Qin served as chief marketing officer and executive director at Longfor Properties Co., Ltd., a leading company involved in property
development and investment in China, from 2008 to 2014. He also served as deputy general manager at Anhui Chery Automobile Sales
and Service Company from 2005 to 2008, as senior consultant and project manager at Roland Berger Strategy Consultants from 2003 to
2005, and as assistant brand manager at the Marketing Department of Procter & Gamble (Guangzhou) Ltd. from 2001 to 2003. Mr. Qin
received his bachelor’s degree and a master’s degree in law from Peking University in 1996 and 1999, respectively, and a master’s
degree in public policy from Harvard University in 2001.
Mr. Feng Shen joined our company in December 2017, and currently serves as our executive vice president and chairman of
quality management committee. Mr. Shen worked in several senior executive management roles, such as president of Polestar China and
global chief technology officer at Polestar, president at Volvo Cars China R&D Company, vice president of Volvo Cars Asia-Pacific
Operation, and chairman at China-Sweden Traffic Safety Research Center from 2010 to 2017. Prior to that, Mr. Shen worked as a
powertrain manager, Six-Sigma Master Black Belt and technical expert at Ford Motor Company from 1999 to 2010 in the United States
and China. Mr. Shen received a bachelor’s degree in mathematics and mechanics and a master’s degree in applied mechanics from Fudan
University in 1984 and 1987, respectively. He also received a doctoral degree in mechanical engineering from Auburn University in
1996.
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Mr. Xin Zhou joined our company in April 2015. He had served as the chairman of product committee since 2017, and currently
serves as our executive vice president. Prior to joining our company, Mr. Zhou served as executive director at Qoros Automotive Co.,
Ltd. from September 2009 to April 2015. Prior to that, he was the engagement manager of McKinsey & Co. from April 2007 to
September 2009, and executive director of Lear Corp. from May 1998 to April 2007. From 1995 to 1998, Mr. Zhou was a senior
manager of General Motors China Inc. Mr. Zhou received a bachelor’s degree in applied science from Fudan University in 1992 and a
master’s degree in business administration from China Europe International Business School in 2008.
Mr. Wei Feng has served as our Chief Financial Officer since November 2019. Prior to joining our company, Mr. Feng served as
managing director and head of the auto and auto parts research team at China International Capital Corporation. Prior to that, Mr. Feng
served as an equity analyst at Everbright Securities Co. Ltd. from 2010 to 2013. Mr. Feng’s career also includes more than five years’
working experience within the ZF Group where he participated in numerous corporate matters. Mr. Feng received his bachelor’s degree
in Engineering from the Department of Automotive Engineering at Tsinghua University, and his joint master’s degree in Automotive
System Engineering from RWTH Aachen University in Germany and Tsinghua University in China.
Mr. Ganesh V. Iyer has served as our global chief information officer since April 2016 and managing director of NIO U.S. since
December 2018. Mr. Iyer has over 30 years of experience delivering results in various industries including autonomous technology, hi-
tech, manufacturing, and telecom. Mr. Iyer worked as vice president of Information Technology at Tesla Inc. from 2012 to 2016. Prior to
Tesla, he held senior information technology leadership roles at VMWare from 2010 to 2012. Prior to VMWare, Mr. Iyer served as
director of information technology at Juniper Networks and WebEx. He also spent 10 years in consulting primarily at Electronic Data
Systems and Tata Consultancy Services. Mr. Iyer received a bachelor’s degree in chemical engineering with a minor in mathematics from
the university of Calicut in India.
Mr. Hai Wu has served as our director since July 2016. Mr. Wu has served as a managing partner of Cenova Capital since May
2019. He has extensive experience in investments and management. Prior to Cenova Capital, Mr. Wu served as a managing director of
China at Temasek Holdings Ltd. Since May 2014. Prior to that, Mr. Wu was the chief executive officer at Ramaxel Technology
(Shenzhen) Limited from April 2012 to February 2014 and a managing director at CITIC Private Equity Funds Management Co., Ltd.
from March 2010 to May 2012. Mr. Wu served as the global director and managing partner of the Beijing Branch office of McKinsey &
Company from August 1999 to February 2010. He also served as a non-executive director of COFCO Meat Holdings Limited from
September 2015 to December 2017. He received a bachelor’s degree in physiology from Peking University, a master’s degree in business
administration from the Johnson School of Management, University of Cornell and a doctoral degree in neuroscience and cell biology
from Rutgers University.
Mr. Denny Ting Bun Lee has served as our director since September 2018. Mr. Lee serves as an independent non-executive
director on the board of NetEase, Inc., a leading internet and online game service provider in China listed on the Nasdaq Global Select
Market. He was the chief financial officer of NetEase, Inc. from 2002 to 2007. Prior to joining NetEase, Inc., Mr. Lee worked in the
Hong Kong office of KPMG for more than ten years. Mr. Lee currently serves as an independent non-executive director and the
chairman of the audit committees of the following four companies: (1) Jianpu Technology Inc., a company listed on the NYSE, (2) New
Oriental Education & Technology Group Inc., a provider of private education services in China listed on the NYSE, (3) Concord Medical
Services Holdings Limited, a leading specialty hospital management solution provider and operator in China listed on the NYSE, and (4)
China Metal Resources Utilization Ltd., a company principally engaged in the manufacture and sales of copper and related products in
China listed on the main board of The Hong Kong Stock Exchange. Mr. Lee graduated from the Hong Kong Polytechnic University and
is a member of the Hong Kong Institute of Certified Public Accountants and The Chartered Association of Certified Accountants.
Mr. James Gordon Mitchell has served as our director since September 2018. Currently, Mr. Mitchell serves as Senior Executive
Vice President and Chief Strategy Officer of Tencent Holdings, where he has worked since July 2011. Mr. Mitchell has also served as the
Chairman and non-executive director of the board of China Literature Limited since June 2017. He is also a non-executive director of
certain other listed companies including TME Group Limited, a Chinese music entertainment company (stock code NYSE:TME); Yixin
Group Limited, a Chinese automobile retail transaction platform company listed on the main board of Hong Kong Stock Exchange (stock
code 2858) and Frontier Developments, a British video game development company listed on the London Stock Exchange (under the
symbol AIM: FDEV), and a director of several unlisted companies. Prior to Tencent, Mr. Mitchell was a managing director at Goldman
Sachs. He is a CFA® charterholder and received a degree from Oxford University.
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B. Compensation of Directors and Executive Officers
For the year ended December 31, 2019, we paid an aggregate of approximately US$2.26 million in cash to our directors and
executive officers. For share incentive grants to our directors and executive officers, see “—Stock Incentive Plans.” We have not set
aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers. Our PRC
subsidiaries and VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her
pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our
executive officers is employed for a specified time period. We may terminate employment for cause, at any time, without advance notice
or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or any crime involving moral
turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. In such case of termination by
us, we will provide severance payments to the executive officer as expressly required by applicable law of the jurisdiction where the
executive officer is based.
Each executive officer has agreed to hold, both during and after the termination or expiry of the executive officer’s employment
agreement, in strict confidence and not to use, except as required in the performance of the executive officer’s duties in connection with
the executive officer’s employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential
information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received
by us and for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all
inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with
us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights
for these inventions, designs and trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term
of the executive officer’s employment and typically for one year following the last date of employment. Specifically, each executive
officer has agreed not to (i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive
officer in the executive officer’s capacity as a representative of us for the purpose of doing business with such persons or entities that will
harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our
competitors, or engage, whether as principal, partner, licensor or otherwise, with any of our competitors, without our express consent; or
(iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive
officer’s termination, or in the year preceding such termination, without our express consent.
We have also entered into indemnification agreements with each of our directors and executive officers. Under these
agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons
in connection with claims made by reason of their being a director or officer of our company.
Stock Incentive Plans
Our board of directors has approved and adopted share-based awards under three stock incentive plans, namely, the 2015 Stock
Incentive Plan, or the 2015 Plan, the 2016 Stock Incentive Plan, or the 2016 Plan, the 2017 Stock Incentive Plan, or the 2017 Plan. The
terms of the 2015 Plan, the 2016 Plan and the 2017 Plan are substantially similar. The purpose of those plans is to attract and retain the
best available personnel, to provide additional incentives to our employees, directors and consultants and to promote the success of our
business. Our board of directors believes that our long-term success is dependent upon our ability to attract and retain superior
individuals who, by virtue of their ability and qualifications, make important contributions to our business.
Under the 2015 Plan, the 2016 Plan and the 2017 Plan, the maximum numbers of Class A ordinary shares which may be issued
pursuant to all awards are 46,264,378, 18,000,000 and 33,000,000, respectively. Under the 2018 Plan, a maximum number of 23,000,000
Class A ordinary shares may be issued pursuant to all awards. The amount should automatically increase each year by the number of
shares representing 1.5% of the then total issued and outstanding share capital of our company as of the end of each preceding year. As
of December 31, 2019, awards to purchase an aggregate amount of 88,843,972 Class A ordinary shares under our stock incentive plans
have been granted and are outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates.
The following paragraphs describe the principal terms of the 2015 Plan, the 2016 Plan, the 2017 Plan and the 2018 Plan.
Types of Awards. Our stock incentive plans permit the awards of options, restricted shares, restricted share units, share
appreciation rights, dividend equivalent right or other right or benefit under each plan.
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Plan Administration. Our board of directors or a committee of one or more members of the board of directors or officers will
administer our stock incentive plans. The committee or the full board of directors, as applicable, will determine the grantees to receive
awards, the type and number of awards to be granted to each grantee, and the terms and conditions of each award grant.
Award Agreement. Awards granted under our stock incentive plans are evidenced by an award agreement that sets forth terms,
conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the
grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend the award.
Eligibility. We may grant awards to our employees, consultants and directors.
Vesting Schedule. Except as approved by the plan administrator, options to be issued to the grantees under the stock incentive
plans shall be subject to a minimum four (4) year vesting schedule calling for vesting no earlier than the following, counting from the
applicable grant date or vesting commencement date (as determined by the plan administrator) with respect to the total issued options:
the option representing 25% of the Class A ordinary shares under the option shall vest at the end of the first twelve (12) months
commencing from the vesting commencement date, with remaining portions vesting in equal monthly installments over the next thirty-
six (36) months.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the relevant award
agreement. Options that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator
determines at the time of grant. However, In the case of an option granted to an employee who, at the time the option is granted, owns
(or, pursuant to Section 424(d) of the U.S. Code, is deemed to own) stock representing more than 10% of the total combined voting
power of all classes of shares of us or our subsidiary or affiliate, the term of the option will not be longer than seven to ten years from the
date of grant under the 2017 Plan, or five years from the date of grant under the 2015 Plan and the 2016 Plan.
Drag-Along Events. Except as provided in the applicable award agreement or sub-plan, in the event of a drag-along event
specified under the stock incentive plans, the grantees who hold any Class A ordinary shares upon exercise of the award shall sell,
transfer, convey or assign all of their shares pursuant to, and so as to give effect to, the drag-along event, and each of such grantees shall
grant to the board of directors or a person authorized by the board of directors, a power of attorney to transfer, sell, convey and assign the
grantee’s shares and to do and carry out all acts and to execute all documents that are necessary or advisable to complete the drag-along
event.
Initial Public Offering. In the case of the initial public offering of our ADSs in September 2018, the grantees could enter into
any agreements with any underwriter, coordinator, bankers or sponsor elected by us for the purpose of the offering, and each of such
grantees would grant to the board of directors or a person authorized by the board of directors, a power of attorney to enter into any
agreements with any underwriter, coordinator, bankers or sponsor elected by us and to do and carry out all the acts and to execute all the
documents that are necessary or advisable to complete the offering.
Transfer Restrictions. Awards shall be transferable, subject to applicable laws, (i) by will and by the laws of descent and
distribution and (ii) during the lifetime of the grantee, to the extent and in the manner authorized by the plan administrator.
Notwithstanding the foregoing, the grantee may designate one or more beneficiaries of the grantee’s award in the event of the grantee’s
death on a beneficiary designation form provided by the plan administrator.
Termination and Amendment of the Plan. Unless terminated earlier or extended before expiration, each of our stock incentive
plans has a term of ten years. The board of directors has the authority to terminate, amend or modify the stock incentive plans; provided,
however, that no such amendment shall be made without the approval of our shareholders to the extent such approval is required by
applicable laws or provisions of the stock incentive plans. However, without the prior written consent of the grantee, no such action may
adversely affect any outstanding award previously granted pursuant to the stock incentive plan.
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The following table summarizes, as of December 31, 2019, the awards granted under the 2015 Plan, the 2016 Plan and the 2017
Plan to several of our executive officers, excluding awards that were forfeited or cancelled after the relevant grant dates.
Name
Bin Li
Lihong Qin
Xin Zhou
Denny Ting Bun Lee
Hai Wu
Feng Shen
Wei Feng
Ganesh V Iyer
Total
Class A Ordinary
Shares Underlying
Options and
Restricted Share
Units
15,000,000
*
*
*
*
*
*
*
24,040,597
Exercise Price
(US$/Share**)
Date of Grant
2.55 March 1, 2018
2.55
2.05-2.55
February 1, 2018
February 28, 2018
February 1, 2018
February 28, 2018
September 25, 2019
N/A September 12, 2018
3.61 May 29, 2019
1.80-2.55 December 31, 2017
Date of Expiration
February 28, 2028
January 31, 2028
February 27, 2028
January 31, 2028
February 27, 2028
September 24, 2026
May 28, 2026
December 30, 2027
January 31, 2028
September 24, 2026
1.8 November 18, 2019 November 17, 2026
February 1, 2018
September 25, 2019
0.27-2.55 May 3, 2016
March 1, 2018
September 25, 2019
May 2, 2026
February 29, 2028
September 24, 2026
* Less than one percent of our total outstanding shares.
** Applicable to options only.
As of December 31, 2019, non-executive officers and other grantees as a group held awards of options to purchase 64,520,670
Class A ordinary shares of our company. The exercise prices of the options range from US$0.1 to US$7.09 per share.
2018 Share Incentive Plan
In August 2018, our board of directors approved the 2018 Share Incentive Plan to attract and retain the best available personnel,
provide additional incentives to employees, directors and consultants and promote the success of our business. Under the 2018 Share
Incentive Plan, or the 2018 Plan, the maximum number of shares available for issuance shall be 23,000,000 ordinary shares, which
should automatically increase each year by the number of shares representing 1.5% of the then total issued and outstanding share capital
of our company as of the end of each preceding year. The 2018 Plan became effective as of January 1, 2019 with a term of five years.
As of December 31, 2019, share incentive award to purchase 14,986,295 ordinary shares has been granted and outstanding
under the 2018 Plan.
The following paragraphs describe the principal terms of the 2018 Plan.
Types of Awards. The 2018 Plan permits the awards of options, restricted shares or any other type of awards that the committee
grants.
Plan Administration. Our board of directors or a committee of one or more members of our board of directors will administer
the 2018 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and
number of awards to be granted to each participant, and the terms and conditions of each award grant.
Award Agreement. Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth terms, conditions
and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s
employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
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Eligibility. We may grant awards to the employees, directors and consultants of our company. However, we may grant incentive
share options only to our employees, parent and subsidiaries.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award
agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award
agreement. The vested portion of an option will expire if not exercised prior to the time as the plan administrator determines at the time
of its grant. However, the maximum exercisable term is five years from the date of a grant.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent
and distribution, except as otherwise provided by the plan administrator.
Termination and amendment of the 2018 Plan. Unless terminated earlier, the 2018 Plan has a term of five years. Our board of
directors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards
previously granted unless agreed by the recipient.
C. Board Practices
The board of directors of our company, or the board, consists of five directors. A director is not required to hold any shares in
our company by way of qualification. A director may vote with respect to any contract, proposed contract or arrangement in which he is
interested provided (a) such director has declared the nature of his interest at the earliest meeting of the board at which it is practicable
for him to do so, either specifically or by way of a general notice and (b) if such contract or arrangement is a transaction with a related
party, such transaction has been approved by the audit committee. The directors may exercise all the powers of our company to borrow
money, mortgage our company’s undertaking, property and uncalled capital, and issue debentures or other securities whenever money is
borrowed or as security for any obligation of our company or of any third party. None of our non-executive directors has a service
contract with us that provides for benefits upon termination of service.
Committees of the Board of Directors
We have established three committees under the board: an audit committee, a compensation committee and a nominating and
corporate governance committee. We will adopt a charter for each of the three committees. Each committee’s members and functions are
described below.
Audit Committee. Our audit committee consists of Denny Ting Bun Lee and Hai Wu. Denny Ting Bun Lee is the chairman of
our audit committee. We have determined that Denny Ting Bun Lee and Hai Wu satisfy the “independence” requirements of
Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3 under the Exchange Act. We have
determined that Denny Ting Bun Lee qualifies as an “audit committee financial expert.” The audit committee oversees our accounting
and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for,
among other things:
● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by
the independent auditors;
● reviewing with the independent auditors any audit problems or difficulties and management’s response;
● discussing the annual audited financial statements with management and the independent auditors;
● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps
taken to monitor and control major financial risk exposures;
● reviewing and approving all proposed related party transactions;
● meeting separately and periodically with management and the independent auditors; and
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● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness
of our procedures to ensure proper compliance.
Compensation Committee. Our compensation committee consists of Hai Wu, Denny Ting Bun Lee and Bin Li. Hai Wu is the
chairman of our compensation committee. We have determined that Hai Wu satisfies the “independence” requirements of Section 303A
of the Corporate Governance Rules of the New York Stock Exchange. The compensation committee assists the board in reviewing and
approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief
executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation
committee is responsible for, among other things:
● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer
and other executive officers;
● reviewing and recommending to the board for determination with respect to the compensation of our non-employee
directors;
● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
● selecting any compensation consultant, legal counsel or other adviser only after taking into consideration all factors
relevant to that person’s independence from management.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Bin Li,
Hai Wu and Denny Ting Bun Lee. Bin Li is the chairperson of our nominating and corporate governance committee. Hai Wu and Denny
Ting Bun Lee satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock
Exchange. The nominating and corporate governance committee assists the board in selecting individuals qualified to become our
directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is
responsible for, among other things:
● selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
● reviewing annually with the board the current composition of the board with regards to characteristics such as
independence, knowledge, skills, experience and diversity;
● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the
committees of the board; and
● advising the board periodically with regard to significant developments in the law and practice of corporate governance as
well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of
corporate governance and on any remedial action to be taken.
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Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty to act honestly, and a duty to act
in good faith. The directors must act bona fide in what they consider to be in our best interests. Our directors must also exercise their
powers only for a proper purpose. Our directors also have a duty to act with skills they actually possess and exercise the care and
diligence that would be displayed by a reasonable director in comparable circumstances. It was previously considered that a director need
not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge
and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill
and care and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must
ensure compliance with our memorandum and articles of association, as amended and restated from time to time, and the class rights
vested thereunder in the holders of the shares. Our directors owe their fiduciary duties to our company and not to our company’s
individual shareholders, and it is our company which has the right to seek damages if a duty owed by our directors is breached. In certain
limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is
breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The
functions and powers of our board of directors include, among others:
● convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such
meetings;
● declaring dividends and other distributions;
● appointing officers and determining the term of office of the officers;
● exercising the borrowing powers of our company and mortgaging the property of our company; and
● approving the transfer of shares in our company, including the registration of such shares in our share register.
Terms of Directors and Officers
Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office
(unless there is any written agreement between our Company and such director) and hold office until such time as they are removed from
office by ordinary resolution of the shareholders or by the board pursuant to our eleventh amended and restated memorandum and
articles of association. The office of a director shall be vacated if, among other things, the director (i) becomes bankrupt or makes any
arrangement or composition with his creditors; or (ii) is found to be or becomes of unsound mind.
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D. Employees
As of December 31, 2019, we had 7,442 full-time employees. The following table sets forth the numbers of our employees
categorized by function and region as of December 31, 2019.
As of December 31, 2019
China:
User experience (sales and marketing and service)
Product and software development
Manufacturing
General administration
Northern California:
Product and software development
General administration
Munich:
Product and software development
General administration
United Kingdom:
Product and software development
General administration
Total number of employees
3,632
2,176
520
571
357
20
101
27
34
4
7,442
Our employees have set up a labor union in China according to the related Chinese labor law. However, no collective bargaining
agreement has been put in place. To date we have not experienced any labor strike, and we consider our relationship with our employees
to be good.
E. Share Ownership
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary
shares as of March 31, 2020 with respect to:
● each of our directors and executive officers; and
● each person known to us to own beneficially more than 5% of our ordinary shares.
The calculations in the table below are based on 1,112,458,304 ordinary shares outstanding as of March 31, 2020, comprising of
831,928,082 Class A ordinary shares, 132,030,222 Class B ordinary shares and 148,500,000 Class C ordinary shares.
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Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to
acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security.
These shares, however, are not included in the computation of the percentage ownership of any other person.
Class A
ordinary
shares
beneficially
owned
Class B
ordinary
shares
beneficially
owned
Class C
ordinary
shares
beneficially
owned
Total
ordinary
shares
beneficially
owned
% of
beneficial
ownership
% of
aggregate
voting
power†
Directors and Executive Officers**:
Bin Li(1)
Lihong Qin(2)
Feng Shen
Xin Zhou
Wei Feng
Ganesh V. Iyer(3)
Hai Wu(4)
Denny Ting Bun Lee(5)
James Gordon Mitchell(6)
All Directors and Executive Officers as a Group
Principal Shareholders:
Founder vehicles(7)
Tencent entities(8)
Baillie Gifford & Co(9)
Temasek Holdings (Private) Limited(10)
6,189,253
10,538,699
*
*
—
*
—
*
—
19,621,947
189,253
8,544,826
101,370,431
13,909,836
* Less than 1% of our total outstanding shares.
154,689,253
— 148,500,000
— 10,538,699
—
*
—
—
*
—
—
—
—
—
*
—
—
—
—
—
*
—
—
—
—
—
168,121,947
— 148,500,000
132,030,222
—
—
— 148,500,000
148,689,253
— 140,575,048
— 101,370,431
— 13,909,836
13.8
*
*
*
—
*
—
*
—
15.0
13.4
12.6
9.1
1.3
47.0
*
*
*
—
*
—
*
—
46.6
46.8
21.1
4.0
0.5
** Except where otherwise disclosed in the footnotes below, the business address of all the directors and executive officers is Building
16, 20 and 22, No. 56 AnTuo Road, Anting Town, Jiading District, Shanghai 201804, People’s Republic of China.
† For each person and group included in this column, percentage of voting power is calculated by dividing the voting power
beneficially owned by such person or group by the voting power of all of our Class A, Class B and Class C ordinary shares as a
single class. Each holder of our Class A ordinary shares is entitled to one vote per share, each holder of our Class B ordinary shares is
entitled to four votes per share and each holder of our Class C ordinary shares is entitled to eight votes per share on all matters
submitted to them for a vote. Our Class A ordinary shares, Class B ordinary shares and Class C ordinary shares vote together as a
single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law.
(1) Represents (i) 6,000,000 Class A ordinary shares issuable to Mr. Bin Li upon exercise of options within 60 days of the date of this
annual report, (ii) 72,234,928 Class C ordinary shares held by Originalwish Limited, a British Virgin Islands company wholly owned
by Mr. Bin Li, (iii) 26,454,325 Class C ordinary shares held by mobike Global Ltd., a British Virgin Islands company wholly owned
by Mr. Bin Li, and (iv) 189,253 Class A ordinary shares and 49,810,747 Class C ordinary shares held by NIO Users Limited, a
holding company controlled by NIO Users Trust, which is under the control of Mr. Bin Li.
(2) Represents (i) 38,700 Class A ordinary shares issuable to Mr. Lihong Qin upon exercise of options within 60 days of the date of this
annual report and (ii) 10,499,999 Class A ordinary shares held by DX Mix Limited, a holding company controlled by DX One Trust,
which is under the control of Mr. Lihong Qin. The business address of Mr. Lihong Qin is Room 1401, No. 82, 1980 Nong, Luoxiu
Road, Minhang District, Shanghai, People’s Republic of China.
(3) The business address of Mr. Iyer is 3200 North First Street, San Jose, CA 95134.
(4) The business address of Mr. Wu is No. 53, Gaoyou Road, Xuhui District, Shanghai, People’s Republic of China.
(5) The business address of Mr. Lee is No. 4 Dianthus Road, Yau Yat Chuen, Kowloon, Hong Kong.
(6) The business address of Mr. Mitchell is Level 29, Three Pacific Place, 1 Queen's Road East, Wanchai, Hong Kong.
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(7) Represents (i) 72,234,928 Class C ordinary shares held by Originalwish Limited, (ii) 26,454,325 Class C ordinary shares held by
mobike Global Ltd., and (iii) 189,253 Class A ordinary shares and 49,810,747 Class C ordinary shares held by NIO Users Limited,
which are collectively referred to in offering memorandum as Founder Vehicles. Each of Originalwish Limited and mobike
Global Ltd. is a company incorporated in the British Virgin Islands and beneficially owned by Mr. Bin Li. NIO Users Limited is a
holding company controlled by NIO Users Trust, which is under the control of Mr. Bin Li. The registered address of Originalwish
Limited and mobike Global Ltd. is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
The registered address of NIO Users Limited is Maples Corporate Services (BVI) Limited, Kingston Chambers, PO Box 173, Road
Town, Tortola, British Virgin Islands.
(8) Based on the statement on Schedule 13G/A filed on February 10, 2020 jointly by (i) Mount Putuo Investment Limited, (ii) Image
Frame Investment (HK) Limited and (iii) Tencent Holdings Limited, pursuant to which Mount Putuo Investment Limited holds
40,905,125 Class B ordinary shares, Image Frame Investment (HK) Limited holds 87,388,807 Class B ordinary shares, TPP Follow-
on I Holding D Limited, an entity controlled by Tencent Holdings Limited, holds 3,736,290 Class B ordinary shares, and Huang
River Investment Limited, a wholly-owned subsidiary of Tencent Holdings Limited, holds 5,390,749 ADSs representing 5,390,749
Class A ordinary shares, and 3,154,077 ADSs representing 3,154,077 Class A ordinary shares, issuable upon the full conversion of
the US$30 million 2024 Notes held by Huang River Investment Limited based on a conversion rate of 105.1359 ADSs per
US$1,000 principal amount of the 2024 Notes. Mount Putuo Investment Limited, Image Frame Investment (HK) Limited, TPP
Follow-on I Holding D Limited and Huang River Investment Limited are collectively referred to in this annual report as the Tencent
entities. Mount Putuo Investment Limited is a company incorporated in the British Virgin Islands, Image Frame Investment (HK)
Limited is a company incorporated in Hong Kong, and TPP Follow-on I Holding D Limited is a company incorporated in the
Cayman Islands. The sole member of Image Frame Investment (HK) Limited is Tencent Holdings Limited, a company listed on the
Main Board of The Stock Exchange of Hong Kong Limited. The registered address of Mount Putuo Investment Limited is P.O. Box
957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The registered address of Image Frame Investment
(HK) Limited is 29/F Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong. The registered address of TPP Follow-on
I Holding D Limited is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
(9) Based on the statement on Schedule 13G/A filed on January 17, 2020 by Baillie Gifford & Co., Baillie Gifford & Co. and/or one or
more of its investment adviser subsidiaries own 101,370,431 ADSs representing 101,370,431 Class A ordinary shares. The
registered address of Baillie Gifford & Co. is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, UK.
(10) Based on the statement on Schedule 13G filed on January 14, 2020 jointly by (i) Temasek Holdings (Private) Limited, or Temasek
Holdings, (ii) Tembusu Capital Pte. Ltd., or Tembusu, (iii) Thomson Capital Pte. Ltd., or Thomson, and (iv) Anderson Investments
Pte. Ltd., or Anderson, Anderson holds 13,909,836 Class A ordinary shares in the form of ADS. Anderson is wholly-owned by
Thomson, which in turn is wholly-owned by Tembusu. Tembusu is wholly-owned by Temasek Holdings.
To our knowledge, as of the date of this annual report, 785,260,606 of our Class A ordinary shares were held by one record
holder in the United States, which was Deutsche Bank Trust Company Americas, the depositary of our ADS program. The number of
beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares
in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
Our ordinary shares are divided into Class A ordinary shares, Class B ordinary shares and Class C ordinary shares. Holders of
Class A ordinary shares are entitled to one vote per share, holders of Class B ordinary shares are entitled to four votes per share, and
holders of Class C ordinary shares are entitled to eight votes per share. We issued Class A ordinary shares represented by our ADSs in
our initial public offering in September 2018. Holders of our Class B ordinary shares and Class C ordinary shares may choose to convert
their respective Class B ordinary shares and Class C ordinary shares into the same number of Class A ordinary shares at any time.
Class A ordinary shares are not convertible into Class B ordinary shares or Class C ordinary shares under any circumstance. See
“Item 10. Additional Information—B. Memorandum and Articles of Association” for a more detailed description of our Class A ordinary
shares and Class B ordinary shares.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
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B. Related Party Transactions
Contractual Arrangements with Our VIEs and Their Respective Shareholders
See “Item 4. Information on the Company—C. Organizational Structure.”
Shareholders Agreement and Registration Rights
We entered into a shareholders agreement and a right of first refusal and co-sale agreement on November 10, 2017 with our
shareholders, which consist of holders of ordinary shares and preferred shares.
The shareholders agreement and right of first refusal and co-sale agreement (i) provide for certain special rights, including right
of first refusal, co-sale rights and preemptive rights and (ii) contain provisions governing board of directors and other corporate
governance matters. Those special rights, as well as the corporate governance provisions, automatically terminated upon the closing of
the initial public offering of our ADSs on September 12, 2018.
Pursuant to our shareholders agreement dated November 10, 2017, we have granted certain registration rights to our
shareholders. Set forth below is a description of the registration rights granted under the agreement.
Demand Registration Rights. Holders holding 10% or more of the voting power of the then outstanding registrable securities
held by all holders are entitled to request in writing that we effect a registration statement for any or all of the registrable securities of the
initiating holders. We have the right to defer filing of a registration statement for a period of not more than 90 days if our board of
directors determines in good faith judgment that filing of a registration statement in the near future will be materially detrimental to us or
our shareholders, but we cannot exercise the deferral right on any one occasion or more than once during any twelve-month period and
cannot register any other securities during such period. We are not obligated to effect more than two demand registrations. Further, if the
registrable securities are offered by means of an underwritten offering, and the managing underwriter advises us that marketing factors
require a limitation of the number of securities to be underwritten, the underwriters may decide to exclude up to 75% of the registrable
securities requested to be registered but only after first excluding all other equity securities from the registration and underwritten
offering, provided that the number of shares to be included in the registration on behalf of the non-excluded holders is allocated among
all holders in proportion to the respective amounts of registrable securities requested by such holders to be included.
Registration on Form F-3 or Form S-3. Any holder is entitled to request us to file a registration statement on Form F-3 or
Form S-3 if we qualify for registration on Form F-3 or Form S-3. The holders are entitled to an unlimited number of registrations on
Form F-3 or Form S-3 so long as such registration offerings are in excess of US$5,000,000. We have the right to defer filing of a
registration statement for a period of not more than 60 days if our board of directors determines in good faith judgment that filing of a
registration statement in the near future will be materially detrimental to us or our shareholders, but we cannot exercise the deferral right
on any one occasion or more than once during any twelve-month period and cannot register any other securities during such period.
Piggyback Registration Rights. If we propose to register for our own account any of our equity securities, or for the account of
any holder, other than current shareholders, of such equity securities, in connection with the public offering, we shall offer holders of our
registrable securities an opportunity to be included in such registration. If the underwriters advise in writing that market factors require a
limitation of the number of registrable securities to be underwritten, the underwriters may exclude up to 75% of the registrable securities
requested to be registered but only after first excluding all other equity securities (except for securities sold for the account of our
company) from the registration and underwriting, provided that the number of shares to be included in the registration on behalf of the
non-excluded holders is allocated among all holders in proportion to the respective amounts of registrable securities requested by such
holders to be included.
Expenses of Registration. We will bear all registration expenses, other than the underwriting discounts and selling commissions
applicable to the sale of registrable securities, incurred in connection with registrations, filings or qualification pursuant to the
shareholders agreement.
Termination of Obligations. We have no obligation to effect any demand, piggyback, Form F-3 or Form S-3 registration upon
the earlier of (i) the tenth anniversary from the date of closing of a Qualified IPO as defined in the shareholders agreement, and (ii) with
respect to any holder, the date on which such holder may sell without registration, all of such holder’s registrable securities under
Rule 144 of the Securities Act in any 90-day period.
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Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—
Employment Agreements and Indemnification Agreements.”
Share Option Grants
See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Stock
Incentive Plans.”
Other Transactions with Related Parties
In September 2019, we issued US$200 million principal amount of convertible notes to Huang River Investment Limited, to an
affiliate of Tencent Holdings Limited, and Mr. Bin Li, our chairman of the board of directors and chief executive officer. Huang River
Investment Limited and Mr. Bin Li each subscribed for US$100 million principal amount of the convertible notes, each in two equally
split tranches. The convertible notes issued in the first tranche will mature in 360 days, bear no interest, and require us to pay a premium
at 2% of the principal amount at maturity. The convertible notes issued in the second tranche will mature in three years, bear no interest,
and require us to pay a premium at 6% of the principal amount at maturity. The 360-day convertible notes will be convertible into our
Class A ordinary shares (or ADSs) at a conversion price of US$2.98 per ADS at the holder's option from the 15th day immediately prior
to maturity, and the three-year convertible notes will be convertible into our Class A ordinary shares (or ADSs) at a conversion price of
US$3.12 per ADS at the holder's option from the first anniversary of the issuance date. The holders of the three-year convertible notes
will have the right to require us to repurchase for cash all of the convertible notes or any portion thereof on February 1, 2022.
In February 2019, we issued $750 million aggregate principal amount of 4.50% convertible senior notes due 2024, or the 2024
Notes. The 2024 Notes are unsecured debt and are not redeemable by us prior to the maturity date except for certain changes in tax law.
The holders of the 2024 Notes may convert their notes to a number of our ADSs at their option at any time prior to the close of business
on the second business day immediately preceding the maturity date pursuant to the 2024 Notes indenture. The 2024 Notes that are
converted in connection with a make-whole fundamental change (as defined in the 2024 Notes Indenture) may be entitled to an increase
in the conversion rate for such 2024 Notes. Huang River Investment Limited subscribed for US$30 million aggregate principal amount
of the 2024 Notes. As of December 2019, the amount of interest payable to Huang River Investment Limited for the 2024 Notes was
US$0.56 million.
In 2019, we borrowed RMB25.8 million principal amount of loan from Beijing Changxing Information Technology Co., Ltd., a
company significantly influenced by one of our principal shareholders, at an interest rate of 15%. As of December 31, 2019, the loan
remained outstanding.
In 2019, we received IT support services from Beijing Bit EP Information Technology Co., Ltd. and Beijing Yiche Information
Science and Technology Co., Ltd., both are companies significantly influenced by Bin Li, and incurred expenses of IT support services
of RMB4.1 million.
In 2018, we granted two interest free loans to NIO Capital, an entity affiliated with our founder Bin Li, with the principal
amount of US$5.0 million each. The loans mature in six months. One of the loans was converted into ordinary shares of a subsidiary of
NIO Capital upon maturity at our option, and we disposed of such investment in 2019. The other loan was fully repaid before the initial
public offering of our ADSs.
In 2017, 2018 and 2019, we received marketing and advertising services from Beijing Xinyi Hudong Guanggao Co., Ltd.,
Beijing Chehui Hudong Guanggao Co., Ltd., Bite Shijie (Beijing) Keji Co., Ltd., or Bite, Beijing Yiche Interactive Advertising Co., Ltd.
Shanghai Branch, Shanghai Yiju Information Technology Co., Ltd., Tianjin Boyou Information Technology Co., Ltd. and Beijing Bit EP
Information Technology Co., Ltd. In 2017, 2018 and 2019, we incurred expenses of marketing and advertising services RMB15.6
million, RMB38.1 million and RMB75.7 million, respectively. Beijing Chehui Hudong Guanggao Co., Ltd., Beijing Xinyi Hudong
Guanggao Co., Ltd., Bite, Beijing Yiche Interactive Advertising Co., Ltd Shanghai Branch, Shanghai Yiju Information Technology Co.,
Ltd., Tianjin Boyou Information Technology Co., Ltd. and Beijing Bit EP Information Technology Co., Ltd. are controlled by our
principal shareholders.
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In 2017, 2018 and 2019, we provided property management, administrative support, design and research and development
services to our affiliates and companies controlled by our principal shareholders, including Hubei Changjiang Nextev New Energy
Investment Management Co., Ltd., Beijing CHJ Information Technology Co., Ltd., Hubei Changjiang Nextev New Energy Industry
Development Capital Partnership (Limited Partnership), Jiangsu Xindian Automotive Co., Ltd., Shanghai NIO Hongling Investment
Management Co., Ltd., Shanghai Weishang Business Consulting Co., Ltd., Nanjing Weibang Transmission Technology Co., Ltd. In
2017, 2018 and 2019, we received total service income of RMB21.5 million, RMB3.6 million and RMB4.2 million, respectively.
In 2017, 2018 and 2019, we paid a total of RMB18.3 million, RMB132.2 million and RMB132.5 million, respectively, for the
cost of manufacturing consignment to Suzhou Zenlead XPT New Energy Technologies Co., Ltd., or Suzhou Zenlead. Suzhou Zenlead is
an affiliate of ours.
In 2017, we paid a total of RMB3.0 million to Bite for the purchase of property and equipment. In 2018, we paid a total of
RMB11.1 million to Kunshan Siwopu Intelligent Equipment Co., Ltd, or Kushan Siwopu, an affiliate of ours, for purchase of property
and equipment. In 2019, we paid a total of RMB42.2 million to Kunshan Siwopu Intelligent Equipment Co., Ltd. and Nanjing Weibang
Transmission Technology Co., Ltd. for purchase of property and equipment.
In 2017, we granted interest-free loans to Ningbo Meishan Bonded Port Area Weilan Investment Co., Ltd., a company
controlled by our principal shareholders. As of December 31, 2019, the loans remained outstanding.
In 2018, we paid a total of RMB8.1 million on behalf of Baidu Capital L.P., a shareholder of our company, to a third party.
In 2018, we made a payment of RMB2.8 million to a supplier on behalf of Nanjing Weibang Transmission Technology
Co., Ltd., one of our affiliates. As of December 31, 2019, the amount receivable remained outstanding.
In 2018 and 2019, we received research and development and maintenance services from Kunshan Siwopu and Suzhou Zenlead,
and paid a total of RMB17.2 million and RMB 0.3 million, respectively.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
From time to time, we may be involved in legal proceedings in the ordinary course of our business. Between March and July
2019, several putative securities class action lawsuits were filed against us, certain of our directors and officers, our underwriters in the
IPO and our process agent. Some of these actions have been withdrawn, transferred or consolidated. Currently, three securities class
actions remain pending in the U.S. District Court for the Eastern District of New York (E.D.N.Y.), Supreme Court of the State of New
York, New York County (N.Y. County), and Supreme Court of the State of New York, County of Kings (Kings County) respectively. In
the E.D.N.Y. action, In re NIO, Inc. Securities Litigation, 1:19-cv-01424, the Court issued an order to appoint the lead plaintiff on March
3, 2020. The parties have entered into a stipulation whereby the plaintiffs will file a consolidated amended complaint on May 18, 2020,
to which we and other defendants will have 60 days to respond. In the New York county action, In re NIO Inc. Securities Litigation,
Index No. 653422/2019, the plaintiffs filed a consolidated amended complaint on October 25, 2019. On December 13, 2019, the Court
granted the defendants’ motion to stay the case in favor of the federal E.D.N.Y. action. In the Kings County action, Sumit Agarwal v. NIO
Inc. et al., Index No. 505647/2019, the complaint was filed on March 14, 2019. The judge has yet to be assigned and there has not been
any major development. The plaintiffs in these cases allege, in sum and substance, that our statements in the Registration Statement
and/or other public statements were false or misleading and in violation of the U.S. federal securities laws. These actions remain in their
preliminary stages. We are currently unable to estimate the potential loss, if any, associated with the resolution of such lawsuits. We
believe these cases are without merit and we are defending the actions vigorously.
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For risks and uncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—
Risks Related to Our Business—We and certain of our directors and officers have been named as defendants in several shareholder class
action lawsuits, which could have a material adverse impact on our business, financial condition, results of operation, cash flows and
reputation.”
Dividend Policy
The payment of dividends is at the discretion of our board of directors, subject to our eleventh amended and restated
memorandum and articles of association. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend
may exceed the amount recommended by our board of directors. In either case, all dividends are subject to certain restrictions under
Cayman Islands law, namely that our company may only pay dividends out of profits or the share premium account, and provided that in
no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary
course of business. Even if we decide to pay dividends, the form, frequency and amount will depend upon our future operations and
earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of
directors may deem relevant.
We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend
to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends paid by our subsidiaries in China for
our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC
subsidiaries to pay dividends to us. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We
may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we
may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on
our ability to conduct our business.”
If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares
underlying our ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to
our ADS holders in proportion to the ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit
agreements, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S.
dollars.
B. Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our
audited consolidated financial statements included in this annual report.
ITEM 9. THE OFFER AND LISTING
A. Offering and Listing Details
Our ADSs, each representing one Class A ordinary share, have been listed on the NYSE since September 12, 2018 under the
symbol “NIO.”
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs, each representing one Class A ordinary share, have been listed on the NYSE since September 12, 2018 under the
symbol “NIO.”
D. Selling Shareholders
Not applicable.
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E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We are an exempted company incorporated under the laws of the Cayman Islands and our affairs are governed by our current
eleventh amended and restated memorandum and articles of association, the Companies Law (2020 Revision) of the Cayman Islands,
which we refer to as the Companies Law below, and the common law of the Cayman Islands.
The following are summaries of material provisions of our eleventh amended and restated memorandum and articles of
association which became effective upon the completion of the initial public offering of our ADSs in September 2018, insofar as they
relate to the material terms of our ordinary shares.
Objects of Our Company
Under our eleventh amended and restated memorandum and articles of association, the objects of our company are unrestricted
and we have the full power and authority to carry out any object not prohibited by the law of the Cayman Islands.
Ordinary Shares
Our authorized share capital is US$1,000,000 divided into 4,000,000,000 shares comprising of (i) 2,500,000,000 Class A
ordinary shares of a par value of US$0.00025 each, (ii) 132,030,222 Class B ordinary shares of a par value of US$0.00025 each
(iii) 148,500,000 Class C ordinary shares of a par value of US$0.00025 each and (iv) 1,219,469,778 shares of a par value of US$0.00025
each of such class or classes (however designated) as our board of directors may determine in accordance with our eleventh amended and
restated memorandum and articles of association. All of our issued and outstanding ordinary shares are fully paid and non-assessable.
Our ordinary shares are issued in registered form, and are issued when registered in our register of members. Our shareholders who are
non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Under our eleventh amended and restated
memorandum and articles of association, our company may not issue bearer shares.
Class of ordinary shares
Holders of Class A ordinary shares, Class B ordinary shares and Class C ordinary shares shall at all times vote together as one
class on all resolutions submitted to a vote by the holders of ordinary shares. Each Class A ordinary share shall entitle the holder thereof
to one (1) vote on all matters subject to vote at general meetings of our company, each Class B ordinary share shall entitle the holder
thereof to four (4) votes on all matters subject to vote at general meetings of our company, and each Class C ordinary share shall entitle
the holder thereof to eight (8) votes on all matters subject to vote at general meetings of our company.
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Conversion
Each Class B ordinary share is convertible into one (1) Class A ordinary share at any time at the option of the holder thereof.
Each Class C ordinary share is convertible into one (1) Class A ordinary share at any time at the option of the holder thereof. In no event
shall Class A ordinary shares be convertible into Class B ordinary shares or Class C ordinary shares. Upon any sale, transfer, assignment
or disposition of any Class B ordinary share or Class C ordinary share by a shareholder to any person who is not an affiliate of such
shareholder, or upon a change of ultimate beneficial ownership of any Class B ordinary share or Class C ordinary share to any person
who is not an affiliate of the registered shareholder of such share, each such Class B ordinary share and Class C ordinary share, as
applicable, shall be automatically and immediately converted into one (1) Class A ordinary share.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors, subject to our
eleventh amended and restated memorandum articles of association. In addition, our shareholders may by ordinary resolution declare a
dividend, but no dividend may exceed the amount recommended by our directors. In either case, under the laws of the Cayman Islands,
our company may pay a dividend out of either profits or share premium account, provided that in no circumstances may a dividend be
paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights
Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. Each Class A ordinary share shall entitle the
holder thereof to one (1) vote on all matters subject to vote at general meetings of our company, each Class B ordinary share shall entitle
the holder thereof to four (4) votes on all matters subject to vote at general meetings of our company, and each Class C ordinary share
shall entitle the holder thereof to eight (8) votes on all matters subject to vote at general meetings of our company. A poll may be
demanded by the chairman of such meeting or any one or more shareholders present in person or by proxy at the meeting.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the
votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds
of the votes cast attaching to the outstanding ordinary shares at a meeting. A special resolution will be required for important matters
such as a change of name or making changes to our eleventh amended and restated memorandum and articles of association. Holders of
our ordinary shares may effect certain changes by ordinary resolution, including increasing the amount of our authorized share capital,
consolidating all or any of our share capital into shares of larger amount than our existing shares, sub-dividing our shares or any of them
into shares of an amount smaller than that fixed by our eleventh amended and restated memorandum and articles of association, and
cancelling any unissued shares. Both ordinary resolution and special resolution may also be passed by a unanimous written resolution
signed by all the shareholders of our company, as permitted by the Companies Law and our eleventh amended and restated memorandum
and articles of association.
Appointment and Removal of Directors
Our board of directors may, by the affirmative vote of a simple majority of the directors present and voting at a board meeting,
appoint any person as a director, to fill a casual vacancy on the board or as an addition to the existing board. Directors may be removed
by ordinary resolution of our shareholders.
General Meetings of Shareholders
As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders’ annual general
meetings. Our eleventh amended and restated memorandum and articles of association provide that we may (but are not obliged to) in
each year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling
it, and the annual general meeting shall be held at such time and place as may be determined by our directors.
Shareholders’ general meetings may be convened by the chairman of board of directors or a majority of our board of directors.
Advance notice of at least ten calendar days is required for the convening of our annual general shareholders’ meeting (if any) and any
other general meeting of our shareholders. A quorum required for any general meeting of shareholders consists of at least one
shareholder present or by proxy, representing not less than one-third of all votes attaching to all of our shares in issue and entitled to vote.
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The Companies Law provides shareholders with only limited rights to requisition a general meeting, and does not provide
shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles
of association. Our eleventh amended and restated memorandum and articles of association provide that upon the requisition of
shareholders representing in aggregate not less than one-third of the votes attaching to the outstanding shares of our company entitled to
vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at
such meeting. However, our eleventh amended and restated memorandum and articles of association do not provide our shareholders
with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
Transfer of Ordinary Shares
Subject to the restrictions in our eleventh amended and restated memorandum and articles of association set out below, any of
our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any
other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully
paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
● the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and
such other evidence as our board of directors may reasonably require to show the right of the transferor to make the
transfer;
● the instrument of transfer is in respect of only one class of ordinary shares;
● the instrument of transfer is properly stamped, if required;
● in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does
not exceed four; and
● a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our
directors may from time to time require is paid to us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was
lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and
the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that
the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board of directors may
determine.
Liquidation
On the winding-up of our company, if the assets available for distribution among our shareholders shall be more than sufficient
to repay the whole of the share capital at the commencement of the winding-up, the surplus shall be distributed amongst our shareholders
in proportion to the par value of the shares held by them at the commencement of the winding-up, subject to a deduction from those
shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets
available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by
our shareholders in proportion to the par value of the shares held by them.
Calls on Shares and Forfeiture of Shares
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and
remain unpaid are subject to forfeiture.
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Redemption, Repurchase and Surrender of Shares
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these
shares, on such terms and in such manner as may be determined by our board of directors or by special resolution of our shareholders.
Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors
or by an ordinary resolution of our shareholders. Under the Companies Law, the redemption or repurchase of any share may be paid out
of our company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of
capital (including share premium account and capital redemption reserve) if our company can, immediately following such payment, pay
its debts as they fall due in the ordinary course of business. In addition, under the Companies Law no such share may be redeemed or
repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding or (c) if
the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.
Variations of Rights of Shares
If at any time, our share capital is divided into different classes of shares, the rights attached to any class of shares (unless
otherwise provided by the terms of issue of the shares of that class), whether or not our company is being wound-up, may be varied with
the consent in writing of holders of not less than two-thirds of the issued shares of that class or with the sanction of a special resolution
passed at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class
issued shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially
adversely varied by, inter alia, the creation, allotment or issue of further shares ranking pari passu with such existing class of shares.
Issuance of Additional Shares
Our eleventh amended and restated memorandum of association authorizes our board of directors to issue additional ordinary
shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our eleventh amended and restated memorandum of association also authorizes our board of directors to establish from time to
time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that
series, including:
● the designation of the series;
● the number of shares of the series;
● the dividend rights, dividend rates, conversion rights and voting rights; and
● the rights and terms of redemption and liquidation preferences.
Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued.
Issuance of these shares may dilute the voting power of holders of ordinary shares.
Inspection of Books and Records
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of
shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10
Additional Information— H. Documents on Display.”
Changes in Capital
Our shareholders may from time to time by ordinary resolution:
● increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall
prescribe;
● consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
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● sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the
proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in
case of the share from which the reduced share is derived; or
● cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person
and diminish the amount of our share capital by the amount of the shares so cancelled.
Our shareholders may, by special resolution and subject to confirmation by the Grand Court of the Cayman Islands on an
application by our company for an order confirming such reduction, reduce our share capital and any capital redemption reserve in any
manner authorized by law.
Anti-Takeover Provisions
Some provisions of our eleventh amended and restated memorandum and articles of association may discourage, delay or
prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:
● authorize our board of directors to issue preference shares in one or more series and to designate the price, rights,
preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders;
and
● limit the ability of shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our eleventh
amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the
best interests of our company.
Exempted Company
We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between
ordinary resident companies, ordinary non-resident companies and exempted companies. Any company that is registered in the Cayman
Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The
requirements for an exempted company are essentially the same as for an ordinary resident/non-resident company except that an
exempted company:
● does not have to file an annual return detailing its shareholders with the Registrar of Companies of the Cayman Islands;
● is not required to open its register of members for inspection;
● does not have to hold an annual general meeting;
● may issue negotiable or bearer shares or shares with no par value;
● may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years
in the first instance);
● may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
● may register as a limited duration company; and
● may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares
of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or
improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
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C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in
“Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” or
elsewhere in this annual report.
D. Exchange Controls
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange.”
E. Taxation
The following discussion of Cayman Islands, PRC and United States federal income tax consequences of an investment in our
ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which
are subject to change or differing interpretation, possibly with retroactive effect. This summary does not deal with all possible tax
consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws
or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States.
Cayman Islands Taxation
The Cayman Islands currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax of gift
tax. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which
may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of the Cayman Islands. The Cayman
Islands are not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange
control regulations under Cayman Islands law.
Payments of dividends and capital in respect of our Class A ordinary shares and ADSs will not be subject to taxation in the
Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Class A ordinary shares
or ADSs, nor will gains derived from the disposal of our Class A ordinary shares or ADSs be subject to Cayman Islands income or
corporation tax.
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a
“de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the
rate of 25% on its global income. The implementation rules define the term “de facto management body” as the body that exercises full
and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In
April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for
determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled
by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position
on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded
as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the
primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human
resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets,
accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at
least 50% of voting board members or senior executives habitually reside in the PRC. Further to Circular 82, the State Administration of
Taxation issued the SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of Circular
82. SAT Bulletin 45 provides for procedures and administration details of determination on resident status and administration on post-
determination matters.
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We believe that NIO Inc. is not a PRC resident enterprise for PRC tax purposes. NIO Inc. is not controlled by a PRC enterprise
or PRC enterprise group and we do not believe that NIO Inc. meets all of the conditions above. NIO Inc. is a company incorporated
outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its
records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For
the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status
of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the
term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with
us.
If the PRC tax authorities determine that NIO Inc. is a PRC resident enterprise for enterprise income tax purposes, we may be
required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the
holders of our ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on
gains realized on the sale or other disposition of ADSs or Class A ordinary shares, if such income is treated as sourced from within the
PRC. It is unclear whether our non-PRC individual shareholders (including our ADS holders) would be subject to any PRC tax on
dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If
any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under
an applicable tax treaty. It is also unclear whether non-PRC shareholders of NIO Inc. would be able to claim the benefits of any tax
treaties between their country of tax residence and the PRC in the event that NIO Inc. is treated as a PRC resident enterprise. Pursuant to
the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in China, or has set
up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be
subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the
Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the tax rate in respect to
dividends paid by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise
directly holds at least 25% of the PRC enterprise. Pursuant to SAT Circular 81, a Hong Kong resident enterprise must meet the following
conditions, among others, in order to enjoy the reduced tax rate: (i) it must directly own the required percentage of equity interests and
voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise
throughout the 12 months prior to receiving the dividends. Furthermore, the Administrative Measures for Non-Resident Enterprises to
Enjoy Treatments under Tax Treaties, which became effective in November 2015, require that non-resident enterprises must obtain
approval from the relevant tax authority in order to enjoy the reduced tax rate. There are also other conditions for enjoying the reduced
tax rate according to other relevant tax rules and regulations. Accordingly, our subsidiaries may be able to enjoy the 5% tax rate for the
dividends it receives from its PRC incorporated subsidiaries if they satisfy the conditions prescribed under SAT Circular 81 and other
relevant tax rules and regulations and obtain the approvals as required. However, according to SAT Circular 81, if the relevant tax
authorities determine our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax
authorities may adjust the favorable tax rate on dividends in the future.
Provided that our Cayman Islands holding company, NIO Inc., is not deemed to be a PRC resident enterprise, holders of our
ADSs and Class A ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or
gains realized from the sale or other disposition of our shares or ADSs. Circular 7 further clarifies that, if a non-resident enterprise
derives income by acquiring and selling shares in an offshore listed enterprise in the public market, such income will not be subject to
PRC tax. However, there is uncertainty as to the application of Circular 7, we and our non-PRC resident investors may be at risk of being
required to file a return and being taxed under Circular 7 and we may be required to expend valuable resources to comply with Circular 7
or to establish that we should not be taxed under Circular 7. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing
Business in China—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-
PRC holding companies.”
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United States Federal Income Taxation
The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and
disposition of our ADSs or Class A ordinary shares by a U.S. Holder (as defined below) that acquires our ADSs and holds our ADSs as
“capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This
discussion is based upon existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive
effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any U.S. federal income tax
consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion,
moreover, does not address the U.S. federal estate, gift, Medicare, alternative minimum tax, and other non-income tax considerations or
any state, local and non-U.S. tax considerations, relating to the ownership or disposition of our ADSs or Class A ordinary shares. The
following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of
their individual circumstances or to persons in special tax situations such as:
● banks and other financial institutions;
● insurance companies;
● pension plans;
● cooperatives;
● regulated investment companies;
● real estate investment trusts;
● broker-dealers;
● traders that elect to use a mark-to-market method of accounting;
● certain former U.S. citizens or long-term residents;
● tax-exempt entities (including private foundations);
● holders who acquire their ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as
compensation;
● investors that will hold their ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale or
other integrated transaction for U.S. federal income tax purposes;
● investors that have a functional currency other than the U.S. dollar;
● investors required to accelerate the recognition of any item of gross income with respect to ADSs or Class A ordinary
shares “as a result of such income being recognized on an applicable financial statement”;
● persons that actually or constructively own 10% or more of our stock (by vote or value); or
● partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or
Class A ordinary shares through such entities.
All of the foregoing may be subject to tax rules that differ significantly from those discussed below.
Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular
circumstances, and the state, local, non-U.S. and other tax considerations of the ownership and disposition of our ADSs or Class A
ordinary shares.
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General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for U.S.
federal income tax purposes:
● an individual who is a citizen or resident of the United States;
● a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under
the law of the United States or any state thereof or the District of Columbia;
● an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
● a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S.
persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be
treated as a U.S. person under the Code.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs
or Class A ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the
activities of the partnership. Partnerships holding our ADSs or Class A ordinary shares and their partners are urged to consult their tax
advisors regarding an investment in our ADSs or Class A ordinary shares.
For U.S. federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial owner of the underlying
shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner.
Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs will generally not be subject to U.S. federal income tax.
Passive Foreign Investment Company Considerations
A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any
taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more
of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce
or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as passive
assets and the company’s goodwill and other unbooked intangibles are taken into account. Passive income generally includes, among
other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a
proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or
indirectly, 25% or more (by value) of the stock.
Although the law in this regard is not entirely clear, we treat our VIEs as being owned by us for U.S. federal income tax
purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with
these entities, and as a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were
determined, however, that we do not own the VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current
taxable year and any subsequent taxable year.
Assuming that we are the owner of our VIEs for U.S. federal income tax purposes, and based upon our current income and
assets, we do not believe we were a PFIC for the taxable year ended December 31, 2019 and we do not expect to be a PFIC for the
current taxable year ended December 31, 2019 or the foreseeable future. While we do not expect to be or to become a PFIC in the current
or foreseeable taxable years, no assurance can be given in this regard because the determination of whether we will be or become a PFIC
is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the
market price of our ADSs may cause us to be classified as a PFIC for the current or future taxable years because the value of our assets
for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the
market price of our ADSs from time to time (which may be volatile). Furthermore, the composition of our income and assets may also be
affected by how, and how quickly, we use our liquid assets. Under circumstances where our passive income significantly increases
relative to our non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of
becoming classified as a PFIC may substantially increase.
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If we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or Class A ordinary shares, the PFIC
rules discussed below under “—Passive Foreign Investment Company Rules” generally will apply to such U.S. Holder for such
taxable year, and unless the U.S. Holder makes certain elections, will apply in future years even if we cease to be a PFIC.
The discussion below under “—Dividends” and “—Sale or Other Disposition” is written on the basis that we will not be or
become classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply generally if we are
treated as a PFIC are discussed below under “—Passive Foreign Investment Company Rules.”
Dividends
Subject to the discussion below under “Passive Foreign Investment Company Rules,” any cash distributions (including the
amount of any PRC tax withheld) paid on our ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as
determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend
income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the depositary, in
the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any
distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. Dividends received on our ADSs or
Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporations. A non-corporate U.S. Holder
will be subject to tax at the lower capital gain tax rate applicable to “qualified dividend income,” provided that certain conditions are
satisfied, including that (1) our ADSs are readily tradeable on an established securities market in the United States, or, in the event that
we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefit of the United States-PRC income
tax treaty, (2) we are neither a PFIC nor treated as such with respect to such a U.S. Holder (as discussed below) for the taxable year in
which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. We expect our ADSs
(but not our Class A ordinary shares) will be considered to be readily tradeable on the New York Stock Exchange, which is an established
securities market in the United States. There can be no assurance, however, that our ADSs will be considered readily tradeable on an
established securities market in later years.
In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “—People’s
Republic of China Taxation” above), we may be eligible for the benefits of the United States-PRC income tax treaty. If we are eligible
for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented by the ADSs,
would be eligible for the reduced rates of taxation described in the preceding paragraph.
Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally
constitute passive category income. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible,
subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on
dividends received on our ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign
tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in
which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and their
outcome depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult
their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Sale or Other Disposition
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize
capital gain or loss upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between
the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary shares. Any capital gain or
loss will be long-term if the ADSs or Class A ordinary shares have been held for more than one year and will generally be U.S.-source
gain or loss for U.S. foreign tax credit purposes. Long-term capital gain of non-corporate U.S. Holders is generally eligible for a reduced
rate of taxation. In the event that gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in the PRC, such gain
may be treated as PRC-source gain under the United States-PRC income tax treaty. If a U.S. Holder is not eligible for the benefits of the
income tax treaty or fails to make the election to treat any gain as foreign source, then such U.S. Holder may not be able to use the
foreign tax credit arising from any PRC tax imposed on the disposition of the ADSs or Class A ordinary shares unless such credit can be
applied (subject to applicable limitations) against U.S. federal income tax due on other income derived from foreign sources in the same
income category (generally, the passive category). The deductibility of a capital loss may be subject to limitations. U.S. Holders are
urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ADSs or Class A
ordinary shares, including the availability of the foreign tax credit under their particular circumstances.
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Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, and
unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax
rules on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to
a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter,
the U.S. Holder’s holding period for the ADSs or Class A ordinary shares), and (ii) any gain realized on the sale or other disposition of
ADSs or Class A ordinary shares. Under the PFIC rules:
● the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A
ordinary shares;
● the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first
taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income;
● the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in
effect for individuals or corporations, as appropriate, for that year; and
● an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the tax
attributable to each prior taxable year, other than a pre-PFIC year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our
subsidiaries, our variable interest entities or any of the subsidiaries of our variable interest entities is also a PFIC, such U.S. Holder
would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of
these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, our
variable interest entities or any of the subsidiaries of our variable interest entities.
As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election
with respect to such stock, provided that such stock is regularly traded. For those purposes, our ADSs, but not our Class A ordinary
shares, will be treated as marketable stock upon their listing on the New York Stock Exchange. We anticipate that our ADSs should
qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes this election, the holder will
generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held
at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the
adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only
be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s
adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S.
Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a
PFIC, the holder will not be required to take into account the gain or loss described above during any period that such corporation is not
classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other
disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss,
but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-
to-market election.
Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to
be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity
interest in a PFIC for U.S. federal income tax purposes.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if
available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described
above.
If a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must
generally file an annual IRS Form 8621. You should consult your tax advisors regarding the U.S. federal income tax consequences of
owning and disposing of our ADSs or Class A ordinary shares if we are or become a PFIC.
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F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we
are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than
four months after the close of each fiscal year. Copies of reports and other information, when so filed, may be inspected without charge
and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer,
we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements,
and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act.
We will furnish Deutsche Bank Trust Company Americas, the depositary of our ADSs, with our annual reports, which will
include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all
notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The
depositary will make such notices, reports and communications available to holders of ADSs and, upon our request, will mail to all
record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.
In accordance with NYSE Rule 203.01, we will post this annual report on our website ir.nio.com. In addition, we will provide
hardcopies of our annual report to shareholders, including ADS holders, free of charge upon request.
I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
As we have begun sales of the ES8, the ES6 and the all-new ES8, and plan to deliver the EC6 in September 2020, we expect
that substantially all of our revenues will be denominated in RMB while our expenses are denominated in RMB and other currencies
including the U.S. dollar, the pound sterling and the Euro. As a result, we are exposed to risk related to movements between the
Renminbi and such other currencies. In addition, the value of our ADSs will be affected by the exchange rate between U.S. dollar and
RMB because the value of our business is effectively denominated in RMB, while our ADSs will be traded in U.S. dollars.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China.
The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces
or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the
U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert
Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business
purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amounts available to us.
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Interest Rate Risk
Our cash balance as of December 31, 2019 primarily consists of bank deposits, so our exposure to market risk for changes in
interest rates is limited. The convertible notes we have issued either bear interest at a fixed rate or bear no interest, so we have no
financial statement impact from changes in interest rates. However, changes in market interest rates impact the fair value of the
convertible notes along with other variables such as our credit spreads and the market price and volatility of our ADSs and ordinary
shares.
We may from to time invest in interest-earning instruments. Investments in both fixed rate and floating rate interest earning
instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less income than expected if interest rates fall.
Inflation
To date, inflation in the PRC has not materially impacted our results of operations. According to the National Bureau of
Statistics of China, the year-over-year percent changes in the consumer price index for December 2017, 2018 and 2019 were increases of
1.8%, 1.9% and 4.5%, respectively. Although we have not been materially affected by inflation in the past, we may be affected in the
future by higher rates of inflation in the PRC. For example, certain operating costs and expenses, such as employee compensation and
office operating expenses may increase as a result of higher inflation. Additionally, because a substantial portion of our assets consists of
cash and cash equivalents and short-term investments, high inflation could significantly reduce the value and purchasing power of these
assets. We are not able to hedge our exposure to higher inflation in China.
Seasonality
Demand for new cars in the automotive industry in general typically declines over the summer season, while sales are generally
higher in the fourth quarter and sprint time, especially from October to December and from March to April each year. Our limited
operating history makes it difficult for us to judge the exact nature or extent of the seasonality of our business. Also, any unusually
severe weather conditions in some markets may impact demand for our vehicles.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
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D. American Depositary Shares
Fees and Charges Our ADS holders May Have to Pay
Holders of our ADSs will be required to pay the following service fees to the depositary bank and certain taxes and
governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited
securities represented by any of ADSs held):
Service
● To any person to which ADSs are issued or to any person to which a distribution is made in
respect of ADS distributions pursuant to stock dividends or other free distributions of stock,
bonus distributions, stock splits or other distributions (except where converted to cash)
Fees
Up to US$0.05 per ADS issued
● Cancellation of ADSs, including the case of termination of the deposit agreement
● Distribution of cash dividends
● Distribution of cash entitlements (other than cash dividends) and/or cash proceeds from the sale
Up to US$0.05 per ADS cancelled
Up to US$0.05 per ADS held
Up to US$0.05 per ADS held
of rights, securities and other entitlements
● Distribution of ADSs pursuant to exercise of rights.
● Distribution of securities other than ADSs or rights to purchase additional ADSs
● Depositary services
Up to US$0.05 per ADS held
Up to US$0.05 per ADS held
Up to US$0.05 per ADS held on
the applicable record
date(s) established by the
depositary bank
Holders of our ADSs will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes
and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited
securities represented by any of your ADSs) such as:
● Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in
Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares).
● Expenses incurred for converting foreign currency into U.S. dollars.
● Expenses for cable, telex and fax transmissions and for delivery of securities.
● Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or
withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit).
● Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
● Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory
requirements applicable to ordinary shares, deposited securities, ADSs and ADRs.
● Any applicable fees and penalties thereon.
The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers
(on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients)
delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees
payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the
depositary bank to the holders of record of ADSs as of the applicable ADS record date.
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The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion
of distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank
charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of
the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date
ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees
through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and
custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn
charge their clients’ accounts the amount of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreements, refuse the
requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS
holder.
The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the
ADS fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree
from time to time.
Fees and Other Payments Made by the Depositary to Us
Deutsche Bank Trust Company Americas, as the depositary, has agreed to reimburse us for certain expenses we incur that are
related to establishment and maintenance of the ADR program upon such terms and conditions as we and the depositary may agree from
time to time. The depositary may make available to us a set amount or a portion of the depositary fees charged in respect of the ADR
program or otherwise upon such terms and conditions as we and the depositary may agree from time to time. In 2019, we received an
after-tax reimbursement payment of US$8,078,000 from the depositary.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II.
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10—Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of
the rights of securities holders, which remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File number: 333-
226822) in relation to the initial public offering of 160,000,000 ADSs representing 160,000,000 of our Class A ordinary shares, at an
initial offering price of US$6.26 per ADS. Our initial public offering closed in September 2018. Morgan Stanley & Co. LLC, Goldman
Sachs (Asia) L.L.C., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc.,
Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, and UBS Securities LLC were the representatives of the
underwriters for our initial public offering. Counting in the ADSs sold upon the exercise of the over-allotment option by our
underwriters, we offered and sold 184,000,000 ADSs and received net proceeds of approximately US$1,099.1 million, after deducting
underwriting discounts and commissions and estimated offering expenses payable by us. The registration statement was declared
effective by the SEC on September 11, 2018. The total expenses incurred for our company’s account in connection with our initial public
offering was approximately US$46.7 million, which included US$40.1 million in underwriting discounts and commissions for the initial
public offering and approximately US$6.7 million in other costs and expenses for our initial public offering. None of the transaction
expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our
equity securities or our affiliates. None of the net proceeds we received from the initial public offering were paid, directly or indirectly, to
any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates. We have used up
the proceeds from our initial public offering .
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ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the
period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has
concluded that, as of December 31, 2019, our disclosure controls and procedures were not effective in ensuring that the information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial
statements for external purposes in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America
and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures of our
company are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance
regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company’s assets that could have a
material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all potential
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange
Commission, our management including our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of internal
control over financial reporting as of December 31, 2019 using the criteria set forth in the report “Internal Control—Integrated
Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
the management concluded that our internal control over financial reporting was ineffective as of December 31, 2019 because of the
material weakness described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or
detected on a timely basis. The material weakness in our internal control over financial reporting identified as of December 31, 2019 was
that we do not have sufficient competent financial reporting and accounting personnel with an appropriate understanding of U.S. GAAP
to (i) design and implement formal period-end financial reporting policies and procedures to address complex U.S. GAAP technical
accounting issues and (ii) prepare and review our consolidated financial statements and related disclosures in accordance with U.S.
GAAP and the financial reporting requirements set forth by the SEC.
We have implemented and plan to implement a number of measures to address the material weakness. We have established clear
roles and responsibilities for accounting and financial reporting staff to address accounting and financial reporting issues. Furthermore,
we plan to expedite and streamline our reporting process and develop our compliance process, including: (i) hiring more qualified
personnel equipped with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting
function and setting up a financial and system control framework, (ii) implementing regular and consistent U.S. GAAP accounting and
financial reporting training programs for our accounting and financial reporting personnel, (iii) establishing effective oversight and
clarifying reporting requirements for non-recurring and complex transactions to ensure consolidated financial statements and related
disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting requirements, and (iv) enhancing our internal
audit function. However, we cannot assure you that we will be able to continue implementing these measures in the future, or that we
will not identify additional material weaknesses in the future.
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Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, has audited the effectiveness of
our company’s internal control over financial reporting as of December 31, 2019, as stated in its report, which appears on page F-2 of
this annual report on Form 20-F.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual
report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 16.A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Mr. Denny Ting Bun Lee, a member of our audit committee and independent director
(under the standards set forth in Section 303A of the Corporate Governance Rules of the NYSE and Rule 10A-3 under the Securities
Exchange Act of 1934), is an audit committee financial expert.
ITEM 16.B. CODE OF ETHICS
Our board of directors has adopted a code of ethics that applies to all of the directors, officers and employees of us and our
subsidiaries, whether they work for us on a full-time, part-time, consultative, or temporary basis. Certain provisions of the code apply
specifically to our chief executive officer, chief financial officer, senior finance officer, controller, senior vice presidents, vice presidents
and any other persons who perform similar functions for us. We have posted a copy of our code of business conduct and ethics on our
website at https://www.nio.io/code-of-business-conduct-and-ethics
ITEM 16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by the categories specified below in connection with certain professional
services rendered by PricewaterhouseCoopers Zhong Tian LLP and its affiliates, our principal external auditors, for the years indicated.
We did not pay any other fees to our principal external auditors during the years indicated below.
Audit fees(1)
Tax fees(2)
Other fees(3)
Total
Note:
For the Year Ended December 31,
2019
2018
(in thousands of RMB)
11,906
2,805
3,251
17,962
8,500
1,747
1,608
11,855
(1) “Audit fees” means the aggregate fees billed for professional services rendered by our principal external auditors for the audits of
our annual financial statements and the quarterly reviews of our condensed consolidated financial information, including audit fees
relating to our initial public offering in 2018.
(2) “Tax fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal
external auditors for tax compliance, tax advice, and tax planning.
(3) “All other fees” means the aggregate fees billed for professional services rendered by our principal external auditors associated with
other advisory services.
The policy of our audit committee is to pre-approve all audit and other service provided by PricewaterhouseCoopers Zhong Tian
LLP and its affiliates, including audit services, tax services and other services described above, other than those for de minimis services
which are approved by the Audit Committee prior to the completion of the audit.
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ITEM 16.D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16.E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16.F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16.G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on the New York Stock Exchange, we are subject to the NYSE corporate governance
listing standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home
country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the
NYSE corporate governance listing standards.
Pursuant to Sections 303A.01, 303A.04, 303A.05 and 303A.07 of the New York Stock Exchange Listed Company Manual, a
company listed on the New York Stock Exchange must have a majority of independent directors, a nominating and corporate governance
committee composed entirely of independent directors, a compensation committee composed entirely of independent directors and an
audit committee with a minimum of three members. We currently follow our home country practice in lieu of these requirements. We
may also continue to rely on these and other exemptions available to foreign private issuers in the future. See “Item 3. Key Information
—D. Risk Factors—Risks relating to our ADSs and Trading Market—Our shareholders may face difficulties in protecting their interests,
and ability to protect their rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.”
Other than the home country practice described above, we are not aware of any significant differences between our corporate
governance practices and those followed by U.S. domestic companies under the NYSE corporate governance listing standards.
ITEM 16.H. MINE SAFETY DISCLOSURE
Not applicable.
PART III.
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements of NIO Inc. and its subsidiaries and the related notes are included at the end of this annual
report.
ITEM 19. EXHIBITS
Exhibit Number
1.1
2.1
2.2
Description of Document
Eleventh Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein
by reference to Exhibit 3.2 to the registration statement on Form F-1 (File No. 333-226822), as amended, initially
filed with the SEC on August 13, 2018)
Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3)
Registrant’s Specimen Certificate for Class A ordinary shares (incorporated herein by reference to Exhibit 4.2 to
the registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on
August 13, 2018)
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2.3
2.4
2.5*
2.6*
4.1
4.2
4.3
4.4
4.5
Deposit Agreement, dated as of September 11, 2018, among the Registrant, Deutsche Bank Trust Company
Americas, as the depositary, and all holders and beneficial owners of the American Depositary Shares issued
thereunder (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File
No. 333-229952), filed with the SEC on February 28, 2019)
Fifth Amended and Restated Shareholders’ Agreement, dated as of November 10, 2017, among the Registrant and
the other signatories thereto (incorporated herein by reference to Exhibit 4.4 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
Description of American Depositary Shares of the Registrant
Description of Class A ordinary shares of the Registrant
2015 Share Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
2016 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
2017 Share Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
2018 Share Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
Form of Indemnification Agreement, between the Registrant and its directors and executive officers (incorporated
herein by reference to Exhibit 10.5 to the registration statement on Form F-1 (File No. 333-226822), as amended,
initially filed with the SEC on August 13, 2018)
4.6†
English translation of Manufacture Cooperation Agreement, dated as of May 23, 2016, between the registrant and
4.7
4.8
4.9
4.10
4.11
4.12
Anhui Jianghuai Automobile Co., Ltd. (incorporated herein by reference to Exhibit 10.6 to the registration
statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
Form of Employment Agreement, between the Registrant and its executive officers (Non-PRC citizens)
(incorporated herein by reference to Exhibit 10.7 to the registration statement on Form F-1 (File No. 333-
226822), as amended, initially filed with the SEC on August 13, 2018)
Form of Employment Agreement, between the Registrant and its executive officers (PRC citizens) (incorporated
herein by reference to Exhibit 10.8 to the registration statement on Form F-1 (File No. 333-226822), as amended,
initially filed with the SEC on August 13, 2018)
Employment Agreement and Severance Agreement, between the Registrant and Padmasree Warrior, dated as of
November 23, 2015 and December 16, 2015, respectively (incorporated herein by reference to Exhibit 10.10 to
the registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on
August 13, 2018)
English translation of Power of Attorney, dated as of April 19, 2018, among shareholders of Shanghai Anbin,
Shanghai Anbin and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.11 to the registration statement
on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
English translation of Loan Agreements, dated as of April 19, 2018, among shareholders of Shanghai Anbin,
Shanghai Anbin and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.12 to the registration statement
on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
English translation of Equity Interest Pledge Agreements, dated as of April 19, 2018, among shareholders of
Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.13 to the
registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13,
2018)
4.13
English translation of Exclusive Business Cooperation Agreements, dated as of April 19, 2018, among
4.14
4.15
4.16
shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. (incorporated herein by reference to
Exhibit 10.14 to the registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with
the SEC on August 13, 2018)
English translation of Exclusive Option Agreements, dated as of April 19, 2018, among shareholders of Shanghai
Anbin, Shanghai Anbin and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.15 to the registration
statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
English translation of Power of Attorney, dated as of April 19, 2018, among shareholders of Beijing NIO, Beijing
NIO and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.16 to the registration statement on
Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
English translation of Loan Agreements, dated April 19, 2018, among shareholders of Beijing NIO, Beijing NIO
and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1
(File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
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4.17
4.18
4.19
4.20
4.21
4.22
4.23*†
4.24*†
4.25*
4.26*
4.27*
4.28*
4.29*
4.30*
4.31*
4.32*
4.33*
4.34*
4.35*
4.36*
8.1*
11.1
12.1*
12.2*
13.1**
13.2**
English translation of Equity Interest Pledge Agreements, dated as of April 19, 2018, among shareholders of
Beijing NIO, Beijing NIO and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.18 to the registration
statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
English translation of Exclusive Business Cooperation Agreements, dated as of April 19, 2018, among
shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.19
to the registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on
August 13, 2018)
English translation of Exclusive Option Agreements, dated as of April 19, 2018, among shareholders of Beijing
NIO, Beijing NIO and NIO Co., Ltd. (incorporated herein by reference to Exhibit 10.20 to the registration
statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13, 2018)
Indenture, dated as of February 4, 2019, by and between the Registrant, as issuer, and The Bank of New York
Mellon, as trustee (incorporated herein by reference to Exhibit 4.22 to the Company’s Report on Form 20-F (File
No. 001-38638), as amended, initially filed with the SEC on April 2, 2019)
Form of 4.50% Convertible Senior Notes due 2024 (included in Exhibit 4.22) (incorporated herein by reference to
Exhibit 4.22 to the Company’s Report on Form 20-F (File No. 001-38638), as amended, initially filed with the
SEC on April 2, 2019)
Deposit Agreement for Restricted Securities, dated as of February 4, 2019, among the Registrant, Deutsche Bank
Trust Company Americas, as the depositary, and all holders and beneficial owners of the American Depositary
Shares issued thereunder (incorporated herein by reference to Exhibit 4.24 to the Company’s Report on Form 20-
F (File No. 001-38638), as amended, initially filed with the SEC on April 2, 2019)
English translation of NIO ES6 Manufacture Cooperation Agreement, dated as of April 30, 2019, between the
registrant and Anhui Jianghuai Automobile Co., Ltd.
English translation of NIO Fury (EC6) Manufacture Cooperation Agreement, dated as of March 10, 2020,
between the registrant and Anhui Jianghuai Automobile Co., Ltd.
Convertible Notes Subscription Agreement, dated September 4, 2019, between the Registrant and Huang River
Investment Limited
Convertible Notes Subscription Agreement, dated September 4, 2019, between the Registrant and Serene View
Investment Limited
Form of 0% Convertible Senior Notes due 2020 (included in Exhibit 4.25)
Form of 0% Convertible Senior Notes due 2022 (included in Exhibit 4.25)
Indenture, dated as of February 10, 2020, among the Registrant, The Bank of New York Mellon, London Branch,
as trustee, The Bank of New York Mellon, London Branch, as paying agent and conversion agent, and The Bank
of New York Mellon SA/NV, Luxembourg Branch, as registrar and transfer agent
Form of 0% Convertible Senior Notes due 2021 (included in Exhibit 4.29)
Indenture, dated as of February 19, 2020, among the Registrant, The Bank of New York Mellon, London Branch,
as trustee, The Bank of New York Mellon, London Branch, as paying agent and conversion agent, and The Bank
of New York Mellon SA/NV, Luxembourg Branch, as registrar and transfer agent
Form of 0% Convertible Senior Notes due 2021 (included in Exhibit 4.31)
Indenture, dated as of March 11, 2020, among the Registrant, The Bank of New York Mellon, London Branch, as
trustee, The Bank of New York Mellon, London Branch, as paying agent and conversion agent, and The Bank of
New York Mellon SA/NV, Luxembourg Branch, as registrar and transfer agent
Form of 0% Convertible Senior Notes due 2021 (included in Exhibit 4.33)
English translation of Investment Agreement, dated April 29, 2020, among Hefei Construction Investment
Holdings (Group) Co., Ltd., the Registrant, NIO Nextev Limited, NIO Power Express Limited, NIO (Anhui)
Holding Co., Ltd. and other parties thereto.
English translation of Shareholders’ Agreement, dated April 29, 2020, among Hefei Construction Investment
Holdings (Group) Co., Ltd., the Registrant, NIO Nextev Limited, NIO Power Express Limited, NIO (Anhui)
Holding Co., Ltd. and other parties thereto.
List of Principal Subsidiaries and Consolidated Variable Interest Entities
Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the
registration statement on Form F-1 (File No. 333-226822), as amended, initially filed with the SEC on August 13,
2018)
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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15.1*
15.2*
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
104
Consent of PricewaterhouseCoopers Zhong Tian LLP
Consent of Han Kun Law Offices
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* Filed herewith.
** Furnished herewith.
† Confidential treatment has been requested for certain portions of this exhibit pursuant to Rule 406 under the Securities Act and
Division of Corporation Finance Staff Legal Bulletin No. 1. In accordance with Rule 406 and Staff Legal Bulletin No. 1, these
confidential portions have been omitted and filed separately with the SEC.
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The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Date: May 14, 2020
NIO Inc.
By: /s/ Bin Li
Name: Bin Li
Title: Chairman of the Board of Directors
and Chief Executive Officer
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2019
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2017, 2018 and 2019
Consolidated Statements of Shareholders’ (Deficit)/Equity for the Years Ended December 31, 2017, 2018 and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2018 and 2019
Notes to Consolidated Financial Statements
Page
F-2
F-5
F-7
F-8
F-11
F-12
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of NIO Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of NIO Inc. and its subsidiaries (the “Company”) as of December
31, 2019 and 2018, and the related consolidated statements of comprehensive loss, of shareholders’ (deficit)/equity and of cash flows for
each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated
financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting
as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a
material weakness in internal control over financial reporting existed as of that date related to the lack of sufficient competent financial
reporting and accounting personnel with an appropriate understanding of US GAAP.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a
timely basis. The material weakness referred to above is described in Management's Annual Report on Internal Control over Financial
Reporting appearing under Item 15. We considered this material weakness in determining the nature, timing, and extent of audit tests
applied in our audit of the 2019 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal
control over financial reporting does not affect our opinion on those consolidated financial statements.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in
2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's
report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
F-2
Table of Contents
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures
that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Going Concern Assessment
As described in Note 1 to the consolidated financial statements, the Company prepared its consolidated financial statements on a
going concern basis, and management has concluded that the Company will be able to realize its assets and discharge its liabilities in the
normal course of operations as they become due for the next twelve months from the date of issuance of the consolidated financial
statements. For the years ended December 31, 2017, 2018 and 2019, the Company incurred net losses of RMB 5.0 billion, RMB 9.6
billion and RMB11.3 billion, respectively, with net cash used in operating activities of RMB 4.6 billion, RMB 7.9 billion and RMB 8.7
billion, respectively. As of December 31, 2018 and 2019, accumulated deficit amounted to RMB 35.0 billion and RMB 46.3 billion,
respectively. As of December 31, 2019, the Company’s total shareholders’ deficit was RMB 6.3 billion and the current liabilities
exceeded the current assets in the amount of RMB 4.6 billion. These adverse conditions and events, before consideration of
management’s plans, raised substantial doubt about the Company’s ability to continue as a going concern. Management’s plans to
mitigate the adverse conditions and events include a business plan with forecasted cash flows covering the next twelve months from the
date of issuance of the consolidated financial statements and the consummation of an external financing project.
F-3
Table of Contents
The principal consideration for our determination that performing procedures relating to the Company’s going concern assessment is
a critical audit matter is there was significant judgment by management when preparing the business plan with forecasted cash flows and
the consummation of an external financing project included in the going concern assessment, which in turn led to a high degree of
auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s business plan
with forecasted cash flows and the consummation of an external financing project.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of internal controls relating to
management’s going concern assessment. These procedures also included, among others, testing management’s process for preparing the
business plan with forecasted cash flows and the consummation of an external financing project included in the going concern
assessment; testing the completeness, accuracy, and relevance of underlying data used; and evaluating the reasonableness of the
assumptions included in the forecasted cash flows used by management in their business plan. Evaluating the forecasted cash flows
involved evaluating whether the underlying assumptions were reasonable considering (i) the Company’s current and past performance,
(ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in
other areas of the audit. The evaluation of management’s going concern assessment also included assessing the level of certainty in the
consummation of the external financing project.
/s/PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
May 14, 2020
We have served as the Company’s auditor since 2015.
F-4
Table of Contents
NIO INC.
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Short-term investment
Trade receivable
Amounts due from related parties
Inventory
Prepayments and other current assets
Total current assets
Non-current assets:
Long-term restricted cash
Property, plant and equipment, net
Intangible assets, net
Land use rights, net
Long-term investments
Amounts due from related parties
Right-of-use assets - operating lease
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities:
Short-term borrowings
Trade payable
Amounts due to related parties
Taxes payable
Current portion of operating lease liabilities
Current portion of long-term borrowings
Accruals and other liabilities
Total current liabilities
Non-current liabilities:
Long-term borrowings
Non-current operating lease liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies (Note 28)
F-5
2018
RMB
As of December 31,
2019
RMB
3,133,847
57,012
5,154,703
756,508
88,066
1,465,239
1,514,257
12,169,632
33,528
4,853,157
3,470
213,662
148,303
7,970
—
1,412,830
6,672,920
18,842,552
862,839
82,507
111,000
1,352,093
50,783
889,528
1,579,258
4,928,008
44,523
5,533,064
1,522
208,815
115,325
—
1,997,672
1,753,100
9,654,021
14,582,029
1,870,000
2,869,953
219,583
51,317
—
198,852
3,383,681
8,593,386
885,620
3,111,699
309,729
43,986
608,747
322,436
4,216,641
9,498,858
1,168,012
—
930,812
2,098,824
10,692,210
7,154,798
1,598,372
1,151,813
9,904,983
19,403,841
2019
US$
Note 2(e)
123,939
11,851
15,944
194,216
7,295
127,773
226,846
707,864
6,395
794,775
219
29,994
16,565
—
286,948
251,817
1,386,713
2,094,577
127,211
446,968
44,490
6,318
87,441
46,315
605,682
1,364,425
1,027,722
229,592
165,448
1,422,762
2,787,187
Table of Contents
NIO INC.
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except for share and per share data)
MEZZANINE EQUITY
Redeemable non-controlling interests
Total mezzanine equity
SHAREHOLDERS’ EQUITY/(DEFICIT)
Class A Ordinary Shares (US$0.00025 par value; 2,500,000,000 and 2,500,000,000 shares authorized;
777,200,790 and 786,937,655 shares issued; 770,268,810 and 783,942,438 shares outstanding as of
December 31, 2018 and 2019, respectively)
Class B Ordinary Shares (US$0.00025 par value; 132,030,222 and 132,030,222 shares authorized,
issued and outstanding as of December 31, 2018 and 2019, respectively)
Class C Ordinary Shares (US$0.00025 par value; 148,500,000 and 148,500,000 shares authorized,
issued and outstanding as of December 31, 2018 and 2019, respectively)
Less: Treasury shares (6,931,980 and 2,995,217 shares as of December 31, 2018 and 2019,
respectively)
Additional paid in capital
Accumulated other comprehensive loss
Accumulated deficit
2018
RMB
As of December 31,
2019
RMB
2019
US$
Note 2(e)
1,329,197
1,329,197
1,455,787
1,455,787
209,111
209,111
1,329
1,347
226
254
226
254
194
32
36
(9,186)
41,918,936
(34,708)
(35,039,810)
—
40,227,856
(203,048)
(46,326,321)
—
5,778,370
(29,166)
(6,654,360)
Total NIO Inc. shareholders’ equity/(deficit)
6,837,041
(6,299,686)
(904,894)
Non-controlling interests
Total shareholders’ equity/(deficit)
(15,896)
22,087
3,173
6,821,145
(6,277,599)
(901,721)
Total liabilities, mezzanine equity and shareholders’ equity
18,842,552
14,582,029
2,094,577
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NIO INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(All amounts in thousands, except for share and per share data)
Table of Contents
Revenues:
Vehicle sales
Other sales
Total revenues
Cost of sales:
Vehicle sales
Other sales
Total cost of sales
Gross loss
Operating expenses:
Research and development
Selling, general and administrative
Total operating expenses
Loss from operations
Interest income
Interest expenses
Share of losses of equity investees
Investment income
Other (loss)/income, net
Loss before income tax expense
Income tax expense
Net loss
Accretion on convertible redeemable preferred shares to redemption value
Accretion on redeemable non-controlling interests to redemption value
Net loss attributable to non-controlling interests
Net loss attributable to ordinary shareholders of NIO Inc.
Net loss
Other comprehensive loss
Foreign currency translation adjustment, net of nil tax
Total other comprehensive loss
Total comprehensive loss
Accretion on convertible redeemable preferred shares to redemption value
Accretion on redeemable non-controlling interests to redemption value
Net loss attributable to non-controlling interests
Comprehensive loss attributable to ordinary shareholders of NIO Inc.
Weighted average number of ordinary shares used in computing net loss per
share
Basic and diluted
Net loss per share attributable to ordinary shareholders
Basic and diluted
Weighted average number of ADS used in computing net loss per ADS
Basic and diluted
Net loss per ADS attributable to ordinary shareholders
Basic and diluted
For the Year Ended December 31,
2017
RMB
2018
RMB
2019
RMB
—
—
—
—
—
—
—
(2,602,889)
(2,350,707)
(4,953,596)
(4,953,596)
18,970
(18,084)
(5,375)
3,498
(58,681)
(5,013,268)
(7,906)
(5,021,174)
(2,576,935)
—
36,440
(7,561,669)
(5,021,174)
(124,374)
(124,374)
(5,145,548)
(2,576,935)
—
36,440
(7,686,043)
4,852,470
98,701
4,951,171
(4,930,135)
(276,912)
(5,207,047)
(255,876)
(3,997,942)
(5,341,790)
(9,339,732)
(9,595,608)
133,384
(123,643)
(9,722)
—
(21,346)
(9,616,935)
(22,044)
(9,638,979)
(13,667,291)
(63,297)
41,705
(23,327,862)
(9,638,979)
(20,786)
(20,786)
(9,659,765)
(13,667,291)
(63,297)
41,705
(23,348,648)
7,367,113
457,791
7,824,904
(8,096,035)
(927,691)
(9,023,726)
(1,198,822)
(4,428,580)
(5,451,787)
(9,880,367)
(11,079,189)
160,279
(370,536)
(64,478)
—
66,160
(11,287,764)
(7,888)
(11,295,652)
—
(126,590)
9,141
(11,413,101)
(11,295,652)
(168,340)
(168,340)
(11,463,992)
—
(126,590)
9,141
(11,581,441)
2019
US$
Note 2(e)
1,058,220
65,758
1,123,978
(1,162,923)
(133,254)
(1,296,177)
(172,199)
(636,126)
(783,100)
(1,419,226)
(1,591,425)
23,023
(53,224)
(9,262)
—
9,503
(1,621,385)
(1,133)
(1,622,518)
—
(18,184)
1,313
(1,639,389)
(1,622,518)
(24,181)
(24,181)
(1,646,699)
—
(18,184)
1,313
(1,663,570)
21,801,525
332,153,211
1,029,931,705
1,029,931,705
(346.84)
(70.23)
(11.08)
(1.59)
—
332,153,211
1,029,931,705
1,029,931,705
—
(70.23)
(11.08)
(1.59)
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
NIO INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT)/EQUITY
(All amounts in thousands, except for share and per share data)
Ordinary Shares
Shares
Par Value
Treasury Shares
Shares
Additional
Paid in
Amount Capital
Accumulated
Other
Total
Non-
Comprehensive Accumulated Shareholders’ Controlling Total (Deficit)/
Income/(Loss)
Deficit
Deficit
Interests
Equity
—
—
—
—
Balance as of
December 31, 2016 32,003,810
Accretion on Series
A-1 and A-2
convertible
redeemable
preferred shares to
redemption value
Accretion on Series
A-3 convertible
redeemable
preferred shares to
redemption value
Accretion on Series
B convertible
redeemable
preferred shares to
redemption value
Accretion on Series
C convertible
redeemable
preferred shares to
redemption value
Accretion on Series
D convertible
redeemable
preferred shares to
redemption value
Grant of restricted
shares
Exercise of share
options
Vesting of restricted
shares
Vesting of share
options
Capital injection by
non-controlling
interests
Acquisition of
additional interests
in subsidiaries from
non-controlling
interests
Foreign currency
translation
adjustment
Net loss
Balance as of
December 31, 2017 36,727,350
2,000,000
2,723,540
—
—
—
—
—
—
—
52
(14,230,351)
(9,186)
70,850
110,452
(4,076,945)
(3,904,777)
(11,583)
(3,916,360)
—
—
—
—
—
(2,205,227)
(2,205,227)
—
(2,205,227)
—
—
—
—
—
(120,451)
(120,451)
—
(120,451)
—
—
—
—
—
(40,011)
(40,011)
—
(40,011)
—
—
—
—
—
(56,283)
(56,283)
—
(56,283)
—
3
5
—
(2,000,000)
—
—
3,353,344
—
—
—
—
—
—
—
—
6,207
24,723
30,127
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(154,963)
(154,963)
3
6,212
24,723
30,127
—
—
—
—
—
(154,963)
3
6,212
24,723
30,127
—
13,376
13,376
—
—
—
—
—
—
(73,334)
(73,334)
45,956
(27,378)
(124,374)
—
—
(4,984,734)
(124,374)
(4,984,734)
—
(36,440)
(124,374)
(5,021,174)
60
(12,877,007)
(9,186)
131,907
(13,922)
(11,711,948)
(11,603,089)
11,309
(11,591,780)
F-8
Table of Contents
NIO INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT)/EQUITY
(All amounts in thousands, except for share and per share data)
Ordinary Shares
Shares
Par Value
Treasury Shares
Shares
Additional
Paid in
Amount Capital
Accumulated
Other
Comprehensive Accumulated
Total
Non-
Shareholders’ Controlling Total (Deficit)/
Loss
Deficit
(Deficit)/Equity Interests
Equity
36,727,350
60
(12,877,007)
(9,186)
131,907
(13,922)
(11,711,948)
(11,603,089)
11,309
(11,591,780)
—
—
—
—
—
—
(7,091,163)
(7,091,163)
—
(7,091,163)
—
—
—
—
—
—
(565,979)
(565,979)
—
(565,979)
—
—
—
—
—
—
(2,417,979)
(2,417,979)
—
(2,417,979)
—
—
—
—
—
—
(2,375,943)
(2,375,943)
—
(2,375,943)
—
—
—
—
—
—
(1,216,227)
(1,216,227)
—
(1,216,227)
—
—
—
—
—
—
(63,297)
(63,297)
—
(63,297)
184,000,000
315
—
—
7,526,681
821,378,518
1,408
—
— 33,724,621
16,026,060
27
(2,176,570)
—
42,224
—
—
—
7,720,681
—
—
—
—
56,183
437,320
509,001
1
(509,001)
—
(909,917)
(2)
909,917
—
—
—
—
—
—
—
—
—
—
—
7,526,996
—
7,526,996
—
—
—
—
—
—
33,726,029
42,251
56,183
437,320
1
(2)
—
—
—
—
—
—
33,726,029
42,251
56,183
437,320
1
(2)
—
—
—
—
—
—
—
—
14,500
14,500
—
—
—
—
—
—
—
—
—
—
(20,786)
—
—
(9,597,274)
(20,786)
(9,597,274)
—
(41,705)
(20,786)
(9,638,979)
1,057,731,012
1,809
(6,931,980)
(9,186) 41,918,936
(34,708)
(35,039,810)
6,837,041
(15,896)
6,821,145
F-9
Balance as of
December 31,
2017
Accretion on
Series A‑1 and
A‑2
convertible
redeemable
preferred
shares to
redemption
value
Accretion on
Series A‑3
convertible
redeemable
preferred
shares to
redemption
value
Accretion on
Series B
convertible
redeemable
preferred
shares to
redemption
value
Accretion on
Series C
convertible
redeemable
preferred
shares to
redemption
value
Accretion on
Series D
convertible
redeemable
preferred
shares to
redemption
value
Accretion on
redeemable
non-
controlling
interests to
redemption
value
Issuance of
ordinary
shares
Conversion of
preferred
shares
Exercise of
share options
Vesting of
restricted
shares
Vesting of
share options
Grant of
restricted
shares
Cancellation
of restricted
shares
Capital
injection by
non-
controlling
interests
Foreign
currency
translation
adjustment
Net loss
Balance as of
December 31,
2018
Table of Contents
NIO INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT)/EQUITY
(All amounts in thousands, except for share and per share data)
Ordinary Shares
Shares
Par Value Shares
Treasury Shares
Additional
Paid in
Amount Capital
Accumulated
Other
Comprehensive Accumulated
Total
Non-
Shareholders’ Controlling Total (Deficit)/
Loss
Deficit
(Deficit)/Equity Interests
Equity
1,057,731,012
1,809
(6,931,980)
(9,186) 41,918,936
(34,708)
(35,039,810)
6,837,041
(15,896)
6,821,145
Balance as of
December 31,
2018
Accretion on
redeemable
non-controlling
interests to
redemption
value
Purchase of
capped call
options and
zero-strike call
options in
connection with
issuance of
convertible
senior notes
Exercise of
share options
Vesting of
restricted shares
Vesting of share
options
Cancellation of
restricted shares
Capital injection
by non-
controlling
interests
Foreign
currency
translation
adjustment
Net loss
Balance as of
December 31,
2019
—
—
—
—
(126,590)
—
—
(126,590)
—
(126,590)
—
12,775,127
—
22
—
—
—
—
—
1,636,001
—
—
— (1,939,567)
—
—
—
50,768
3,802
329,693
(3,038,262)
(4)
2,300,762
9,186
(9,186)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,939,567)
50,790
3,802
329,693
(4)
—
—
—
—
—
(1,939,567)
50,790
3,802
329,693
(4)
—
47,124
47,124
—
—
—
—
—
—
—
—
—
—
(168,340)
—
—
(11,286,511)
(168,340)
(11,286,511)
—
(9,141)
(168,340)
(11,295,652)
1,067,467,877
1,827
(2,995,217)
— 40,227,856
(203,048)
(46,326,321)
(6,299,686)
22,087
(6,277,599)
The accompanying notes are an integral part of these consolidated financial statements.
F-10
Table of Contents
NIO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands, except for share and per share data)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Allowance against receivables
Write-downs of inventory
Impairment on property, plant and equipment
Foreign exchange loss
Share-based compensation expenses
Investment income
Gain from disposal of an equity investee
Share of losses of equity investee
Loss on disposal of property, plant and equipment
Amortization of right-of-use assets
Changes in operating assets and liabilities:
Prepayments and other current assets
Inventory
Other non-current assets
Taxes payable
Trade receivable
Trade payable
Long-term receivables
Operating lease liabilities
Non-current deferred revenue
Accruals and other liabilities
Other non-current liabilities
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment and intangible assets
Purchases of short-term investments
Proceeds from sale of short-term investments
Purchase of held for trading securities
Sale of held for trading securities
Loan to related parties
Loan repayment from related parties
Acquisitions of equity investees
Acquisition of additional interests in subsidiaries from non-controlling interests
Proceeds from disposal of an equity investee
Net cash provided by/(used) in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options
Proceeds from issuance of series A convertible redeemable preferred shares, net of issuance costs
Proceeds from issuance of series B convertible redeemable preferred shares, net of issuance costs
Proceeds from issuance of series C convertible redeemable preferred shares, net of issuance costs
Proceeds from collection of receivable from a holder of Series D convertible redeemable preferred shares
Capital injection from non-controlling interests
Deposit from non-controlling interest
Proceeds from issuance of redeemable non-controlling interests
Repayment of non-recourse loan
Repurchase of restricted shares
Principal payments on finance leases
Proceeds from issuance of convertible promissory note
Repayment of convertible promissory note
Proceeds from borrowings
Repayments of borrowings
Proceeds from issuance of ordinary share, net
Net cash provided by financing activities
Effects of exchange rate changes on cash, cash equivalents and restricted cash
NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash, cash equivalents and restricted cash at beginning of the year
Cash, cash equivalents and restricted cash at end of the year
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of series D convertible redeemable preferred shares
Acquisition of an equity investee
Accruals related to purchase of property and equipment
Supplemental Disclosure
Interest paid
Income taxes paid
For the Year Ended December 31,
2017
RMB
2018
RMB
2019
RMB
2019
US$
Note 2(e)
(5,021,174)
(9,638,979)
(11,295,652)
(1,622,518)
167,858
474,223
—
—
—
49,503
90,296
(3,498)
—
5,375
6,192
—
(404,762)
(89,464)
(66,698)
9,650
—
—
—
—
—
603,374
78,629
(4,574,719)
(1,113,893)
—
—
(1,337,413)
1,340,911
—
—
(52,500)
(27,378)
—
(1,190,273)
6,207
273,686
240,066
4,398,313
7,314,387
13,376
—
—
—
—
—
312,624
(325,013)
633,688
—
—
12,867,334
(168,120)
6,934,222
596,631
7,530,853
85,553
—
410,726
496,279
15,434
1,129
—
—
—
36,597
679,468
—
—
9,722
21,547
—
(811,138)
(1,375,862)
(657,986)
21,398
(756,508)
2,827,144
(574,677)
—
193,524
1,348,622
291,137
(7,911,768)
(2,643,964)
(8,090,703)
2,936,000
—
—
(65,342)
34,066
(110,900)
—
—
(7,940,843)
42,251
—
—
—
78,651
14,500
47,124
1,265,900
82,863
(7,490)
—
—
—
2,668,461
(120,205)
7,531,037
11,603,092
(56,947)
(4,306,466)
7,530,853
3,224,387
—
—
1,027,377
1,027,377
112,682
11,157
998,938
108,459
10,427
75,278
13,876
333,495
—
(40,722)
64,478
50,845
522,035
(58,728)
569,163
(243,936)
(7,948)
(681,556)
116,527
(83,021)
(345,323)
102,391
848,361
220,907
(8,721,706)
(1,706,787)
(2,202,762)
7,246,465
—
—
—
—
(31,500)
—
76,653
3,382,069
50,790
—
—
—
—
—
—
—
—
—
(43,916)
4,322,457
—
1,376,580
(2,610,958)
—
3,094,953
10,166
(2,234,518)
3,224,387
989,869
—
35,931
1,121,715
1,157,646
260,377
18,189
143,488
15,579
1,498
10,813
1,993
47,903
—
(5,849)
9,262
7,303
74,986
(8,437)
81,755
(35,039)
(1,142)
(97,899)
16,738
(11,925)
(49,603)
14,708
121,860
31,731
(1,252,795)
(245,165)
(316,407)
1,040,890
—
—
—
—
(4,525)
—
11,011
485,804
7,296
—
—
—
—
—
—
—
—
—
(6,308)
620,882
—
197,733
(375,041)
—
444,562
1,460
(320,969)
463,154
142,185
—
5,161
161,124
166,285
37,401
2,613
The accompanying notes are an integral part of these consolidated financial statements.
F-11
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
1. Organization and Nature of Operations
NIO Inc. (“NIO”, or “the Company”) was incorporated under the laws of the Cayman Islands in November, 2014, as an exempted
company with limited liability. The Company was formerly known as NextCar Inc.. It changed its name to NextEV Inc. in December,
2014, and then changed to NIO Inc. in July, 2017. The Company, its subsidiaries and consolidated variable interest entities (“VIEs”) are
collectively referred to as the “Group”.
The Group designs and develops high-performance fully electric vehicles. It launched the first volume manufactured electric vehicle,
the ES8, to the public in December 2017. The Group jointly manufactures its vehicles through strategic collaboration with other Chinese
vehicle manufacturers. The Group also offers Energy and Service packages to its users. As of December 31, 2018 and 2019, its primary
operations are conducted in the People’s Republic of China (“PRC”). The Group began to sell its first vehicles in June 2018. As of
December 31, 2019, the Company’s principal subsidiaries and VIEs are as follows:
Subsidiaries
NIO NextEV Limited (“NIO HK”) (formerly known as NextEV Limited)
NIO GmbH (formerly known as NextEV GmbH)
NIO Co., Ltd. (“NIO SH”) (formerly known as NextEV Co., Ltd.)
NIO USA, Inc. (“NIO US”) (formerly known as NextEV USA, Inc.)
XPT Limited (“XPT”)
NIO Performance Engineering Limited ("NPE")
NIO Sport Limited (“NIO Sport”) (formerly known as NextEV NIO Sport
Limited)
XPT Technology Limited (“XPT Technology”)
XPT Inc. (“XPT US”)
XPT (Jiangsu) Investment Co., Ltd. (“XPT Jiangsu”)
Shanghai XPT Technology Limited
XPT (Nanjing) E-Powertrain Technology Co., Ltd. (“XPT NJEP”)
XPT (Nanjing) Energy Storage System Co., Ltd. (“XPT NJES”)
NIO Power Express Limited (“PE HK)
NextEV User Enterprise Limited (“UE HK”)
Shanghai NIO Sales and Services Co., Ltd. (“UE CNHC”)
NIO Energy Investment (Hubei) Co., Ltd. (“PE CNHC”)
Wuhan NIO Energy Co., Ltd. (“PE WHJV”)
XTRONICS (Nanjing) Automotive Intelligent Technologies Co. Ltd. (“XPT
NJWL”)
XPT (Jiangsu) Automotive Technology Co., Ltd. (“XPT AUTO”)
Equity
interest held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
Place and date of incorporation
or date of acquisition
Hong Kong, February 2015
Germany, May 2015
Shanghai, PRC, May 2015
United States, November 2015
Hong Kong, December 2015
United Kingdom, July 2019
Investment holding
Principal activities
Design and technology development
Headquarter and technology development
Technology development
Investment holding
Marketing and technology development
Hong Kong, April 2016
Hong Kong, April 2016
United States, April 2016
Jiangsu, PRC, May 2016
Shanghai, PRC, May 2016
Nanjing, PRC, July 2016
Nanjing, PRC, October 2016
Hong Kong, January 2017
Hong Kong, February 2017
Shanghai, PRC, March 2017
Wuhan PRC, April 2017
Wuhan, PRC, May 2017
Racing management
Investment holding
Technology development
Investment holding
Technology development
Manufacturing of E-Powertrain
Manufacturing of battery pack
Investment holding
Investment holding
Investment holding and sales and after sales management
Investment holding
Investment holding
Nanjing, PRC, June 2017
Nanjing, PRC, May 2018
Manufacturing of components
Investment holding
VIE and VIE’s subsidiaries
Prime Hubs Limited (“Prime Hubs”)
NIO Technology Co., Ltd. (“NIO SHTECH”) (formerly known as Shanghai NextEV
Technology Co., Ltd.)
Beijing NIO Network Technology Co., Ltd. (“NIO BJTECH”)
Shanghai Anbin Technology Co., Ltd. (“NIO ABTECH”)
Economic
interest held
100%
Place and Date of incorporation
or date of acquisition
BVI, October 2014
100%
100%
100%
Shanghai, PRC, November 2014
Beijing, PRC, July 2017
Shanghai, PRC, April 2018
In accordance with the Article of Association of XPT NJWL, the Company has the power to control the board of directors of XPT
NJWL to unilaterally govern the financial and operating policies of XPT NJWL and the non-controlling shareholder does not have
substantive participating rights, therefore, the Group consolidates this entity.
Initial Public Offering
On September 12, 2018, the Company consummated its initial public offering (the “IPO”) on the New York Stock Exchange, where
160,000,000 ordinary shares were newly issued with the total net proceeds of RMB6,568,291 (US$956,362). Subsequently on
October 12, 2018, over-allotment option were fully exercised and the Company received a net proceeds of RMB962,746 (US$138,982)
associated with issuing additional 24,000,000 ordinary shares.
F-12
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Variable interest entity
NIO SHTECH was established by Li Bin and Qin Lihong (the “Nominee Shareholders”) in November, 2014. In 2015, NIO SH, NIO
SHTECH, and the Nominee Shareholders of NIO SHTECH entered into a series of contractual agreements, including a loan agreement,
an equity pledge agreement, exclusive call option agreement and power of attorney that irrevocably authorized the Nominee
Shareholders designated by NIO SH to exercise the equity owner’s rights over NIO SHTECH. These agreements provide the Company,
as the only shareholder of NIO SH, with effective control over NIO SHTECH to direct the activities that most significantly impact NIO
SHTECH’s economic performance and enable the Company to obtain substantially all of the economic benefits arising from NIO
SHTECH. Management concluded that NIO SHTECH is a variable interest entity of the Company and the Company is the ultimate
primary beneficiary of NIO SHTECH and shall consolidate the financial results of NIO SHTECH in the Group’s consolidated financial
statements. In April 2018, the above mentioned contractual agreements were terminated. On the same date, NIO SHTECH became a
subsidiary wholly owned by NIO ABTECH, who also became a VIE of the Group on that day. As of December 31, 2018 and 2019, NIO
SHTECH did not have significant operations, nor any material assets or liabilities.
In October 2014, Prime Hubs, a British Virgin Islands (“BVI”) incorporated company and a consolidated variable interest entity of
the Group, was established by the shareholders of the Group to facilitate the adoption of the Company’s employee stock incentive plans.
The Company entered into a management agreement with Prime Hubs and Li Bin. The agreement provides the company with effective
control over Prime Hubs and enables the Company to obtain substantially all of the economic benefits arising from Prime Hubs. As of
December 31, 2018 and 2019, Prime Hubs held 4,250,002 Class A Ordinary Shares and 4,250,002 Class A Ordinary Shares of the
Company, respectively.
In April 2018, NIO SH entered into a series of contractual arrangements with the Nominee Shareholders as well as NIO ABTECH
and NIO BJTECH separately, each including a loan agreement, an equity pledge agreement, exclusive call option agreement and power
of attorney that irrevocably authorized the Nominee Shareholders designated by NIO SH to exercise the equity owner’s rights over NIO
ABTECH and NIO BJTECH. These agreements provide the Company, as the only shareholder of NIO SH, with effective control over
NIO ABTECH and NIO BJTECH to direct the activities that most significantly impact their economic performance and enable the
Company to obtain substantially all of the economic benefits arising from them. Management concluded that NIO ABTECH and NIO
BJTECH are variable interest entities of the Company and the Company is the ultimate primary beneficiary of them and shall consolidate
the financial results of NIO ABTECH and NIO BJTECH in the Group’s consolidated financial statements. As of December 31, 2019,
NIO ABTECH and NIO BJTECH did not have significant operations, nor any material assets or liabilities.
Liquidity and Going Concern
The Group’s consolidated financial statements have been prepared on a going concern basis, which assumes that the Group will
continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal
course of operations as they come due.
The Group has been incurring losses from operations since inception. The Group incurred net losses of RMB5.0 billion, RMB9.6
billion and RMB11.3 billion for the years ended December 31, 2017, 2018 and 2019, respectively. Accumulated deficit amounted to
RMB35.0 billion and RMB46.3 billion as of December 31, 2018 and 2019, respectively. Net cash used in operating activities was
RMB4.6 billion, RMB7.9 billion and RMB8.7 billion for the years ended December 31, 2017, 2018 and 2019, respectively. As of
December 31, 2019, the Group’s total shareholders’ deficit was RMB6.3 billion and the current liabilities exceeded the current assets in
the amount of RMB4.6 billion. The Group’s cash balance as of December 31, 2019 is not sufficient to meet its obligations or liabilities
when they become due, nor is it adequate to provide the required working capital and liquidity for continuous operation over the next
twelve months from the date of issuance of the consolidated financial statements.
F-13
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
These adverse conditions and events indicate there could be substantial doubt about the Group’s ability to continue as a going
concern. Management has developed plans to mitigate these adverse conditions and events which included a business plan covering the
next twelve months from the date of issuance of the consolidated financial statements which considers the increase in revenue and
optimizing operation efficiency to improve operating cash flows, the use of and the consummation of external financing projects since
the Group’s operation has historically depended on, and will continue to depend on its capability to obtain sufficient external equity or
debt financing. As described in Note 29, on April 29, 2020, the Group entered into a definitive agreement with several third party
investors who are committed to invest in a subsidiary of the Group with a total cash consideration of RMB 7 billion. In addition, as of the
date of issuance of the consolidated financial statements, the Company had unused loan facilities of RMB 1.5 billion with respective
expiration dates between June 2020 and May 2022. Management believes that funds from the equity financing and available loan
facilities will be sufficient to support the Group’s continuous operations and the Group will be able to meet its payment obligations when
liabilities fall due within the next twelve months from the date of issuance of these consolidated financial statements. Accordingly,
management continues to prepare the Group’s consolidated financial statements on going concern basis.
2. Summary of Significant Accounting Policies
(a) Basis of presentation
The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”). Significant accounting policies followed by the Group in the preparation of the
accompanying consolidated financial statements are summarized below.
(b) Principles of consolidation
The consolidated financial statements include the financial statements of the Company, its subsidiaries and the VIE for which the
Company is the ultimate primary beneficiary.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the
power to appoint or remove the majority of the members of the board of directors (the “Board”): to cast majority of votes at the meeting
of the Board or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or
equity holders.
A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the
rewards normally associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the
entity.
All significant transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon
consolidation. The non-controlling interests in consolidated subsidiaries are shown separately in the consolidated financial statements.
(c) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance
sheet date, and the reported revenue and expenses during the reported period in the consolidated financial statements and accompanying
notes. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include, but are not limited to,
standalone selling price of each distinct performance obligation in revenue recognition, the valuation and recognition of share-based
compensation arrangements, depreciable lives of property, equipment and software, assessment for impairment of long-lived assets,
inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, valuation of deferred tax
assets, recoverability of receivables, warranty liabilities as well as redemption value of the convertible redeemable preferred shares.
Actual results could differ from those estimates.
(d) Functional currency and foreign currency translation
The Group’s reporting currency is the Renminbi (“RMB”). The functional currency of the Company and its subsidiaries which are
incorporated in HK is United States dollars (“US$”), except NIO Sport which operates mainly in United Kingdom and uses Great Britain
pounds (“GBP”). The functional currencies of the other subsidiaries and the VIE are their respective local currencies. The determination
of the respective functional currency is based on the criteria set out by ASC 830, Foreign Currency Matters.
F-14
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Transactions denominated in currencies other than in the functional currency are translated into the functional currency using the
exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into
functional currency using the applicable exchange rates at the balance sheet date. Non-monetary items that are measured in terms of
historical cost in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains or
losses arising from foreign currency transactions are included in the consolidated statements of comprehensive loss.
The financial statements of the Group’s entities of which the functional currency is not RMB are translated from their respective
functional currency into RMB. Assets and liabilities denominated in foreign currencies are translated into RMB at the exchange rates at
the balance sheet date. Equity accounts other than earnings generated in current period are translated into RMB at the appropriate
historical rates. Income and expense items are translated into RMB using the periodic average exchange rates. The resulting foreign
currency translation adjustments are recorded in other comprehensive loss in the consolidated statements of comprehensive gain or loss,
and the accumulated foreign currency translation adjustments are presented as a component of accumulated other comprehensive loss in
the consolidated statements of shareholders’ (deficit)/equity. Total foreign currency translation adjustment losses were RMB124,374,
RMB20,786 and RMB168,340 for the years ended December 31, 2017, 2018 and 2019, respectively. The grant-date fair value of the
Group’s share-based compensation expenses is reported in US$ as the respective valuation is conducted in US$ as the shares are
denominated in US$.
(e) Convenience translation
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss and consolidated
statements of cash flows from RMB into US$ as of and for the year ended December 31, 2019 are solely for the convenience of the
reader and were calculated at the rate of US$1.00 = RMB6.9618, representing the noon buying rate in The City of New York for cable
transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2019. No representation
is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on
December 31, 2019, or at any other rate.
(f) Fair value
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or
permitted to be either recorded or disclosed at fair value, the Group considers the principal or most advantageous market in which it
would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs
that may be used to measure fair value:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.
Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or
liabilities.
Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, restricted cash, short-term investments,
trade receivable, amounts due from related parties, prepayments and other current assets, long-term investments, trade payable, amounts
due to related parties, short-term borrowings, taxes payable, accruals and other liabilities, long-term receivables and long-term
borrowings. As of December 31, 2018 and 2019, the carrying values of these financial instruments are approximated to their fair values
due to the short-term maturity of these instruments except for long-term receivables, long-term borrowings and certain investments
which are carried at fair value at each balance sheet date. Certain long-term investments in equity investees classified within Level 3 are
valued based on a model utilizing unobservable inputs which require significant management judgment and estimation.
F-15
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are
not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or
independently sourced market parameters, such as interest rates and currency rates. Below is a description of the valuation techniques
that the Group uses to measure the fair value of assets that the Group reports on its consolidated balance sheets at fair value on a
recurring basis.
Time deposits. The Group values its time deposits held in certain bank accounts using quoted prices for securities with similar
characteristics and other observable inputs, and accordingly, the Group classifies the valuation techniques that use these inputs as Level
2.
Short-term borrowings. The rates of interest under the loan agreements with the lending banks were determined based on the
prevailing interest rates in the market. The Group classifies the valuation techniques that use these inputs as Level 2.
Short-term receivables and payables. Trade receivable and prepayments and other current assets are financial assets with carrying
values that approximate fair value due to their short term nature. Trade payable, accruals and other liabilities are financial liabilities with
carrying values that approximate fair value due to their short term nature.
Prepayments and other assets in non-current assets. Prepayments and other assets in non-current assets are financial assets with
carrying values that approximates fair value due to the change in fair value after considering the discount rate. The Group estimated fair
values of non-current prepayments and other assets using the discount cash flow method.
(g) Cash, cash equivalents and restricted cash
Cash and cash equivalents represent cash on hand, time deposits and highly-liquid investments placed with banks or other financial
institutions, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less.
Restricted cash is restricted to withdrawal for use or pledged as security is reported separately on the face of the Consolidated
Balance Sheets. The Group’s restricted cash mainly represents (a) the secured deposits held in designated bank accounts for issuance of
bank credit card; (b) time deposit that are pledged for property lease.
Cash, cash equivalents and restricted cash as reported in the consolidated statement of cash flows are presented separately on our
consolidated balance sheet as follows:
Cash and cash equivalents
Restricted cash
Long-term restricted cash
Total
(h) Short-term investment
7,505,954 3,133,847
57,012
33,528
7,530,853 3,224,387
10,606
14,293
December 31, December 31, December 31
2018
2017
2019
862,839
82,507
44,523
989,869
Short-term investments consist primarily of investments in fixed deposits with maturities between three months and one year and
investments in money market funds and financial products issued by banks. As of December 31, 2018 and 2019, the investment in fixed
deposits that were recorded as short-term investments amounted to RMB5,154,703 and RMB111,000, respectively, among which,
RMB1,775,000 and RMB96,000 were restricted as collateral for bank borrowings and letter of guarantee as of December 31, 2018 and
2019 respectively.
(i) Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily include amounts of vehicle sales in relation of government subsidy to be collected from government
on behalf of customers, current portion of battery installment and receivables due from vehicle users. The Group provides an allowance
against accounts receivable when there is doubt as to the collectability of individual balances. The Group writes off accounts receivable
when they are deemed uncollectible. Allowance for doubtful accounts recognized for the years ended December 31, 2017, 2018 and
2019 was nil, nil and RMB85,824, respectively.
F-16
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(j) Inventory
Inventories are stated at the lower of cost or net realizable value. Cost is calculated on the average basis and includes all costs to
acquire and other costs to bring the inventories to their present location and condition. The Group records inventory write-downs for
excess or obsolete inventories based upon assumptions on current and future demand forecasts. If the inventory on hand is in excess of
future demand forecast, the excess amounts are written off. The Group also reviews inventory to determine whether its carrying value
exceeds the net amount realizable upon the ultimate sale of the inventory. This requires the determination of the estimated selling price of
the vehicles less the estimated cost to convert inventory on hand into a finished product. Once inventory is written-down, a new, lower-
cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase
in that newly established cost basis.
(k) Trading securities
Trading securities are comprised of bonds and are all designated as trading securities as they have been acquired principally for the
purpose of selling in the near term. They are recognized on the trade date, when the Group enters into contractual arrangements with
counterparties, and are normally derecognized when sold. They are initially measured at fair value, with transaction costs taken to the
Statements of Comprehensive Loss.Subsequent changes in their fair values and interest are recognized in the Statements of
Comprehensive Loss.
(l) Property, plant and equipment, net
Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if any. Property and equipment
are depreciated at rates sufficient to write off their costs less impairment and residual value, if any, over their estimated useful lives on a
straight-line basis. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related
assets.
The estimated useful lives are as follows:
Building and constructions
Production facilities
Charging & battery swap infrastructure
R&D equipment
Computer and electronic equipment
Purchased software
Leasehold improvements
Others
Useful lives
20 years
10 years
5 years
5 years
3 years
3 years
Shorter of the estimated useful life or remaining lease term
3 to 5 years
Depreciation for mold and tooling is computed using the units-of-production method whereby capitalized costs are amortized over
the total estimated productive life of the related assets.
The cost of maintenance and repairs is expensed as incurred, whereas the cost of renewals and betterment that extends the useful
lives of property, plant and equipment is capitalized as additions to the related assets. Interest expense on outstanding debt is capitalized
during the period of significant capital asset construction. Capitalized interest on construction-in-progress is included within property,
plant and equipment and is amortized over the life of the related assets. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation and amortization are removed from their respective accounts, and any gain or loss on such sale or
disposal is reflected in the statements of comprehensive loss.
F-17
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(m) Intangible assets, net
Intangible assets are carried at cost less accumulated amortization and impairment, if any. Intangible assets are amortized using the
straight-line method over the estimated useful lives as below:
Domain names and others
License
5 years
3 years
Useful lives
The estimated useful lives of amortized intangible assets are reassessed if circumstances occur that indicate the original estimated
useful lives have changed.
(n) Land use rights, net
Land use rights are recorded at cost less accumulated amortization. Amortization is provided on a straight-line basis over the
estimated useful lives which are 536 months representing the shorter of the estimated usage periods or the terms of the agreements.
(o) Long-term investments
The Group’s long-term investments include equity investments in entities. Investments in entities in which the Group can exercise
significant influence and holds an investment in voting common stock or in-substance common stock (or both) of the investee but does
not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC topic 323,
Investments—Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Group initially records its investments at fair
value. The Group subsequently adjusts the carrying amount of the investments to recognize the Group’s proportionate share of each
equity investee’s net income or loss into earnings after the date of investment. The Group evaluates the equity method investments for
impairment under ASC 323. An impairment loss on the equity method investments is recognized in earnings when the decline in value is
determined to be other-than-temporary. The carrying value of the Group’s long-term investments measured under equity method was
RMB148,303 and RMB115,325 as of December 31, 2018 and 2019, respectively. No impairment charge was recognized for the years
ended December 31, 2017, 2018 and 2019.
(p) Impairment of long-lived assets
Long-lived assets are evaluated for impairment whenever events or changes in circumstances (such as a significant adverse change
to market conditions that will impact the future use of the assets) indicate that the carrying amount may not be fully recoverable or that
the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment by
comparing carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the
assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the
assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
Impairment charge recognized for the years ended December 31, 2017, 2018 and 2019 was nil, nil and RMB75,278, respectively.
(q) Warranty liabilities
The Company accrues a warranty reserve for all new vehicles sold by the Company, which includes the Company's best estimate of
the projected costs to repair or replace items under warranties. These estimates are based on actual claims incurred to date and an
estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given the Company's relatively
short history of sales, and changes to the historical or projected warranty experience may cause material changes to the warranty reserve
when the Company accumulates more actual data and experience in the future.
The portion of the warranty reserve expected to be incurred within the next 12 months is included within accruals and other
liabilities, while the remaining balance is included within other non-current liabilities on the consolidated balance sheets. Warranty
expense is recorded as a component of cost of revenues in the consolidated statements of comprehensive loss.
F-18
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
The following table shows a reconciliation in the current reporting period related to carried-forward warranty liabilities.
Warranty – beginning of year
Provision for warranty
Warranty costs incurred
Warranty– end of year
(r) Revenue recognition
For the Year Ended December 31
2018
2017
—
—
—
—
179,766
(2,473)
2019
177,293
283,647
(48,936)
—
177,293
412,004
Revenue is recognized when or as the control of the goods or services is transferred to a customer. Depending on the terms of the
contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time.
Control of the goods and services is transferred over time if the Group’s performance:
● provides all of the benefits received and consumed simultaneously by the customer;
● creates and enhances an asset that the customer controls as the Group performs; or
● does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance
completed to date.
If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the
progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the
customer obtains control of the goods and services.
Contracts with customers may include multiple performance obligations. For such arrangements, the Group allocates revenue to
each performance obligation based on its relative standalone selling price. The Group generally determines standalone selling prices
based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus
a margin or adjusted market assessment approach, depending on the availability of observable information. Assumptions and estimations
have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these
assumptions and estimates may impact the revenue recognition.
When either party to a contract has performed, the Group presents the contract in the statement of financial position as a contract
asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment.
A contract asset is the Group’s right to consideration in exchange for goods and services that the Group has transferred to a
customer. A receivable is recorded when the Group has an unconditional right to consideration. A right to consideration is unconditional
if only the passage of time is required before payment of that consideration is due.
If a customer pays consideration or the Group has a right to an amount of consideration that is unconditional, before the Group
transfers a good or service to the customer, the Group presents the contract liability when the payment is made, or a receivable is
recorded (whichever is earlier). A contract liability is the Group’s obligation to transfer goods or services to a customer for which the
Group has received consideration (or an amount of consideration is due) from the customer. The Group’s contract liabilities primarily
resulted from the multiple performance obligations identified in the vehicle sales contract and the sales of Energy and Service Packages,
which is recorded as deferred revenue and advance from customers. As of December 31, 2018 and 2019, the balances of contract
liabilities from vehicle sales contracts were RMB99,128 and RMB96,827, respectively. As of December 31, 2018 and 2019, the balances
of contract liabilities from the sales of Energy and Service Packages were RMB32,226 and RMB65,361, respectively.
F-19
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Vehicle sales
The Group generates revenue from sales of electric vehicles, together with a number of embedded products and services through a
series of contracts. The Group identifies the users who purchase the vehicle as its customers. There are multiple distinct performance
obligations explicitly stated in a series of contracts including sales of vehicles, charging piles, vehicle internet connection services and
extended lifetime warranty which are accounted for in accordance with ASC 606. The standard warranty provided by the Group is
accounted for in accordance with ASC 460, Guarantees, and the estimated costs are recorded as a liability when NIO transfers the control
of vehicle to a user.
Customers only pay the amount after deducting the government subsidies to which they are entitled for the purchase of electric
vehicles. The government subsidies are applied on their behalves and collected by the Group or Jianghuai Automobile Group Co., Ltd.
(“JAC”) from the government. The Group has concluded that government subsidies should be considered as a part of the transaction
price it charges the customers for the electric vehicle, as the subsidy is granted to the buyer of the electric vehicle and the buyer remains
liable for such amount in the event the subsidies were not received by the Group. For efficiency reason, the Group or JAC applies and
collects the payment on behalf of the customers. In the instance that some eligible customer selects installment payment for battery, the
Group believes such arrangement contains a significant financing component and as a result adjusts the amount considering the impact of
time value on the transaction price using an appropriate discount rate (i.e. the interest rates of the loan reflecting the credit risk of the
borrower). The long-term receivable of installment payment for battery was recognized as non-current assets. The difference between the
gross receivable and the present value is recorded as unrealized finance income. Interest income resulting from a significant financing
component will be presented separately from revenue from contracts with customers as this is not the Group’s ordinary business.
The Group uses a cost plus margin approach to determine the estimated standalone selling price for each individual distinct
performance obligation identified, considering the Group’s pricing policies and practices, and the data utilized in making pricing
decisions. The overall contract price is then allocated to each distinct performance obligation based on the relative estimated standalone
selling price in accordance with ASC 606. The revenue for vehicle sales and charging piles are recognized at a point in time when the
control of the product is transferred to the customer. For the vehicle internet connection service and free battery swapping service, the
Group recognizes the revenue using a straight-line method. As for the extended lifetime warranty, given limited operating history and
lack of historical data, the Group decides to recognize the revenue over time based on a straight-line method initially, and will continue
monitoring the cost pattern periodically and adjust the revenue recognition pattern to reflect the actual cost pattern as it becomes
available.
As the consideration for the vehicle and all embedded services must be paid in advance, which means the payments received are
prior to the transfer of goods or services by the Group, the Group records a contract liability (deferred revenue) for the allocated amount
regarding those unperformed obligations.
Sales of Energy and Service Packages
The Group also sells the two packages, Energy Package and Service Package in exchange of considerations. The Energy Package
provides vehicle users with a comprehensive range of charging solutions (including charging and battery swapping). The energy service
is applied by users on the mobile application depending on their needs and the Group can decide the most appropriate service to offer
according to its available resource. Through the Service Package, the Group offers vehicle users with a “worry free” vehicle ownership
experience (including free repair service with certain limitations, routine maintenance service, enhanced data package, etc.), which can
be applied by user via mobile application.
The Group identifies the users who purchase Energy Package and Service Package meet the definition of a customer. The
agreements for Energy Package and Service Package create legal enforceability to both parties on a monthly basis as the respective
Energy or Service Packages can be canceled at any time without any penalty. The Group concludes the energy or service provided in
Energy Package or Service Package respectively meets the stand-ready criteria and contains only one performance obligation within each
package, the revenue is recognized over time on a monthly basis as customer simultaneously receives and consumes the benefits
provided and the term of legally enforceable contract is only one month.
F-20
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Incentives
The Group offers a self-managed customer loyalty program points, which can be used in the Group’s online store and at NIO houses
to redeem NIO merchandise. The Group determines the value of each point based on estimated incremental cost. Customers and NIO
fans and advocates have a variety of ways to obtain the points. The major accounting policy for its points program is described as
follows:
(i) Sales of vehicle
The Group concludes the points offered linked to the purchase transaction of the vehicle is a material right and accordingly a
separate performance obligation according to ASC 606, and should be taken into consideration when allocating the transaction price of
the vehicle sales. The Group also estimates the probability of points redemption when performing the allocation. Since historical
information does not yet exist for the Group to determine any potential points forfeitures and the fact that most merchandise can be
redeemed without requiring a significant amount of points compared with the amount of points provided to users, the Group believes it is
reasonable to assume all points will be redeemed and no forfeiture is estimated currently. The amount allocated to the points as separate
performance obligation is recorded as contract liability (deferred revenue) and revenue should be recognized when future goods or
services are transferred. The Group will continue to monitor when and if forfeiture rate data becomes available and will apply and update
the estimated forfeiture rate at each reporting period.
(ii) Sales of Energy Package and Service Package
Energy Package—When the customers charge their vehicles without using the Group’s charging network, the Group will grant
points based on the actual cost the customers incur. The Group records the value of the points as a reduction of revenue from the Energy
Package.
Service Package-The Group grants points to the customers with safe driving record during the effective period of the service
package. The Group records the value of the points as a reduction of revenue from the Service Package.
Since historical information is limited for the Group to determine any potential points forfeiture and most merchandise can be
redeemed without requiring a significant amount of points compared with the amount of points provided to users, the Group has used an
estimated forfeiture rate of zero.
(iii) Other scenarios
Customers or users of the mobile application can also obtain points through any other ways such as frequent sign-ins to the Group’s
mobile application, sharing articles from the application to users’ own social media. The Group believes these points are to encourage
user engagement and generate market awareness. As a result, the Group accounts for such points as selling and marketing expenses with
a corresponding liability recorded under other current liabilities of its consolidated balance sheets upon the points offering. The Group
estimates liabilities under the customer loyalty program based on cost of the NIO merchandise that can be redeemed, and its estimate of
probability of redemption. At the time of redemption, the Group records a reduction of inventory and other current liabilities. In certain
cases where merchandise is sold for cash in addition to points, the Group records other revenue.
Similar to the reasons above, the Group estimates no points forfeiture currently and continues to assess when and if a forfeiture rate
should be applied.
For the years ended December 31, 2017, 2018 and 2019, the revenue portion allocated to the points as separate performance
obligation was nil, RMB47,310 and RMB66,286, respectively, which is recorded as contract liability (deferred revenue). For the years
ended December 31, 2017, 2018 and 2019, the total points recorded as a reduction of revenue was nil, RMB441 and RMB25,408,
respectively. For the years ended December 31, 2017, 2018 and 2019, the total points recorded as selling and marketing expenses were
RMB16,460, RMB153,057 and RMB142,425, respectively.
As of December 31, 2018 and 2019, liabilities recorded related to unredeemed points were RMB143,868 and RMB178,666,
respectively.
F-21
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Practical expedients and exemptions
The Group follows the guidance on immaterial promises when identifying performance obligations in the vehicle sales contracts and
concludes that lifetime roadside assistance and out-of-town charging services are not performance obligations considering these two
services are value-added services to enhance user experience rather than critical items for vehicle driving and forecasted that usage of
these two services will be very limited. The Group also performs an estimation on the standalone fair value of each promise applying a
cost plus margin approach and concludes that the standalone fair value of roadside assistance and out-of-town charging services are
insignificant individually and in aggregate, representing less than 1% of vehicle gross selling price and aggregate fair value of each
individual promise.
Considering the qualitative assessment and the result of the quantitative estimate, the Group concluded not to assess whether
promises are performance obligations if they are immaterial in the context of the contract and the relative standalone fair value
individually and in aggregate is less than 3% of the contract price, namely the road-side assistance and out-of-town charging services.
Related costs are recognized as incurred.
(s) Cost of Sales
Vehicle
Cost of vehicle revenue includes direct parts, material, processing fee, loss compensation to JAC, labor costs, manufacturing
overhead (including depreciation of assets associated with the production), and reserves for estimated warranty expenses. Cost of vehicle
revenue also includes adjustments to warranty expense and charges to write-down the carrying value of the inventory when it exceeds its
estimated net realizable value and to provide for on-hand inventory that is either obsolete or in excess of forecasted demand.
Service and Other
Cost of service and other revenue includes direct parts, material, labor costs, vehicle internet connectivity costs, and depreciation of
assets that are associated with sales of Energy and Service packages.
(t) Sales and marketing expenses
Sales and marketing expenses consist primarily of marketing and promotional expenses, salaries and other compensation-related
expenses to sales and marketing personnel. Advertising expenses consist primarily of costs for the promotion of corporate image and
product marketing. The Group expenses all advertising costs as incurred and classifies these costs under sales and marketing expenses.
For the years ended December 31, 2017, 2018 and 2019, advertising costs totalled RMB63,427, RMB218,060 and RMB230,061,
respectively.
(u) Research and development expenses
Certain costs associated with developing internal-use software are capitalized when such costs are incurred within the application
development stage of software development. Other than that, all costs associated with research and development (“R&D”) are expensed
as incurred. R&D expenses are primary comprised of charges for R&D and consulting work performed by third parties; salaries, bonuses,
share-based compensation, and benefits for those employees engaged in research, design and development activities; costs related to
design tools; license expenses related to intellectual property, supplies and services; and allocated costs, including depreciation and
amortization, rental fees, and utilities.
(v) General and administrative expenses
General and administrative expenses consist primarily of salaries, bonuses, share-based compensation and benefits for employees
involved in general corporate functions and those not specifically dedicated to research and development activities, depreciation and
amortization of fixed assets which are not used in research and development activities, legal and other professional services fees, rental
and other general corporate related expenses.
F-22
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(w) Employee benefits
Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which
certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor
regulations require that the PRC subsidiaries and VIE of the Group make contributions to the government for these benefits based on
certain percentages of the employees’ salaries, up to a maximum amount specified by the local government. The Group has no legal
obligation for the benefits beyond the contributions made. Total amounts of such employee benefit expenses, which were expensed as
incurred, were approximately RMB231,070, RMB517,787 and RMB553,523 for the years ended December 31, 2017, 2018 and 2019,
respectively.
(x) Government grants
The Group’s PRC based subsidiaries received government subsidies from certain local governments. The Group’s government
subsidies consisted of specific subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a
specific purpose, such as product development and renewal of production facilities. Other subsidies are the subsidies that the local
government has not specified its purpose for and are not tied to future trends or performance of the Group; receipt of such subsidy
income is not contingent upon any further actions or performance of the Group and the amounts do not have to be refunded under any
circumstances. The Group recorded specific purpose subsidies as advances payable when received. For specific subsidies, upon
government acceptance of the related project development or asset acquisition, the specific purpose subsidies are recognized to reduce
related R&D expenses or the cost of asset acquisition. Other subsidies are recognized as other income upon receipt as further
performance by the Group is not required.
(y) Income taxes
Current income taxes are recorded in accordance with the regulations of the relevant tax jurisdiction. The Group accounts for income
taxes under the asset and liability method in accordance with ASC 740, Income Tax. Under this method, deferred tax assets and liabilities
are recognized for the tax consequences attributable to differences between carrying amounts of existing assets and liabilities in the
financial statements and their respective tax basis, and operating loss carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive
loss in the period of change. Valuation allowances are established when necessary to reduce the amount of deferred tax assets if it is
considered more likely than not that amount of the deferred tax assets will not be realized.
The Group records liabilities related to uncertain tax positions when, despite the Group’s belief that the Group’s tax return positions
are supportable, the Group believes that it is more likely than not that those positions may not be fully sustained upon review by tax
authorities. Accrued interest and penalties related to unrecognized tax benefits are classified as income tax expense. The Group did not
recognize uncertain tax positions as of December 31, 2018 and 2019.
(z) Share-based compensation
The Company grants restricted shares and share options to eligible employees and non-employee consultants and accounts for share-
based compensation in accordance with ASC 718, Compensation—Stock Compensation and ASC 505-50 Equity-Based Payments to
Non-Employees. There were no new grants to non-employee consultants after the effectiveness of ASU 2018-07-Compensation-stock
compensation (Topic 718)-Improvements to nonemployee share-based payment accounting.
Employees’ share-based compensation awards are measured at the grant date fair value of the awards and recognized as expenses a)
immediately at the grant date if no vesting conditions are required; or b) for share options or restricted shares granted with only service
conditions, using the straight-line vesting method, net of estimated forfeitures, over the vesting period; or c) for share options granted
with service conditions and the occurrence of an IPO as performance condition, cumulative share-based compensation expenses for the
options that have satisfied the service condition should be recorded upon the completion of the IPO, using the graded vesting method.
This performance condition was met upon completion of the Company’s IPO on September 12, 2018 and the associated share-based
compensation expense for awards vested as of that date were recognized; or d) for share options where the underlying share is liability
within the scope of ASC 480, using the graded vesting method, net of estimated forfeitures, over the vesting period, and re-measuring the
fair value of the award at each reporting period end until the award is settled.
F-23
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value
of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Share-based compensation expenses for share options and restricted shares granted to non-employees are measured at fair value at
the earlier of the performance commitment date or the date service is completed, and recognized over the period during which the service
is provided. The Group applies the guidance in ASC 505-50 to measure share options and restricted shares granted to non-employees
based on the then-current fair value at each reporting date.
Before the completion of the Company's IPO, the fair value of the restricted shares was assessed using the income approaches /
market approaches, with a discount for lack of marketability given that the shares underlying the awards were not publicly traded at the
time of grant. This assessment required complex and subjective judgments regarding the Company’s projected financial and operating
results, its unique business risks, the liquidity of its ordinary shares and its operating history and prospects at the time the grants were
made. Upon the completion of the IPO, the fair value of the restricted shares is based on the fair market value of the underlying ordinary
shares on the date of grant. In addition, the binomial option-pricing model is used to measure the value of share options. The
determination of the fair value is affected by the fair value of the ordinary shares as well as assumptions including the expected share
price volatility, actual and projected employee and non-employee share option exercise behavior, risk-free interest rates and expected
dividends. The fair value of these awards was determined taking into account independent valuation advice.
The assumptions used in share-based compensation expense recognition represent management’s best estimates, but these estimates
involve inherent uncertainties and application of management judgment. If factors change or different assumptions are used, the share-
based compensation expenses could be materially different for any period. Moreover, the estimates of fair value of the awards are not
intended to predict actual future events or the value that ultimately will be realized by grantees who receive share-based awards, and
subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company for accounting
purposes.
Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. The
Group uses historical data to estimate pre-vesting options and records share-based compensation expenses only for those awards that are
expected to vest.
(aa) Comprehensive income/(loss)
The Group applies ASC 220, Comprehensive Income, with respect to reporting and presentation of comprehensive loss and its
components in a full set of financial statements. Comprehensive loss is defined to include all changes in equity of the Group during a
period arising from transactions and other event and circumstances except those resulting from investments by shareholders and
distributions to shareholders. For the years presented, the Group’s comprehensive loss includes net loss and other comprehensive loss,
which mainly consists of the foreign currency translation adjustment that have been excluded from the determination of net loss.
(ab) Leases
In February 2016, the FASB issued ASU No. 2016-02 (“ASC 842”), Leases, to require lessees to recognize all leases, with certain
exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting.
Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Targeted
Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU 2019-01, Codification Improvements, to clarify
and amend the guidance in ASU No. 2016-02. ASC 842 eliminates real estate-specific provisions and modifies certain aspects of lessor
accounting. This standard is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted.
The Group adopted ASC 842 as of January 1, 2019 using the additional transition method (“adoption of the new lease standard”). In
addition, the Group elected the package of practical expedients permitted under the transition guidance within the new standard, which
allowed us to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for
historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast
to reflect the application of the new standard to all comparative periods presented. The finance lease classification under ASC 842
includes leases previously classified as capital leases under ASC 840.
Operating lease assets are included within right-of-use assets - operating lease, and the corresponding operating lease liabilities are
included within operating lease liabilities on the consolidated balance sheet as of December 31, 2019. Finance lease assets are included
within other non-current assets, and the corresponding finance lease liabilities are included within accruals and other liabilities for the
current portion, and within other non-current liabilities on our consolidated balance sheet as of December 31, 2019.
F-24
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Adoption of the new lease standard on January 1, 2019 had a material impact on the consolidated financial statements. The most
significant impacts related to the 1) recognition of right-of-use assets of RMB2,023.8 million and lease liabilities of RMB2,102.2 million
for operating leases on the consolidated balance sheet; 2) recognition of right-of-use assets of RMB5.6 million and lease liabilities of
RMB7.7 million for finance leases on the consolidated balance sheet.
There was no impact to accumulated deficit at adoption.
The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of the new lease
standard was as follows (in thousands):
Assets
Prepayments and other current assets
Property, plant and equipment, net
Right-of-use assets - operating lease
Other non-current assets
Liabilities
Current portion of operating lease liabilities
Accruals and other liabilities
Non-current operating lease liabilities
Other non-current liabilities
(ac) Dividends
Balances at
December 31, 2018
Adjustments
from Adoption
of New Lease
Standard
Balances at
January 1, 2019
1,514,257
4,853,157
—
—
—
3,383,681
—
930,812
(90,074)
(5,563)
2,023,785
5,563
510,295
(37,137)
1,591,865
(131,312)
1,424,183
4,847,594
2,023,785
5,563
510,295
3,346,544
1,591,865
799,500
Dividends are recognized when declared. No dividends were declared for the years ended December 31, 2017, 2018 and 2019.
(ad) Earnings/(Loss) per share
Basic earnings/(loss) per share is computed by dividing net income/(loss) attributable to holders of ordinary shares, considering the
accretions to redemption value of the preferred shares, by the weighted average number of ordinary shares outstanding during the period
using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating
securities based on their participating rights. Diluted earnings/(loss) per share is calculated by dividing net income/(loss) attributable to
ordinary shareholders, as adjusted for the accretion and allocation of net income related to the preferred shares, if any, by the weighted
average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of
shares issuable upon the conversion of the preferred shares using the if-converted method, unvested restricted shares, restricted share
units and ordinary shares issuable upon the exercise of outstanding share options (using the treasury stock method). Ordinary equivalent
shares are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-
dilutive.
(ae) Segment reporting
ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating
segments, products, services, geographic areas, and major customers.
Based on the criteria established by ASC 280, the Group’s chief operating decision maker (“CODM”) has been identified as the
Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance
of the Group. As a whole and hence, the Group has only one reportable segment. The Group does not distinguish between markets or
segments for the purpose of internal reporting. As the Group’s long-lived assets are substantially located in the PRC, no geographical
segments are presented.
F-25
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
3. Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Statements. This ASU update on the measurement of credit losses for certain financial assets measured at amortized cost and
available-for-sale debt securities. In April 2019, the FASB issued ASU 2019-04 "Codification Improvements to Topic 326, Financial
Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments." For financial assets measured
at amortized cost, this update requires an entity to (1) estimate its lifetime expected credit losses upon recognition of the financial assets
and establish an allowance to present the net amount expected to be collected, (2) recognize this allowance and changes in the allowance
during subsequent periods through net income and (3) consider relevant information about past events, current conditions and reasonable
and supportable forecasts in assessing the lifetime expected credit losses. For available-for-sale debt securities, this update made several
targeted amendments to the existing other-than-temporary impairment model, including (1) requiring disclosure of the allowance for
credit losses, (2) allowing reversals of the previously recognized credit losses until the entity has the intent to sell, is more-likely-than-not
required to sell the securities or the maturity of the securities, (3) limiting impairment to the difference between the amortized cost basis
and fair value and (4) not allowing entities to consider the length of time that fair value has been less than amortized cost as a factor in
evaluating whether a credit loss exists. The Company adopted this update in the first quarter of 2020 and applied this update on a
modified retrospective basis. The adoption did not have a material impact to the Company’s Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the
Disclosure Requirements for Fair Value Measurement," which eliminates, adds and modifies certain disclosure requirements for fair
value measurements as part of the FASB's disclosure framework project. The new guidance is effective for the fiscal years and interim
reporting periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for the adoption of either the
entire ASU or only the provisions that eliminate or modify the requirements. The Company is evaluating the effects, if any, of the
adoption of this guidance on the fair value disclosure in the consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This
ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss
exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is
partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2)
requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which
goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that
an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that
includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early
adoption permitted. The Company is currently evaluating the impact.
4. Concentration and Risks
(a) Concentration of credit risk
Assets that potentially subject the Group to significant concentrations of credit risk primarily consist of cash and cash equivalents,
restricted cash and short-term investment. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance
sheet dates. As of December 31, 2018 and 2019, all of the Group’s cash and cash equivalents, restricted cash and short-term investments
were held by major financial institutions located in the PRC and Hong Kong which management believes are of high credit quality. The
PRC does not have an official deposit insurance program, nor does it have an agency similar to the Federal Deposit Insurance
Corporation (FDIC) in the United States. However, the Group believes that the risk of failure of any of these PRC banks is remote. Bank
failure is uncommon in China and the Group believes that those Chinese banks that hold the Group’s cash and cash equivalents and
restricted cash are financially sound based on publicly available information.
F-26
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(b) Currency convertibility risk
The PRC government imposes controls on the convertibility of RMB into foreign currencies. The Group’s cash and cash equivalents
and restricted cash denominated in RMB that are subject to such government controls amounted to RMB2,051,482 and RMB829,175 as
of December 31, 2018 and 2019, respectively. The value of RMB is subject to changes in the central government policies and to
international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market. In
the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange
rates set by the People’s Bank of China (the “PBOC”). Remittances in currencies other than RMB by the Group in the PRC must be
processed through PBOC or other Chinese foreign exchange regulatory bodies which require certain supporting documentation in order
to process the remittance.
(c) Foreign currency exchange rate risk
Since July 21, 2005, the RMB has been permitted to fluctuate within a narrow and managed band against a basket of certain foreign
currencies. While the international reaction to the RMB appreciation has generally been positive, there remains significant international
pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant
appreciation of the RMB against other currencies.
5. Inventory
Inventory consists of the following:
Raw materials
Work in process
Finished Goods
Merchandise
Less: write-downs
Total
December 31, December 31,
2018
696,005
6,727
723,591
38,916
—
1,465,239
2019
510,990
1,862
291,116
95,987
(10,427)
889,528
Raw materials primarily consist of materials for volume production as well as spare parts used for aftersales services.
Work in progress are mainly used for research and development of new models and will be expensed when incurred. Electric drive
systems in production are also recorded as work in progress.
Finished goods include vehicles ready for transit at production factory, vehicles in transit to fulfill customer orders, new vehicles
available for immediate sale at our sales and service center locations and charging piles.
Merchandise inventory includes accessories and branded merchandise of NIO which can be redeemed by deducting membership
rewards points of customer loyalty program in the Group’s application store.
Inventory write-downs recognized in cost of sales for the years ended December 31, 2017 and 2018 and 2019 were nil, nil and
10,427, respectively.
F-27
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
6. Prepayments and Other Current Assets
Prepayments and other current assets consist of the following:
Deductible VAT input
Prepayment to vendors
Deposits
Other receivables
Less: Allowance for doubtful accounts
Total
December 31, December 31,
2018
1,018,766
333,367
23,321
138,803
—
1,514,257
2019
1,253,617
88,900
73,271
186,105
(22,635)
1,579,258
Prepayment to vendors mainly consist of prepayment for raw materials, prepaid rental for offices and NIO Houses, and prepaid
expenses for R&D services provided by suppliers.
Allowance for doubtful accounts in prepayments and other current assets recognized for the years ended December 31, 2017, 2018
and 2019 was nil, nil and RMB22,635, respectively.
7. Property, Plant and Equipment, Net
Property and equipment and related accumulated depreciation were as follows:
Mold and tooling
Leasehold improvements
Production facilities
Building and construction
Charging & battery swap infrastructure
Construction in process
Computer and electronic equipment
R&D equipment
Purchased software
Others
Subtotal
Less: Accumulated depreciation
Less: Accumulated impairment
Total property, plant and equipment, net
December 31, December 31,
2018
1,032,685
653,298
456,569
481,121
470,506
1,289,611
393,931
320,362
286,034
146,869
5,530,986
(677,829)
—
4,853,157
2019
1,898,975
1,025,570
869,819
828,958
608,919
475,977
428,028
400,461
341,379
279,233
7,157,319
(1,548,977)
(75,278)
5,533,064
The Group recorded depreciation expenses of RMB165,960, RMB469,408 and RMB993,070 for the years ended December 31,
2017, 2018 and 2019, respectively.
8. Intangible Assets, Net
Intangible assets and related accumulated amortization were as follows:
Domain names and others
License
Total intangible assets, net
Gross carrying Accumulated Net carrying Gross carrying Accumulated Net carrying
December 31, 2018
December 31, 2019
value
5,269
3,161
8,430
amortization
(1,974)
(2,986)
(4,960)
value
value
3,295
175
3,470
4,342
—
4,342
amortization
(2,820)
—
(2,820)
value
1,522
—
1,522
The Group recorded amortization expenses of RMB1,898, RMB1,988 and RMB1,021 for the years ended December 31, 2017, 2018
and 2019, respectively.
F-28
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
9. Land Use Rights, Net
Land use rights and related accumulated amortization were as follows:
Land use rights
Less: Accumulated amortization—land use rights
Total land use rights, net
December 31, December 31,
2018
216,489
(2,827)
213,662
2019
216,489
(7,674)
208,815
In June 2018, XPT NJEP entered into an agreement to purchase land use rights for usage of land to build a factory for manufacturing
of e-powertrain for the Group.
The Group recorded amortization expenses for land use rights of nil, RMB2,827 and RMB4,847 for the years ended December 31,
2017, 2018 and 2019, respectively.
10. Other Non-current Assets
Other non-current assets consist of the following:
Long-term deposits
Receivables of installment payments for battery
Right-of-use assets - finance lease
Prepayments for purchase of property and equipment
Others
Total
December 31, December 31,
2018
616,199
574,677
—
159,341
62,613
1,412,830
2019
848,655
657,698
155,051
17,603
74,093
1,753,100
Long-term deposit mainly consists of deposits to vendors for guarantee of production capacity as well as rental deposit for offices
and NIO Houses which will not be collectible within one year.
11. Accruals and Other Liabilities
Accruals and other liabilities consist of the following:
Payables for purchase of property and equipment
Payable for R&D expenses
Payables for marketing events
Salaries and benefits payable
Advance from customers
Accrued expenses
Current portion of deferred revenue
Investment deposit from investors
Warranty liabilities
Interest payables
Current portion of deferred construction allowance
Current portion of finance lease liabilities
Payables for traveling expenses of employees
Other payables
Total
F-29
December 31, December 31,
2018
1,027,377
437,731
423,953
402,163
233,767
308,486
108,250
47,124
46,574
2,584
87,330
—
43,147
215,195
3,383,681
2019
1,121,715
694,081
436,610
344,922
297,096
246,121
189,172
154,643
120,161
105,940
84,495
40,334
17,685
363,666
4,216,641
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
12. Borrowings
Borrowings consist of the following:
Short-term borrowing:
Bank loan (i)
Convertible notes (ii)
Current portion of long-term bank loan (iii)
Long-term borrowings:
Bank loan(iii)
Convertible notes(ii)
Loan from joint investor(iv)
Total
(i) Short-term bank loan
December 31, December 31,
2018
2019
1,870,000
—
198,852
188,000
697,620
322,436
766,592
950,154
— 5,784,984
419,660
8,362,854
401,420
3,236,864
As of December 31, 2018, we obtained short-term borrowings from ten banks of RMB1,870,000 in aggregate collateralized by bank
deposit of RMB1,375,000 classified as short-term investment provided by one of our wholly-owned subsidiaries. The annual interest rate
of these borrowings is approximately 4.35% to 5.22%.
As of December 31, 2019, we obtained short-term borrowings from several banks of RMB128,000 in aggregate and bank acceptance
of RMB60,000. The annual interest rate of these borrowings is approximately 3.45% to 4.87%.
(ii) Convertible notes
On January 30, 2019, the Group issued US$650,000 convertible senior notes and additional US$100,000 senior notes (collectively
the “Notes”) to the notes purchasers (the “Notes Offering”). The Notes bears interest at a rate of 4.50% per year, payable semi-annually
in arrears on February 1 and August 1 of each year, beginning on August 1, 2019. The Notes is convertible into the Company’s American
Depositary Shares at the pre-agreed fixed conversion price at the discretion of the holders and will mature for repayment on February 1,
2024. Holders of the Notes are entitled to require the Company to repurchase all or part of the Notes in cash on February 1, 2022 or in
the event of certain fundamental changes. In connection with the Notes Offering, the Company entered into capped call transactions with
certain notes purchasers and/or their respective affiliates and/or other financial institutions (the “Capped Call Option Counterparties”)
and used a portion of the net proceeds of the Notes Offering to pay the cost of such transactions. In addition, the Company also entered
into privately negotiated zero-strike call option transactions with certain notes purchasers or their respective affiliates (the “Zero-Strike
Call Option Counterparties”) and used a portion of the net proceeds of the Notes Offering to pay the aggregate premium under such
transactions. The Company accounts for the Notes as a single instruments as a long-term debt. The debt issuance cost were recorded as
reduction to the long-term debts and are amortised as interest expenses using the effective interest method. The value of the Notes are
measured by the cash received. The cost for the capped call transactions have been recorded as deduction of additional paid-in capital
within total shareholders’ deficit. The zero-strike call option was deemed as a prepaid forward to purchase the Company’s own shares
and recognized as permanent equity at its fair value at inception as a reduction to additional paid in capital in the consolidated balance
sheet.
On September 5, 2019, the Group issued US$200,000 convertible senior notes to an affiliate of Tencent Holdings Limited and Mr.
Bin Li, chairman and chief executive officer of the Company. Tencent and Mr. Li each subscribed for US$100 principal amount of the
convertible notes, each in two equally split tranches. The 360-day Notes will be convertible into Class A ordinary shares (or ADSs) of
the Company at a conversion price of US$2.98 per ADS at the holder’s option from the 15th day immediately prior to maturity, and the
3-year Notes will be convertible into Class A ordinary shares (or ADSs) of the Company at a conversion price of US$3.12 per ADS at
the holder’s option from the first anniversary of the issuance date. The holders of the 3-year Notes will have the right to require the
Company to repurchase for cash all of the Notes or any portion thereof on February 1, 2022. The 360-day Notes was recorded in short-
term borrowings and the 3-year Notes were recorded in short-term borrowings. The company will pay an annual premium of 2% at
maturity. Interest expenses were accrued over the term of each note using the effective interest method.
As of December 31, 2019, RMB697,620 of convertible notes will be due within one year.
F-30
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(iii) Long-term bank loan
On May 17, 2017, the Group entered into a secured loan agreement with the Bank of Nanjing of a facility amount of RMB685,000
with a maturity date of May 17, 2022. As of December 31, 2018 and 2019, the aggregated draw amounted to RMB674,279 and
RMB475,382, respectively. The annual interest rate of these borrowings is approximately 4.75% to 5.80%. The loan was guaranteed by
Nanjing Xingzhi to support XPT NJES to continue doing business in the respective region. There is no restrictive financial covenants
attached to the loan.
On September 28, 2017, the Group entered into a loan agreement with China Merchants Bank of a facility amount of RMB200,000
with a maturity date of September 14, 2021. December 31, 2019, the aggregated draw amounted to RMB96,000 subject to a floating
interest of 10% to 18% above the benchmark interest rate of three-year RMB loan announced by PBOC.
On February 2, 2018, the Group entered into a loan agreement with China CITIC Bank of a principal of RMB50,000 with a maturity
date of February 1, 2021. The As of December 31, 2019, the aggregated draw amounted to RMB44,500 subject to a floating interest rate
of 10% above the average quoted interest rate of one-year RMB loan announced by the National Interbank Funding Center. On
August 17, 2018, the Group entered into a loan agreement with China CITIC Bank of a principal of RMB50,000 with a maturity date of
Mar 7, 2021. As of December 31, 2019, the aggregated draw amounted to RMB49,500 subject to a floating interest rate of 26% above
the average quoted interest rate of one-year RMB loan announced by the National Interbank Funding Center.
On November 30, 2018, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB5,200 with a maturity
date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB4,102 subject to a floating interest rate of
30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On December 24, 2018, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB40,000 with a
maturity date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB32,305, subject to a floating
interest rate of 30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On September 7, 2016, the Group entered into a joint investment agreement with Nanjing Xingzhi Technology Industry
Development Co., Ltd (“Nanjing Xingzhi”, formerly known as Nanjing Zijin (New Harbor) Technology Entrepreneurial Special
Community Construction Development Co., Ltd). Nanjing Xingzhi invested in XPT NJES, a subsidiary of the Group, with a contribution
of RMB37,500. According to the agreement, the annual rate of return on investment of Nanjing Xingzhi equals the benchmark interest
rate of one-year RMB loan announced by PBOC. Given Nanjing Xingzhi does not bear the risk of the losses and only entitles to fixed
interest income, the Group regarded it a loan in substance and recorded it in liability with the interest expenses amortized through the
period. On May 16, 2018, the Group entered into an agreement with Nanjing Xingzhi to purchase Nanjing Xingzhi’s shareholding in
XPT NJES at a price of RMB41,773, which approximately the entire principal plus interest accrued then.
On January 3, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB20,000 with a maturity
date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB16,145, subject to a floating interest rate
of 30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On January 10, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB40,000 with a maturity
date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB32,305, subject to a floating interest rate
of 30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On January 17, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB40,000 with a maturity
date of November 30, 2021.As of December 31, 2019, the aggregated draw amounted to RMB32,305, is subject to a floating interest rate
of 30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On January 24, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB35,000 with a maturity
date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB28,257, subject to a floating interest rate
of 30% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On March 25, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB150,000 with a maturity
date of November 30, 2021.As of December 31, 2019, the aggregated draw amounted to RMB128,354, subject to a floating interest rate
of 15% above the average quoted interest rate of three-year RMB loan announced by PBOC.
F-31
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
On March 27, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB50,000 with a maturity
date of November 30, 2021. As of December 31, 2019, the aggregated draw amounted to RMB42,777, subject to a floating interest rate
of 15% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On March 29, 2019, the Group entered into a loan agreement with Hanhou Bank of a facility amount of RMB200,000 with a
maturity date of March 29, 2022. As of December 31, 2019, the aggregated draw amounted to RMB199,000, subject to a floating interest
of 20% above the benchmark interest rate of three-year RMB loan announced by PBOC.
On June 26, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB20,000 with a maturity date
of November 30, 2021.As of December 31, 2019, the aggregated draw amounted to RMB18,072, is subject to a floating interest rate of
15% above the average quoted interest rate of three-year RMB loan announced by PBOC.
On September 11, 2019, the Group entered into a loan agreement with Bank of Shanghai of a principal of RMB80,000 with a
maturity date of November 30, 2021.As of December 31, 2019, the aggregated draw amounted to RMB73,587, is subject to a floating
interest rate of 15% above the average quoted interest rate of three-year RMB loan announced by PBOC.
As of December 31, 2018 and 2019, RMB198,852 and RMB322,436 of long-term bank borrowings will be due within one year,
respectively.
(iv) Loan from joint investor
On May 18, 2017, the Group entered into a joint investment agreement with Wuhan Donghu New Technology Development Zone
Management Committee ("Wuhan Donghu") to set up an entity (the "PE WHJV"). Wuhan Donghu subscribed for RMB384,000 paid in
capital in PE WHJV with 49% of the shares. On June 30, 2017, September 29, 2017 and April 16, 2018, Wuhan Donghu injected
RMB50,000, RMB100,000 and RMB234,000 in cash to PE WHJV, respectively. Pursuant to the investment agreement, Wuhan Donghu
does not have substantive participating rights to PE WHJV, nor is allowed to transfer its equity interest in PE WHJV to other third party.
In addition, within five years or when the net assets of PE WHJV is less than RMB550,000, the Group is obligated to purchase from
Wuhan Donghu all of its interest in PE WHJV at its investment amount paid plus interest at the current market rate announced by PBOC.
As such, the Group consolidates PE WHJV. The investment by Wuhan Donghu is accounted for as a loan because it is only entitled to
fixed interest income and subject to repayment within five years or upon the financial covenant violation. As of December 31, 2018 and
2019, RMB17,420 and RMB35,660 of interest were accrued at the benchmark rate of medium and long-term loan announced by PBOC.
13. Other Non-Current Liabilities
Other non-current liabilities consist of the following:
Deferred government grants
Deferred revenue
Warranty liabilities
Non-current finance lease liabilities
Deferred construction allowance
Rental payable
Others
Total
December 31, December 31,
2018
351,896
193,524
130,719
—
124,678
129,995
—
930,812
2019
340,667
295,915
291,843
88,790
72,762
—
61,836
1,151,813
Deferred government grants mainly consist of specific government subsidies for purchase of land use right and buildings, product
development and renewal of production facilities, which is amortized using the straight-line method as a deduction of the amortization
expense of the land use right over its remaining estimated useful life.
Rental payable represents the difference between the straight-line rental expenses and the actual rental fee paid for long term rental
agreements. On January 1, 2019, the Group adopted ASC 842 Leases and used the additional transition method to initially apply this new
lease standard at the adoption date. Liabilities were recognized on the Company's consolidated financial statements.
Deferred construction allowance consists of long-term payable of construction projects, with payment terms over one year.
F-32
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
14. Lease
The Group has entered into various non-cancellable operating and finance lease agreements for certain offices, warehouses, retail
and service locations, equipment and vehicles worldwide. The Group determines if an arrangement is a lease, or contains a lease, at
inception and record the leases in the financial statements upon lease commencement, which is the date when the underlying asset is
made available for use by the lessor.
The balances for the operating and finance leases where the Group is the lessee are presented as follows within the consolidated
balance sheet:
Operating leases:
Right-of-use assets - operating lease
Current portion of operating lease liabilities
Non-current operating lease liabilities
Total operating lease liabilities
Finance leases:
Right-of-use assets - finance lease
Current portion of finance lease liabilities
Non-current finance lease liabilities
Total finance lease liabilities
The components of lease expenses were as follows:
Lease cost:
Amortization of right-of-use assets
Interest of operating lease liabilities
Expenses for short-term leases within 12 months and other non-lease component
Total lease cost
Other information related to leases where the Group is the lessee is as follows:
Weighted-average remaining lease term:
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
F-33
As of December 31,
2019
1,997,672
608,747
1,598,372
2,207,119
155,051
40,334
88,790
129,124
Year Ended
December 31,
2019
522,035
137,459
155,613
815,107
As of December 31,
2019
4.7 years
3.9 years
5.83 %
5.77 %
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Supplemental cash flow information related to leases where we are the lessee is as follows (in thousands):
Operating cash outflows from operating leases
Operating cash outflows from finance leases (interest payments)
Financing cash outflows from finance leases
Right-of-use assets obtained in exchange for operating lease liabilities
Year Ended
December 31,
2019
482,782
5,969
43,916
777,169
As of Dec 31, 2019, the maturities of our operating and finance lease liabilities (excluding short-term leases) are as follows (in
thousands):
2020
2021
2022
2023
2024
Thereafter
Total minimum lease payments
Less: Interest
Present value of lease obligations
Less: Current portion
Long-term portion of lease obligations
Operating
Leases
716,289
574,702
466,041
332,357
173,133
254,607
2,517,129
310,010
2,207,119
608,747
1,598,372
Finance
Leases
50,043
36,585
28,206
20,042
7,858
—
142,734
13,610
129,124
40,334
88,790
As of December 31, 2019, the Group had future minimum lease payments for non-cancelable short-term operating leases of
RMB33,580.
As previously reported in our Annual Report on Form 20-F for the year ended December 31, 2018 and under legacy lease
accounting (ASC 840), future minimum lease payments under non-cancellable leases as of December 31, 2018 are as follows:
2019
2020
2021
Thereafter
Total minimum lease payments
Operating
Leases
393,734
457,892
444,909
1,091,911
2,388,446
For the year ended December 31, 2017 and 2018, the Company recognized lease expense of RMB228,478 and RMB490,936,
respectively, under ASC 840.
15. Revenues
Revenues by source consists of the following:
Vehicle sales
Sales of charging pile
Sales of Packages
Others
Total
F-34
2017
For the Year Ended December 31,
2018
4,852,470
82,184
10,220
6,297
4,951,171
2019
7,367,113
127,632
111,448
218,711
7,824,904
—
—
—
—
—
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
16. Deferred Revenue/Income
The following table shows a reconciliation in the current reporting period related to carried-forward deferred revenue/income.
Deferred revenue/income – beginning of year
Additions
Recognition
Effects on foreign exchange adjustment
Deferred revenue/income – end of year
—
—
—
—
—
—
384,116
(82,342)
—
301,774
2019
301,774
428,786
(246,861)
1,388
485,087
For the Year Ended December 31
2018
2017
Deferred revenue mainly includes the transaction price allocated to the performance obligations that are unsatisfied, or partially
satisfied, which mainly arises from the undelivered charging pile, the vehicle internet connection service, the extended lifetime warranty
service, the points offered to customers as well as free battery swapping service embedded in the vehicle sales contract, with
unrecognized deferred revenue balance of RMB181,539 and RMB405,326 as of December 31, 2018 and 2019.
The Group expects that 39% of the transaction price allocated to unsatisfied performance obligation as at December 31, 2019 will be
recognized as revenue during the period from January 1, 2020 to December 31, 2020. The remaining 61% will be recognized during the
period from January 1, 2021 to December 31, 2024.
Deferred income includes the reimbursement from a depository bank in connection with the advancement of the Company’s ADR
and investor relations programs in the next five years. The Company initially recorded the payment from the depository bank as deferred
revenue and then recognized as other gain over the beneficial period, with unrecognized deferred income balance of RMB99,684 and
RMB79,761 as of December 31, 2018 and 2019.
17. Manufacturing in collaboration with JAC
In May 2016 and April 2019, the Group entered into an arrangement with JAC for the manufacture of the ES8 and the ES6 for five
years. Pursuant to the arrangement, JAC built up a new manufacturing plant (“Hefei Manufacturing Plant”) and is responsible for the
equipment used on the product line while NIO is responsible for the tooling. For each vehicle produced the Group pays processing fee to
JAC on a per-vehicle basis monthly for the first three years on the basis that NIO provides all the raw materials to JAC. In addition, for
the first 36 months after agreed time of start of production, which was April 2018, the Group should compensate JAC operating losses
incurred in Hefei Manufacturing Plant. For the years ended December 31, 2017, 2018 and 2019, JAC charged the Group nil,
RMB126,425 and RMB206,736, respectively, based on the actual losses incurred in Hefei Manufacturing Plant during the same periods,
which was recorded in cost of sales.
18. Research and Development Expenses
Research and development expenses consist of the following:
Design and development expenses
Employee compensation
Depreciation and amortization expenses
Travel and entertainment expenses
Rental and related expenses
Others
Total
F-35
2017
1,455,297
1,004,835
38,940
60,622
12,367
30,828
2,602,889
Year Ended December 31,
2018
1,827,980
1,850,886
103,427
104,949
33,105
77,595
3,997,942
2019
2,041,024
2,004,931
187,137
63,998
57,401
74,089
4,428,580
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
19. Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of the following:
Employee compensation
Marketing and promotional expenses
Rental and related expenses
Professional services
Depreciation and amortization expenses
Travel and entertainment expenses
IT consumable, office supply and other low value consumable
Allowance against receivables
Others
Total
20. Convertible Promissory Note
Year Ended December 31,
2018
2,256,455
1,158,519
450,113
578,469
249,765
197,187
167,323
2017
929,928
523,535
216,111
238,740
128,918
71,278
114,668
—
—
127,529
2,350,707
283,959
5,341,790
2019
2,231,698
818,053
737,578
487,537
457,364
126,571
109,501
108,459
375,026
5,451,787
On February 16, 2017, the Company issued convertible promissory note (“the Note”) in the aggregated principal amount of
US$48,000 (RMB312,624 equivalent) to one of its existing convertible redeemable preferred shareholder with compounding interest at
15% per annum, maturing 90 days after the issuance date. Pursuant to the Note agreements, the holders of the Note may (i) convert the
outstanding principal and accrued interest of the Note into the most recent round of equity security at a conversion price equal to 97% of
the per share price paid by the investors in the event that the Company issues and sells equity security to investors on or before the date
of the repayment in full of this Note in an equity financing resulting in gross proceeds to the Company of at least US$100,000
(“Qualified Financing”), however, the Company and the Note holder both agreed that the 3% discount on the price shall not be applicable
to the Series C Convertible Redeemable Preferred Shares (“Series C Preferred Shares”), or (ii) convert the outstanding principal and
accrued interest of the Note into Series B Convertible Redeemable Preferred Shares (“Series B Preferred Shares”) of the Company at a
conversion price of US$2.751 per share if no Qualified Financing occurred before prior to the maturity date. The Company may elect to
repay the accrued interests in cash under either way. The issuance cost for the Note was immaterial. On May 17, 2017, the Note was fully
repaid in cash together with the accrued interest of US$1,800 (RMB12,389 equivalent).
21. Convertible Redeemable Preferred Shares
In March 2015, the Company issued 165,000,000 shares of Series A-1 convertible redeemable preferred shares (“Series A-1
Preferred Shares”) for US$1.00 per share for cash of US$165,000. The total consideration was paid in three instalments and were fully
paid in January 2017. In March and May 2015, the Company issued 130,000,000 shares of Series A-2 convertible redeemable preferred
shares (“Series A-2 Preferred Shares”) for US$1.00 per share for cash of US$130,000. In September 2015, the Company issued
24,210,431 shares of Series A-3 Preferred Shares for US$1.6522 per share for cash of US$40,000. The Series A-1, A-2 and A-3 Preferred
Shares are collectively referred to as the “Series A Preferred Shares”.
In June, July, August, September 2016 and February 2017, the Company issued 114,867,321 shares of Series B convertible
redeemable preferred shares (“Series B Preferred Shares”) for US$2.751 per share for cash of US$316,000.
In March, April, May and July 2017, the Company issued 166,205,830 shares of Series C convertible redeemable preferred shares
(“Series C Preferred Shares”) for US$3.885 per share for cash of US$645,709.
In November and December 2017, the Company issued 211,156,415 shares of Series D convertible redeemable preferred shares
(“Series D Preferred Shares”) for US$5.353 per share for cash of US$1,130,320. US$12,000 out of the total consideration from one of
the investor was not paid until March 28, 2018 and it was treated as a reduction of Series D Preferred Shares until it was paid. In
addition, a finder’s commission of US$26,000 was incurred for the Series D Preferred Shares financing. The Company paid 50% of the
commission in cash amounted US$13,000 and the remaining 50% by issuance of 2,428,588 shares of Series D Preferred Shares for free
to the financial advisory. The total of the finder’s commission was also recorded as an issuance cost as a deduction of the preferred
shares.
F-36
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
The Series A-1, A-2, A-3, B, C and D Preferred Shares are collectively referred to as the “Preferred Shares”. All series of Preferred
Shares have the same par value of US$0.00025 per share.
The Company classified the Preferred Shares in the mezzanine section of the consolidated balance sheets because they were
redeemable at the holders’ option any time after a certain date and were contingently redeemable upon the occurrence of certain
liquidation events outside of the Company’s control, that being the Company’s failure to complete a QIPO by December 31, 2021. The
Preferred Shares are recorded initially at fair value, net of issuance costs. The issuance costs for Series A-1, A-2, A-3, B, C, and D were
RMB1,892, RMB1,177, RMB1,296, RMB11,857, RMB10,039 and RMB6,033 (US$301, US$189, US$208, US$1,782, US$1,489 and
US$901, equivalent).
The major rights, preferences and privileges of the Preferred Shares are as follows:
Voting Rights
The holders of the Preferred Shares shall have the right to one vote for each ordinary share into which each outstanding Preferred
Share held could then be converted. The holders of the Preferred Shares vote together with the Ordinary Shareholders, and not as a
separate class or series, on all matters put before the shareholders. The holders of the Preferred Shares are entitled to appoint a total of 10
out of 11 directors of the Board.
Dividends
Subject to the approval and declaration by the Board of Directors, the holders of the Preferred Shares (exclusive of unpaid shares)
are entitled to receive dividends in the following order:
● Series D Preferred Shareholders are entitled to receive dividends at an amount equal to 5% of the issue price prior to and in
preference to any dividend on the Series C preferred Shares, Series B preferred shares, Series A Preferred Shares and ordinary
shares;
● Series C Preferred Shareholders are entitled to receive dividends at an amount equal to 5% of the issue price prior to and in
preference to any dividend on the Series B preferred shares, Series A Preferred Shares and ordinary shares;
● Series B Preferred Shareholders are entitled to receive dividends at an amount equal to 5% of the issue price prior to and in
preference to any dividend on the Series A Preferred Shares and ordinary shares;
● Series A Preferred Shareholders are entitled to receive dividends at an amount equal to 5% of the issue price prior to and in
preference to any ordinary shares;
● any remaining dividends shall be distributed on a pro rata basis to holders of all the Preferred Shares and ordinary shares on a
fully diluted and as-if converted basis.
No dividends on preferred and ordinary shares have been declared since the issuance date through December 31, 2018 and 2019.
Liquidation
In the event of any liquidation, the holders of Preferred Shares have preference over holders of ordinary shares with respect to
payment of dividends and distribution of assets. Upon Liquidation, Series D Preferred Shares shall rank senior to Series C Preferred
Shares, Series C Preferred Shares shall rank senior to Series B Preferred Shares, Series B Preferred Shares shall rank senior to Series A-3
Preferred Shares, Series A-3 Preferred Shares shall rank senior to Series A-1 and A-2 Preferred Shares, Series A-1 and A-2 Preferred
Shares shall rank senior to ordinary shares.
F-37
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
The holders of Preferred Shares (exclusive of unpaid shares) shall be entitled to receive an amount per share equal to (A) an amount
equal to the higher of (1) 100% of the original issue price of such Preferred Shares, and (2) the amount that would be payable on such
Preferred Shares if converted into ordinary shares immediately before such Liquidation; and (B) the amount of all declared but unpaid
dividends on such Preferred Shares based on such holder’s pro rata portion of the total number of the Preferred Shares. If there are still
assets of the Company legally available for distribution, such remaining assets of the Company shall be distributed to the holders of
issued and outstanding Ordinary Shares on pro rata basis among themselves.
Conversion
The Preferred Shares (exclusive of unpaid shares) would automatically be converted into common shares 1) upon a QIPO; or 2)
upon the written consent of the holders of a majority of the outstanding Preferred Share of each class with respect to conversion of each
class.
The initial conversion ratio of Preferred Shares to ordinary shares shall be 1:1, subject to adjustments in the event of (i) share splits,
share dividends, combinations, recapitalization and similar events, or (ii) issuance of Ordinary Shares (excluding certain events such as
issuance of ordinary shares pursuant to a public offering) at a price per share less than the conversion price in effect on the date of or
immediately prior to such issuance.
The Company determined that there were no beneficial conversion features identified for any of the Preferred Shares during any of
the periods. In making this determination, the Company compared the fair value of the ordinary shares into which the Preferred Shares
are convertible with the respective effective conversion price at the issuance date. In all instances, the effective conversion price was
greater than the fair value of the ordinary shares. To the extent a conversion price adjustment occurs, as described above, the Company
will re-evaluate whether or not a beneficial conversion feature should be recognized.
Redemption
The Company shall redeem, at the option of any holder of outstanding Preferred Shares, all of the outstanding Preferred Shares
(other than the unpaid shares) held by the requesting holder, at any time after the earliest to occur of (a) December 31, 2021, if no QIPO
or Approved Sale has been consummated prior to such date, (b) any material change in applicable law that would prohibit or otherwise
make it illegal to continue to operate the business under the then-existing equity structure of the Group, which could not be solved by
alteration or adjustment of the equity structure of the Group after good faith consultation among the Company and its shareholders,
(c) the early termination of employment or service contracts of no less than 30% of the certain key employees (or subsequent persons
holding their respective positions) with the Group during any six-month period (excluding any early termination with cause) which has
resulted in material adverse effect with respect to the Business of the Group as a whole, and (d) termination or disruption of the business
of the Group as a whole, which is attributable to any Group Company’s non-compliance with applicable laws or breach or early
termination of material business contracts or business arrangements with any supplier, clients or otherwise (any matter or event as
described in items (a) to (d), hereinafter a “Redemption Event”), or (e) any other Preferred Share holder has requested the Company to
redeem its shares in any Redemption Event by delivery of a notice.
The redemption amount payable for each Preferred Share (other than the unpaid shares) will be an amount equal to the greater of
(a) 100% of the Preferred Shares’ original issue price, plus all accrued but unpaid dividends thereon up to the date of redemption and
compound interest on the preferred shares’ original issue price at the rate of 8% per annum, proportionally adjusted for share
subdivisions, share dividends, reorganizations, reclassifications, consolidations, mergers or similar transactions, and (b) the fair market
value of such Preferred Shares at the date of redemption.
Upon the redemption, Series D Preferred Shares shall rank senior to Series C Preferred Shares, Series C Preferred Shares shall rank
senior to Series B Preferred Shares, Series B Preferred Shares shall rank senior to Series A-3 Preferred Shares, Series A-3 Preferred
Shares shall rank senior to Series A-1 and A-2 Preferred Shares, Series A-1 and A-2 Preferred Shares shall rank pari passu to each other.
Conversion upon IPO
On September 14, 2018, in connection with the completion of IPO, all of the Preferred Shares were automatically converted to
821,378,518 ordinary shares based on the aforementioned conversion price.
F-38
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Accounting for Preferred Shares
The Company recognized accretion to the respective redemption value of the Preferred Shares over the period starting from issuance
date to September 12, 2018, the earliest redemption date. According to the redemption price calculation described above, the Company
recognized accretion of the Preferred Shares amounted to RMB2,576,935, RMB13,667,291 and nil for the years ended December 31,
2017, 2018 and 2019.
F-39
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
The Company’s convertible redeemable preferred shares activities for the years ended December 31, 2017 and 2018 are summarized
below.:
Balances as of December 31, 2016
Proceeds from Series A-1
Preferred Shares
Issuance of preferred shares
Accretion on convertible
redeemable preferred shares to
redemption value
Balances as of December 31, 2017
Series A‑1 & A‑2
Series A‑3
Series B
Series C
Series D
Total
Number of Amount
(RMB)
2,539,993 24,210,431
Number of Amount Number of Amount
(RMB)
2,014,903
shares
295,000,000
shares
102,144,675
(RMB)
306,678
shares
Number of Amount
(RMB)
shares
Number of Amount
(RMB)
shares
—
—
—
Number of Amount
(RMB)
4,861,574
— 421,355,106
shares
—
—
266,511
—
2,205,227
—
—
—
—
—
—
12,722,646
—
240,066
—
166,205,830
—
4,398,313
—
213,585,003
—
7,314,387
—
392,513,479
266,511
11,952,766
120,451
—
40,011
—
56,283
—
154,963
—
2,576,935
—
295,000,000
5,011,731
24,210,431
427,129
114,867,321
2,294,980
166,205,830
4,454,596 213,585,003
7,469,350 813,868,585 19,657,786
Series A‑1 & A‑2
Series A‑3
Series B
Series C
Series D
Total
Number of Amount
(RMB)
5,011,731
shares
295,000,000
Number of Amount
(RMB)
427,129
shares
24,210,431
Number of Amount
(RMB)
2,294,980
shares
114,867,321
Number of Amount
(RMB)
4,454,596
shares
166,205,830
Number of Amount
(RMB)
7,469,350
shares
213,585,003
Number of Amount
(RMB)
19,657,786
shares
813,868,585
Balances as of December 31, 2017
Issuance of Series A‑3 Preferred Shares
(note 24(c))
Proceeds from Series D Preferred Shares
Accretion on convertible redeemable
preferred shares to redemption value
Conversion of Series A‑1 and A‑2
Preferred Shares to Ordinary shares
Conversion of Series A‑3 Preferred Shares
to Ordinary shares
Conversion of Series B Preferred Shares
to Ordinary shares
Conversion of Series C Preferred Shares
to Ordinary shares
Conversion of Series D Preferred Shares
to Ordinary shares
Balances as of December 31, 2018
—
—
—
—
7,509,933
—
—
—
—
—
—
—
—
—
—
—
—
—
—
78,651
7,509,933
—
—
78,651
—
7,091,163
—
565,979
—
2,417,979
—
2,375,943
—
1,216,227
—
13,667,291
(295,000,000)
(12,102,894)
—
—
—
(31,720,364)
(993,108)
—
—
—
—
—
(114,867,321)
(4,712,959)
—
—
—
—
—
—
—
—
—
—
—
(295,000,000)
(12,102,894)
—
(31,720,364)
(993,108)
—
(114,867,321)
(4,712,959)
—
(166,205,830)
(6,830,539)
—
(166,205,830)
(6,830,539)
—
—
—
—
—
—
(213,585,003)
—
(8,764,228)
—
(213,585,003)
—
(8,764,228)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
F-40
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
22. Redeemable non-controlling interests
XPT (Jiangsu) Automotive Technology Co., Ltd. (“XPT Auto”), the Group’s wholly owned subsidiary had its redeemable preferred
share (“XPT Auto PS”) financing of RMB1,269,900 to certain third party strategic investors in the second quarter of 2018. These third
party strategic investors’ contributions in XPT Auto were accounted for as the Group’s redeemable non-controlling interests, and were
classified as Mezzanine equity. Pursuant to XPT Auto’s share purchase agreement, the XPT Auto PS issued to third party strategic
investors have the same rights as the existing ordinary shareholder of XPT Auto except that they have following privileges:
Redemption
The holders of XPT Auto PS have the option to request XPT Auto to redeem those shares under certain circumstance: (1) a qualified
initial public offering of XPT Auto has not occurred by the fifth anniversary after the issuance of XPT Auto PS; (2) XPT Auto doesn’t
meet its performance target (revenue and net profit) for each of the year during FY2019 and FY2023; or (3) a deadlock event lasts for 60
working days and cannot be resolved.
The redemption price should be equal to the original issue price plus simple interest on the original issue price at the rate of 10% per
annum minus the dividends paid up to the date of redemption.
Liquidation
In the event of any liquidation, the holders of XPT Auto PS have preference over holders of ordinary shares. On a return of capital
on liquidation, XPT Auto’s assets available for distribution among the investors shall first be paid to XPT Auto PS investors at the
amount equal to the original issue price plus simple interest on the original issue price at the rate of 10% per annum minus the dividends
paid up to the date of liquidation. The remaining assets of XPT Auto shall all be distributed to its ordinary shareholders.
The Company recognized accretion to the respective redemption value of the XPT Auto PS as a reduction of additional paid in
capital over the period starting from issuance date. As of December 31, 2019, RMB1,265,900 out of the total consideration was paid by
those investors and the remaining RMB4,000 were still outstanding.
23. Ordinary Shares
Upon inception, each ordinary share was issued at a par value of US$0.00025 per share. Various numbers of ordinary shares were
issued to share-based compensation award recipients. As of December 31, 2018 and 2019, the authorized share capital of the Company is
US$1,000 divided into 4,000,000,000 shares, comprising of: 2,500,000,000 Class A Ordinary Shares, 132,030,222 Class B Ordinary
Shares, 148,500,000 Class C Ordinary Shares, each at a par value of US$0.00025 per share, and 1,219,469,778 shares of a par value of
US$0.00025 each of such class or classes as the board of directors may determine.
As of December 31, 2018 and 2019, 4,000,000,000 ordinary shares were authorized. 1,057,731,012 and 1,067,467,877 shares were
issued and 1,050,799,032 and 1,064,472,660 shares were outstanding as of December 31, 2018 and 2019, respectively. The share number
excludes 47,985,539 Class A Ordinary Shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuance upon
the exercise or vesting of awards granted under the Company’s share incentive plans.
24. Share-based Compensation
Compensation expenses recognized for share-based awards granted by the Company were as follows:
For the Year Ended December 31,
2018
2019
2017
Cost of sales
Research and development expenses
Selling, general and administrative expenses
Total
—
23,210
67,086
90,296
9,289
109,124
561,055
679,468
9,763
82,680
241,052
333,495
There was no income tax benefit recognized in the consolidated statements of comprehensive loss for share-based compensation
expenses and the Group did not capitalize any of the share-based compensation expenses as part of the cost of any assets in the years
ended December 31, 2017, 2018 and 2019.
F-41
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(a) Prime Hubs’ Restricted Shares Plan
In 2015, the Company adopted the Prime Hubs Restricted Shares Plan (the “Prime Hubs Plan”). Pursuant to the Prime Hubs Plan,
restricted shares were granted to certain employees and non-employee consultants of the Group as approved by the board of directors.
The restricted shares granted require the non-employee consultants to serve the Group for a period of one year with 100% of the
restricted shares vesting upon the completion of the service period and the employees to serve the group for a period of four years with
25% of the restricted shares vesting at each anniversary of the service commencement date. The restricted shares issued under the Prime
Hubs Plan are held by Prime Hubs, a consolidated variable interest entity of the Company, and are accounted for as treasury stocks of the
Company prior to their vesting.
The following table summarizes activities of the Company’s restricted shares granted to employees under the Prime Hubs Plan:
Employees
Unvested as of December 31, 2016
Granted
Vested
Forfeited
Unvested as of December 31, 2017
Vested
Unvested as of December 31, 2018
Number of Shares Weighted Average
Outstanding
Grant Date Fair Value
US$
8,400,000
2,000,000
(3,133,329)
(208,333)
7,058,338
(7,058,338)
—
0.72
2.05
0.84
0.72
1.04
1.04
—
In August 2018, the Company agreed to repurchase 562,500 vested Prime Hubs restricted shares from a former employee who
passed away with total cash consideration of RMB7,490 at the fair value.
For the years ended December 31, 2017, 2018 and 2019, total share-based compensation expenses recognized for the employee
restricted shares granted under the Prime Hubs Plan were RMB20,572, RMB39,560 and nil, respectively.
As of December 31, 2018 , all the employee restricted shares granted under the Prime Hubs Plan have been fully vested and hence
all related share-based compensation expenses have been recognized.
(b) NIO Incentive Plans
In 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which allows the plan administrator to grant options
and restricted shares of the Company to its employees, directors, and consultants.
The Company granted both share options and restricted shares to the employees. The share options and restricted shares of the
Company under 2015 Plan have a contractual term of ten years from the grant date, and vest over a period of four years of continuous
service, one fourth (1/4) of which vest upon the first anniversary of the stated vesting commencement date and the remaining vest
rateably over the following 36 months. Under the 2015 plan, share options granted to the non-NIO US employees of the Group are only
exercisable upon the occurrence of an initial public offering by the Company.
In 2016, 2017 and 2018, the Board of Directors further approved the 2016 Stock Incentive Plan (the “2016 Plan”), the 2017 Stock
Incentive Plan (the “2017 Plan") and the 2018 Stock Incentive Plan (the "2018 Plan”). The share options of the Company under 2016 and
2017 Plan have a contractual term of seven or ten years from the grant date, and vest immediately or over a period of four or five years of
continuous service.
The Group did not recognize any share-based compensation expenses for options granted to the non-NIO US employees of the
Group until completion of the Company’s IPO on September 12, 2018. The Group recognized the share options and restricted shares of
the Company granted to the employees of NIO US on a straight-line basis over the vesting term of the awards, net of estimated
forfeitures. Share-based compensation expenses for options granted to the non-NIO US employees of the Group before IPO were
recognized by using the graded-vesting method.
F-42
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(i) Share Options
The following table summarizes activities of the Company’s share options under the 2016, 2017 and 2018 Plans for the years ended
December 31, 2017, 2018 and 2019:
Outstanding as of December 31, 2016
Granted
Exercised
Cancelled
Expired
Outstanding as of December 31, 2017
Granted
Exercised
Cancelled
Expired
Outstanding as of December 31, 2018
Granted
Exercised
Cancelled
Expired
Outstanding as of December 31, 2019
Vested and expected to vest as of December 31, 2017
Exercisable as of December 31, 2017
Vested and expected to vest as of December 31, 2018
Exercisable as of December 31, 2018
Vested and expected to vest as of December 31, 2019
Exercisable as of December 31, 2019
Number of
Options
Outstanding
Weighted Weighted
Average
Remaining
Contractual Life
In Years
Average
Exercise
Price
US$
52,623,554
13,460,477
(2,723,540)
(5,236,562)
(348,015)
57,775,914
47,216,792
(7,732,317)
(5,498,453)
(687,796)
91,074,140
33,964,176
(20,133,668)
(14,759,778)
(1,300,898)
88,843,972
55,832,678
5,089,894
99,702,386
32,959,964
118,546,834
32,925,154
0.32
1.46
0.39
0.44
0.25
0.57
2.79
0.40
1.17
0.62
1.69
3.29
0.49
2.69
4.11
2.38
—
—
—
—
—
—
8.30
—
—
—
—
8.52
—
—
—
—
8.23
—
—
—
—
6.77
—
—
—
—
—
—
Aggregate
Intrinsic
Value
US$
51,506
—
—
—
—
114,299
—
—
—
—
425,988
—
—
—
—
164,363
107,299
11,070
467,127
185,787
354,839
80,801
The weighted-average grant date fair value for options granted under the Company’s 2016, 2017 and 2018 Plans during the years
ended December 31, 2017, 2018 and 2019 was US$1.21, US$1.93 and US$1.46, respectively, computed using the binomial option
pricing model.
The total share-based compensation expenses recognized for share options during the years ended December 31, 2017, 2018 and
2019 was RMB30,127, RMB437,320 and RMB329,693 respectively.
The fair value of each option granted under the Company’s 2016, 2017 and 2018 Plans during 2017,2018 and 2019 was estimated on
the date of each grant using the binomial option pricing model with the assumptions (or ranges thereof) in the following table:
2017
2018
2019
Exercise price (US$)
Fair value of the ordinary shares on the date of option grant (US$)
Risk-free interest rate
Expected term (in years)
Expected dividend yield
Expected volatility
Expected forfeiture rate (post-vesting)
F-43
- 2.55
- 2.55
0.61
1.30
2.31 %- 2.40 % 2.74 % - 3.15 % 1.66 % - 2.54 %
-
- 6.74
- 6.74
- 7.09
- 7.09
1.80
1.80
0.10
3.38
10
10
10
7
7
-
51 %-
0 %
52 %
5 %
47 % -
5 % -
0 %
51 %
8 %
44 % -
6 % -
0 %
52 %
8 %
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Risk-free interest rate is estimated based on the yield curve of US Sovereign Bond as of the option valuation date. The expected
volatility at the grant date and each option valuation date is estimated based on annualized standard deviation of daily stock price return
of comparable companies with a time horizon close to the expected expiry of the term of the options. The Company has never declared
or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future.
Expected term is the contract life of the options.
As of December 31, 2018 and 2019, there were RMB117,367 and RMB89,896 of unrecognized compensation expenses related to
the stock options granted to the employees of NIO US, which is expected to be recognized over a weighted-average period of 2.67 and
2.78 years, respectively.
As of December 31, 2018 and 2019, there were RMB345,072 and RMB269,425 of unrecognized compensation expenses related to
the stocks options granted to the Group’s non-NIO US employees which is expected to be recognized over a weighted-average period of
3.02 years and 2.67 years, respectively.
(ii) Restricted shares
The fair value of each restricted share granted with service conditions is estimated based on the fair market value of the underlying
ordinary shares of the Company on the date of grant.
The following table summarizes activities of the Company’s restricted shares to US employees under the 2016 plan:
Unvested at December 31, 2016
Vested
Forfeited
Unvested at December 31, 2017
Vested
Forfeited
Unvested at December 31, 2018
Vested
Forfeited
Unvested at December 31, 2019
Number of Restricted Weighted Average
Shares Outstanding
Grant Date Fair Value
US$
1,837,387
(470,015)
(254,395)
1,112,977
(608,406)
(63,058)
441,513
(362,685)
(78,828)
—
0.96
0.96
0.96
0.96
0.96
0.96
0.96
0.96
0.96
—
Share-based compensation expenses of RMB4,151, RMB3,790 and RMB2,357 related to restricted shares granted to the employees
of NIO US was recognized for the years ended December 31, 2017, 2018 and 2019, respectively.
As of December 31, 2018 and 2019, there were RMB2,812 and nil of unrecognized compensation expenses related to restricted
shares granted to the employees of NIO US, which is expected to be recognized over a weighted-average period of 0.75 and 0 years,
respectively.
The following table summarizes activities of the Company’s restricted shares to non-US employees under the 2017 and 2018 plan:
Unvested at December 31, 2017
Granted
Vested
Unvested at December 31, 2018
Granted
Vested
Unvested at December 31, 2019
Number of Restricted Weighted Average
Shares Outstanding
Grant Date Fair Value
US$
—
509,001
(445,104)
63,897
—
(31,949)
31,948
—
6.72
6.74
6.60
—
6.60
6.60
F-44
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
As of December 31, 2018 and 2019, there were RMB2,798 and RMB1,028 of unrecognized compensation expenses related to
restricted shares granted to the non-US employees, which is expected to be recognized over a weighted-average period of 1.7 and
0.7 years, respectively.
Share-based compensation expenses of nil, RMB20,323 and RMB1,445 related to restricted shares granted to the non-US employees
was recognized for the years ended December 31, 2017, 2018 and 2019.
(c) Non-recourse Loan
In November 2015, the Company issued an offer letter to one of its key management team member (“the Borrower”). In the offer
letter, the Company offered the Borrower to purchase 7,509,933 Series A-3 Preferred Shares of the Company at the price of US $1.6522
per share, which equals to the purchase price same class of preferred shares by other third party investors in the most recent round of
financing prior to the offer letter. In addition, the Company agreed to provide a loan in the amount of US $12,408 with an interest rate of
1.8% compounded semiannually to paid for the fund the purchase of such Series A-3 Preferred Shares by the Borrower (“the Loan”). The
Loan agreement was signed on March 10, 2016. The Loan is subject to a three-year service condition with 25% immediately vested on
the grant date and 25% cliff vesting annually. The Borrower’s personal liability on the Loan, and the Company’s recourse against the
Borrower personally on the Loan, shall be limited to 50% of the then-outstanding principal amount of the Loan, including any interest
accrued thereon.
In June 2018, the Borrower repaid the loan pursuant to the agreement, including the interest accrued, to the Company, amounting to
RMB82,863. By the time of the repayment, 75% of the Award was vested and considered as exercised while 25% remained as unvested.
Pursuant to ASC 718, the Company accounted for the Loan as a stock liability (the “Award”). Given the underlying of the Award is
Series A-3 Preferred Shares, it was treated as a liability award following ASC 480. The Award was initially recognized at fair value and
subsequently re-measured by recognizing the change in fair value as an adjustment to the compensation costs. The fair value of the
Award granted was estimated on each reporting date using the Black-Scholes option pricing model with the assumptions (or ranges
thereof) in the following table:
Exercise price
Fair value of the Preferred Shares on the measurement date
Risk-free interest rate
Remaining life (in years)
Expected dividend yield
Expected volatility
As of December 31, 2018, the Award was fully vested and exercised.
2017
2018
1.82
2.70
2 %
3.64
0 %
47 -48 %
1.74
4.54
2 %
0.26
0 %
43%-44 %
Share-based compensation expenses related to the Award of RMB35,446, RMB178,475 and nil was recognized for the years ended
December 31, 2017, 2018 and 2019, respectively.
25. Taxation
(a) Income taxes
Cayman Islands
The Company was incorporated in the Cayman Islands and conducts most of its business through its subsidiaries located in
Mainland China, Hong Kong, United States, United Kingdom and Germany. Under the current laws of the Cayman Islands, the
Company is not subject to tax on either income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman
Islands withholding tax will be imposed.
PRC
All Chinese companies are subject to enterprise income tax (“EIT”) at a uniform rate of 25%.
F-45
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Under the EIT Law enacted by the National People’s Congress of PRC on March 16, 2007 and its implementation rules which
became effective on January 1, 2008, dividends generated after January 1, 2008 and payable by a foreign investment enterprise in the
PRC to its foreign investors who are non-resident enterprises are subject to a 10% withholding tax, unless any such foreign investor’s
jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation
arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds
25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands,
where the Company was incorporated, does not have a tax treaty with PRC.
The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto
management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC
income tax at the rate of 25% for its global income. The Implementing Rules of the EIT Law merely define the location of the “de facto
management body” as “the place where the exercising, in substance, of the overall management and control of the production and
business operation, personnel, accounting, properties, etc., of a non-PRC company is located.” Based on a review of surrounding facts
and circumstances, the Group does not believe that it is likely that its operations outside of the PRC will be considered a resident
enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, there is uncertainty as to
the application of the EIT Law. Should the Company be treated as a resident enterprise for PRC tax purposes, the Company will be
subject to PRC income tax on worldwide income at a uniform tax rate of 25%.
According to relevant laws and regulations promulgated by the State Administration of Tax of the PRC effective from 2008
onwards, enterprises engaging in research and development activities are entitled to claim 175% of their qualified research and
development expenses so incurred as tax deductible expenses when determining their assessable profits for the year (‘Super Deduction’).
The additional deduction of 75% of qualified research and development expenses can only be claimed directly in the annual EIT filing
and subject to the approval from the relevant tax authorities.
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, the subsidiaries of the Group incorporated in Hong Kong are subject to
16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by
the subsidiaries incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.
Other Countries
The maximum applicable income tax rates of other countries where the Company’s subsidiaries having significant operations for
the years ended December 31, 2017, 2018 and 2019 are as follows:
United States
United Kingdom
Germany
Composition of income tax expense for the periods presented are as follows:
Current income tax expense
F-46
For the Year Ended December 31,
2018
29.84 %
19.00 %
32.98 %
2017
42.84 %
19.25 %
32.98 %
2019
29.84 %
19.00 %
32.98 %
2017
For the Year Ended December 31,
2018
22,044
7,906
2019
7,888
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Reconciliations of the income tax expense computed by applying the PRC statutory income tax rate of 25%to the Group’s income
tax expense of the years presented are as follows:
Loss before income tax expense
Income tax expense computed at PRC statutory income tax rate of 25%
Non-deductible expenses
Foreign tax rates differential
Additional 75% (2017: 50%) tax deduction for qualified research and development expenses
Tax exempted interest income
Effect of U.S. tax law change
US tax credits
Prior year adjustments
Tax benefit contributed by Non-controlling interest
Tax benefit not utilized
Income tax expense
For the
Year Ended December 31,
2018
(9,616,935)
(2,404,234)
96,684
167,180
(216,993)
(10,377)
—
(42,781)
(1,422)
2017
(5,013,268)
(1,253,318)
91,093
(74,531)
(93,513)
(845)
165,898
(52,185)
(10,293)
—
—
1,235,600
7,906
2,433,987
22,044
2019
(11,287,764)
(2,821,941)
58,374
107,617
(22,630)
(3,093)
—
(72,448)
(16,259)
2,285
2,775,983
7,888
The PRC statutory income tax rate was used because the majority of the Group’s operations are based in PRC.
(b) Deferred tax
The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be
more-likely-than-not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and
forecasts of future profitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent
with the plans and estimates the Group is using to manage the underlying business. The statutory income tax rate of 25%or applicable
preferential income tax rates were applied when calculating deferred tax assets.
The Group’s deferred tax assets consist of the following components:
Deferred tax assets
Net operating loss carry-forwards
Accrued and prepaid expenses
Tax credit carry-forwards
Deferred Revenue
Intangible assets
Unrealized financing cost
Allowance against receivables
Deferred rent
Property, plant and equipment, net
Share-based compensation
Write-downs of inventory
Advertising expenses in excess of deduction limit
Unrealized foreign exchange loss
Others
Total deferred tax assets
Less: Valuation allowance
Total deferred tax assets, net
F-47
2017
As of December 31,
2018
2019
1,620,535
84,320
60,624
—
7,104
—
—
8,699
27,463
4,106
—
65,737
55
—
3,777,696
255,240
117,801
83,877
15,687
41,939
—
36,729
17,467
8,962
—
14,234
55
—
1,878,643
(1,878,643)
—
4,369,687
(4,369,687)
—
6,005,461
420,714
213,773
105,840
36,362
29,200
27,196
19,035
10,584
7,688
2,607
353
55
162
6,879,030
(6,879,030)
—
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Full valuation allowances have been provided where, based on all available evidence, management determined that deferred tax
assets are not more likely than not to be realizable in future tax years. Movement of valuation allowance is as follow:
Valuation allowance
Balance at beginning of the year
Additions
Balance at end of the year
2017
As of December 31,
2018
2019
672,889
1,205,754
1,878,643
1,878,643
2,491,044
4,369,687
4,369,687
2,509,343
6,879,030
The Group has tax losses arising in Mainland China of 18,484,434 that will expire in one to five years for deduction against future
taxable profit.
Loss expiring in 2020
Loss expiring in 2021
Loss expiring in 2022
Loss expiring in 2023
Loss expiring in 2024
Total
186,827
1,335,168
3,007,243
5,950,981
8,004,215
18,484,434
The Group has tax losses arising in Hong Kong of 2,497,854 for which could be carried forward indefinitely against future taxable
income.
The Group has tax losses arising in United States of 24,513, 248,151, 869,914 and 2,139,756 that will expire in sixteen, seventeen,
eighteen and infinite years for deduction against future taxable income.
Uncertain Tax Position
The Group did not identify any significant unrecognized tax benefits for each of the periods presented. The Group did not incur any
interest related to unrecognized tax benefits, did not recognize any penalties as income tax expense and also does not anticipate any
significant change in unrecognized tax benefits within 12 months from December 31, 2019.
26. Loss Per Share
Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260 on computation of earnings per
share for the years ended December 31, 2017, 2018 and 2019 as follows:
Numerator:
Net loss
Accretion on convertible redeemable preferred shares to redemption value
Accretion on redeemable non-controlling interests to redemption value
Net loss attributable to non-controlling interests
Net loss attributable to ordinary shareholders of NIO Inc. for basic/dilutive net loss per
share
Denominator:
Weighted-average number of ordinary shares outstanding — basic and diluted
Basic and diluted net loss per share attributable to ordinary shareholders of NIO Inc.
For the Year Ended December 31,
2017
2018
2019
(5,021,174)
(2,576,935)
—
36,440
(9,638,979)
(13,667,291)
(63,297)
41,705
(11,295,652)
—
(126,590)
9,141
(7,561,669)
(23,327,862)
(11,413,101)
21,801,525 332,153,211 1,029,931,705
(11.08)
(346.84)
(70.23)
For the years ended December 31, 2017, 2018 and 2019, assumed conversion of the Preferred Shares into ordinary shares were
excluded from the calculations of diluted net loss per share of the Company due to the anti-dilutive effect. The effects of all outstanding
share options have also been excluded from the computation of diluted net loss per share for the years ended December 31, 2017, 2018
and 2019 as their effects would be anti-dilutive.
F-48
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
For the years ended December 31, 2017, 2018 and 2019, the Company had potential ordinary shares, including non-vested restricted
shares, option granted, Convertible Notes and Preferred Shares. As the Group incurred losses for the years ended December 31, 2017,
2018 and 2019, these potential ordinary shares were anti-dilutive and excluded from the calculation of diluted net loss per share of the
Company. Such weighted average numbers of ordinary shares outstanding are as following:
Non-vested restricted shares
Outstanding weighted average options granted
Convertible Notes
Preferred Shares
Total
27. Related Party Balances and Transactions
2017
8,323,591
27,495,737
—
For the Year Ended December 31,
2018
340,518
72,735,288
—
593,611,970 678,614,152
629,431,298 751,689,958
2019
459,199
31,276,979
92,512,382
—
124,248,560
The principal related parties with which the Group had transactions during the years presented are as follows:
Name of Entity or Individual
Baidu Capital L.P.
Hubei Changjiang Nextev New Energy Investment Management
Co., Ltd.
Jiangsu Xindian Automotive Co., Ltd.
Beijing CHJ Information Technology Co., Ltd.
Ningbo Meishan Bonded Port Area Weilan Investment Co., Ltd.
Shanghai NIO Hongling Investment Management Co., Ltd.
NIO Capital
Hubei Changjiang Nextev New Energy Industry Development Capital
Partnership (Limited Partnership)
Suzhou Zenlead XPT New Energy Technologies Co., Ltd.
Beijing Chehui Hudong Guanggao Co., Ltd.
Beijing Xinyi Hudong Guanggao Co., Ltd.
Bite Shijie (Beijing) Keji Co., Ltd.
Kunshan Siwopu Intelligent Equipment Co., Ltd.
Nanjing Weibang Transmission Technology Co., Ltd.
Shanghai Weishang Business Consulting Co., Ltd.
Beijing Bit Ep Information Technology Co., Ltd.
Serene View Investment Limited
Huang River Investment Limited
Tianjin Boyou Information Technology Co., Ltd.
Wistron Info Comm (Kunshan) Co., Ltd.
Beijing Yiche Information Science and Technology Co., Ltd.
Beijing Yiche Interactive Advertising Co., Ltd. Shanghai Branch
Shanghai Yiju Information Technology Co., Ltd.
Beijing Changxing Information Technology Co., Ltd.
Relationship with the Company
Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Affiliate
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Affiliate
Affiliate
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Subsidiary's Non-controlling shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Controlled by Principal Shareholder
Significantly influenced by Principal Shareholder
In September 2018, Xiang Li resigned as the Company's board director. Since then, Beijing CHJ Information Technology Co., Ltd.
and Jiangsu Xindian Automotive Co., Ltd., companies controlled by Xiang Li, were no longer the Group's related parties.
In June 2018, Wenjie Wu, originally appointed by Baidu Capital L.P. to be a board director of the Company, resigned and since then,
Baidu Capital L.P. ceased to have significant influence over the Company and was no longer the Group's related party.
F-49
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(a) The Group entered into the following significant related party transactions:
(i) Provision of service
For the years ended December 31, 2017, 2018 and 2019, service income was primarily generated from property management and
miscellaneous research and development services the Group provided to its related parties.
Nanjing Weibang Transmission Technology Co., Ltd.
Shanghai Weishang Business Consulting Co., Ltd.
Shanghai NIO Hongling Investment Management Co., Ltd.
Hubei Changjiang Nextev New Energy Investment Management Co., Ltd.
Beijing CHJ Information Technology Co., Ltd.
Hubei Changjiang Nextev New Energy Industry Development Capital Partnership (Limited
Partnership)
Jiangsu Xindian Automotive Co., Ltd.
—
—
—
11,121
4,588
4,015
1,785
21,509
—
905
2,707
—
—
—
—
3,612
2,417
1,806
—
—
—
—
—
4,223
For the Year Ended December 31,
2018
2019
2017
(ii) Acceptance of service
Beijing Xinyi Hudong Guanggao Co., Ltd.
Beijing Chehui Hudong Guanggao Co., Ltd.
Beijing Yiche Interactive Advertising Co., Ltd. Shanghai Branch
Beijing Bit Ep Information Technology Co., Ltd.
Bite Shijie (Beijing) Keji Co., Ltd.
Beijing Yiche Information Science and Technology Co., Ltd.
Tianjin Boyou Information Technology Co., Ltd.
Shanghai Yiju Information Technology Co., Ltd.
(iii) Loan to related party
NIO Capital
Ningbo Meishan Bonded Port Area Weilan Investment Co., Ltd.
2017
For the Year Ended December 31,
2018
28,245
6,915
—
—
2,865
32
—
—
8,021
544
—
—
6,987
—
—
—
15,552
38,057
2019
37,935
29,599
6,132
3,627
1,664
466
264
76
79,763
2017
For the Year Ended December 31,
2018
66,166
—
66,166
—
50,000
50,000
2019
—
—
—
In 2017, the Company granted interest-free loans to Ningbo Meishan Bonded Port Area Weilan Investment Co., Ltd. As of
December 31, 2019, the loans remain outstanding.
On January 12, 2018, the Group granted two interest free loans to NIO Capital, with principal amount of US$5,000 each. The loans
mature in six months. One of the loan has been received by the Group and the other has been converted into the investment in ordinary
shares of a subsidiary of NIO Capital, which was further disposed in 2019.
(iv) Cost of manufacturing consignment
Suzhou Zenlead XPT New Energy Technologies Co., Ltd.
F-50
For the Year Ended December 31,
2018
132,152
2017
18,324
2019
132,511
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(v) Purchase of property and equipment
Nanjing Weibang Transmission Technology Co., Ltd.
Kunshan Siwopu Intelligent Equipment Co., Ltd.
Bite Shijie (Beijing) Keji Co., Ltd.
(vi) Interest payable on behalf of related party
Baidu Capital L.P.
(vii) Acceptance of R&D and maintenance service
Kunshan Siwopu Intelligent Equipment Co., Ltd.
Suzhou Zenlead XPT New Energy Technologies Co., Ltd.
(viii) Payment on behalf of related party
For the Year Ended December 31,
2018
2017
—
—
2,960
2,960
—
11,107
—
11,107
2019
34,220
7,982
—
42,202
For the Year Ended December 31,
2018
2019
8,065
—
2017
21,671
For the Year Ended December 31,
2018
2019
2017
—
—
—
2,436
14,776
17,212
341
—
341
For the Year Ended December 31,
2018
2019
2017
Nanjing Weibang Transmission Technology Co., Ltd.
—
2,790
—
(ix) Loan from related party
Beijing Changxing Information Technology Co., Ltd.
—
—
For the Year Ended December 31,
2018
2017
2019
25,799
In 2019, the Company signed a loan agreement with Beijing Changxing Information Technology Co., Ltd. for a loan of RMB25,799
at an interest rate of 15%. As of December 31, 2019, the loan remains outstanding.
(x) Sale of raw material, property and equipment
Wistron Info Comm (Kunshan) Co., Ltd.
—
—
725
For the Year Ended December 31,
2018
2019
2017
(xi) Convertible notes issued to related parties (Note 12)
Huang River Investment Limited
Serene View Investment Limited
For the Year Ended December 31,
2018
2017
2019
920,914
614,926
1,535,840
—
—
—
—
—
—
F-51
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
(b) The Group had the following significant related party balances:
(i) Amounts due from related parties
Ningbo Meishan Bonded Port Area Weilan Investment Co., Ltd.
Nanjing Weibang Transmission Technology Co., Ltd.
Wistron Info Comm (Kunshan) Co., Ltd.
NIO Capital
Kunshan Siwopu Intelligent Equipment Co., Ltd.
Shanghai NIO Hongling Investment Management Co., Ltd.
Total
(ii) Amounts due to related parties
Suzhou Zenlead XPT New Energy Technologies Co., Ltd.
Beijing Xinyi Hudong Guanggao Co., Ltd.
Nanjing Weibang Transmission Technology Co., Ltd.
Beijing Changxing Information Technology Co., Ltd.
Beijing Chehui Hudong Guanggao Co., Ltd.
Beijing Yiche Interactive Advertising Co., Ltd. Shanghai Branch
Beijing Bit Ep Information Technology Co., Ltd.
Bite Shijie (Beijing) Keji Co., Ltd.
Kunshan Siwopu Intelligent Equipment Co., Ltd.
Beijing Yiche Information Technology Cp., Ltd.
Shanghai Yiju Information Technology Co., Ltd.
Tianjin Boyou Information Technology Co., Ltd.
Total
(iii) Short-term borrowings
Huang River Investment Limited
Serene View Investment Limited
Total
(iv) Long-term borrowings
Huang River Investment Limited
Serene View Investment Limited
Total
F-52
December 31, December 31,
2018
50,000
2,790
—
34,316
7,970
960
96,036
2019
50,000
674
109
—
—
—
50,783
December 31, December 31,
2018
210,868
3,530
—
—
4,085
—
—
339
761
—
—
—
219,583
2019
180,687
36,714
33,018
25,799
25,170
3,500
2,598
1,549
379
205
80
30
309,729
December 31, 2018 December 31, 2019
354,840
350,255
705,095
—
—
—
December 31, December 31,
2018
—
—
—
2019
560,325
258,213
818,538
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
28. Commitments and Contingencies
(a) Capital commitment
Capital expenditures contracted for at the balance sheet dates but not recognized in the Group’s consolidated financial statements are
as follows:
Property and equipment
Leasehold improvements
Total
(b) Contingencies
December 31, December 31,
2018
1,454,031
149,551
1,603,582
2019
551,582
68,652
620,234
Between March and July 2019, several putative securities class action lawsuits were filed against the Company, certain of the
Company’s directors and officers, the underwriters in the IPO and the process agent, alleging, in sum and substance, that the Company’s
statements in the Registration Statement and/or other public statements were false or misleading and in violation of the U.S. federal
securities laws. Some of these actions have been withdrawn, transferred or consolidated. Currently, three securities class actions remain
pending in the U.S. District Court for the Eastern District of New York (E.D.N.Y.), Supreme Court of the State of New York, New York
County (N.Y. County), and Supreme Court of the State of New York, County of Kings (Kings County) respectively. These actions remain
in their preliminary stages. The Company is currently unable to determine any estimate of the amount or range of any potential loss, if
any, associated with the resolution of such lawsuits, if they proceed.
29. Subsequent Events
In January and February 2020, the Company consummated the issuance of convertible notes to several third party investors in an
aggregate principal amount of US$200 million (Rmb 1,389 million). The notes issued bear zero interest and mature on February 4, 2021.
Prior to maturity, the holder of the notes has the right to convert the notes (a) after the six-month anniversary, into ADSs representing
Class A ordinary shares of the Company at an initial conversion price of US$3.07 per ADS or (b) upon the completion of a bona fide
issuance of equity securities of the Company for fundraising purposes, into ADSs representing Class A ordinary shares of the Company
at the conversion price derived from such equity financing.
In March 2020, the Company consummated the issuance of convertible notes to several third party investors with in an aggregate
principal amount of US$235 million (Rmb 1,636 million). The notes issued bear zero interest and will mature on March 5, 2021. Prior to
maturity, holders of the notes have the right to convert either all or part of the principal amount of the notes into Class A ordinary shares
(or ADSs) of the Company from September 5, 2020, at a conversion price of US$3.50 per ADS, subject to certain adjustments.
In December 2019, it was reported that a novel strain of coronavirus, later named COVID-19, has surfaced and subsequently spread
throughout China and worldwide. In response to intensifying efforts to contain the spread of COVID-19, the Chinese government has
taken a number of actions, which included extending the Chinese New Year holiday, quarantining individuals infected with or suspected
of having COVID-19, prohibiting residents from free travel, encouraging employees of enterprises to work remotely from home and
cancelling public activities, among others. The COVID-19 has also resulted in temporary closure of many corporate offices, retail stores,
manufacturing facilities and factories across China.
The COVID-19 has impact on China’s auto industry in general and the production and delivery of vehicles of the Group. The
production of electric vehicles were suspended due to the temporary closure of manufacturing facilities of the Group’s suppliers and
JAC. In addition, the Group has several service centers and vehicle delivery centers in Wuhan and other major cities in China, which
were temporarily closed during the outbreak.
As a result of the outbreak of COVID-19, the Group’s businesses, results of operation, financial positions and cash flows are
materially and adversely affected in the first quarter of 2020 with potential continuing impacts on subsequent periods, including but not
limited to the adverse impact on the Group’s revenues and operating cash flows. The Group has been closely monitoring the impacts of
COVID-19 and because of the uncertainties surrounding the COVID-19, the exact financial impact is unpredictable and will depend on
future developments, including the duration, severity and reach of the COVID-19 outbreak globally.
F-53
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
On April 29, 2020, the Group entered into definitive agreements for investments in NIO (Anhui) Holding Ltd., (“NIO China”) with a
group of investors (collectively, the “Strategic Investors”) led by Hefei City Construction and Investment Holding (Group) Co., Ltd.,
CMG-SDIC Capital Co., Ltd., and Anhui Provincial Emerging Industry Investment Co., Ltd. Under the definitive agreements, the
Strategic Investors will invest an aggregate of RMB7 billion in cash into NIO China. The Group will inject its core businesses and assets
in China, including vehicle research and development, supply chain, sales and services and NIO Power (the “Asset Consideration”), into
NIO China. The Asset Consideration is valued at RMB17.77 billion, as calculated based on 85% of the market value of NIO Inc.
(calculated based on the Company’s average ADS trading price over the thirty public trading days preceding April 21, 2020). Further,
NIO will invest RMB4.26 billion in cash into NIO China. Upon the completion of the investments, NIO will hold 75.9% of controlling
equity interests in NIO China, and the Strategic Investors will collectively hold the remaining 24.1%. The Strategic Investors and NIO
will each inject cash into NIO China in five installments, namely (i) RMB3.5 billion and RMB1.278 billion respectively within five
business days of the satisfaction of closing conditions, (ii) RMB1.5 billion and RMB1.278 billion respectively on or prior to June 30,
2020, (iii) RMB1 billion and RMB0.852 billion respectively on or prior to September 30, 2020, (iv) RMB0.5 billion and RMB0.426
billion respectively on or prior to December 31, 2020, and (v) RMB0.5 billion and RMB0.426 billion respectively on or prior to March
31, 2021. The Group expects the closing of the investments to take place in the second quarter of 2020 when certain customary closing
conditions are met.
30. Parent Company Only Condensed Financial Information
The Company performed a test on the restricted net assets of its consolidated subsidiaries and VIEs in accordance with Securities
and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was
applicable for the Company to disclose the financial information for the Company only.
The subsidiaries did not pay any dividend to the Company for the years presented. Certain information and footnote disclosures
generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote
disclosures contain supplemental information relating to the operations of the Company, as such, these statements are not the general-
purpose financial statements of the reporting entity and should be read in conjunction with the notes to the consolidated financial
statements of the Company.
The Company did not have significant capital and other commitments, or guarantees as of December 31, 2019.
F-54
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Condensed Balance Sheets
ASSETS
Current assets:
Cash and cash equivalents
Amounts due from related parties
Prepayments and other current assets
Total current assets
Non-current assets:
Investments in subsidiaries and VIEs
Total non-current assets
Total assets
LIABILITIES
Current liabilities:
Short-term borrowings
Amounts due to related parties
Accruals and other liabilities
Total current liabilities
Long-term borrowings
Deferred revenue
Total non-current liabilities
Total liabilities
SHAREHOLDERS’ EQUITY/(DEFICIT)
Class A Ordinary Shares
Class B Ordinary Shares
Class C Ordinary Shares
Treasury shares
Additional paid in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity/(deficit)
Total liabilities, mezzanine equity and shareholders’ equity
F-55
2018
RMB
As of December 31,
2019
RMB
2019
US$
Note 2(e)
17,179
20,701
54,847
92,727
11,629
22,698
—
34,327
1,670
3,260
—
4,930
8,891,882
8,891,882
8,984,609
2,884,635
2,884,635
2,918,962
414,352
414,352
419,282
—
2,046,971
913
2,047,884
—
99,684
99,684
2,147,568
697,620
2,555,511
100,772
3,353,903
5,784,984
79,761
5,864,745
9,218,648
100,207
367,076
14,475
481,758
830,961
11,457
842,418
1,324,176
1,329
226
254
(9,186)
41,918,936
(34,708)
(35,039,810)
6,837,041
8,984,609
1,347
226
254
—
40,227,856
(203,048)
(46,326,321)
(6,299,686)
2,918,962
194
32
36
—
5,778,370
(29,166)
(6,654,360)
(904,894)
419,282
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Condensed Statements of Comprehensive Loss
Operating expenses:
Selling, general and administrative
Total operating expenses
Loss from operations
Interest income
Interest expense
Equity in loss of subsidiaries and VIEs
Investment income
Other (loss)/gain, net
Loss before income tax expense
Income tax expense
Net loss
Accretion on convertible redeemable preferred shares to redemption value
Accretion on redeemable non-controlling interests to redemption value
Net loss attributable to ordinary shareholders of NIO Inc.
Condensed Statements of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities
Purchase of held for trading securities
Acquisitions of equity investees
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
For the Year ended December 31,
2017
RMB
2018
RMB
2019
RMB
(52,518)
(52,518)
(52,518)
2,391
(12,389)
(4,924,897)
3,498
(819)
(4,984,734)
—
(4,984,734)
(2,576,935)
—
(7,561,669)
(178,479)
(178,479)
(178,479)
7,692
—
(9,432,640)
—
6,153
(9,597,274)
—
(9,597,274)
(13,667,291)
(63,297)
(23,327,862)
(97)
(97)
(97)
4,212
(237,374)
(11,076,907)
—
23,655
(11,286,511)
—
(11,286,511)
—
(126,590)
(11,413,101)
2019
US$
Note 2(e)
(14)
(14)
(14)
605
(34,097)
(1,591,097)
—
3,398
(1,621,205)
—
(1,621,205)
—
(18,184)
(1,639,389)
For The Year ended December 31,
2017
RMB
2018
RMB
2019
RMB
2019
US$
Note 2(e)
(4,920,905)
3,917,654
438,465
62,981
1,340,911
(1,337,413)
(6,223,178)
(6,219,680)
—
—
(11,693,144)
(11,693,144)
—
—
(4,817,498)
(4,817,498)
—
—
(691,990)
(691,990)
Proceeds from exercise of stock options
Repurchase of restricted shares
Proceeds from issuance of convertible promissory note
Repayment of convertible promissory note
Repayment of non-recourse loan
Proceeds from issuance of ordinary shares, net of issuance costs
Proceeds from issuance of convertible redeemable preferred shares, net of
issuance costs
Net cash provided by financing activities
Effects of exchange rate changes on cash and cash equivalents
NET DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
6,207
—
312,624
(325,013)
—
—
11,093,377
11,087,195
(3,031)
(56,421)
79,691
23,270
42,251
(7,490)
—
—
82,863
7,566,470
78,651
7,762,745
6,654
(6,091)
23,270
17,179
50,790
—
4,322,457
—
—
—
—
4,373,247
236
(5,550)
17,179
11,629
7,296
—
620,882
—
—
—
—
628,178
33
(798)
2,468
1,670
Basis of presentation
The Company’s accounting policies are the same as the Group’s accounting policies with the exception of the accounting for the
investments in subsidiaries and VIEs.
For the Company only condensed financial information, the Company records its investments in subsidiaries and VIEs under the
equity method of accounting as prescribed in ASC 323, Investments—Equity Method and Joint Ventures.
F-56
NIO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data)
Such investments are presented on the Condensed Balance Sheets as “Investments in subsidiaries and VIEs” and shares in the
subsidiaries and VIEs’ loss are presented as “Equity in loss of subsidiaries and VIEs” on the Condensed Statements of Comprehensive
Loss. The parent company only condensed financial information should be read in conjunction with the Group’ consolidated financial
statements.
F-57
Exhibit 2.5
Description of American Depositary Shares
registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”)
American Depositary Shares (“ADSs”), each representing one Class A ordinary share of NIO Inc. (the “we,” “us,” “our
company” or “our”) are listed and traded on the New York Stock Exchange. This exhibit contains a description of the rights of the
holders of ADSs.
Deutsche Bank Trust Company Americas, as depositary, registers and delivers the ADSs. Each ADS represents ownership of
one class A ordinary share, deposited with Deutsche Bank AG, Hong Kong Branch, as custodian for the depositary. Each ADS also
represents ownership of any other securities, cash or other property which may be held by the depositary. The depositary’s corporate trust
office at which the ADSs are administered is located at 60 Wall Street, New York, NY 10005, USA. The principal executive office of the
depositary is located at 60 Wall Street, New York, NY 10005, USA.
The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to
which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements
issued by the depositary to the ADS holders entitled thereto.
We will not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, will not have shareholder rights.
Cayman Islands law governs shareholder rights. The depositary will be the holder of the Class A ordinary shares underlying your ADSs.
Holder of our ADSs have ADS holder rights. A deposit agreement among our company, the depositary and the holders and the beneficial
owners of our ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York
govern the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should
read the entire deposit agreement and the form of American Depositary Receipt, which has been filed with the SEC as an exhibit to our
Registration Statement on Form F-1 (File No. 333-226822)..
Holding the ADSs
How will you hold your ADSs?
You may hold ADSs either (1) directly (a) by having an American Depositary Receipt, or ADR, which is a certificate
evidencing a specific number of ADSs, registered in your name, or (b) by holding ADSs in DRS, or (2) indirectly through your broker or
other financial institution. If you hold ADSs directly, you are an ADS holder. This description assumes you hold your ADSs directly.
ADSs will be issued through DRS, unless you specifically request certificated ADRs. If you hold the ADSs indirectly, you must rely on
the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should
consult with your broker or financial institution to find out what those procedures are.
Dividends and Other Distributions
How will you receive dividends and other distributions on the shares?
The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares
or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of
ordinary shares your ADSs represent as of the record date (which will be as close as practicable to the record date for our ordinary
shares) set by the depositary with respect to the ADSs.
(cid:0) Cash. The depositary will convert or cause to be converted any cash dividend or other cash distribution we pay on the ordinary
shares or any net proceeds from the sale of any ordinary shares, rights, securities or other entitlements under the terms of the
deposit agreement into U.S. dollars if it can do so on a practicable basis, and can transfer the U.S. dollars to the United States
and will distribute promptly the amount thus received. If the depositary shall determine in its judgment that such conversions or
transfers are not practical or lawful or if any government approval or license is needed and cannot be obtained at a reasonable
cost within a reasonable period or otherwise sought, the deposit agreement allows the depositary to distribute the foreign
currency only to those ADS holders to whom it is possible to do so. It will hold or cause the custodian to hold the foreign
currency it cannot convert for the account of the ADS holders who have not been paid and such funds will be held for the
respective accounts of the ADS holders. It will not invest the foreign currency and it will not be liable for any interest for the
respective accounts of the ADS holders.
Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that
must be paid, will be deducted. It will distribute only whole U.S. dollars and cents and will round down fractional cents to the
nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you
may lose some or all of the value of the distribution.
(cid:0) Shares. For any ordinary shares we distribute as a dividend or free distribution, either (1) the depositary will distribute
additional ADSs representing such ordinary shares or (2) existing ADSs as of the applicable record date will represent rights
and interests in the additional ordinary shares distributed, to the extent reasonably practicable and permissible under law, in
either case, net of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges.
The depositary will only distribute whole ADSs. It will try to sell ordinary shares which would require it to deliver a fractional
ADS and distribute the net proceeds in the same way as it does with cash. The depositary may sell a portion of the distributed
ordinary shares sufficient to pay its fees and expenses, and any taxes and governmental charges, in connection with that
distribution.
(cid:0) Elective Distributions in Cash or Shares. If we offer holders of our ordinary shares the option to receive dividends in either cash
or shares, the depositary, after consultation with us and having received timely notice as described in the deposit agreement of
such elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to
you as a holder of the ADSs. We must timely first instruct the depositary to make such elective distribution available to you and
furnish it with
2
satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practicable to make such
elective distribution available to you. In such case, the depositary shall, on the basis of the same determination as is made in
respect of the ordinary shares for which no election is made, distribute either cash in the same way as it does in a cash
distribution, or additional ADSs representing ordinary shares in the same way as it does in a share distribution. The depositary is
not obligated to make available to you a method to receive the elective dividend in shares rather than in ADSs. There can be no
assurance that you will be given the opportunity to receive elective distributions on the same terms and conditions as the holders
of ordinary shares.
(cid:0) Rights to Purchase Additional Shares. If we offer holders of our ordinary shares any rights to subscribe for additional shares, the
depositary shall having received timely notice as described in the deposit agreement of such distribution by us, consult with us,
and we must determine whether it is lawful and reasonably practicable to make these rights available to you. We must first
instruct the depositary to make such rights available to you and furnish the depositary with satisfactory evidence that it is legal
to do so. If the depositary decides it is not legal or reasonably practicable to make the rights available but that it is lawful and
reasonably practicable to sell the rights, the depositary will endeavor to sell the rights and in a riskless principal capacity or
otherwise, at such place and upon such terms (including public or private sale) as it may deem proper distribute the net proceeds
in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you
will receive no value for them.
If the depositary makes rights available to you, it will establish procedures to distribute such rights and enable you to exercise
the rights upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or other
governmental charges. The Depositary shall not be obliged to make available to you a method to exercise such rights to
subscribe for ordinary shares (rather than ADSs).
U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights.
For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver
restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the
necessary restrictions in place.
There can be no assurance that you will be given the opportunity to exercise rights on the same terms and conditions as the
holders of ordinary shares or be able to exercise such rights.
(cid:0) Other Distributions. Subject to receipt of timely notice, as described in the deposit agreement, from us with the request to make
any such distribution available to you, and provided the depositary has determined such distribution is lawful and reasonably
practicable and feasible and in accordance with the terms of the deposit agreement, the depositary will distribute to you
anything else we distribute on deposited securities by any means it may deem practicable, upon your payment of applicable
fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. If any of the conditions
above are not met, the depositary will endeavor to sell, or cause to be sold,
3
what we distributed and distribute the net proceeds in the same way as it does with cash; or, if it is unable to sell such property,
the depositary may dispose of such property in any way it deems reasonably practicable under the circumstances for nominal or
no consideration, such that you may have no rights to or arising from such property.
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS
holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to
take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not
receive the distributions we make on our shares or any value for them if we and/or the depositary determines that it is illegal or not
practicable for us or the depositary to make them available to you.
Deposit, Withdrawal and Cancellation
How are ADS issued?
The depositary will deliver ADSs if you or your broker deposit ordinary shares or evidence of rights to receive ordinary shares
with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or
fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the
order of the person or persons entitled thereto.
How do ADR holders cancel an American Depositary Share?
You may turn in your ADSs at the depositary’s corporate trust office or by providing appropriate instructions to your broker.
Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will
deliver the ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the
custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, to the
extent permitted by law.
How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The
depositary will cancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively,
upon receipt by the depositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated
ADSs for certificated ADSs, the depositary will execute and deliver to you an ADR evidencing those ADSs.
Voting Rights
How do you vote?
You may instruct the depositary to vote the ordinary shares or other deposited securities underlying your ADSs at any meeting
at which you are entitled to vote pursuant to any applicable law, the provisions of our memorandum and articles of association, and the
provisions
4
of or governing the deposited securities. Otherwise, you could exercise your right to vote directly if you withdraw the ordinary shares.
However, you may not know about the meeting sufficiently enough in advance to withdraw the ordinary shares.
If we ask for your instructions and upon timely notice from us by regular, ordinary mail delivery, or by electronic transmission,
as described in the deposit agreement, the depositary will notify you of the upcoming meeting at which you are entitled to vote pursuant
to any applicable law, the provisions of our memorandum and articles of association, and the provisions of or governing the deposited
securities, and arrange to deliver our voting materials to you. The materials will include or reproduce (a) such notice of meeting or
solicitation of consents or proxies; (b) a statement that the ADS holders at the close of business on the ADS record date will be entitled,
subject to any applicable law, the provisions of our memorandum and articles of association, and the provisions of or governing the
deposited securities, to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the ordinary shares or other
deposited securities represented by such holder’s ADSs; and (c) a brief statement as to the manner in which such instructions may be
given to the depositary or deemed given in accordance with the second to last sentence of this paragraph if no instruction is received to
the depositary to give a discretionary proxy to a person designated by us. Voting instructions may be given only in respect of a number of
ADSs representing an integral number of ordinary shares or other deposited securities. For instructions to be valid, the depositary must
receive them in writing on or before the date specified. The depositary will try, as far as practical, subject to applicable law and the
provisions of our memorandum and articles of association, to vote or to have its agents vote the ordinary shares or other deposited
securities (in person or by proxy) as you instruct. The depositary will only vote or attempt to vote as you instruct. If we timely requested
the depositary to solicit your instructions but no instructions are received by the depositary from an owner with respect to any of the
deposited securities represented by the ADSs of that owner on or before the date established by the depositary for such purpose, the
depositary shall deem that owner to have instructed the depositary to give a discretionary proxy to a person designated by us with respect
to such deposited securities, and the depositary shall give a discretionary proxy to a person designated by us to vote such deposited
securities. However, no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter
if we inform the depositary we do not wish such proxy given, substantial opposition exists or the matter materially and adversely affects
the rights of holders of the ordinary shares.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the
ordinary shares underlying your ADSs. In addition, there can be no assurance that ADS holders and beneficial owners generally, or any
holder or beneficial owner in particular, will be given the opportunity to vote or cause the custodian to vote on the same terms and
conditions as the holders of our ordinary shares.
The depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out
voting instructions. This means that you may not be able to exercise your right to vote and you may have no recourse if the ordinary
shares underlying your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited
securities, if we request the depositary to act, we will give
5
the depositary notice of any such meeting and details concerning the matters to be voted at least 30 business days in advance of the
meeting date.
Compliance with Regulations
Information Requests
Each ADS holder and beneficial owner shall (a) provide such information as we or the depositary may request pursuant to law,
including, without limitation, relevant Cayman Islands law, any applicable law of the United States of America, our memorandum and
articles of association, any resolutions of our Board of Directors adopted pursuant to such memorandum and articles of association, the
requirements of any markets or exchanges upon which the ordinary shares, ADSs or ADRs are listed or traded, or to any requirements of
any electronic book-entry system by which the ADSs or ADRs may be transferred, regarding the capacity in which they own or owned
ADRs, the identity of any other persons then or previously interested in such ADRs and the nature of such interest, and any other
applicable matters, and (b) be bound by and subject to applicable provisions of the laws of the Cayman Islands, our memorandum and
articles of association, and the requirements of any markets or exchanges upon which the ADSs, ADRs or ordinary shares are listed or
traded, or pursuant to any requirements of any electronic book-entry system by which the ADSs, ADRs or ordinary shares may be
transferred, to the same extent as if such ADS holder or beneficial owner held ordinary shares directly, in each case irrespective of
whether or not they are ADS holders or beneficial owners at the time such request is made.
Disclosure of Interests
Each ADS holder and beneficial owner shall comply with our requests pursuant to Cayman Islands law, the rules and
requirements of the New York Stock Exchange and any other stock exchange on which the ordinary shares are, or will be, registered,
traded or listed or our memorandum and articles of association, which requests are made to provide information, inter alia, as to the
capacity in which such ADS holder or beneficial owner owns ADS and regarding the identity of any other person interested in such ADS
and the nature of such interest and various other matters, whether or not they are ADS holders or beneficial owners at the time of such
requests.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable, or which become payable, on your ADSs or on the
deposited securities represented by any of your ADSs. The depositary may refuse to register or transfer your ADSs or allow you to
withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to
you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the
depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to you any net
proceeds, or send to you any property, remaining after it has paid the taxes. You agree to indemnify us, the depositary, the custodian and
each of our and their respective agents, directors, employees and affiliates for, and hold each of them harmless from, any claims with
respect to
6
taxes (including applicable interest and penalties thereon) arising from any refund of taxes, reduced rate of withholding at source or other
tax benefit obtained for you. Your obligations under this paragraph shall survive any transfer of ADRs, any surrender of ADRs and
withdrawal of deposited securities or the termination of the deposit agreement.
Reclassifications, Recapitalizations and Mergers
Change the nominal or par value of our class A ordinary shares
If we:
Reclassify, split up or consolidate any of the deposited securities
Distribute securities on the class A ordinary shares that are not
distributed to you, or Recapitalize, reorganize, merge, liquidate, sell
all or substantially all of our assets, or take any similar action
Amendment and Termination
How may the deposit agreement be amended?
Then:
The cash, shares or other securities received by the depositary
will become deposited securities.
Each ADS will automatically represent its equal share of the
new deposited securities.
The depositary may distribute some or all of the cash, shares or
other securities it received. It may also deliver new ADSs or
ask you to surrender your outstanding ADRs in exchange for
new ADRs identifying the new deposited securities.
We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If
an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for
registration fees, facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange
control regulations and other charges specifically payable by ADS holders under the deposit agreement, or materially prejudices a
substantial existing right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies
ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to
agree to the amendment and to be bound by the ADRs and the deposit agreement as amended. If any new laws are adopted which would
require the deposit agreement to be amended in order to comply therewith, we and the depositary may amend the deposit agreement in
accordance with such laws and such amendment may become effective before notice thereof is given to ADS holders.
How may the deposit agreement be terminated?
The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at
least 90 days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like
to resign, or if we have removed the depositary, and in either case we have not appointed a new depositary within 90 days. In either such
case, the depositary must notify you at least 30 days before termination.
7
After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect
distributions on the deposited securities, sell rights and other property and deliver ordinary shares and other deposited securities upon
cancellation of ADSs after payment of any fees, charges, taxes or other governmental charges. Six months or more after the date of
termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the
money it received on the sale, as well as any other cash it is holding under the deposit agreement, for the pro rata benefit of the ADS
holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. After such sale, the
depositary’s only obligations will be to account for the money and other cash. After termination, we shall be discharged from all
obligations under the deposit agreement except for our obligations to the depositary thereunder.
Books of Depositary
The depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during
regular business hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the
Company, the ADRs and the deposit agreement.
The depositary will maintain facilities in the Borough of Manhattan, The City of New York to record and process the issuance,
cancellation, combination, split-up and transfer of ADRs.
These facilities may be closed at any time or from time to time when such action is deemed necessary or advisable by the
depositary in connection with the performance of its duties under the deposit agreement or at our reasonable written request.
Limitations on Obligations and Liability to ADR Holders
Limits on our Obligations and the Obligations of the Depositary and the Custodian; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary and the custodian. It also limits our
liability and the liability of the depositary. The depositary and the custodian:
·
·
are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful
misconduct;
are not liable if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any
civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of
the deposit agreement and any ADR, by reason of any provision of any present or future law or regulation of the United States
or any state thereof, Cayman Islands or any other country, or of any other governmental authority or regulatory authority or
stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or
future, of our memorandum and articles of association or any provision of or governing any deposited securities, or by reason of
any act of God or war or other
8
circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work
stoppage, strikes, civil unrest, revolutions, rebellions, explosions and computer failure);
are not liable by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in our
memorandum and articles of association or provisions of or governing deposited securities;
are not liable for any action or inaction of the depositary, the custodian or us or their or our respective controlling persons or
agents in reliance upon the advice of or information from legal counsel, any person presenting ordinary shares for deposit or any
other person believed by it in good faith to be competent to give such advice or information;
are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made
available to holders of ADSs under the terms of the deposit agreement;
are not liable for any special, consequential, indirect or punitive damages for any breach of the terms of the deposit agreement,
or otherwise;
·
·
·
·
· may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party;
·
·
disclaim any liability for any action or inaction or inaction of any of us or our respective controlling persons or agents in
reliance upon the advice of or information from legal counsel, accountants, any person presenting ordinary shares for deposit,
holders and beneficial owners (or authorized representatives) of ADSs, or any person believed in good faith to be competent to
give such advice or information; and
disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available
to holders of deposited securities but not made available to holders of ADS.
The depositary and any of its agents also disclaim any liability (i) for any failure to carry out any instructions to vote, the
manner in which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or
reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or
timeliness of any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any
translation thereof, (iii) any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth
of the deposited securities, the credit-worthiness of any third party, (iv) for any tax consequences that may result from ownership of
ADSs, ordinary shares or deposited securities, or (v) for any acts or omissions made by a successor depositary whether in connection
with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the
depositary, provided that in connection with the issue out of which such potential liability arises the depositary performed its obligations
without gross negligence or willful misconduct while it acted as depositary.
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In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will issue, deliver or register a transfer of an ADS, split-up, subdivide or combine ADSs, make a
distribution on an ADS, or permit withdrawal of ordinary shares, the depositary may require:
·
·
·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties
for the transfer of any ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of
the depositary;
satisfactory proof of the identity and genuineness of any signature or any other matters contemplated in the deposit agreement;
and
compliance with (A) any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to the
withdrawal or delivery of deposited securities and (B) such reasonable regulations and procedures as the depositary may
establish, from time to time, consistent with the deposit agreement and applicable laws, including presentation of transfer
documents.
The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary
or our transfer books are closed or at any time if the depositary or we determine that it is necessary or advisable to do so.
Your Rights to Receive the Shares Underlying Your ADSs
You have the right to cancel your ADSs and withdraw the underlying ordinary shares at any time except:
·
·
·
·
·
when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2)
the transfer of ordinary shares is blocked to permit voting at a shareholders’ meeting; or (3) we are paying a dividend on our
ordinary shares;
when you owe money to pay fees, taxes and similar charges;
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs
or to the withdrawal of ordinary shares or other deposited securities, or
other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General
Instructions may be amended from time to time); or
for any other reason if the depositary or we determine, in good faith, that it is necessary or advisable to prohibit withdrawals.
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The depositary shall not knowingly accept for deposit under the deposit agreement any ordinary shares or other deposited
securities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such
ordinary shares.
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or
Profile, will apply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to
which the depositary may register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements
issued by the depositary to the ADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant,
claiming to act on behalf of an ADS holder, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to
deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS
holder to register such transfer.
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Exhibit 2.6
Description of Class A Ordinary Shares
registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”)
In connection with our initial public offering, but not for trading, our Class A ordinary shares are registered under Section 12(b)
of the Exchange Act. This exhibit contains a description of the rights of the holders of Class A ordinary shares.
The following is a summary of material provisions of our currently effective eleventh amended and restated memorandum and
articles of association (the “Memorandum and Articles of Association”), as well as the Companies Law (as amended) of the Cayman
Islands (the "Companies Law") insofar as they relate to the material terms of our ordinary shares. Notwithstanding this, because it is a
summary, it may not contain all the information that you may otherwise deem important. For more complete information, you should
read the entire Memorandum and Articles of Association, which has been filed with the SEC as an exhibit to our Registration Statement
on Form F-1 (File No. 333-226822).
Ordinary Shares
Our authorized share capital is US$1,000,000 divided into 4,000,000, 000 shares comprising of (i) 2,500,000,000 Class A
ordinary shares of a par value of US$0.00025 each, (ii) 132,030,222 Class B ordinary shares of a par value of US$0.00025 each (iii)
148,500,000 Class C ordinary shares of a par value of US$0.00025 each and (iv) 1,219,469,778 shares of a par value of US$0.00025
each of such class or classes (however designated) as our board of directors may determine in accordance with our eleventh amended and
restated memorandum and articles of association. All of our issued and outstanding ordinary shares are fully paid and non-assessable.
Our ordinary shares are issued in registered form, and are issued when registered in our register of members. Our shareholders who are
non-residents of the Cayman Islands may freely hold and vote their ordinary shares. Under our eleventh amended and restated
memorandum and articles of association, our company may not issue bearer shares.
Class of ordinary shares
Holders of Class A ordinary shares, Class B ordinary shares and Class C ordinary shares shall at all times vote together as one
class on all resolutions submitted to a vote by the holders of ordinary shares. Each Class A ordinary share shall entitle the holder thereof
to one (1) vote on all matters subject to vote at general meetings of our company, each Class B ordinary share shall entitle the holder
thereof to four (4) votes on all matters subject to vote at general meetings of our company, and each Class C ordinary share shall entitle
the holder thereof to eight (8) votes on all matters subject to vote at general meetings of our company.
Conversion
Each Class B ordinary share is convertible into one (1) Class A ordinary share at any time at the option of the holder thereof.
Each Class C ordinary share is convertible into one (1) Class A ordinary share at any time at the option of the holder thereof. In no event
shall Class A
ordinary shares be convertible into Class B ordinary shares or Class C ordinary shares. Upon any sale, transfer, assignment or disposition
of any Class B ordinary share or Class C ordinary share by a shareholder to any person who is not an affiliate of such shareholder, or
upon a change of ultimate beneficial ownership of any Class B ordinary share or Class C ordinary share to any person who is not an
affiliate of the registered shareholder of such share, each such Class B ordinary share and Class C ordinary share, as applicable, shall be
automatically and immediately converted into one (1) Class A ordinary share.
Dividends
The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors, subject to our
eleventh amended and restated memorandum articles of association. In addition, our shareholders may by ordinary resolution declare a
dividend, but no dividend may exceed the amount recommended by our directors. In either case, under the laws of the Cayman Islands,
our company may pay a dividend out of either profits or share premium account, provided that in no circumstances may a dividend be
paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights
Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. Each Class A ordinary share shall entitle the
holder thereof to one (1) vote on all matters subject to vote at general meetings of our company, each Class B ordinary share shall entitle
the holder thereof to four (4) votes on all matters subject to vote at general meetings of our company, and each Class C ordinary share
shall entitle the holder thereof to eight (8) votes on all matters subject to vote at general meetings of our company. A poll may be
demanded by the chairman of such meeting or any one or more shareholders present in person or by proxy at the meeting.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the
votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds
of the votes cast attaching to the outstanding ordinary shares at a meeting. A special resolution will be required for important matters
such as a change of name or making changes to our eleventh amended and restated memorandum and articles of association. Holders of
our ordinary shares may effect certain changes by ordinary resolution, including increasing the amount of our authorized share capital,
consolidating all or any of our share capital into shares of larger amount than our existing shares, sub-dividing our shares or any of them
into shares of an amount smaller than that fixed by our eleventh amended and restated memorandum and articles of association, and
cancelling any unissued shares. Both ordinary resolution and special resolution may also be passed by a unanimous written resolution
signed by all the shareholders of our company, as permitted by the Companies Law and our eleventh amended and restated memorandum
and articles of association.
Appointment and Removal of Directors
Our board of directors may, by the affirmative vote of a simple majority of the directors present and voting at a board meeting,
appoint any person as a director, to fill a casual vacancy
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on the board or as an addition to the existing board. Directors may be removed by ordinary resolution of our shareholders.
General Meetings of Shareholders
As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders’ annual general
meetings. Our eleventh amended and restated memorandum and articles of association provide that we may (but are not obliged to) in
each year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling
it, and the annual general meeting shall be held at such time and place as may be determined by our directors.
Shareholders’ general meetings may be convened by the chairman of board of directors or a majority of our board of directors.
Advance notice of at least ten calendar days is required for the convening of our annual general shareholders’ meeting (if any) and any
other general meeting of our shareholders. A quorum required for any general meeting of shareholders consists of at least one
shareholder present or by proxy, representing not less than one-third of all votes attaching to all of our shares in issue and entitled to vote.
The Companies Law provides shareholders with only limited rights to requisition a general meeting, and does not provide
shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles
of association. Our eleventh amended and restated memorandum and articles of association provide that upon the requisition of
shareholders representing in aggregate not less than one-third of the votes attaching to the outstanding shares of our company entitled to
vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at
such meeting. However, our eleventh amended and restated memorandum and articles of association do not provide our shareholders
with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
Transfer of Ordinary Shares
Subject to the restrictions in our eleventh amended and restated memorandum and articles of association set out below, any of
our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any
other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully
paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
·
·
·
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such
other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;
the instrument of transfer is in respect of only one class of ordinary shares;
the instrument of transfer is properly stamped, if required;
3
·
·
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not
exceed four; and
a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors
may from time to time require is paid to us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was
lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and
the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that
the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board of directors may
determine.
Liquidation
On the winding-up of our company, if the assets available for distribution among our shareholders shall be more than sufficient
to repay the whole of the share capital at the commencement of the winding-up, the surplus shall be distributed amongst our shareholders
in proportion to the par value of the shares held by them at the commencement of the winding-up, subject to a deduction from those
shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets
available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by
our shareholders in proportion to the par value of the shares held by them.
Calls on Shares and Forfeiture of Shares
Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice
served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and
remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Shares
We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these
shares, on such terms and in such manner as may be determined by our board of directors or by special resolution of our shareholders.
Our company may also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors
or by an ordinary resolution of our shareholders. Under the Companies Law, the redemption or repurchase of any share may be paid out
of our company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of
capital (including share premium account and capital redemption reserve) if our company can, immediately following such payment, pay
its debts as they fall due in the ordinary course of business. In addition, under the Companies Law no such share may be redeemed or
repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in
4
there being no shares outstanding or (c) if the company has commenced liquidation. In addition, our company may accept the surrender
of any fully paid share for no consideration.
Variations of Rights of Shares
If at any time, our share capital is divided into different classes of shares, the rights attached to any class of shares (unless
otherwise provided by the terms of issue of the shares of that class), whether or not our company is being wound-up, may be varied with
the consent in writing of holders of not less than two-thirds of the issued shares of that class or with the sanction of a special resolution
passed at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class
issued shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be materially
adversely varied by, inter alia, the creation, allotment or issue of further shares ranking pari passu with such existing class of shares.
Issuance of Additional Shares
Our eleventh amended and restated memorandum of association authorizes our board of directors to issue additional ordinary
shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our eleventh amended and restated memorandum of association also authorizes our board of directors to establish from time to
time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that
series, including:
·
·
·
·
the designation of the series;
the number of shares of the series;
the dividend rights, dividend rates, conversion rights and voting rights; and
the rights and terms of redemption and liquidation preferences.
Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued.
Issuance of these shares may dilute the voting power of holders of ordinary shares.
Inspection of Books and Records
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of
shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10
Additional Information— H. Documents on Display.”
Changes in Capital
Our shareholders may from time to time by ordinary resolution:
5
·
·
·
·
increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;
consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion
between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share
from which the reduced share is derived; or
cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and
diminish the amount of our share capital by the amount of the shares so cancelled.
Our shareholders may, by special resolution and subject to confirmation by the Grand Court of the Cayman Islands on an
application by our company for an order confirming such reduction, reduce our share capital and any capital redemption reserve in any
manner authorized by law.
Anti-Takeover Provisions
Some provisions of our eleventh amended and restated memorandum and articles of association may discourage, delay or
prevent a change of control of our company or management that shareholders may consider favorable, including provisions that:
·
·
authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,
privileges and restrictions of such preference shares without any further vote or action by our shareholders; and
limit the ability of shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our eleventh
amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the
best interests of our company.
Exempted Company
We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between
ordinary resident companies, ordinary non-resident companies and exempted companies. Any company that is registered in the Cayman
Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The
requirements for an exempted company are essentially the same as for an ordinary resident/non-resident company except that an
exempted company:
6
·
·
·
does not have to file an annual return detailing its shareholders with the Registrar of Companies of the Cayman Islands;
is not required to open its register of members for inspection;
does not have to hold an annual general meeting;
· may issue negotiable or bearer shares or shares with no par value;
· may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the
first instance);
· may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
· may register as a limited duration company; and
· may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares
of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or
improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
7
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY [***], HAS BEEN OMITTED BECAUSE NIO INC. HAS DETERMINED THE
INFORMATION (I) IS NOT MATERIAL AND (II) WOULD LIKELY CAUSE
COMPETITIVE HARM TO NIO INC. IF PUBLICLY DISCLOSED.
Exhibit 4.23
NIO ES6 Manufacturing Cooperation Agreement
Between
Party A: Jianghuai Automobile Group Co., Ltd.
And
Party B: NIO Co., Ltd.
Dated: April 30, 2019
This AGREEMENT (this “Agreement”) is made by and between Jianghuai Automobile Group Co., Ltd. (formerly known as Anhui
Jianghuai Automobile Co., Ltd. and renamed to Anhui Jianghuai Automobile Group Co., Ltd. on November 18, 2016, “Party A”) and
NIO Co., Ltd. (“Party B”, collectively with Party A, the "Parties") through negotiations based on the Manufacturing Cooperation
Agreement dated May 23, 2016 made by and between Party A and Party B, with the view to further providing for cooperation in NIO
ES6 manufacturing and certain matters relating thereto.
I. Cooperation
1. Scope of cooperation
The Parties have had their first cooperation on Model ES8 based on the Manufacturing Cooperation Agreement. Considering the
satisfactory development of the ES8 cooperation, the Parties agree to continue cooperation on mass production of the NIO ES6, whereby
Party A shall be responsible for manufacturing of the NIO ES6. Unless otherwise expressly agreed by the Parties in writing, it is agreed
that the provisions in the Manufacturing Cooperation Agreement and the Ancillary Agreements made by the Parties regarding
cooperation to manufacture the ES8 (the “Ancillary Agreements”) shall apply to the cooperation to manufacture the NIO ES6.
2. New investment
Party B shall be responsible for investment in new technical equipment and ancillary facilities necessary for satisfactory production of
NIO ES6 in the applicable manufacturing plant of Party A ("Party A Manufacturing Plant").
3. Calculation and payment of manufacturing and processing fee
3.1 It is agreed that in 2019, Party B shall pay Party A monthly a manufacturing and processing fee of RMB[***] (excluding tax) for
each mass produced NIO ES6 vehicle. For ease of settlement, Party A will issue an invoice to Party B for the amount of the
manufacturing and processing fee confirmed by the Parties on the last business day of each month, and it is agreed that the amount so
confirmed shall be paid by Party B to Party A within the first five business days of the next month.
3.2 [***]
3.3 It is agreed that from January 1, 2019, the Parties shall settle payment by way of providing from Party A to Party B an invoice of
an amount equal to raw material costs plus processing fees (excluding tax) for the vehicles manufactured by the Parties (including ES8
and ES6). It is agreed that Party B shall pay the invoiced amount (including tax) to Party A within the first five business days of the next
month. Reconciliation of any amount invoiced in the first quarter of 2019 will be made in the third quarter of 2019.
4. Loss indemnification
2
Party B agrees to indemnify the entire annual losses incurred by Party A Manufacturing Plant due to low sales volume for the three-year
period (from April 10, 2018 to April 9, 2021) provided under the Manufacturing Cooperation Agreement, and the amount of such
indemnification shall be determined based on the audit results of annual accounting firm engaged by Party A, which audit results shall be
subject to confirmation of the Parties. If any material difference occurs between the Parties regarding the audit results (any difference
more than RMB5 million regarding the annual indemnification amount based on the audit results shall be regarded as major difference)
or the foregoing audit firm is found with material negligence or in breach of any Chinese laws and regulations in its audit, either of the
Parties may request engagement of a third-party audit firm acceptable to the Party to conduct audit.
[***]
5. Return of government subsidy
Party A shall return to Party B within five business days any government subsidy received by it in connection with the manufacturing of
the ES8 and ES6 less any outstanding loss and any subsidy related expenses.
II. Certain notes
Any other matter regarding the NIO ES6 under the cooperation of Party A and Party B, including without limitation prototype trial,
product announcement, trademark licensing, technical permit, vehicle technical standards and quality assurance, manufacturing
operation, general distribution, manufacturing preparation area management, vehicle parking management, mode and tool custody,
product filing and application of government subsidy, product after-sales service and guarantee, and supply of after-sales factory-made
parts, shall be subject to applicable provisions under the Manufacturing Cooperation Agreement and the Ancillary Agreements. If there
is any conflict between those agreements and this Agreement, this Agreement shall prevail.
Party B shall provide to Party A by April 30, 2019 the list of product parameters and deliverables of NIO ES6, which shall form a
supplementary delivery list of the Technology License Agreement.
This Agreement is a supplement to and has the same effect with the Manufacturing Cooperation Agreement. Any matter not provided
hereunder shall be resolved by the Parties through negotiations.
III. Confidentiality
Each of the Parties shall keep contents of this Agreement in strict confidence and, unless otherwise expressly provided hereunder, may
not disclose contents of this Agreement to any person or affiliate not involved in the cooperation without prior written consent of the
Parties.
IV. Counterparts and effect
3
This Agreement is made in four counterparts with each Party holding two thereof, each of which shall have the same legal effect, become
effective as of the date of signature and affixture of corporate seal hereupon by the Parties.
Party A: Jianghuai Automobile Group Co., Ltd.
Party B: NIO Co., Ltd.
/s/: legal representative/authorized representative
/s/: legal representative/authorized representative
4
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT,
MARKED BY [***], HAS BEEN OMITTED BECAUSE NIO INC. HAS DETERMINED THE
INFORMATION (I) IS NOT MATERIAL AND (II) WOULD LIKELY CAUSE
COMPETITIVE HARM TO NIO INC. IF PUBLICLY DISCLOSED.
Exhibit 4.24
NIO Fury (EC6) Manufacturing Cooperation Agreement
Between
Party A: Jianghuai Automobile Group Co., Ltd.
And
Party B: NIO Co., Ltd.
Dated: March 10, 2020
This AGREEMENT (this “Agreement”) is made by and between Party A (formerly known as Anhui Jianghuai Automobile Co., Ltd. and
renamed to Anhui Jianghuai Automobile Group Co., Ltd. on November 18, 2016) and Party B through negotiations based on the
Manufacturing Cooperation Agreement dated May 23, 2016, the NIO ES6 Manufacturing Cooperation Agreement dated April 30, and
the ancillary agreements relating to ES8 manufacturing cooperation (the “Ancillary Agreements”), each made by and between Party A
and Party B (collectively, the "Parties"), with the view to further providing for cooperation in NIO Fury (EC6) manufacturing and
certain matters relating thereto.
I. Cooperation
1．Scope of cooperation
The Parties have had cooperation on two models of automobile (the ES8 and ES6) based on the Manufacturing Cooperation Agreement,
NIO ES6 Manufacturing Cooperation Agreement and the Ancillary Agreements. Considering satisfactory development of previous
cooperation, the Parties agree to continue cooperation on mass production of the NIO Fury (EC6), whereby Party A shall be responsible
for manufacturing and any other work related thereto. Unless otherwise expressly agreed by the Parties in writing,, it is agreed that the
provisions in the Manufacturing Cooperation Agreement, the NIO ES6 Manufacturing Cooperation Agreement and the Ancillary
Agreements shall apply to the cooperation to manufacture the NIO Fury (EC6).
2．New investment
Party B shall be responsible for investment in new technical equipment and ancillary facilities necessary for satisfactory production of
NIO Fury (EC6) in the new energy automobile manufacturing plant of Party A ("Party A Manufacturing Plant").
3．Calculation and payment of manufacturing and processing fee
It is agreed that in 2020, Party B shall pay Party A a monthly manufacturing and processing fee of RMB[***] (excluding tax) for each
mass produced NIO Fury (EC6) vehicle. For ease of settlement, Party A will issue an invoice to Party B for amount of the
manufacturing and processing fee confirmed by the Parties on the last business day of each month, and it is agreed that the amount so
confirmed shall be paid by Party B to Party A within the first five business days of the next month. If Party A Manufacturing Plant
incurs any loss, Party B shall make up such loss to Party A on a monthly basis in accordance with the detailed loss make-up plan
provided under the NIO ES6 Manufacturing Cooperation Agreement (the “Loss Make-up Plan”).
4．Vehicle trial production
Party B shall be responsible for investment in production increase and renovation in connection with the trial production. The operating
expenses incurred during trial production shall be included in the operating costs of Party A Manufacturing Plant as well as the Loss
Make-up Plan. The fee for the manufacture of the Fury (EC6) vehicle by the main manufacturing line of
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Party A Manufacturing Plant during trial production shall be RMB[***] per vehicle (excluding tax), consisting of: (a) a processing fee
of RMB[***] per vehicle (excluding tax), which will be accounted for in the Loss Make-up Plan, and (b) an additional cost of
RMB[***] per vehicle (excluding tax), which will be accounted for separately from the Make-up Plan. The number of trial-manufactured
vehicles and the manufacturing and processing fees thereof shall be confirmed by the Parties within five business days after the date of
completion of the trial production (which date shall be agreed by both Parties). Party A shall provide to Party B an invoice of the amount
of the fees so confirmed and Party B, upon receipt of the correctly issued invoice, shall pay Party A the amount of the fee so confirmed
by the Parties within the first five business days of the next month. The Parties shall avoid double counting of any manner and jointly
calculate the number of trial-produced vehicles.
5．Consultation services
Party A shall designate relevant employees from its technical center to participate in trial and mass productions at the expenses of Party
B to meet the technical standards of NIO Fury (EC6) production technology standards. The list and costs and expenses of such
employees shall be agreed by the Parties in advance and duly documented by the Parties in the consulting service stage. After
completion of the support by the employees designated by Party A and before Fury (EC6) SOP (which is the time when Fury (EC6) is
put into production), the Parties shall complete settlement of such consulting service fees payable by Party B and enter into a separate
settlement agreement thereof. Such fees shall be accounted for separately from the Loss Make-up Plan and any tax and levy imposed
thereupon shall be paid by Party B.
II. Certain notes
Any other matter regarding the model of NIO Fury (EC6) under cooperation of Party A and Party B, including without limitation
prototype trial, product announcement, trademark licensing, technical permit, vehicle technical standards and quality assurance,
manufacturing operation, general distribution, manufacturing preparation area management, vehicle parking management, mode and tool
custody, product filing and application of government subsidy, product after-sales service and guarantee, and supply of after-sales
factory-made parts, shall be subject to applicable provisions under the Manufacturing Cooperation Agreement, the NIO ES6
Manufacturing Cooperation Agreement and the Ancillary Agreements. If there is any conflict between those agreements and this
Agreement, this Agreement shall prevail.
Party B shall provide to Party A the list of product parameters and deliverables of NIO Fury (EC6) before the deadline set forth in Annex
I attached hereto, which shall form a supplementary delivery list of the Technology License Agreement.
This Agreement is a supplement to and has the same effect with the Manufacturing Cooperation Agreement, the NIO ES6 Manufacturing
Cooperation Agreement and the Ancillary Agreements. Any matter not provided hereunder shall be resolved by the Parties through
negotiations. The term of this Agreement shall be consistent with that of the Manufacturing Cooperation Agreement and the NIO ES6
Manufacturing Cooperation Agreement.
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III. Confidentiality
Each of the Parties shall keep contents of this Agreement in strict confidence and, unless otherwise expressly provided hereunder, may
not disclose contents of this Agreement to any person or affiliate not involved in the cooperation without prior written consent of the
Parties.
IV. Counterparts and effect
This Agreement is made in four counterparts with each Party holding two thereof, each of which shall have the same legal effect, become
effective as of the date of signature and affixture of corporate seal hereupon by the Parties, and be binding on each of the Parties.
V. Governing law and dispute resolution
This Agreement shall be governed by Chinese laws in all respects. All disputes arising from interpretation or performance of this
Agreement shall be resolved in accordance with the dispute resolution provisions under Section Article 13.1 of the Manufacturing
Cooperation Agreement.
Party A: Jianghuai Automobile Group Co., Ltd.
Party B: NIO Co., Ltd.
/s/: legal representative/authorized representative
/s/: legal representative/authorized representative
4
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT
dated as of September 4, 2019
Exhibit 4.25
between
NIO INC.
and
HUANG RIVER INVESTMENT LIMITED
TABLE OF CONTENTS
ARTICLE I DEFINITION AND INTERPRETATION
Section 1.01
Definition, Interpretation and Rules of Construction
ARTICLE II PURCHASE AND SALE; CLOSING
Section 2.01
Section 2.02
Issuance, Sale and Purchase of the Convertible Notes
Closing.
ARTICLE III CONDITIONS TO CLOSING
Section 3.01
Section 3.02
Section 3.03
Conditions to Obligations of Both Parties
Conditions to Obligations of Purchaser
Conditions to Obligations of the Company
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.01
Section 4.02
Representations and Warranties of the Company
Representations and Warranties of the Purchaser
ARTICLE V COVENANTS
Section 5.01
Section 5.02
Section 5.03
Section 5.04
Section 5.05
Section 5.06
Section 5.07
Section 5.08
Conduct of Business of the Company
FPI Status
Other Transactions
Further Assurances
No Contract.
Reservation of Shares.
No Integrated Offering.
Use of Proceeds.
ARTICLE VI INDEMNIFICATION
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Indemnification
Third Party Claims.
Other Claims
Limitation on the Company’s Liability
ARTICLE VII MISCELLANEOUS
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Survival of the Representations and Warranties.
Governing Law; Arbitration
No Third Party Beneficiaries
Acknowledgement
Amendment
Binding Effect
Page
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Section 7.07
Section 7.08
Section 7.09
Section 7.10
Section 7.11
Section 7.12
Section 7.13
Section 7.14
Section 7.15
Section 7.16
Section 7.17
Section 7.18 Waiver
Assignment
Notices
Entire Agreement
Severability
Fees and Expenses
Confidentiality
Specific Performance
Termination
Headings
Execution in Counterparts
Public Disclosure
Exhibit A Form of 2020 Convertible Note
Exhibit B Form of 2022 Convertible Note
ii
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CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of September 4, 2019, is entered into by and
between (i) NIO INC., an exempted company with limited liability organized and existing under the laws of the Cayman Islands (the
“Company”), and HUANG RIVER INVESTMENT LIMITED, a company limited by shares incorporated under the laws of the British
Virgin Islands (the “Purchaser”).
RECITALS
WHEREAS, the Purchaser desires to subscribe for and purchase, and the Company desires to issue and sell, certain Convertible Notes
pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth
herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the
Parties hereto, intending to be legally bound, agrees as follows:
ARTICLE I
DEFINITION AND INTERPRETATION
Section 1.01 Definition, Interpretation and Rules of Construction
(a) As used in this Agreement, the following terms have the following meanings:
“ADSs” means the American depositary shares of the Company, each representing one (1) Class A Share of the
Company as of the date hereof.
“ADRs” means the American depositary receipts issued by the relevant depositary evidencing the ADSs.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under
common control with such Person; provided, that none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the
Purchaser. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the
terms “controlling” and “controlled” have correlative meanings.
“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign, state or local law
(statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree,
ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or
applicable to such Person, as amended unless expressly specified otherwise.
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“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the People’s
Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau SAR and
Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the
Company.
Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the
“Company SEC Documents” means all registration statements, proxy statements and other statements, reports,
schedules, forms and other documents required to be filed or furnished by the Company with the SEC pursuant to the Exchange Act and
the Securities Act and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by
reference therein, in each case, filed or furnished with the SEC.
“Company Securities” means (i) Ordinary Shares, (ii) securities convertible into or exchangeable for Ordinary Shares,
(iii) any options, warrants or other rights to acquire Ordinary Shares (including any awards under the Employee Stock Incentive Plans)
and (iv) any depository receipts or similar instruments issued in respect of Ordinary Shares.
“Condition” means any condition to any Party’s obligation to effect the Closing as set forth in ARTICLE III, and
collectively, the “Conditions”.
“Employee Benefit Plan” means any written plan, program, policy, contract or other arrangement providing for
severance, termination pay, deferred compensation, performance awards, share or share-related awards, housing funds, insurance
arrangements, fringe benefits, perquisites, superannuation funds retirement benefits, pension schemes or other employee benefits, that is
maintained, contributed to or required to be contributed to by the Company or any of its Subsidiaries for the benefit of any current or
former employee, director, officer or independent contractor of the Company or any of its Subsidiaries, or with respect to which the
Company or any of its Subsidiaries has or would reasonably expect to have any liability or obligation, other than, in each case, one that is
sponsored and maintained by a Governmental Authority;
“Environment” means land (including, without limitation, surface land, sub-surface strata and natural and man-made
structures), water (including, without limitation, coastal and inland waters, surface waters, ground waters and water in drains and
sewers), and air.
“Environmental Law” means all Applicable Laws in relation to (i) pollution or contamination of the Environment; (ii)
the production, storage, use, transport, disposal, release or discharge of hazardous substances; (iii) the exposure of any person or other
2
living organism to hazardous substances; or (iv) the creation of any noise, vibration or other material adverse impact on the Environment.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.
“Fundamental Warranties” means any representations and warranties of the Company contained in Section 4.01(a) to
Section 4.01(f) and Section 4.01(i).
“GAAP” means generally accepted accounting principles in the United States.
“Material Adverse Effect” with respect to a party means 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 (i) the financial condition, assets, liabilities, results of operations, business or
operations of such party and its Subsidiaries taken as a whole, or (ii) the ability of such party to consummate the transactions
contemplated by the Transaction Agreements and to timely perform its obligations hereunder and thereunder, except to the extent that
any such material adverse effect results from (a) changes in generally accepted accounting principles that are generally applicable to
comparable companies (to the extent not materially disproportionately affecting such party and its Subsidiaries), (b) changes in general
economic and market conditions and capital market conditions or changes affecting any of the industries in which such party and its
Subsidiaries operate generally (in each case to the extent not materially disproportionately affecting such party and its Subsidiaries), (c)
the announcement or disclosure of this Agreement or any other Transaction Agreement or the consummation of the transactions
hereunder or thereunder, or any act or omission required or specifically permitted by this Agreement and/or any other Transaction
Agreement; (d) any pandemic, earthquake, typhoon, tornado or other natural disaster or similar force majeure event, (e) in the case of the
Company, any failure to meet any internal or public projections, forecasts, or guidance, or (f) in the case of the Company, any change in
the Company’s stock price or trading volume, in and of itself; provided, however, that the underlying causes giving rise to or
contributing to any such change or failure under sub-clause (e) or (f) shall not be excluded in determining whether a Material Adverse
Effect has occurred except to the extent such underlying causes are otherwise excluded pursuant to any of sub-clauses (a) through (d).
“Ordinary Shares” means, collectively, the Class A Shares, the Class B Shares and the Class C Shares.
“Parties” means, collectively, the Company and the Purchaser.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or
organization.
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.
“SEC” means the Securities and Exchange Commission of the United States of America or any other federal agency at
the time administering the Securities Act.
3
“Securities Act” means the Securities Act of 1933, as amended, and all of the rules and regulations promulgated
thereunder.
“Shareholders’ Agreement” means Fifth Amended and Restated Shareholders’ Agreement, dated November 10, 2017,
by and among the Company and the parties listed therein.
“Subsidiary” of a party means any organization or entity, whether incorporated or unincorporated, which is controlled
by such party and, for the avoidance of doubt, the Subsidiaries of a party shall include any variable interest entity over which such party
or any of its Subsidiaries effects control pursuant to contractual arrangements and which is consolidated with such party in accordance
with generally accepted accounting principles applicable to such party and any Subsidiaries of such variable interest entity.
Significant Subsidiaries has the meaning given to it in Article 1, Rule 1-02 of Regulation S-X under the U.S. Securities
Exchange Act of 1934, as amended.
“Transaction Agreements” means, collectively, this Agreement and each of the Convertible Notes and each of the other
agreements and documents entered into or delivered by the parties hereto or their respective Affiliates in connection with the transactions
contemplated by this Agreement.
“Underlying ADSs” means the ADSs issuable upon conversion and registration with the SEC in accordance with the
Shareholders’ Agreement.
(b) Each of the following terms is defined in the Section set forth opposite such term:
Term
“2020 Convertible Note”
“2022 Convertible Note”
“Agreement”
“Bankruptcy and Equity Exception”
“Bin Li Subscription Agreement”
“Claim Notice”
“Closing”
“Closing Date”
“Company”
“Confidential Information”
“Control Contracts”
“Convertible Notes”
“Conversion Shares”
“Encumbrances”
“ESOP”
“EU”
“Governmental Authority”
“HMT”
“Indemnifying Party”
“Indemnified Party”
Section
2.01
2.01
Preamble
4.01(b)
3.02(h)
6.02(a)
2.02(a)
2.02(a)
Preamble
7.11(a)
4.01(aa)
2.01
2.01
4.01(d)
4.01(i)
4.01(ee)
3.01(a)
4.01(ee)
6.01
6.01
4
Term
“Indemnity Notice”
“Intellectual Property”
“Losses”
“Material Contracts”
“MFN Period”
“NDRC”
“NDRC Circular”
“OFAC”
“Permits”
“Purchase Price”
“Purchaser”
“Returns”
“Sanctions”
“Tax”
“Third Party Claim”
“UNSC”
Section
6.03
4.01(u)
6.01
4.01(r)
5.03(a)
4.01(cc)
4.01(cc)
4.01(ee)
4.01(g)
2.01
Preamble
4.01(w)
4.01(ee)
4.01(r)
6.02(a)
4.01(ee)
(c) In this Agreement, except to the extent otherwise provided or that the context otherwise requires:
(i) The words “Party” and “Parties” shall be construed to mean a party or the parties to this
Agreement, and any reference to a party to this Agreement or any other agreement or document contemplated hereby shall
include such party’s successors and permitted assigns.
such reference is to an Article, Section, Exhibit, Schedule or clause of this Agreement.
(ii) When a reference is made in this Agreement to an Article, Section, Exhibit, Schedule or clause,
meaning or interpretation of this Agreement.
(iii) The headings for this Agreement are for reference purposes only and do not affect in any way the
deemed to be followed by the words “without limitation.”
(iv) Whenever the words “include,” “includes” or “including” are used in this Agreement, they are
Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement.
(v) The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this
other document made or delivered pursuant hereto, unless otherwise defined therein.
(vi) All terms defined in this Agreement have the defined meanings when used in any certificate or
forms of such terms.
(vii) The definitions contained in this Agreement are applicable to the singular as well as the plural
5
(viii) The use of “or” is not intended to be exclusive unless expressly indicated otherwise.
(ix) The term “$” means United States Dollars.
(x) The word “will” shall be construed to have the same meaning and effect as the word “shall.”
(xi) References to “law,” “laws” or to a particular statute or law shall be deemed also to include
any and all Applicable Law.
(xii) A reference to any legislation or to any provision of any legislation shall include any
modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and
statutory instruments issued or related to such legislation.
(xiii) References herein to any gender include the other gender.
(xiv) The Parties hereto have each participated in the negotiation and drafting of this Agreement and
if any ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties
hereto and no presumption or burden of proof shall arise favoring or burdening any Party by virtue of the authorship of any of
the provisions in this Agreement or any interim drafts thereof.
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.01 Issuance, Sale and Purchase of the Convertible Notes.
Upon the terms and subject to the conditions of this Agreement, at Closing (as defined below), the Purchaser hereby agrees to
subscribe for and purchase, and the Company hereby agrees to issue and sell to the Purchaser (i) Convertible Senior Note due 2020 with
the principal amount of US$50,000,000, in the form attached hereto as Exhibit A (the “2020 Convertible Note”), and (ii) Convertible
Senior Note due 2022 with the principal amount of US$50,000,000, in the form attached hereto as Exhibit B (the “2022 Convertible
Note”, together with the 2020 Convertible Note, the “Convertible Notes”), each convertible into certain number of Class A Shares of the
Company or ADSs at the option of the holder or holders of such Convertible Notes (the “Conversion Shares”) on, and subject to, the
terms and conditions set forth in the Convertible Notes, for an aggregate purchase price of US$100,000,000 (the “Purchase Price”).
Section 2.02 Closing.
(a) Closing. Subject to satisfaction or, to the extent permissible, waiver by the Party or Parties entitled to the
benefit of the relevant Conditions, of all the Conditions (other than Conditions that by their nature are to be satisfied at Closing, but
subject to the satisfaction or, to the extent permissible, waiver of those Conditions at Closing), the closing of the sale and purchase of the
Convertible Notes pursuant to this
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Section 2.02(a) (the “Closing”) shall take place remotely by electronic means on the earlier of (i) the third (3rd) Business Day after the
date on which the Conditions (other than the Conditions that by their nature are to be satisfied at Closing, but subject to the satisfaction
or, to the extent permissible, waiver of those Conditions at the Closing) are satisfied, or (ii) any other earlier time before such date as may
be agreed by the Purchaser and the Company in writing (the “Closing Date”).
(b) Payment and Delivery. At Closing,
(i) the Purchaser shall arrange for electronic funds transfer in immediately available funds of the
Purchase Price in U.S. dollars to such bank account designated in writing by the Company to the Purchaser on the date of this
Agreement; and
(ii) the Company shall deliver
(1) the duly executed 2020 Convertible Note dated as of the Closing Date and issued in the
name of the Purchaser;
name of the Purchaser;
(2) the duly executed 2022 Convertible Note dated as of the Closing Date and issued in the
(3) copies of the Bin Li Subscription Agreement referred to in Section 3.02 (h);
(4) copies of all the written consents and waivers referred to in Section 3.02(i); and
(5) copies of the certificate referred to in Section 3.02 (j).
(c) Restrictive Legend. Each certificate representing any Ordinary Shares received by the Purchaser after
conversion of the Convertible Notes on, and subject to, the terms and conditions set forth in the applicable Convertible Notes shall be
endorsed with the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (AS AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTIONS. THESE SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED: (A) IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (2) AN EXEMPTION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B)
UNLESS IN COMPLIANCE WITH THE CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE
COMPANY AND HUANG RIVER INVESTMENT LIMITED, DATED SEPTEMBER 4, 2019 (THE “SUBSCRIPTION
AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY IN
VIOLATION OF
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THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS SET FORTH IN THE SUBSCRIPTION AGREEMENT SHALL
BE VOID.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Conditions to Obligations of Both Parties.
(a) No United States or non-United States federal, national, supranational, state, provincial, local or similar
government, governmental, regulatory or administrative authority, branch, agency or commission or any court, tribunal, or arbitral or
judicial body (including any grand jury) (each, a “Governmental Authority”) shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, judgment, injunction, order or decree (in each case, 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
the Transaction Agreements.
(b) No action, suit, proceeding or investigation shall have been instituted or threatened by a Governmental
Authority or any third party that seeks to restrain, enjoin, prevent, prohibit or otherwise make illegal the consummation of the
transactions contemplated by the Transaction Agreements.
Section 3.02 Conditions to Obligations of Purchaser. The obligations of the Purchaser to subscribe for, purchase and pay
for the Convertible Notes as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of the
following conditions (except that the conditions set out in Section 3.02 (h) shall be satisfied at least three (3) Business Days before the
Closing Date, subject to Section 2.02), any of which may be waived in writing by the Purchaser in its sole discretion:
(a) The Fundamental Warranties shall have been true and correct
in all respects on the date of this Agreement and true and accurate on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date (except for representations and warranties that expressly speak as of a specific date,
in which case on and as of such specified date). Other representations and warranties of the Company contained in Section 4.01 of this
Agreement shall have been true and correct on the date of this Agreement, and true and correct in all material respects (or, if qualified by
materiality or Material Adverse Effect, true and correct in all respects) on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date (except for representations and warranties that expressly speak as of a specified date,
in which case on and as of such specified date).
(b) The Company shall have performed and complied with all, and not be in breach or default in 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 in all material aspects.
(c) There shall have been no Material Adverse Effect with respect to the Company.
8
(d) All corporate and other actions required to be taken by the Company in connection with the issuance and
sale of the Convertible Notes and the Company’s execution, delivery and performance of this Agreement and the other Transaction
Agreements and the transactions contemplated hereby and thereby shall have been completed.
Kong) LLP, Cayman counsel to the Company, in form and substance to the satisfaction of the Purchaser.
(e) The Purchaser shall have received an opinion, dated the Closing Date, of Maples and Calder (Hong
SEC or any other Governmental Authority with respect to the public trading of the ADSs.
(f) No stop order or suspension of trading shall have been imposed by The New York Stock Exchange, the
delivered each Transaction Agreement to which it is a party to the Purchaser at or prior to Closing.
(g) The Company shall have duly executed and delivered or shall have caused to be duly executed and
(h) The Company shall have entered into a definitive agreement (the “Bin Li Subscription Agreement”) with
Mr. Bin Li and/or his holding entity relating to the subscription by Mr. Bin Li of certain convertible notes of the Company on
substantially the same terms as the Convertible Notes on the date of this Agreement, with the completion date of such subscription
expected to be before September 30, 2019; and the Bin Li Subscription Agreement shall have been in full force and effect and not
terminated by any parties thereto.
(i) All consents required to be obtained by the Company in connection with the issuance and sale of the
Convertible Notes and the Company’s execution, delivery and performance of this Agreement and the other Transaction Agreements and
the transactions contemplated hereby and thereby shall have been obtained.
satisfaction of Sections 3.02 (a) to (i) above.
(j) The Purchaser shall have received a certificate signed by a director of the Company confirming the
Section 3.03 Conditions to Obligations of the Company. The obligation of the Company to issue and sell the
Convertible Notes to the Purchaser as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of
each of the following conditions, any of which may be waived in writing by the Company in its sole discretion:
(a) The representations and warranties of the Purchaser contained in Section 4.02 of this Agreement shall have
been true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all respects) on
the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the
Closing Date; provided that each representation and warranty of the Purchaser contained in Sections 4.02(a) to 4.02(c) of this Agreement
shall have been true and correct in all respects on the date of this Agreement and on and as of the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
9
(b) The Purchaser shall have performed and complied with all, and not be in breach or default under any,
agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or
before the Closing Date.
to the Company at or prior to Closing.
(c) The Purchaser shall have duly executed and delivered each Transaction Agreement to which it is a party
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 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 that, except as set forth in the Company SEC Documents:
(a) Due Formation. The Company is an exempted company, duly incorporated, validly existing and in good
standing under the laws of the Cayman Islands. Each of the Company and the Company’s Subsidiaries is duly formed, validly existing
and in good standing in the jurisdiction of its organization. Each of the Company and the Subsidiaries has all requisite power and
authority to carry on its business as it is currently being conducted.
(b) Authority; Valid Agreement. The Company has all requisite legal power and authority to execute, deliver
and perform its obligations under the Transaction Agreements to which it is a party and each other agreement, certificate, document and
instrument to be executed by the Company pursuant to this Agreement and each other Transaction Agreement. The execution, delivery
and performance by the Company of this Agreement and each other Transaction Agreement to which it is a party and the performance by
the Company of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been, and each other Transaction Agreements to which it is a party will be duly executed and delivered by
the Company and, assuming due authorization, execution and delivery by the Purchaser, constitutes (or, when executed and delivered in
accordance herewith will constitute) a legal, valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a court of law or a
court of equity, and by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar law affecting
creditors’ rights and remedies generally (the “Bankruptcy and Equity Exception”). Without limiting the generality of the foregoing, as of
Closing, no approval by the shareholders of the Company is required in connection with this Agreement or other Transaction
Agreements, the performance by the Company of its obligations hereunder or thereunder, or the consummation by the Company of the
transactions contemplated hereby or thereby, except for those that have been obtained, waived or exempted at or prior to Closing.
(c) Convertible Notes. Each of 2020 Convertible Note and 2022 Convertible Note, when issued and
delivered by the Company, will constitute direct, unconditional, unsecured and unsubordinated obligations of the Company and will at all
times rank pari passu with all other present and future unconditional and unsubordinated
10
obligations of the Company (other than those preferred by Applicable Law that are mandatory and of general application).
(d) Conversion Shares. The Conversion Shares have been duly and validly authorized for issuance by the
Company and, when issued and delivered by the Company to the Purchaser in accordance with the terms of each of the 2020 Convertible
Note and 2022 Convertible Note will be (i) duly and validly issued, fully paid and non-assessable, and rank pari passu with, and carry
the same rights in all aspects as, the other Class A Shares then in issue, (ii) entitled to all dividends and other distributions declared, paid
or made thereon, and (iii) 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 as disclosed in the Company SEC Documents or created by virtue of the transactions under this Agreement
(collectively, the “Encumbrances”). Upon entry of the Purchaser into the register of members of the Company as the legal owner of the
Conversion Shares, the Company will transfer to the Purchaser good and valid title to the Conversion Shares, free and clear of any
Encumbrances.
(e) Non-contravention. None of the execution and the delivery of this Agreement and other Transaction
Agreements, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any provision of the
organizational documents of the Company, (ii) 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 is subject, or (iii) conflict
with, result in a breach of, constitute a default under, result in the acceleration of or creation of any Encumbrances 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 any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of
the Company’s or any of its Subsidiaries’ assets are subject, except, in the case of (ii) and (iii) above, for such conflicts, breach, defaults,
rights or violations, which would not reasonably be expected to result in a Material Adverse Effect. There is no action, suit or
proceeding, pending or, to the knowledge of the Company, threatened against the Company that questions the validity of the Transaction
Agreements or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby or thereby.
(f) Consents and Approvals. None of the execution and delivery by the Company of this Agreement or any
Transaction Agreement, nor the consummation by the Company of any of the transactions contemplated hereby or thereby, nor the
performance by the Company of this Agreement or other Transaction Agreements in accordance with their respective 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 and except for any
filing or notification required to made with the SEC or the New York Stock Exchange regarding the issuance of the Convertible Notes or
the Conversion Shares.
has not been conducted at any time during the
(g) Compliance with Laws. The business of the Company and its Subsidiaries is not being conducted, and
11
three years prior to the date hereof, in violation of any applicable law (including, without limitation, the U.S. Foreign Corrupt Practices
Act, the UK Bribery Act 2010, the PRC anti-bribery laws, the Bank Secrecy Act, as amended by Title III of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)
and the applicable anti-money laundering statutes of jurisdictions where the Company and its Subsidiaries conduct business, the rules
and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental or regulatory agency, in each case as supplemented, amended, re-enacted or replaced from time to time) or government
order applicable to the Company in any material respect. Except as disclosed in the Company SEC Documents, the Company and each of
its Subsidiaries have all permits, licenses, authorizations, consents, orders and approvals in material respects (collectively, “Permits”) that
are required in order to carry on their business as presently conducted. Except as disclosed in the Company SEC Documents, all such
Permits are in full force and effect and, to the knowledge of the Company, no suspension or cancellation of any of them is threatened.
The Company has complied with the applicable listing and corporate governance rules and regulations of the New York Stock Exchange
in all material respects. The Company and its Subsidiaries have taken no action designed to, or reasonably likely to have the effect of,
delisting the ADSs from the New York Stock Exchange. There are no proceedings pending or, to the Company’s knowledge, threatened
against the Company relating to the continued listing of the ADSs on the New York Stock Exchange and the Company has not received
any notification that the SEC or the New York Stock Exchange is contemplating suspending or terminating such listing (or the applicable
registration under the Exchange Act related thereto).
(h) Information. All information which has been provided by or on behalf of the Company or its authorized
representatives to the Purchaser, its advisers or agents in the course of the due diligence conducted by the Purchaser and the negotiation
leading to this Agreement and the other Transaction Agreements is true, complete and accurate.
(i) Capitalization.
(i) The authorized share capital of the Company consists of 4,000,000,000 Ordinary Shares, of which
832,665,477 Class A Shares (including 120,264,378 Class A Shares that have been reserved under the 2015 Stock Incentive
Plan, 2016 Stock Incentive Plan, 2017 Stock Incentive Plan and 2018 Share Incentive Plan of the Company as disclosed in the
Company SEC Documents (altogether, the “ESOP”)), 132,030,222 Class B Shares and 148,500,000 Class C Shares are issued
and outstanding as of the date hereof. All of the Company’s issued and outstanding Ordinary Shares are fully paid and non-
assessable. As of the date of this Agreement, 8,201,639 Class A Shares have been authorized and reserved and available for
issuance pursuant to the ESOP. Except as disclosed in the Company SEC Documents, the Company has no outstanding bonds,
debentures, notes or other obligations, the holders of which have been granted the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders of the Company on any matter. All issued and
outstanding Ordinary Shares have been duly authorized and validly issued and are fully paid and non-assessable, are free of
preemptive rights, were
12
issued in compliance with applicable U.S. and other applicable securities laws and were not issued in violation of any
preemptive right, resale right, right of first refusal, or similar right and the ADSs have been duly listed and admitted and
authorized for trading on the New York Stock Exchange.
(ii) Except as set forth above in this Section 4.01(i), there are no outstanding (A) shares of capital
stock or voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company or (C) preemptive or other outstanding rights, options, warrants, conversion rights,
“phantom” stock rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind that obligate the Company to issue or sell any shares of capital stock or other securities of the
Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to
subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized,
issued or outstanding.
(iii) Except as disclosed in the Company SEC Documents, to the knowledge of the Company, there
are no registration rights, rights of first offer, rights of first refusal, tag-along rights with respect to the securities of the
Company or any Subsidiary of the Company that have been granted to any Person.
(iv) All outstanding shares of capital stock or other securities or ownership interests of the
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and all such shares or other securities or
ownership interests in any Subsidiary of the Company (except for any Subsidiary which is a variable interest entity over which
the Company or any of its Subsidiaries effects control pursuant to the Control Contracts) are owned, directly or indirectly, by the
Company free and clear of any Encumbrance.
(j) SEC Matters. The Company has filed or furnished, as applicable, on a timely basis, all registration
statements, proxy statements and other documents required to be filed or furnished by it with the SEC, including the Company SEC
Documents. None of the Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of their
respective effective dates (in the case of the Company SEC Documents that are registration statements filed pursuant to the requirements
of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company SEC Documents), or in each case, if
amended prior to the date hereof, as of the date of the last such amendment: (A) each of the Company SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the Exchange Act and the Sarbanes-Oxley Act of 2002, as
amended, and any rules and regulations promulgated thereunder applicable to the Company SEC Documents (as the case may be) and
(B) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading.
(k) Financial Statements.
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(i) The financial statements (including any related notes) contained in the Company SEC
Documents: (A) complied as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, (B) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except (a) as may be otherwise specifically provided in such financial statements or the
notes thereto, or (b) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
to summary statements) and (C) fairly present in all material respects the consolidated financial position of the Company and
the Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and
its Subsidiaries for the periods covered thereby (other than as may have corrected or clarified in a subsequent Company SEC
Document), in each case except as disclosed therein and as permitted under the Exchange Act.
(ii) Neither the Company nor any of its Subsidiaries is a party to, nor has any commitment to become
a party to, any joint venture, off-balance sheet partnership or any similar contract, agreement, arrangement or undertaking
(including any contract, agreement, arrangement or undertaking relating to any transaction or relationship between or among
one or more of the Company and/or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any
structured finance, special purpose or limited purpose entity or Person, on the other hand), or any “off-balance sheet
arrangements” (as defined in Item 303(a) of Regulation S-K promulgated by the SEC), where the result, purpose or intended
effect of such contract, agreement, arrangement or undertaking is to avoid disclosure of any material transaction involving, or
material liabilities of, the Company or any of the Subsidiaries in the Company’s or such Subsidiary’s published financial
statements or other Company SEC Documents.
(iii) PricewaterhouseCoopers Zhong Tian LLP, who have certified certain financial statements of the
Company, are independent public accountants as required by the Securities Act and the rules and regulations of the SEC
thereunder and are independent in accordance with the requirements of the U.S. Public Company Accounting Oversight Board.
(l) Internal Control and Procedures. The Company has established and maintains a system of internal control
over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange Act) sufficient to provide reasonable
assurance regarding the reliability of financial reporting, including policies and procedures that (A) mandate the maintenance of records
that in reasonable detail accurately and fairly reflect the material transactions and dispositions of the assets of the Company, (B) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP,
and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management
and the board of directors of the Company and (C) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of the Company. Save as disclosed in the Company SEC Documents, there are
no material weaknesses or significant deficiencies in the Company’s internal controls. The Company’s auditors and the audit committee
of the board of
14
directors of the Company have not been advised of any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company’s internal controls over financial reporting. Since December 31, 2014, there has been no
change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting, except for the implementation of certain measures to address the material
weakness in the Company’s internal control over financial reporting that has been disclosed in the Company SEC Documents.
(m) No Undisclosed Liabilities. There are no liabilities of the Company or any Subsidiary of any kind,
whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities reflected on, reserved against, or
disclosed in the Company’s unaudited consolidated balance sheet as of December 31, 2018, (ii) liabilities incurred since December 31,
2018 in the ordinary course of business consistent with past practices, (iii) any other undisclosed liabilities that are not material to the
Company and its Subsidiaries on a consolidated basis, and (iv) any liabilities incurred as a result of the Company’s performing the
transactions contemplated by any Transaction Agreement. There are no unconsolidated Subsidiaries of the Company or any off-balance
sheet arrangements of any type (including any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of
Regulation S-K promulgated under the Securities Act) that have not been so described in the Company SEC Documents nor any
obligations to enter into any such arrangements.
(n) Investment Company. The Company is not and, after giving effect to the offering and sale of the
Convertible Notes, the consummation of the offering and the application of the proceeds hereof, will not be an “investment company,” as
such term is defined in the U.S. Investment Company Act of 1940, as amended.
(o) No Registration. Assuming the accuracy of the representations and warranties set forth in Section
4.02 of this Agreement, it is not necessary in connection with the issuance and sale of each of the 2020 Convertible Note and the 2022
Convertible Note (and, when issued, the Conversion Shares) to register each of the 2020 Convertible Note and the 2022 Convertible
Note (and, when issued, the Conversion Shares) under the Securities Act or to qualify or register them under applicable U.S. state
securities laws. No directed selling efforts (as defined in Rule 902 of Regulation S under the Securities Act) have been made by any of
the Company, any of its Affiliates or any person acting on its behalf with respect to any Convertible Notes; and none of such Persons has
taken any actions that would result in the sale of any of the Convertible Notes to the Purchaser under this Agreement requiring
registration under the Securities Act; and the Company is a “foreign issuer” (as defined in Regulation S).
(p) Brokers. The Company has not dealt with any broker, finder, commission agent, placement agent or
arranger in connection with the sale of the Convertible Notes, and the Company is not under any obligation to pay any broker’s fee or
commission in connection with the sale of the Convertible Notes.
15
business in the ordinary course of business consistent with past practice and there has not been
(q) Absence of Changes. Since December 31, 2018, the Company and its Subsidiaries have conducted their
(i) any declaration, setting aside or payment of any dividend or other distribution with respect to any
securities of the Company or any of its Subsidiaries (except for dividends or other distributions by any Subsidiary to the
Company or to any of the Company’s wholly owned Subsidiaries);
(ii) any issuances or sales of shares of capital stock or other securities or obligations convertible or
exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company or
any of its Subsidiaries or any redemption, share splits, reclassifications, share dividends, share combinations or other
recapitalizations of any such securities other than pursuant to any Employee Benefit Plan effective as at the date of this
Agreement;
(iii) any amendment to the constitutional documents of the Company;
(iv) any redemption or repurchase of any equity securities of the Company; or
foregoing.
(v) any entry into any contract, agreement, instrument or other document in respect of any of the
(r) Contracts. The Company has filed as exhibits to the Company SEC Documents all contracts, agreements and
instruments (including all amendments thereto) to which the Company or any of its Subsidiaries is a party or by which it is bound and
which is material to the business of the Company and its Subsidiaries, taken as a whole, and are required to be filed as an exhibit to the
Company SEC Documents pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K promulgated by the SEC(the “Material
Contracts”). Each Material Contract is in full force and effect and, to the knowledge of the Company, enforceable against the
counterparties of the Company or the Subsidiaries party thereto, except for the contracts and agreements that have already expired
pursuant to the terms therein (which for the avoidance of doubt excludes those contracts or agreements that had been terminated by the
other party thereto for cause). The Company and its Subsidiaries and, to the knowledge of the Company, each other party thereto, are not
in default under, or in breach or violation of, any Material Contract, in all material respects. To the Company’s knowledge, no event, fact
or circumstance has occurred that will have or is reasonably expected to have a material adverse impact on the renewal or extension of
any Material Contract.
(s) Litigation. Except as disclosed in the Company SEC Documents and to the knowledge of the Company, any
officer and director of the Company or any of its Subsidiaries in their capacities as such, there are no pending or threatened material
actions, claims, demands, investigations, examinations, indictments, litigations, suits or other criminal, civil or administrative or
investigative proceedings before or by any Governmental Authority or by any other person against the Company or any of its
16
Subsidiaries or any proceedings that seek to restrain or enjoin the consummation of the transactions under the Transaction Agreements.
(t) Ownership of Assets. The Company and its Subsidiaries have good and marketable title to, or in the case
of leased property and assets, have valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible)
reflected on the Company’s consolidated unaudited balance sheet as of December 31, 2018 or acquired thereafter, except for properties
and assets sold since such date in the ordinary course of business consistent with past practices and except where the failure to have such
good and marketable title or valid leasehold interests would not have a Material Adverse Effect.
rights
reissues,
reexaminations and
(including any divisions, continuations, continuations-in-part,
(u) Intellectual Property. All registered or unregistered, (i) patents, patentable inventions and other
interferences
patent
thereof); (ii) trademarks, service marks, trade dress, trade names, taglines, brand names, logos and corporate names and all goodwill
related thereto; (iii) copyrights, mask works and designs; (iv) trade secrets, know-how, inventions, processes, procedures, databases,
confidential business information and other proprietary information and rights; (v) computer software programs, including all source
code, object code, specifications, designs and documentation related thereto; and (vi) domain names, Internet addresses and other
computer identifiers, in each case that is material to the business of the Company or any of its Subsidiaries as currently being conducted
(the “Intellectual Property”) is either (a) owned by the Company or one or more of its Subsidiaries or (b) is used by the Company or one
or more of its Subsidiaries pursuant to a valid license. To the knowledge of the Company, there are no material infringements or other
material violations of any Intellectual Property owned by the Company or any of its Subsidiaries by any third party. The Company and its
Subsidiaries have taken all necessary actions to maintain and protect each item of Intellectual Property. The conduct of the business of
the Company and its Subsidiaries does not infringe or otherwise violate any intellectual property or other proprietary rights of any other
person in material respects, and there is no action pending or, to the knowledge of the Company, threatened alleging any such
infringement or violation or challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property which, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(v) Employment Matters.
(i) Neither the Company nor any of its Significant Subsidiaries is a party to or bound by any collective
bargaining agreement or other labor union contract applicable to persons employed by the Company or any of its Significant
Subsidiaries. There are no unfair labor practice complaints pending, or to the knowledge of the Company, threatened, against the
Company or any of its Significant Subsidiaries before any Governmental Authority. Each of the Company and its Subsidiaries
complies with all Applicable Laws relating to employment and employment practices (including without limitation, terms and
conditions of employment, termination of employment, mandatory severance benefits, pension programs, social insurance
programs, employee health and safety, equal employment, employment of veterans and the handicapped, and prohibition of
17
discrimination) in all material aspects. There is no material claim with respect to payment of wages, salary, overtime pay,
withholding individual income taxes, social security fund or housing fund that has been asserted and is now pending or, to the
knowledge of the Company, threatened before any Governmental Authority with respect to any persons currently or formerly
employed by the Company or any of its Significant Subsidiaries.
(ii) Each Employee Benefit Plan is in compliance in all material respects with its terms and the
requirements of all Applicable Laws. All employer and employee contributions to each Employee Benefit Plan required by the
terms of such Employee Benefit Plan or by the Applicable Laws have been made, or, if applicable, accrued in accordance with
normal accounting practices and in compliance in all material respects with its terms and the requirements of all Applicable
Laws. Each Employee Benefit Plan required to be registered has been registered and has been maintained in good standing with
applicable Governmental Authorities.
(w) Tax Status. Except as disclosed in the Company SEC Documents, the Company and each of its
Subsidiaries (i) has made or filed in the appropriate jurisdictions all material foreign, federal and state income and all other tax returns
required to be filed or maintained in connection with the calculation, determination, assessment or collection of any and all federal,
state, local, foreign and other taxes, levies, fees, imposts, duties, governmental fees and charges of whatever kind (including any
interest, penalties or additions to the tax imposed in connection therewith or with respect thereto) (each a “Tax”), including all amended
returns required as a result of examination adjustments made by any Governmental Authority responsible for the imposition of any Tax
(collectively, the “Returns”), and such Returns are true, correct and complete in all material respects, and (ii) has paid all material Taxes
and other governmental assessments and charges shown or determined to be due on such Returns, except those being contested or will
be contested in good faith. Except as disclosed in the Company SEC Documents, neither the Company nor any of its Subsidiaries has
received notice regarding unpaid foreign, federal and state income in any amount or any Taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the Company is not aware of any reasonable basis for such claim. No Returns filed by or
on behalf of the Company or any of its Subsidiaries with respect to material Taxes are currently being audited, and neither the Company
nor any of its Subsidiaries has received notice of any such audit.
(x) Tax Election. No Tax elections under the income tax laws of the United States have been made with
respect to the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries is, or is at risk of being or becoming,
classified as a “passive foreign investment company” or a “controlled foreign corporation” for United States federal income tax
purposes.
(y) Solvency. Both before and after giving effect to the transactions contemplated by this Agreement and
other Transaction Agreements, each of the Company and its Subsidiaries (i) will be solvent (in that both the fair value of its assets will
not be less than the sum of its debts and that the present fair saleable value of its assets will not be less than the amount required to pay
its probable liability on its recourse debts as they mature or become due) and (ii) will have adequate capital and liquidity with which
18
to engage in the their businesses as currently conducted and as described in the Company SEC Documents.
(z) Transactions with Affiliates and Employees. All related party transactions required to be disclosed under
applicable rules of the New York Stock Exchange or the applicable securities law have been accurately described in the Company SEC
Documents in all material respects. Any such related party transaction was entered into on terms and conditions no less favorable to the
Company or its applicable Subsidiary than those applicable in comparable transactions between independent parties acting at arm’s
length.
(aa) Variable Interest Entities. The Company controls its variable interest entities, Beijing Wo Mai Wo Pai
Auction Co., Ltd. and Beijing Secoo Trading Limited, through a series of contractual arrangements (“Control Contracts”), and there is no
enforceable agreement or understanding to rescind, amend or change the nature of such captive structure or the terms of the Control
Contracts.
(bb) Environment. Each of the Company and its Subsidiaries (i) has at all times complied and are presently in
compliance with all applicable Environmental Laws in all material respects; (ii) has not received any notice, demand, claim, letter or
request for information, relating to any alleged violation of Environmental Law, or otherwise identifies an environmental concern, health
and safety concern or any other concern relating to the security and protection of people, property, flora and fauna relating thereto; (iii)
possesses all approvals, consents or authorizations required under Environmental Laws for its business as presently conducted and there
are no circumstances that could reasonably be expected to result in any such approvals, consents or authorizations being revoked,
terminated, revised, amended or not renewed in the ordinary course of its business. There has been no incident of any occupational
disease incurred by any employees of the Company or any of its Subsidiaries due to harmful factors present in their working environment
or the nature of their work, and there are no other circumstances or conditions. There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a Material Adverse Effect.
(cc) NDRC. The Company (through a PRC Subsidiary) obtained an enterprise foreign debt registration
certificate dated January 21, 2019 with a validity period of one year (the “Registration Certificate”) from the National Development and
Reform Commission (“NDRC”). Such registration has not been withdrawn and is not subject to any condition which has not been
fulfilled or performed, except for the filing by such PRC Subsidiary with NDRC of the requisite information and documents in relation to
the issue and sale of the 2022 Convertible Note within ten (10) business days in the PRC after the date of issuance of the 2022
Convertible Note in accordance with the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises
of Foreign Debt Filings and Registrations (国家发展改革委关于推进企业发行外债备案登记制管理改革的通知(发改外资[2015]2044
号)) (the “NDRC Circular”).
19
(dd) Use of Proceeds. The application of the net proceeds from the issue and sale of the Convertible Notes will
not (i) contravene any provision of any current and applicable laws or the current constituent documents of the Company or any of its
Subsidiaries, (ii) contravene the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust, loan
agreement, note, lease or other agreement or instrument currently binding upon the Company or any of its Subsidiaries, or (iii)
contravene or violate the terms or provisions of any order or decree of any government entity having jurisdiction over the Company or
any Subsidiary.
(ee) Sanctions.
(i) None of the Company, any of its Subsidiaries, or any director or officer thereof, or, to the
Company's knowledge, any agent, affiliate, employee or other representative of the Company or any of its Subsidiaries, is a
Person that is, or is owned or controlled by one or more Persons that are: (A) the subject of any sanctions administered or
enforced by the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the
United Nations Security Council ("UNSC"), the European Union ("EU") (including under Council Regulation (EC) No.
194/2008), Her Majesty's Treasury ("HMT"), the State Secretariat for Economic Affairs, or other relevant sanctions authority
(collectively, "Sanctions"), or engaged in any activities sanctionable under the Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, the Iran Sanctions Act, the Iran Threat Reduction and Syria Human Rights Act, or any applicable
executive order, or (B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without
limitation, Crimea, Cuba, Iran, North Korea and Syria).
(ii) The Company will not, directly or indirectly, use the proceeds of the offering received by the
Company, or lend, contribute or otherwise make available such proceeds to any Subsidiary, Affiliate, joint venture partner or
other Person: (A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the
time of such funding or facilitation, is the subject of Sanctions; or (B) in any other manner that will result in a violation of
Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or
otherwise).
(iii) For the past 5 years, the Company and its Subsidiaries have not knowingly engaged in, are not
now knowingly engaged in, and will not knowingly engage in, any dealings or transactions with any Person, or in any country
or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
(ff) No Stamp Duty. Except as disclosed in the Company SEC Documents, no stamp, documentary, issuance,
registration, transfer, withholding, capital gains, income or other taxes or duties are payable by or on behalf of the Purchasers, the
Company or any of its Subsidiaries in the Cayman Islands, the PRC, any other jurisdiction in which the Company is organized,
incorporated, engaged in business for tax purposes or is otherwise resident for tax purposes, any jurisdiction from or through which a
payment is made by or on behalf of the Company or any political subdivision thereof or therein
20
having the authority to tax, in connection with (i) the execution, delivery or consummation of, or consummation of the transactions
contemplated by, this Agreement, the 2020 Convertible Note or the 2022 Convertible Note, (ii) the creation, allotment and issuance of
the Ordinary Shares represented by the Underlying ADSs to be issued upon conversion of the Conversion Shares, (iii) the deposit with
the Depositary of the Ordinary Shares represented by the Underlying ADSs by the Company against the issuance of ADRs evidencing
the Underlying ADSs, (iv) the issuance and delivery of the Underlying ADSs, when issued by the Company upon conversion of the
Conversion Shares, (v) the issuance, sale and delivery of the Conversion Shares to or for the accounts of the Purchaser, or (vi) the resale
and delivery of the Conversion Shares by the Purchaser in the manner contemplated herein.
(gg) Labor disputes. No material labor dispute with the employees of the Company or any of its Subsidiaries
exists, except as described in the Company SEC Documents, or, to the knowledge of the Company, is imminent; and, to the Company’s
knowledge, there is no existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a Material Adverse Effect.
(hh) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary in the businesses in
which they are engaged; neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for;
and neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, except in each case as described in the Company SEC Documents.
(ii) No Side Agreement. None of the Company nor any of its Subsidiaries has entered into any side agreement,
side letter or any other agreements or documents or consummated any transactions referred to in Section 5.03(a) of which true and
accurate copies of such agreements or documents, or materials related to such transactions have not been provided to the Purchaser.
(jj) Registrable Securities. The Company acknowledges that the Conversion Shares shall be considered
“Registrable Securities” under the Shareholders’ Agreement and that the Purchaser shall be entitled to the registration rights set forth in
and in accordance with the Shareholders’ Agreement.
Section 4.02 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the
Company as of the date hereof and as of Closing, as follows:
its organization. The Purchaser has all requisite power and authority to carry on its business as it is currently being conducted.
(a) Due Formation. The Purchaser is duly formed, validly existing and in good standing in the jurisdiction of
and other Transaction Agreements to which
(b) Authority. The Purchaser has full power and authority to enter into, execute and deliver this Agreement
21
it is to become a party and each other agreement, certificate, document and instrument to be executed and delivered by the Purchaser
pursuant to this Agreement and each other Transaction Agreement and to perform its obligations hereunder and thereunder. The
execution and delivery by the Purchaser of this Agreement and each other Transaction Agreement to which it is or is to become a party
and the performance by the Purchaser of its obligations hereunder and thereunder have been duly authorized by all requisite actions on
its part.
(c) Valid Agreement. This Agreement has been, and each other Transaction Agreement to which it is to
become a party will be, duly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by
the Company, constitutes (or, when executed and delivered in accordance herewith will constitute), the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to the Bankruptcy and Equity
Exception and except as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable
remedies.
(d) Non-contravention. None of the execution and the delivery of this Agreement or any other Transaction
Agreement, nor the consummation of the transactions contemplated hereby or thereby, by the Purchaser will 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.
(e) Consents and Approvals. None of the execution and delivery by the Purchaser of this Agreement and the
Transaction Agreements to which the Purchaser is to become a Party, nor the consummation by the Purchaser of any of the transactions
contemplated hereby or thereby, nor the performance by the Purchaser of this Agreements or any such Transaction 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 at or
prior to Closing.
(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 relevant Convertible Notes. 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 Convertible Notes pursuant
to this Agreement for investment for its own account for investment purposes only and not with the view to, or with any
intention of, resale, distribution or other disposition thereof in a manner that would violate the registration requirements of the
Securities Act.
securities” that have not been registered under the Securities Act or any applicable state securities law. The Purchaser
(iii) Restricted Securities. The Purchaser acknowledges that the Convertible Notes are “restricted
22
further acknowledges that, absent an effective registration under the Securities Act, the Securities may only be offered, sold or
otherwise transferred (x) to the Company, (y) outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, or (z) pursuant to an exemption from registration under the Securities Act.
Regulation S, or (ii) an “accredited investor” within the meaning of Rule 501(a) under Regulation D of the Securities Act.
(iv) Not a U.S. Person. The Purchaser is either (i) not a “U.S. person” as defined in Rule 902 of
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of the Company. From the date hereof until the Closing Date,
(a) the Company shall, and the Company shall cause each of its Subsidiaries to (i) conduct its business and
operations in the ordinary course of business consistent with past practice, and (ii) not take any action, or omit to take any action, that
would reasonably be expected to make any of its representations and warranties in this Agreement untrue such that the Condition set out
in Section 3.02(a) would not be satisfied at the Closing Date;
(b) the Company shall (i) take all actions necessary to continue the listing and trading of its ADSs on the
New York Stock Exchange and shall comply with the Company’s reporting, filing and other obligations under the rules of the New York
Stock Exchange, and (ii) file with the New York Stock Exchange a supplemental listing application in respect of the Conversion Shares,
when issued and delivered in the manner contemplated by the applicable Convertible Notes; and
to the Closing Date that would constitute a breach of any terms and conditions contained in this Agreement.
(c) the Company shall promptly notify the Purchaser of any event, condition or circumstance occurring prior
Section 5.02 FPI Status. Without limiting the generality of the foregoing, the Company shall promptly after the date
hereof and reasonably prior to Closing take all necessary or desirable actions required to duly and validly rely on the exemption for
foreign private issuers from applicable rules and regulations of the New York Stock Exchange with respect to corporate governance to
rely on “home country practice” in connection with the transactions contemplated hereunder (including an exemption from any New
York Stock Exchange rules that would otherwise require seeking shareholder approval in respect of such transactions), including without
limitation, to the extent necessary, making disclosures, notices and filings to or with the SEC and New York Stock Exchange and
obtaining an adequate opinion of counsel in respect of the home country practice exemption. The Company will use commercially
reasonable efforts to continue the listing and trading of its ADSs on New York Stock Exchange and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of such market or exchange, as applicable.
23
Section 5.03 Other Transactions.
(a) Subject to Section 5.03(b), during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to Section 7.14 hereof or one (1) year after the Closing Date (such period, the
“MFN Period”), the Company agrees not, without the consent of the Purchaser, to initiate, solicit, encourage or engage in any discussion
or negotiation of any type with, provide any information to, accept any proposal from, or enter into any letter of intent, purchase contract
or any other similar agreement, or consummate any transaction, with any Persons other than the Purchaser with respect to the issuance,
sale, grant, transfer, purchase or other acquisition by any such Person of any Company Securities other than pursuant to the Employee
Benefit Plan effective as at the date of this Agreement, except that the relevant transaction with respect to the issuance, sale, grant,
transfer, purchase or other acquisition by any such Person of any Company Securities contains terms and conditions with respect to the
subscription or purchase of securities of the Company, or has the effect of establishing any investor or shareholder rights or benefits to
such Person, that are in each case not more favorable than the comparable terms and conditions or rights or benefits of the Purchaser
under this Agreement or the other Transaction Agreements. During the MFN Period, the Company undertakes not to, and cause all of its
Subsidiaries not to, enter into any agreement, side letter or any other agreements or documents or consummated any transactions referred
to in this Section 5.03(a) of which true and accurate copies of such agreements or documents, or materials relating to such transactions
shall have not been provided to the Purchaser.
(b) The Company undertakes to use its best endeavors to complete a transaction or a series of transactions
during the MFN Period relating to the issuance and subscription of any notes convertible into equity securities of the Company, or any
other debt securities of the Company on private placement basis or that are capable of being quoted, listed or dealt in or traded on any
stock exchange or over-the-counter or other securities market, and the Company agrees that, notwithstanding Section 5.03(a), (i) the
tenor of such securities, if applicable, may be less than one year, but in no event shall the tenor be less than 360 days, if such transaction
or transactions are completed at or within 30 days after the Closing Date, and (ii) more than 50% of the aggregate principal amount of
such securities shall have a tenor of not less than 3 years, if applicable, if such transaction or transactions are completed during the MFN
Period but more than 30 days after the Closing Date.
Section 5.04 Further Assurances. From the date of this Agreement until Closing, the Parties shall each use their
respective reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to the consummation of the transactions
contemplated hereby and by the Transaction Agreements.
Section 5.05 No Contract. Without limiting the generality of the foregoing, the Company agrees that from the date
hereof until the Closing Date, it shall not make (or otherwise enter into any contract with respect to) (x) any material change in any
method of accounting or accounting practice by the Company or any of its Subsidiaries; (y) any declaration, setting aside or payment of
any dividend or other distribution with respect to any securities of the Company or any of its Subsidiaries (except for dividends or other
distributions by any Subsidiary to the Company or to any of the Company’s
24
Subsidiaries) or (z) any redemption, repurchase or other acquisition of any share capital of the Company or any of its Subsidiaries, except
in each case for the avoidance of doubt as contemplated by the Transaction Agreements.
Section 5.06 Reservation of Shares. The Company shall ensure that it has sufficient number of duly authorized Ordinary
Shares to comply with its obligations to issue the Conversion Shares pursuant to the terms of each of the 2020 Convertible Note and the
2022 Convertible Note.
Section 5.07 No Integrated Offering. The Company shall not, and shall cause its Affiliates and any Person acting on its
or their behalf not to, directly or indirectly, make any offers or sales of any security or solicit any offers to buy any security, under
circumstances that would require registration of the issuance of any of the Convertible Notes (and, when issued, the Conversion Shares)
under the Securities Act whether through integration with prior offerings or otherwise.
Section 5.08 Use of Proceeds. The Company undertakes to reserve and dedicate the proceeds from the issue and sale of
the Convertible Notes solely for capital expenditure and/or other working capital purpose in connection with the Company’s daily
operations, and/or any other purposes as approved by the Purchaser from time to time.
ARTICLE VI
INDEMNIFICATION
Section 6.01 Indemnification. From and after the Closing Date and subject to Section 6.04, the Company (the
“Indemnifying Party”), shall indemnify and hold the Purchaser, its Affiliates and their respective directors, officers, agents, successors
and assigns (collectively, the “Indemnified Party”) harmless from and against any losses, claims, damages, liabilities, judgments, fines,
obligations, expenses and liabilities, including but not limited to any investigative, legal and other expenses incurred and any Taxes or
levies that may be payable by reason of the indemnification of any indemnifiable loss hereunder (collectively, “Losses”) by any
Indemnified Party as a result of or arising out of: (i) breach of any representation or warranty of the Indemnifying Party contained in the
Transaction Agreements; (ii) violation or nonperformance, partial or total, of any covenant or agreement of the Indemnifying Party
contained in the Transaction Agreements; or (iii) any failure of the Indemnifying Party to comply with Applicable Laws in relation to
Taxes to the extent required in connection with the transactions contemplated by this Agreement or any other Transaction Agreement
and/or any conversion of the Convertible Notes. 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 6.02 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 VI, then the Indemnified Party shall promptly following receipt of notice of such
claim (i) notify the Indemnifying Party thereof in writing and (ii) transmit to the Indemnifying Party a written notice (“Claim
25
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. Notwithstanding the foregoing, no
failure or delay in providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to indemnity
hereunder, except to the extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.
(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. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim if (i) the Third Party Claim relates
to or arises in connection with any criminal action, (ii) the Third Party Claim seeks an injunction or equitable relief against any
Indemnified Party (other than immaterial equitable relief in connection with an award of monetary damages) or (iii) the Indemnifying
Party has not acknowledged that such Third Party Claim is subject to indemnification pursuant to this ARTICLE VI. If the Indemnifying
Party assumes the defense of a Third Party Claim pursuant to this Section 6.02(b), the Indemnifying Party shall conduct such defense in
good faith.
(c) If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the
Indemnifying Party, cooperate reasonably with the Indemnifying Party and its counsel in contesting any Third Party Claim which the
Indemnifying Party elects to contest, including in connection with 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 6.02(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 6.03 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
26
claim and the basis of the Indemnified Party’s request for indemnification under this Agreement; provided, that no failure or delay in
providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to indemnity hereunder, except to the
extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.
Section 6.04 Limitation on the Company’s Liability. Absent fraud, intentional misrepresentation or willful breach on
the part of the Company:
(a) the Indemnifying Party shall have no liability to the Indemnified Parties with respect to any breach of any
representation or warranty (other than Fundamental Warranties) made by the Company in this Agreement unless the aggregate amount of
the Losses suffered or incurred by such Indemnified Parties thereunder exceeds US$1 million, in which case the Indemnifying Party shall
be liable to such Indemnified Parties for the full amount of their Losses from dollar one pursuant to Section 6.01;
(b) the maximum aggregate liabilities of the Indemnifying Party in respect of Losses suffered by the
Indemnified Parties with respect to any breach of any representation or warranty (other than Fundamental Warranties) made by the
Company in this Agreement shall not in any event be greater than the Purchase Price; and
(c) notwithstanding any other provision contained herein, from and after the Closing, the right to indemnity
pursuant to ARTICLE VI shall be the sole and exclusive remedy of any of the Indemnified Party for any claims against the Company
arising out of or resulting from this Agreement; provided that the Purchaser shall also be entitled to specific performance or other
equitable remedies in any court of competent jurisdiction pursuant to Section 7.13 hereof.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Survival of the Representations and Warranties.
(a) The Fundamental Warranties shall survive indefinitely or until the latest date permitted by law and the
representations contained in Section 4.01(w) shall survive until the expiration of the applicable statute of limitations. All other
representations and warranties of the Company contained in this Agreement shall survive Closing until eighteen (18) months after the
Closing Date.
(b) Notwithstanding anything to the contrary in the foregoing clauses, (i) any breach of representation or
warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been
given to the party against whom such indemnity may be sought in accordance with this Agreement prior to such time and (ii) any breach
of representation or warranty in respect of which indemnity may be sought that was caused as a result of fraud or intentional
misrepresentation shall survive until the latest date permitted by law.
27
Section 7.02 Governing Law; Arbitration. This Agreement shall be governed and interpreted in accordance with the
laws of Hong Kong. Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or
termination 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 at the time of commencement of the
arbitration. There shall be three arbitrators. The Company shall have the right to appoint one arbitrator, the Purchaser shall have the right
to appoint the second 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 7.03 No Third Party Beneficiaries. A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Ordinance (Cap. 623) to enforce any term of this Agreement.
Section 7.04 Acknowledgement. The Purchaser acknowledges that it understands that the Company, in issuing the
Convertible Notes to the Purchaser pursuant to this Agreement, is relying upon the exemption from registration provided by Regulation S
under the Securities Act.
Section 7.05 Amendment. This Agreement shall not be amended, changed or modified, except by another agreement in
writing executed by the Parties hereto.
Section 7.06 Binding Effect. This Agreement shall inure to the benefit of, and be binding upon, each of the Parties and
their respective heirs, successors and permitted assigns and legal representatives.
Section 7.07 Assignment. Neither this Agreement nor any of the rights, duties or obligations hereunder may be assigned
by the any Party without the express written consent of the other Parties. Any purported assignment in violation of the foregoing
sentence shall be null and void. Notwithstanding the foregoing, the Purchaser may assign its rights hereunder to any of its Affiliates,
provided, that no such assignment shall relieve the Purchaser of its obligations hereunder.
Section 7.08 Notices. All notices, requests, demands, and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given if (a) in writing and served by personal delivery upon the party for whom it is
intended; or (b) if delivered by certified mail, registered mail or courier service, return-receipt received to the party at the address set
forth below:
If to Company, at: NIO Inc.
Address: Building 20, No. 56 AnTuo Road, Jiading
District, Shanghai, 201804, People’s Republic of
China
28
Attention: Fang Liu
Email: fang.liu@nio.com
With a copy to: Skadden, Arps, Slate, Meagher & Flom
Address: 42/F, Edinburgh Tower, The Landmark, 15
Queen’s Road Central, Hong Kong, Hong Kong
Attention: Z. Julie Gao
Email: Julie.gao@skadden.com
If to Purchaser, at: Huang River Investment Limited
Address: c/o Tencent Holdings Limited
Level 29, Three Pacific Place
1 Queen's Road East
Wanchai, Hong Kong
Attention: Compliance and Transactions Department
Email: legalnotice@tencent.com
With a copy to: Tencent Binhai Towers, No.33 Haitian 2nd
Road, Nanshan District, Shenzhen, P.R.China
518054 Attention: Mergers and Acquisitions
Department Email: PD_Support@tencent.com
Latham & Watkins
Address: 18th Floor, One Exchange Square, 8
Connaught Place, Central, Hong Kong
Attention: Ji Liu
Email: ji.liu@lw.com
Any Party may change its address for purposes of this Section 7.08 by giving the other Parties hereto written notice of the new
address in the manner set forth above. For the avoidance of doubt, only notice delivered to the address and person of the parties to this
Agreement shall constitute effective notice to such party for the purposes of this Agreement.
Section 7.09 Entire Agreement. This Agreement and the other Transaction Agreements including the
schedules and exhibits hereto and thereto constitutes the entire understanding and agreement between the Parties with respect to the
matters covered hereby and thereby, and all prior agreements and understandings, oral or in writing, if any, between the Parties with
respect to the matters covered hereby and thereby are merged and superseded by this Agreement and the other Transaction Agreements.
Section 7.10 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.
29
Section 7.11 Fees and Expenses. The Company will reimburse the Purchaser all expenses incurred in connection with
the negotiation, preparation and execution of this Agreement and other Transaction Agreements and the transactions contemplated
hereby and thereby, including fees and expenses of attorneys, accountants, consultants and financial advisors.
Section 7.12 Confidentiality.
(a) Each Party shall keep confidential any non-public material or information with respect to the business,
technology, financial conditions, and other aspects of the other Parties which it is aware of, or have access to, in signing or performing
this Agreement (including written or non-written information, hereinafter the “Confidential Information”). Confidential Information shall
not include any information that is (a) previously known on a non-confidential basis by the receiving Party, (b) in the public domain
through no fault of such receiving Party, its Affiliates or its or its Affiliates’ officers, directors or employees, (c) received from a party
other than the Company or the Company’s representatives or agents, so long as such party was not, to the knowledge of the receiving
party, subject to a duty of confidentiality to the Company or (d) developed independently by the receiving Party without reference to
confidential information of the disclosing Party. No Party shall disclose such Confidential Information to any third Party. Either Party
may use the Confidential Information only for the purpose of, and to the extent necessary for performing this Agreement; and shall not
use such Confidential Information for any other purposes. The Parties hereby agree, for the purpose of this Section 7.12, that the
existence and terms and conditions of this Agreement and schedule hereof shall be deemed as Confidential Information.
(b) Notwithstanding any other provisions in this Section 7.12, if any Party believes in good faith that any
announcement or notice must be prepared or published pursuant to applicable laws (including any rules or regulations of any securities
exchange or valid legal process) or information is otherwise required to be disclosed to any Governmental Authority, such Party may, in
accordance with its understanding of the applicable laws, make the required disclosure in the manner it deems in compliance with the
requirements of applicable laws; provided, that, the Party who is required to make such disclosure shall, to the extent permitted by law
and so far as it is practicable, provide the other Parties with prompt notice of such requirement and cooperate with the other Parties at
such other Parties’ request and at the requesting Party’s cost, to enable such other Parties to seek an appropriate protection order or
remedy. In addition, each Party may disclose, after giving prior notice to the other Parties to the extent practicable under the
circumstances and subject to any practicable arrangements to protect confidentiality, Confidential Information to the extent required
under judicial or regulatory process or in connection with any judicial process regarding any legal action, suit or proceeding arising out
of or relating to this Agreement or any Transaction Agreement; provided that, the Party who is required to make such disclosure shall, to
the extent permitted by law and so far as it is practicable, at the other Parties’ request and at the requesting Party’s cost, cooperate with
the other Parties to enable such other Parties to seek an appropriate protection order or remedy.
officers, directors, employees, agents and
(c) Each Party may disclose the Confidential Information only to its Affiliates and its and its Affiliates’
30
representatives on a need-to-know basis in the performance of the Transaction Agreements; provided that, such Party shall ensure such
persons strictly abide by the confidentiality obligations hereunder.
(d) Without the prior written consent of the Purchaser (regardless of whether or not the Purchaser is then a
shareholder of the Company), the Company shall not, and shall cause its Affiliates not to, (i) use in advertising, publicity,
announcements, or otherwise, the name of the Purchaser or any Affiliate of the Purchaser, either alone or in combination with any
company name, trade name, trademark, service mark, domain name, device, design, symbol or any abbreviation, contraction or
simulation thereof owned or used by the Purchaser or any of its Affiliates, or (ii) represent, directly or indirectly, that any product or
services provided by the Company or any of its Affiliates has been approved or endorsed by the Purchaser or any of its Affiliates.
(e) The confidentiality obligations of each Party hereunder shall survive the termination of this Agreement.
Each Party shall continue to abide by the confidentiality clause hereof and perform the obligation of confidentiality it undertakes until the
other Party approves release of that obligation or until a breach of the confidentiality clause hereof will no longer result in any prejudice
to the other Party.
Section 7.13 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.
Section 7.14 Termination.
earliest to occur of:
(a) This Agreement shall automatically terminate as between the Company and the Purchaser upon the
(i) the written consent of each of the Company and the Purchaser;
(ii) the delivery of written notice to terminate by either the Company or the Purchaser if Closing shall
not have occurred by three (3) months after the date of this Agreement; provided, however, that such right to terminate this
Agreement under this Section 7.14(a)(ii) shall not be available to any party whose failure to fulfill any obligation under this
Agreement shall have been the principal cause of, or shall have resulted in, the failure of Closing to occur on or prior to such
date; or
(iii) by the Company or the Purchaser in the event that any Governmental Authority shall have issued a
judgment or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by the
Transaction Agreements and such judgment or other action shall have become final and non-appealable.
(b) Upon the termination of this Agreement, this Agreement will have no further force or effect, except for
the provisions of Section 7.02, Section 7.08 and Section 7.12 hereof, which shall survive any termination under this Section 7.14;
provided,
31
that neither the Company nor the Purchaser shall be relieved or released from any liabilities or damages arising out of (i) fraud or (ii) any
breach of this Agreement prior to such termination.
Section 7.15 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 7.16 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. Signatures in the form of facsimile or electronically imaged “PDF” shall be deemed to be original
signatures for all purposes hereunder.
Section 7.17 Public Disclosure. Without limiting any other provision of this Agreement, both the Purchaser and the
Company shall consult and agree with each other on the terms and content of a joint press release with respect to the execution of this
Agreement and any other Transaction Agreements and the transactions contemplated hereby and thereby and no press release shall be
issued by any Party hereto without the prior written consent of the other Parties. Thereafter, neither the Company nor the Purchaser, nor
any of their respective Affiliates, shall issue any press release or other public announcement or communication (to the extent not
previously publicly disclosed or made in accordance with this Agreement or any other Transaction Agreements) with respect to the
transactions contemplated hereby or thereby without the prior written consent of the other parties (such consent not to be unreasonably
withheld, conditioned or delayed), except to the extent a party’s counsel deems such disclosure necessary or desirable in order to comply
with any law or the regulations or policies of any securities exchange or other similar regulatory body (in which case the disclosing party
shall give the other parties notice as promptly as is reasonably practicable of any required disclosure to the extent permitted by applicable
law), shall limit such disclosure to the information such counsel advises is required to comply with such law or regulations, and if
reasonably practicable, shall consult with the other party regarding such disclosure and give good faith consideration to any suggested
changes to such disclosure from the other party. Notwithstanding anything to the contrary in this Section 7.17, the Purchaser and the
Company may make public statements in response to specific questions by the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as any such statements are not materially inconsistent with previous press
releases, public disclosures or public statements made by the Company or the Purchaser and do not reveal material, non-public
information regarding the other Parties or the transactions contemplated by this Agreement.
Section 7.18 Waiver. No waiver of any provision of this Agreement shall be effective unless set forth in a written
instrument signed by the Party waiving such provision. No failure or delay by a Party in exercising any right, power or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or
the exercise of any other right, power or remedy.
32
[Signature pages follow]
33
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
NIO INC.
By:/s/ Bin Li
Name: Bin Li
Title: Chairman and Chief Executive Officer
[Signatue Page to Convertible Notes Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
HUANG RIVER INVESTMENT LIMITED
By: /s/ Ma Huateng
Name: Ma Huateng
Title: Authorized Signatory
[Signatue Page to Convertible Notes Subscription Agreement]
Exhibit A
Form of 2020 Convertible Note
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE
SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN EXEMPTION OR
QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B) UNLESS IN COMPLIANCE WITH THE
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND HUANG RIVER INVESTMENT
LIMITED, DATED SEPTEMBER 4, 2019 (THE “SUBSCRIPTION AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL,
PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS
SET FORTH IN THE SUBSCRIPTION AGREEMENT SHALL BE VOID.
US$50,000,000
CONVERTIBLE SENIOR NOTE
September ____, 2019
Subject to the terms and conditions of this Convertible Senior Note due 2020 (the “Note”), for good and valuable consideration
received, NIO Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Company”),
promises to pay to the order of Huang River Investment Limited, a company incorporated under the laws of the British Virgin Islands
(such party and any other permitted transferee, the “Holder”), the principal amount of US$50,000,000, plus other amounts payable
provided below, on [ ] (the “Maturity Date”), or such earlier date as may be otherwise provided herein, unless the outstanding principal
is settled in accordance with Article 3 of the Note.
1
The Note is issued pursuant to, and in accordance with, the Convertible Notes Subscription Agreement, dated September 4, 2019
(the “Subscription Agreement”), between the Company and the Holder and is subject to the provisions thereof. Unless the context
requires otherwise, capitalized terms used herein shall have the meaning set forth in Article 1 of this Note.
The following is a statement of the rights of the Holder of the Note and the terms and conditions to which the Note is subject,
and to which the Holder hereof, by the acceptance of the Note, agrees:
1. DEFINITIONS
“ADS” means an American Depositary Share, each of which represents one Class A Share as of the date of this Note.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under
common control with such Person; provided, that
1
NTD: The 360th day of the Issue Date .
1
none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the Purchaser. For purposes of this
definition, “control” when used with respect to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the People’s
Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau
SAR and Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Capital Stock” means for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Clause A Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause B Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause C Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“close of business” means 5:00 p.m. (New York City time).
“Common Equity” of any Person means ordinary share capital or Capital Stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning ascribed to such term in the Preamble.
“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities
having the power to elect a majority of
the board of directors or similar body governing the affairs of such Person or securities that represent a majority of the
outstanding voting securities of such Person.
“Conversion Date” shall have the meaning ascribed to such term in Section 3.3. “Conversion Notice” shall have the meaning
ascribed to such term in Section 3.3.
“Conversion Period” shall mean the period starting from (and including) the fifteenth (15 ) Business Day immediately
preceding the Maturity Date and prior to the close of business on the second Business Day immediately preceding the Maturity
Date.
th
“Conversion Rate” shall have the meaning ascribed to such term in Section 3.2.
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported Sale
Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading
Day immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall
have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of
this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS;
or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the
quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition be
deemed to be the amount thereof increased by such similar amount;
and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of
a dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that
dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof
reduced by an amount equal to the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
“Defaulted Amounts” means any amounts on this Note (including, without limitation, the Repurchase Price, principal and
interest) that are payable but are not punctually paid or duly provided for.
“Distributed Property” shall have the meaning ascribed to such term in Section 4.1(c). “EoD Notice” shall have the meaning
ascribed to such term in Section 2.5(a)
“EoD Repurchase Price” shall have the meaning ascribed to such term in Section 2.5(a).
“Event of Default” shall have the meaning ascribed to such term in Section 2.4.
“Ex-Dividend Date” means the first date on which the Class A Shares, ADSs representing Class A Shares (or other applicable
security), trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance,
dividend or distribution in question, from the Company or, if applicable, from the seller of the Class A Shares, ADSs
representing Class A Shares (or other applicable security) on such exchange or market (in the form of due bills or otherwise) as
determined by such exchange or market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Class A Shares or ADSs that expire on or prior to the
Maturity Date.
“Fundamental Change” shall be deemed to have occurred if any of the following occurs after the Note is originally issued:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its
Subsidiaries (together with the Company, the “Company Group”), the employee benefit plans of the Company and its
Subsidiaries and any of the Permitted Holders, has become the direct or indirect “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of (i) the Company’s Common Equity (including Common Equity held in the form of
ADSs) representing more than 50% of the voting power of the Company’s Common Equity or (ii) more than 50% of the
outstanding Class A Shares (including Class A Shares held in the form of ADSs); or (B) the Permitted Holders (together
with any of their respective Affiliates) have become the direct or indirect “beneficial owner,” as defined in Rule 13d-3
under the Exchange Act, of Class A Shares (including Class A Shares held in the form of ADSs) representing, in the
aggregate, more than 65% of the outstanding Class A Shares (including Class A Shares held in the form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Class A Shares or the ADSs (other than
changes resulting from a subdivision or combination) as a result of which the Class A Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation
or merger of the Company, or any similar transaction, pursuant to which the Class A Shares or the ADSs will be
converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of
transactions of all or substantially all of the consolidated assets of the Company Group, taken as a whole, to any Person
other than one of the Company’s wholly-owned Subsidiaries; provided, however, that a transaction described in clause
(B) in which the holders of all classes of the Company’s Common Equity immediately prior to such transaction own,
directly or indirectly, more than
50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof immediately
after such transaction in substantially the same proportions vis-a-vis each other as such ownership immediately prior to such
transaction shall not be a Fundamental Change pursuant to this clause (b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) cease to be listed
or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official
application thereof (a “change in law”) that results in (A) the Company Group (as in existence immediately subsequent
to such change in law), taken as a whole, being legally prohibited from operating substantially all of the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) as of the last
date of the period described in the Company’s consolidated financial statements for the most recent fiscal quarter and
(B) the Company being unable to continue to derive substantially all of the economic benefits from the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) in the same
manner as reflected in the Company’s consolidated financial statements for the most recent fiscal quarter,
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change if at least
90% of the consideration received or to be received by holders of the ADSs, excluding cash payments for any fractional Class A
Shares and cash payments made in connection with dissenters’ appraisal rights, in connection with such transaction or event
consists of shares of Common Equity or ADSs or depositary receipts in respect of Common Equity that are listed or quoted on
any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their
respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event and
as a result of such transaction or event, the Note becomes convertible into such consideration, excluding cash payments for any
fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights.
“Fundamental Change Repurchase Date” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Repurchase Notice” shall have the meaning ascribed to such term in Section 5.2(b).
“Fundamental Change Repurchase Price” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Company Notice” shall have the meaning ascribed to such term in Section 5.2(d).
“GAAP” means the generally accepted accounting principles in the United States.
“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local, municipal or other
political subdivision or other government, governmental, regulatory or administrative authority, agency, board, bureau,
department, instrumentality or commission or any court, tribunal, judicial or arbitral body of competent jurisdiction or stock
exchange.
“Holder” shall have the meaning ascribed to such term in the Preamble. “Issue Date” means September [ (cid:0) ], 2019.
“Last Reported Sale Price” of the Class A Shares on any date shall be calculated as (i) the closing sale price per ADS (or if no
closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional
securities exchange on which the ADSs are traded divided by (ii) the applicable number of Class A Shares then represented by
one ADS. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be (i) the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as
reported by OTC Markets Group Inc. or a similar organization divided by (ii) the applicable number of Class A Shares then
represented by one ADS. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be (i) the average of the midpoint
of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent
investment banking firms selected by the Company for this purpose divided by (ii) the applicable number of Class A Shares
then represented by one ADS.
“Law” means any statute, law, ordinance, regulation, rule, code, order, judgment, writ, injunction, decree or requirement of law
(including common law) enacted, issued, promulgated, enforced or entered by a Governmental Authority.
“Maturity Date” shall have the meaning ascribed to such term in the Preamble.
“Maturity Repurchase Price” shall have the meaning ascribed to such term in Section 5.1.
“Merger Event” shall have the meaning ascribed to such term in Section 4.3. “Note” shall have the meaning ascribed to such
term in the Preamble.
“Officer” means, with respect to the Company, the Chairman, President, the Chief Executive Officer, the Secretary, any
Executive or any Vice President (whether or not designated by a number or numbers or word or words added before or after the
title “Vice President”).
“Officer’s Certificate”, when used with respect to the Company, means a certificate that is delivered to the Holder and that is
signed by the principal executive, financial
or accounting officer of the Company who has been duly authorized to sign such certificate. To the extent applicable, each such
certificate shall include (a) a statement that the person making such certificate is familiar with the requested action and the Note;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statement contained in such
certificate is based; (c) a statement that, in the judgment of such person, he or she has made such examination or investigation as
is necessary to enable him or her to express an informed judgment as to whether or not such action is permitted by the Note; and
(d) a statement as to whether or not, in the judgment of such person, such action is permitted by the Note, if and to the extent
required by the provisions of the Note.
“open of business” means 9:00 a.m. (New York City time).
“Ordinary Shares” means collectively the Class A Shares, the Class B Shares and the Class C Shares.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation of ordinary share capital of the Company (including ordinary share capital held in the form of ADSs)
with any of the aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability
company, organization, entity or Governmental Authority.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class
A Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Class A Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted
into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$2.98 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Note and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to
under the provisions in Section 4.1.
“Reference Property” and “unit of Reference Property” have the meanings ascribed thereto in Section 4.3.
“Relevant Securities” shall have the meaning ascribed to such term in Section 4.1(f).
“Repurchase Price” means any of the EoD Repurchase Price, the Fundamental Change Repurchase Price and the Maturity
Repurchase Price, as applicable.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act.
“Spin-Off” shall have the meaning ascribed to such term in Section 4.1(c).
“Subscription Agreement” shall have the meaning ascribed to such term in the Preamble.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint stock company, joint venture or
other organization or entity, whether incorporated or unincorporated, which is Controlled by such Person and, for the avoidance
of doubt, the Subsidiaries of any Person shall include any variable interest entity over which such Person or any of its
Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such Person in accordance
with GAAP applicable to such Person.
“Successor Company” shall have the meaning ascribed to such term in Section 7.1(a).
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on The NASDAQ Global Market or, if the ADSs (or such other security) are not then listed on
The NASDAQ Global Market, on the principal other U.S. national or regional securities exchange on which the ADSs (or such
other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities
exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale
Price with respect to the ADSs (or closing sale price for such other security) is available on such securities exchange or market;
provided that if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day.
“Transaction Documents” means the Note, the Subscription Agreement, the Convertible Senior Notes due 2022 and each of the
other agreements and documents entered into or delivered by the Company, the Holder or their respective Affiliates in
connection with the transactions contemplated by the Subscription Agreement.
“Trigger Event” shall have the meaning ascribed to such term in Section 4.1(c). “U.S.” means United States.
“US$” or “$” means the United States dollar, the lawful currency of the United States of America.
“Valuation Period” shall have the meaning ascribed to such term in Section 4.1(c).
2. INTEREST; PAYMENTS; DEFAULTS
2.1 Interest Rate. The principal amount outstanding under the Note shall not bear any interest, except for any interest on the
Defaulted Amounts in accordance with Section 2.6.
2.2 Payment. All amounts payable on or in respect of the Note or the indebtedness evidenced hereby shall be paid to the Holder in
U.S. dollars, in immediately available funds on the date that any principal (or interest, in accordance with Section 2.6) or any
Repurchase Price is due and payable hereunder. The Company shall make such principal (or interest, in accordance with Section
2.6) or such payment of Repurchase
Price to the Holder by wire transfer of immediately available funds for the account of the Holder or any of its Affiliates as may
be designated by the Holder in writing from time to time; provided that any change to such accounts shall be notified in writing
to the Company at least two (2) Business Days prior to the relevant payment date. If any such payment date or the Maturity
Date falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day and no
interest on such payment will accrue in respect of the delay.
2.3 Seniority. The Note ranks (a) senior in right of payment to any of the Company’s present and future indebtedness that is
expressly subordinated in right of payment to the Note, (b) equal in right of payment to any of the Company’s present and
future indebtedness and other liabilities of the Company that are not so subordinated, (c) junior in right of payment to any of
the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (d) structurally
junior to all indebtedness incurred by the Company’s Subsidiaries and their other liabilities (including trade payables).
2.4 Events of Default. For purposes of the Note, an “Event of Default” shall be deemed to have occurred if any of the following
events occurs, whatever the reason or cause for such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Failure to Pay. The Company defaults in the payment of principal of the Note when due and payable on the Maturity
Date or upon declaration of acceleration, or the Company defaults in the payment of any Repurchase Price upon any
required repurchase, in each case in accordance with the terms hereof;
(b) Breach of Conversion Obligation. The Company fails to comply with its obligation to convert all or a portion of the
Note in accordance with Article 3 upon Holder’s exercise of its conversion rights and such failure continues for a period
of five (5) Business Days;
(c) Breach of Article 7. The Company fails to comply with its obligations under Article 7;
(d) Breach of Other Obligations. The Company fails for sixty (60) days after written notice from the Holder has been
received by the Company to comply with any of its other agreements contained in any Transaction Document to which
the Company is a party;
(e) Cross Default. Any default by the Company or any Subsidiary of the Company with respect to any mortgage, agreement
or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any
indebtedness for money borrowed in excess of US$50 million (or the foreign currency equivalent thereof) in the
aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be
created (A) resulting in such indebtedness becoming or being declared due and payable or (B) constituting a failure to
pay the principal or
interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of
acceleration or otherwise;
(f) Adverse Judgment. A final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or
more (excluding any amounts covered by insurance) is rendered against the Company or any Subsidiary of the
Company, which judgment is not paid, bonded or otherwise discharged or stayed within sixty (60) days after the earlier
of (i) the date on which the right to appeal thereof has expired if no such appeal has commenced and (ii) the date on
which all rights to appeal have been extinguished;
(g) Trading Suspension. The ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the
Note) have been suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select
market or The NASDAQ Global Market (or any of their respective successors) for a period of ninety (90) consecutive
trading days or for more than one hundred and eighty (180) trading days in any twelve (12)-month period;
(h) Bankruptcy. The Company, any Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a
“significant subsidiary” as defined in rule 1-02(w) of Regulation S-X under the Exchange Act shall commence a
voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to the
Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under any bankruptcy, liquidation,
insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Company, such Significant Subsidiary or such other Subsidiaries or all or
substantially all of its or their property, or shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its or their debts as they become due; or
(i) Involuntary Proceedings. An involuntary case or other proceeding shall be commenced against the Company, any
Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a “significant subsidiary” as defined
in rule 1-02(w) of Regulation S-X under the Exchange Act seeking liquidation, winding-up, reorganization or other
relief with respect to the Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under any
bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of the Company, such Significant Subsidiary or such other
Subsidiaries or all or substantially all of its or their property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) consecutive days.
2.5 Consequences of Event of Default.
(a) If one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any Governmental Authority), then,
(i) in each and every such case (other than an Event of Default specified in Section 2.4(h) or Section 2.4(i)),
unless the principal of the Note shall have already become due and payable, the Holder may by notice in
writing to the Company (the “EoD Notice”) to require the Company to repurchase for cash all of the Note or
any portion thereof on the fifth (5 ) Business Day after the date of the EoD Notice at a repurchase price (the
“EoD Repurchase Price”) equal to (A) 100% of the principal amount thereof, plus (B) a premium equal to the
aggregate interest that would have accrued on such principal amount over the period starting from (and
including) the date of the Issue Date and ending on (and including) the date when the EoD Repurchase Price is
made in full, if the Note were to bear interest at a rate of 2.0% per annum, accrued daily and computed on the
basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days
elapsed over a 30-day month, and plus (C) all other amounts due and payable on or in respect of the Note
(including any accrued and unpaid interest on the Defaulted Amounts pursuant to Section 2.6), if any; or
th
(ii) if an Event of Default specified in Section 2.4(h) or Section 2.4(i) occurs and is continuing, the Company shall
promptly repurchase for cash all of the Note at a repurchase price equal to the EoD Repurchase Price without
any action on the part of the Holder.
(b) Section 2.5(a), however, is subject to the conditions that if, at any time after the outstanding principal of the Note shall
have been so declared due and payable, and before any arbitral award for the payment of the monies due shall have
been obtained or entered as hereinafter provided, the Company has paid or deposited with the Holder a sum sufficient
to pay the outstanding principal of and any other amounts due and payable on the Note that shall have become due
otherwise than by acceleration (with interest on the Defaulted Amounts), and if (1) rescission would not conflict with
any such arbitral award and (2) any and all existing Events of Default under the Note, other than the nonpayment of the
principal of and any other amounts due and payable on the Note that shall have become due solely by such
acceleration, shall have been cured or waived, then and in every such case the Holder, by written notice to the
Company, may waive all Default or Events of Default with respect to the Note and rescind and annul such declaration
and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Note; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. Notwithstanding
anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any Default
or Event of Default resulting from (i) the nonpayment of the principal of, or any other amounts due and payable on, the
Note or (ii) a failure to pay or deliver, as the case may be, the consideration due upon conversion of the Note.
2.6 Defaulted Amounts. Any Defaulted Amounts shall accrue interest at a rate equal to three percent (3.0%) per annum accrued
daily during the period from (and including) such relevant payment date and ending on (and including) the date on which such
Defaulted Amounts and such interest thereon are fully paid, and such Defaulted Amounts together with such interest thereon
pursuant to this Section 2.6 shall be paid by the Company to the Holder by wire transfer of immediately available funds
pursuant to the procedures set forth in Section 2.2.
3. CONVERSION
3.1 Conversion by Holder. Subject to and upon compliance with the provisions of this Article 3, the Holder shall have the right, at
the Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral
thereof) of the Note to the Company’s fully paid Class A Shares at the applicable Conversion Rate at any time during the
Conversion Period.
3.2 Conversion Price; Conversion Rate. Subject to adjustments as provided in Article 4, the initial conversion price shall be equal
to US$2.98 per Class A Share, representing an initial conversion rate of 335.5705 Class A Shares (the “Conversion Rate”) per
US$1,000 principal amount of the Note.
3.3 Conversion Procedure; Settlement Upon Conversion.
(a) This Note shall be deemed to have been converted immediately prior to the close of business on the date (the
“Conversion Date”) that is the Maturity Date, provided that the Holder has delivered a duly completed irrevocable
written notice to the Company (the “Conversion Notice”) to the Company during the Conversion Period. Within five
(5) Business Days after the delivery of the Note and the Conversion Notice to the Company, the Company shall (i) take
all actions and execute all documents necessary to effect the issuance of the full number of Class A Shares to which the
Holder shall be entitled in satisfaction of any conversion pursuant to Section 3.1, (ii) deliver to the Holder certificate(s)
representing the number of Class A Shares delivered upon each such conversion, (iii) deliver to the Holder a certified
copy of the register of members of the Company, reflecting the Holder’s ownership of the Class A Shares delivered
upon each such conversion, and (iv) cancel the Note. No Conversion Notice may be delivered and the Note may not be
surrendered by a Holder for conversion thereof if the Holder has also delivered a Fundamental Change Repurchase
Notice to the Company in respect of the Note and not validly withdrawn such Fundamental Change Repurchase Notice
in accordance with Article 5.
(b) [Reserved]
(c) If the Holder submits the Note for conversion, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the delivery of the Class A Shares upon such conversion of the Note, unless the tax is due because
the Holder requests such Class A Shares to be issued in a name other than the Holder’s name, in which case (i) if in the
name of any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any
other Person, the Holder shall pay that tax. The Company shall
pay the relevant fees for issuance of the Class A Shares and shall pay the relevant depositary’s fees for any future
conversion of the issued Class A Shares into the ADSs.
(d) Except as provided in Section 4.1, no adjustment shall be made for dividends on any Class A Shares delivered upon
any conversion of this Note as provided in this Article 3.
(e) Without prejudice to the Holder’s right to receive the interest in accordance with Section 3.3(h), the Company’s
settlement of each conversion pursuant to this Article 3 shall be deemed to satisfy in full its obligation to pay the
principal amount of the Note converted.
(f) The Holder in whose name the certificate for any Class A Shares delivered upon conversion is registered shall be
treated as a holder of record of such Class A Shares as of the close of business on the relevant Conversion Date. Upon
a conversion of the entire outstanding amount of the Note, the Holder shall no longer be a holder of the Note
surrendered for conversion.
(g) The Company shall not issue any fractional Class A Share upon conversion of the Note and shall instead pay cash in
lieu of any fractional Class A Share deliverable upon conversion based on the Last Reported Sale Price of the Class A
Shares on the relevant Conversion Date.
(h) Nothing in this Article 3 shall prejudice the Holder’s entitlement to receive interest on any of the Defaulted Amounts in
accordance with Section 2.6.
3.4 Without prejudice to any other provision in this Note, the Holder may elect to convert all or any portion (if the portion to be
converted is US$1,000 principal amount or an integral thereof) of the Note to ADSs (each representing one Class A Share) at
the applicable Conversion Rate at any time during the Conversion Period and the provisions in this Article 3 shall apply
mutatis mutandis; provided that, the Company shall pay (A) any documentary, stamp or similar issue or transfer tax due on the
delivery of such ADSs upon conversion of the Note (or the issuance of the underlying Class A Shares), unless the tax is due
because the Holder requests such ADSs to be issued in a name other than the Holder’s name, in which case (i) if in the name of
any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any other Person, the
Holder shall pay that tax; and (B) the depositary’s fees for issuance of such ADSs.
4. ADJUSTMENTS
4.1 Adjustment of Conversion Rate. If the number of Class A Shares represented by the ADSs is changed, after the date of this
Note, for any reason other than one or more of the events described in this Section 4.1, the Company shall make an appropriate
adjustment to the Conversion Rate such that the number of Class A Shares represented by the ADSs upon which any
conversion of this Note is based remains the same.
Notwithstanding the adjustment provisions described in this Section 4.1, if the Company distributes to holders of the Class A
Shares any cash, rights, options,
warrants, shares of capital stock or similar equity interest, evidences of indebtedness or other assets or property of the
Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of the ADSs, but, instead,
the ADSs shall represent, in addition to Class A Shares, such cash, rights, options, warrants, shares of Capital Stock or similar
equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the Conversion
Rate described in this Section 4.1 shall not be made until and unless a corresponding distribution (if any) is made to holders of
the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and
not on the distribution made to the holders of the Class A Shares. However, in the event that the Company issues or distributes
to all holders of the Class A Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company
shall adjust the Conversion Rate pursuant to Section 4.1(b) (in the case of in-the-money Expiring Rights entitling holders of the
Class A Shares for a period of not more than 45 calendar days after the announcement date of such issuance to subscribe for or
purchase Class A Shares or ADSs) or Section 4.1(c) (in the case of all other Expiring Rights).
For the avoidance of doubt, if any event described in this Section 4.1 results in a change to the number of Class A Shares
represented by the ADSs, then such change shall be deemed to satisfy the Company’s obligation to effect the relevant
adjustment to the Conversion Rate on account of such event to the extent such change produces the same economic result as
the adjustment to the Conversion Rate that would otherwise have been on account of such event.
Subject to the foregoing, the Conversion Rate shall be adjusted from time to time by the Company if any of the following
events occurs, except that the Company shall not make any adjustments to the Conversion Rate if the Holder participates (other
than in the case of a share split or share combination), at the same time and upon the same terms as holders of the Class A
Shares and solely as a result of holding the Note, in any of the transactions described in this Section 4.1, without having to
convert the Note, as if it held a number of Class A Shares equal to the Conversion Rate, multiplied by the principal amount of
the Note held by the Holder.
(a) If the Company exclusively issues Class A Shares as a dividend or distribution on the Class A Shares, or if the
Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following
formula:
CR1 = CR0 ×
OS1
OS0
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution, or immediately prior to the close of business on the effective date of such share split or share
combination, as applicable;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date or immediately
after the close of business on such effective date, as applicable;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date or
immediately prior to the close of business on such effective date, as applicable; and
OS1 = the number of Class A Shares outstanding immediately after giving effect to such dividend, distribution, share
split or share combination.
Any adjustment made under this Section 4.1(a) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution, or immediately after the open of business on the effective date for such
share split or share combination, as applicable. If any dividend or distribution of the type described in this Section
4.1(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date
the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be
in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Class A Shares (directly in or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date
of such issuance, to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A
Share that is less than the average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of
such issuance, the Conversion Rate shall be increased based on the following formula:
CR1 = CR0 ×
OS0 + X
OS0 + Y
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date;
X = the total number of Class A Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or
warrants; and
Y = the number of Class A Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants,
divided by (ii) the average of the
Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period ending on, and including,
the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.
Any increase made under this Section 4.1(b) shall be made successively whenever any such rights, options or warrants
are issued and shall become effective immediately after the close of business on the Record Date for the Class A
Shares (directly or in the form of ADSs), as applicable, for such issuance. To the extent that Class A Shares or ADSs
are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Class A Shares actually delivered (directly or in the
form of ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect if such the Record Date for such issuance had not occurred.
For purposes of this Section 4.1(b), in determining whether any rights, options or warrants entitle the holders to
subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than
such average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending
on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in
determining the aggregate offering price of such Class A Shares (directly or in the form of ADSs), there shall be taken
into account any consideration received by the Company for such rights, options or warrants and any amount payable
on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of
Directors acting in good faith.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders
of the Class A Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which
an adjustment was effected pursuant to Section 4.1(a) or Section 4.1(b), (ii) dividends or distributions paid exclusively
in cash as to which an adjustment was effected pursuant to Section 4.1(d), and (iii) Spin-Offs as to which the
provisions set forth below in this Section 4.1(c) shall apply (any of such shares of Capital Stock, evidences of
indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the
Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:
CR1 = CR0 × SP0 − FMV
SP0
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such
distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day
period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution;
and
FMV = the fair market value (as determined by the Board of Directors acting in good faith) of the Distributed Property
with respect to each outstanding Class A Share (directly or in the form of ADSs) on the Record Date for such
distribution.
Any increase made under the portion of this Section 4.1(c) above shall become effective immediately after the close of
business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall
be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared.
Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in
lieu of the foregoing increase, the Holder shall receive, in respect of each US$1,000 principal amount thereof, at the
same time and upon the same terms as holders of the Class A Shares receive the Distributed Property, the amount and
kind of Distributed Property the Holder would have received if the Holder owned a number of Class A Shares equal to
the Conversion Rate in effect on the Record Date for the distribution.
With respect to an adjustment pursuant to this Section 4.1(c) where there has been a payment of a dividend or other
distribution on the Class A Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or
similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued,
will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall
be increased based on the following formula:
CR1 = CR0 ×
FMV + MP0
MP0
where,
CR0 = the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR1 = the Conversion Rate in effect immediately after the end of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to
holders of the Class A Shares (directly or in the form of ADSs) applicable to one Class A Share (determined by
reference to the definition of Last Reported Sale Price as if references therein to the ADSs were to such Capital Stock
or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0 = the average of the Last Reported Sale Prices of the Class A Shares over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur on the last Trading Day of the
Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 4.1(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of
Trading Days as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the
Conversion Date in determining the Conversion Rate.
For purposes of this Section 4.1(c) (and subject in all respect to Section 4.1(f)), rights, options or warrants distributed
by the Company to all holders of the Class A Shares (directly or in the form of ADSs) entitling them to subscribe for or
purchase shares of the Company’s Capital Stock, including Class A Shares (either initially or under certain
circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):
(i) are deemed to be transferred with such Class A Shares (directly or in the form of ADSs); (ii) are not exercisable;
and (iii) are also issued in respect of future issuances of the Class A Shares (directly or in the form of ADSs), shall be
deemed not to have been distributed for purposes of this Section 4.1(c) (and no adjustment to the Conversion Rate
under this Section 4.1(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights,
options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 4.1(c). If any such right, option or warrant, including any such
existing rights, options or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence
of which such rights, options or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date
of distribution and Record Date with respect to new rights, options or warrants with such rights (in which case the
existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or
any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that
was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under
this Section 4.1(c) was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed
or purchased without exercise by any holders thereof, upon such final redemption or purchase (x)
the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the
Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event,
as the case may be, as though it were a cash distribution, equal to the per Class A Share redemption or purchase price
received by a holder or holders of Class A Shares (directly or in the form of ADSs) with respect to such rights, options
or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Class A Shares
(directly or in the form of ADSs) as of the date of such redemption or purchase, and (2) in the case of such rights,
options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion
Rate shall be readjusted as if such rights, options and warrants had not been issued.
For purposes of Section 4.1(a), Section 4.1(b) and this Section 4.1(c), any dividend or distribution to which this Section
4.1(c) is applicable that also includes one or both of:
(A) a dividend or distribution of Class A Shares (directly or in the form of ADSs) to which Section 4.1(a)
is applicable (the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 4.1(b) is applicable (the
“Clause B Distribution”), then (1) such dividend or distribution, other than the Clause A Distribution
and the Clause B Distribution, shall be deemed to be a dividend or distribution to which this Section
4.1(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment required by this
Section 4.1(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A
Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C
Distribution and any Conversion Rate adjustment required by Section 4.1(a) and Section 4.1(b) with
respect thereto shall then be made, except that, if determined by the Company (I) the “Record Date” of
the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of the
Clause C Distribution and (II) any Class A Shares (directly or in the form of ADSs) included in the
Clause A Distribution or Clause B Distribution shall be deemed not to be “outstanding immediately
prior to the close of business on such Record Date or immediately after the open of business on such
effective date, as applicable” within the meaning of Section 4.1(a) or “outstanding immediately prior
to the close of business on such Record Date” within the meaning of Section 4.1(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Class A Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
CR1 = CRa ×
Spa
SPa – C
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the Last Reported Sale Price of the Class A Shares on the Trading Day immediately preceding the Ex-Dividend
Date for such dividend or distribution; and
C = the amount in cash per Class A Share the Company distributes to all or substantially all holders of the Class A
Shares (directly or in the form of ADSs).
Any increase pursuant to this Section 4.1(d) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall
be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or
distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been
declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above),
in lieu of the foregoing increase, the Holder shall receive, for each US$1,000 principal amount of the Note, at the same
time and upon the same terms as holders of the Class A Shares (directly or in the form of ADSs), the amount of cash
that the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate on
the Record Date for such cash dividend or distribution.
(e) If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A
Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the
payment per Class A Share exceeds the average of the Last Reported Sale Prices of the Class A Shares over the 10
consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender
or exchange offer expires, the Conversion Rate shall be increased based on the following formula:
AC + (cid:0)OS1 ×
CR1 = CR0 ×
OS0 × SP
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors acting in
good faith) paid or payable for Class A Shares (directly or in the form of ADSs) purchased in such tender or exchange
offer;
OS0 = the number of Class A Shares outstanding immediately prior to the date such tender or exchange offer expires
(prior to giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer);
OS1 = the number of Class A Shares outstanding immediately after the date such tender or exchange offer expires
(after giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer); and
SP = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 4.1(e) shall occur at the close of business on the 10th
Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange
offer expires; provided that in respect of any conversion within the 10 Trading Days immediately following, and
including, the expiration date of any tender or exchange offer, references in this Section 4.1(e) with respect to 10
Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed from, and including,
the Trading Day next succeeding the expiration date of such tender or exchange offer to, and including, the Conversion
Date in determining the Conversion Rate. No adjustment to the Conversion Rate under this Section 4.1(e) shall be
made if such adjustment would result in a decrease in the Conversion Rate. In the event that the Company or one of the
Company’s Subsidiaries is obligated to purchase Class A Shares (directly or in the form of ADSs) pursuant to any such
tender offer or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable Law from
effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Note
or on the exercise of any other rights, existing as of the Issue Date, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into,
exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition
only excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise
or exchange for Ordinary
Shares or ADSs issued or granted in accordance with any employee incentive plan of the Company), in each case at a
consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares,
such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each
ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 ×
A + B
C
where:
CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant
Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of
Ordinary Shares then represented by each ADS; and
C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities, provided that
references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued
assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for
Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants
or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Shares or ADSs or
any securities convertible into or exchangeable for Class A Shares or ADSs or the right to purchase Class A Shares or
ADSs or such convertible or exchangeable securities.
(h) In addition to those adjustments required by subsections (a), (b), (c), (d), (e) and (f) of this Section 4.1, and to the extent
permitted by applicable Law and subject to the applicable rules of The NASDAQ Global Market and any other
securities exchange on which any of the Company’s securities are then listed, the Company from time to time may
increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors
determines that such increase would be in the Company’s best interest, and the Company may (but is not required to)
increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A
Shares or the ADSs or rights to purchase Class A Shares or ADSs in connection with a dividend or
distribution of Class A Shares or ADSs (or rights to acquire Class A Shares or ADSs) or similar event.
(i) Notwithstanding anything to the contrary in this Section 4.1, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Class A Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional
optional amounts in Class A Shares or ADSs under any plan;
(ii) upon the issuance of any Class A Shares or ADSs or options or rights to purchase those Class A Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or
assumed by the Company or any of the Company’s Subsidiaries;
(iii) upon the issuance of any Class A Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of
the date this Note was first issued;
(iv) solely for a change in the par value of the Class A Shares or ADSs; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Section 4.1 shall be made by the Company and shall be made to
the nearest one-ten thousandth (1/10,000) of a Class A Shares.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment
becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder.
(l) For purposes of this Article 4, the number of Class A Shares at any time outstanding shall not include Class A Shares
held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any
dividend or make any distribution on Class A Shares held in the treasury of the Company (directly or in the form of
ADSs), but shall include Class A Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A
Shares.
(m) For purposes of this Section 4.1, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as
applicable.
4.2 Adjustments of Prices. Whenever any provision of this Note requires the Company to calculate the Last Reported Sale Prices
over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment
to
the Conversion Rate that becomes effective pursuant to Section 4.1, or any event requiring an adjustment to the Conversion
Rate pursuant to Section 4.1 where the Record Date, effective date or expiration date, as the case may be, of the event occurs, at
any time during the period when such Last Reported Sale Prices are to be calculated.
4.3 Effect of Recapitalizations, Reclassifications and Changes of the Class A Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Class A Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries substantially as an entirety; or
(iv) any statutory share exchange, in each case, as a result of which the Class A Shares (directly or in the form of
ADSs) would be converted into, or exchanged for, stock, other securities, other property or assets (including
cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of
such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute an
amendment to this Note providing that, at and after the effective time of such Merger Event, the right to
convert the Note shall be changed into a right to convert the Note into the kind and amount of shares of stock,
other securities or other property or assets (including cash or any combination thereof) that a holder of a
number of Class A Shares equal to the Conversion Rate immediately prior to such Merger Event would have
owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property” meaning
the kind and amount of Reference Property that a holder of one Class A Share is entitled to receive) upon such
Merger Event; provided, however, that at and after the effective time of the Merger Event the number of Class
A Shares otherwise deliverable upon any conversion of the Note in accordance with Article 3 shall instead be
deliverable in the amount and type of Reference Property that a holder of that number of Class A Shares would
have been entitled to receive in such Merger Event.
If the Merger Event causes the Class A Shares (directly or in the form of ADSs) to be converted into, or
exchanged for, the right to receive more than a single type of consideration (determined based in part upon any
form of holder election), then (i) the Reference Property into which the Note will be convertible shall be
deemed to be the weighted average of the types and amounts of consideration received by the holders of Class
A Shares (directly or in the form of ADSs) that affirmatively make such an election, and (ii) the unit of
Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration
referred to in clause (i) attributable
to one Class A Shares. The Company shall provide written notice to the Holder of such weighted average as soon as
practicable after such determination is made.
Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 4 (it being
understood that no such adjustments shall be required with respect to any portion of the Reference Property that does
not consist of shares of Common Equity (however evidenced) or depositary receipts in respect thereof). If, in the case
of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including
cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the
case may be, in such Merger Event, then such other Person shall also execute such amendment, and such amendment
shall contain such additional provisions to protect the interests of the Holder, including the rights of the Holder to
require the Company to repurchase this Note upon a Fundamental Change pursuant to Article 5 as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) None of the foregoing provisions shall affect the right of the Holder to convert this Note into Class A Shares as set
forth in Article 3 prior to the effective date of such Merger Event.
(c) The above provisions of this Section 4.3 shall similarly apply to successive Merger Events.
4.4 No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Article 4 shall be required to be
made to the Conversion Rate if the Company receives written notice from the Holder that no such adjustment is required.
4.5 Certain Covenants.
(a) The Company covenants that all Class A Shares delivered upon any conversion of this Note will be fully paid and non-
assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company covenants that if any Class A Shares to be provided for the purpose of any conversion of this Note
require registration with or approval of any Governmental Authority under any Law before such Class A Shares may be
validly issued upon conversion, the Company will, to the extent then permitted by applicable Law, secure such
registration or approval, as the case may be.
(c) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to
any conversion of this Note into Class A Shares, and shall reserve for issuance an adequate number of Class A Shares,
such that Class A Shares can be delivered in accordance with the terms of this Note upon any conversion hereunder. In
addition, the Company further covenants to provide the Holder with a reasonably detailed description of the
mechanics for the delivery of Class A Shares upon any conversion of this Note upon request.
(d) The parties hereto acknowledge and agree that the Holder may only resell the Note, the Class A Shares delivered upon
conversion of all or any portion of the Note pursuant to an effective registration statement or an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act and other applicable securities Laws.
4.6 Notice for Certain Actions. In case of any (a) action by the Company or one of its Subsidiaries that would require an
adjustment in the Conversion Rate pursuant to Section 4.1, (b) Merger Event or (c) voluntary or involuntary dissolution,
liquidation or winding-up of the Company or any of its Subsidiaries, then, in each case (unless notice of such event is
otherwise required pursuant to another provision of this Note), the Company shall deliver a written notice to the Holder, as
promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified, stating (i) the date on
which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be
taken, the date as of which the holders of Class A Shares, of record are to be determined for the purposes of such action by the
Company or one of its Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is expected that holders of Class A Shares, of record shall be
entitled to exchange their Class A Shares, for securities or other property deliverable upon such Merger Event, dissolution,
liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such
action by the Company or one of its Subsidiaries, dissolution, liquidation or winding-up unless otherwise provided for pursuant
to any applicable Laws, the constitutional documents of the Company or any such Subsidiaries or any agreement or document
to which the Company or any such Subsidiaries is a party; provided that nothing herein shall adversely affect any right, claim
or other remedies, at law or contract, of the Holder arising as a result of or in connection with such failure or defect.
4.7 Termination of Depository Receipt Program. If the Class A Shares cease to be represented by ADSs issued under a depositary
receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a
reference to the number of Class A Shares (and other property, if any) represented by the ADSs on the last day on which the
ADSs represented the Class A Shares and as if the Class A Shares and the other property had been distributed to holders of the
ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last
Reported Sale Price of the Class A Shares, and other appropriate adjustments, including adjustments to the Conversion Rate,
will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any
other currency are required, the exchange rate in effect on the date of determination will apply.
5. REPURCHASE
5.1 Repurchase on Maturity Date. Unless previously repurchased or surrendered and converted, the Company shall, without any
action on the part of the Holder, redeem this Note in whole on the Maturity Date at a price (the “Maturity Repurchase Price”)
equal to (A) the outstanding principal amount, plus (B) a premium which shall be equal to 2.0% of the outstanding principal
amount, and plus (C) all other amounts due and payable on or in respect of the Note (including any accrued and unpaid interest
on the Defaulted Amounts), if any.
5.2 Repurchase on Fundamental Change.
(a) If a Fundamental Change occurs at any time, the Holder shall have the right, at its option, to require the Company to
repurchase for cash all of the Note or any portion thereof on the date (the “Fundamental Change Repurchase Date”)
notified in writing by the Company that is not less than twenty (20) Business Days and not more than thirty-five (35)
Business Days following the date of the Fundamental Change Company Notice (as defined below) at a repurchase
price (the “Fundamental Change Repurchase Price”) equal to (A) 100% of the principal amount (or such portion
thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued on such
principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of
the Issue Date and ending on (and including) the Fundamental Change Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month, and plus (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) Repurchase of the Note under this Section 5.2 shall be made, at the option of the Holder thereof, upon: (i) delivery by
the Holder to the Company of a duly completed notice (the “Fundamental Change Repurchase Notice”), in the form
attached hereto as Exhibit A, on or before the close of business on the second Business Day immediately preceding the
Fundamental Change Repurchase Date; and (ii) delivery of the Note to the Company at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer), such delivery being a
condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor. Each Fundamental Change
Repurchase Notice shall state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the
Company in accordance with Section 5.5.
(d) On or before the twentieth (20 ) calendar day after the occurrence of the effective date of a Fundamental Change, the
Company shall provide to the Holder a written notice (the “Fundamental Change Company Notice”) of the occurrence
of the effective date of the Fundamental Change and of the repurchase right at the option of the Holder arising as a
result thereof. Each Fundamental Change Company Notice shall specify:
th
(i) the events causing the Fundamental Change;
(ii) the date of the Fundamental Change;
(iii) the last date on which the Holder may exercise the repurchase right pursuant to this Section 5.2;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) if applicable, the Conversion Rate and any adjustments to the Conversion Rate;
(vii) that the Note may be converted only if any Fundamental Change Repurchase Notice that has been delivered by
the Holder has been withdrawn in accordance with the terms of this Note; and
(viii) the procedures in accordance with the terms of this Note that the Holder must follow to require the Company to
repurchase the Note.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holder’s repurchase rights
or affect the validity of the proceedings for the repurchase of the Note pursuant to this Section 5.2.
5.3 [Reserved]
5.4 No Repurchase in the Event of Acceleration. Notwithstanding the foregoing, the Note may not be repurchased by the Company
on any date at the option of the Holder upon a Fundamental Change if the principal amount of the Note has been accelerated,
and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a
default by the Company in the payment of the Fundamental Change Repurchase Price with respect to the Note).
5.5 Withdrawal of Fundamental Change Repurchase Notice. A Fundamental Change Repurchase Notice may be withdrawn (in
whole or in part) by means of a duly completed written notice of withdrawal delivered to the Company in accordance with this
Section 5.5 at any time prior to the close of business on the second Business Day immediately preceding the relevant
Fundamental Change Repurchase Date, specifying (a) the principal amount of the Note with respect to which such notice of
withdrawal is being submitted and (b) the principal amount, if any, of the Note that remains subject to the original Fundamental
Change Repurchase Notice.
5.6 Payment of Fundamental Change Repurchase Price.
(a) On or prior to 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change
Repurchase Date, the Company shall set aside, segregate and hold in trust for the benefit of the Holder an amount of
money sufficient to repurchase the applicable portion of the Note to be repurchased at the Fundamental Change
Repurchase Price. Payment for the applicable portion of the Note surrendered for repurchase (and not withdrawn in
accordance with Section 5.5) will be made in accordance with Section 2.2 on the later of (i)
such Fundamental Change Repurchase Date, provided the Holder has satisfied the conditions in this Article 5; and (ii)
the time of delivery of the applicable portion of the Note by the Holder to the Company in the manner required by
Section 5.2.
(b) If by 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase Date, the
Company holds money sufficient to make payment on the applicable portion of the Note to be repurchased on such
date, then, with respect to the applicable portion of the Note that has been properly surrendered for repurchase and not
validly withdrawn in accordance with Section 5.5, on such Fundamental Change Repurchase Date, (i) such portion of
the Note will cease to be outstanding, (ii) interest will cease to accrue on such portion of the Note and (iii) in the event
the entire outstanding amount of the Note is surrendered by the Holder to be repurchased, all other rights of the Holder
will terminate (other than the right to receive the Fundamental Change Repurchase Price).
(c) Upon the surrender of the Note that is to be repurchased in part pursuant to this Article 5, the Company shall execute
and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unrepurchased
portion of the Note.
5.7 Covenant to Comply with Applicable Law upon Repurchase of the Note. In connection with any repurchase offer, the Company
will, if required, comply with all federal and state securities laws in connection with any offer by the Company to repurchase
the Note so as to permit the rights and obligations under this Article 5 to be exercised in the time and in the manner specified in
this Article 5.
6. COVENANTS
6.1 Payment. The Company covenants and agrees that it will cause to be paid the principal of, and any other amounts due and
payable on, the Note or any Repurchase Price at the respective times and in accordance with the terms hereof.
6.2 Existence. Subject to Article 7, the Company shall do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
6.3 No Withholding. All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or
with respect to this Note, including, but not limited to, payments of principal (including, if applicable, the Fundamental Change
Repurchase Price), payments of interest and deliveries of Class A Shares (together with payments of cash for any fractional
Class A Share) upon any conversion of the Note, shall be made without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any
jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing
business or through which payment is made or deemed made (or any political subdivision or taxing authority thereof or
therein), unless such withholding or deduction is required by Law or by regulation or governmental policy having the force of
law.
6.4 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other Law that would prohibit or forgive the Company from paying all or any portion of the principal of or any other amounts
due and payable on the Note or any Repurchase Price as contemplated herein, wherever enacted, now or at any time hereafter
in force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not, by resort to any such Law,
hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of
every such power as though no such Law had been enacted.
6.5 Compliance Certificates; Statements as to Defaults. The Company shall deliver to the Holder within 120 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) and within 14 days of a written
request made by the Holder a certificate executed by an executive officer of the Company stating that a review has been
conducted of the Company’s activities under this Note and whether the Company has fulfilled its obligations hereunder, and
whether such officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then
continuing and, if so, specifying each such Default and the nature thereof. The Company shall deliver to the Holder, as soon as
possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is
then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is
taking or proposing to take in respect thereof.
6.6 Further Instruments and Acts. Upon request of the Holder, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Note.
6.7 New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of
smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts without
charge within three (3) Business Days after the date of such request, provided that the existing note instrument of this Note
shall be returned by the Holder to the Company for cancellation.
6.8 Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of
indemnity from the Holder reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and
cancellation thereof), the Company shall at its own expense within five (5) Business Days execute and deliver to the Holder, in
lieu thereof, a new Note, dated and bearing interest from the date hereof.
7. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
7.1 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 7.2, the Company shall not consolidate
with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person
unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation,
organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the
Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company)
shall expressly assume all of the obligations of the Company under the Note and the Subscription Agreement; and
(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be
continuing under this Note.
For purposes of this Section 7.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of
one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of
such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis,
shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the
Company to another Person.
7.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and
upon the assumption by the Successor Company of the due and punctual payment of the principal of and any other amounts
due and payable on the Note and any Repurchase Price, the due and punctual delivery or payment, as the case may be, of any
consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of
the Note to be performed by the Company, in each case in accordance with the terms hereof, such Successor Company (if not
the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and
assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. In
the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with
this Article 7 the Person named as the “Company” in the first paragraph of the Note (or any successor that shall thereafter have
become such in the manner prescribed in this Article 7) may be dissolved, wound up and liquidated at any time thereafter and,
except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Note and from its
obligations under the Note.
7.3 No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless any such consolidation, merger, sale,
conveyance, transfer or lease and any such assumption has complied with the provisions of this Article 7.
8. CANCELLATION
After all amounts at any time owing on the Note have been paid in full or upon the conversion of the Note in full pursuant to
Article 3, the Note shall be surrendered to the Company for cancellation and shall not be reissued.
9. NO REDEMPTION OR PREPAYMENT
This Note shall not be redeemable or pre-paid by the Company prior to the Maturity Date, and no sinking fund is provided for
this Note.
10. MISCELLANEOUS
10.1 Termination of Rights. All rights under this Note shall terminate when (a) all amounts at any time owing on the Note have been
paid in full or (ii) the Note is converted in full pursuant to the terms set forth in Article 3.
10.2 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained
in the Note shall bind its successors and assigns whether so expressed or not.
10.3 Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or
performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect by
the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the
Company.
10.4 Amendments and Waivers; Notice. The amendment or waiver of any term of the Note shall be subject to the written consent of the
Holder and the Company. The provision of notice shall be made pursuant to the terms of the Subscription Agreement.
10.5 Transfer Restrictions.
(a) The Holder covenants that the Note and/or the Class A Shares issuable upon conversion of the Note will only be
disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any transfer of Notes and/or the Class A
Shares issuable upon conversion of the Note other than pursuant to an effective registration statement or Rule 144
promulgated under the Securities Act (“Rule 144”), the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably
acceptable to the Company with respect to transactions of a similar nature, to the effect that such transfer does not
require registration under the Securities Act.
(b) The Holder agrees to the imprinting, until no longer required by this Section 10.5, of the following legend on any
certificate evidencing any of the Note or the Class A Shares issuable upon conversion of the Note:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the
holder of the Note or the Class A Shares
issuable upon conversion of the Note if, unless otherwise required by state securities laws, (i) such securities are
registered for resale under the Securities Act and are transferred to a Holder pursuant to a registration statement that is
effective at the time of such transfer, (ii) in connection with a sale, assignment or other transfer, such Holder provides
the Company with an opinion of counsel, the form and substance of which opinion shall be reasonably acceptable to
the Company with respect to transactions of a similar nature, that the sale, assignment or transfer of the securities may
be made without registration under the applicable requirements of the Securities Act or (iii) such Holder provides the
Company with reasonable assurance that the securities can be sold, assigned or transferred pursuant to Rule 144 or
have been sold under Rule 144.
(c) Notwithstanding anything to the contrary herein, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of
receiving all payments of principal of and any other amounts due and payable on the Note and any Repurchase Price
and for all other purposes whatsoever. This provision is intended to be a book entry system as defined in Treasury
Regulations Section 5f.103-1(c) and shall be interpreted consistently therewith.
10.6 No Third Party Beneficiary. A person who is not a party to this Note shall have no right under the Contracts (Rights of Third
Parties) Ordinance (Chapter 623) to enforce any of its terms.
10.7 Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
10.8 Arbitration.
(a) Any dispute, controversy, difference or claim arising out of or relating to this Note, including the existence, validity,
interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising
out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong
International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the
Notice of Arbitration is submitted.
(b) The law of this arbitration clause shall be Hong Kong law.
(c) The seat of arbitration shall be Hong Kong.
(d) The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the HKIAC rules. The
arbitration proceedings shall be conducted in English.
(e) It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from
courts of competent jurisdiction before the constitution of the arbitral tribunal.
10.9 Force Majeure. In no event shall the Holder be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood
that the Holder shall use reasonable efforts to resume performance as soon as practicable under the circumstances.
10.10 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under
the Note. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices, accrued interest
payable on the Note, if any, and the Conversion Rate of the Note. The Company shall make all these calculations in good faith
and, absent manifest error, the Company’s calculations shall be final and binding on the Holder. The Company shall provide a
schedule of its calculations to the Holder.
10.11 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to
exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of
any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring.
10.12 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no
presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or
its counsel.
[The remainder of this page has been deliberately left blank]
IN WITNESS WHEREOF, the Company has caused the Note to be issued on the date first above written.
COMPANY:
NIO Inc.
By:
Name:
Title:
Exhibit A
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to the
occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the Holder in accordance with Section 5.2 of this Note the entire principal amount of this
Note, or the portion thereof below designated, and the premium amount below calculated in accordance with Section 5.2(a)(B).
Principal amount to be repaid (if less than all): US$
Premium: US$
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
Exhibit B
Form of 2022 Convertible Note
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE
SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN EXEMPTION OR
QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B) UNLESS IN COMPLIANCE WITH THE
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND HUANG RIVER INVESTMENT
LIMITED, DATED SEPTEMBER 4, 2019 (THE “SUBSCRIPTION AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL,
PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS
SET FORTH IN THE SUBSCRIPTION AGREEMENT SHALL BE VOID.
US$50,000,000
CONVERTIBLE SENIOR NOTE
September ____, 2019
Subject to the terms and conditions of this Convertible Senior Note due 2022 (the “Note”), for good and valuable consideration
received, NIO Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Company”),
promises to pay to the order of Huang River Investment Limited, a company incorporated under the laws of the British Virgin Islands
(such party and any other permitted transferee, the “Holder”), the principal amount of US$50,000,000, plus other amounts payable
provided below, on [ ] (the “Maturity Date”), or such earlier date as may be otherwise provided herein, unless the outstanding principal
is settled in accordance with Article 3 of the Note.
1
The Note is issued pursuant to, and in accordance with, the Convertible Notes Subscription Agreement, dated September 4, 2019
(the “Subscription Agreement”), between the Company and the Holder and is subject to the provisions thereof. Unless the context
requires otherwise, capitalized terms used herein shall have the meaning set forth in Article 1 of this Note.
The following is a statement of the rights of the Holder of the Note and the terms and conditions to which the Note is subject,
and to which the Holder hereof, by the acceptance of the Note, agrees:
1. DEFINITIONS
“ADS” means an American Depositary Share, each of which represents one Class A Share as of the date of this Note.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under
common control with such Person; provided, that
1
NTD: the 3 anniversary of the Issue Date.
rd
1
none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the Purchaser. For purposes of this
definition, “control” when used with respect to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the People’s
Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau
SAR and Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Capital Stock” means for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Clause A Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause B Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause C Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“close of business” means 5:00 p.m. (New York City time).
“Common Equity” of any Person means ordinary share capital or Capital Stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning ascribed to such term in the Preamble.
“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities
having the power to elect a majority of
the board of directors or similar body governing the affairs of such Person or securities that represent a majority of the
outstanding voting securities of such Person.
“Conversion Date” shall have the meaning ascribed to such term in Section 3.3. “Conversion Notice” shall have the meaning
ascribed to such term in Section 3.3.
“Conversion Period” shall mean the period starting from (and including the first anniversary of the Issue Date and prior to the
close of business on the second Business Day immediately preceding the Maturity Date.
“Conversion Rate” shall have the meaning ascribed to such term in Section 3.2.
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported Sale
Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading
Day immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall
have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of
this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per
ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the
quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition
be deemed to be the amount thereof increased by such similar amount; and provided further that if the ADSs on each of
the said thirty (30) Trading Days have been quoted cum-dividend in respect of a dividend which has been declared or
announced but the ADSs or the Ordinary Shares to be issued do not rank for that dividend, the quotations on each of
such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to
the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
“Defaulted Amounts” means any amounts on this Note (including, without limitation, the Repurchase Price, principal and
interest) that are payable but are not punctually paid or duly provided for.
“Distributed Property” shall have the meaning ascribed to such term in Section 4.1(c).
“Early Repurchase Date” shall have the meaning ascribed to such term in Section 5.3(a).
“Early Repurchase Notice” shall have the meaning ascribed to such term in Section 5.3(a).
“Early Repurchase Price” shall have the meaning ascribed to such term in Section 5.3(a).
“EoD Notice” shall have the meaning ascribed to such term in Section 2.5(a)
“EoD Repurchase Price” shall have the meaning ascribed to such term in Section 2.5(a).
“Event of Default” shall have the meaning ascribed to such term in Section 2.4.
“Ex-Dividend Date” means the first date on which the Class A Shares, ADSs representing Class A Shares (or other applicable
security), trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance,
dividend or distribution in question, from the Company or, if applicable, from the seller of the Class A Shares, ADSs
representing Class A Shares (or other applicable security) on such exchange or market (in the form of due bills or otherwise) as
determined by such exchange or market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Class A Shares or ADSs that expire on or prior to the
Maturity Date.
“Fundamental Change” shall be deemed to have occurred if any of the following occurs after the Note is originally issued:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its
Subsidiaries (together with the Company, the “Company Group”), the employee benefit plans of the Company and its
Subsidiaries and any of the Permitted Holders, has become the direct or indirect “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of (i) the Company’s Common Equity (including Common Equity held in the form of
ADSs) representing more than 50% of the voting power of the Company’s Common Equity or (ii) more than 50% of
the outstanding Class A Shares (including Class A Shares held in the form of ADSs); or (B) the Permitted Holders
(together with any of their respective Affiliates) have become the direct or indirect “beneficial owner,” as defined in
Rule 13d-3 under the Exchange Act, of Class A Shares (including Class A Shares held in the form of ADSs)
representing, in the aggregate, more than 65% of the outstanding Class A Shares (including Class A Shares held in the
form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Class A Shares or the ADSs (other than
changes resulting from a subdivision or combination) as a result of which the Class A Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation
or merger of the Company, or
any similar transaction, pursuant to which the Class A Shares or the ADSs will be converted into cash, securities or
other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially
all of the consolidated assets of the Company Group, taken as a whole, to any Person other than one of the Company’s
wholly-owned Subsidiaries; provided, however, that a transaction described in clause (B) in which the holders of all
classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than
50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof
immediately after such transaction in substantially the same proportions vis-a-vis each other as such ownership
immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) cease to be listed
or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official
application thereof (a “change in law”) that results in (A) the Company Group (as in existence immediately subsequent
to such change in law), taken as a whole, being legally prohibited from operating substantially all of the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) as of the last
date of the period described in the Company’s consolidated financial statements for the most recent fiscal quarter and
(B) the Company being unable to continue to derive substantially all of the economic benefits from the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) in the same
manner as reflected in the Company’s consolidated financial statements for the most recent fiscal quarter, provided,
however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change if at least
90% of the consideration received or to be received by holders of the ADSs, excluding cash payments for any
fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights, in connection with
such transaction or event consists of shares of Common Equity or ADSs or depositary receipts in respect of Common
Equity that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The
NASDAQ Global Market (or any of their respective successors) or will be so listed or quoted when issued or
exchanged in connection with such transaction or event and as a result of such transaction or event, the Note becomes
convertible into such consideration, excluding cash payments for any fractional Class A Shares and cash payments
made in connection with dissenters’ appraisal rights.
“Fundamental Change Repurchase Date” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Repurchase Notice” shall have the meaning ascribed to such term in Section 5.2(b).
“Fundamental Change Repurchase Price” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Company Notice” shall have the meaning ascribed to such term in Section 5.2(d).
“GAAP” means the generally accepted accounting principles in the United States.
“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local, municipal or other
political subdivision or other government, governmental, regulatory or administrative authority, agency, board, bureau,
department, instrumentality or commission or any court, tribunal, judicial or arbitral body of competent jurisdiction or stock
exchange.
“Holder” shall have the meaning ascribed to such term in the Preamble. “Issue Date” means September [ (cid:0) ], 2019.
“Last Reported Sale Price” of the Class A Shares on any date shall be calculated as (i) the closing sale price per ADS (or if no
closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional
securities exchange on which the ADSs are traded divided by (ii) the applicable number of Class A Shares then represented by
one ADS. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be (i) the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as
reported by OTC Markets Group Inc. or a similar organization divided by (ii) the applicable number of Class A Shares then
represented by one ADS. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be (i) the average of the midpoint
of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent
investment banking firms selected by the Company for this purpose divided by (ii) the applicable number of Class A Shares
then represented by one ADS.
“Law” means any statute, law, ordinance, regulation, rule, code, order, judgment, writ, injunction, decree or requirement of law
(including common law) enacted, issued, promulgated, enforced or entered by a Governmental Authority.
“Maturity Date” shall have the meaning ascribed to such term in the Preamble.
“Maturity Repurchase Price” shall have the meaning ascribed to such term in Section 5.1.
“Merger Event” shall have the meaning ascribed to such term in Section 4.3. “Note” shall have the meaning ascribed to such
term in the Preamble.
“Officer” means, with respect to the Company, the Chairman, President, the Chief Executive Officer, the Secretary, any
Executive or any Vice President (whether or not designated by a number or numbers or word or words added before or after the
title “Vice President”).
“Officer’s Certificate”, when used with respect to the Company, means a certificate that is delivered to the Holder and that is
signed by the principal executive, financial or accounting officer of the Company who has been duly authorized to sign such
certificate. To the extent applicable, each such certificate shall include (a) a statement that the person making such certificate is
familiar with the requested action and the Note; (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement contained in such certificate is based; (c) a statement that, in the judgment of such
person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed
judgment as to whether or not such action is permitted by the Note; and (d) a statement as to whether or not, in the judgment of
such person, such action is permitted by the Note, if and to the extent required by the provisions of the Note.
“open of business” means 9:00 a.m. (New York City time).
“Ordinary Shares” means collectively the Class A Shares, the Class B Shares and the Class C Shares.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation of ordinary share capital of the Company (including ordinary share capital held in the form of ADSs)
with any of the aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability
company, organization, entity or Governmental Authority.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class
A Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Class A Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted
into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$3.12 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Note and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to
under the provisions in Section 4.1.
“Reference Property” and “unit of Reference Property” have the meanings ascribed thereto in Section 4.3.
“Relevant Securities” shall have the meaning ascribed to such term in Section 4.1(f).
“Repurchase Price” means any of the Early Repurchase Price, the EoD Repurchase Price, the Fundamental Change Repurchase
Price and the Maturity Repurchase Price, as applicable.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act.
“Spin-Off” shall have the meaning ascribed to such term in Section 4.1(c).
“Subscription Agreement” shall have the meaning ascribed to such term in the Preamble.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint stock company, joint venture or
other organization or entity, whether incorporated or unincorporated, which is Controlled by such Person and, for the avoidance
of doubt, the Subsidiaries of any Person shall include any variable interest entity over which such Person or any of its
Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such Person in accordance
with GAAP applicable to such Person.
“Successor Company” shall have the meaning ascribed to such term in Section 7.1(a).
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on The NASDAQ Global Market or, if the ADSs (or such other security) are not then listed on
The NASDAQ Global Market, on the principal other U.S. national or regional securities exchange on which the ADSs (or such
other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities
exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale
Price with respect to the ADSs (or closing sale price for such other security) is available on such securities exchange or market;
provided that if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day.
“Transaction Documents” means the Note, the Subscription Agreement, the Convertible Senior Notes due 2020 and each of the
other agreements and documents entered into or delivered by the Company, the Holder or their respective Affiliates in
connection with the transactions contemplated by the Subscription Agreement.
“Trigger Event” shall have the meaning ascribed to such term in Section 4.1(c). “U.S.” means United States.
“US$” or “$” means the United States dollar, the lawful currency of the United States of America.
“Valuation Period” shall have the meaning ascribed to such term in Section 4.1(c).
2. INTEREST; PAYMENTS; DEFAULTS
2.1 Interest Rate. The principal amount outstanding under the Note shall not bear any interest, except for any interest on the
Defaulted Amounts in accordance with Section 2.6.
2.2 Payment. All amounts payable on or in respect of the Note or the indebtedness evidenced hereby shall be paid to the Holder in
U.S. dollars, in immediately available funds on the date that any principal (or interest, in accordance with Section 2.6) or any
Repurchase Price is due and payable hereunder. The Company shall make such principal (or interest, in accordance with
Section 2.6) or such payment of Repurchase Price to the Holder by wire transfer of immediately available funds for the account
of the Holder or any of its Affiliates as may be designated by the Holder in writing from time to time; provided that any change
to such accounts shall be notified in writing to the Company at least two (2) Business Days prior to the relevant payment date.
If any such payment date or the Maturity Date falls on a day that is not a Business Day, the required payment will be made on
the next succeeding Business Day and no interest on such payment will accrue in respect of the delay.
2.3 Seniority. The Note ranks (a) senior in right of payment to any of the Company’s present and future indebtedness that is
expressly subordinated in right of payment to the Note, (b) equal in right of payment to any of the Company’s present and
future indebtedness and other liabilities of the Company that are not so subordinated, (c) junior in right of payment to any of
the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (d) structurally
junior to all indebtedness incurred by the Company’s Subsidiaries and their other liabilities (including trade payables).
2.4 Events of Default. For purposes of the Note, an “Event of Default” shall be deemed to have occurred if any of the following
events occurs, whatever the reason or cause for such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Failure to Pay. The Company defaults in the payment of principal of the Note when due and payable on the Maturity
Date or upon declaration of acceleration, or the Company defaults in the payment of any Repurchase Price upon any
required repurchase, in each case in accordance with the terms hereof;
(b) Breach of Conversion Obligation. The Company fails to comply with its obligation to convert all or a portion of the
Note in accordance with Article 3 upon Holder’s exercise of its conversion rights and such failure continues for a
period of five (5) Business Days;
(c) Breach of Article 7. The Company fails to comply with its obligations under Article 7;
(d) Breach of Other Obligations. The Company fails for sixty (60) days after written notice from the Holder has been
received by the Company to comply with any of its other agreements contained in any Transaction Document to which
the Company is a party;
(e) Cross Default. Any default by the Company or any Subsidiary of the Company with respect to any mortgage,
agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced,
any indebtedness for money borrowed in excess of US$50 million (or the foreign currency equivalent thereof) in the
aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be
created (A) resulting in such indebtedness becoming or being declared due and payable or (B) constituting a failure to
pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase,
upon declaration of acceleration or otherwise;
(f) Adverse Judgment. A final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or
more (excluding any amounts covered by insurance) is rendered against the Company or any Subsidiary of the
Company, which judgment is not paid, bonded or otherwise discharged or stayed within sixty (60) days after the earlier
of (i) the date on which the right to appeal thereof has expired if no such appeal has commenced and (ii) the date on
which all rights to appeal have been extinguished;
(g) Trading Suspension. The ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the
Note) have been suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select
market or The NASDAQ Global Market (or any of their respective successors) for a period of ninety (90) consecutive
trading days or for more than one hundred and eighty (180) trading days in any twelve (12)-month period;
(h) Bankruptcy. The Company, any Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a
“significant subsidiary” as defined in rule 1-02(w) of Regulation S-X under the Exchange Act shall commence a
voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to the
Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under any bankruptcy, liquidation,
insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Company, such Significant Subsidiary or such other Subsidiaries or all or
substantially all of its or their property, or shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its or their debts as they become due; or
(i) Involuntary Proceedings. An involuntary case or other proceeding shall be commenced against the Company, any
Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a “significant subsidiary” as defined
in rule 1-02(w) of Regulation S-X under the Exchange Act seeking liquidation, winding-up, reorganization or other
relief with respect to the Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under
any bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of the Company, such Significant
Subsidiary or such other Subsidiaries or all or substantially all of its or their property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive days.
2.5 Consequences of Event of Default.
(a) If one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any Governmental Authority), then,
(i) in each and every such case (other than an Event of Default specified in Section 2.4(h) or Section 2.4(i)),
unless the principal of the Note shall have already become due and payable, the Holder may by notice in
writing to the Company (the “EoD Notice”) to require the Company to repurchase for cash all of the Note or
any portion thereof on the fifth (5 ) Business Day after the date of the EoD Notice at a repurchase price (the
“EoD Repurchase Price”) equal to (A) 100% of the principal amount thereof, plus (B) a premium equal to the
aggregate interest that would have accrued on such principal amount over the period starting from (and
including) the date of the Issue Date and ending on (and including) the date when the EoD Repurchase Price
is made in full, if the Note were to bear interest at a rate of 2.0% per annum, accrued daily and computed on
the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual
days elapsed over a 30-day month, and plus (C) all other amounts due and payable on or in respect of the Note
(including any accrued and unpaid interest on the Defaulted Amounts pursuant to Section 2.6), if any; or
th
(ii) if an Event of Default specified in Section 2.4(h) or Section 2.4(i) occurs and is continuing, the Company
shall promptly repurchase for cash all of the Note at a repurchase price equal to the EoD Repurchase Price
without any action on the part of the Holder.
(b) Section 2.5(a), however, is subject to the conditions that if, at any time after the outstanding principal of the Note shall
have been so declared due and payable, and before any arbitral award for the payment of the monies due shall have
been obtained or entered as hereinafter provided, the Company has paid or deposited with the Holder a sum sufficient
to pay the outstanding principal of and any other amounts due and payable on the Note that shall have become due
otherwise than by acceleration (with interest on the Defaulted Amounts), and if (1) rescission would not conflict with
any such arbitral award and (2) any and all existing Events of Default under the Note, other than the nonpayment of the
principal of and any other amounts due and payable on the Note that shall have become due solely by such
acceleration, shall have been cured or waived, then and in every such case the Holder, by written notice to the
Company, may waive all Default or Events of Default with respect to the Note and rescind and annul such declaration
and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Note; but no such
waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall
impair any right consequent thereon. Notwithstanding anything to the contrary herein, no such waiver or rescission and
annulment shall extend to or shall affect any Default or Event of Default resulting from (i) the nonpayment of the
principal of, or any other amounts due and payable on, the Note or (ii) a failure to pay or deliver, as the case may be,
the consideration due upon conversion of the Note.
2.6 Defaulted Amounts. Any Defaulted Amounts shall accrue interest at a rate equal to three percent (3.0%) per annum accrued
daily during the period from (and including) such relevant payment date and ending on (and including) the date on which such
Defaulted Amounts and such interest thereon are fully paid, and such Defaulted Amounts together with such interest thereon
pursuant to this Section 2.6 shall be paid by the Company to the Holder by wire transfer of immediately available funds
pursuant to the procedures set forth in Section 2.2.
3. CONVERSION
3.1 Conversion by Holder. Subject to and upon compliance with the provisions of this Article 3, the Holder shall have the right, at
the Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral
thereof) of the Note to the Company’s fully paid Class A Shares at the applicable Conversion Rate at any time during the
Conversion Period.
3.2 Conversion Price; Conversion Rate. Subject to adjustments as provided in Article 4, the initial conversion price shall be equal
to US$3.12 per Class A Share, representing an initial conversion rate of 320.5128 Class A Shares (the “Conversion Rate”) per
US$1,000 principal amount of the Note.
3.3 Conversion Procedure; Settlement Upon Conversion.
(a) Subject to Section 3.3(b), this Note shall be deemed to have been converted immediately prior to the close of business
on the date (the “Conversion Date”) that the Holder has delivered a duly completed irrevocable written notice to the
Company (the “Conversion Notice”) and the Note for cancellation to the Company. Within five (5) Business Days after
the delivery of the Note and the Conversion Notice to the Company, the Company shall (i) take all actions and execute
all documents necessary to effect the issuance of the full number of Class A Shares to which the Holder shall be
entitled in satisfaction of any conversion pursuant to Section 3.1, (ii) deliver to the Holder certificate(s) representing
the number of Class A Shares delivered upon each such conversion, (iii) deliver to the Holder a certified copy of the
register of members of the Company, reflecting the Holder’s ownership of the Class A Shares delivered upon each such
conversion, and (iv) subject to Section 3.3(b), cancel the Note. No Conversion Notice may be delivered and the Note
may not be surrendered by a Holder for conversion thereof if the Holder has also delivered a Fundamental Change
Repurchase Notice to the Company in respect of the Note and not validly withdrawn such Fundamental Change
Repurchase Notice in accordance with Article 5.
(b) In the event the Holder surrenders this Note pursuant to Section 3.3(a) for partial conversion, the Company shall, in
addition to cancelling the Note upon such surrender, execute and deliver to the Holder a new note denominated in U.S.
dollars and in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without
payment of any service charge by the Holder.
(c) If the Holder submits the Note for conversion, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the delivery of the Class A Shares upon such conversion of the Note, unless the tax is due because
the Holder requests such Class A Shares to be issued in a name other than the Holder’s name, in which case (i) if in the
name of any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any
other Person, the Holder shall pay that tax. The Company shall pay the relevant fees for issuance of the Class A Shares
and shall pay the relevant depositary’s fees for any future conversion of the issued Class A Shares into the ADSs.
(d) Except as provided in Section 4.1, no adjustment shall be made for dividends on any Class A Shares delivered upon
any conversion of this Note as provided in this Article 3.
(e) Without prejudice to the Holder’s right to receive the interest in accordance with Section 3.3(h), the Company’s
settlement of each conversion pursuant to this Article 3 shall be deemed to satisfy in full its obligation to pay the
principal amount of the Note converted.
(f) The Holder in whose name the certificate for any Class A Shares delivered upon conversion is registered shall be
treated as a holder of record of such Class A Shares as of the close of business on the relevant Conversion Date. Upon
a conversion of the entire outstanding amount of the Note, the Holder shall no longer be a holder of the Note
surrendered for conversion.
(g) The Company shall not issue any fractional Class A Share upon conversion of the Note and shall instead pay cash in
lieu of any fractional Class A Share deliverable upon conversion based on the Last Reported Sale Price of the Class A
Shares on the relevant Conversion Date.
(h) Nothing in this Article 3 shall prejudice the Holder’s entitlement to receive interest on any of the Defaulted Amounts in
accordance with Section 2.6.
3.4 Without prejudice to any other provision in this Note, the Holder may elect to convert all or any portion (if the portion to be
converted is US$1,000 principal amount or an integral thereof) of the Note to ADSs (each representing one Class A Share) at
the applicable Conversion Rate at any time during the Conversion Period and the provisions in this Article 3 shall apply
mutatis mutandis; provided that, the Company shall pay (A) any documentary, stamp or similar issue or transfer tax due on the
delivery of such ADSs upon conversion of the Note (or the issuance of the underlying Class A Shares), unless the tax is due
because the Holder requests such ADSs to be issued in a name other than the Holder’s name, in which case (i) if in the name of
any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in
the name of any other Person, the Holder shall pay that tax; and (B) the depositary’s fees for issuance of such ADSs.
4. ADJUSTMENTS
4.1 Adjustment of Conversion Rate. If the number of Class A Shares represented by the ADSs is changed, after the date of this
Note, for any reason other than one or more of the events described in this Section 4.1, the Company shall make an appropriate
adjustment to the Conversion Rate such that the number of Class A Shares represented by the ADSs upon which any conversion
of this Note is based remains the same.
Notwithstanding the adjustment provisions described in this Section 4.1, if the Company distributes to holders of the Class A
Shares any cash, rights, options, warrants, shares of capital stock or similar equity interest, evidences of indebtedness or other
assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of
the ADSs, but, instead, the ADSs shall represent, in addition to Class A Shares, such cash, rights, options, warrants, shares of
Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an
adjustment to the Conversion Rate described in this Section 4.1 shall not be made until and unless a corresponding distribution
(if any) is made to holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to
the holders of the ADSs and not on the distribution made to the holders of the Class A Shares. However, in the event that the
Company issues or distributes to all holders of the Class A Shares any Expiring Rights, notwithstanding the immediately
preceding sentence, the Company shall adjust the Conversion Rate pursuant to Section 4.1(b) (in the case of in-the-money
Expiring Rights entitling holders of the Class A Shares for a period of not more than 45 calendar days after the announcement
date of such issuance to subscribe for or purchase Class A Shares or ADSs) or Section 4.1(c) (in the case of all other Expiring
Rights).
For the avoidance of doubt, if any event described in this Section 4.1 results in a change to the number of Class A Shares
represented by the ADSs, then such change shall be deemed to satisfy the Company’s obligation to effect the relevant
adjustment to the Conversion Rate on account of such event to the extent such change produces the same economic result as the
adjustment to the Conversion Rate that would otherwise have been on account of such event.
Subject to the foregoing, the Conversion Rate shall be adjusted from time to time by the Company if any of the following events
occurs, except that the Company shall not make any adjustments to the Conversion Rate if the Holder participates (other than in
the case of a share split or share combination), at the same time and upon the same terms as holders of the Class A Shares and
solely as a result of holding the Note, in any of the transactions described in this Section 4.1, without having to convert the
Note, as if it held a number of Class A Shares equal to the Conversion Rate, multiplied by the principal amount of the Note held
by the Holder.
(a) If the Company exclusively issues Class A Shares as a dividend or distribution on the Class A Shares, or if the
Company effects a share split or share
combination, the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 ×
OS1
OS0
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution, or immediately prior to the close of business on the effective date of such share split or share
combination, as applicable;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date or immediately
after the close of business on such effective date, as applicable;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date or
immediately prior to the close of business on such effective date, as applicable; and
OS1 = the number of Class A Shares outstanding immediately after giving effect to such dividend, distribution, share
split or share combination.
Any adjustment made under this Section 4.1(a) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution, or immediately after the open of business on the effective date for such
share split or share combination, as applicable. If any dividend or distribution of the type described in this Section
4.1(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date
the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be
in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Class A Shares (directly in or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date
of such issuance, to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A
Share that is less than the average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of
such issuance, the Conversion Rate shall be increased based on the following formula:
CR1 = CR0 ×
OS0 + X
OS0 + Y
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date;
X = the total number of Class A Shares (directly or in the form of ADSs) deliverable pursuant to such rights,
options or warrants; and
Y = the number of Class A Shares equal to (i) the aggregate price payable to exercise such rights, options or
warrants, divided by (ii) the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the
issuance of such rights, options or warrants.
Any increase made under this Section 4.1(b) shall be made successively whenever any such rights, options or warrants
are issued and shall become effective immediately after the close of business on the Record Date for the Class A
Shares (directly or in the form of ADSs), as applicable, for such issuance. To the extent that Class A Shares or ADSs
are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Class A Shares actually delivered (directly or in the
form of ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect if such the Record Date for such issuance had not occurred.
For purposes of this Section 4.1(b), in determining whether any rights, options or warrants entitle the holders to
subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than
such average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending
on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in
determining the aggregate offering price of such Class A Shares (directly or in the form of ADSs), there shall be taken
into account any consideration received by the Company for such rights, options or warrants and any amount payable
on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of
Directors acting in good faith.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially
all holders of the Class A Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances
as to which an adjustment was effected pursuant to Section 4.1(a) or Section 4.1(b), (ii) dividends or distributions paid
exclusively in cash as to which an adjustment was effected pursuant to Section 4.1(d), and (iii) Spin-Offs as to which
the provisions set forth below in this Section 4.1(c) shall apply (any of such shares of Capital Stock, evidences of
indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the
Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:
CR1 = CR0 × SP0 − FMV
SP0
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such
distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day
period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution;
and
FMV = the fair market value (as determined by the Board of Directors acting in good faith) of the Distributed Property
with respect to each outstanding Class A Share (directly or in the form of ADSs) on the Record Date for such
distribution.
Any increase made under the portion of this Section 4.1(c) above shall become effective immediately after the close of
business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall
be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared.
Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in
lieu of the foregoing increase, the Holder shall receive, in respect of each US$1,000 principal amount thereof, at the
same time and upon the same terms as holders of the Class A Shares receive the Distributed Property, the amount and
kind of Distributed Property the Holder would have received if the Holder owned a number of Class A Shares equal to
the Conversion Rate in effect on the Record Date for the distribution.
With respect to an adjustment pursuant to this Section 4.1(c) where there has been a payment of a dividend or other
distribution on the Class A Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or
similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued,
will be, listed or admitted for
trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the
following formula:
CR1 = CR0 ×
FMV + MP0
MP0
where,
CR0 = the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR1 = the Conversion Rate in effect immediately after the end of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to
holders of the Class A Shares (directly or in the form of ADSs) applicable to one Class A Share (determined by
reference to the definition of Last Reported Sale Price as if references therein to the ADSs were to such Capital Stock
or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0 = the average of the Last Reported Sale Prices of the Class A Shares over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur on the last Trading Day of the
Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 4.1(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of
Trading Days as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the
Conversion Date in determining the Conversion Rate.
For purposes of this Section 4.1(c) (and subject in all respect to Section 4.1(f)), rights, options or warrants distributed
by the Company to all holders of the Class A Shares (directly or in the form of ADSs) entitling them to subscribe for or
purchase shares of the Company’s Capital Stock, including Class A Shares (either initially or under certain
circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):
(i) are deemed to be transferred with such Class A Shares (directly or in the form of ADSs); (ii) are not exercisable;
and (iii) are also issued in respect of future issuances of the Class A Shares (directly or in the form of ADSs), shall be
deemed not to have been distributed for purposes of this Section 4.1(c) (and no adjustment to the Conversion Rate
under this Section 4.1(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights,
options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 4.1(c). If any such right, option or warrant, including any such
existing rights, options or warrants
distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights, options or
warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of
the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect
to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be
deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in the event
of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the
type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating
a distribution amount for which an adjustment to the Conversion Rate under this Section 4.1(c) was made, (1) in the
case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any
holders thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights,
options or warrants had not been issued and (y) the Conversion Rate shall then again be readjusted to give effect to
such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per Class A Share redemption or purchase price received by a holder or holders of Class A Shares (directly or in
the form of ADSs) with respect to such rights, options or warrants (assuming such holder had retained such rights,
options or warrants), made to all holders of Class A Shares (directly or in the form of ADSs) as of the date of such
redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been
terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options
and warrants had not been issued.
For purposes of Section 4.1(a), Section 4.1(b) and this Section 4.1(c), any dividend or distribution to which this Section
4.1(c) is applicable that also includes one or both of:
(A) a dividend or distribution of Class A Shares (directly or in the form of ADSs) to which Section 4.1(a)
is applicable (the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 4.1(b) is applicable (the
“Clause B Distribution”), then (1) such dividend or distribution, other than the Clause A Distribution
and the Clause B Distribution, shall be deemed to be a dividend or distribution to which this Section
4.1(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment required by
this Section 4.1(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A
Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C
Distribution and any Conversion Rate adjustment required by Section 4.1(a) and Section 4.1(b) with
respect thereto shall then be made, except that, if determined by the Company (I) the “Record Date”
of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of
the Clause C Distribution and (II) any Class A Shares (directly or in
the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be deemed not to be
“outstanding immediately prior to the close of business on such Record Date or immediately after the open of business
on such effective date, as applicable” within the meaning of Section 4.1(a) or “outstanding immediately prior to the
close of business on such Record Date” within the meaning of Section 4.1(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Class A Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
CR1 = CRa ×
Spa
SPa – C
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the Last Reported Sale Price of the Class A Shares on the Trading Day immediately preceding the Ex-Dividend
Date for such dividend or distribution; and
C = the amount in cash per Class A Share the Company distributes to all or substantially all holders of the Class A
Shares (directly or in the form of ADSs).
Any increase pursuant to this Section 4.1(d) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall
be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or
distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been
declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above),
in lieu of the foregoing increase, the Holder shall receive, for each US$1,000 principal amount of the Note, at the same
time and upon the same terms as holders of the Class A Shares (directly or in the form of ADSs), the amount of cash
that the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate on
the Record Date for such cash dividend or distribution.
(e) If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A
Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the
payment per Class A Share exceeds the average of the Last
Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period commencing on, and
including, the Trading Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall
be increased based on the following formula:
AC + (cid:0)OS1 ×
CR1 = CR0 ×
OS0 × SP
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors acting in
good faith) paid or payable for Class A Shares (directly or in the form of ADSs) purchased in such tender or exchange
offer;
OS0 = the number of Class A Shares outstanding immediately prior to the date such tender or exchange offer expires
(prior to giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer);
OS1 = the number of Class A Shares outstanding immediately after the date such tender or exchange offer expires
(after giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer); and
SP = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 4.1(e) shall occur at the close of business on the 10th
Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange
offer expires; provided that in respect of any conversion within the 10 Trading Days immediately following, and
including, the expiration date of any tender or exchange offer, references in this Section 4.1(e) with respect to 10
Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed from, and including,
the Trading Day next succeeding the expiration date of such tender or exchange offer to, and including, the Conversion
Date in determining the Conversion Rate. No adjustment to the Conversion Rate under this Section 4.1(e) shall be
made if such adjustment would result in a decrease in the Conversion Rate. In the event that the
Company or one of the Company’s Subsidiaries is obligated to purchase Class A Shares (directly or in the form of
ADSs) pursuant to any such tender offer or exchange offer, but the Company or such Subsidiary is permanently
prevented by applicable Law from effecting any such purchases, or all such purchases are rescinded, then the
Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender offer or
exchange offer had not been made.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Note
or on the exercise of any other rights, existing as of the Issue Date, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into,
exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition
only excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise
or exchange for Ordinary Shares or ADSs issued or granted in accordance with any employee incentive plan of the
Company), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any
issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary
Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted
based on the following formula:
CR1 = CR0 ×
A + B
C
where:
CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant
Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of
Ordinary Shares then represented by each ADS; and
C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities, provided that
references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued
assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for
Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants
or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Shares or ADSs
or any securities convertible into or exchangeable for Class A Shares or ADSs or the right to purchase Class A Shares
or ADSs or such convertible or exchangeable securities.
(h) In addition to those adjustments required by subsections (a), (b), (c), (d), (e) and (f) of this Section 4.1, and to the extent
permitted by applicable Law and subject to the applicable rules of The NASDAQ Global Market and any other
securities exchange on which any of the Company’s securities are then listed, the Company from time to time may
increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors
determines that such increase would be in the Company’s best interest, and the Company may (but is not required to)
increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A Shares or the ADSs or
rights to purchase Class A Shares or ADSs in connection with a dividend or distribution of Class A Shares or ADSs (or
rights to acquire Class A Shares or ADSs) or similar event.
(i) Notwithstanding anything to the contrary in this Section 4.1, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Class A Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional
optional amounts in Class A Shares or ADSs under any plan;
(ii) upon the issuance of any Class A Shares or ADSs or options or rights to purchase those Class A Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or
assumed by the Company or any of the Company’s Subsidiaries;
(iii) upon the issuance of any Class A Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the
date this Note was first issued;
(iv) solely for a change in the par value of the Class A Shares or ADSs; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Section 4.1 shall be made by the Company and shall be made to
the nearest one-ten thousandth (1/10,000) of a Class A Shares.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment
becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder.
(l) For purposes of this Article 4, the number of Class A Shares at any time outstanding shall not include Class A Shares
held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any
dividend or make any distribution on Class A Shares held in the treasury of the Company (directly or in the form of
ADSs), but shall include Class A Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A
Shares.
(m) For purposes of this Section 4.1, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as
applicable.
4.2 Adjustments of Prices. Whenever any provision of this Note requires the Company to calculate the Last Reported Sale Prices
over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment
to the Conversion Rate that becomes effective pursuant to Section 4.1, or any event requiring an adjustment to the Conversion
Rate pursuant to Section 4.1 where the Record Date, effective date or expiration date, as the case may be, of the event occurs,
at any time during the period when such Last Reported Sale Prices are to be calculated.
4.3 Effect of Recapitalizations, Reclassifications and Changes of the Class A Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Class A Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries substantially as an entirety; or
(iv) any statutory share exchange, in each case, as a result of which the Class A Shares (directly or in the form of
ADSs) would be converted into, or exchanged for, stock, other securities, other property or assets (including
cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of
such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute an
amendment to this Note providing that, at and after the effective time of such Merger Event, the right to
convert the Note shall be changed into a right to convert the Note into the kind and amount of shares of stock,
other securities or other property or assets (including cash or any combination thereof) that a holder of a
number of Class A Shares equal to the Conversion Rate immediately prior to such Merger Event would have
owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property” meaning
the kind and amount of Reference Property that
a holder of one Class A Share is entitled to receive) upon such Merger Event; provided, however, that at and
after the effective time of the Merger Event the number of Class A Shares otherwise deliverable upon any
conversion of the Note in accordance with Article 3 shall instead be deliverable in the amount and type of
Reference Property that a holder of that number of Class A Shares would have been entitled to receive in such
Merger Event.
If the Merger Event causes the Class A Shares (directly or in the form of ADSs) to be converted into, or
exchanged for, the right to receive more than a single type of consideration (determined based in part upon
any form of holder election), then (i) the Reference Property into which the Note will be convertible shall be
deemed to be the weighted average of the types and amounts of consideration received by the holders of Class
A Shares (directly or in the form of ADSs) that affirmatively make such an election, and (ii) the unit of
Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration
referred to in clause (i) attributable to one Class A Shares. The Company shall provide written notice to the
Holder of such weighted average as soon as practicable after such determination is made.
Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and
other adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this
Article 4 (it being understood that no such adjustments shall be required with respect to any portion of the
Reference Property that does not consist of shares of Common Equity (however evidenced) or depositary
receipts in respect thereof). If, in the case of any Merger Event, the Reference Property includes shares of
stock, securities or other property or assets (including cash or any combination thereof) of a Person other than
the Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such
other Person shall also execute such amendment, and such amendment shall contain such additional
provisions to protect the interests of the Holder, including the rights of the Holder to require the Company to
repurchase this Note upon a Fundamental Change pursuant to Article 5 as the Board of Directors shall
reasonably consider necessary by reason of the foregoing.
(b) None of the foregoing provisions shall affect the right of the Holder to convert this Note into Class A Shares as set forth
in Article 3 prior to the effective date of such Merger Event.
(c) The above provisions of this Section 4.3 shall similarly apply to successive Merger Events.
4.4 No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Article 4 shall be required to be
made to the Conversion Rate if the Company receives written notice from the Holder that no such adjustment is required.
4.5 Certain Covenants.
(a) The Company covenants that all Class A Shares delivered upon any conversion of this Note will be fully paid and non-
assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company covenants that if any Class A Shares to be provided for the purpose of any conversion of this Note
require registration with or approval of any Governmental Authority under any Law before such Class A Shares may
be validly issued upon conversion, the Company will, to the extent then permitted by applicable Law, secure such
registration or approval, as the case may be.
(c) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to
any conversion of this Note into Class A Shares, and shall reserve for issuance an adequate number of Class A Shares,
such that Class A Shares can be delivered in accordance with the terms of this Note upon any conversion hereunder. In
addition, the Company further covenants to provide the Holder with a reasonably detailed description of the mechanics
for the delivery of Class A Shares upon any conversion of this Note upon request.
(d) The parties hereto acknowledge and agree that the Holder may only resell the Note, the Class A Shares delivered upon
conversion of all or any portion of the Note pursuant to an effective registration statement or an exemption from, or in
a transaction not subject to, the registration requirements of the Securities Act and other applicable securities Laws.
4.6 Notice for Certain Actions. In case of any (a) action by the Company or one of its Subsidiaries that would require an
adjustment in the Conversion Rate pursuant to Section 4.1, (b) Merger Event or (c) voluntary or involuntary dissolution,
liquidation or winding-up of the Company or any of its Subsidiaries, then, in each case (unless notice of such event is
otherwise required pursuant to another provision of this Note), the Company shall deliver a written notice to the Holder, as
promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified, stating (i) the date on
which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be
taken, the date as of which the holders of Class A Shares, of record are to be determined for the purposes of such action by the
Company or one of its Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is expected that holders of Class A Shares, of record shall be
entitled to exchange their Class A Shares, for securities or other property deliverable upon such Merger Event, dissolution,
liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such
action by the Company or one of its Subsidiaries, dissolution, liquidation or winding-up unless otherwise provided for pursuant
to any applicable Laws, the constitutional documents of the Company or any such Subsidiaries or any agreement or document
to which the Company or any such Subsidiaries is a party; provided that nothing herein shall adversely affect any right, claim
or other remedies, at law or contract, of the Holder arising as a result of or in connection with such failure or defect.
4.7 Termination of Depository Receipt Program. If the Class A Shares cease to be represented by ADSs issued under a depositary
receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a
reference to the number of Class A Shares (and other property, if any) represented by the ADSs on the last day on which the
ADSs represented the Class A Shares and as if the Class A Shares and the other property had been distributed to holders of the
ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last
Reported Sale Price of the Class A Shares, and other appropriate adjustments, including adjustments to the Conversion Rate,
will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any
other currency are required, the exchange rate in effect on the date of determination will apply.
5. REPURCHASE
5.1 Repurchase on Maturity Date. Unless previously repurchased or surrendered and converted, the Company shall, without any
action on the part of the Holder, redeem this Note in whole on the Maturity Date at a price (the “Maturity Repurchase Price”)
equal to (A) the outstanding principal amount, plus (B) a premium which shall be equal to 6.0% of the outstanding principal
amount, and plus (C) all other amounts due and payable on or in respect of the Note (including any accrued and unpaid interest
on the Defaulted Amounts), if any.
5.2 Repurchase on Fundamental Change.
(a) If a Fundamental Change occurs at any time, the Holder shall have the right, at its option, to require the Company to
repurchase for cash all of the Note or any portion thereof on the date (the “Fundamental Change Repurchase Date”)
notified in writing by the Company that is not less than twenty (20) Business Days and not more than thirty-five (35)
Business Days following the date of the Fundamental Change Company Notice (as defined below) at a repurchase
price (the “Fundamental Change Repurchase Price”) equal to (A) 100% of the principal amount (or such portion
thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued on such
principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of
the Issue Date and ending on (and including) the Fundamental Change Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month, and plus (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) Repurchase of the Note under this Section 5.2 shall be made, at the option of the Holder thereof, upon: (i) delivery by
the Holder to the Company of a duly completed notice (the “Fundamental Change Repurchase Notice”), in the form
attached hereto as Exhibit A, on or before the close of business on the second Business Day immediately preceding the
Fundamental Change Repurchase Date; and (ii) delivery of the Note to the Company at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer), such delivery being a
condition to receipt by the
Holder of the Fundamental Change Repurchase Price therefor. Each Fundamental Change Repurchase Notice shall
state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the
Company in accordance with Section 5.5.
(d) On or before the twentieth (20 ) calendar day after the occurrence of the effective date of a Fundamental Change, the
Company shall provide to the Holder a written notice (the “Fundamental Change Company Notice”) of the occurrence
of the effective date of the Fundamental Change and of the repurchase right at the option of the Holder arising as a
result thereof. Each Fundamental Change Company Notice shall specify:
th
(i) the events causing the Fundamental Change;
(ii) the date of the Fundamental Change;
(iii) the last date on which the Holder may exercise the repurchase right pursuant to this Section 5.2;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) if applicable, the Conversion Rate and any adjustments to the Conversion Rate;
(vii) that the Note may be converted only if any Fundamental Change Repurchase Notice that has been delivered by
the Holder has been withdrawn in accordance with the terms of this Note; and
(viii) the procedures in accordance with the terms of this Note that the Holder must follow to require the Company to
repurchase the Note.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holder’s repurchase rights
or affect the validity of the proceedings for the repurchase of the Note pursuant to this Section 5.2.
5.3 Early Repurchase at the option of the Holder.
(a) The Holder shall have the right, at its option, to require the Company to repurchase for cash all of the Note or any
portion thereof on February 1, 2022 (the “Early Repurchase Date”), by delivering a duly completed notice in writing to
the Company (the “Early Repurchase Notice”), in the form attached hereto as Exhibit B, during the period starting
from the open of business that is twenty (20) Business Days prior to the Early Repurchase Date until the close of
business on the second Business Day immediately preceding the Early
Repurchase Date, at a repurchase price (the “Early Repurchase Price”) equal to (A) 100% of the principal amount (or
such portion thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued
on such principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the
date of the Issue Date and ending on (and including) the date when the Early Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month; and (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) The Holder shall deliver of the Note to the Company at any time after delivery of the Early Repurchase Notice, such
delivery being a condition to receipt by the Holder of the Early Repurchase Price therefor. The Early Repurchase
Notice shall state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Early Repurchase Notice at any time prior to the close of business on the second Business Day immediately preceding
the Early Repurchase Date by delivery of a written notice of withdrawal to the Company in accordance with Section
5.5.
5.4 No Repurchase in the Event of Acceleration. Notwithstanding the foregoing, the Note may not be repurchased by the
Company on any date at the option of the Holder upon a Fundamental Change or on the Early Repurchase Date (as the case
may be) if the principal amount of the Note has been accelerated, and such acceleration has not been rescinded, on or prior to
such date (except in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental
Change Repurchase Price or the Early Repurchase Price (as the case may be) with respect to the Note).
5.5 Withdrawal of Fundamental Change Repurchase Notice or Early Repurchase Notice. A Fundamental Change Repurchase
Notice or an Early Repurchase Notice (as the case may be) may be withdrawn (in whole or in part) by means of a duly
completed written notice of withdrawal delivered to the Company in accordance with this Section 5.5 at any time prior to the
close of business on the second Business Day immediately preceding the relevant Fundamental Change Repurchase Date or the
Early Repurchase Date (as the case may be), specifying (a) the principal amount of the Note with respect to which such notice
of withdrawal is being submitted and (b) the principal amount, if any, of the Note that remains subject to the original
Fundamental Change Repurchase Notice or the original Early Repurchase Notice (as the case may be).
5.6 Payment of Fundamental Change Repurchase Price or Early Repurchase Price.
(a) On or prior to 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase
Date or the Early Repurchase Date (as the case may be), the Company shall set aside, segregate and hold in trust for the
benefit of the Holder an amount of money sufficient to repurchase the applicable portion of the Note to be repurchased
at the Fundamental Change
Repurchase Price or the Early Repurchase Price (as the case may be). Payment for the applicable portion of the Note
surrendered for repurchase (and not withdrawn in accordance with Section 5.5) will be made in accordance with
Section 2.2 on the later of (i) such Fundamental Change Repurchase Date or the Early Repurchase Date (as the case
may be), provided the Holder has satisfied the conditions in this Article 5; and (ii) the time of delivery of the applicable
portion of the Note by the Holder to the Company in the manner required by Section 5.2 or Section 5.3 (as the case
may be).
(b) If by 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase Date or
the Early Repurchase Date (as the case may be), the Company holds money sufficient to make payment on the
applicable portion of the Note to be repurchased on such date, then, with respect to the applicable portion of the Note
that has been properly surrendered for repurchase and not validly withdrawn in accordance with Section 5.5, on such
Fundamental Change Repurchase Date or the Early Repurchase Date (as the case may be), (i) such portion of the Note
will cease to be outstanding, (ii) interest will cease to accrue on such portion of the Note and (iii) in the event the entire
outstanding amount of the Note is surrendered by the Holder to be repurchased, all other rights of the Holder will
terminate (other than the right to receive the Fundamental Change Repurchase Price or the Early Repurchase Price (as
the case may be)).
(c) Upon the surrender of the Note that is to be repurchased in part pursuant to this Article 5, the Company shall execute
and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unrepurchased
portion of the Note.
5.7 Covenant to Comply with Applicable Law upon Repurchase of the Note. In connection with any repurchase offer, the
Company will, if required, comply with all federal and state securities laws in connection with any offer by the Company to
repurchase the Note so as to permit the rights and obligations under this Article 5 to be exercised in the time and in the manner
specified in this Article 5.
6. COVENANTS
6.1 Payment. The Company covenants and agrees that it will cause to be paid the principal of, and any other amounts due and
payable on, the Note or any Repurchase Price at the respective times and in accordance with the terms hereof.
6.2 Existence. Subject to Article 7, the Company shall do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
6.3 No Withholding. All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under
or with respect to this Note, including, but not limited to, payments of principal (including, if applicable, the Fundamental
Change Repurchase Price), payments of interest and deliveries of Class A Shares (together with payments of cash for any
fractional Class A Share) upon any conversion of the Note, shall be made without withholding or deduction for, or on account
of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within
any jurisdiction in which the Company or any
successor to the Company is, for tax purposes, organized or resident or doing business or through which payment is made or
deemed made (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is
required by Law or by regulation or governmental policy having the force of law.
6.4 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other Law that would prohibit or forgive the Company from paying all or any portion of the principal of or any other amounts
due and payable on the Note or any Repurchase Price as contemplated herein, wherever enacted, now or at any time hereafter
in force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not, by resort to any such Law,
hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of
every such power as though no such Law had been enacted.
6.5 Compliance Certificates; Statements as to Defaults. The Company shall deliver to the Holder within 120 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) and within 14 days of a written
request made by the Holder a certificate executed by an executive officer of the Company stating that a review has been
conducted of the Company’s activities under this Note and whether the Company has fulfilled its obligations hereunder, and
whether such officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then
continuing and, if so, specifying each such Default and the nature thereof. The Company shall deliver to the Holder, as soon as
possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is
then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is
taking or proposing to take in respect thereof.
6.6 Further Instruments and Acts. Upon request of the Holder, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Note.
6.7 New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of
smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts without
charge within three (3) Business Days after the date of such request, provided that the existing note instrument of this Note
shall be returned by the Holder to the Company for cancellation.
6.8 Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of
indemnity from the Holder reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and
cancellation thereof), the Company shall at its own expense within five (5) Business Days execute and deliver to the Holder, in
lieu thereof, a new Note, dated and bearing interest from the date hereof.
7. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
7.1 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 7.2, the Company shall not consolidate
with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person
unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation,
organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the
Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company)
shall expressly assume all of the obligations of the Company under the Note and the Subscription Agreement; and
(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be
continuing under this Note.
For purposes of this Section 7.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of
one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of
such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis,
shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the
Company to another Person.
7.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon
the assumption by the Successor Company of the due and punctual payment of the principal of and any other amounts due and
payable on the Note and any Repurchase Price, the due and punctual delivery or payment, as the case may be, of any
consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of
the Note to be performed by the Company, in each case in accordance with the terms hereof, such Successor Company (if not
the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and
assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. In
the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with
this Article 7 the Person named as the “Company” in the first paragraph of the Note (or any successor that shall thereafter have
become such in the manner prescribed in this Article 7) may be dissolved, wound up and liquidated at any time thereafter and,
except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Note and from its
obligations under the Note.
7.3 No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless any such consolidation, merger, sale,
conveyance, transfer or lease and any such assumption has complied with the provisions of this Article 7.
8. CANCELLATION
After all amounts at any time owing on the Note have been paid in full or upon the conversion of the Note in full pursuant to
Article 3, the Note shall be surrendered to the Company for cancellation and shall not be reissued.
9. NO REDEMPTION OR PREPAYMENT
This Note shall not be redeemable or pre-paid by the Company prior to the Maturity Date, and no sinking fund is provided for
this Note.
10. MISCELLANEOUS
10.1 Termination of Rights. All rights under this Note shall terminate when (a) all amounts at any time owing on the Note have been
paid in full or (ii) the Note is converted in full pursuant to the terms set forth in Article 3.
10.2 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained
in the Note shall bind its successors and assigns whether so expressed or not.
10.3 Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or
performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect by
the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the
Company.
10.4 Amendments and Waivers; Notice. The amendment or waiver of any term of the Note shall be subject to the written consent of the
Holder and the Company. The provision of notice shall be made pursuant to the terms of the Subscription Agreement.
10.5 Transfer Restrictions.
(a) The Holder covenants that the Note and/or the Class A Shares issuable upon conversion of the Note will only be
disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any transfer of Notes and/or the Class A Shares
issuable upon conversion of the Note other than pursuant to an effective registration statement or Rule 144 promulgated
under the Securities Act (“Rule 144”), the Company may require the transferor to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion shall be reasonably acceptable to the
Company with respect to transactions of a similar nature, to the effect that such transfer does not require registration
under the Securities Act.
(b) The Holder agrees to the imprinting, until no longer required by this Section 10.5, of the following legend on any
certificate evidencing any of the Note or the Class A Shares issuable upon conversion of the Note:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the
holder of the Note or the Class A Shares issuable upon conversion of the Note if, unless otherwise required by state
securities laws, (i) such securities are registered for resale under the Securities Act and are transferred to a Holder
pursuant to a registration statement that is effective at the time of such transfer, (ii) in connection with a sale,
assignment or other transfer, such Holder provides the Company with an opinion of counsel, the form and substance of
which opinion shall be reasonably acceptable to the Company with respect to transactions of a similar nature, that the
sale, assignment or transfer of the securities may be made without registration under the applicable requirements of the
Securities Act or (iii) such Holder provides the Company with reasonable assurance that the securities can be sold,
assigned or transferred pursuant to Rule 144 or have been sold under Rule 144.
(c) Notwithstanding anything to the contrary herein, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of
receiving all payments of principal of and any other amounts due and payable on the Note and any Repurchase Price
and for all other purposes whatsoever. This provision is intended to be a book entry system as defined in Treasury
Regulations Section 5f.103-1(c) and shall be interpreted consistently therewith.
10.6 No Third Party Beneficiary. A person who is not a party to this Note shall have no right under the Contracts (Rights of Third
Parties) Ordinance (Chapter 623) to enforce any of its terms.
10.7 Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
10.8 Arbitration.
(a) Any dispute, controversy, difference or claim arising out of or relating to this Note, including the existence, validity,
interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising
out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong
International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the
Notice of Arbitration is submitted.
(b) The law of this arbitration clause shall be Hong Kong law.
(c) The seat of arbitration shall be Hong Kong.
(d) The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the HKIAC rules. The
arbitration proceedings shall be conducted in English.
(e) It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from
courts of competent jurisdiction before the constitution of the arbitral tribunal.
10.9 Force Majeure. In no event shall the Holder be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood
that the Holder shall use reasonable efforts to resume performance as soon as practicable under the circumstances.
10.10 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under
the Note. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices, accrued interest
payable on the Note, if any, and the Conversion Rate of the Note. The Company shall make all these calculations in good faith
and, absent manifest error, the Company’s calculations shall be final and binding on the Holder. The Company shall provide a
schedule of its calculations to the Holder.
10.11 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to
exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of
any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring.
10.12 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no
presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or
its counsel.
[The remainder of this page has been deliberately left blank]
IN WITNESS WHEREOF, the Company has caused the Note to be issued on the date first above written.
COMPANY:
NIO Inc.
By:
Name:
Title:
Exhibit A
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to the
occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the Holder in accordance with Section 5.2 of this Note the entire principal amount of this
Note, or the portion thereof below designated, and the premium amount below calculated in accordance with Section 5.2(a)(B).
Principal amount to be repaid (if less than all): US$
Premium: US$
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
Exhibit B
[FORM OF EARLY REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby requests and instructs NIO Inc. (the “Company”) to pay to the Holder in
accordance with Section 5.3 of this Note the entire principal amount of this Note, or the portion thereof below designated, and the
premium below amount calculated in accordance with Section 5.3(a)(B).
Principal amount to be repaid (if less than all): US$
Premium: US$
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
Exhibit 4.26
Execution Version
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT
dated as of September 4, 2019
between
NIO INC.
and
SERENE VIEW LIMITED
TABLE OF CONTENTS
ARTICLE I DEFINITION AND INTERPRETATION
Section 1.01
Definition, Interpretation and Rules of Construction
ARTICLE II PURCHASE AND SALE; CLOSING
Section 2.01
Section 2.02
Issuance, Sale and Purchase of the Convertible Notes.
Closing.
ARTICLE III CONDITIONS TO CLOSING
Section 3.01
Section 3.02
Section 3.03
Conditions to Obligations of Both Parties.
Conditions to Obligations of Purchaser
Conditions to Obligations of the Company
ARTICLE IV REPRESENTATIONS AND WARRANTIES
Section 4.01
Section 4.02
Representations and Warranties of the Company
Representations and Warranties of the Purchaser
ARTICLE V COVENANTS
Section 5.01
Section 5.02
Section 5.03
Section 5.04
Section 5.05
Section 5.06
Section 5.07
Conduct of Business of the Company
FPI Status
Further Assurances
No Contract.
Reservation of Shares.
No Integrated Offering.
Use of Proceeds.
ARTICLE VI INDEMNIFICATION
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Indemnification
Third Party Claims.
Other Claims
Limitation on the Company’s Liability
ARTICLE VII MISCELLANEOUS
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Section 7.08
Survival of the Representations and Warranties.
Governing Law; Arbitration
No Third Party Beneficiaries
Acknowledgement
Amendment
Binding Effect
Assignment
Notices
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Section 7.09
Section 7.10
Section 7.11
Section 7.12
Section 7.13
Section 7.14
Section 7.15
Section 7.16
Section 7.17
Section 7.18
Entire Agreement
Severability
Fees and Expenses
Confidentiality
Specific Performance
Termination
Headings
Execution in Counterparts
Public Disclosure
Waiver
Exhibit A Form of 2020 Convertible Note
Exhibit B Form of 2022 Convertible Note
ii
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CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of September 4, 2019, is entered into by and
between (i) NIO INC., an exempted company with limited liability organized and existing under the laws of the Cayman Islands (the
“Company”), and Serene View Limited, a company limited by shares incorporated under the laws of the British Virgin Islands (the
“Purchaser”).
RECITALS
WHEREAS, the Purchaser desires to subscribe for and purchase, and the Company desires to issue and sell, certain Convertible
Notes pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth
herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the
Parties hereto, intending to be legally bound, agrees as follows:
ARTICLE I
DEFINITION AND INTERPRETATION
Section 1.01 Definition, Interpretation and Rules of Construction
(a) As used in this Agreement, the following terms have the following meanings:
Company as of the date hereof.
“ADSs” means the American depositary shares of the Company, each representing one (1) Class A Share of the
“ADRs” means the American depositary receipts issued by the relevant depositary evidencing the ADSs.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or
under common control with such Person; provided, that none of the Company, nor any of its Subsidiaries shall be considered an Affiliate
of the Purchaser. For purposes of this definition, “control” when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms “controlling” and “controlled” have correlative meanings.
“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign, state or local law
(statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree,
ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or
applicable to such Person, as amended unless expressly specified otherwise.
1
“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the
People’s Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau
SAR and Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the
Company.
Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the
“Company SEC Documents” means all registration statements, proxy statements and other statements, reports,
schedules, forms and other documents required to be filed or furnished by the Company with the SEC pursuant to the Exchange Act and
the Securities Act and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by
reference therein, in each case, filed or furnished with the SEC.
“Company Securities” means (i) Ordinary Shares, (ii) securities convertible into or exchangeable for Ordinary Shares,
(iii) any options, warrants or other rights to acquire Ordinary Shares (including any awards under the Employee Stock Incentive Plans)
and (iv) any depository receipts or similar instruments issued in respect of Ordinary Shares.
collectively, the “Conditions”.
“Condition” means any condition to any Party’s obligation to effect the Closing as set forth in ARTICLE III, and
“Employee Benefit Plan” means any written plan, program, policy, contract or other arrangement providing for
severance, termination pay, deferred compensation, performance awards, share or share-related awards, housing funds, insurance
arrangements, fringe benefits, perquisites, superannuation funds retirement benefits, pension schemes or other employee benefits, that is
maintained, contributed to or required to be contributed to by the Company or any of its Subsidiaries for the benefit of any current or
former employee, director, officer or independent contractor of the Company or any of its Subsidiaries, or with respect to which the
Company or any of its Subsidiaries has or would reasonably expect to have any liability or obligation, other than, in each case, one that is
sponsored and maintained by a Governmental Authority;
“Environment” means land (including, without limitation, surface land, sub-surface strata and natural and man-made
structures), water (including, without limitation, coastal and inland waters, surface waters, ground waters and water in drains and
sewers), and air.
the production, storage, use, transport, disposal, release or discharge of hazardous substances; (iii) the exposure of any person or
“Environmental Law” means all Applicable Laws in relation to (i) pollution or contamination of the Environment; (ii)
2
other living organism to hazardous substances; or (iv) the creation of any noise, vibration or other material adverse impact on the
Environment.
regulations promulgated thereunder.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and
Section 4.01(f) and Section 4.01(i).
“Fundamental Warranties” means any representations and warranties of the Company contained in Section 4.01(a) to
“GAAP” means generally accepted accounting principles in the United States.
“Material Adverse Effect” with respect to a party means 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 (i) the financial condition, assets, liabilities, results of operations, business or
operations of such party and its Subsidiaries taken as a whole, or (ii) the ability of such party to consummate the transactions
contemplated by the Transaction Agreements and to timely perform its obligations hereunder and thereunder, except to the extent that
any such material adverse effect results from (a) changes in generally accepted accounting principles that are generally applicable to
comparable companies (to the extent not materially disproportionately affecting such party and its Subsidiaries), (b) changes in general
economic and market conditions and capital market conditions or changes affecting any of the industries in which such party and its
Subsidiaries operate generally (in each case to the extent not materially disproportionately affecting such party and its Subsidiaries), (c)
the announcement or disclosure of this Agreement or any other Transaction Agreement or the consummation of the transactions
hereunder or thereunder, or any act or omission required or specifically permitted by this Agreement and/or any other Transaction
Agreement; (d) any pandemic, earthquake, typhoon, tornado or other natural disaster or similar force majeure event, (e) in the case of the
Company, any failure to meet any internal or public projections, forecasts, or guidance, or (f) in the case of the Company, any change in
the Company’s stock price or trading volume, in and of itself; provided, however, that the underlying causes giving rise to or
contributing to any such change or failure under sub-clause (e) or (f) shall not be excluded in determining whether a Material Adverse
Effect has occurred except to the extent such underlying causes are otherwise excluded pursuant to any of sub-clauses (a) through (d).
“Ordinary Shares” means, collectively, the Class A Shares, the Class B Shares and the Class C Shares.
“Parties” means, collectively, the Company and the Purchaser.
organization.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or
“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.
3
the time administering the Securities Act.
“SEC” means the Securities and Exchange Commission of the United States of America or any other federal agency at
thereunder.
“Securities Act” means the Securities Act of 1933, as amended, and all of the rules and regulations promulgated
by and among the Company and the parties listed therein.
“Shareholders’ Agreement” means Fifth Amended and Restated Shareholders’ Agreement, dated November 10, 2017,
“Subsidiary” of a party means any organization or entity, whether incorporated or unincorporated, which is controlled
by such party and, for the avoidance of doubt, the Subsidiaries of a party shall include any variable interest entity over which such party
or any of its Subsidiaries effects control pursuant to contractual arrangements and which is consolidated with such party in accordance
with generally accepted accounting principles applicable to such party and any Subsidiaries of such variable interest entity.
Exchange Act of 1934, as amended.
Significant Subsidiaries has the meaning given to it in Article 1, Rule 1-02 of Regulation S-X under the U.S. Securities
“Transaction Agreements” means, collectively, this Agreement and each of the Convertible Notes and each of the other
agreements and documents entered into or delivered by the parties hereto or their respective Affiliates in connection with the transactions
contemplated by this Agreement.
Shareholders’ Agreement.
“Underlying ADSs” means the ADSs issuable upon conversion and registration with the SEC in accordance with the
(b) Each of the following terms is defined in the Section set forth opposite such term:
Term
“2020 Convertible Note”
“2022 Convertible Note”
“Agreement”
“Bankruptcy and Equity Exception”
“Claim Notice”
“Closing”
“Closing Date”
“Company”
“Confidential Information”
“Control Contracts”
“Convertible Notes”
“Conversion Shares”
“Encumbrances”
“ESOP”
“EU”
“Recognized Investment Agreement”
Section
2.01
2.01
Preamble
4.01(b)
6.02(a)
2.02(a)
2.02(a)
Preamble
7.11(a)
4.01(aa)
2.01
2.01
4.01(d)
4.01(i)
4.01(ee)
3.02(h)
4
Term
"Recognized Investor"
“Governmental Authority”
“HMT”
“Indemnifying Party”
“Indemnified Party”
“Indemnity Notice”
“Intellectual Property”
“Losses”
“Material Contracts”
“NDRC”
“NDRC Circular”
“OFAC”
“Permits”
“Purchase Price”
“Purchaser”
“Returns”
“Sanctions”
“Tax”
“Third Party Claim”
“UNSC”
Section
3.02(h)
3.01(a)
4.01(ee)
6.01
6.01
6.03
4.01(u)
6.01
4.01(r)
4.01(cc)
4.01(cc)
4.01(ee)
4.01(g)
2.01
Preamble
4.01(w)
4.01(ee)
4.01(r)
6.02(a)
4.01(ee)
(c) In this Agreement, except to the extent otherwise provided or that the context otherwise requires:
(i) The words “Party” and “Parties” shall be construed to mean a party or the parties to this
Agreement, and any reference to a party to this Agreement or any other agreement or document contemplated hereby shall
include such party’s successors and permitted assigns.
clause, such reference is to an Article, Section, Exhibit, Schedule or clause of this Agreement.
(ii) When a reference is made in this Agreement to an Article, Section, Exhibit, Schedule or
way the meaning or interpretation of this Agreement.
(iii) The headings for this Agreement are for reference purposes only and do not affect in any
are deemed to be followed by the words “without limitation.”
(iv) Whenever the words “include,” “includes” or “including” are used in this Agreement, they
this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement.
(v) The words “hereof,” “herein” and “hereunder” and words of similar import, when used in
or other document made or delivered pursuant hereto, unless otherwise defined therein.
(vi) All terms defined in this Agreement have the defined meanings when used in any certificate
5
plural forms of such terms.
(vii) The definitions contained in this Agreement are applicable to the singular as well as the
(viii) The use of “or” is not intended to be exclusive unless expressly indicated otherwise.
(ix) The term “$” means United States Dollars.
(x) The word “will” shall be construed to have the same meaning and effect as the word
(xi) References to “law,” “laws” or to a particular statute or law shall be deemed also to include
“shall.”
any and all Applicable Law.
(xii) A reference to any legislation or to any provision of any legislation shall include any
modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and
statutory instruments issued or related to such legislation.
(xiii) References herein to any gender include the other gender.
(xiv) The Parties hereto have each participated in the negotiation and drafting of this
Agreement and if any ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted
jointly by the Parties hereto and no presumption or burden of proof shall arise favoring or burdening any Party by virtue of the
authorship of any of the provisions in this Agreement or any interim drafts thereof.
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.01 Issuance, Sale and Purchase of the Convertible Notes.
Upon the terms and subject to the conditions of this Agreement, at Closing (as defined below), the Purchaser hereby agrees to
subscribe for and purchase, and the Company hereby agrees to issue and sell to the Purchaser (i) Convertible Senior Note due 2020 with
the principal amount of US$50,000,000, in the form attached hereto as Exhibit A (the “2020 Convertible Note”), and (ii) Convertible
Senior Note due 2022 with the principal amount of US$50,000,000, in the form attached hereto as Exhibit B (the “2022 Convertible
Note”, together with the 2020 Convertible Note, the “Convertible Notes”), each convertible into certain number of Class A Shares of the
Company or ADSs at the option of the holder or holders of such Convertible Notes (the “Conversion Shares”) on, and subject to, the
terms and conditions set forth in the Convertible Notes, for an aggregate purchase price of US$100,000,000 (the “Purchase Price”).
Section 2.02 Closing.
benefit of the relevant Conditions, of all the Conditions (other than Conditions that by their nature are to be satisfied at Closing, but
(a) Closing. Subject to satisfaction or, to the extent permissible, waiver by the Party or Parties entitled to the
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subject to the satisfaction or, to the extent permissible, waiver of those Conditions at Closing), the closing of the sale and purchase of the
Convertible Notes pursuant to this Section 2.02(a) (the “Closing”) shall take place remotely by electronic means on the third (3rd)
Business Day after the date on which the Conditions (other than the Conditions that by their nature are to be satisfied at Closing, but
subject to the satisfaction or, to the extent permissible, waiver of those Conditions at the Closing) are satisfied, or any other earlier time
before such date as may be agreed by the Purchaser and the Company (the “Closing Date”).
(b) Payment and Delivery. At Closing,
(i) the Purchaser shall arrange for electronic funds transfer in immediately available funds of
the Purchase Price in U.S. dollars to such bank account designated in writing by the Company to the Purchaser on the date of
this Agreement; and
(ii) the Company shall deliver
(1) the duly executed 2020 Convertible Note dated as of the Closing Date and issued in the
(2) the duly executed 2022 Convertible Note dated as of the Closing Date and issued in the
name of the Purchaser;
name of the Purchaser;
(3) copies of the Recognized Investment Agreement referred to in Section 3.02 (h);
(4) copies of all the written consents and waivers referred to in Section 3.02(i); and
(5) copies of the certificate referred to in Section 3.02 (j).
(c) Restrictive Legend. Each certificate representing any Ordinary Shares received by the Purchaser after
conversion of the Convertible Notes on, and subject to, the terms and conditions set forth in the applicable Convertible Notes shall be
endorsed with the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (AS AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER
JURISDICTIONS. THESE SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED: (A) IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (2) AN EXEMPTION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B)
UNLESS IN COMPLIANCE WITH THE CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE
COMPANY AND SERENE VIEW LIMITED, DATED SEPTEMBER 4, 2019 (THE “SUBSCRIPTION AGREEMENT”).
ANY ATTEMPT TO TRANSFER, SELL,
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PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER
RESTRICTIONS SET FORTH IN THE SUBSCRIPTION AGREEMENT SHALL BE VOID.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.01 Conditions to Obligations of Both Parties.
(a) No United States or non-United States federal, national, supranational, state, provincial, local or similar
government, governmental, regulatory or administrative authority, branch, agency or commission or any court, tribunal, or arbitral or
judicial body (including any grand jury) (each, a “Governmental Authority”) shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, judgment, injunction, order or decree (in each case, 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
the Transaction Agreements.
(b) No action, suit, proceeding or investigation shall have been instituted or threatened by a Governmental
Authority or any third party that seeks to restrain, enjoin, prevent, prohibit or otherwise make illegal the consummation of the
transactions contemplated by the Transaction Agreements.
Section 3.02 Conditions to Obligations of Purchaser. The obligations of the Purchaser to subscribe for, purchase and
pay for the Convertible Notes as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of the
following conditions, any of which may be waived in writing by the Purchaser in its sole discretion:
(a) The Fundamental Warranties shall have been true and correct in all respects on the date of this
Agreement and true and accurate on and as of the Closing Date as though such representations and warranties were made on and as of
the Closing Date (except for representations and warranties that expressly speak as of a specific date, in which case on and as of such
specified date). Other representations and warranties of the Company contained in Section 4.01 of this Agreement shall have been true
and correct on the date of this Agreement, and true and correct in all material respects (or, if qualified by materiality or Material Adverse
Effect, true and correct in all respects) on and as of the Closing Date as though such representations and warranties were made on and as
of the Closing Date (except for representations and warranties that expressly speak as of a specified date, in which case on and as of such
specified date).
(b) The Company shall have performed and complied with all, and not be in breach or default in 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 in all material aspects.
(c) There shall have been no Material Adverse Effect with respect to the Company.
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(d) All corporate and other actions required to be taken by the Company in connection with the issuance and
sale of the Convertible Notes and the Company’s execution, delivery and performance of this Agreement and the other Transaction
Agreements and the transactions contemplated hereby and thereby shall have been completed.
Kong) LLP, Cayman counsel to the Company, in form and substance to the satisfaction of the Purchaser.
(e) The Purchaser shall have received an opinion, dated the Closing Date, of Maples and Calder (Hong
SEC or any other Governmental Authority with respect to the public trading of the ADSs.
(f) No stop order or suspension of trading shall have been imposed by The New York Stock Exchange, the
delivered each Transaction Agreement to which it is a party to the Purchaser at or prior to Closing.
(g) The Company shall have duly executed and delivered or shall have caused to be duly executed and
(h) The Company and certain Person or Persons that are not Affiliate of the Company or the Purchaser (the
“Recognized Investor”) as consented to by the Purchaser shall have entered into the Investment Agreement (the “Recognized Investment
Agreement”) in connection with certain investment in the Company or a Subsidiary of the Company by the Recognized Investor, in form
and substance to the satisfaction of the Purchaser; and the Recognized Investment Agreement shall have been in full force and effect and
not terminated by any parties thereto.
(i) All consents required to be obtained by the Company in connection with the issuance and sale of the
Convertible Notes and the Company’s execution, delivery and performance of this Agreement and the other Transaction Agreements and
the transactions contemplated hereby and thereby shall have been obtained.
satisfaction of Sections 3.02 (a) to (i) above.
(j) The Purchaser shall have received a certificate signed by a director of the Company confirming the
Section 3.03 Conditions to Obligations of the Company. The obligation of the Company to issue and sell the
Convertible Notes to the Purchaser as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of
each of the following conditions, any of which may be waived in writing by the Company in its sole discretion:
(a) The representations and warranties of the Purchaser contained in Section 4.02 of this Agreement shall
have been true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all
respects) on the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on
and as of the Closing Date; provided that each representation and warranty of the Purchaser contained in Sections 4.02(a) to 4.02(c) of
this Agreement shall have been true and correct in all respects on the date of this Agreement and on and as of the Closing Date as though
such representations and warranties were made on and as of the Closing Date.
9
(b) The Purchaser shall have performed and complied with all, and not be in breach or default under any,
agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or
before the Closing Date.
to the Company at or prior to Closing.
(c) The Purchaser shall have duly executed and delivered each Transaction Agreement to which it is a party
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 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 that, except as set forth in the Company SEC Documents:
(a) Due Formation. The Company is an exempted company, duly incorporated, validly existing and in good
standing under the laws of the Cayman Islands. Each of the Company and the Company’s Subsidiaries is duly formed, validly existing
and in good standing in the jurisdiction of its organization. Each of the Company and the Subsidiaries has all requisite power and
authority to carry on its business as it is currently being conducted.
(b) Authority; Valid Agreement. The Company has all requisite legal power and authority to execute,
deliver and perform its obligations under the Transaction Agreements to which it is a party and each other agreement, certificate,
document and instrument to be executed by the Company pursuant to this Agreement and each other Transaction Agreement. The
execution, delivery and performance by the Company of this Agreement and each other Transaction Agreement to which it is a party and
the performance by the Company of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been, and each other Transaction Agreements to which it is a party will be duly
executed and delivered by the Company and, assuming due authorization, execution and delivery by the Purchaser, constitutes (or, when
executed and delivered in accordance herewith will constitute) a legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a
court of law or a court of equity, and by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar
law affecting creditors’ rights and remedies generally (the “Bankruptcy and Equity Exception”). Without limiting the generality of the
foregoing, as of Closing, no approval by the shareholders of the Company is required in connection with this Agreement or other
Transaction Agreements, the performance by the Company of its obligations hereunder or thereunder, or the consummation by the
Company of the transactions contemplated hereby or thereby, except for those that have been obtained, waived or exempted at or prior to
Closing.
(c) Convertible Notes. Each of 2020 Convertible Note and 2022 Convertible Note, when issued and
delivered by the Company, will constitute direct, unconditional, unsecured and unsubordinated obligations of the Company and will at all
times rank pari passu with all other present and future unconditional and
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unsubordinated obligations of the Company (other than those preferred by Applicable Law that are mandatory and of general
application).
(d) Conversion Shares. The Conversion Shares have been duly and validly authorized for issuance by the
Company and, when issued and delivered by the Company to the Purchaser in accordance with the terms of each of the 2020 Convertible
Note and 2022 Convertible Note will be (i) duly and validly issued, fully paid and non-assessable, and rank pari passu with, and carry
the same rights in all aspects as, the other Class A Shares then in issue, (ii) entitled to all dividends and other distributions declared, paid
or made thereon, and (iii) 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 as disclosed in the Company SEC Documents or created by virtue of the transactions under this Agreement
(collectively, the “Encumbrances”). Upon entry of the Purchaser into the register of members of the Company as the legal owner of the
Conversion Shares, the Company will transfer to the Purchaser good and valid title to the Conversion Shares, free and clear of any
Encumbrances.
(e) Non-contravention. None of the execution and the delivery of this Agreement and other Transaction
Agreements, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any provision of the
organizational documents of the Company, (ii) 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 is subject, or (iii) conflict
with, result in a breach of, constitute a default under, result in the acceleration of or creation of any Encumbrances 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 any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of
the Company’s or any of its Subsidiaries’ assets are subject, except, in the case of (ii) and (iii) above, for such conflicts, breach, defaults,
rights or violations, which would not reasonably be expected to result in a Material Adverse Effect. There is no action, suit or
proceeding, pending or, to the knowledge of the Company, threatened against the Company that questions the validity of the Transaction
Agreements or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby or thereby.
(f) Consents and Approvals. None of the execution and delivery by the Company of this Agreement or any
Transaction Agreement, nor the consummation by the Company of any of the transactions contemplated hereby or thereby, nor the
performance by the Company of this Agreement or other Transaction Agreements in accordance with their respective 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 and except for any
filing or notification required to made with the SEC or the New York Stock Exchange regarding the issuance of the Convertible Notes or
the Conversion Shares.
has not been conducted at any time during
(g) Compliance with Laws. The business of the Company and its Subsidiaries is not being conducted, and
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the three years prior to the date hereof, in violation of any applicable law (including, without limitation, the U.S. Foreign Corrupt
Practices Act, the UK Bribery Act 2010, the PRC anti-bribery laws, the Bank Secrecy Act, as amended by Title III of the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)
and the applicable anti-money laundering statutes of jurisdictions where the Company and its Subsidiaries conduct business, the rules
and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any
governmental or regulatory agency, in each case as supplemented, amended, re-enacted or replaced from time to time) or government
order applicable to the Company in any material respect. Except as disclosed in the Company SEC Documents, the Company and each
of its Subsidiaries have all permits, licenses, authorizations, consents, orders and approvals in material respects (collectively, “Permits”)
that are required in order to carry on their business as presently conducted. Except as disclosed in the Company SEC Documents, all
such Permits are in full force and effect and, to the knowledge of the Company, no suspension or cancellation of any of them is
threatened. The Company has complied with the applicable listing and corporate governance rules and regulations of the New York
Stock Exchange in all material respects. The Company and its Subsidiaries have taken no action designed to, or reasonably likely to
have the effect of, delisting the ADSs from the New York Stock Exchange. There are no proceedings pending or, to the Company’s
knowledge, threatened against the Company relating to the continued listing of the ADSs on the New York Stock Exchange and the
Company has not received any notification that the SEC or the New York Stock Exchange is contemplating suspending or terminating
such listing (or the applicable registration under the Exchange Act related thereto).
(h) Information. All information which has been provided by or on behalf of the Company or its authorized
representatives to the Purchaser, its advisers or agents in the course of the due diligence conducted by the Purchaser and the negotiation
leading to this Agreement and the other Transaction Agreements is true, complete and accurate.
(i) Capitalization.
(i) The authorized share capital of the Company consists of 4,000,000,000 Ordinary Shares, of
which 832,665,477 Class A Shares (including 120,264,378 Class A Shares that have been reserved under the 2015 Stock
Incentive Plan, 2016 Stock Incentive Plan, 2017 Stock Incentive Plan and 2018 Share Incentive Plan of the Company as
disclosed in the Company SEC Documents (altogether, the “ESOP”)), 132,030,222 Class B Shares and 148,500,000 Class C
Shares are issued and outstanding as of the date hereof. All of the Company’s issued and outstanding Ordinary Shares are fully
paid and non-assessable. As of the date of this Agreement, 8,201,639 Class A Shares have been authorized and reserved and
available for issuance pursuant to the ESOP. Except as disclosed in the Company SEC Documents, the Company has no
outstanding bonds, debentures, notes or other obligations, the holders of which have been granted the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter. All
issued and outstanding Ordinary Shares have been duly authorized
12
and validly issued and are fully paid and non-assessable, are free of preemptive rights, were issued in compliance with
applicable U.S. and other applicable securities laws and were not issued in violation of any preemptive right, resale right, right
of first refusal, or similar right and the ADSs have been duly listed and admitted and authorized for trading on the New York
Stock Exchange.
(ii) Except as set forth above in this Section 4.01(i), there are no outstanding (A) shares of
capital stock or voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of
capital stock or voting securities of the Company or (C) preemptive or other outstanding rights, options, warrants, conversion
rights, “phantom” stock rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind that obligate the Company to issue or sell any shares of capital stock or other securities of the
Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to
subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized,
issued or outstanding.
(iii) Except as disclosed in the Company SEC Documents, to the knowledge of the Company,
there are no registration rights, rights of first offer, rights of first refusal, tag-along rights with respect to the securities of the
Company or any Subsidiary of the Company that have been granted to any Person.
(iv) All outstanding shares of capital stock or other securities or ownership interests of the
Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and all such shares or other securities or
ownership interests in any Subsidiary of the Company (except for any Subsidiary which is a variable interest entity over which
the Company or any of its Subsidiaries effects control pursuant to the Control Contracts) are owned, directly or indirectly, by the
Company free and clear of any Encumbrance.
(j) SEC Matters. The Company has filed or furnished, as applicable, on a timely basis, all registration
statements, proxy statements and other documents required to be filed or furnished by it with the SEC, including the Company SEC
Documents. None of the Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of their
respective effective dates (in the case of the Company SEC Documents that are registration statements filed pursuant to the requirements
of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company SEC Documents), or in each case, if
amended prior to the date hereof, as of the date of the last such amendment: (A) each of the Company SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the Exchange Act and the Sarbanes-Oxley Act of 2002, as
amended, and any rules and regulations promulgated thereunder applicable to the Company SEC Documents (as the case may be) and
(B) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading.
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(k) Financial Statements.
(i) The financial statements (including any related notes) contained in the Company SEC
Documents: (A) complied as to form in all material respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, (B) were prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby (except (a) as may be otherwise specifically provided in such financial statements or the
notes thereto, or (b) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed
to summary statements) and (C) fairly present in all material respects the consolidated financial position of the Company and
the Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and
its Subsidiaries for the periods covered thereby (other than as may have corrected or clarified in a subsequent Company SEC
Document), in each case except as disclosed therein and as permitted under the Exchange Act.
(ii) Neither the Company nor any of its Subsidiaries is a party to, nor has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any similar contract, agreement, arrangement or
undertaking (including any contract, agreement, arrangement or undertaking relating to any transaction or relationship between
or among one or more of the Company and/or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited purpose entity or Person, on the other hand), or any “off-balance
sheet arrangements” (as defined in Item 303(a) of Regulation S-K promulgated by the SEC), where the result, purpose or
intended effect of such contract, agreement, arrangement or undertaking is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or any of the Subsidiaries in the Company’s or such Subsidiary’s published
financial statements or other Company SEC Documents.
(iii) PricewaterhouseCoopers Zhong Tian LLP, who have certified certain financial statements
of the Company, are independent public accountants as required by the Securities Act and the rules and regulations of the SEC
thereunder and are independent in accordance with the requirements of the U.S. Public Company Accounting Oversight Board.
(l) Internal Control and Procedures. The Company has established and maintains a system of internal
control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange Act) sufficient to provide
reasonable assurance regarding the reliability of financial reporting, including policies and procedures that (A) mandate the maintenance
of records that in reasonable detail accurately and fairly reflect the material transactions and dispositions of the assets of the Company,
(B) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of
management and the board of directors of the Company and (C) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of the Company. Save as
14
disclosed in the Company SEC Documents, there are no material weaknesses or significant deficiencies in the Company’s internal
controls. The Company’s auditors and the audit committee of the board of directors of the Company have not been advised of any fraud,
whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls
over financial reporting. Since December 31, 2014, there has been no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, except
for the implementation of certain measures to address the material weakness in the Company’s internal control over financial reporting
that has been disclosed in the Company SEC Documents.
(m) No Undisclosed Liabilities. There are no liabilities of the Company or any Subsidiary of any kind,
whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities reflected on, reserved against, or
disclosed in the Company’s unaudited consolidated balance sheet as of December 31, 2018, (ii) liabilities incurred since December 31,
2018 in the ordinary course of business consistent with past practices, (iii) any other undisclosed liabilities that are not material to the
Company and its Subsidiaries on a consolidated basis, and (iv) any liabilities incurred as a result of the Company’s performing the
transactions contemplated by any Transaction Agreement. There are no unconsolidated Subsidiaries of the Company or any off-balance
sheet arrangements of any type (including any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of
Regulation S-K promulgated under the Securities Act) that have not been so described in the Company SEC Documents nor any
obligations to enter into any such arrangements.
(n) Investment Company. The Company is not and, after giving effect to the offering and sale of the
Convertible Notes, the consummation of the offering and the application of the proceeds hereof, will not be an “investment company,” as
such term is defined in the U.S. Investment Company Act of 1940, as amended.
(o) No Registration. Assuming the accuracy of the representations and warranties set forth in Section 4.02
of this Agreement, it is not necessary in connection with the issuance and sale of each of the 2020 Convertible Note and the 2022
Convertible Note (and, when issued, the Conversion Shares) to register each of the 2020 Convertible Note and the 2022 Convertible
Note (and, when issued, the Conversion Shares) under the Securities Act or to qualify or register them under applicable U.S. state
securities laws. No directed selling efforts (as defined in Rule 902 of Regulation S under the Securities Act) have been made by any of
the Company, any of its Affiliates or any person acting on its behalf with respect to any Convertible Notes; and none of such Persons has
taken any actions that would result in the sale of any of the Convertible Notes to the Purchaser under this Agreement requiring
registration under the Securities Act; and the Company is a “foreign issuer” (as defined in Regulation S).
(p) Brokers. The Company has not dealt with any broker, finder, commission agent, placement agent or
arranger in connection with the sale of the Convertible Notes, and the Company is not under any obligation to pay any broker’s fee or
commission in connection with the sale of the Convertible Notes.
15
business in the ordinary course of business consistent with past practice and there has not been
(q) Absence of Changes. Since December 31, 2018, the Company and its Subsidiaries have conducted their
(i) any declaration, setting aside or payment of any dividend or other distribution with respect
to any securities of the Company or any of its Subsidiaries (except for dividends or other distributions by any Subsidiary to the
Company or to any of the Company’s wholly owned Subsidiaries);
(ii) any issuances or sales of shares of capital stock or other securities or obligations convertible
or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company
or any of its Subsidiaries or any redemption, share splits, reclassifications, share dividends, share combinations or other
recapitalizations of any such securities other than pursuant to any Employee Benefit Plan effective as at the date of this
Agreement;
(iii) any amendment to the constitutional documents of the Company;
(iv) any redemption or repurchase of any equity securities of the Company; or
the foregoing.
(v) any entry into any contract, agreement, instrument or other document in respect of any of
(r) Contracts. The Company has filed as exhibits to the Company SEC Documents all contracts,
agreements and instruments (including all amendments thereto) to which the Company or any of its Subsidiaries is a party or by which it
is bound and which is material to the business of the Company and its Subsidiaries, taken as a whole, and are required to be filed as an
exhibit to the Company SEC Documents pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K promulgated by the SEC(the
“Material Contracts”). Each Material Contract is in full force and effect and, to the knowledge of the Company, enforceable against the
counterparties of the Company or the Subsidiaries party thereto, except for the contracts and agreements that have already expired
pursuant to the terms therein (which for the avoidance of doubt excludes those contracts or agreements that had been terminated by the
other party thereto for cause). The Company and its Subsidiaries and, to the knowledge of the Company, each other party thereto, are not
in default under, or in breach or violation of, any Material Contract, in all material respects. To the Company’s knowledge, no event, fact
or circumstance has occurred that will have or is reasonably expected to have a material adverse impact on the renewal or extension of
any Material Contract.
(s) Litigation. Except as disclosed in the Company SEC Documents and to the knowledge of the Company,
any officer and director of the Company or any of its Subsidiaries in their capacities as such, there are no pending or threatened material
actions, claims, demands, investigations, examinations, indictments, litigations, suits or other criminal, civil or administrative or
investigative proceedings
16
before or by any Governmental Authority or by any other person against the Company or any of its Subsidiaries or any proceedings that
seek to restrain or enjoin the consummation of the transactions under the Transaction Agreements.
(t) Ownership of Assets. The Company and its Subsidiaries have good and marketable title to, or in the
case of leased property and assets, have valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible)
reflected on the Company’s consolidated unaudited balance sheet as of December 31, 2018 or acquired thereafter, except for properties
and assets sold since such date in the ordinary course of business consistent with past practices and except where the failure to have such
good and marketable title or valid leasehold interests would not have a Material Adverse Effect.
(u) Intellectual Property. All registered or unregistered, (i) patents, patentable inventions and other patent
rights (including any divisions, continuations, continuations-in-part, reissues, reexaminations and interferences thereof); (ii) trademarks,
service marks, trade dress, trade names, taglines, brand names, logos and corporate names and all goodwill related thereto;
(iii) copyrights, mask works and designs; (iv) trade secrets, know-how, inventions, processes, procedures, databases, confidential
business information and other proprietary information and rights; (v) computer software programs, including all source code, object
code, specifications, designs and documentation related thereto; and (vi) domain names, Internet addresses and other computer
identifiers, in each case that is material to the business of the Company or any of its Subsidiaries as currently being conducted (the
“Intellectual Property”) is either (a) owned by the Company or one or more of its Subsidiaries or (b) is used by the Company or one or
more of its Subsidiaries pursuant to a valid license. To the knowledge of the Company, there are no material infringements or other
material violations of any Intellectual Property owned by the Company or any of its Subsidiaries by any third party. The Company and
its Subsidiaries have taken all necessary actions to maintain and protect each item of Intellectual Property. The conduct of the business
of the Company and its Subsidiaries does not infringe or otherwise violate any intellectual property or other proprietary rights of any
other person in material respects, and there is no action pending or, to the knowledge of the Company, threatened alleging any such
infringement or violation or challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property which, either
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(v) Employment Matters.
(i) Neither the Company nor any of its Significant Subsidiaries is a party to or bound by any
collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any of its
Significant Subsidiaries. There are no unfair labor practice complaints pending, or to the knowledge of the Company,
threatened, against the Company or any of its Significant Subsidiaries before any Governmental Authority. Each of the
Company and its Subsidiaries complies with all Applicable Laws relating to employment and employment practices (including
without limitation, terms and conditions of employment, termination of employment, mandatory severance benefits, pension
programs, social insurance programs, employee health and safety, equal employment, employment of veterans and the
handicapped, and
17
prohibition of discrimination) in all material aspects. There is no material claim with respect to payment of wages, salary,
overtime pay, withholding individual income taxes, social security fund or housing fund that has been asserted and is now
pending or, to the knowledge of the Company, threatened before any Governmental Authority with respect to any persons
currently or formerly employed by the Company or any of its Significant Subsidiaries.
(ii) Each Employee Benefit Plan is in compliance in all material respects with its terms and the
requirements of all Applicable Laws. All employer and employee contributions to each Employee Benefit Plan required by the
terms of such Employee Benefit Plan or by the Applicable Laws have been made, or, if applicable, accrued in accordance with
normal accounting practices and in compliance in all material respects with its terms and the requirements of all Applicable
Laws. Each Employee Benefit Plan required to be registered has been registered and has been maintained in good standing with
applicable Governmental Authorities.
(w) Tax Status. Except as disclosed in the Company SEC Documents, the Company and each of its
Subsidiaries (i) has made or filed in the appropriate jurisdictions all material foreign, federal and state income and all other tax returns
required to be filed or maintained in connection with the calculation, determination, assessment or collection of any and all federal, state,
local, foreign and other taxes, levies, fees, imposts, duties, governmental fees and charges of whatever kind (including any interest,
penalties or additions to the tax imposed in connection therewith or with respect thereto) (each a “Tax”), including all amended returns
required as a result of examination adjustments made by any Governmental Authority responsible for the imposition of any Tax
(collectively, the “Returns”), and such Returns are true, correct and complete in all material respects, and (ii) has paid all material Taxes
and other governmental assessments and charges shown or determined to be due on such Returns, except those being contested or will be
contested in good faith. Except as disclosed in the Company SEC Documents, neither the Company nor any of its Subsidiaries has
received notice regarding unpaid foreign, federal and state income in any amount or any Taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and the Company is not aware of any reasonable basis for such claim. No Returns filed by or
on behalf of the Company or any of its Subsidiaries with respect to material Taxes are currently being audited, and neither the Company
nor any of its Subsidiaries has received notice of any such audit.
(x) Tax Election. No Tax elections under the income tax laws of the United States have been made with
respect to the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries is, or is at risk of being or becoming,
classified as a “passive foreign investment company” or a “controlled foreign corporation” for United States federal income tax purposes.
(y) Solvency. Both before and after giving effect to the transactions contemplated by this Agreement and
other Transaction Agreements, each of the Company and its Subsidiaries (i) will be solvent (in that both the fair value of its assets will
not be less than the sum of its debts and that the present fair saleable value of its assets will not be less than the amount required to pay
its probable liability on its recourse debts as they mature or become due) and (ii) will have adequate capital and
18
liquidity with which to engage in the their businesses as currently conducted and as described in the Company SEC Documents.
(z) Transactions with Affiliates and Employees. All related party transactions required to be disclosed
under applicable rules of the New York Stock Exchange or the applicable securities law have been accurately described in the Company
SEC Documents in all material respects. Any such related party transaction was entered into on terms and conditions no less favorable to
the Company or its applicable Subsidiary than those applicable in comparable transactions between independent parties acting at arm’s
length.
(aa) Variable Interest Entities. The Company controls its variable interest entities, Beijing Wo Mai Wo Pai
Auction Co., Ltd. and Beijing Secoo Trading Limited, through a series of contractual arrangements (“Control Contracts”), and there is no
enforceable agreement or understanding to rescind, amend or change the nature of such captive structure or the terms of the Control
Contracts.
(bb) Environment. Each of the Company and its Subsidiaries (i) has at all times complied and are presently
in compliance with all applicable Environmental Laws in all material respects; (ii) has not received any notice, demand, claim, letter or
request for information, relating to any alleged violation of Environmental Law, or otherwise identifies an environmental concern, health
and safety concern or any other concern relating to the security and protection of people, property, flora and fauna relating thereto; (iii)
possesses all approvals, consents or authorizations required under Environmental Laws for its business as presently conducted and there
are no circumstances that could reasonably be expected to result in any such approvals, consents or authorizations being revoked,
terminated, revised, amended or not renewed in the ordinary course of its business. There has been no incident of any occupational
disease incurred by any employees of the Company or any of its Subsidiaries due to harmful factors present in their working environment
or the nature of their work, and there are no other circumstances or conditions. There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating expenditures required for clean‑up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a Material Adverse Effect.
(cc) NDRC. The Company (through a PRC Subsidiary) obtained an enterprise foreign debt registration
certificate dated January 21, 2019 with a validity period of one year (the “Registration Certificate”) from the National Development and
Reform Commission (“NDRC”). Such registration has not been withdrawn and is not subject to any condition which has not been
fulfilled or performed, except for the filing by such PRC Subsidiary with NDRC of the requisite information and documents in relation to
the issue and sale of the 2022 Convertible Note within ten (10) business days in the PRC after the date of issuance of the 2022
Convertible Note in accordance with the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises
of Foreign Debt Filings and Registrations (国家发展改革委关于推进企业发行外债备案登记制管理改革的通知(发改外资[2015]2044
号)) (the “NDRC Circular”).
19
(dd) Use of Proceeds. The application of the net proceeds from the issue and sale of the Convertible Notes
will not (i) contravene any provision of any current and applicable laws or the current constituent documents of the Company or any of
its Subsidiaries, (ii) contravene the terms or provisions of, or constitute a default under, any material indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument currently binding upon the Company or any of its Subsidiaries, or (iii)
contravene or violate the terms or provisions of any order or decree of any government entity having jurisdiction over the Company or
any Subsidiary.
(ee) Sanctions.
(i) None of the Company, any of its Subsidiaries, or any director or officer thereof, or, to the
Company's knowledge, any agent, affiliate, employee or other representative of the Company or any of its Subsidiaries, is a
Person that is, or is owned or controlled by one or more Persons that are: (A) the subject of any sanctions administered or
enforced by the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the
United Nations Security Council ("UNSC"), the European Union ("EU") (including under Council Regulation (EC) No.
194/2008), Her Majesty's Treasury ("HMT"), the State Secretariat for Economic Affairs, or other relevant sanctions authority
(collectively, "Sanctions"), or engaged in any activities sanctionable under the Comprehensive Iran Sanctions, Accountability,
and Divestment Act of 2010, the Iran Sanctions Act, the Iran Threat Reduction and Syria Human Rights Act, or any applicable
executive order, or (B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without
limitation, Crimea, Cuba, Iran, North Korea and Syria).
(ii) The Company will not, directly or indirectly, use the proceeds of the offering received by the
Company, or lend, contribute or otherwise make available such proceeds to any Subsidiary, Affiliate, joint venture partner or
other Person: (A) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the
time of such funding or facilitation, is the subject of Sanctions; or (B) in any other manner that will result in a violation of
Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or
otherwise).
(iii) For the past 5 years, the Company and its Subsidiaries have not knowingly engaged in, are
not now knowingly engaged in, and will not knowingly engage in, any dealings or transactions with any Person, or in any
country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
(ff) No Stamp Duty. Except as disclosed in the Company SEC Documents, no stamp, documentary,
issuance, registration, transfer, withholding, capital gains, income or other taxes or duties are payable by or on behalf of the Purchasers,
the Company or any of its Subsidiaries in the Cayman Islands, the PRC, any other jurisdiction in which the Company is organized,
incorporated, engaged in business for tax purposes or is otherwise resident for tax purposes, any jurisdiction from or through which a
payment is made by or on behalf of the Company or any political subdivision thereof or therein having the authority to tax, in connection
with (i) the execution,
20
delivery or consummation of, or consummation of the transactions contemplated by, this Agreement, the 2020 Convertible Note or the
2022 Convertible Note, (ii) the creation, allotment and issuance of the Ordinary Shares represented by the Underlying ADSs to be issued
upon conversion of the Conversion Shares, (iii) the deposit with the Depositary of the Ordinary Shares represented by the Underlying
ADSs by the Company against the issuance of ADRs evidencing the Underlying ADSs, (iv) the issuance and delivery of the Underlying
ADSs, when issued by the Company upon conversion of the Conversion Shares, (v) the issuance, sale and delivery of the Conversion
Shares to or for the accounts of the Purchaser, or (vi) the resale and delivery of the Conversion Shares by the Purchaser in the manner
contemplated herein.
(gg) Labor disputes. No material labor dispute with the employees of the Company or any of its Subsidiaries
exists, except as described in the Company SEC Documents, or, to the knowledge of the Company, is imminent; and, to the Company’s
knowledge, there is no existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a Material Adverse Effect.
(hh) Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary in the businesses in
which they are engaged; neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for;
and neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, except in each case as described in the Company SEC Documents.
(ii) No Side Agreement. None of the Company nor any of its Subsidiaries has entered into any side
agreement, side letter or any other agreements or documents or consummated any transactions of which true and accurate copies of such
agreements or documents, or materials related to such transactions have not been provided to the Purchaser.
Company as of the date hereof and as of Closing, as follows:
Section 4.02 Representations and Warranties of the Purchaser.The Purchaser hereby represents and warrants to the
of its organization. The Purchaser has all requisite power and authority to carry on its business as it is currently being conducted.
(a) Due Formation. The Purchaser is duly formed, validly existing and in good standing in the jurisdiction
(b) Authority. The Purchaser has full power and authority to enter into, execute and deliver this Agreement
and other Transaction Agreements to which it is to become a party and each other agreement, certificate, document and instrument to be
executed and delivered by the Purchaser pursuant to this Agreement and each other Transaction Agreement and to perform its obligations
hereunder and thereunder. The execution and delivery by the Purchaser of this Agreement and each
21
other Transaction Agreement to which it is or is to become a party and the performance by the Purchaser of its obligations hereunder and
thereunder have been duly authorized by all requisite actions on its part.
(c) Valid Agreement. This Agreement has been, and each other Transaction Agreement to which it is to
become a party will be, duly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by the
Company, constitutes (or, when executed and delivered in accordance herewith will constitute), the legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to the Bankruptcy and Equity Exception and except
as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
(d) Non-contravention. None of the execution and the delivery of this Agreement or any other Transaction
Agreement, nor the consummation of the transactions contemplated hereby or thereby, by the Purchaser will 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.
(e) Consents and Approvals. None of the execution and delivery by the Purchaser of this Agreement and
the Transaction Agreements to which the Purchaser is to become a Party, nor the consummation by the Purchaser of any of the
transactions contemplated hereby or thereby, nor the performance by the Purchaser of this Agreements or any such Transaction
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
at or prior to Closing.
(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 relevant Convertible Notes. 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 Convertible Notes
pursuant to this Agreement for investment for its own account for investment purposes only and not with the view to, or with
any intention of, resale, distribution or other disposition thereof in a manner that would violate the registration requirements of
the Securities Act.
(iii) Restricted Securities. The Purchaser acknowledges that the Convertible Notes are
“restricted securities” that have not been registered under the Securities Act or any applicable state securities law. The Purchaser
further acknowledges that, absent an effective registration under the Securities Act, the Securities may only be offered, sold or
otherwise transferred (x) to the Company, (y) outside the United States in accordance with Rule 904 of
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Regulation S under the Securities Act, or (z) pursuant to an exemption from registration under the Securities Act.
Regulation S, or (ii) an “accredited investor” within the meaning of Rule 501(a) under Regulation D of the Securities Act.
(iv) Not a U.S. Person. The Purchaser is either (i) not a “U.S. person” as defined in Rule 902 of
ARTICLE V
COVENANTS
Section 5.01 Conduct of Business of the Company. From the date hereof until the Closing Date,
(a) the Company shall, and the Company shall cause each of its Subsidiaries to (i) conduct its business and
operations in the ordinary course of business consistent with past practice, and (ii) not take any action, or omit to take any action, that
would reasonably be expected to make any of its representations and warranties in this Agreement untrue such that the Condition set out
in Section 3.02(a) would not be satisfied at the Closing Date;
(b) the Company shall (i) take all actions necessary to continue the listing and trading of its ADSs on the
New York Stock Exchange and shall comply with the Company’s reporting, filing and other obligations under the rules of the New York
Stock Exchange, and (ii) file with the New York Stock Exchange a supplemental listing application in respect of the Conversion Shares,
when issued and delivered in the manner contemplated by the applicable Convertible Notes; and
prior to the Closing Date that would constitute a breach of any terms and conditions contained in this Agreement.
(c) the Company shall promptly notify the Purchaser of any event, condition or circumstance occurring
Section 5.02 FPI Status. Without limiting the generality of the foregoing, the Company shall promptly after the date
hereof and reasonably prior to Closing take all necessary or desirable actions required to duly and validly rely on the exemption for
foreign private issuers from applicable rules and regulations of the New York Stock Exchange with respect to corporate governance to
rely on “home country practice” in connection with the transactions contemplated hereunder (including an exemption from any New
York Stock Exchange rules that would otherwise require seeking shareholder approval in respect of such transactions), including without
limitation, to the extent necessary, making disclosures, notices and filings to or with the SEC and New York Stock Exchange and
obtaining an adequate opinion of counsel in respect of the home country practice exemption. The Company will use commercially
reasonable efforts to continue the listing and trading of its ADSs on New York Stock Exchange and, in accordance, therewith, will use
commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of such market or exchange, as applicable.
Section 5.03 Further Assurances. From the date of this Agreement until Closing, the Parties shall each use their
respective reasonable best efforts to fulfill or
23
obtain the fulfillment of the conditions precedent to the consummation of the transactions contemplated hereby and by the Transaction
Agreements.
Section 5.04 No Contract. Without limiting the generality of the foregoing, the Company agrees that from the date
hereof until the Closing Date, it shall not make (or otherwise enter into any contract with respect to) (x) any material change in any
method of accounting or accounting practice by the Company or any of its Subsidiaries; (y) any declaration, setting aside or payment of
any dividend or other distribution with respect to any securities of the Company or any of its Subsidiaries (except for dividends or other
distributions by any Subsidiary to the Company or to any of the Company’s Subsidiaries) or (z) any redemption, repurchase or other
acquisition of any share capital of the Company or any of its Subsidiaries, except in each case for the avoidance of doubt as contemplated
by the Transaction Agreements.
Section 5.05 Reservation of Shares. The Company shall ensure that it has sufficient number of duly authorized
Ordinary Shares to comply with its obligations to issue the Conversion Shares pursuant to the terms of each of the 2020 Convertible Note
and the 2022 Convertible Note.
Section 5.06 No Integrated Offering. The Company shall not, and shall cause its Affiliates and any Person acting on
its or their behalf not to, directly or indirectly, make any offers or sales of any security or solicit any offers to buy any security, under
circumstances that would require registration of the issuance of any of the Convertible Notes (and, when issued, the Conversion Shares)
under the Securities Act whether through integration with prior offerings or otherwise.
Section 5.07 Use of Proceeds. The Company undertakes to reserve and dedicate the proceeds from the issue and sale
of the Convertible Notes solely for capital expenditure and/or other working capital purpose in connection with the Company’s daily
operations, and/or any other purposes as approved by the Purchaser from time to time.
ARTICLE VI
INDEMNIFICATION
Section 6.01 Indemnification. From and after the Closing Date and subject to Section 6.04, the Company (the
“Indemnifying Party”), shall indemnify and hold the Purchaser, its Affiliates and their respective directors, officers, agents, successors
and assigns (collectively, the “Indemnified Party”) harmless from and against any losses, claims, damages, liabilities, judgments, fines,
obligations, expenses and liabilities, including but not limited to any investigative, legal and other expenses incurred and any Taxes or
levies that may be payable by reason of the indemnification of any indemnifiable loss hereunder (collectively, “Losses”) by any
Indemnified Party as a result of or arising out of: (i) breach of any representation or warranty of the Indemnifying Party contained in the
Transaction Agreements; (ii) violation or nonperformance, partial or total, of any covenant or agreement of the Indemnifying Party
contained in the Transaction Agreements; or (iii) any failure of the Indemnifying Party to comply with Applicable Laws in relation to
Taxes to the extent required in connection with the transactions contemplated by this Agreement or any other Transaction Agreement
and/or any conversion of the Convertible Notes. In calculating the amount of
24
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 6.02 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 VI, then the Indemnified Party shall promptly following receipt of notice of such
claim (i) notify the Indemnifying Party thereof in writing 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. Notwithstanding the foregoing, no failure or delay in
providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to indemnity hereunder, except to the
extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.
(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. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim if (i) the Third Party Claim relates
to or arises in connection with any criminal action, (ii) the Third Party Claim seeks an injunction or equitable relief against any
Indemnified Party (other than immaterial equitable relief in connection with an award of monetary damages) or (iii) the Indemnifying
Party has not acknowledged that such Third Party Claim is subject to indemnification pursuant to this ARTICLE VI. If the Indemnifying
Party assumes the defense of a Third Party Claim pursuant to this Section 6.02(b), the Indemnifying Party shall conduct such defense in
good faith.
(c) If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the
Indemnifying Party, cooperate reasonably with the Indemnifying Party and its counsel in contesting any Third Party Claim which the
Indemnifying Party elects to contest, including in connection with 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 6.02(b).
25
(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 6.03 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;
provided, that no failure or delay in providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to
indemnity hereunder, except to the extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.
the part of the Company:
Section 6.04 Limitation on the Company’s Liability. Absent fraud, intentional misrepresentation or willful breach on
(a) the Indemnifying Party shall have no liability to the Indemnified Parties with respect to any breach of
any representation or warranty (other than Fundamental Warranties) made by the Company in this Agreement unless the aggregate
amount of the Losses suffered or incurred by such Indemnified Parties thereunder exceeds US$1 million, in which case the Indemnifying
Party shall be liable to such Indemnified Parties for the full amount of their Losses from dollar one pursuant to Section 6.01;
(b) the maximum aggregate liabilities of the Indemnifying Party in respect of Losses suffered by the
Indemnified Parties with respect to any breach of any representation or warranty (other than Fundamental Warranties) made by the
Company in this Agreement shall not in any event be greater than the Purchase Price; and
(c) notwithstanding any other provision contained herein, from and after the Closing, the right to indemnity
pursuant to ARTICLE VI shall be the sole and exclusive remedy of any of the Indemnified Party for any claims against the Company
arising out of or resulting from this Agreement; provided that the Purchaser shall also be entitled to specific performance or other
equitable remedies in any court of competent jurisdiction pursuant to Section 7.13 hereof.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Survival of the Representations and Warranties.
representations contained in Section 4.01(w) shall survive until the expiration of the applicable statute of limitations. All other
(a) The Fundamental Warranties shall survive indefinitely or until the latest date permitted by law and the
26
representations and warranties of the Company contained in this Agreement shall survive Closing until eighteen (18) months after the
Closing Date.
(b) Notwithstanding anything to the contrary in the foregoing clauses, (i) any breach of representation or
warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been
given to the party against whom such indemnity may be sought in accordance with this Agreement prior to such time and (ii) any breach
of representation or warranty in respect of which indemnity may be sought that was caused as a result of fraud or intentional
misrepresentation shall survive until the latest date permitted by law.
Section 7.02 Governing Law; Arbitration. This Agreement shall be governed and interpreted in accordance with the
laws of Hong Kong. Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or
termination 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 at the time of commencement of the
arbitration. There shall be three arbitrators. The Company shall have the right to appoint one arbitrator, the Purchaser shall have the
right to appoint the second 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.
Contracts (Rights of Third Parties) Ordinance (Cap. 623) to enforce any term of this Agreement.
Section 7.03 No Third Party Beneficiaries. A person who is not a party to this Agreement has no right under the
Section 7.04 Acknowledgement. The Purchaser acknowledges that it understands that the Company, in issuing the
Convertible Notes to the Purchaser pursuant to this Agreement, is relying upon the exemption from registration provided by Regulation S
under the Securities Act.
Section 7.05 Amendment. This Agreement shall not be amended, changed or modified, except by another agreement
in writing executed by the Parties hereto.
and their respective heirs, successors and permitted assigns and legal representatives.
Section 7.06 Binding Effect. This Agreement shall inure to the benefit of, and be binding upon, each of the Parties
Section 7.07 Assignment. Neither this Agreement nor any of the rights, duties or obligations hereunder may be
assigned by the any Party without the express written consent of the other Parties. Any purported assignment in violation of the
foregoing sentence shall be null and void. Notwithstanding the foregoing, the Purchaser
27
may assign its rights hereunder to any of its Affiliates, provided, that no such assignment shall relieve the Purchaser of its obligations
hereunder.
Section 7.08 Notices. All notices, requests, demands, and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given if (a) in writing and served by personal delivery upon the party for whom it is
intended; or (b) if delivered by certified mail, registered mail or courier service, return-receipt received to the party at the address set
forth below:
If to Company, at:
With a copy to:
If to Purchaser, at:
NIO Inc.
Address: Building 20, No. 56 AnTuo Road, Jiading
District, Shanghai, 201804, People’s Republic of
China
Attention: Fang Liu
Email: fang.liu@nio.com
Skadden, Arps, Slate, Meagher & Flom
Address: 42/F, Edinburgh Tower, The Landmark, 15
Queen’s Road Central, Hong Kong, Hong Kong
Attention: Z. Julie Gao
Email: Julie.gao@skadden.com
Serene View Limited
Address: 6th Floor, Office Building 3 of New Century
Hotel, No. 6 of Capital Stadium South Road, Haidian
District, Beijing, PRC
Attention: Mr. Bin Li
Email: william.li@nio.com
Any Party may change its address for purposes of this Section 7.08 by giving the other Parties hereto written notice of the new
address in the manner set forth above. For the avoidance of doubt, only notice delivered to the address and person of the parties to this
Agreement shall constitute effective notice to such party for the purposes of this Agreement.
Section 7.09 Entire Agreement. This Agreement and the other Transaction Agreements including the schedules and
exhibits hereto and thereto constitutes the entire understanding and agreement between the Parties with respect to the matters covered
hereby and thereby, and all prior agreements and understandings, oral or in writing, if any, between the Parties with respect to the matters
covered hereby and thereby are merged and superseded by this Agreement and the other Transaction Agreements.
Section 7.10 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.
28
Section 7.11 Fees and Expenses. The Company will reimburse the Purchaser all expenses incurred in connection
with the negotiation, preparation and execution of this Agreement and other Transaction Agreements and the transactions contemplated
hereby and thereby, including fees and expenses of attorneys, accountants, consultants and financial advisors.
Section 7.12 Confidentiality.
(a) Each Party shall keep confidential any non-public material or information with respect to the business,
technology, financial conditions, and other aspects of the other Parties which it is aware of, or have access to, in signing or performing
this Agreement (including written or non-written information, hereinafter the “Confidential Information”). Confidential Information
shall not include any information that is (a) previously known on a non-confidential basis by the receiving Party, (b) in the public domain
through no fault of such receiving Party, its Affiliates or its or its Affiliates’ officers, directors or employees, (c) received from a party
other than the Company or the Company’s representatives or agents, so long as such party was not, to the knowledge of the receiving
party, subject to a duty of confidentiality to the Company or (d) developed independently by the receiving Party without reference to
confidential information of the disclosing Party. No Party shall disclose such Confidential Information to any third Party. Either Party
may use the Confidential Information only for the purpose of, and to the extent necessary for performing this Agreement; and shall not
use such Confidential Information for any other purposes. The Parties hereby agree, for the purpose of this Section 7.12, that the
existence and terms and conditions of this Agreement and schedule hereof shall be deemed as Confidential Information.
(b) Notwithstanding any other provisions in this Section 7.12, if any Party believes in good faith that any
announcement or notice must be prepared or published pursuant to applicable laws (including any rules or regulations of any securities
exchange or valid legal process) or information is otherwise required to be disclosed to any Governmental Authority, such Party may, in
accordance with its understanding of the applicable laws, make the required disclosure in the manner it deems in compliance with the
requirements of applicable laws; provided, that, the Party who is required to make such disclosure shall, to the extent permitted by law
and so far as it is practicable, provide the other Parties with prompt notice of such requirement and cooperate with the other Parties at
such other Parties’ request and at the requesting Party’s cost, to enable such other Parties to seek an appropriate protection order or
remedy. In addition, each Party may disclose, after giving prior notice to the other Parties to the extent practicable under the
circumstances and subject to any practicable arrangements to protect confidentiality, Confidential Information to the extent required
under judicial or regulatory process or in connection with any judicial process regarding any legal action, suit or proceeding arising out
of or relating to this Agreement or any Transaction Agreement; provided that, the Party who is required to make such disclosure shall, to
the extent permitted by law and so far as it is practicable, at the other Parties’ request and at the requesting Party’s cost, cooperate with
the other Parties to enable such other Parties to seek an appropriate protection order or remedy.
officers, directors, employees, agents and representatives on a need-to-know basis in the performance of the Transaction
(c) Each Party may disclose the Confidential Information only to its Affiliates and its and its Affiliates’
29
Agreements; provided that, such Party shall ensure such persons strictly abide by the confidentiality obligations hereunder.
(d) Without the prior written consent of the Purchaser (regardless of whether or not the Purchaser is then a
shareholder of the Company), the Company shall not, and shall cause its Affiliates not to, (i) use in advertising, publicity,
announcements, or otherwise, the name of the Purchaser or any Affiliate of the Purchaser, either alone or in combination with any
company name, trade name, trademark, service mark, domain name, device, design, symbol or any abbreviation, contraction or
simulation thereof owned or used by the Purchaser or any of its Affiliates, or (ii) represent, directly or indirectly, that any product or
services provided by the Company or any of its Affiliates has been approved or endorsed by the Purchaser or any of its Affiliates.
(e) The confidentiality obligations of each Party hereunder shall survive the termination of this
Agreement. Each Party shall continue to abide by the confidentiality clause hereof and perform the obligation of confidentiality it
undertakes until the other Party approves release of that obligation or until a breach of the confidentiality clause hereof will no longer
result in any prejudice to the other Party.
Section 7.13 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.
Section 7.14 Termination.
earliest to occur of:
(a) This Agreement shall automatically terminate as between the Company and the Purchaser upon the
(i) the written consent of each of the Company and the Purchaser;
(ii) the delivery of written notice to terminate by either the Company or the Purchaser if Closing
shall not have occurred by three (3) months after the date of this Agreement; provided, however, that such right to terminate
this Agreement under this Section 7.14(a)(ii) shall not be available to any party whose failure to fulfill any obligation under this
Agreement shall have been the principal cause of, or shall have resulted in, the failure of Closing to occur on or prior to such
date; or
(iii) by the Company or the Purchaser in the event that any Governmental Authority shall have
issued a judgment or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by the
Transaction Agreements and such judgment or other action shall have become final and non-appealable.
the provisions of Section 7.02, Section 7.08 and Section 7.12 hereof, which shall survive any termination under this Section 7.14;
(b) Upon the termination of this Agreement, this Agreement will have no further force or effect, except for
30
provided, that neither the Company nor the Purchaser shall be relieved or released from any liabilities or damages arising out of (i) fraud
or (ii) any breach of this Agreement prior to such termination.
Section 7.15 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 7.16 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. Signatures in the form of facsimile or electronically imaged “PDF” shall be deemed to be
original signatures for all purposes hereunder.
Section 7.17 Public Disclosure. Without limiting any other provision of this Agreement, both the Purchaser and the
Company shall consult and agree with each other on the terms and content of a joint press release with respect to the execution of this
Agreement and any other Transaction Agreements and the transactions contemplated hereby and thereby and no press release shall be
issued by any Party hereto without the prior written consent of the other Parties. Thereafter, neither the Company nor the Purchaser, nor
any of their respective Affiliates, shall issue any press release or other public announcement or communication (to the extent not
previously publicly disclosed or made in accordance with this Agreement or any other Transaction Agreements) with respect to the
transactions contemplated hereby or thereby without the prior written consent of the other parties (such consent not to be unreasonably
withheld, conditioned or delayed), except to the extent a party’s counsel deems such disclosure necessary or desirable in order to comply
with any law or the regulations or policies of any securities exchange or other similar regulatory body (in which case the disclosing party
shall give the other parties notice as promptly as is reasonably practicable of any required disclosure to the extent permitted by applicable
law), shall limit such disclosure to the information such counsel advises is required to comply with such law or regulations, and if
reasonably practicable, shall consult with the other party regarding such disclosure and give good faith consideration to any suggested
changes to such disclosure from the other party. Notwithstanding anything to the contrary in this Section 7.17, the Purchaser and the
Company may make public statements in response to specific questions by the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as any such statements are not materially inconsistent with previous press
releases, public disclosures or public statements made by the Company or the Purchaser and do not reveal material, non-public
information regarding the other Parties or the transactions contemplated by this Agreement.
Section 7.18 Waiver. No waiver of any provision of this Agreement shall be effective unless set forth in a written
instrument signed by the Party waiving such provision. No failure or delay by a Party in exercising any right, power or remedy under
this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof
or the exercise of any other right, power or remedy.
31
[Signature pages follow]
32
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
NIO INC.
/s/ Bin Li
By:
Name: Bin Li
Title:
Chairman and Chief Executive Officer
[Signatue Page to Convertible Notes Subscription Agreement (Mr. Li)]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.
SERENE VIEW LIMITED
/s/ Bin Li
By:
Name: Bin Li
Title:
Authorized Signatory
[Signatue Page to Convertible Notes Subscription Agreement (Mr. Li)]
Exhibit A
Form of 2020 Convertible Note
35
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE
SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN EXEMPTION OR
QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B) UNLESS IN COMPLIANCE WITH THE
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND SERENE VIEW LIMITED, DATED
SEPTEMBER 4, 2019 (THE “SUBSCRIPTION AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR
HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS SET FORTH
IN THE SUBSCRIPTION AGREEMENT SHALL BE VOID.
US$50,000,000
CONVERTIBLE SENIOR NOTE
[(cid:0)], 2019
Subject to the terms and conditions of this Convertible Senior Note due 2020 (the “Note”), for good and valuable consideration
received, NIO Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Company”),
promises to pay to the order of Serene View Limited, a company incorporated under the laws of the British Virgin Islands (such party and
any other permitted transferee, the “Holder”), the principal amount of US$50,000,000, plus other amounts payable provided below, on
[ (cid:0) ] (the “Maturity Date”), or such earlier date as may be otherwise provided herein, unless the outstanding principal is settled in
accordance with Article 3 of the Note.
1
The Note is issued pursuant to, and in accordance with, the Convertible Notes Subscription Agreement, dated September 4,
2019 (the “Subscription Agreement”), between the Company and the Holder and is subject to the provisions thereof. Unless the context
requires otherwise, capitalized terms used herein shall have the meaning set forth in Article 1 of this Note.
The following is a statement of the rights of the Holder of the Note and the terms and conditions to which the Note is subject,
and to which the Holder hereof, by the acceptance of the Note, agrees:
1. DEFINITIONS
“ADS” means an American Depositary Share, each of which represents one Class A Share as of the date of this Note.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under
common control with such Person; provided, that
1
NTD: The 360th day of the Issue Date .
1
none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the Purchaser. For purposes of this
definition, “control” when used with respect to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the People’s
Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau
SAR and Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Capital Stock” means for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Clause A Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause B Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause C Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“close of business” means 5:00 p.m. (New York City time).
“Common Equity” of any Person means ordinary share capital or Capital Stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning ascribed to such term in the Preamble.
“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities
having the power to elect a majority of
the board of directors or similar body governing the affairs of such Person or securities that represent a majority of the
outstanding voting securities of such Person.
“Conversion Date” shall have the meaning ascribed to such term in Section 3.3.
“Conversion Notice” shall have the meaning ascribed to such term in Section 3.3.
“Conversion Period” shall mean the period starting from (and including) the fifteenth (15 ) Business Day immediately
preceding the Maturity Date and prior to the close of business on the second Business Day immediately preceding the Maturity
Date.
th
“Conversion Rate” shall have the meaning ascribed to such term in Section 3.2.
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported Sale
Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading
Day immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall
have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of
this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per
ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the
quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition
be deemed to be the amount thereof increased by such similar amount;
and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of
a dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that
dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof
reduced by an amount equal to the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
“Defaulted Amounts” means any amounts on this Note (including, without limitation, the Repurchase Price, principal and
interest) that are payable but are not punctually paid or duly provided for.
“Distributed Property” shall have the meaning ascribed to such term in Section 4.1(c).
“EoD Notice” shall have the meaning ascribed to such term in Section 2.5(a)
“EoD Repurchase Price” shall have the meaning ascribed to such term in Section 2.5(a).
“Event of Default” shall have the meaning ascribed to such term in Section 2.4.
“Ex-Dividend Date” means the first date on which the Class A Shares, ADSs representing Class A Shares (or other applicable
security), trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance,
dividend or distribution in question, from the Company or, if applicable, from the seller of the Class A Shares, ADSs
representing Class A Shares (or other applicable security) on such exchange or market (in the form of due bills or otherwise) as
determined by such exchange or market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Class A Shares or ADSs that expire on or prior to the
Maturity Date.
“Fundamental Change” shall be deemed to have occurred if any of the following occurs after the Note is originally issued:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its
Subsidiaries (together with the Company, the “Company Group”), the employee benefit plans of the Company and its
Subsidiaries and any of the Permitted Holders, has become the direct or indirect “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of (i) the Company’s Common Equity (including Common Equity held in the form of
ADSs) representing more than 50% of the voting power of the Company’s Common Equity or (ii) more than 50% of
the outstanding Class A Shares (including Class A Shares held in the form of ADSs); or (B) the Permitted Holders
(together with any of their respective Affiliates) have become the direct or indirect “beneficial owner,” as defined in
Rule 13d-3 under the Exchange Act, of Class A Shares (including Class A Shares held in the form of ADSs)
representing, in the aggregate, more than 65% of the outstanding Class A Shares (including Class A Shares held in the
form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Class A Shares or the ADSs (other than
changes resulting from a subdivision or combination) as a result of which the Class A Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation
or merger of the Company, or any similar transaction, pursuant to which the Class A Shares or the ADSs will be
converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of
transactions of all or substantially all of the consolidated assets of the Company Group, taken as a whole, to any Person
other than one of the Company’s wholly-owned Subsidiaries; provided, however, that a transaction described in clause
(B) in which the holders of all classes of the Company’s Common Equity immediately prior to such transaction own,
directly or indirectly, more than
50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof
immediately after such transaction in substantially the same proportions vis-a-vis each other as such ownership
immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) cease to be listed
or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official
application thereof (a “change in law”) that results in (A) the Company Group (as in existence immediately subsequent
to such change in law), taken as a whole, being legally prohibited from operating substantially all of the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) as of the last
date of the period described in the Company’s consolidated financial statements for the most recent fiscal quarter and
(B) the Company being unable to continue to derive substantially all of the economic benefits from the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) in the same
manner as reflected in the Company’s consolidated financial statements for the most recent fiscal quarter,
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change if at least
90% of the consideration received or to be received by holders of the ADSs, excluding cash payments for any fractional Class A
Shares and cash payments made in connection with dissenters’ appraisal rights, in connection with such transaction or event
consists of shares of Common Equity or ADSs or depositary receipts in respect of Common Equity that are listed or quoted on
any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their
respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event and
as a result of such transaction or event, the Note becomes convertible into such consideration, excluding cash payments for any
fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights.
“Fundamental Change Repurchase Date” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Repurchase Notice” shall have the meaning ascribed to such term in Section 5.2(b).
“Fundamental Change Repurchase Price” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Company Notice” shall have the meaning ascribed to such term in Section 5.2(d).
“GAAP” means the generally accepted accounting principles in the United States.
“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local, municipal or other
political subdivision or other government, governmental, regulatory or administrative authority, agency, board, bureau,
department, instrumentality or commission or any court, tribunal, judicial or arbitral body of competent jurisdiction or stock
exchange.
“Holder” shall have the meaning ascribed to such term in the Preamble.
“Issue Date” means [ (cid:0) ], 2019.
“Last Reported Sale Price” of the Class A Shares on any date shall be calculated as (i) the closing sale price per ADS (or if no
closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional
securities exchange on which the ADSs are traded divided by (ii) the applicable number of Class A Shares then represented by
one ADS. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be (i) the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as
reported by OTC Markets Group Inc. or a similar organization divided by (ii) the applicable number of Class A Shares then
represented by one ADS. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be (i) the average of the midpoint
of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent
investment banking firms selected by the Company for this purpose divided by (ii) the applicable number of Class A Shares
then represented by one ADS.
“Law” means any statute, law, ordinance, regulation, rule, code, order, judgment, writ, injunction, decree or requirement of law
(including common law) enacted, issued, promulgated, enforced or entered by a Governmental Authority.
“Maturity Date” shall have the meaning ascribed to such term in the Preamble.
“Maturity Repurchase Price” shall have the meaning ascribed to such term in Section 5.1.
“Merger Event” shall have the meaning ascribed to such term in Section 4.3.
“Note” shall have the meaning ascribed to such term in the Preamble.
“Officer” means, with respect to the Company, the Chairman, President, the Chief Executive Officer, the Secretary, any
Executive or any Vice President (whether or not designated by a number or numbers or word or words added before or after the
title “Vice President”).
“Officer’s Certificate”, when used with respect to the Company, means a certificate that is delivered to the Holder and that is
signed by the principal executive, financial
or accounting officer of the Company who has been duly authorized to sign such certificate. To the extent applicable, each such
certificate shall include (a) a statement that the person making such certificate is familiar with the requested action and the Note;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statement contained in such
certificate is based; (c) a statement that, in the judgment of such person, he or she has made such examination or investigation as
is necessary to enable him or her to express an informed judgment as to whether or not such action is permitted by the Note; and
(d) a statement as to whether or not, in the judgment of such person, such action is permitted by the Note, if and to the extent
required by the provisions of the Note.
“open of business” means 9:00 a.m. (New York City time).
“Ordinary Shares” means collectively the Class A Shares, the Class B Shares and the Class C Shares.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation of ordinary share capital of the Company (including ordinary share capital held in the form of ADSs)
with any of the aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability
company, organization, entity or Governmental Authority.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class
A Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Class A Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted
into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$2.98 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Note and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to
under the provisions in Section 4.1.
“Reference Property” and “unit of Reference Property” have the meanings ascribed thereto in Section 4.3.
“Relevant Securities” shall have the meaning ascribed to such term in Section 4.1(f).
“Repurchase Price” means any of the EoD Repurchase Price, the Fundamental Change Repurchase Price and the Maturity
Repurchase Price, as applicable.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act.
“Spin-Off” shall have the meaning ascribed to such term in Section 4.1(c).
“Subscription Agreement” shall have the meaning ascribed to such term in the Preamble.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint stock company, joint venture or
other organization or entity, whether incorporated or unincorporated, which is Controlled by such Person and, for the avoidance
of doubt, the Subsidiaries of any Person shall include any variable interest entity over which such Person or any of its
Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such Person in accordance
with GAAP applicable to such Person.
“Successor Company” shall have the meaning ascribed to such term in Section 7.1(a).
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on The NASDAQ Global Market or, if the ADSs (or such other security) are not then listed on
The NASDAQ Global Market, on the principal other U.S. national or regional securities exchange on which the ADSs (or such
other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities
exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale
Price with respect to the ADSs (or closing sale price for such other security) is available on such securities exchange or market;
provided that if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day.
“Transaction Documents” means the Note, the Subscription Agreement, the Convertible Senior Notes due 2022 and each of the
other agreements and documents entered into or delivered by the Company, the Holder or their respective Affiliates in
connection with the transactions contemplated by the Subscription Agreement.
“Trigger Event” shall have the meaning ascribed to such term in Section 4.1(c).
“U.S.” means United States.
“US$” or “$” means the United States dollar, the lawful currency of the United States of America.
“Valuation Period” shall have the meaning ascribed to such term in Section 4.1(c).
2. INTEREST; PAYMENTS; DEFAULTS
2.1 Interest Rate. The principal amount outstanding under the Note shall not bear any interest, except for any interest on the
Defaulted Amounts in accordance with Section 2.6.
2.2 Payment. All amounts payable on or in respect of the Note or the indebtedness evidenced hereby shall be paid to the Holder in
U.S. dollars, in immediately available funds on the date that any principal (or interest, in accordance with Section 2.6) or any
Repurchase Price is due and payable hereunder. The Company shall make such principal (or interest, in accordance with Section
2.6) or such payment of Repurchase
Price to the Holder by wire transfer of immediately available funds for the account of the Holder or any of its Affiliates as may
be designated by the Holder in writing from time to time; provided that any change to such accounts shall be notified in writing
to the Company at least two (2) Business Days prior to the relevant payment date. If any such payment date or the Maturity
Date falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day and no
interest on such payment will accrue in respect of the delay.
2.3 Seniority. The Note ranks (a) senior in right of payment to any of the Company’s present and future indebtedness that is
expressly subordinated in right of payment to the Note, (b) equal in right of payment to any of the Company’s present and future
indebtedness and other liabilities of the Company that are not so subordinated, (c) junior in right of payment to any of the
Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (d) structurally junior to
all indebtedness incurred by the Company’s Subsidiaries and their other liabilities (including trade payables).
2.4 Events of Default. For purposes of the Note, an “Event of Default” shall be deemed to have occurred if any of the following
events occurs, whatever the reason or cause for such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Failure to Pay. The Company defaults in the payment of principal of the Note when due and payable on the Maturity
Date or upon declaration of acceleration, or the Company defaults in the payment of any Repurchase Price upon any
required repurchase, in each case in accordance with the terms hereof;
(b) Breach of Conversion Obligation. The Company fails to comply with its obligation to convert all or a portion of the
Note in accordance with Article 3 upon Holder’s exercise of its conversion rights and such failure continues for a
period of five (5) Business Days;
(c) Breach of Article 7. The Company fails to comply with its obligations under Article 7;
(d) Breach of Other Obligations. The Company fails for sixty (60) days after written notice from the Holder has been
received by the Company to comply with any of its other agreements contained in any Transaction Document to which
the Company is a party;
(e) Cross Default. Any default by the Company or any Subsidiary of the Company with respect to any mortgage,
agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced,
any indebtedness for money borrowed in excess of US$50 million (or the foreign currency equivalent thereof) in the
aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be
created (A) resulting in such indebtedness becoming or being declared due and payable or (B) constituting a failure to
pay the principal or
interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of
acceleration or otherwise;
(f) Adverse Judgment. A final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or
more (excluding any amounts covered by insurance) is rendered against the Company or any Subsidiary of the
Company, which judgment is not paid, bonded or otherwise discharged or stayed within sixty (60) days after the earlier
of (i) the date on which the right to appeal thereof has expired if no such appeal has commenced and (ii) the date on
which all rights to appeal have been extinguished;
(g) Trading Suspension. The ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the
Note) have been suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select
market or The NASDAQ Global Market (or any of their respective successors) for a period of ninety (90) consecutive
trading days or for more than one hundred and eighty (180) trading days in any twelve (12)-month period;
(h) Bankruptcy. The Company, any Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a
“significant subsidiary” as defined in rule 1-02(w) of Regulation S-X under the Exchange Act shall commence a
voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to the
Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under any bankruptcy, liquidation,
insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Company, such Significant Subsidiary or such other Subsidiaries or all or
substantially all of its or their property, or shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its or their debts as they become due; or
(i) Involuntary Proceedings. An involuntary case or other proceeding shall be commenced against the Company, any
Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a “significant subsidiary” as defined
in rule 1-02(w) of Regulation S-X under the Exchange Act seeking liquidation, winding-up, reorganization or other
relief with respect to the Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under
any bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of the Company, such Significant Subsidiary or such
other Subsidiaries or all or substantially all of its or their property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of sixty (60) consecutive days.
2.5 Consequences of Event of Default.
(a) If one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any Governmental Authority), then,
(i) in each and every such case (other than an Event of Default specified in Section 2.4(h) or Section 2.4(i)),
unless the principal of the Note shall have already become due and payable, the Holder may by notice in
writing to the Company (the “EoD Notice”) to require the Company to repurchase for cash all of the Note or
any portion thereof on the fifth (5 ) Business Day after the date of the EoD Notice at a repurchase price (the
“EoD Repurchase Price”) equal to (A) 100% of the principal amount thereof, plus (B) a premium equal to the
aggregate interest that would have accrued on such principal amount over the period starting from (and
including) the date of the Issue Date and ending on (and including) the date when the EoD Repurchase Price
is made in full, if the Note were to bear interest at a rate of 2.0% per annum, accrued daily and computed on
the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual
days elapsed over a 30-day month, and plus (C) all other amounts due and payable on or in respect of the Note
(including any accrued and unpaid interest on the Defaulted Amounts pursuant to Section 2.6), if any; or
th
(ii) if an Event of Default specified in Section 2.4(h) or Section 2.4(i) occurs and is continuing, the Company
shall promptly repurchase for cash all of the Note at a repurchase price equal to the EoD Repurchase Price
without any action on the part of the Holder.
(b) Section 2.5(a), however, is subject to the conditions that if, at any time after the outstanding principal of the Note shall
have been so declared due and payable, and before any arbitral award for the payment of the monies due shall have
been obtained or entered as hereinafter provided, the Company has paid or deposited with the Holder a sum sufficient
to pay the outstanding principal of and any other amounts due and payable on the Note that shall have become due
otherwise than by acceleration (with interest on the Defaulted Amounts), and if (1) rescission would not conflict with
any such arbitral award and (2) any and all existing Events of Default under the Note, other than the nonpayment of the
principal of and any other amounts due and payable on the Note that shall have become due solely by such
acceleration, shall have been cured or waived, then and in every such case the Holder, by written notice to the
Company, may waive all Default or Events of Default with respect to the Note and rescind and annul such declaration
and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Note; but no such waiver or rescission and annulment shall extend to or
shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. Notwithstanding
anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any Default
or Event of Default resulting from (i) the nonpayment of the principal of, or any other amounts due and payable on, the
Note or (ii) a failure to pay or deliver, as the case may be, the consideration due upon conversion of the Note.
2.6 Defaulted Amounts. Any Defaulted Amounts shall accrue interest at a rate equal to three percent (3.0%) per annum accrued
daily during the period from (and including) such relevant payment date and ending on (and including) the date on which such
Defaulted Amounts and such interest thereon are fully paid, and such Defaulted Amounts together with such interest thereon
pursuant to this Section 2.6 shall be paid by the Company to the Holder by wire transfer of immediately available funds
pursuant to the procedures set forth in Section 2.2.
3. CONVERSION
3.1 Conversion by Holder. Subject to and upon compliance with the provisions of this Article 3, the Holder shall have the right, at
the Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral
thereof) of the Note to the Company’s fully paid Class A Shares at the applicable Conversion Rate at any time during the
Conversion Period.
3.2 Conversion Price; Conversion Rate. Subject to adjustments as provided in Article 4, the initial conversion price shall be equal
to US$2.98 per Class A Share, representing an initial conversion rate of 335.5705 Class A Shares (the “Conversion Rate”) per
US$1,000 principal amount of the Note.
3.3 Conversion Procedure; Settlement Upon Conversion.
(a) This Note shall be deemed to have been converted immediately prior to the close of business on the date (the
“Conversion Date”) that is the Maturity Date, provided that the Holder has delivered a duly completed irrevocable
written notice to the Company (the “Conversion Notice”) to the Company during the Conversion Period. Within five
(5) Business Days after the delivery of the Note and the Conversion Notice to the Company, the Company shall (i) take
all actions and execute all documents necessary to effect the issuance of the full number of Class A Shares to which the
Holder shall be entitled in satisfaction of any conversion pursuant to Section 3.1, (ii) deliver to the Holder certificate(s)
representing the number of Class A Shares delivered upon each such conversion, (iii) deliver to the Holder a certified
copy of the register of members of the Company, reflecting the Holder’s ownership of the Class A Shares delivered
upon each such conversion, and (iv) cancel the Note. No Conversion Notice may be delivered and the Note may not be
surrendered by a Holder for conversion thereof if the Holder has also delivered a Fundamental Change Repurchase
Notice to the Company in respect of the Note and not validly withdrawn such Fundamental Change Repurchase Notice
in accordance with Article 5.
(b) [Reserved]
(c) If the Holder submits the Note for conversion, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the delivery of the Class A Shares upon such conversion of the Note, unless the tax is due because
the Holder requests such Class A Shares to be issued in a name other than the Holder’s name, in which case (i) if in the
name of any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any
other Person, the Holder shall pay that tax. The Company shall
pay the relevant fees for issuance of the Class A Shares and shall pay the relevant depositary’s fees for any future
conversion of the issued Class A Shares into the ADSs.
(d) Except as provided in Section 4.1, no adjustment shall be made for dividends on any Class A Shares delivered upon
any conversion of this Note as provided in this Article 3.
(e) Without prejudice to the Holder’s right to receive the interest in accordance with Section 3.3(h), the Company’s
settlement of each conversion pursuant to this Article 3 shall be deemed to satisfy in full its obligation to pay the
principal amount of the Note converted.
(f) The Holder in whose name the certificate for any Class A Shares delivered upon conversion is registered shall be
treated as a holder of record of such Class A Shares as of the close of business on the relevant Conversion Date. Upon
a conversion of the entire outstanding amount of the Note, the Holder shall no longer be a holder of the Note
surrendered for conversion.
(g) The Company shall not issue any fractional Class A Share upon conversion of the Note and shall instead pay cash in
lieu of any fractional Class A Share deliverable upon conversion based on the Last Reported Sale Price of the Class A
Shares on the relevant Conversion Date.
(h) Nothing in this Article 3 shall prejudice the Holder’s entitlement to receive interest on any of the Defaulted Amounts
in accordance with Section 2.6.
3.4 Without prejudice to any other provision in this Note, the Holder may elect to convert all or any portion (if the portion to be
converted is US$1,000 principal amount or an integral thereof) of the Note to ADSs (each representing one Class A Share) at
the applicable Conversion Rate at any time during the Conversion Period and the provisions in this Article 3 shall apply mutatis
mutandis; provided that, the Company shall pay (A) any documentary, stamp or similar issue or transfer tax due on the delivery
of such ADSs upon conversion of the Note (or the issuance of the underlying Class A Shares), unless the tax is due because the
Holder requests such ADSs to be issued in a name other than the Holder’s name, in which case (i) if in the name of any Person
which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any other Person, the Holder shall
pay that tax; and (B) the depositary’s fees for issuance of such ADSs.
4. ADJUSTMENTS
4.1 Adjustment of Conversion Rate. If the number of Class A Shares represented by the ADSs is changed, after the date of this
Note, for any reason other than one or more of the events described in this Section 4.1, the Company shall make an appropriate
adjustment to the Conversion Rate such that the number of Class A Shares represented by the ADSs upon which any conversion
of this Note is based remains the same.
Notwithstanding the adjustment provisions described in this Section 4.1, if the Company distributes to holders of the Class A
Shares any cash, rights, options,
warrants, shares of capital stock or similar equity interest, evidences of indebtedness or other assets or property of the Company
(but excluding Expiring Rights) and a corresponding distribution is not made to holders of the ADSs, but, instead, the ADSs
shall represent, in addition to Class A Shares, such cash, rights, options, warrants, shares of Capital Stock or similar equity
interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the Conversion Rate
described in this Section 4.1 shall not be made until and unless a corresponding distribution (if any) is made to holders of the
ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and not
on the distribution made to the holders of the Class A Shares. However, in the event that the Company issues or distributes to all
holders of the Class A Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall
adjust the Conversion Rate pursuant to Section 4.1(b) (in the case of in-the-money Expiring Rights entitling holders of the Class
A Shares for a period of not more than 45 calendar days after the announcement date of such issuance to subscribe for or
purchase Class A Shares or ADSs) or Section 4.1(c) (in the case of all other Expiring Rights).
For the avoidance of doubt, if any event described in this Section 4.1 results in a change to the number of Class A Shares
represented by the ADSs, then such change shall be deemed to satisfy the Company’s obligation to effect the relevant
adjustment to the Conversion Rate on account of such event to the extent such change produces the same economic result as the
adjustment to the Conversion Rate that would otherwise have been on account of such event.
Subject to the foregoing, the Conversion Rate shall be adjusted from time to time by the Company if any of the following events
occurs, except that the Company shall not make any adjustments to the Conversion Rate if the Holder participates (other than in
the case of a share split or share combination), at the same time and upon the same terms as holders of the Class A Shares and
solely as a result of holding the Note, in any of the transactions described in this Section 4.1, without having to convert the
Note, as if it held a number of Class A Shares equal to the Conversion Rate, multiplied by the principal amount of the Note held
by the Holder.
(a) If the Company exclusively issues Class A Shares as a dividend or distribution on the Class A Shares, or if the
Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following
formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution, or immediately prior to the close of business on the effective date of such share split or share
combination, as applicable;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date or immediately
after the close of business on such effective date, as applicable;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date or
immediately prior to the close of business on such effective date, as applicable; and
OS1 = the number of Class A Shares outstanding immediately after giving effect to such dividend, distribution, share
split or share combination.
Any adjustment made under this Section 4.1(a) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution, or immediately after the open of business on the effective date for such
share split or share combination, as applicable. If any dividend or distribution of the type described in this Section
4.1(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date
the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be
in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Class A Shares (directly in or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date
of such issuance, to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A
Share that is less than the average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of
such issuance, the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date;
X = the total number of Class A Shares (directly or in the form of ADSs) deliverable pursuant to such rights,
options or warrants; and
Y = the number of Class A Shares equal to (i) the aggregate price payable to exercise such rights, options or
warrants, divided by (ii) the average of the
Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period ending on, and including,
the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.
Any increase made under this Section 4.1(b) shall be made successively whenever any such rights, options or warrants
are issued and shall become effective immediately after the close of business on the Record Date for the Class A
Shares (directly or in the form of ADSs), as applicable, for such issuance. To the extent that Class A Shares or ADSs
are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Class A Shares actually delivered (directly or in the
form of ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect if such the Record Date for such issuance had not occurred.
For purposes of this Section 4.1(b), in determining whether any rights, options or warrants entitle the holders to
subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than
such average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending
on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in
determining the aggregate offering price of such Class A Shares (directly or in the form of ADSs), there shall be taken
into account any consideration received by the Company for such rights, options or warrants and any amount payable
on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of
Directors acting in good faith.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders
of the Class A Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which
an adjustment was effected pursuant to Section 4.1(a) or Section 4.1(b), (ii) dividends or distributions paid exclusively
in cash as to which an adjustment was effected pursuant to Section 4.1(d), and (iii) Spin-Offs as to which the
provisions set forth below in this Section 4.1(c) shall apply (any of such shares of Capital Stock, evidences of
indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the
Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such
distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV = the fair market value (as determined by the Board of Directors acting in good faith) of the Distributed Property
with respect to each outstanding Class A Share (directly or in the form of ADSs) on the Record Date for such
distribution.
Any increase made under the portion of this Section 4.1(c) above shall become effective immediately after the close of
business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall
be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared.
Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in
lieu of the foregoing increase, the Holder shall receive, in respect of each US$1,000 principal amount thereof, at the
same time and upon the same terms as holders of the Class A Shares receive the Distributed Property, the amount and
kind of Distributed Property the Holder would have received if the Holder owned a number of Class A Shares equal to
the Conversion Rate in effect on the Record Date for the distribution.
With respect to an adjustment pursuant to this Section 4.1(c) where there has been a payment of a dividend or other
distribution on the Class A Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or
similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued,
will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall
be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR1 = the Conversion Rate in effect immediately after the end of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to
holders of the Class A Shares (directly or in the form of ADSs) applicable to one Class A Share (determined by
reference to the definition of Last Reported Sale Price as if references therein to the ADSs were to such Capital Stock
or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0 = the average of the Last Reported Sale Prices of the Class A Shares over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur on the last Trading Day of the
Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 4.1(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of
Trading Days as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the
Conversion Date in determining the Conversion Rate.
For purposes of this Section 4.1(c) (and subject in all respect to Section 4.1(f)), rights, options or warrants distributed
by the Company to all holders of the Class A Shares (directly or in the form of ADSs) entitling them to subscribe for or
purchase shares of the Company’s Capital Stock, including Class A Shares (either initially or under certain
circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):
(i) are deemed to be transferred with such Class A Shares (directly or in the form of ADSs); (ii) are not exercisable;
and (iii) are also issued in respect of future issuances of the Class A Shares (directly or in the form of ADSs), shall be
deemed not to have been distributed for purposes of this Section 4.1(c) (and no adjustment to the Conversion Rate
under this Section 4.1(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights,
options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 4.1(c). If any such right, option or warrant, including any such
existing rights, options or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence
of which such rights, options or warrants become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date
of distribution and Record Date with respect to new rights, options or warrants with such rights (in which case the
existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the
holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or
any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that
was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under
this Section 4.1(c) was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed
or purchased without exercise by any holders thereof, upon such final redemption or purchase (x)
the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the
Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event,
as the case may be, as though it were a cash distribution, equal to the per Class A Share redemption or purchase price
received by a holder or holders of Class A Shares (directly or in the form of ADSs) with respect to such rights, options
or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Class A Shares
(directly or in the form of ADSs) as of the date of such redemption or purchase, and (2) in the case of such rights,
options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion
Rate shall be readjusted as if such rights, options and warrants had not been issued.
For purposes of Section 4.1(a), Section 4.1(b) and this Section 4.1(c), any dividend or distribution to which this Section
4.1(c) is applicable that also includes one or both of:
(A) a dividend or distribution of Class A Shares (directly or in the form of ADSs) to which Section 4.1(a)
is applicable (the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 4.1(b) is applicable (the
“Clause B Distribution”),
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be
deemed to be a dividend or distribution to which this Section 4.1(c) is applicable (the “Clause C Distribution”) and any
Conversion Rate adjustment required by this Section 4.1(c) with respect to such Clause C Distribution shall then be
made, and (2) the Clause A Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C
Distribution and any Conversion Rate adjustment required by Section 4.1(a) and Section 4.1(b) with respect thereto
shall then be made, except that, if determined by the Company (I) the “Record Date” of the Clause A Distribution and
the Clause B Distribution shall be deemed to be the Record Date of the Clause C Distribution and (II) any Class A
Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be
deemed not to be “outstanding immediately prior to the close of business on such Record Date or immediately after the
open of business on such effective date, as applicable” within the meaning of Section 4.1(a) or “outstanding
immediately prior to the close of business on such Record Date” within the meaning of Section 4.1(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Class A Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the Last Reported Sale Price of the Class A Shares on the Trading Day immediately preceding the Ex-Dividend
Date for such dividend or distribution; and
C = the amount in cash per Class A Share the Company distributes to all or substantially all holders of the Class A
Shares (directly or in the form of ADSs).
Any increase pursuant to this Section 4.1(d) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall
be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or
distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been
declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above),
in lieu of the foregoing increase, the Holder shall receive, for each US$1,000 principal amount of the Note, at the same
time and upon the same terms as holders of the Class A Shares (directly or in the form of ADSs), the amount of cash
that the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate on
the Record Date for such cash dividend or distribution.
(e) If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A
Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the
payment per Class A Share exceeds the average of the Last Reported Sale Prices of the Class A Shares over the 10
consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender
or exchange offer expires, the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors acting in
good faith) paid or payable for Class A Shares (directly or in the form of ADSs) purchased in such tender or exchange
offer;
OS0 = the number of Class A Shares outstanding immediately prior to the date such tender or exchange offer expires
(prior to giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer);
OS1 = the number of Class A Shares outstanding immediately after the date such tender or exchange offer expires
(after giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer); and
SP = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 4.1(e) shall occur at the close of business on the 10th
Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange
offer expires; provided that in respect of any conversion within the 10 Trading Days immediately following, and
including, the expiration date of any tender or exchange offer, references in this Section 4.1(e) with respect to 10
Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed from, and including,
the Trading Day next succeeding the expiration date of such tender or exchange offer to, and including, the Conversion
Date in determining the Conversion Rate. No adjustment to the Conversion Rate under this Section 4.1(e) shall be
made if such adjustment would result in a decrease in the Conversion Rate. In the event that the Company or one of the
Company’s Subsidiaries is obligated to purchase Class A Shares (directly or in the form of ADSs) pursuant to any such
tender offer or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable Law from
effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Note
or on the exercise of any other rights, existing as of the Issue Date, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into,
exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition
only excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise
or exchange for Ordinary
Shares or ADSs issued or granted in accordance with any employee incentive plan of the Company), in each case at a
consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares,
such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each
ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted based on the following formula:
where:
CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant
Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of
Ordinary Shares then represented by each ADS; and
C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,
provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to
be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange
for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options,
warrants or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Shares or ADSs
or any securities convertible into or exchangeable for Class A Shares or ADSs or the right to purchase Class A Shares
or ADSs or such convertible or exchangeable securities.
(h) In addition to those adjustments required by subsections (a), (b), (c), (d), (e) and (f) of this Section 4.1, and to the
extent permitted by applicable Law and subject to the applicable rules of The NASDAQ Global Market and any other
securities exchange on which any of the Company’s securities are then listed, the Company from time to time may
increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors
determines that such increase would be in the Company’s best interest, and the Company may (but is not required to)
increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A Shares or the ADSs or
rights to purchase Class A Shares or ADSs in connection with a dividend or
distribution of Class A Shares or ADSs (or rights to acquire Class A Shares or ADSs) or similar event.
(i) Notwithstanding anything to the contrary in this Section 4.1, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Class A Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional
optional amounts in Class A Shares or ADSs under any plan;
(ii) upon the issuance of any Class A Shares or ADSs or options or rights to purchase those Class A Shares or ADSs
pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by
the Company or any of the Company’s Subsidiaries;
(iii) upon the issuance of any Class A Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the
date this Note was first issued;
(iv) solely for a change in the par value of the Class A Shares or ADSs; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Section 4.1 shall be made by the Company and shall be made to the
nearest one-ten thousandth (1/10,000) of a Class A Shares.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment
becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder.
(l) For purposes of this Article 4, the number of Class A Shares at any time outstanding shall not include Class A Shares
held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any
dividend or make any distribution on Class A Shares held in the treasury of the Company (directly or in the form of
ADSs), but shall include Class A Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A
Shares.
(m) For purposes of this Section 4.1, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as
applicable.
4.2 Adjustments of Prices. Whenever any provision of this Note requires the Company to calculate the Last Reported Sale Prices over
a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment to
the Conversion Rate that becomes effective pursuant to Section 4.1, or any event requiring an adjustment to the Conversion
Rate pursuant to Section 4.1 where the Record Date, effective date or expiration date, as the case may be, of the event occurs, at
any time during the period when such Last Reported Sale Prices are to be calculated.
4.3 Effect of Recapitalizations, Reclassifications and Changes of the Class A Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Class A Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries substantially as an entirety; or
(iv) any statutory share exchange,
in each case, as a result of which the Class A Shares (directly or in the form of ADSs) would be converted into, or
exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such
event, a “Merger Event”), then, prior to or at the effective time of such Merger Event, the Company or the successor or
purchasing Person, as the case may be, shall execute an amendment to this Note providing that, at and after the
effective time of such Merger Event, the right to convert the Note shall be changed into a right to convert the Note into
the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination
thereof) that a holder of a number of Class A Shares equal to the Conversion Rate immediately prior to such Merger
Event would have owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property”
meaning the kind and amount of Reference Property that a holder of one Class A Share is entitled to receive) upon
such Merger Event; provided, however, that at and after the effective time of the Merger Event the number of Class A
Shares otherwise deliverable upon any conversion of the Note in accordance with Article 3 shall instead be deliverable
in the amount and type of Reference Property that a holder of that number of Class A Shares would have been entitled
to receive in such Merger Event.
If the Merger Event causes the Class A Shares (directly or in the form of ADSs) to be converted into, or exchanged for,
the right to receive more than a single type of consideration (determined based in part upon any form of holder
election), then (i) the Reference Property into which the Note will be convertible shall be deemed to be the weighted
average of the types and amounts of consideration received by the holders of Class A Shares (directly or in the form of
ADSs) that affirmatively make such an election, and (ii) the unit of Reference Property for purposes of the immediately
preceding paragraph shall refer to the consideration referred to in clause (i) attributable
to one Class A Shares. The Company shall provide written notice to the Holder of such weighted average as soon as
practicable after such determination is made.
Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 4 (it being
understood that no such adjustments shall be required with respect to any portion of the Reference Property that does
not consist of shares of Common Equity (however evidenced) or depositary receipts in respect thereof). If, in the case
of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including
cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the
case may be, in such Merger Event, then such other Person shall also execute such amendment, and such amendment
shall contain such additional provisions to protect the interests of the Holder, including the rights of the Holder to
require the Company to repurchase this Note upon a Fundamental Change pursuant to Article 5 as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) None of the foregoing provisions shall affect the right of the Holder to convert this Note into Class A Shares as set
forth in Article 3 prior to the effective date of such Merger Event.
(c) The above provisions of this Section 4.3 shall similarly apply to successive Merger Events.
4.4 No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Article 4 shall be required to be
made to the Conversion Rate if the Company receives written notice from the Holder that no such adjustment is required.
4.5 Certain Covenants.
(a) The Company covenants that all Class A Shares delivered upon any conversion of this Note will be fully paid and non-
assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company covenants that if any Class A Shares to be provided for the purpose of any conversion of this Note
require registration with or approval of any Governmental Authority under any Law before such Class A Shares may
be validly issued upon conversion, the Company will, to the extent then permitted by applicable Law, secure such
registration or approval, as the case may be.
(c) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to
any conversion of this Note into Class A Shares, and shall reserve for issuance an adequate number of Class A Shares,
such that Class A Shares can be delivered in accordance with the terms of this Note upon any conversion hereunder. In
addition, the Company further covenants to provide the Holder with a reasonably detailed description of the
mechanics for the delivery of Class A Shares upon any conversion of this Note upon request.
(d) The parties hereto acknowledge and agree that the Holder may only resell the Note, the Class A Shares delivered upon
conversion of all or any portion of the Note pursuant to an effective registration statement or an exemption from, or in
a transaction not subject to, the registration requirements of the Securities Act and other applicable securities Laws.
4.6 Notice for Certain Actions. In case of any (a) action by the Company or one of its Subsidiaries that would require an adjustment
in the Conversion Rate pursuant to Section 4.1, (b) Merger Event or (c) voluntary or involuntary dissolution, liquidation or
winding-up of the Company or any of its Subsidiaries, then, in each case (unless notice of such event is otherwise required
pursuant to another provision of this Note), the Company shall deliver a written notice to the Holder, as promptly as possible but
in any event at least 20 days prior to the applicable date hereinafter specified, stating (i) the date on which a record is to be taken
for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be taken, the date as of which
the holders of Class A Shares, of record are to be determined for the purposes of such action by the Company or one of its
Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Class A Shares, of record shall be entitled to exchange their
Class A Shares, for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of
its Subsidiaries, dissolution, liquidation or winding-up unless otherwise provided for pursuant to any applicable Laws, the
constitutional documents of the Company or any such Subsidiaries or any agreement or document to which the Company or any
such Subsidiaries is a party; provided that nothing herein shall adversely affect any right, claim or other remedies, at law or
contract, of the Holder arising as a result of or in connection with such failure or defect.
4.7 Termination of Depository Receipt Program. If the Class A Shares cease to be represented by ADSs issued under a depositary
receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a
reference to the number of Class A Shares (and other property, if any) represented by the ADSs on the last day on which the
ADSs represented the Class A Shares and as if the Class A Shares and the other property had been distributed to holders of the
ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last
Reported Sale Price of the Class A Shares, and other appropriate adjustments, including adjustments to the Conversion Rate,
will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any
other currency are required, the exchange rate in effect on the date of determination will apply.
5. REPURCHASE
5.1 Repurchase on Maturity Date. Unless previously repurchased or surrendered and converted, the Company shall, without any
action on the part of the Holder, redeem this Note in whole on the Maturity Date at a price (the “Maturity Repurchase Price”)
equal to (A) the outstanding principal amount, plus (B) a premium which shall be equal to 2.0% of the outstanding principal
amount, and plus (C) all other amounts due and payable on or in respect of the Note (including any accrued and unpaid interest
on the Defaulted Amounts), if any.
5.2 Repurchase on Fundamental Change.
(a) If a Fundamental Change occurs at any time, the Holder shall have the right, at its option, to require the Company to
repurchase for cash all of the Note or any portion thereof on the date (the “Fundamental Change Repurchase Date”)
notified in writing by the Company that is not less than twenty (20) Business Days and not more than thirty-five (35)
Business Days following the date of the Fundamental Change Company Notice (as defined below) at a repurchase
price (the “Fundamental Change Repurchase Price”) equal to (A) 100% of the principal amount (or such portion
thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued on such
principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of
the Issue Date and ending on (and including) the Fundamental Change Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month, and plus (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) Repurchase of the Note under this Section 5.2 shall be made, at the option of the Holder thereof, upon: (i) delivery by
the Holder to the Company of a duly completed notice (the “Fundamental Change Repurchase Notice”), in the form
attached hereto as Exhibit A, on or before the close of business on the second Business Day immediately preceding the
Fundamental Change Repurchase Date; and (ii) delivery of the Note to the Company at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer), such delivery being a
condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor. Each Fundamental Change
Repurchase Notice shall state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the
Company in accordance with Section 5.5.
(d) On or before the twentieth (20 ) calendar day after the occurrence of the effective date of a Fundamental Change, the
Company shall provide to the Holder a written notice (the “Fundamental Change Company Notice”) of the occurrence
of the effective date of the Fundamental Change and of the repurchase right at the option of the Holder arising as a
result thereof. Each Fundamental Change Company Notice shall specify:
th
(i) the events causing the Fundamental Change;
(ii) the date of the Fundamental Change;
(iii) the last date on which the Holder may exercise the repurchase right pursuant to this Section 5.2;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) if applicable, the Conversion Rate and any adjustments to the Conversion Rate;
(vii) that the Note may be converted only if any Fundamental Change Repurchase Notice that has been delivered
by the Holder has been withdrawn in accordance with the terms of this Note; and
(viii) the procedures in accordance with the terms of this Note that the Holder must follow to require the Company
to repurchase the Note.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holder’s repurchase rights
or affect the validity of the proceedings for the repurchase of the Note pursuant to this Section 5.2.
5.3 [Reserved]
5.4 No Repurchase in the Event of Acceleration. Notwithstanding the foregoing, the Note may not be repurchased by the Company
on any date at the option of the Holder upon a Fundamental Change if the principal amount of the Note has been accelerated,
and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a
default by the Company in the payment of the Fundamental Change Repurchase Price with respect to the Note).
5.5 Withdrawal of Fundamental Change Repurchase Notice. A Fundamental Change Repurchase Notice may be withdrawn (in
whole or in part) by means of a duly completed written notice of withdrawal delivered to the Company in accordance with this
Section 5.5 at any time prior to the close of business on the second Business Day immediately preceding the relevant
Fundamental Change Repurchase Date, specifying (a) the principal amount of the Note with respect to which such notice of
withdrawal is being submitted and (b) the principal amount, if any, of the Note that remains subject to the original Fundamental
Change Repurchase Notice.
5.6 Payment of Fundamental Change Repurchase Price.
(a) On or prior to 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase
Date, the Company shall set aside, segregate and hold in trust for the benefit of the Holder an amount of money
sufficient to repurchase the applicable portion of the Note to be repurchased at the Fundamental Change Repurchase
Price. Payment for the applicable portion of the Note surrendered for repurchase (and not withdrawn in accordance
with Section 5.5) will be made in accordance with Section 2.2 on the later of (i)
such Fundamental Change Repurchase Date, provided the Holder has satisfied the conditions in this Article 5; and (ii)
the time of delivery of the applicable portion of the Note by the Holder to the Company in the manner required by
Section 5.2.
(b) If by 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase Date, the
Company holds money sufficient to make payment on the applicable portion of the Note to be repurchased on such
date, then, with respect to the applicable portion of the Note that has been properly surrendered for repurchase and not
validly withdrawn in accordance with Section 5.5, on such Fundamental Change Repurchase Date, (i) such portion of
the Note will cease to be outstanding, (ii) interest will cease to accrue on such portion of the Note and (iii) in the event
the entire outstanding amount of the Note is surrendered by the Holder to be repurchased, all other rights of the Holder
will terminate (other than the right to receive the Fundamental Change Repurchase Price).
(c) Upon the surrender of the Note that is to be repurchased in part pursuant to this Article 5, the Company shall execute
and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unrepurchased
portion of the Note.
5.7 Covenant to Comply with Applicable Law upon Repurchase of the Note. In connection with any repurchase offer, the Company
will, if required, comply with all federal and state securities laws in connection with any offer by the Company to repurchase the
Note so as to permit the rights and obligations under this Article 5 to be exercised in the time and in the manner specified in this
Article 5.
6. COVENANTS
6.1 Payment. The Company covenants and agrees that it will cause to be paid the principal of, and any other amounts due and
payable on, the Note or any Repurchase Price at the respective times and in accordance with the terms hereof.
6.2 Existence. Subject to Article 7, the Company shall do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
6.3 No Withholding. All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or
with respect to this Note, including, but not limited to, payments of principal (including, if applicable, the Fundamental Change
Repurchase Price), payments of interest and deliveries of Class A Shares (together with payments of cash for any fractional
Class A Share) upon any conversion of the Note, shall be made without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any
jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business
or through which payment is made or deemed made (or any political subdivision or taxing authority thereof or therein), unless
such withholding or deduction is required by Law or by regulation or governmental policy having the force of law.
6.4 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other Law that would prohibit or forgive the Company from paying all or any portion of the principal of or any other amounts
due and payable on the Note or any Repurchase Price as contemplated herein, wherever enacted, now or at any time hereafter in
force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not, by resort to any such Law,
hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of
every such power as though no such Law had been enacted.
6.5 Compliance Certificates; Statements as to Defaults. The Company shall deliver to the Holder within 120 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) and within 14 days of a written
request made by the Holder a certificate executed by an executive officer of the Company stating that a review has been
conducted of the Company’s activities under this Note and whether the Company has fulfilled its obligations hereunder, and
whether such officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then
continuing and, if so, specifying each such Default and the nature thereof. The Company shall deliver to the Holder, as soon as
possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is
then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is
taking or proposing to take in respect thereof.
6.6 Further Instruments and Acts. Upon request of the Holder, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Note.
6.7 New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of
smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts without
charge within three (3) Business Days after the date of such request, provided that the existing note instrument of this Note shall
be returned by the Holder to the Company for cancellation.
6.8 Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of
indemnity from the Holder reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and cancellation
thereof), the Company shall at its own expense within five (5) Business Days execute and deliver to the Holder, in lieu thereof, a
new Note, dated and bearing interest from the date hereof.
7. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
7.1 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 7.2, the Company shall not consolidate
with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person
unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation,
organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the
Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company)
shall expressly assume all of the obligations of the Company under the Note and the Subscription Agreement; and
(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be
continuing under this Note.
For purposes of this Section 7.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of
one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of
such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis,
shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the
Company to another Person.
7.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and
upon the assumption by the Successor Company of the due and punctual payment of the principal of and any other amounts due
and payable on the Note and any Repurchase Price, the due and punctual delivery or payment, as the case may be, of any
consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of
the Note to be performed by the Company, in each case in accordance with the terms hereof, such Successor Company (if not
the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and
assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. In
the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with
this Article 7 the Person named as the “Company” in the first paragraph of the Note (or any successor that shall thereafter have
become such in the manner prescribed in this Article 7) may be dissolved, wound up and liquidated at any time thereafter and,
except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Note and from its
obligations under the Note.
7.3 No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless any such consolidation, merger, sale,
conveyance, transfer or lease and any such assumption has complied with the provisions of this Article 7.
8. CANCELLATION
After all amounts at any time owing on the Note have been paid in full or upon the conversion of the Note in full pursuant to
Article 3, the Note shall be surrendered to the Company for cancellation and shall not be reissued.
9. NO REDEMPTION OR PREPAYMENT
This Note shall not be redeemable or pre-paid by the Company prior to the Maturity Date, and no sinking fund is provided for
this Note.
10. MISCELLANEOUS
10.1 Termination of Rights. All rights under this Note shall terminate when (a) all amounts at any time owing on the Note have been
paid in full or (ii) the Note is converted in full pursuant to the terms set forth in Article 3.
10.2 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company
contained in the Note shall bind its successors and assigns whether so expressed or not.
10.3 Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or
performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect
by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the
Company.
10.4 Amendments and Waivers; Notice. The amendment or waiver of any term of the Note shall be subject to the written consent of
the Holder and the Company. The provision of notice shall be made pursuant to the terms of the Subscription Agreement.
10.5 Transfer Restrictions.
(a) The Holder covenants that the Note and/or the Class A Shares issuable upon conversion of the Note will only be
disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any transfer of Notes and/or the Class A
Shares issuable upon conversion of the Note other than pursuant to an effective registration statement or Rule 144
promulgated under the Securities Act (“Rule 144”), the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably
acceptable to the Company with respect to transactions of a similar nature, to the effect that such transfer does not
require registration under the Securities Act.
(b) The Holder agrees to the imprinting, until no longer required by this Section 10.5, of the following legend on any
certificate evidencing any of the Note or the Class A Shares issuable upon conversion of the Note:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the
holder of the Note or the Class A Shares
issuable upon conversion of the Note if, unless otherwise required by state securities laws, (i) such securities are
registered for resale under the Securities Act and are transferred to a Holder pursuant to a registration statement that is
effective at the time of such transfer, (ii) in connection with a sale, assignment or other transfer, such Holder provides
the Company with an opinion of counsel, the form and substance of which opinion shall be reasonably acceptable to
the Company with respect to transactions of a similar nature, that the sale, assignment or transfer of the securities may
be made without registration under the applicable requirements of the Securities Act or (iii) such Holder provides the
Company with reasonable assurance that the securities can be sold, assigned or transferred pursuant to Rule 144 or
have been sold under Rule 144.
(c) Notwithstanding anything to the contrary herein, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of
receiving all payments of principal of and any other amounts due and payable on the Note and any Repurchase Price
and for all other purposes whatsoever. This provision is intended to be a book entry system as defined in Treasury
Regulations Section 5f.103-1(c) and shall be interpreted consistently therewith.
10.6 No Third Party Beneficiary. A person who is not a party to this Note shall have no right under the Contracts (Rights of Third
Parties) Ordinance (Chapter 623) to enforce any of its terms.
10.7 Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
10.8 Arbitration.
(a) Any dispute, controversy, difference or claim arising out of or relating to this Note, including the existence, validity,
interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising
out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong
International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the
Notice of Arbitration is submitted.
(b) The law of this arbitration clause shall be Hong Kong law.
(c) The seat of arbitration shall be Hong Kong.
(d) The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the HKIAC rules. The
arbitration proceedings shall be conducted in English.
(e) It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from
courts of competent jurisdiction before the constitution of the arbitral tribunal.
10.9 Force Majeure. In no event shall the Holder be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes,
work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God,
and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being
understood that the Holder shall use reasonable efforts to resume performance as soon as practicable under the circumstances.
10.10 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under
the Note. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices, accrued interest
payable on the Note, if any, and the Conversion Rate of the Note. The Company shall make all these calculations in good faith
and, absent manifest error, the Company’s calculations shall be final and binding on the Holder. The Company shall provide a
schedule of its calculations to the Holder.
10.11 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to
exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of
any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring.
10.12 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no
presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or
its counsel.
[The remainder of this page has been deliberately left blank]
IN WITNESS WHEREOF, the Company has caused the Note to be issued on the date first above written.
COMPANY:
NIO Inc.
By:
Name:
Title:
Exhibit A
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to the
occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the Holder in accordance with Section 5.2 of this Note the entire principal amount of this
Note, or the portion thereof below designated, and the premium amount below calculated in accordance with Section 5.2(a)(B).
Principal amount to be repaid (if less than all): US$_____________
Premium: US$_____________
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
36
Exhibit B
Form of 2022 Convertible Note
37
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS
AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE
SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN EXEMPTION OR
QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B) UNLESS IN COMPLIANCE WITH THE
CONVERTIBLE NOTES SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND SERENE VIEW LIMITED, DATED
SEPTEMBER 4, 2019 (THE “SUBSCRIPTION AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR
HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS SET FORTH
IN THE SUBSCRIPTION AGREEMENT SHALL BE VOID.
US$50,000,000
CONVERTIBLE SENIOR NOTE
[(cid:0)], 2019
Subject to the terms and conditions of this Convertible Senior Note due 2022 (the “Note”), for good and valuable consideration
received, NIO Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands (the
“Company”), promises to pay to the order of Serene View Limited, a company incorporated under the laws of the British Virgin
Islands (such party and any other permitted transferee, the “Holder”), the principal amount of US$50,000,000, plus other
amounts payable provided below, on [ (cid:0) ] (the “Maturity Date”), or such earlier date as may be otherwise provided herein,
unless the outstanding principal is settled in accordance with Article 3 of the Note.
1
The Note is issued pursuant to, and in accordance with, the Convertible Notes Subscription Agreement, dated September 4,
2019 (the “Subscription Agreement”), between the Company and the Holder and is subject to the provisions thereof. Unless the context
requires otherwise, capitalized terms used herein shall have the meaning set forth in Article 1 of this Note.
The following is a statement of the rights of the Holder of the Note and the terms and conditions to which the Note is subject,
and to which the Holder hereof, by the acceptance of the Note, agrees:
1. DEFINITIONS
“ADS” means an American Depositary Share, each of which represents one Class A Share as of the date of this Note.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under
common control with such Person; provided, that
1
NTD: the 3 anniversary of the Issue Date.
rd
1
none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the Purchaser. For purposes of this
definition, “control” when used with respect to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have correlative meanings.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Business Day” means any day other than a Saturday, Sunday or another day on which commercial banks in the People’s
Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau
SAR and Taiwan), Hong Kong SAR or New York are required or authorized by law or executive order to be closed.
“Capital Stock” means for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Class A Shares” means Class A ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class B Shares” means the Class B ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Class C Shares” means the Class C ordinary shares, par value US$0.00025 per share, in the share capital of the Company.
“Clause A Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause B Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“Clause C Distribution” shall have the meaning ascribed to such term in Section 4.1(c).
“close of business” means 5:00 p.m. (New York City time).
“Common Equity” of any Person means ordinary share capital or Capital Stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning ascribed to such term in the Preamble.
“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of
voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities
having the power to elect a majority of
the board of directors or similar body governing the affairs of such Person or securities that represent a majority of the
outstanding voting securities of such Person.
“Conversion Date” shall have the meaning ascribed to such term in Section 3.3.
“Conversion Notice” shall have the meaning ascribed to such term in Section 3.3.
“Conversion Period” shall mean the period starting from (and including the first anniversary of the Issue Date and prior to the
close of business on the second Business Day immediately preceding the Maturity Date.
“Conversion Rate” shall have the meaning ascribed to such term in Section 3.2.
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported Sale
Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading
Day immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall
have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in question,
the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this
definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the
quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition
be deemed to be the amount thereof increased by such similar amount;
and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of
a dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that
dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof
reduced by an amount equal to the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
“Defaulted Amounts” means any amounts on this Note (including, without limitation, the Repurchase Price, principal and
interest) that are payable but are not punctually paid or duly provided for.
“Distributed Property” shall have the meaning ascribed to such term in Section 4.1(c).
“Early Repurchase Date” shall have the meaning ascribed to such term in Section 5.3(a).
“Early Repurchase Notice” shall have the meaning ascribed to such term in Section 5.3(a).
“Early Repurchase Price” shall have the meaning ascribed to such term in Section 5.3(a).
“EoD Notice” shall have the meaning ascribed to such term in Section 2.5(a)
“EoD Repurchase Price” shall have the meaning ascribed to such term in Section 2.5(a).
“Event of Default” shall have the meaning ascribed to such term in Section 2.4.
“Ex-Dividend Date” means the first date on which the Class A Shares, ADSs representing Class A Shares (or other applicable
security), trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance,
dividend or distribution in question, from the Company or, if applicable, from the seller of the Class A Shares, ADSs
representing Class A Shares (or other applicable security) on such exchange or market (in the form of due bills or otherwise) as
determined by such exchange or market.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Class A Shares or ADSs that expire on or prior to the
Maturity Date.
“Fundamental Change” shall be deemed to have occurred if any of the following occurs after the Note is originally issued:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its
Subsidiaries (together with the Company, the “Company Group”), the employee benefit plans of the Company and its
Subsidiaries and any of the Permitted Holders, has become the direct or indirect “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of (i) the Company’s Common Equity (including Common Equity held in the form of
ADSs) representing more than 50% of the voting power of the Company’s Common Equity or (ii) more than 50% of
the outstanding Class A Shares (including Class A Shares held in the form of ADSs); or (B) the Permitted Holders
(together with any of their respective Affiliates) have become the direct or indirect “beneficial owner,” as defined in
Rule 13d-3 under the Exchange Act, of Class A Shares (including Class A Shares held in the form of ADSs)
representing, in the aggregate, more than 65% of the outstanding Class A Shares (including Class A Shares held in the
form of ADSs);
(b) the consummation of (A) any recapitalization, reclassification or change of the Class A Shares or the ADSs (other than
changes resulting from a subdivision or combination) as a result of which the Class A Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation
or merger of the Company, or
any similar transaction, pursuant to which the Class A Shares or the ADSs will be converted into cash, securities or
other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially
all of the consolidated assets of the Company Group, taken as a whole, to any Person other than one of the Company’s
wholly-owned Subsidiaries; provided, however, that a transaction described in clause (B) in which the holders of all
classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than
50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof
immediately after such transaction in substantially the same proportions vis-a-vis each other as such ownership
immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company;
(d) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) cease to be listed
or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
(e) any change in or amendment to the laws, regulations and rules of the PRC or the official interpretation or official
application thereof (a “change in law”) that results in (A) the Company Group (as in existence immediately subsequent
to such change in law), taken as a whole, being legally prohibited from operating substantially all of the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) as of the last
date of the period described in the Company’s consolidated financial statements for the most recent fiscal quarter and
(B) the Company being unable to continue to derive substantially all of the economic benefits from the business
operations conducted by the Company Group (as in existence immediately prior to such change in law) in the same
manner as reflected in the Company’s consolidated financial statements for the most recent fiscal quarter,
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change if at least
90% of the consideration received or to be received by holders of the ADSs, excluding cash payments for any fractional Class A
Shares and cash payments made in connection with dissenters’ appraisal rights, in connection with such transaction or event
consists of shares of Common Equity or ADSs or depositary receipts in respect of Common Equity that are listed or quoted on
any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their
respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event and
as a result of such transaction or event, the Note becomes convertible into such consideration, excluding cash payments for any
fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights.
“Fundamental Change Repurchase Date” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Repurchase Notice” shall have the meaning ascribed to such term in Section 5.2(b).
“Fundamental Change Repurchase Price” shall have the meaning ascribed to such term in Section 5.2(a).
“Fundamental Change Company Notice” shall have the meaning ascribed to such term in Section 5.2(d).
“GAAP” means the generally accepted accounting principles in the United States.
“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local, municipal or other
political subdivision or other government, governmental, regulatory or administrative authority, agency, board, bureau,
department, instrumentality or commission or any court, tribunal, judicial or arbitral body of competent jurisdiction or stock
exchange.
“Holder” shall have the meaning ascribed to such term in the Preamble.
“Issue Date” means [ (cid:0) ], 2019.
“Last Reported Sale Price” of the Class A Shares on any date shall be calculated as (i) the closing sale price per ADS (or if no
closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average
bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional
securities exchange on which the ADSs are traded divided by (ii) the applicable number of Class A Shares then represented by
one ADS. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be (i) the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as
reported by OTC Markets Group Inc. or a similar organization divided by (ii) the applicable number of Class A Shares then
represented by one ADS. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be (i) the average of the midpoint
of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent
investment banking firms selected by the Company for this purpose divided by (ii) the applicable number of Class A Shares
then represented by one ADS.
“Law” means any statute, law, ordinance, regulation, rule, code, order, judgment, writ, injunction, decree or requirement of law
(including common law) enacted, issued, promulgated, enforced or entered by a Governmental Authority.
“Maturity Date” shall have the meaning ascribed to such term in the Preamble.
“Maturity Repurchase Price” shall have the meaning ascribed to such term in Section 5.1.
“Merger Event” shall have the meaning ascribed to such term in Section 4.3.
“Note” shall have the meaning ascribed to such term in the Preamble.
“Officer” means, with respect to the Company, the Chairman, President, the Chief Executive Officer, the Secretary, any
Executive or any Vice President (whether or not designated by a number or numbers or word or words added before or after the
title “Vice President”).
“Officer’s Certificate”, when used with respect to the Company, means a certificate that is delivered to the Holder and that is
signed by the principal executive, financial or accounting officer of the Company who has been duly authorized to sign such
certificate. To the extent applicable, each such certificate shall include (a) a statement that the person making such certificate is
familiar with the requested action and the Note; (b) a brief statement as to the nature and scope of the examination or
investigation upon which the statement contained in such certificate is based; (c) a statement that, in the judgment of such
person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed
judgment as to whether or not such action is permitted by the Note; and (d) a statement as to whether or not, in the judgment of
such person, such action is permitted by the Note, if and to the extent required by the provisions of the Note.
“open of business” means 9:00 a.m. (New York City time).
“Ordinary Shares” means collectively the Class A Shares, the Class B Shares and the Class C Shares.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation of ordinary share capital of the Company (including ordinary share capital held in the form of ADSs)
with any of the aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability
company, organization, entity or Governmental Authority.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class
A Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Class A Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted
into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive
such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$3.12 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Note and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to
under the provisions in Section 4.1.
“Reference Property” and “unit of Reference Property” have the meanings ascribed thereto in Section 4.3.
“Relevant Securities” shall have the meaning ascribed to such term in Section 4.1(f).
“Repurchase Price” means any of the Early Repurchase Price, the EoD Repurchase Price, the Fundamental Change Repurchase
Price and the Maturity Repurchase Price, as applicable.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act.
“Spin-Off” shall have the meaning ascribed to such term in Section 4.1(c).
“Subscription Agreement” shall have the meaning ascribed to such term in the Preamble.
“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint stock company, joint venture or
other organization or entity, whether incorporated or unincorporated, which is Controlled by such Person and, for the avoidance
of doubt, the Subsidiaries of any Person shall include any variable interest entity over which such Person or any of its
Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such Person in accordance
with GAAP applicable to such Person.
“Successor Company” shall have the meaning ascribed to such term in Section 7.1(a).
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on The NASDAQ Global Market or, if the ADSs (or such other security) are not then listed on
The NASDAQ Global Market, on the principal other U.S. national or regional securities exchange on which the ADSs (or such
other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities
exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale
Price with respect to the ADSs (or closing sale price for such other security) is available on such securities exchange or market;
provided that if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day.
“Transaction Documents” means the Note, the Subscription Agreement, the Convertible Senior Notes due 2020 and each of the
other agreements and documents entered into or delivered by the Company, the Holder or their respective Affiliates in
connection with the transactions contemplated by the Subscription Agreement.
“Trigger Event” shall have the meaning ascribed to such term in Section 4.1(c).
“U.S.” means United States.
“US$” or “$” means the United States dollar, the lawful currency of the United States of America.
“Valuation Period” shall have the meaning ascribed to such term in Section 4.1(c).
2. INTEREST; PAYMENTS; DEFAULTS
2.1 Interest Rate. The principal amount outstanding under the Note shall not bear any interest, except for any interest on the
Defaulted Amounts in accordance with Section 2.6.
2.2 Payment. All amounts payable on or in respect of the Note or the indebtedness evidenced hereby shall be paid to the Holder in
U.S. dollars, in immediately available funds on the date that any principal (or interest, in accordance with Section 2.6) or any
Repurchase Price is due and payable hereunder. The Company shall make such principal (or interest, in accordance with Section
2.6) or such payment of Repurchase Price to the Holder by wire transfer of immediately available funds for the account of the
Holder or any of its Affiliates as may be designated by the Holder in writing from time to time; provided that any change to
such accounts shall be notified in writing to the Company at least two (2) Business Days prior to the relevant payment date. If
any such payment date or the Maturity Date falls on a day that is not a Business Day, the required payment will be made on the
next succeeding Business Day and no interest on such payment will accrue in respect of the delay.
2.3 Seniority. The Note ranks (a) senior in right of payment to any of the Company’s present and future indebtedness that is
expressly subordinated in right of payment to the Note, (b) equal in right of payment to any of the Company’s present and future
indebtedness and other liabilities of the Company that are not so subordinated, (c) junior in right of payment to any of the
Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (d) structurally junior to
all indebtedness incurred by the Company’s Subsidiaries and their other liabilities (including trade payables).
2.4 Events of Default. For purposes of the Note, an “Event of Default” shall be deemed to have occurred if any of the following
events occurs, whatever the reason or cause for such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Failure to Pay. The Company defaults in the payment of principal of the Note when due and payable on the Maturity
Date or upon declaration of acceleration, or the Company defaults in the payment of any Repurchase Price upon any
required repurchase, in each case in accordance with the terms hereof;
(b) Breach of Conversion Obligation. The Company fails to comply with its obligation to convert all or a portion of the
Note in accordance with Article 3 upon Holder’s exercise of its conversion rights and such failure continues for a
period of five (5) Business Days;
(c) Breach of Article 7. The Company fails to comply with its obligations under Article 7;
(d) Breach of Other Obligations. The Company fails for sixty (60) days after written notice from the Holder has been
received by the Company to comply with any of its other agreements contained in any Transaction Document to which
the Company is a party;
(e) Cross Default. Any default by the Company or any Subsidiary of the Company with respect to any mortgage,
agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced,
any indebtedness for money borrowed in excess of US$50 million (or the foreign currency equivalent thereof) in the
aggregate of the Company and/or any such Subsidiary, whether such indebtedness now exists or shall hereafter be
created (A) resulting in such indebtedness becoming or being declared due and payable or (B) constituting a failure to
pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase,
upon declaration of acceleration or otherwise;
(f) Adverse Judgment. A final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or
more (excluding any amounts covered by insurance) is rendered against the Company or any Subsidiary of the
Company, which judgment is not paid, bonded or otherwise discharged or stayed within sixty (60) days after the earlier
of (i) the date on which the right to appeal thereof has expired if no such appeal has commenced and (ii) the date on
which all rights to appeal have been extinguished;
(g) Trading Suspension. The ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the
Note) have been suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select
market or The NASDAQ Global Market (or any of their respective successors) for a period of ninety (90) consecutive
trading days or for more than one hundred and eighty (180) trading days in any twelve (12)-month period;
(h) Bankruptcy. The Company, any Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a
“significant subsidiary” as defined in rule 1-02(w) of Regulation S-X under the Exchange Act shall commence a
voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to the
Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under any bankruptcy, liquidation,
insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of the Company, such Significant Subsidiary or such other Subsidiaries or all or
substantially all of its or their property, or shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its or their debts as they become due; or
(i) Involuntary Proceedings. An involuntary case or other proceeding shall be commenced against the Company, any
Significant Subsidiary or any other Subsidiaries which in the aggregate constitute a “significant subsidiary” as defined
in rule 1-02(w) of Regulation S-X under the Exchange Act seeking liquidation, winding-up, reorganization or other
relief with respect to the Company, such Significant Subsidiary or such other Subsidiaries or its or their debts under
any bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of the Company, such Significant
Subsidiary or such other Subsidiaries or all or substantially all of its or their property, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive days.
2.5 Consequences of Event of Default.
(a) If one or more Events of Default shall have occurred and be continuing (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any Governmental Authority), then,
(i) in each and every such case (other than an Event of Default specified in Section 2.4(h) or Section 2.4(i)),
unless the principal of the Note shall have already become due and payable, the Holder may by notice in
writing to the Company (the “EoD Notice”) to require the Company to repurchase for cash all of the Note or
any portion thereof on the fifth (5 ) Business Day after the date of the EoD Notice at a repurchase price (the
“EoD Repurchase Price”) equal to (A) 100% of the principal amount thereof, plus (B) a premium equal to the
aggregate interest that would have accrued on such principal amount over the period starting from (and
including) the date of the Issue Date and ending on (and including) the date when the EoD Repurchase Price
is made in full, if the Note were to bear interest at a rate of 2.0% per annum, accrued daily and computed on
the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual
days elapsed over a 30-day month, and plus (C) all other amounts due and payable on or in respect of the Note
(including any accrued and unpaid interest on the Defaulted Amounts pursuant to Section 2.6), if any; or
th
(ii) if an Event of Default specified in Section 2.4(h) or Section 2.4(i) occurs and is continuing, the Company
shall promptly repurchase for cash all of the Note at a repurchase price equal to the EoD Repurchase Price
without any action on the part of the Holder.
(b) Section 2.5(a), however, is subject to the conditions that if, at any time after the outstanding principal of the Note shall
have been so declared due and payable, and before any arbitral award for the payment of the monies due shall have
been obtained or entered as hereinafter provided, the Company has paid or deposited with the Holder a sum sufficient
to pay the outstanding principal of and any other amounts due and payable on the Note that shall have become due
otherwise than by acceleration (with interest on the Defaulted Amounts), and if (1) rescission would not conflict with
any such arbitral award and (2) any and all existing Events of Default under the Note, other than the nonpayment of the
principal of and any other amounts due and payable on the Note that shall have become due solely by such
acceleration, shall have been cured or waived, then and in every such case the Holder, by written notice to the
Company, may waive all Default or Events of Default with respect to the Note and rescind and annul such declaration
and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Note; but no such
waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall
impair any right consequent thereon. Notwithstanding anything to the contrary herein, no such waiver or rescission and
annulment shall extend to or shall affect any Default or Event of Default resulting from (i) the nonpayment of the
principal of, or any other amounts due and payable on, the Note or (ii) a failure to pay or deliver, as the case may be,
the consideration due upon conversion of the Note.
2.6 Defaulted Amounts. Any Defaulted Amounts shall accrue interest at a rate equal to three percent (3.0%) per annum accrued
daily during the period from (and including) such relevant payment date and ending on (and including) the date on which such
Defaulted Amounts and such interest thereon are fully paid, and such Defaulted Amounts together with such interest thereon
pursuant to this Section 2.6 shall be paid by the Company to the Holder by wire transfer of immediately available funds
pursuant to the procedures set forth in Section 2.2.
3. CONVERSION
3.1 Conversion by Holder. Subject to and upon compliance with the provisions of this Article 3, the Holder shall have the right, at
the Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral
thereof) of the Note to the Company’s fully paid Class A Shares at the applicable Conversion Rate at any time during the
Conversion Period.
3.2 Conversion Price; Conversion Rate. Subject to adjustments as provided in Article 4, the initial conversion price shall be equal to
US$3.12 per Class A Share, representing an initial conversion rate of 320.5128 Class A Shares (the “Conversion Rate”) per
US$1,000 principal amount of the Note.
3.3 Conversion Procedure; Settlement Upon Conversion.
(a) Subject to Section 3.3(b), this Note shall be deemed to have been converted immediately prior to the close of business
on the date (the “Conversion Date”) that the Holder has delivered a duly completed irrevocable written notice to the
Company (the “Conversion Notice”) and the Note for cancellation to the Company. Within five (5) Business Days after
the delivery of the Note and the Conversion Notice to the Company, the Company shall (i) take all actions and execute
all documents necessary to effect the issuance of the full number of Class A Shares to which the Holder shall be
entitled in satisfaction of any conversion pursuant to Section 3.1, (ii) deliver to the Holder certificate(s) representing
the number of Class A Shares delivered upon each such conversion, (iii) deliver to the Holder a certified copy of the
register of members of the Company, reflecting the Holder’s ownership of the Class A Shares delivered upon each such
conversion, and (iv) subject to Section 3.3(b), cancel the Note. No Conversion Notice may be delivered and the Note
may not be surrendered by a Holder for conversion thereof if the Holder has also delivered a Fundamental Change
Repurchase Notice to the Company in respect of the Note and not validly withdrawn such Fundamental Change
Repurchase Notice in accordance with Article 5.
(b) In the event the Holder surrenders this Note pursuant to Section 3.3(a) for partial conversion, the Company shall, in
addition to cancelling the Note upon such surrender, execute and deliver to the Holder a new note denominated in U.S.
dollars and in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without
payment of any service charge by the Holder.
(c) If the Holder submits the Note for conversion, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the delivery of the Class A Shares upon such conversion of the Note, unless the tax is due because
the Holder requests such Class A Shares to be issued in a name other than the Holder’s name, in which case (i) if in the
name of any Person which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in the name of any
other Person, the Holder shall pay that tax. The Company shall pay the relevant fees for issuance of the Class A Shares
and shall pay the relevant depositary’s fees for any future conversion of the issued Class A Shares into the ADSs.
(d) Except as provided in Section 4.1, no adjustment shall be made for dividends on any Class A Shares delivered upon
any conversion of this Note as provided in this Article 3.
(e) Without prejudice to the Holder’s right to receive the interest in accordance with Section 3.3(h), the Company’s
settlement of each conversion pursuant to this Article 3 shall be deemed to satisfy in full its obligation to pay the
principal amount of the Note converted.
(f) The Holder in whose name the certificate for any Class A Shares delivered upon conversion is registered shall be
treated as a holder of record of such Class A Shares as of the close of business on the relevant Conversion Date. Upon
a conversion of the entire outstanding amount of the Note, the Holder shall no longer be a holder of the Note
surrendered for conversion.
(g) The Company shall not issue any fractional Class A Share upon conversion of the Note and shall instead pay cash in
lieu of any fractional Class A Share deliverable upon conversion based on the Last Reported Sale Price of the Class A
Shares on the relevant Conversion Date.
(h) Nothing in this Article 3 shall prejudice the Holder’s entitlement to receive interest on any of the Defaulted Amounts
in accordance with Section 2.6.
3.4 Without prejudice to any other provision in this Note, the Holder may elect to convert all or any portion (if the portion to be
converted is US$1,000 principal amount or an integral thereof) of the Note to ADSs (each representing one Class A Share) at
the applicable Conversion Rate at any time during the Conversion Period and the provisions in this Article 3 shall apply mutatis
mutandis; provided that, the Company shall pay (A) any documentary, stamp or similar issue or transfer tax due on the delivery
of such ADSs upon conversion of the Note (or the issuance of the underlying Class A Shares), unless the tax is due because the
Holder requests such ADSs to be issued in a name other than the Holder’s name, in which case (i) if in the name of any Person
which is an Affiliate of the Holder, the Company shall pay that tax or (ii) if in
the name of any other Person, the Holder shall pay that tax; and (B) the depositary’s fees for issuance of such ADSs.
4. ADJUSTMENTS
4.1 Adjustment of Conversion Rate. If the number of Class A Shares represented by the ADSs is changed, after the date of this
Note, for any reason other than one or more of the events described in this Section 4.1, the Company shall make an appropriate
adjustment to the Conversion Rate such that the number of Class A Shares represented by the ADSs upon which any conversion
of this Note is based remains the same.
Notwithstanding the adjustment provisions described in this Section 4.1, if the Company distributes to holders of the Class A
Shares any cash, rights, options, warrants, shares of capital stock or similar equity interest, evidences of indebtedness or other
assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of
the ADSs, but, instead, the ADSs shall represent, in addition to Class A Shares, such cash, rights, options, warrants, shares of
Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an
adjustment to the Conversion Rate described in this Section 4.1 shall not be made until and unless a corresponding distribution
(if any) is made to holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to
the holders of the ADSs and not on the distribution made to the holders of the Class A Shares. However, in the event that the
Company issues or distributes to all holders of the Class A Shares any Expiring Rights, notwithstanding the immediately
preceding sentence, the Company shall adjust the Conversion Rate pursuant to Section 4.1(b) (in the case of in-the-money
Expiring Rights entitling holders of the Class A Shares for a period of not more than 45 calendar days after the announcement
date of such issuance to subscribe for or purchase Class A Shares or ADSs) or Section 4.1(c) (in the case of all other Expiring
Rights).
For the avoidance of doubt, if any event described in this Section 4.1 results in a change to the number of Class A Shares
represented by the ADSs, then such change shall be deemed to satisfy the Company’s obligation to effect the relevant
adjustment to the Conversion Rate on account of such event to the extent such change produces the same economic result as the
adjustment to the Conversion Rate that would otherwise have been on account of such event.
Subject to the foregoing, the Conversion Rate shall be adjusted from time to time by the Company if any of the following events
occurs, except that the Company shall not make any adjustments to the Conversion Rate if the Holder participates (other than in
the case of a share split or share combination), at the same time and upon the same terms as holders of the Class A Shares and
solely as a result of holding the Note, in any of the transactions described in this Section 4.1, without having to convert the
Note, as if it held a number of Class A Shares equal to the Conversion Rate, multiplied by the principal amount of the Note held
by the Holder.
(a) If the Company exclusively issues Class A Shares as a dividend or distribution on the Class A Shares, or if the
Company effects a share split or share
combination, the Conversion Rate shall be adjusted based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution, or immediately prior to the close of business on the effective date of such share split or share
combination, as applicable;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date or immediately
after the close of business on such effective date, as applicable;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date or
immediately prior to the close of business on such effective date, as applicable; and
OS1 = the number of Class A Shares outstanding immediately after giving effect to such dividend, distribution, share
split or share combination.
Any adjustment made under this Section 4.1(a) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution, or immediately after the open of business on the effective date for such
share split or share combination, as applicable. If any dividend or distribution of the type described in this Section
4.1(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date
the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be
in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Class A Shares (directly in or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date
of such issuance, to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A
Share that is less than the average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of
such issuance, the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
OS0 = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date;
X = the total number of Class A Shares (directly or in the form of ADSs) deliverable pursuant to such rights,
options or warrants; and
Y = the number of Class A Shares equal to (i) the aggregate price payable to exercise such rights, options or
warrants, divided by (ii) the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive
Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the
issuance of such rights, options or warrants.
Any increase made under this Section 4.1(b) shall be made successively whenever any such rights, options or warrants
are issued and shall become effective immediately after the close of business on the Record Date for the Class A
Shares (directly or in the form of ADSs), as applicable, for such issuance. To the extent that Class A Shares or ADSs
are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Class A Shares actually delivered (directly or in the
form of ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the
Conversion Rate that would then be in effect if such the Record Date for such issuance had not occurred.
For purposes of this Section 4.1(b), in determining whether any rights, options or warrants entitle the holders to
subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than
such average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending
on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in
determining the aggregate offering price of such Class A Shares (directly or in the form of ADSs), there shall be taken
into account any consideration received by the Company for such rights, options or warrants and any amount payable
on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of
Directors acting in good faith.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially
all holders of the Class A Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances
as to which an adjustment was effected pursuant to Section 4.1(a) or Section 4.1(b), (ii) dividends or distributions paid
exclusively in cash as to which an adjustment was effected pursuant to Section 4.1(d), and (iii) Spin-Offs as to which
the provisions set forth below in this Section 4.1(c) shall apply (any of such shares of Capital Stock, evidences of
indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the
Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such
distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and
FMV = the fair market value (as determined by the Board of Directors acting in good faith) of the Distributed Property
with respect to each outstanding Class A Share (directly or in the form of ADSs) on the Record Date for such
distribution.
Any increase made under the portion of this Section 4.1(c) above shall become effective immediately after the close of
business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall
be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared.
Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in
lieu of the foregoing increase, the Holder shall receive, in respect of each US$1,000 principal amount thereof, at the
same time and upon the same terms as holders of the Class A Shares receive the Distributed Property, the amount and
kind of Distributed Property the Holder would have received if the Holder owned a number of Class A Shares equal to
the Conversion Rate in effect on the Record Date for the distribution.
With respect to an adjustment pursuant to this Section 4.1(c) where there has been a payment of a dividend or other
distribution on the Class A Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or
similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued,
will be, listed or admitted for
trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the
following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the end of the Valuation Period;
CR1 = the Conversion Rate in effect immediately after the end of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to
holders of the Class A Shares (directly or in the form of ADSs) applicable to one Class A Share (determined by
reference to the definition of Last Reported Sale Price as if references therein to the ADSs were to such Capital Stock
or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0 = the average of the Last Reported Sale Prices of the Class A Shares over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur on the last Trading Day of the
Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 4.1(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of
Trading Days as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the
Conversion Date in determining the Conversion Rate.
For purposes of this Section 4.1(c) (and subject in all respect to Section 4.1(f)), rights, options or warrants distributed
by the Company to all holders of the Class A Shares (directly or in the form of ADSs) entitling them to subscribe for or
purchase shares of the Company’s Capital Stock, including Class A Shares (either initially or under certain
circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”):
(i) are deemed to be transferred with such Class A Shares (directly or in the form of ADSs); (ii) are not exercisable;
and (iii) are also issued in respect of future issuances of the Class A Shares (directly or in the form of ADSs), shall be
deemed not to have been distributed for purposes of this Section 4.1(c) (and no adjustment to the Conversion Rate
under this Section 4.1(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights,
options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the
Conversion Rate shall be made under this Section 4.1(c). If any such right, option or warrant, including any such
existing rights, options or warrants
distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights, options or
warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of
the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect
to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be
deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in the event
of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the
type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating
a distribution amount for which an adjustment to the Conversion Rate under this Section 4.1(c) was made, (1) in the
case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any
holders thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights,
options or warrants had not been issued and (y) the Conversion Rate shall then again be readjusted to give effect to
such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal
to the per Class A Share redemption or purchase price received by a holder or holders of Class A Shares (directly or in
the form of ADSs) with respect to such rights, options or warrants (assuming such holder had retained such rights,
options or warrants), made to all holders of Class A Shares (directly or in the form of ADSs) as of the date of such
redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been
terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options
and warrants had not been issued.
For purposes of Section 4.1(a), Section 4.1(b) and this Section 4.1(c), any dividend or distribution to which this Section
4.1(c) is applicable that also includes one or both of:
(A) a dividend or distribution of Class A Shares (directly or in the form of ADSs) to which Section 4.1(a)
is applicable (the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 4.1(b) is applicable (the
“Clause B Distribution”),
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be
deemed to be a dividend or distribution to which this Section 4.1(c) is applicable (the “Clause C Distribution”) and any
Conversion Rate adjustment required by this Section 4.1(c) with respect to such Clause C Distribution shall then be
made, and (2) the Clause A Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C
Distribution and any Conversion Rate adjustment required by Section 4.1(a) and Section 4.1(b) with respect thereto
shall then be made, except that, if determined by the Company (I) the “Record Date” of the Clause A Distribution and
the Clause B Distribution shall be deemed to be the Record Date of the Clause C Distribution and (II) any Class A
Shares (directly or in
the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be deemed not to be
“outstanding immediately prior to the close of business on such Record Date or immediately after the open of business
on such effective date, as applicable” within the meaning of Section 4.1(a) or “outstanding immediately prior to the
close of business on such Record Date” within the meaning of Section 4.1(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Class A Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend
or distribution;
CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0 = the Last Reported Sale Price of the Class A Shares on the Trading Day immediately preceding the Ex-Dividend
Date for such dividend or distribution; and
C = the amount in cash per Class A Share the Company distributes to all or substantially all holders of the Class A
Shares (directly or in the form of ADSs).
Any increase pursuant to this Section 4.1(d) shall become effective immediately after the close of business on the
Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall
be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or
distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been
declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above),
in lieu of the foregoing increase, the Holder shall receive, for each US$1,000 principal amount of the Note, at the same
time and upon the same terms as holders of the Class A Shares (directly or in the form of ADSs), the amount of cash
that the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate on
the Record Date for such cash dividend or distribution.
(e) If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A
Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the
payment per Class A Share exceeds the average of the Last
Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period commencing on, and
including, the Trading Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall
be increased based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately
following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors acting in
good faith) paid or payable for Class A Shares (directly or in the form of ADSs) purchased in such tender or exchange
offer;
OS0 = the number of Class A Shares outstanding immediately prior to the date such tender or exchange offer expires
(prior to giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer);
OS1 = the number of Class A Shares outstanding immediately after the date such tender or exchange offer expires
(after giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or
exchange in such tender or exchange offer); and
SP = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period
commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 4.1(e) shall occur at the close of business on the 10th
Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange
offer expires; provided that in respect of any conversion within the 10 Trading Days immediately following, and
including, the expiration date of any tender or exchange offer, references in this Section 4.1(e) with respect to 10
Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed from, and including,
the Trading Day next succeeding the expiration date of such tender or exchange offer to, and including, the Conversion
Date in determining the Conversion Rate. No adjustment to the Conversion Rate under this Section 4.1(e) shall be
made if such adjustment would result in a decrease in the Conversion Rate. In the event that the
Company or one of the Company’s Subsidiaries is obligated to purchase Class A Shares (directly or in the form of
ADSs) pursuant to any such tender offer or exchange offer, but the Company or such Subsidiary is permanently
prevented by applicable Law from effecting any such purchases, or all such purchases are rescinded, then the
Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender offer or
exchange offer had not been made.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Note
or on the exercise of any other rights, existing as of the Issue Date, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into,
exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition
only excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise
or exchange for Ordinary Shares or ADSs issued or granted in accordance with any employee incentive plan of the
Company), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any
issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary
Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted
based on the following formula:
where:
CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant
Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of
Ordinary Shares then represented by each ADS; and
C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,
provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to
be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange
for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options,
warrants or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Shares or ADSs
or any securities convertible into or exchangeable for Class A Shares or ADSs or the right to purchase Class A Shares
or ADSs or such convertible or exchangeable securities.
(h) In addition to those adjustments required by subsections (a), (b), (c), (d), (e) and (f) of this Section 4.1, and to the
extent permitted by applicable Law and subject to the applicable rules of The NASDAQ Global Market and any other
securities exchange on which any of the Company’s securities are then listed, the Company from time to time may
increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors
determines that such increase would be in the Company’s best interest, and the Company may (but is not required to)
increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A Shares or the ADSs or
rights to purchase Class A Shares or ADSs in connection with a dividend or distribution of Class A Shares or ADSs (or
rights to acquire Class A Shares or ADSs) or similar event.
(i) Notwithstanding anything to the contrary in this Section 4.1, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Class A Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional
optional amounts in Class A Shares or ADSs under any plan;
(ii) upon the issuance of any Class A Shares or ADSs or options or rights to purchase those Class A Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or
assumed by the Company or any of the Company’s Subsidiaries;
(iii) upon the issuance of any Class A Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the
date this Note was first issued;
(iv) solely for a change in the par value of the Class A Shares or ADSs; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Section 4.1 shall be made by the Company and shall be made to
the nearest one-ten thousandth (1/10,000) of a Class A Shares.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment
becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder.
(l) For purposes of this Article 4, the number of Class A Shares at any time outstanding shall not include Class A Shares
held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any
dividend or make any distribution on Class A Shares held in the treasury of the Company (directly or in the form of
ADSs), but shall include Class A Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A
Shares.
(m) For purposes of this Section 4.1, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as
applicable.
4.2 Adjustments of Prices. Whenever any provision of this Note requires the Company to calculate the Last Reported Sale Prices over
a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment to the
Conversion Rate that becomes effective pursuant to Section 4.1, or any event requiring an adjustment to the Conversion Rate
pursuant to Section 4.1 where the Record Date, effective date or expiration date, as the case may be, of the event occurs, at any
time during the period when such Last Reported Sale Prices are to be calculated.
4.3 Effect of Recapitalizations, Reclassifications and Changes of the Class A Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Class A Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries substantially as an entirety; or
(iv) any statutory share exchange,
in each case, as a result of which the Class A Shares (directly or in the form of ADSs) would be converted into, or
exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such
event, a “Merger Event”), then, prior to or at the effective time of such Merger Event, the Company or the successor or
purchasing Person, as the case may be, shall execute an amendment to this Note providing that, at and after the
effective time of such Merger Event, the right to convert the Note shall be changed into a right to convert the Note into
the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination
thereof) that a holder of a number of Class A Shares equal to the Conversion Rate immediately prior to such Merger
Event would have owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property”
meaning the kind and amount of Reference Property that
a holder of one Class A Share is entitled to receive) upon such Merger Event; provided, however, that at and after the
effective time of the Merger Event the number of Class A Shares otherwise deliverable upon any conversion of the
Note in accordance with Article 3 shall instead be deliverable in the amount and type of Reference Property that a
holder of that number of Class A Shares would have been entitled to receive in such Merger Event.
If the Merger Event causes the Class A Shares (directly or in the form of ADSs) to be converted into, or exchanged for,
the right to receive more than a single type of consideration (determined based in part upon any form of holder
election), then (i) the Reference Property into which the Note will be convertible shall be deemed to be the weighted
average of the types and amounts of consideration received by the holders of Class A Shares (directly or in the form of
ADSs) that affirmatively make such an election, and (ii) the unit of Reference Property for purposes of the immediately
preceding paragraph shall refer to the consideration referred to in clause (i) attributable to one Class A Shares. The
Company shall provide written notice to the Holder of such weighted average as soon as practicable after such
determination is made.
Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 4 (it being
understood that no such adjustments shall be required with respect to any portion of the Reference Property that does
not consist of shares of Common Equity (however evidenced) or depositary receipts in respect thereof). If, in the case
of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including
cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the
case may be, in such Merger Event, then such other Person shall also execute such amendment, and such amendment
shall contain such additional provisions to protect the interests of the Holder, including the rights of the Holder to
require the Company to repurchase this Note upon a Fundamental Change pursuant to Article 5 as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) None of the foregoing provisions shall affect the right of the Holder to convert this Note into Class A Shares as set
forth in Article 3 prior to the effective date of such Merger Event.
(c) The above provisions of this Section 4.3 shall similarly apply to successive Merger Events.
4.4 No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Article 4 shall be required to be
made to the Conversion Rate if the Company receives written notice from the Holder that no such adjustment is required.
4.5 Certain Covenants.
(a) The Company covenants that all Class A Shares delivered upon any conversion of this Note will be fully paid and non-
assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.
(b) The Company covenants that if any Class A Shares to be provided for the purpose of any conversion of this Note
require registration with or approval of any Governmental Authority under any Law before such Class A Shares may
be validly issued upon conversion, the Company will, to the extent then permitted by applicable Law, secure such
registration or approval, as the case may be.
(c) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to
any conversion of this Note into Class A Shares, and shall reserve for issuance an adequate number of Class A Shares,
such that Class A Shares can be delivered in accordance with the terms of this Note upon any conversion hereunder. In
addition, the Company further covenants to provide the Holder with a reasonably detailed description of the mechanics
for the delivery of Class A Shares upon any conversion of this Note upon request.
(d) The parties hereto acknowledge and agree that the Holder may only resell the Note, the Class A Shares delivered upon
conversion of all or any portion of the Note pursuant to an effective registration statement or an exemption from, or in
a transaction not subject to, the registration requirements of the Securities Act and other applicable securities Laws.
4.6 Notice for Certain Actions. In case of any (a) action by the Company or one of its Subsidiaries that would require an adjustment
in the Conversion Rate pursuant to Section 4.1, (b) Merger Event or (c) voluntary or involuntary dissolution, liquidation or
winding-up of the Company or any of its Subsidiaries, then, in each case (unless notice of such event is otherwise required
pursuant to another provision of this Note), the Company shall deliver a written notice to the Holder, as promptly as possible but
in any event at least 20 days prior to the applicable date hereinafter specified, stating (i) the date on which a record is to be taken
for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be taken, the date as of which
the holders of Class A Shares, of record are to be determined for the purposes of such action by the Company or one of its
Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Class A Shares, of record shall be entitled to exchange their
Class A Shares, for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up.
Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of
its Subsidiaries, dissolution, liquidation or winding-up unless otherwise provided for pursuant to any applicable Laws, the
constitutional documents of the Company or any such Subsidiaries or any agreement or document to which the Company or any
such Subsidiaries is a party; provided that nothing herein shall adversely affect any right, claim or other remedies, at law or
contract, of the Holder arising as a result of or in connection with such failure or defect.
4.7 Termination of Depository Receipt Program. If the Class A Shares cease to be represented by ADSs issued under a depositary
receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a
reference to the number of Class A Shares (and other property, if any) represented by the ADSs on the last day on which the
ADSs represented the Class A Shares and as if the Class A Shares and the other property had been distributed to holders of the
ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last
Reported Sale Price of the Class A Shares, and other appropriate adjustments, including adjustments to the Conversion Rate,
will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any
other currency are required, the exchange rate in effect on the date of determination will apply.
5. REPURCHASE
5.1 Repurchase on Maturity Date. Unless previously repurchased or surrendered and converted, the Company shall, without any
action on the part of the Holder, redeem this Note in whole on the Maturity Date at a price (the “Maturity Repurchase Price”)
equal to (A) the outstanding principal amount, plus (B) a premium which shall be equal to 6.0% of the outstanding principal
amount, and plus (C) all other amounts due and payable on or in respect of the Note (including any accrued and unpaid interest
on the Defaulted Amounts), if any.
5.2 Repurchase on Fundamental Change.
(a) If a Fundamental Change occurs at any time, the Holder shall have the right, at its option, to require the Company to
repurchase for cash all of the Note or any portion thereof on the date (the “Fundamental Change Repurchase Date”)
notified in writing by the Company that is not less than twenty (20) Business Days and not more than thirty-five (35)
Business Days following the date of the Fundamental Change Company Notice (as defined below) at a repurchase
price (the “Fundamental Change Repurchase Price”) equal to (A) 100% of the principal amount (or such portion
thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued on such
principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of
the Issue Date and ending on (and including) the Fundamental Change Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month, and plus (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) Repurchase of the Note under this Section 5.2 shall be made, at the option of the Holder thereof, upon: (i) delivery by
the Holder to the Company of a duly completed notice (the “Fundamental Change Repurchase Notice”), in the form
attached hereto as Exhibit A, on or before the close of business on the second Business Day immediately preceding the
Fundamental Change Repurchase Date; and (ii) delivery of the Note to the Company at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer), such delivery being a
condition to receipt by the
Holder of the Fundamental Change Repurchase Price therefor. Each Fundamental Change Repurchase Notice shall
state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the
Company in accordance with Section 5.5.
(d) On or before the twentieth (20 ) calendar day after the occurrence of the effective date of a Fundamental Change, the
Company shall provide to the Holder a written notice (the “Fundamental Change Company Notice”) of the occurrence
of the effective date of the Fundamental Change and of the repurchase right at the option of the Holder arising as a
result thereof. Each Fundamental Change Company Notice shall specify:
th
(i) the events causing the Fundamental Change;
(ii) the date of the Fundamental Change;
(iii) the last date on which the Holder may exercise the repurchase right pursuant to this Section 5.2;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) if applicable, the Conversion Rate and any adjustments to the Conversion Rate;
(vii) that the Note may be converted only if any Fundamental Change Repurchase Notice that has been delivered by
the Holder has been withdrawn in accordance with the terms of this Note; and
(viii) the procedures in accordance with the terms of this Note that the Holder must follow to require the Company
to repurchase the Note.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holder’s repurchase rights
or affect the validity of the proceedings for the repurchase of the Note pursuant to this Section 5.2.
5.3 Early Repurchase at the option of the Holder.
(a) The Holder shall have the right, at its option, to require the Company to repurchase for cash all of the Note or any
portion thereof on February 1, 2022 (the “Early Repurchase Date”), by delivering a duly completed notice in writing to
the Company (the “Early Repurchase Notice”), in the form attached hereto as Exhibit B, during the period starting
from the open of business that is twenty (20) Business Days prior to the Early Repurchase Date until the close of
business on the second Business Day immediately preceding the Early
Repurchase Date, at a repurchase price (the “Early Repurchase Price”) equal to (A) 100% of the principal amount (or
such portion thereof, as the case may be), plus (B) a premium equal to the aggregate interest that would have accrued
on such principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the
date of the Issue Date and ending on (and including) the date when the Early Repurchase Date, if the Note were to bear
interest at a rate of 2.0% per annum, accrued daily and computed on the basis of a 360-day year composed of twelve
30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month; and (C) all other
amounts due and payable on or in respect of the Note (including any accrued and unpaid interest on the Defaulted
Amounts), if any.
(b) The Holder shall deliver of the Note to the Company at any time after delivery of the Early Repurchase Notice, such
delivery being a condition to receipt by the Holder of the Early Repurchase Price therefor. The Early Repurchase
Notice shall state the portion of the principal amount of the Note to be repurchased.
(c) Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such
Early Repurchase Notice at any time prior to the close of business on the second Business Day immediately preceding
the Early Repurchase Date by delivery of a written notice of withdrawal to the Company in accordance with Section
5.5.
5.4 No Repurchase in the Event of Acceleration. Notwithstanding the foregoing, the Note may not be repurchased by the Company
on any date at the option of the Holder upon a Fundamental Change or on the Early Repurchase Date (as the case may be) if the
principal amount of the Note has been accelerated, and such acceleration has not been rescinded, on or prior to such date (except
in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental Change Repurchase
Price or the Early Repurchase Price (as the case may be) with respect to the Note).
5.5 Withdrawal of Fundamental Change Repurchase Notice or Early Repurchase Notice. A Fundamental Change Repurchase Notice
or an Early Repurchase Notice (as the case may be) may be withdrawn (in whole or in part) by means of a duly completed
written notice of withdrawal delivered to the Company in accordance with this Section 5.5 at any time prior to the close of
business on the second Business Day immediately preceding the relevant Fundamental Change Repurchase Date or the Early
Repurchase Date (as the case may be), specifying (a) the principal amount of the Note with respect to which such notice of
withdrawal is being submitted and (b) the principal amount, if any, of the Note that remains subject to the original Fundamental
Change Repurchase Notice or the original Early Repurchase Notice (as the case may be).
5.6 Payment of Fundamental Change Repurchase Price or Early Repurchase Price.
(a) On or prior to 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase
Date or the Early Repurchase Date (as the case may be), the Company shall set aside, segregate and hold in trust for the
benefit of the Holder an amount of money sufficient to repurchase the applicable portion of the Note to be repurchased
at the Fundamental Change
Repurchase Price or the Early Repurchase Price (as the case may be). Payment for the applicable portion of the Note
surrendered for repurchase (and not withdrawn in accordance with Section 5.5) will be made in accordance with
Section 2.2 on the later of (i) such Fundamental Change Repurchase Date or the Early Repurchase Date (as the case
may be), provided the Holder has satisfied the conditions in this Article 5; and (ii) the time of delivery of the applicable
portion of the Note by the Holder to the Company in the manner required by Section 5.2 or Section 5.3 (as the case
may be).
(b) If by 10:00 a.m., New York time, on one Business Day prior to the relevant Fundamental Change Repurchase Date or
the Early Repurchase Date (as the case may be), the Company holds money sufficient to make payment on the
applicable portion of the Note to be repurchased on such date, then, with respect to the applicable portion of the Note
that has been properly surrendered for repurchase and not validly withdrawn in accordance with Section 5.5, on such
Fundamental Change Repurchase Date or the Early Repurchase Date (as the case may be), (i) such portion of the Note
will cease to be outstanding, (ii) interest will cease to accrue on such portion of the Note and (iii) in the event the entire
outstanding amount of the Note is surrendered by the Holder to be repurchased, all other rights of the Holder will
terminate (other than the right to receive the Fundamental Change Repurchase Price or the Early Repurchase Price (as
the case may be)).
(c) Upon the surrender of the Note that is to be repurchased in part pursuant to this Article 5, the Company shall execute
and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unrepurchased
portion of the Note.
5.7 Covenant to Comply with Applicable Law upon Repurchase of the Note. In connection with any repurchase offer, the Company
will, if required, comply with all federal and state securities laws in connection with any offer by the Company to repurchase the
Note so as to permit the rights and obligations under this Article 5 to be exercised in the time and in the manner specified in this
Article 5.
6. COVENANTS
6.1 Payment. The Company covenants and agrees that it will cause to be paid the principal of, and any other amounts due and
payable on, the Note or any Repurchase Price at the respective times and in accordance with the terms hereof.
6.2 Existence. Subject to Article 7, the Company shall do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.
6.3 No Withholding. All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or
with respect to this Note, including, but not limited to, payments of principal (including, if applicable, the Fundamental Change
Repurchase Price), payments of interest and deliveries of Class A Shares (together with payments of cash for any fractional
Class A Share) upon any conversion of the Note, shall be made without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any
jurisdiction in which the Company or any
successor to the Company is, for tax purposes, organized or resident or doing business or through which payment is made or
deemed made (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is
required by Law or by regulation or governmental policy having the force of law.
6.4 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or
other Law that would prohibit or forgive the Company from paying all or any portion of the principal of or any other amounts
due and payable on the Note or any Repurchase Price as contemplated herein, wherever enacted, now or at any time hereafter in
force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not, by resort to any such Law,
hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of
every such power as though no such Law had been enacted.
6.5 Compliance Certificates; Statements as to Defaults. The Company shall deliver to the Holder within 120 days after the end of
each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) and within 14 days of a written
request made by the Holder a certificate executed by an executive officer of the Company stating that a review has been
conducted of the Company’s activities under this Note and whether the Company has fulfilled its obligations hereunder, and
whether such officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then
continuing and, if so, specifying each such Default and the nature thereof. The Company shall deliver to the Holder, as soon as
possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is
then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is
taking or proposing to take in respect thereof.
6.6 Further Instruments and Acts. Upon request of the Holder, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Note.
6.7 New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of
smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts without
charge within three (3) Business Days after the date of such request, provided that the existing note instrument of this Note shall
be returned by the Holder to the Company for cancellation.
6.8 Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of
indemnity from the Holder reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and cancellation
thereof), the Company shall at its own expense within five (5) Business Days execute and deliver to the Holder, in lieu thereof, a
new Note, dated and bearing interest from the date hereof.
7. CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
7.1 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 7.2, the Company shall not consolidate
with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person
unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation,
organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the
Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company)
shall expressly assume all of the obligations of the Company under the Note and the Subscription Agreement; and
(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be
continuing under this Note.
For purposes of this Section 7.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of
one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of
such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis,
shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the
Company to another Person.
7.2 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon
the assumption by the Successor Company of the due and punctual payment of the principal of and any other amounts due and
payable on the Note and any Repurchase Price, the due and punctual delivery or payment, as the case may be, of any
consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of
the Note to be performed by the Company, in each case in accordance with the terms hereof, such Successor Company (if not
the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and
assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. In
the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with
this Article 7 the Person named as the “Company” in the first paragraph of the Note (or any successor that shall thereafter have
become such in the manner prescribed in this Article 7) may be dissolved, wound up and liquidated at any time thereafter and,
except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Note and from its
obligations under the Note.
7.3 No consolidation, merger, sale, conveyance, transfer or lease shall be effective unless any such consolidation, merger, sale,
conveyance, transfer or lease and any such assumption has complied with the provisions of this Article 7.
8. CANCELLATION
After all amounts at any time owing on the Note have been paid in full or upon the conversion of the Note in full pursuant to
Article 3, the Note shall be surrendered to the Company for cancellation and shall not be reissued.
9. NO REDEMPTION OR PREPAYMENT
This Note shall not be redeemable or pre-paid by the Company prior to the Maturity Date, and no sinking fund is provided for
this Note.
10. MISCELLANEOUS
10.1 Termination of Rights. All rights under this Note shall terminate when (a) all amounts at any time owing on the Note have been
paid in full or (ii) the Note is converted in full pursuant to the terms set forth in Article 3.
10.2 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company
contained in the Note shall bind its successors and assigns whether so expressed or not.
10.3 Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or
performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect
by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the
Company.
10.4 Amendments and Waivers; Notice. The amendment or waiver of any term of the Note shall be subject to the written consent of
the Holder and the Company. The provision of notice shall be made pursuant to the terms of the Subscription Agreement.
10.5 Transfer Restrictions.
(a) The Holder covenants that the Note and/or the Class A Shares issuable upon conversion of the Note will only be
disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the
Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any transfer of Notes and/or the Class A
Shares issuable upon conversion of the Note other than pursuant to an effective registration statement or Rule 144
promulgated under the Securities Act (“Rule 144”), the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably
acceptable to the Company with respect to transactions of a similar nature, to the effect that such transfer does not
require registration under the Securities Act.
(b) The Holder agrees to the imprinting, until no longer required by this Section 10.5, of the following legend on any
certificate evidencing any of the Note or the Class A Shares issuable upon conversion of the Note:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM.
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the
holder of the Note or the Class A Shares issuable upon conversion of the Note if, unless otherwise required by state
securities laws, (i) such securities are registered for resale under the Securities Act and are transferred to a Holder
pursuant to a registration statement that is effective at the time of such transfer, (ii) in connection with a sale,
assignment or other transfer, such Holder provides the Company with an opinion of counsel, the form and substance of
which opinion shall be reasonably acceptable to the Company with respect to transactions of a similar nature, that the
sale, assignment or transfer of the securities may be made without registration under the applicable requirements of the
Securities Act or (iii) such Holder provides the Company with reasonable assurance that the securities can be sold,
assigned or transferred pursuant to Rule 144 or have been sold under Rule 144.
(c) Notwithstanding anything to the contrary herein, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of
receiving all payments of principal of and any other amounts due and payable on the Note and any Repurchase Price
and for all other purposes whatsoever. This provision is intended to be a book entry system as defined in Treasury
Regulations Section 5f.103-1(c) and shall be interpreted consistently therewith.
10.6 No Third Party Beneficiary. A person who is not a party to this Note shall have no right under the Contracts (Rights of Third
Parties) Ordinance (Chapter 623) to enforce any of its terms.
10.7 Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
10.8 Arbitration.
(a) Any dispute, controversy, difference or claim arising out of or relating to this Note, including the existence, validity,
interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising
out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong
International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the
Notice of Arbitration is submitted.
(b) The law of this arbitration clause shall be Hong Kong law.
(c) The seat of arbitration shall be Hong Kong.
(d) The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the HKIAC rules. The
arbitration proceedings shall be conducted in English.
(e) It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from
courts of competent jurisdiction before the constitution of the arbitral tribunal.
10.9 Force Majeure. In no event shall the Holder be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes,
work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God,
and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being
understood that the Holder shall use reasonable efforts to resume performance as soon as practicable under the circumstances.
10.10 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for
under the Note. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices, accrued
interest payable on the Note, if any, and the Conversion Rate of the Note. The Company shall make all these calculations in
good faith and, absent manifest error, the Company’s calculations shall be final and binding on the Holder. The Company shall
provide a schedule of its calculations to the Holder.
10.11 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to
exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of
any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring.
10.12 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no
presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or
its counsel.
[The remainder of this page has been deliberately left blank]
IN WITNESS WHEREOF, the Company has caused the Note to be issued on the date first above written.
COMPANY:
NIO Inc.
By:
Name:
Title:
Exhibit A
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to the
occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the Holder in accordance with Section 5.2 of this Note the entire principal amount of this
Note, or the portion thereof below designated, and the premium amount below calculated in accordance with Section 5.2(a)(B).
Principal amount to be repaid (if less than all): US$_____________
Premium: US$_____________
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
37
Exhibit B
[FORM OF EARLY REPURCHASE NOTICE]
To: [Name of Company]
The undersigned Holder of this Note hereby requests and instructs NIO Inc. (the “Company”) to pay to the Holder in
accordance with Section 5.3 of this Note the entire principal amount of this Note, or the portion thereof below designated, and the
premium below amount calculated in accordance with Section 5.3(a)(B).
Principal amount to be repaid (if less than all): US$_____________
Premium: US$____________
Dated:
[NAME OF HOLDER]
By:
Name:
Capacity:
NIO Inc.
and
Exhibit 4.29
The Bank of New York Mellon, London Branch as Trustee
and
The Bank of New York Mellon, London Branch, as Paying Agent and Conversion Agent
and
The Bank of New York Mellon SA/NV, Luxembourg Branch, as Registrar and Transfer Agent
INDENTURE
dated as of February 10, 2020
US$70,000,000 0% CONVERTIBLE SENIOR NOTES DUE 2021
i
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.01
Definitions
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Designation and Amount
Form of Notes
Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts
Execution, Authentication and Delivery of Notes
Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary
Mutilated, Destroyed, Lost or Stolen Notes
Temporary Notes
Cancellation of Notes Paid, Converted, Etc.
Common Code and ISIN Numbers
[RESERVED]
Section 3.01
Satisfaction and Discharge
ARTICLE 3
SATISFACTION AND DISCHARGE
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07
Payment of Principal and Premium
Maintenance of Office or Agency
Appointments to Fill Vacancies in Trustee’s Office
Provisions as to Paying Agent
Existence
[RESERVED]
Additional Amounts
ii
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12
13
14
15
21
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22
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24
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26
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Section 4.08
Section 4.09
Section 4.10
Stay, Extension and Usury Laws
Compliance Certificate; Statements as to Defaults
Further Instruments and Acts
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01
Section 5.02
Lists of Holders
Preservation and Disclosure of Lists
ARTICLE 6
DEFAULTS AND REMEDIES
Events of Default
Acceleration; Rescission and Annulment
[RESERVED]
Payments of Notes on Default; Suit Therefor
Application of Monies Collected by Trustee
Proceedings by Holders
Proceedings by Trustee
Remedies Cumulative and Continuing
Direction of Proceedings and Waiver of Defaults by Majority of Holders
Notice of Defaults and Events of Default
Undertaking to Pay Costs
ARTICLE 7
CONCERNING THE TRUSTEE
Duties and Responsibilities of Trustee
Reliance on Documents, Opinions, Etc.
No Responsibility for Recitals, Etc.
Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes
Monies to Be Held in Trust
Compensation and Expenses of Trustee
Officers’ Certificate as Evidence
Eligibility of Trustee
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section 6.05
Section 6.06
Section 6.07
Section 6.08
Section 6.09
Section 6.10
Section 6.11
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Section 7.08
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33
33
34
35
36
36
37
37
38
38
41
43
44
44
44
45
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Section 7.09
Section 7.10
Section 7.11
Section 7.12
Resignation or Removal of Trustee
Acceptance by Successor Trustee
Succession by Merger, Etc.
Trustee’s Application for Instructions from the Company
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Action by Holders
Proof of Execution by Holders
Who Are Deemed Absolute Owners
Company-Owned Notes Disregarded
Revocation of Consents; Future Holders Bound
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
Purpose of Meetings
Call of Meetings by Trustee
Call of Meetings by Company or Holders
Qualifications for Voting
Regulations
Voting
No Delay of Rights by Meeting
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01
Section 10.02
Section 10.03
Section 10.04
Section 10.05
Supplemental Indentures Without Consent of Holders
Supplemental Indentures with Consent of Holders
Effect of Supplemental Indentures
Notation on Notes
Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01
Section 11.02
Company May Consolidate, Etc. on Certain Terms
Successor Corporation to Be Substituted
iv
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47
48
48
49
49
49
50
50
50
51
51
51
52
52
52
53
54
54
55
55
56
Section 11.03
Opinion of Counsel to Be Given to Trustee
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01
Indenture and Notes Solely Corporate Obligations
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01
Section 14.02
Section 14.03
Section 14.04
Section 14.05
Section 14.06
Section 14.07
Section 14.08
Section 14.09
Section 14.10
Section 14.11
Section 14.12
Conversion Privilege
Conversion Procedure; Settlement Upon Conversion.
[RESERVED]
Adjustment of Conversion Rate
Adjustments of Prices
Ordinary Shares to Be Fully Paid
Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares
Certain Covenants
Responsibility of Trustee
Notice to Holders Prior to Certain Actions
Stockholder Rights Plans
Termination of Depositary Receipt Program
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01
Section 15.02
Section 15.03
Section 15.04
Section 15.05
[RESERVED]
Repurchase at Option of Holders Upon a Fundamental Change
Withdrawal of Fundamental Change Repurchase Notice
Deposit of Fundamental Change Repurchase Price
Covenant to Comply with Applicable Laws Upon Repurchase of Notes
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75
75
77
78
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ARTICLE 16
BRRD MATTERS
v
ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01
Section 17.02
Section 17.03
Section 17.04
Section 17.05
Section 17.06
Section 17.07
Section 17.08
Section 17.09
Section 17.10
Section 17.11
Section 17.12
Section 17.13
Section 17.14
Section 17.15
Provisions Binding on Company’s Successors
Official Acts by Successor Corporation
Addresses for Notices, Etc.
Governing Law; Jurisdiction
Submission to Jurisdiction; Service of Process
Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee
Legal Holidays
No Security Interest Created
Benefits of Indenture
Table of Contents, Headings, Etc.
Execution in Counterparts
Severability
Waiver of Jury Trial
Force Majeure
Calculations
Exhibit A
Exhibit B
Form of Note
Form of Authorization Certificate
EXHIBIT
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A-1
B-1
INDENTURE dated as of February 10, 2020 between NIO INC., a Cayman Islands exempted company, PO Box 309, Ugland
House, Grand Cayman, KY1-1104, Cayman Islands, as issuer (the “Company,” as more fully set forth in Section 1.01), THE BANK OF
NEW YORK MELLON, LONDON BRANCH, a banking organization organized and existing under the laws of the State of New York
with limited liability and operating through its branch in London at One Canada Square, London E14 5AL, United Kingdom, as trustee
(the “Trustee”), as paying agent (the “Paying Agent”) and as conversion agent (the “Conversion Agent”) (as more fully set forth in
Section 1.01) and THE BANK OF NEW YORK MELLON, SA/NV, LUXEMBOURG BRANCH, operating through its branch in
Luxembourg at Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg as registrar (the “Registrar”) and as transfer
agent (the “Transfer Agent”) (as more fully set forth in Section 1.01).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 0% Convertible Senior
Notes due 2021 (the “Notes”), offered and sold outside the United States pursuant to Regulation S in an aggregate principal amount not
to exceed US$70,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the
Form of Fundamental Change Repurchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided; and
WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered
by the Note Registrar, as in this Indenture provided, the valid, binding and legal obligations of the Company, and this Indenture a valid
agreement according to its terms, have been done and performed, and the execution of this Indenture and the issuance hereunder of the
Notes have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered,
and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as
otherwise provided below), as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.01. The words “herein,” “hereof,” “hereunder,” and words of similar import
1
refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include
the plural as well as the singular.
“Additional Amounts” shall have the meaning specified in Section 4.07(a).
“ADS” means an American Depositary Share issued pursuant to the Deposit Agreement representing one Ordinary Share of the
Company as of the date of this Indenture, and deposited with the ADS Custodian.
“ADS Custodian” means Deutsche Bank AG, Hong Kong Branch, with respect to the ADSs delivered pursuant to the Deposit
Agreement or any successor entity thereto.
“ADS Depositary” means Deutsche Bank Trust Company Americas, as depositary for the ADSs.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any
specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
“Agents” means the Paying Agent, the Transfer Agent, the Note Registrar and the Conversion Agent.
“applicable taxes” shall have the meaning specified in Section 4.07(a).
“Bail-in Legislation” means in relation to a member state of the European Economic Area which has implemented, or which at
any time implements, the BRRD, the relevant implementing law, regulation, rule or requirement as described in the EU Bail-in
Legislation Schedule from time to time.
“Bail-in Powers” means any Write-down and Conversion Powers as defined in the EU Bail-in Legislation Schedule, in relation
to the relevant Bail-in Legislation.“BNY Mellon Group” shall have the meaning specified in Section 7.02.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the
Trustee.
“BRRD” means Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and
investment firms.
2
“BRRD Liability” means a liability in respect of which the relevant Write Down and Conversion Powers in the applicable Bail-
in Legislation may be exercised.
“Business Day” means, with respect to any Note, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in the State of New York, or the Cayman Islands are authorized or obligated by law or executive order to
close.
“Capital Stock” means, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Clause A Distribution” shall have the meaning specified in Section 14.04(c).
“Clause B Distribution” shall have the meaning specified in Section 14.04(c).
“Clause C Distribution” shall have the meaning specified in Section 14.04(c).
"Clearstream" means Clearstream Banking S.A.
“close of business” means 5:00 p.m. (New York City time).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Commission” means the U.S. Securities and Exchange Commission.
"Common Depositary" means the common depositary acting on behalf of Euroclear and Clearstream.
“Common Equity” of any Person means ordinary share capital or common stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection
of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning specified in the first paragraph of this Indenture, and subject to the provisions of Article 11,
shall include its successors and assigns.
“Company Order” means a written order of the Company, signed by an Officer of the Company and delivered to the Trustee
and/or Note Registrar, as applicable.
“Consolidated Affiliated Entity” means, with respect to any Person, any corporation, association or other entity which is or is
required to be consolidated with such Person under Accounting Standards Codification subtopic 810-10, Consolidation: Overall
(including any changes, amendments or supplements thereto) or, if such person prepares its financial statements in accordance with
accounting principles other than the accounting principles generally accepted in the United States of America, the equivalent of
Accounting Standards Codification subtopic 810-10, Consolidation: Overall under such accounting principles.
3
“Conversion Agent” shall have the meaning specified in Section 4.02.
“Conversion Date” shall have the meaning specified in Section 14.02(c).
“Conversion Obligation” shall have the meaning specified in Section 14.01.
“Conversion Rate” shall have the meaning specified in Section 14.01.
“Corporate Trust Office” means the corporate trust office of the Trustee at which at any time its corporate trust business shall
be administered, which office at the date hereof is located at The Bank of New York Mellon, London Branch, One Canada Square,
London E14 5AL, United Kingdom, Attention: Corporate Trust Administration – Project Camel (NIO Inc.), Fax: +44 1202 689660, and
shall include a reference to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific Place, 1 Queen’s Road East,
Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852 2295 3283, or such other address as the Trustee may
designate from time to time by notice to the Holders and the Company, or the corporate trust office of any successor trustee (or such
other address as such successor trustee may designate from time to time by notice to the Holders and the Company).
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported
Sale Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading Day
immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall have been
quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this
definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this
definition be deemed to be the amount thereof increased by such similar amount;
and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of a
dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that dividend, the
quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal
to the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
4
“Defaulted Amounts” means any amounts on any Note (including, without limitation, the Fundamental Change Repurchase
Price, principal, premium and interest) that are payable but are not punctually paid or duly provided for.
“Deposit Agreement” means the deposit agreement dated as of September 11, 2018 by and among the Company, the ADS
Depositary and the holders and beneficial owners of the ADSs delivered thereunder or, if amended or supplemented as provided therein,
as so amended or supplemented.
“Distributed Property” shall have the meaning specified in Section 14.04(c).
“Distribution Compliance Period Termination Date” shall have the meaning specified in Section 2.05(c).
“EU Bail-in Legislation Schedule” means the document described as such, then in effect, and published by the Loan Market
Association (or any successor person) from time to time at http://www.lma.eu.com/pages.aspx?p=499.
"Euroclear" means Euroclear Bank SA/NV.
“Event of Default” shall have the meaning specified in Section 6.01.
“Ex-Dividend Date” means the first date on which the ADSs trade on the applicable exchange or in the applicable market,
regular way, without the right to receive the issuance, dividend or distribution in question, from the Company or, if applicable, from the
seller of the ADSs on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Ordinary Shares or ADSs that expire on or prior to the
Maturity Date.
“FATCA” shall have the meaning specified in Section 4.07(a)(i)(D).
“Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form
of Note attached hereto as Exhibit A.
“Form of Fundamental Change Repurchase Notice” shall mean the “Form of Fundamental Change Repurchase Notice”
attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.
“Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note
attached hereto as Exhibit A.
“Fractional ADS” shall have the meaning specified in Section 14.02(a).
5
“Fundamental Change” shall be deemed to have occurred at the time after the Notes are originally issued if any of the
following occurs:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company,
its Subsidiaries, the employee benefit plans of the Company and its Subsidiaries and any of the Permitted Holders, files a
Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct
or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of (i) the Company’s Common Equity
(including Common Equity held in the form of ADSs) representing more than 50% of the voting power of the Company’s
Common Equity or (ii) more than 50% of the outstanding Ordinary Shares (including Ordinary Shares held in the form of
ADSs); or (B) the Permitted Holders (together with any of their respective Affiliates) have become the direct or indirect
“beneficial owners,” as defined in Rule 13d-3 under the Exchange Act, of Ordinary Shares (including Ordinary Shares held in
the form of ADSs) representing, in the aggregate, more than 65% of the outstanding Ordinary Shares (including Ordinary
Shares held in the form of ADSs), based on any Schedule TO or any schedule, form or report under the Exchange Act disclosing
the same filed by any one or more of the Permitted Holders;
(b) the consummation of (A) any recapitalization, reclassification or change of the Ordinary Shares or the ADSs
(other than changes resulting from a subdivision or combination) as a result of which the Ordinary Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or
merger of the Company, or any similar transaction, pursuant to which the Ordinary Shares or the ADSs will be converted into
cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or
substantially all of the consolidated assets of the Company and its Subsidiaries and Consolidated Affiliated Entities, taken as a
whole, to any Person other than one of the Company’s wholly-owned Subsidiaries; provided, however, that a transaction
described in clause (B) in which the holders of all classes of the Company’s Common Equity immediately prior to such
transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving
corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-a-vis
each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause
(b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the
Company;
(d) the ADSs (or other Common Equity or ADSs in respect of Common Equity underlying the Notes) cease to be
listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
6
(e) any change in or amendment to the laws, regulations and rules of the People’s Republic of China or the official
interpretation or official application thereof (a “Change in Law”) that results in (x) the Company, its Subsidiaries and its
Consolidated Affiliated Entities (collectively, the “Company Group”) (as in existence immediately subsequent to such Change
in Law), as a whole, being legally prohibited from operating substantially all of the business operations conducted by the
Company Group (as in existence immediately prior to such Change in Law) as of the last date of the period described in the
Company’s consolidated financial statements for the most recent fiscal quarter and (y) the Company’s being unable to continue
to derive substantially all of the economic benefits from the business operations conducted by the Company Group (as in
existence immediately prior to such Change in Law) in the same manner as reflected in the Company’s consolidated financial
statements for the most recent fiscal quarter;
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change, if at least 90% of
the consideration received or to be received by holders of the ADSs, excluding cash payments for Fractional ADSs, in connection with
such transaction or event consists of shares of Common Equity or ADSs in respect of Common Equity that are listed or quoted on any of
The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective
successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event and as a result of such
transaction or event, the Notes become convertible into such consideration, excluding cash payments for Fractional ADSs and cash
payments made in connection with dissenters' appraisal rights.
“Fundamental Change Company Notice” shall have the meaning specified in Section 15.02(c).
“Fundamental Change Repurchase Date” shall have the meaning specified in Section 15.02(a).
“Fundamental Change Repurchase Notice” shall have the meaning specified in Section 15.02(b)(i).
“Fundamental Change Repurchase Price” shall have the meaning specified in Section 15.02(a).
“Global Note” shall have the meaning specified in Section 2.05(b).
“Holder,” shall mean any Person in whose name at the time a particular Note is registered on the Note Register provided that,
for the purposes of Section 6.01(f) and Section 6.04 only, “Holder” shall include a beneficial owner of any Note who has validly made a
request that its beneficial interest therein be issued as a Physical Note, and thereafter the Company failed to execute, or the Registrar
failed to authenticate and deliver, a Physical Note to that beneficial owner in accordance with Section 2.05(c) within 10 Business Days of
the beneficial owner's request.
7
“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
“Last Reported Sale Price” of the ADSs on any date means the closing sale price per ADS (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask
prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the
ADSs are traded. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as reported by
OTC Markets Group Inc. or a similar organization. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be the average of
the mid-point of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized
independent investment banking firms selected by the Company for this purpose.
“Maturity Date” means February 4, 2021.
“Merger Event” shall have the meaning specified in Section 14.07(a).
“Note” or “Notes” shall have the meaning specified in the first paragraph of the recitals of this Indenture.
“Note Register” shall have the meaning specified in Section 2.05(a).
“Note Registrar” shall have the meaning specified in Section 2.05(a).
“Notice of Conversion” shall have the meaning specified in Section 14.02(b).
“Officer” means, with respect to the Company, the President, the Chief Executive Officer, the Chief Financial Officer the
Treasurer, the Secretary, any Executive or Senior Vice President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title “Vice President”).
“Officers’ Certificate,” when used with respect to the Company, means a certificate that is delivered to the Trustee and that is
signed by (a) two Officers of the Company or (b) one Officer of the Company and one of any Assistant Treasurer, any Assistant
Secretary or General Counsel or the Controller of the Company. Each such certificate shall include the statements provided for in
Section 17.06 if and to the extent required by the provisions of such Section. One of the Officers giving an Officers’ Certificate pursuant
to Section 4.09 shall be the principal executive, financial or accounting officer of the Company.
“open of business” means 9:00 a.m. (New York City time).
“Opinion of Counsel” means an opinion in writing signed by legal counsel and in a form reasonably acceptable to the Trustee,
who may be counsel to the Company, or other counsel acceptable to the Trustee, that is delivered to the Trustee. Each such opinion shall
include the
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statements provided for in Section 17.06 if and to the extent required by the provisions of such Section 17.06.
“Ordinary Shares” means Class A ordinary shares of the Company, par value US$0.00025 per share, at the date of this
Indenture, subject to Section 14.07.
“outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.04, mean, as of any particular
time, all Notes authenticated and delivered by the Note Registrar under this Indenture, except:
(a) Notes theretofore canceled by the Note Registrar or accepted by the Note Registrar for cancellation;
(b) Notes, or portions thereof, that have become due and payable and in respect of which monies in the necessary
amount shall have been deposited with the Trustee or with any Paying Agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);
(c) Notes that have been paid pursuant to Section 2.06 or Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee
is presented that any such Notes are held by protected purchasers in due course;
(d) Notes converted pursuant to Article 14 and required to be cancelled pursuant to Section 2.08; and
(e) Notes repurchased by the Company pursuant to the third sentence of Section 2.10.
“Paying Agent” shall have the meaning specified in Section 4.02.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation with respect to the Ordinary Shares (including Ordinary Shares held in the form of ADSs) with any of the
aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means an individual, a corporation, a limited liability company, an association, a partnership, a joint venture, a joint
stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof.
“Physical Notes” means permanent certificated Notes in registered form issued in denominations of US$1,000 principal amount
and multiples thereof.
"PRC" means the People's Republic of China and, for the purposes for this Indenture, shall exclude Hong Kong SAR, Macau
SAR and Taiwan.
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“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in
lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note that it replaces.
“Qualified Equity Financing” means a bona fide issuance of equity securities of the Company for fundraising purposes after
the date of this Indenture or to the Maturity Date, excluding any of the following: (i) ADSs issued upon conversion of any Note or any
convertible securities then outstanding, (ii) Ordinary Shares (directly or in the form of ADSs) issued upon share split, share dividend or
any subdivision of Ordinary Shares (directly or in the form of ADSs), (iii) Ordinary Shares (directly or in the form of ADSs) (or options
or warrants therefor) issued to officers, directors, employees and consultants of the Company or issued to the trustee, general partner or
other entity that is to hold the Ordinary Shares (directly or in the form of ADSs), in each case pursuant to a duly approved employee
equity incentive plan, and (iv) shares of the Company issued pursuant to any bona fide acquisition, on arms-length terms, of interests in
or assets of another corporation or entity by the Company as duly approved by the Board of Directors.
“Qualified Equity Financing Conversion Date” shall have the meaning specified in Section 14.02(c).
“Qualified Equity Financing Conversion Rate” means the conversion rate equal to US$1,000 divided by the per-share
issuance price applicable to the new issuance of equity securities of the Company in the Qualified Equity Financing (subject to
adjustment as set forth in this Indenture).
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the
Ordinary Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Ordinary Shares (directly or in the form of ADSs) (or such other security) are exchanged for or converted into
any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$3.07 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Indenture and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to under
the provisions in Section 14.04(f).
“Reference Property” shall have the meaning specified in Section 14.07(a).
“Regulation S” means Regulation S under the Securities Act or any successor to such regulation.
“Relevant Jurisdiction” shall have the meaning specified in Section 4.07(a).
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“Relevant Resolution Authority” means the resolution authority with the ability to exercise any Bail-in Powers in relation to
The Bank of New York Mellon SA/NV, Luxembourg Branch.
“Relevant Taxing Jurisdiction” shall have the meaning specified in Section 4.07(a).
“Responsible Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of
the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this Indenture.
“Rule 144” means Rule 144 as promulgated under the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act. Each of the Company’s Consolidated Affiliated Entities will be deemed to be a
“subsidiary” for purposes of the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X.
“Specified Portion” means such portion of the Notes that upon conversion by a Holder will result in a number of ADSs
(assuming delivery of the maximum number of ADSs due upon conversion that do not represent a fractional ADS) to be delivered to
such Holder to equal to (x) seventy five percent (75%), fifty percent (50%) or twenty five percent (25%) multiplied by (y) the number of
ADSs calculated as (i) the aggregate principal amount of the Notes issued on the date of this Indenture divided by (ii) US$1,000 and
multiplied by (A) the Conversion Rate (in the case of conversion of the Notes pursuant to Section 14.01(a)) or (B) the Qualified Equity
Financing Conversion Rate (in the case of conversion of the Notes pursuant to Section 14.01(b)), in each case, in effect immediately
prior to the close of business on the relevant Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be).
“Spin-Off” shall have the meaning specified in Section 14.04(c).
“Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii)
one or more Subsidiaries of such Person.
“Successor Company” shall have the meaning specified in Section 11.01(a).
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“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on the New York Stock Exchange or, if the ADSs (or such other security) are not then listed on the New
York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the ADSs (or such other security) are
then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities exchange, on the principal
other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale Price for the ADSs (or closing sale
price for such other security) is available on such securities exchange or market; provided that if the ADSs (or such other security) are
not so listed or traded, “Trading Day” means a Business Day.
“transfer” shall have the meaning specified in Section 2.05(c) and Section 2.05(e), as applicable.
“Transfer Agent” shall have the meaning specified in Section 4.02.
“Trigger Event” shall have the meaning specified in Section 14.04(c).
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this
Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after the date hereof, the term “Trust
Indenture Act” shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended.
“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor trustee shall have
become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is
then a Trustee hereunder.
“unit of Reference Property” shall have the meaning specified in Section 14.07(a).
“U.S. Person” shall have the meaning as such term is defined under Regulation S.
“Valuation Period” shall have the meaning specified in Section 14.04(c).
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01 Designation and Amount. The Notes shall be designated as the “0% Convertible Senior Notes due 2021.” The
aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is limited to US$70,000,000, except
for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section
2.05, Section 2.06, Section 2.07, Section 10.04, Section 14.02 and Section 15.04.
Section 2.02 Form of Notes. The Notes and the Note Registrar’s certificate of authentication to be borne by such Notes shall
be substantially in the respective forms set forth in
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Exhibit A, the terms and provisions of which shall constitute, and are hereby expressly incorporated in and made a part of this
Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the Common Depositary, or as may be required to comply with
any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation
system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular Notes are subject.
Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements
as the Officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes
are subject.
Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect redemptions,
repurchases, cancellations, conversions, transfers or exchanges permitted hereby. Any endorsement of the Global Note to reflect the
amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Note
Registrar in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of
principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Global Note
shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to
receive payment is provided for herein.
Section 2.03 Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts. (a) The Notes shall be
issuable in registered form without coupons in denominations of US$1,000 principal amount and integral multiples thereof. Each Note
shall be dated the date of its authentication and shall not bear regular interest, and the principal amount of the Notes will not accrete.
(b) [RESERVED]
(c) Any Defaulted Amounts shall forthwith cease to be payable to the Holder on the relevant payment date but shall accrue
interest per annum at the rate of three percent per annum, subject to the enforceability thereof under applicable law, from, and including,
such relevant
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payment date, and such Defaulted Amounts together with such interest thereon shall be paid by the Company, at its election in each case,
as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Amounts to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such
Defaulted Amounts, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the
amount of the Defaulted Amounts proposed to be paid on each Note and the date of the proposed payment (which shall be not
less than 25 days after the receipt by the Trustee of such notice, unless the Trustee in its sole discretion shall consent to an
earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Amounts or shall make arrangements satisfactory to the Trustee for such deposit
on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Amounts as in this clause provided. Thereupon the Company shall fix a special record date for the
payment of such Defaulted Amounts which shall be not more than 15 days and not less than 10 days prior to the date of the
proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The
Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such Defaulted Amounts and the special record date
therefor to be mailed, first-class postage prepaid (at the Company’s expense), to each Holder at its address as it appears in the
Note Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted
Amounts and the special record date therefor having been so mailed, such Defaulted Amounts shall be paid to the Persons in
whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date
and shall no longer be payable pursuant to the following clause (ii) of this Section 2.03(c).
(ii) The Company may make payment of any Defaulted Amounts in any other lawful manner not inconsistent with
the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for
issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable
by the Trustee.
Section 2.04 Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chief Executive Officer, President, Chief Financial Officer, Treasurer, Secretary or
any of its Executive or Senior Vice Presidents. With the delivery of this Indenture, the Company is furnishing, and from time to time
thereafter may furnish, a certificate substantially in the form of Exhibit B (an “Authorization Certificate”) identifying and certifying the
incumbency and specimen (and/or facsimile) signatures of its active authorized Officers. Until the Trustee receives a subsequent
Authorization Certificate, the Trustee shall be entitled to conclusively rely
14
on the last Authorization Certificate delivered to it for purposes of determining the relevant authorized Officers. Typographical and other
minor errors or defects in any signature shall not affect the validity or enforceability of any Note which has been duly authenticated and
delivered by the Note Registrar.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed
by the Company to the Note Registrar for authentication, together with a Company Order for the authentication and delivery of such
Notes, and the Note Registrar in accordance with such Company Order shall authenticate and deliver such Notes, without any further
action by the Company hereunder.
The Company Order shall specify the amount of Notes to be authenticated, the date on which the original issuance of such
Notes is to be authenticated, the date on which the principal of such Notes will be payable and other terms relating to such Notes. The
Note Registrar shall thereupon authenticate and deliver said Notes to or upon the written order of the Company (as set forth in such
Company Order).
The Note Registrar shall have the right to decline to authenticate and deliver any Notes under this Section (a) unless and until it
receives from the Company a Company Order instructing it to so authenticate and deliver such Notes and, if requested by the Note
Registrar, an Officers’ Certificate and an Opinion of Counsel in accordance with Section 17.06 hereof; (b) if the Note Registrar
determines that such action may not lawfully be taken; or (c) if the Note Registrar determines that such action would expose the Note
Registrar to personal liability, unless indemnity and/or security and/or pre-funding satisfactory to the Note Registrar against such liability
is provided to the Note Registrar.
Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note
attached as Exhibit A hereto, executed manually or by facsimile by an authorized officer of the Note Registrar, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Note Registrar upon any Note executed by the
Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
In case any Officer of the Company who shall have signed any of the Notes shall cease to be such Officer before the Notes so
signed shall have been authenticated and delivered by the Note Registrar, or disposed of by the Company, such Notes nevertheless may
be authenticated and delivered or disposed of as though the Person who signed such Notes had not ceased to be such Officer of the
Company; and any Note may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Note,
shall be the Officers of the Company, although at the date of the execution of this Indenture any such Person was not such an Officer.
Section 2.05 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary. (a) The
Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or
agency of the Company
15
designated pursuant to Section 4.02, the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form or in any form
capable of being converted into written form within a reasonable period of time. The Bank of New York Mellon SA/NV, Luxembourg
Branch is hereby initially appointed the “Note Registrar” and “Transfer Agent” for the purpose of registering Notes and transfers of
Notes as herein provided. The Company may appoint one or more co-Note Registrars in accordance with Section 4.02.
Prior to the Distribution Compliance Period Termination Date, upon surrender for registration of transfer of any Note to the
Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05(c), the
Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one
or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may
be required by this Indenture. Following the Distribution Compliance Period Termination Date, upon surrender for registration of
transfer of any Note to the Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this
Section 2.05, the Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and not bearing the
restrictive legends required by the second paragraph of Section 2.05(c).
Prior to the Distribution Compliance Period Termination Date, Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding. Following the Distribution Compliance Period Termination Date, Notes may
be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount but not bearing the restrictive
legend required by the second paragraph of Section 2.05(c), upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of transfer or for exchange, repurchase or conversion shall (if so required by
the Company, the Trustee, the Note Registrar or any co-Note Registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and duly executed, by the Holder thereof or its attorney-in-fact duly
authorized in writing.
No service charge shall be imposed by the Company, the Transfer Agent, the Note Registrar, any co-Note Registrar or the
Paying Agent for any exchange or registration of transfer of Notes, but the Company may require a Holder to pay a sum sufficient to
cover any
16
documentary, stamp, issue, transfer or similar tax required in connection therewith as a result of the name of the Holder of new Notes
issued upon such exchange or registration of transfer being different from the name of the Holder of the old Notes surrendered for
exchange or registration of transfer. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
None of the Company, the Trustee, the Note Registrar or any co-Note Registrar shall be required to exchange or register a
transfer of (i) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof
surrendered for conversion or (ii) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) in accordance
with Article 15.
All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered
upon such registration of transfer or exchange.
The Trustee shall have no responsibility or obligation to any direct or indirect participant or any other Person with respect to the
accuracy of the books or records, or the acts or omissions, of the Common Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any direct or indirect participant or other
Person (other than the Common Depositary and any other registered Holder of Notes) of any notice or the payment of any amount, under
or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under
the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Common Depositary or its
nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Common
Depositary subject to the customary procedures of Euroclear and Clearstream. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Common Depositary with respect to its direct or indirect participants.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers
between or among direct or indirect participants in any Global Note) other than to require delivery of such certificates as are expressly
required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
(b) So long as the Notes are eligible for book-entry settlement with Euroclear and Clearstream, unless otherwise required by
law, subject to the fourth paragraph from the end of Section 2.05(c) all Notes shall be represented by one or more Notes in global form
(each, a “Global Note”) registered in the name of the Common Depositary or its nominee. The transfer and exchange of beneficial
interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Common Depositary in
accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of Euroclear and Clearstream.
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(c) Every Note that bears or is required under this Section 2.05(c) to bear the legend set forth in this Section 2.05(c) shall,
until no longer required by this Section 2.05(c), be subject to the restrictions on transfer set forth in this Section 2.05(c) (including the
legends set forth below), unless such restrictions on transfer shall be eliminated or otherwise waived by written consent of the Company,
and the Holder of each such Note, by such Holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used
in this Section 2.05(c), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any such Note.
Until the date (the “Distribution Compliance Period Termination Date”) that is 40 days after the date hereof, any certificate
evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following
form (unless such Notes have been transferred pursuant to a registration statement that has become or been declared effective under the
Securities Act and that continues to be effective at the time of such transfer, or unless otherwise agreed by the Company in writing, with
notice thereof to the Trustee):
THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOTE SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE
DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
18
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Any certificate evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form (unless otherwise agreed by the Company in writing, with notice thereof to the Trustee):
PRIOR TO AUGUST 10, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE NOTE SUBSCRIPTION
AGREEMENT BETWEEN NIO INC. AND THE PURCHASER NAMED THEREIN, DATED FEBRUARY 6, 2020 (THE
“SUBSCRIPTION AGREEMENT”). ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE,
HYPOTHECATE OR OTHERWISE TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION
SHALL BE VOID.
No transfer of any Note prior to the Distribution Compliance Period Termination Date will be registered by the Note Registrar
unless the applicable box on the Form of Assignment and Transfer has been checked.
The Company shall promptly notify the Trustee and the ADS Depositary in writing upon the occurrence of the Distribution
Compliance Period Termination Date and after a registration statement, if any, with respect to the Notes has been declared effective
under the Securities Act.
Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.05(c)), a Global
Note may not be transferred as a whole or in part except (i) by the Common Depositary to a nominee of the Common Depositary or by a
nominee of the Common Depositary to the Common Depositary or another nominee of the Common Depositary or by the Common
Depositary or any such nominee to a successor Common Depositary or a nominee of such successor Common Depositary and (ii) for
transfers of portions of a Global Note in certificated form made upon request of a member of, or a participant in, the Common Depositary
(for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Common Depositary in
accordance with customary procedures of Euroclear and Clearstream and in compliance with this Section 2.05(c).
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Initially, each Global Note shall be delivered by or on behalf of the Trustee to, and registered in the name of, the Common
Depositary or its nominee for the accounts of Euroclear and Clearstream.
If (i) the Common Depositary notifies the Company at any time that the Common Depositary is unwilling or unable to continue
as depositary for the Global Notes and a successor depositary is not appointed within 90 days, (ii) either Euroclear or Clearstream, or a
successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or
otherwise) or announces an intention to permanently cease business or does in fact do so, or (iii) an Event of Default with respect to the
Notes has occurred and is continuing and a beneficial owner of any Note requests that its beneficial interest therein be issued as a
Physical Note, the Company shall execute, and the Note Registrar, upon receipt of an Officers’ Certificate and a Company Order for the
authentication and delivery of Notes, shall authenticate and deliver (x) in the case of clause (iii), a Physical Note to such beneficial owner
in a principal amount equal to the principal amount of such Note corresponding to such beneficial owner’s beneficial interest and (y) in
the case of clause (i) or (ii), Physical Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate
principal amount equal to the aggregate principal amount of such Global Notes in exchange for such Global Notes, and upon delivery of
the Global Notes to the Note Registrar such Global Notes shall be canceled.
Physical Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(c) shall be registered in such
names and in such authorized denominations as the Common Depositary, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Note Registrar in writing. Upon execution and authentication, the Note Registrar shall deliver such
Physical Notes to the Persons in whose names such Physical Notes are so registered.
At such time as all interests in a Global Note have been converted, canceled, repurchased, redeemed or transferred, such Global
Note shall be, upon receipt thereof, canceled by the Note Registrar in accordance with standing procedures and existing instructions of
the Common Depositary. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Physical Notes,
converted, canceled, repurchased, redeemed or transferred to a transferee who receives Physical Notes therefor or any Physical Note is
exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing
procedures and existing instructions of the Common Depositary, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Global Note, by the Note Registrar, to reflect such reduction or increase.
None of the Company, the Trustee, the Paying Agent, any agent of the Company or any agent of the Trustee shall have any
responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a
Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(d) [RESERVED]
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(e) Any Note that is repurchased or owned by any Affiliate of the Company may not be resold by such Affiliate unless
registered under the Securities Act or resold pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act in a transaction that results in such Note no longer being a “restricted security” (as defined under Rule
144 under the Securities Act). The Company shall cause any Note that is repurchased or owned by it to be surrendered to the Note
Registrar for cancellation in accordance with Section 2.08.
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon receipt of a Company Order, the Note Registrar shall authenticate and
deliver, a new Note, bearing a registration number not contemporaneously outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall
furnish to the Company and to the Note Registrar such security and/or indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company and to the Note Registrar evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
The Note Registrar may authenticate any such substituted Note and deliver the same upon the receipt of such security and/or
indemnity as the Note Registrar and the Company may require. No service charge shall be imposed by the Company, the Transfer Agent,
the Note Registrar, any co-Note Registrar or the Paying Agent upon the issuance of any substitute Note, but the Company may require a
Holder to pay a sum sufficient to cover any documentary, stamp, issue, transfer or similar tax required in connection therewith as a result
of the name of the Holder of the new substitute Note being different from the name of the Holder of the old Note that became mutilated
or was destroyed, lost or stolen. In case any Note that has matured or is about to mature or has been surrendered for repurchase (and not
withdrawn) in accordance with Article 15 or is about to be converted in accordance with Article 14 shall become mutilated or be
destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or
convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if
the applicant for such payment or conversion shall furnish to the Company and to the Trustee such security and/or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and,
in every case of destruction, loss or theft, evidence satisfactory to the Company, and the Trustee evidence of their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be
found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally
and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and
owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement, payment,
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redemption, conversion or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement, payment, redemption,
conversion or repurchase of negotiable instruments or other securities without their surrender.
Section 2.07 Temporary Notes. Pending the preparation of Physical Notes, the Company may execute and the Note Registrar
shall, upon receipt of a Company Order, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be
issuable in any authorized denomination, and substantially in the form of the Physical Notes but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Note Registrar upon the same conditions and in substantially the same manner, and
with the same effect, as the Physical Notes. Without unreasonable delay, the Company shall execute and deliver to the Note Registrar
Physical Notes (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered
in exchange therefor, at each office or agency maintained by the Company pursuant to Section 4.02 and the Note Registrar shall upon
receipt of a Company Order authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of
Physical Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged,
the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as
Physical Notes authenticated and delivered hereunder.
Section 2.08 Cancellation of Notes Paid, Converted, Etc. The Company shall cause all Notes surrendered for the purpose of
payment, repurchase, redemption, registration of transfer or exchange or conversion, if surrendered to any Person other than the Note
Registrar (including any of the Company’s agents, Subsidiaries or Affiliates), to be delivered and surrendered to the Note Registrar for
cancellation. All Notes delivered to the Note Registrar shall be canceled promptly by it, and no Notes shall be authenticated in exchange
thereof except as expressly permitted by any of the provisions of this Indenture. The Note Registrar shall dispose of canceled Notes in
accordance with its customary procedures and, after such disposition, shall deliver a certificate of such cancellation and disposition to the
Company, at the Company’s written request in a Company Order.
Section 2.09 Common Code and ISIN Numbers. The Company in issuing the Notes may use "Common Code" or “ISIN”
numbers (if then generally in use), and, if so, the Trustee shall use "Common Code" or “ISIN” numbers in all notices issued to Holders as
a convenience to such Holders; provided that any such notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed
on the Notes. The Company shall promptly notify the Trustee in writing of any change in the “Common Code” or "ISIN" numbers.
Section 2.10 [RESERVED]
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ARTICLE 3
SATISFACTION AND DISCHARGE
Section 3.01 Satisfaction and Discharge. This Indenture shall upon request of the Company contained in an Officers’
Certificate cease to be of further effect, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when (a) (i) all Notes theretofore authenticated and delivered (other than (x) Notes which
have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06 and (y) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 4.04(d)) have been delivered to the Note Registrar for cancellation; or (ii) the
Company has deposited with the Paying Agent or delivered to Holders, as applicable, after the Notes have become due and payable,
whether on the Maturity Date, any Fundamental Change Repurchase Date, upon conversion or otherwise, cash or cash and ADSs (solely
to satisfy the Company’s Conversion Obligation, if applicable), sufficient to pay all of the outstanding Notes and all other sums due and
payable under this Indenture by the Company; and (b) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have
been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee
under Section 7.06 shall survive.
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01 Payment of Principal and Premium. (a) The Company covenants and agrees that it will cause to be paid the
principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of each of the Notes
at the places, at the respective times and in the manner provided herein and in the Notes.
(b) The Company covenants and agrees that it will cause to be paid a premium equal to (i) in the case of any payment of
principal to be made on the Maturity Date or pursuant to Section 6.02, 2.0% of the outstanding principal amount of the Notes, or (ii) in
the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate interest that would have
accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case may be) over the period
starting from (and including) the original date of issuance of the Notes and ending on (and including) the Fundamental Change
Repurchase Date, if the Notes were to bear interest at a rate of 2.0% per annum (accruing daily and computed on the basis of a 360-day
year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day month). For the
avoidance of doubt, any reference in this Indenture of the Notes in any context to the principal shall be deemed to include, without
duplication, the premium contemplated by this Section 4.01(b) to the extent that, in such context, such premium is, was or would be
payable pursuant to this Section 4.01(b).
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Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency (which will be the Corporate Trust Office initially) where the Notes may be surrendered for registration of
transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and
where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust Office, provided, however, that the legal service of
process against the Company shall in no circumstance be made at an office or agency of the Trustee.
The Company may also from time to time designate as co-Note Registrars one or more other offices or agencies where the
Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that
no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such other office or agency. The terms “Paying Agent” and
“Conversion Agent” include any such additional or other offices or agencies, as applicable.
The Company hereby initially designates (i) The Bank of New York Mellon, London Branch as the Paying Agent and
Conversion Agent and the Corporate Trust Office and the office or agency of The Bank of New York Mellon in the Borough of
Manhattan, The City of New York, each shall be considered as one such office or agency of the Company for each of the aforesaid
purposes; and (ii) The Bank of New York Mellon SA/NV, Luxembourg Branch of Vertigo Building – Polaris, 2-4 rue Eugène Ruppert,
L-2453 Luxembourg as the Note Registrar and Transfer Agent.
Section 4.03 Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy
in the office of Trustee, will appoint, in the manner provided in Section 7.09, a trustee, so that there shall at all times be a trustee
hereunder.
Section 4.04 Provisions as to Paying Agent. (a) If the Company shall appoint a Paying Agent other than the Trustee, the
Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 4.04:
(i) that it will hold all sums held by it as such agent for the payment of the principal (including the Fundamental
Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes for the benefit of the Holders of the
Notes;
(ii) that it will give the Trustee prompt notice of any failure by the Company to make any payment of the principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes when
the same shall be due and payable; and
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(iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith
pay to the Trustee all sums so held.
The Company shall, on or before each due date of the principal (including the Fundamental Change Repurchase Price, if
applicable, and any premium payable hereunder) of the Notes, deposit with the Paying Agent a sum sufficient to pay such principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of any failure to take such action; provided that such deposit must be
received by the Paying Agent by 10:00 a.m., New York City time, one Business Day prior to the relevant due date. The Paying Agent
shall not be bound to make any payment until it has received, in immediately available and cleared funds, an amount which shall be
sufficient to pay, as applicable, the aggregate amount of principal (including the Fundamental Change Repurchase Price, if applicable,
and any premium payable hereunder) of the Notes when such principal shall become due and payable. The Paying Agent shall not be
responsible or liable for any delay in making the payment if it does not receive funds before 10:00 a.m. one Business Day prior to the
payment date. The Company shall use reasonable efforts to procure that, before 10:00 a.m., New York City time, on the second Business
Day before each payment date, the bank effecting payment for it has confirmed by facsimile to the Paying Agent the payment
instructions relating to such payment.
(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the
Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes, set aside, segregate and hold in
trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the Fundamental Change Repurchase
Price, if applicable, and any premium payable hereunder) so becoming due and will promptly notify the Trustee in writing of any failure
to take such action and of any failure by the Company to make any payment of the principal (including the Fundamental Change
Repurchase Price, if applicable, and any premium payable hereunder) of the Notes when the same shall become due and payable. Upon
an Event of Default under Section 6.01(i) or Section 6.01(j) hereof, the Trustee shall automatically become the Paying Agent.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay, cause to be paid or deliver to the Trustee all sums or
amounts held by the Company in trust or by any Paying Agent as required by this Section 4.04, such sums or amounts to be held by the
Trustee upon the trusts herein contained and upon such payment or delivery by the Company or any Paying Agent to the Trustee, the
Company or such Paying Agent shall be released from all further liability but only with respect to such sums or amounts.
(d) Any money and ADSs deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of any
Note (or, in the case of ADSs, in satisfaction of the Conversion Obligation) and remaining unclaimed for two years after such principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) has become due and payable
or such Conversion Obligation has become due shall be paid or delivered, as the case may be, to the Company on request of the
25
Company contained in an Officers’ Certificate, or (if then held by the Company) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such money and ADSs, and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment or delivery, may at the
expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The Borough of Manhattan, The City of New York, notice that such money and ADSs
remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money and ADSs then remaining will be repaid or delivered to the Company.
Section 4.05 Existence. Subject to Article 11, the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence. The Company shall promptly provide the Trustee with written notice of any change
to its name, jurisdiction of incorporation or change to its corporate organization.
Section 4.06 [RESERVED]
Section 4.07 Additional Amounts. (a) All payments and deliveries made by, or on behalf of, the Company or any successor to
the Company under or with respect to this Indenture and the Notes, including, but not limited to, payments of principal (including, if
applicable, the Fundamental Change Repurchase Price), premium, if any, payments of interest, if any, and deliveries of ADSs or any
other consideration due on conversion of a Note (together with payments of cash for any Fractional ADS or other consideration) upon
conversion of the Notes, shall be made without withholding, deduction or reduction for any other collection at source for, or on account
of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied (including any
penalties and interest related thereto) (“applicable taxes”) by or within any jurisdiction in which the Company or any successor to the
Company is, for tax purposes, incorporated, organized or resident or doing business (each, as applicable, a “Relevant Taxing
Jurisdiction”) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a “Relevant
Jurisdiction,” and in each case, any political subdivision or taxing authority thereof or therein) unless such withholding, deduction or
reduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding,
deduction or reduction is so required, the Company or any successor to the Company shall pay or deliver to each Holder such additional
amounts of cash, ADSs or other consideration, as applicable (“Additional Amounts”) as may be necessary to ensure that the net amount
received by the beneficial owner of the Notes after such withholding, deduction or reduction (and after deducting any taxes on the
Additional Amounts) shall equal the amounts that would have been received by such beneficial owner had no such withholding,
deduction or reduction been required; provided that no Additional Amounts shall be payable:
(i) for or on account of:
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(A) any applicable taxes that would not have been imposed but for:
(1) the existence of any present or former connection between the relevant Holder or beneficial
owner of such Note and the Relevant Jurisdiction, other than merely acquiring or holding such Note, receiving
ADSs (together with the payment of cash for any Fractional ADS) or other consideration upon conversion of
such Note or the receipt of payments or the exercise or enforcement of rights thereunder, including, without
limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such
Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in
a trade or business therein or having had a permanent establishment therein;
(2) the presentation of such Note (in cases in which presentation is required) more than 30 days
after the later of the date on which the payment of the principal of (including the Fundamental Change
Repurchase Price, if applicable, and any premium payable hereunder) and interest on, such Note or the
delivery of ADSs (together with payment of cash for any Fractional ADS) upon conversion of such Note
became due and payable pursuant to the terms thereof or was made or duly provided for;
(3) the failure of the Holder or beneficial owner to comply with a timely written request from the
Company or any successor of the Company, addressed to the Holder, to the extent such Holder or beneficial
owner is legally entitled, to provide certification, information, documents or other evidence concerning such
Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Taxing
Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if
and to the extent that due and timely compliance with such request is required by statute, regulation or
administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or
deduction as to which Additional Amounts would have otherwise been payable to such Holder or beneficial
owner; or
(4) the presentation of such Note (in cases in which presentation is required) for payment in the
Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
(B) any estate, inheritance, gift, sale, transfer, personal property or similar applicable tax or any excise or
similar taxes imposed with respect to a transfer;
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(C) any applicable tax that is payable otherwise than by withholding, deduction or reduction for any other
collection at source from payments or deliveries under or with respect to the Notes;
(D) any applicable tax required to be withheld or deducted under Sections 1471 to 1474 of the Code (or
any amended or successor versions of such Sections) (“FATCA”), any regulations or other official guidance
thereunder, any intergovernmental agreement or agreement pursuant to Section 1471(b)(1) of the Code entered into in
connection with FATCA, or any law, regulation or other official guidance enacted in any jurisdiction implementing
FATCA or an intergovernmental agreement; or
(E) any combination of applicable taxes referred to in the preceding clauses (A), (B), (C) or (D); or
(ii) with respect to any payment of the principal of (including the Fundamental Change Repurchase Price, if
applicable, and any premium payable hereunder), and interest on, such Note or the delivery of ADSs (together with payment of
cash for any Fractional ADS) upon conversion of such Note to a Holder, if the Holder is a fiduciary, partnership or person other
than the sole beneficial owner of that payment to the extent that such payment would be required to be included in the income
under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, a partner or
member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that
beneficiary, settlor, partner, member or beneficial owner been the Holder thereof.
(b) If the Company or its successor becomes obligated to pay Additional Amounts with respect to any payment or delivery
under or with respect to the Notes, the Company or its successor shall deliver to the Trustee and the Paying Agent, if other than the
Trustee, on a date that is at least 30 days prior to the date of that payment or delivery (unless the obligation to pay Additional Amounts
arises after the 30th day prior to that payment date, in which case the Company or its successor shall notify the Trustee and the Paying
Agent promptly thereafter) an Officers’ Certificate stating the fact that Additional Amounts will be payable and the amount estimated to
be so payable. The Officers’ Certificate must also set forth any other information reasonably necessary to enable the Paying Agent or the
Conversion Agent, as the case may be, to pay Additional Amounts to Holders on the relevant payment date. The Trustee and the Paying
Agent shall be entitled to rely solely on such Officers’ Certificate as conclusive proof that such payments are necessary. The Company or
its successor shall provide the Trustee and the Paying Agent with documentation reasonably satisfactory to the Trustee evidencing the
payment of Additional Amounts.
(c) The Company or its successor shall make all withholdings and deductions required by law and shall remit the full
amount deducted or withheld to the relevant tax authority in accordance with applicable law. Upon request, the Company or its successor
shall provide to the Trustee an official receipt or, if official receipts are not obtainable, an Officers’ Certificate evidencing the payment of
any applicable taxes so deducted or withheld. Copies of those receipts
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or other documentation, as the case may be, shall be made available by the Trustee to the Holders of the Notes upon written request.
(d) Any reference in this Indenture or the Notes in any context to the delivery of ADSs (together with payment of cash for
any Fractional ADS) or other consideration upon conversion of any Note or the payment of principal of (including the Fundamental
Change Repurchase Price, if applicable) and any premium or interest, if any, on any Note or any other amount payable with respect to
such Note, shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were
or would be payable with respect to that amount pursuant to this Section 4.07.
(e) Notwithstanding any other provisions, the Company or its successor, the Trustee and the Paying Agent shall be entitled
to make any withholding or deduction pursuant to FATCA.
(f) If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with
respect to the Notes, it will deliver to the Trustee official tax receipts evidencing the remittance to the relevant tax authorities of the
amounts so withheld or deducted.
(g) The foregoing obligations shall survive termination or discharge of this Indenture.
Section 4.08 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law had been enacted.
Section 4.09 Compliance Certificate; Statements as to Defaults. The Company shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) an Officers’ Certificate
stating that a review has been conducted of the Company’s activities under this Indenture and the Company has fulfilled its obligations
hereunder, and whether the authorized Officers thereof have knowledge of any Default by the Company that occurred during the
previous year that is then continuing and, if so, specifying each such Default and the nature thereof.
In addition, the Company shall deliver to the Trustee, as soon as possible, and in any event within 30 days after the Company
becomes aware of the occurrence of any Default if such Default is then continuing, an Officers’ Certificate setting forth the details of
such Default, its status and the action that the Company is taking or proposing to take in respect thereof. The Trustee shall have no
responsibility to take any steps to ascertain whether any Event of Default
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or Default has occurred, and until (i) a Responsible Officer of the Trustee has received an Officers’ Certificate regarding such an
occurrence, or (ii) the Trustee has received written notice at the Corporate Trust Office from the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding regarding such an occurrence, the Trustee is entitled to assume, without liability, that no
Event of Default or Default has occurred.
Section 4.10 Further Instruments and Acts. The Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01 Lists of Holders. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee,
semi-annually, not more than 15 days after July 26, 2020, and January 26, 2021, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in
order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require
of the names and addresses of the Holders as of a date not more than 15 days (or such other date as the Trustee may reasonably request in
order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as
the Bank of New York Mellon SA/NV, Luxembourg Branch is acting as Note Registrar.
Section 5.02 Preservation and Disclosure of Lists. The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders contained in the most recent list furnished to it as provided in
Section 5.01 or maintained by the Trustee in its capacity as Note Registrar, if so acting. The Trustee may destroy any list furnished to it
as provided in Section 5.01 upon receipt of a new list so furnished.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default. The following events shall be “Events of Default” with respect to the Notes:
(a) [RESERVED]
(b) default in the payment of principal of any Note when due and payable on the Maturity Date, upon any required
repurchase, upon declaration of acceleration or otherwise (including, for the avoidance, the Fundamental Change Repurchase Price, if
applicable, any premium due to the Holders hereunder and Additional Amounts, if any);
(c) failure by the Company to comply with its obligation to convert the Notes in accordance with this Indenture upon
exercise of a Holder’s conversion right and such failure continues for a period of five Business Days;
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(d) failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 15.02(c) when due
and such failure continues for a period of five Business Days;
(e) failure by the Company to comply with its obligations under Article 11;
(f) failure by the Company for 60 days after written notice from the Trustee or by the Trustee at the request of the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding has been received by the Company, or after written notice
from the Holders of at least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section
8.04 has been received by the Company (which notice is to be copied to the Trustee in writing), to comply with any of its other
agreements or obligations contained in the Notes or this Indenture;
(g) default by the Company or any Significant Subsidiary of the Company with respect to any mortgage, agreement or other
instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed
in excess of US$50 million (or the foreign currency equivalent thereof) in the aggregate of the Company and/or any such Significant
Subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being
declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated
maturity, upon required repurchase, upon declaration of acceleration or otherwise;
(h) a final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or more (excluding any
amounts covered by insurance) rendered against the Company or any Significant Subsidiary of the Company, which judgment is not
paid, bonded or otherwise discharged or stayed within 60 days after (i) the date on which the right to appeal thereof has expired if no
such appeal has commenced, or (ii) the date on which all rights to appeal have been extinguished;
(i) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Company or any such Significant Subsidiary or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or any such Significant Subsidiary or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due;
(j) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to the Company or such Significant Subsidiary or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or such Significant Subsidiary or
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any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of
30 consecutive days; or
(k) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) have been
suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select market or The NASDAQ Global Market
(or any of their respective successors) for a period of ninety (90) consecutive trading days or for more than one hundred and eighty (180)
trading days in any twelve (12)-month period.
Section 6.02 Acceleration; Rescission and Annulment. If one or more Events of Default shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental
body), then, and in each and every such case (other than an Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to
the Company or any of its Significant Subsidiaries), unless the principal of all of the Notes shall have already become due and payable,
the Trustee may by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding determined in accordance with Section 8.04, by notice in writing to the Company and to the Trustee may, and the Trustee at
the request of such Holders shall (subject to being indemnified and/or secured and/or pre-funded to its satisfaction), declare 100% of the
principal of all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall
automatically be immediately due and payable, notwithstanding anything contained in this Indenture or in the Notes to the contrary. If an
Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to the Company or any of its Significant Subsidiaries occurs
and is continuing, 100% of the principal of all Notes shall become and shall automatically be immediately due and payable without any
action on the part of the Trustee. If an Event of Default occurs and is continuing, all agents of the Company appointed under this
Indenture will be required to act on the direction of the Trustee.
The immediately preceding paragraph, however, is subject to the conditions that if, at any time after the principal of the Notes
shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay the principal
of any and all Notes that shall have become due otherwise than by acceleration (with interest on any overdue principal at the rate of three
percent per annum) and amounts due to the Trustee pursuant to Section 7.06, and if (1) rescission would not conflict with any judgment
or decree of a court of competent jurisdiction and (2) any and all existing Events of Default under this Indenture, other than the
nonpayment of the principal of Notes that shall have become due solely by such acceleration, shall have been cured or waived pursuant
to Section 6.09, then and in every such case (except as provided in the immediately succeeding sentence) the Holders of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults
or Events of Default with respect to the Notes and rescind and annul such declaration and its consequences and such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such
waiver or rescission and annulment
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shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. Notwithstanding
anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any Default or Event of Default
resulting from (i) the nonpayment of the principal of any Notes, (ii) a failure to repurchase any Notes when required or (iii) a failure to
pay or deliver, as the case may be, the consideration due upon conversion of the Notes.
Section 6.03 [RESERVED]
Section 6.04 Payments of Notes on Default; Suit Therefor. If an Event of Default described in clause (a) or (b) of Section
6.01 shall have occurred, the Company shall, upon demand of the Trustee acting in its own discretion or at the request of Holders of at
least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 8.04 and subject to
indemnity and/or security and/or pre-funding satisfactory to the Trustee, or upon demand of the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding determined in accordance with Section 8.04 (which demand is to be in writing, copied to
the Trustee in writing), pay to the Trustee, for the benefit of the Holders of the Notes, the whole amount then due and payable on the
Notes for principal (including, for the avoidance of doubt, the Fundamental Change Repurchase Price, if applicable and any premium
payable hereunder), with interest on any overdue principal at the rate of three percent per annum, and, in addition thereto, such further
amount as shall be sufficient to cover any amounts due to the Trustee under Section 7.06. If the Company shall fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against
the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes, wherever situated.
In the event there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor
on the Notes under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy
or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such
other obligor, the property of the Company or such other obligor, or in the event of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.04, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and
accrued and unpaid interest, if any, in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other
papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee
(including any claim for the compensation, properly incurred expenses, properly incurred disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceedings relative to the Company or any
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other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable
or deliverable on any such claims, and to distribute the same after the deduction of any amounts due to the Trustee under Section 7.06;
and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each
of the Holders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any amount due to it for compensation, properly incurred
expenses, advances and properly incurred disbursements, including agents and counsel fees and expenses, and including any other
amounts due to the Trustee under Section 7.06, incurred by it up to the date of such distribution. To the extent that such payment of
compensation, properly incurred expenses, advances and properly incurred disbursements out of the estate in any such proceedings shall
be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends,
monies, securities and other property that the Holders of the Notes may be entitled to receive in such proceedings, whether in liquidation
or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition affecting such Holder or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee
without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name or as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the compensation, properly incurred expenses, properly incurred disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Holders of the Notes parties to any such proceedings.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of any waiver pursuant to Section 6.09 or any rescission and annulment pursuant to Section 6.02 or
for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders, and
the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been
instituted.
Section 6.05 Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 6 with
respect to the Notes shall be applied in the following
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order, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:
First, to the payment of all amounts due the Trustee, including to its agents and counsel, under Section 7.06 and any payments
due to the Paying Agent, the Transfer Agent, the Conversion Agent and the Note Registrar;
Second, in case the principal of the outstanding Notes shall not have become due and be unpaid, to the payment of interest on
the Notes in default in the order of the date due of the payments of such interest, with interest (to the extent that such interest is payable
pursuant to the Indenture and has been collected by the Trustee) upon such overdue payments at the rate per annum borne by the Notes at
such time (including, without duplication, any additional interest on such overdue payments pursuant to Section 6.04), such payments to
be made ratably to the Persons entitled thereto;
Third, in case the principal of the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the
payment of the whole amount (including, if applicable, the payment of the Fundamental Change Repurchase Price and any cash due
upon conversion) then owing and unpaid upon the Notes for principal and interest, if any, with interest on the overdue principal and, to
the extent that such interest has been collected by the Trustee, upon overdue installments of interest at the rate of three percent per
annum, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the
payment of such principal (including, if applicable, the Fundamental Change Repurchase Price, any premium due to the Holders
hereunder and the cash due upon conversion) and interest without preference or priority of principal over interest, or of interest over
principal or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the
aggregate of such principal (including, if applicable, the Fundamental Change Repurchase Price); and
Fourth, to the payment of the remainder, if any, to the Company.
Section 6.06 Proceedings by Holders. Except to enforce the right to receive payment of principal (including, if applicable,
the Fundamental Change Repurchase Price and premium due to the Holders hereunder) or interest when due, or the right to receive
payment or delivery of the consideration due upon conversion, no Holder of any Note shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this
Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder,
unless:
(a) such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance
thereof, as herein provided;
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(b) Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder;
(c) such Holders shall have offered to the Trustee such security and/or indemnity and/or pre-funding satisfactory to it
against any loss, liability or expense to be incurred therein or thereby;
(d) the Trustee for 30 days after its receipt of such notice, request and offer of security and/or indemnity and/or pre-funding,
shall have neglected or refused to institute any such action, suit or proceeding; and
(e) no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the
Trustee by the Holders of a majority of the aggregate principal amount of the Notes then outstanding within such 30-day period pursuant
to Section 6.09,
it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and
Holder and the Trustee that no one or more Holders shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any other Holder, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section
6.06, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Holder to receive payment
or delivery, as the case may be, of (x) the principal (including the Fundamental Change Repurchase Price, if applicable, and any premium
payable hereunder) of, and (y) the consideration due upon conversion of, such Note, on or after the respective due dates expressed or
provided for in such Note or in this Indenture, or to institute suit for the enforcement of any such payment or delivery, as the case may
be, on or after such respective dates against the Company shall not be impaired or affected without the consent of such Holder.
Section 6.07 Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of
such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce
any other legal or equitable right vested in the Trustee by this Indenture or by law.
Section 6.08 Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.06, all powers and
remedies given by this Article 6 to the Trustee or to
36
the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any
of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall
be construed to be a waiver of any such Default or Event of Default or any acquiescence therein; and, subject to the provisions of Section
6.06, every power and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Holders.
Section 6.09 Direction of Proceedings and Waiver of Defaults by Majority of Holders. The Holders of a majority of the
aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or
with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such
direction. The Trustee may refuse to follow any direction that would involve the Trustee in personal liability, or if it is not provided with
security and/or indemnity and/or pre-funding to its satisfaction, or that the Trustee determines is unduly prejudicial to the rights of any
other Holder. In addition, the Trustee will not be required to expend its own funds under any circumstances. The Holders of a majority
in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 may on behalf of the
Holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a default in the payment
of the principal (including, if applicable, the Fundamental Change Repurchase Price) of the Notes when due that has not been cured
pursuant to the provisions of Section 6.02, (ii) a failure by the Company to pay or deliver, or cause to be delivered, as the case may be,
the consideration due upon conversion of the Notes or (iii) a default in respect of a covenant or provision hereof which under Article 10
cannot be modified or amended without the consent of each Holder of an outstanding Note affected. Upon any such waiver the
Company, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or
Event of Default hereunder shall have been waived as permitted by this Section 6.09, said Default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent thereon.
Section 6.10 Notice of Defaults and Events of Default. If a Default or Event of Default occurs and is continuing and is
notified in writing to the Trustee, the Trustee shall, within 90 days after the occurrence and continuance of such Default or Event of
Default, mail to all Holders (at the Company’s expense) as the names and addresses of such Holders appear upon the Note Register,
notice of all Defaults so notified in writing, unless such Defaults shall have been cured or waived before the giving of such notice;
provided that the Trustee shall not be deemed to have knowledge of any occurrence of a Default or Event unless it has received written
notice.
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Except in the case of a Default in the payment of the principal of (including the Fundamental Change Repurchase Price, if applicable,
and any premium payable hereunder) any of the Notes or a Default in the payment or delivery of the consideration due upon conversion,
the Trustee shall be protected in withholding such notice if and so long as the Trustee’s board of directors, a Responsible Officer, an
executive committee or a committee of Responsible Officers of the Trustee (in its sole discretion) in good faith determines that the
withholding of such notice is in the interests of the Holders.
Section 6.11 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note by its acceptance
thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess costs, including
attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this Section 6.11 (to the extent permitted by law) shall not apply to
any suit instituted by or against the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than
10% in principal amount of the Notes at the time outstanding determined in accordance with Section 8.04, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of any Note (including, but not limited to, the Fundamental Change
Repurchase Price with respect to the Notes being repurchased as provided in this Indenture) on or after the due date expressed or
provided for in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Article
14.
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01 Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the
curing or waiver of all Events of Default that may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations will be read into the Indenture against the Trustee. In case
an Event of Default, of which the Trustee has actual written notice, has occurred that has not been cured or waived the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default
occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the
request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding
satisfactory to it against the costs, liabilities or expenses that might be incurred by it in compliance with such request or direction.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its
own grossly negligent failure to act or its own willful misconduct, except that:
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(a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have
occurred:
(i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture,
and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of gross negligence and willful misconduct on the part of the Trustee, as proven in a final
decision of a court of competent jurisdiction, the Trustee may conclusively and without liability rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions that by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy
of any mathematical calculations or other facts, statements, opinions or conclusions stated therein);
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved in a final decision in a court of competent jurisdiction that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority of the aggregate principal amount of the Notes at the time outstanding
determined as provided in Section 8.04 relating to the time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d) whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of this Section;
(e) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any
other matters relating to payment) or notice effected by the Company or any Paying Agent or any records maintained by any co-Note
Registrar with respect to the Notes;
(f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to be
sent to the Trustee, the Trustee may conclusively and without liability rely on its failure to receive such notice as reason to act as if no
such event occurred;
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(g) [RESERVED]
(h) the rights, immunities, privileges, disclaimers from liability and protections (including the right to compensation and
indemnity) afforded to the Trustee pursuant to this Article 7 shall also be afforded to such Note Registrar, Paying Agent, Conversion
Agent or Transfer Agent;
(i) the Trustee shall have no duty to inquire, no duty to determine and no duty to monitor as to the performance of the
Company’s covenants in this Indenture or the financial performance of the Company; the Trustee shall be entitled to assume, until it has
received written notice in accordance with this Indenture, that the Company is properly performing its duties hereunder;
(j) the Trustee shall be under no obligation to enforce any of the provisions of this Indenture unless it is instructed by
Holders of at least 25% of the aggregate principal amount of outstanding Notes and is provided with security and/or indemnity and/or
pre-funding satisfactory to it;
(k) the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request or
direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding satisfactory
to it against any costs, expenses and liabilities that might be incurred by it in compliance with such requests or direction.
(l) before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel prepared
and delivered at the cost of the Company conforming to Section 17.06 and the Trustee and the Agents may rely conclusively on such
certificate or opinion and will not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or
Opinion of Counsel;
(m) in connection with the exercise by it of its trusts, powers, authorities or discretions (including, without limitation, any
modification, waiver, authorization or determination), the Trustee shall have regard to the general interests of the Holders as a class but
shall not have regard to any interests arising from circumstances particular to individual Holders (whatever their number) and in
particular, but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers, authorities or discretions
for individual Holders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise
connected with, or subject to the jurisdiction of, any country, state or territory; and
(n) the Trustee is not obliged to do or omit to do anything which in its reasonable opinion, would or may be illegal or would
constitute a breach of any fiduciary duty or duty of confidentiality, or any law, rule, regulation, or any decree, order or judgment of any
court, or practice, request, direction, notice, announcement or similar action (whether or not having the force of law) of any relevant
government, government agency, regulatory authority, stock exchange or self-regulatory organization to which the Trustee is
subject. The Trustee may
40
without liability to do anything which is, in its reasonable opinion, necessary to comply with any such law, directive or regulations.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.
Section 7.02 Reliance on Documents, Opinions, Etc. Except as otherwise provided in Section 7.01:
(a) the Trustee may conclusively and without liability rely and shall be fully protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, Note, coupon or other paper or document
(whether in its original or facsimile form) believed by it in good faith to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an
Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and require an Opinion of Counsel and any advice of such counsel or Opinion of
Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such
inquiry or investigation;
(e) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or
through agents, delegates, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence
on the part of any agent, delegate, representative, custodian, nominee or attorney appointed by it with due care hereunder;
(f) the permissive rights of the Trustee enumerated herein shall not be construed as duties;
(g) under no circumstances and notwithstanding any contrary provision included herein, neither the Trustee, the Paying
Agent, the Conversion Agent nor the Note Registrar shall be responsible or liable for special, indirect, punitive, or consequential
damages or loss of any
41
kind whatsoever (including, but not limited to, loss of profit) irrespective of whether any of them have been advised of the likelihood of
such loss or damage and regardless of the form of action; this provision shall remain in full force and effect notwithstanding the
discharge of the Notes, the termination of this Indenture or the resignation, replacement or removal of the Trustee, the Paying Agent, the
Conversion Agent and the Note Registrar;
(h) the Trustee, the Paying Agent, the Conversion Agent and the Note Registrar may refrain from taking any action in any
jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be
contrary to any law of that jurisdiction or, to the extent applicable, of New York; furthermore, the Trustee may also refrain from taking
such action if it would otherwise render it liable to any person in that jurisdiction or New York or if, in its opinion based on such legal
advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or in
New York or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power;
(i) the Company understands that The Bank of New York Mellon Corporation is a global financial organization that
operates in and provides services and products to clients through its affiliates, branches, representative offices and/or subsidiaries located
in multiple jurisdictions (collectively, the “BNY Mellon Group” and each a “BNY Mellon Entity”). The BNY Mellon Group may: (i)
use and/or centralize in one or more BNY Mellon Entity in connection with its performance of the functions, duties and services
provided and any other obligations under this Indenture and/or the Notes and in certain other activities (the “Centralized Functions”),
including, without limitation, audit, accounting, tax, administration, risk management, credit, legal, compliance, operation, sales and
marketing, product communication, relationship management, information technology, records and data storage, performance
measurement, data aggregation and the compilation and analysis of information and data regarding the Company (which, for purposes of
this sub-Section 7.02(i), includes the name and business contact information for the employees and representatives of the Company and
any personal data) and the accounts established pursuant to the transactions contemplated in this Indenture and/or the Notes (“Client
Information”); and (ii) use third party service providers to store, maintain and process Client Information (“Outsourced
Functions”). Notwithstanding anything to the contrary contained elsewhere in this Indenture and/or the Notes and solely in connection
with the Centralized Functions and/or Outsourced Functions, the Company consents to the: (i) collection, use and storage of, and
authorizes the BNY Mellon Group to collect, use and store, Client Information within and outside of any jurisdiction, including without
limitation Australia, the European Economic Area, Hong Kong, the PRC, Japan, Singapore, India, the British Virgin Islands and the
United States of America; and (ii) disclosure of, and authorizes the BNY Mellon Group to disclose, Client Information to: (A) any other
BNY Mellon Entity (and their respective officers, directors and employees); and (B) third-party service providers (but solely in
connection with Outsourced Functions) who are required to maintain the confidentiality of Client Information. In addition, the BNY
Mellon Group may aggregate Client Information with other data collected and/or calculated by the BNY Mellon Group, and the BNY
Mellon Group will own all such aggregated data, provided that the BNY Mellon Group shall not distribute the aggregated data in a
format that identifies Client Information with the Company specifically. The Company represents to the BNY Mellon Group that it is
authorized to consent
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to the foregoing and that the disclosure of Client Information in connection with the Centralized Functions and/or Outsourced Functions
does not violate any relevant data protection legislation. The Company also consents to the disclosure of Client Information to
governmental, tax, regulatory, law enforcement and other authorities in jurisdictions where the BNY Mellon Group operates and
otherwise as required by law, rule, or guideline (including any tax and swap trade data reporting regulations);
(j) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties
hereunder;
(k) the Trustee may request that the Company deliver Officers' Certificates setting forth the names of individuals and their
titles and specimen signatures of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers'
Certificates may be signed by any Person authorized to sign an Officers' Certificate, as the case may be, including any Person specified
as so authorized in any such certificate previously delivered and not superseded;
(l) the Trustee shall not be responsible or liable for any action it takes or omits to take in good faith which it reasonably
believes to be authorized or within its rights or powers;
(m) the Trustee shall not be responsible or liable for any action taken or omitted by it in good faith at the direction, in
accordance with Section 6.09, of the Holders of not less than a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 8.04 as to the time, method and place of conducting any proceeding for any remedy
available to the Trustee or the exercising of any power conferred by this Indenture; and
(n) the Trustee shall not be responsible or any inaccuracy in the information obtained from the Company or for any
inaccuracy or omission in the records which may result from such information or any failure by the Trustee to perform its duties as set
forth herein as a result of any inaccuracy or incompleteness of such information.
Section 7.03 No Responsibility for Recitals, Etc. The recitals, statements, warranties and representations contained herein and
in the Notes (except in the Note Registrar’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the accuracy or correctness of the
same or for any failure by the Company or any other party to disclose events that may have occurred and may affect the significance or
accuracy of such information, or the execution, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in
evidence of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes
or the proceeds of any Notes authenticated and delivered by the Note Registrar in conformity with the provisions of this
Indenture. Notwithstanding the generality of the foregoing, each Holder shall be solely responsible for making its own independent
appraisal of, and investigation into, the financial condition, creditworthiness, condition, affairs, status and nature of the Company, and the
Trustee
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shall not at any time have any responsibility for the same and each Holder shall not rely on the Trustee in respect thereof.
Section 7.04 Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes. The Trustee, any Paying Agent,
any Conversion Agent or Note Registrar, in its individual or any other capacity, may engage in business and contractual relationships
with the Company or its Affiliates and may become the owner or pledgee of Notes with the same rights it would have if it were not the
Trustee, Paying Agent, Conversion Agent or Note Registrar, and nothing herein shall obligate any of them to account for any profits
earned from any business or transactional relationship.
Section 7.05 Monies to Be Held in Trust. All monies received by the Trustee shall, until used or applied as herein provided,
be held in trust for the purposes for which they were received. Money held by the Trustee in trust or by the Paying Agent hereunder need
not be segregated from other funds except to the extent required by law. Neither the Trustee nor the Paying Agent shall be under any
liability for interest on any money received by it hereunder.
Section 7.06 Compensation and Expenses of Trustee. (a) The Company covenants and agrees to pay to the Trustee from time
to time, and the Trustee shall be entitled to, compensation for all services rendered by it hereunder in any capacity (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between
the Trustee and the Company (which sum shall be paid free and clear of deduction and withholding on account of taxation, set-off and
counterclaim), and the Company will pay or reimburse the Trustee upon its request for all properly incurred expenses, disbursements and
advances properly incurred or made by the Trustee in accordance with any of the provisions of this Indenture in any capacity thereunder
(including the compensation and the properly incurred expenses and disbursements of its agents and counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as shall have been caused by its gross negligence or willful
misconduct as proven in a final decision in a court of competent jurisdiction. The Company also covenants to indemnify the Trustee
(which for the purposes of this Section 7.06 shall be deemed to include its officers, directors, agents and employees) in any capacity
under this Indenture (including without limitation as Note Registrar, Transfer Agent, Conversion Agent and Paying Agent) and any other
document or transaction entered into in connection herewith, and to hold it harmless against, any loss, claim, damage, liability or expense
(whether arising from third party claims or claims by or against the Company) incurred without gross negligence or willful misconduct
on the part of the Trustee, its officers, directors, agents or employees, as the case may be, as proven in a final decision of a court of
competent jurisdiction, and arising out of or in connection with the acceptance or administration of this Indenture or in any other capacity
hereunder, including the costs and expenses of defending themselves against any claim of liability in the process of enforcing this
indemnity. The obligations of the Company under this Section 7.06 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a senior claim to which the Notes are hereby made subordinate on
all money or property held or collected by the Trustee, except, subject to the effect of Section 6.05, funds held in trust herewith for the
benefit of the Holders of particular Notes. The Trustee’s right to receive payment of any amounts due under this Section 7.06 shall not
be subordinate to any other
44
liability or indebtedness of the Company. The indemnity under this Section 7.06(a) is payable upon demand by the Trustee. The
obligation of the Company under this Section 7.06(a) shall survive the satisfaction and discharge of the Notes, the termination or
discharge of this Indenture and the resignation, replacement or removal or the Trustee. The indemnification provided in this Section
7.06(a) shall extend to the officers, directors, agents and employees of the Trustee. Subject to Section 7.02(e), any negligence or
misconduct of any agent, delegate, attorney or representative, in each case, of the Trustee, shall not affect indemnification of the Trustee.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee and its agents incur
expenses or render services after an Event of Default specified in Section 6.01(i) or Section 6.01(j) occurs, the expenses and the
compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws. If
a Default or Event of Default shall have occurred or if the Trustee finds it expedient or necessary or is requested by the Company and/or
the Holders to undertake duties which are of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties under
this Indenture, the Company will pay such additional remuneration as the Company and the Trustee may separately agree in writing.
(b) The Paying Agent, the Conversion Agent and the Note Registrar shall be entitled to the compensation to be agreed upon
in writing with the Company for all services rendered by it under this Indenture, and the Company agrees promptly to pay such
compensation and to reimburse the Paying Agent, the Conversion Agent and the Note Registrar for its out-of-pocket expenses (including
fees and expenses of counsel) properly incurred by it in connection with the services rendered by it under this Indenture. The Company
hereby agrees to indemnify the Paying Agent, the Conversion Agent and the Note Registrar and their respective officers, directors, agents
and employees and any successors thereto for, and to hold it harmless against, any loss, liability or expense (including fees and expenses
of counsel) properly incurred without gross negligence or willful misconduct on its part arising out of or in connection with its acting as
the Paying Agent, the Conversion Agent and the Note Registrar hereunder. The obligations of the Company under this paragraph (b)
shall survive the payment of the Notes, the termination or discharge of the Indenture and the resignation, replacement or removal of the
Paying Agent, the Conversion Agent and the Note Registrar.
Section 7.07 Officers’ Certificate as Evidence. Except as otherwise provided in Section 7.01, whenever in the administration
of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such Officers’ Certificate shall be full
warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.08 Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least US$50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
45
such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 7.09 Resignation or Removal of Trustee. (a) The Trustee may at any time resign by giving 60 days written notice of
such resignation to the Company and by mailing notice thereof to the Holders at their addresses as they shall appear on the Note
Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after
the mailing of such notice of resignation to the Holders, the resigning Trustee may appoint a successor trustee on behalf of and at the
expense of the Company or it may at the expense of the Company petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Holder who has been a bona fide holder of a Note or Notes for at least six months may, subject to the provisions
of Section 6.11, on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.08 and shall fail to resign
after written request therefor by the Company or by any such Holder, or
(ii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in either case, the Company may by a Board Resolution remove the Trustee and appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee, or, subject to the provisions of Section 6.11, any Holder who has been a bona fide holder of a Note or
Notes for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, as determined in
accordance with Section 8.04, may at any time remove the Trustee and nominate a successor trustee that shall be deemed appointed as
successor trustee unless within ten days after notice to the Company of such nomination the Company objects thereto, in
46
which case the Trustee so removed or any Holder, upon the terms and conditions and otherwise as in Section 7.09(a) provided, may
petition any court of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of
this Section 7.09 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.10.
Section 7.10 Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 7.09 shall execute,
acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, the
trustee ceasing to act shall, upon payment of any amounts then due to it pursuant to the provisions of Section 7.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a senior claim to which the Notes
are hereby made subordinate on all money or property held or collected by such trustee as such, except for funds held in trust for the
benefit of Holders of particular Notes, to secure any amounts then due to it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this Section 7.10 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 7.08.
Upon acceptance of appointment by a successor trustee as provided in this Section 7.10, each of the Company and the successor
trustee, at the written direction and at the expense of the Company shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the Holders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
Section 7.11 Succession by Merger, Etc. Any corporation or other entity into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the
Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto; provided that in the case of any corporation or other entity
succeeding to all or substantially all of the corporate trust business of the Trustee such corporation or other entity shall be eligible under
the provisions of Section 7.08.
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In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor
note registrar, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any
successor to the Note Registrar may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Note Registrar shall have; provided, however, that the right to adopt the certificate of authentication of
any predecessor note registrar or to authenticate Notes in the name of any predecessor trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 7.12 Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions
from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights
of the Holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or
omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in
such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any
officer that the Company has indicated to the Trustee should receive such application actually receives such application, unless any such
officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any
omission), the Trustee shall have received written instructions in accordance with this Indenture in response to such application
specifying the action to be taken or omitted.
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01 Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage of the
aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified
percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by
Holders in person or by agent or proxy appointed in writing, or (b) by the record of the Holders voting in favor thereof at any meeting of
Holders duly called and held in accordance with the provisions of Article 9, or (c) by a combination of such instrument or instruments
and any such record of such a meeting of Holders. Whenever the Company or the Trustee solicits the taking of any action by the Holders
of the Notes, the Company or the Trustee may fix, but shall not be required to, in advance of such solicitation, a date as the record date
for determining Holders entitled to take such action. The record date if one is selected shall be not more than fifteen days prior to the
date of commencement of solicitation of such action.
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Section 8.02 Proof of Execution by Holders. Subject to the provisions of Section 7.01, Section 7.02 and Section 9.05, proof
of the execution of any instrument by a Holder or its agent or proxy shall be sufficient if made in accordance with such reasonable rules
and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall
be proved by the Note Register or by a certificate of the Note Registrar. The record of any Holders’ meeting shall be proved in the
manner provided in Section 9.06.
Section 8.03 Who Are Deemed Absolute Owners. The Company, the Trustee, any Paying Agent, any Conversion Agent and
any Note Registrar may deem the Person in whose name a Note shall be registered upon the Note Register to be, and may treat it as, the
absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the
principal of (subject to Section 2.03) such Note, for the purpose of conversion of such Note and for all other purposes; and neither the
Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Note Registrar shall be affected by any notice to the
contrary. All such payments or deliveries so made to any Holder for the time being, or upon its order, shall be valid, and, to the extent of
the sums or ADSs so paid or delivered, effectual to satisfy and discharge the liability for monies payable or ADSs deliverable upon any
such Note. Notwithstanding anything to the contrary in this Indenture or the Notes following an Event of Default, any Holder of a
beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or
any other action of the Common Depositary or any other Person, such Holder’s right to exchange such beneficial interest for a Note in
certificated form in accordance with the provisions of this Indenture and such Holder’s rights under Article 6 of this Indenture.
Section 8.04 Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the
Company, by any Subsidiary or Consolidated Affiliated Entity thereof or by any Affiliate of the Company or any Subsidiary or
Consolidated Affiliated Entity thereof shall be disregarded and deemed not to be outstanding for the purpose of any such determination;
provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or
other action only Notes in respect of which a Responsible Officer is notified in writing shall be so disregarded. Notes so owned that have
been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.04 if the pledgee shall establish its right to
so act with respect to such Notes and that the pledgee is not the Company, a Subsidiary or Consolidated Affiliated Entity thereof or an
Affiliate of the Company or a Subsidiary or Consolidated Affiliated Entity thereof. Within five days of acquisition of the Notes by any
of the above described persons or entities or at the request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’
Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above
described Persons; and, subject to Section 7.01, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of
the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.
49
Section 8.05 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage of the aggregate principal amount of the
Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the
Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Note. Except as aforesaid, any such action
taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note
and of any Notes issued in exchange or substitution therefor or upon registration of transfer thereof, irrespective of whether any notation
in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor or upon registration of transfer thereof.
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01 Purpose of Meetings. A meeting of Holders may be called at any time and from time to time pursuant to the
provisions of this Article 9 for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this
Indenture, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders pursuant to any of the provisions of Article 6;
(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 7;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section
10.02; or
(d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal
amount of the Notes under any other provision of this Indenture or under applicable law.
Section 9.02 Call of Meetings by Trustee. The Trustee may (in its sole discretion and without obligation) at any time call a
meeting of Holders to take any action specified in Section 9.01, to be held at such time and at such place as the Trustee shall
determine. Notice of every meeting of the Holders, setting forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and the establishment of any record date pursuant to Section 8.01, shall be mailed to Holders of
such Notes at their addresses as they shall appear on the Note Register. Such notice shall also be mailed to the Company. Such notices
shall be mailed not less than 20 nor more than 90 days prior to the date fixed for the meeting.
Any meeting of Holders shall be valid without notice if the Holders of all Notes then outstanding are present in person or by
proxy or if notice is waived before or after the meeting by
50
the Holders of all Notes then outstanding, and if the Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
Section 9.03 Call of Meetings by Company or Holders. In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% of the aggregate principal amount of the Notes then outstanding, shall have requested the Company to call a
meeting of Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Company
shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Trustee or such Holders may
determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 9.01, by mailing
notice thereof as provided in Section 9.02.
Section 9.04 Qualifications for Voting. To be entitled to vote at any meeting of Holders a Person shall (a) be a Holder of one
or more Notes on the record date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a
Holder of one or more Notes on the record date pertaining to such meeting. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the
Trustee and its counsel and any representatives of the Company and its counsel.
Section 9.05 Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable
regulations as it may deem advisable for any meeting of Holders, in regard to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 9.03, in which case the Company or the Holders calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall
be elected by vote of the Holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 8.04, at any meeting of Holders each Holder or proxyholder shall be entitled to one vote for
each US$1,000 principal amount of Notes held or represented by him or her; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Note challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of Notes held by it or instruments in writing as aforesaid duly
designating it as the proxy to vote on behalf of other Holders. Any meeting of Holders duly called pursuant to the provisions of Section
9.02 or Section 9.03 may be adjourned from time to time by the Holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
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Minutes shall be made of all resolutions and proceedings at every meeting and, if purporting to be signed by the chairman of
that meeting or of the next succeeding meeting of Holders of the Notes, shall be conclusive evidence of the matters in them. Until the
contrary is proved every meeting for which minutes have been so made and signed shall be deemed to have been duly convened and held
and all resolutions passed or proceedings transacted at it to have been duly passed and transacted.
Section 9.06 Voting. The vote upon any resolution submitted to any meeting of Holders shall be by written ballot on which
shall be subscribed the signatures of the Holders or of their representatives by proxy and the outstanding principal amount of the Notes
held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 9.02. The record shall show the principal amount of the Notes voting in favor
of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters therein stated.
Section 9.07 No Delay of Rights by Meeting. Nothing contained in this Article 9 shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders under any of the
provisions of this Indenture or of the Notes.
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Holders. The Company, when authorized by the resolutions of the
Board of Directors, and the Trustee, at the Company’s expense and direction, may from time to time and at any time amend or
supplement this Indenture or the Notes for one or more of the following purposes:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to provide for the assumption by a Successor Company of the obligations of the Company under this Indenture and the
Notes pursuant to Article 11;
(c) to add guarantees with respect to the Notes;
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(d) to secure the Notes;
(e) to add to the covenants or Events of Defaults of the Company for the benefit of the Holders or surrender any right or
power conferred upon the Company;
(f) upon the occurrence of any transaction or event described in Section 14.07(a), to (i) provide that the Notes are
convertible into Reference Property, subject to Section 14.02, and (ii) effect the related changes to the terms of the Notes described under
Section 14.07(a), in each case, in accordance with Section 14.07;
(g) to make any change that does not adversely affect the rights of any Holder; or
(h) comply with the rules of the Euroclear and Clearstream.
Upon the written request of the Company, the Trustee is hereby authorized to join with the Company in the execution of any
such amendment or supplement to this Indenture or the Notes, to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects
the Trustee’s own rights, duties or immunities under this Indenture or otherwise. The Trustee shall seek an Officers’ Certificate and an
Opinion of Counsel, at the Company’s expense, that any such amendment or supplement to this Indenture or the Notes is authorized and
permitted by the terms of this Indenture and not contrary to law.
Any amendment or supplement to this Indenture or the Notes authorized by the provisions of this Section 10.01 may be
executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 10.02.
Section 10.02 Supplemental Indentures with Consent of Holders. With the consent (evidenced as provided in Article 8) of the
Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article 8
and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes), the
Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to
time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights
of the Holders; provided, however, that, without the consent of each Holder of an outstanding Note affected, no such supplemental
indenture shall:
(a) reduce the amount of Notes whose Holders must consent to an amendment or waiver;
(b) reduce the rate of or extend the stated time for payment of interest on any Note;
(c) reduce the principal of or extend the Maturity Date of any Note;
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(d) make any change that adversely affects the conversion rights of any Notes;
(e) reduce the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the
Holders the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants,
definitions or otherwise;
(f) make any Note payable in a currency other than U.S. dollars;
(g) change the ranking of the Notes;
(h) impair the right of any Holder to receive payment of principal and interest (if any) on such Holder’s Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Note;
(i) change the Company’s obligation to pay Additional Amounts on any Note; or
(j) make any change in this Article 10 that requires each Holder’s consent or in the waiver provisions in Section 6.02 or
Section 6.09.
Upon the written request of the Company, and upon the filing with the Trustee of evidence of the consent of Holders as
aforesaid and subject to Section 10.05, the Trustee shall join with the Company in the execution of such supplemental indenture unless
(i) the Trustee has not received an Officers’ Certificate and an Opinion of Counsel that such supplemental indenture is authorized and
permitted by the terms of this Indenture and not contrary to law or (ii) such supplemental indenture affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Holders do not need under this Section 10.02 to approve the particular form of any proposed supplemental indenture. It shall be
sufficient if such Holders approve the substance thereof. After any supplemental indenture becomes effective under Section 10.01 or
Section 10.02, the Company shall mail to the Holders a notice briefly describing such supplemental indenture. However, the failure to
give such notice to all the Holders, or any defect in the notice, will not impair or affect the validity of the supplemental indenture.
Section 10.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions
of this Article 10, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 10.04 Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture
pursuant to the provisions of this Article 10 may, at the
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Company’s expense, bear a notation in form approved by the Note Registrar as to any matter provided for in such supplemental
indenture. If the Company or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense,
be prepared and executed by the Company, authenticated by the Note Registrar upon receipt of a Company Order and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.05 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee. In addition to the documents
required by Section 17.06, the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements of this Article 10 and is permitted or authorized by this
Indenture and is not contrary to law.
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 11.02, the Company
shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated assets of the
Company, its Subsidiaries and its Consolidated Affiliated Entities, taken as a whole, to another Person, unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation
organized and existing under the laws of the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor
Company (if not the Company) shall expressly assume, by supplemental indenture all of the obligations of the Company under the Notes
and this Indenture (including, for the avoidance of doubt, the obligation to pay Additional Amounts pursuant to Section 4.07);
(b) if the Company will not be the resulting or surviving corporation, the Company shall have, at or prior to the effective
date of such transaction, delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the execution and
delivery of the supplemental indenture do not conflict with the requirements set forth in the Indenture and that all conditions precedent to
the execution and delivery of such supplemental indenture have been satisfied; and
(c) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing
under this Indenture.
For purposes of this Section 11.01, the sale, conveyance, transfer or lease of all or substantially all of the assets of one or more
Subsidiaries or Consolidated Affiliated Entities of the Company to another Person, which properties and assets, if held by the Company
instead of such Subsidiaries or Consolidated Affiliated Entities, would constitute all or substantially all of the assets of the Company on a
consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the consolidated assets of the
Company to another Person.
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Section 11.02 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer
or lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the principal of all of the Notes (including, for the avoidance of
doubt, any Additional Amounts), the due and punctual delivery or payment, as the case may be, of any consideration due upon
conversion of the Notes (including, for the avoidance of doubt, any Additional Amounts) and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Company, such Successor Company (if not the Company) shall
succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and assets, shall be substituted for the
Company, with the same effect as if it had been named herein as the party of the first part. Such Successor Company thereupon may
cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the Note Registrar; and, upon the order of such Successor
Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Note Registrar
shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and
delivered by the Officers of the Company to the Note Registrar for authentication, and any Notes that such Successor Company
thereafter shall cause to be signed and delivered to the Note Registrar for that purpose. All the Notes so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger,
sale, conveyance or transfer (but not in the case of a lease), upon compliance with this Article 11 the Person named as the “Company” in
the first paragraph of this Indenture (or any successor that shall thereafter have become such in the manner prescribed in this Article 11)
may be dissolved, wound up and liquidated at any time thereafter and, except in the case of a lease, such Person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under this Indenture and the Notes.
In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in
substance) may be made in the Notes thereafter to be issued as may be appropriate.
Section 11.03 Opinion of Counsel to Be Given to Trustee. No consolidation, merger, sale, conveyance, transfer or lease shall
be effective unless the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or lease and any such assumption and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, complies with the provisions of this Article 11, that all conditions
precedent thereto have been satisfied and that the Notes and such supplemental indenture are the legal, valid and binding obligations of
the Successor Company, enforceable against it in accordance with its terms, subject to customary assumptions, qualifications, and
exceptions.
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ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01 Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of any Note,
nor for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any Note, nor because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, employee, agent, Officer or director or Subsidiary, as such, past,
present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Notes.
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01 Conversion Privilege. Subject to and upon compliance with the provisions of this Article 14, each Holder of a
Note shall have the right, at such Holder’s option, (a) to convert all or any Specified Portion of the principal amount of such Note at any
time on or after August 10, 2020 and prior to the close of business on the second Business Day immediately preceding the Maturity Date
into ADSs at an initial conversion rate of 325.733 ADSs (subject to adjustment as provided in this Article 14, the “Conversion Rate”)
per US$1,000 principal amount of Notes, or (b) to convert all or any Specified Portion of the principal amount of such Note at any time
on or after the completion date of any Qualified Equity Financing and prior to the close of business on the tenth (10th) day immediately
following the completion of such Qualified Equity Financing into ADSs at Qualified Equity Financing Conversion Rate per US$1,000
principal amount of Notes (in each case, subject to the settlement provisions of Section 14.02, the “Conversion Obligation”), provided
that no Holder or beneficial owner of a Note shall have the right to receive ADSs on or prior to the Distribution Compliance Period
Termination Date and further provided that if a Holder or a beneficial owner is prevented from receiving any ADSs to which it would
otherwise be entitled pursuant to this Section 14.01, the Company’s obligation to deliver such ADSs shall not be extinguished, and the
Company shall deliver such ADSs within one Business Day following the occurrence of the Distribution Compliance Period Termination
Date in accordance with the last sentence of Section 14.02(c).
Section 14.02 Conversion Procedure; Settlement Upon Conversion.
(a) Upon conversion of any Note, the Company shall cause to be delivered to the converting Holder, in respect of each
US$1,000 principal amount of Notes being converted, a number of ADSs equal to the Conversion Rate or Qualified Equity Financing
Conversion Rate (as the case may be) in effect immediately prior to the close of business on the relevant
57
Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be), together with a cash payment, if applicable, in
lieu of any fractional ADSs (“Fractional ADSs”) (assuming delivery of the maximum number of ADSs due upon conversion that do not
represent a fractional ADS) in accordance with subsection (j) of this Section 14.02, on the third Business Day immediately following the
relevant Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be); provided that, if a Conversion Date
occurs after the Ordinary Shares have been replaced by the Reference Property consisting solely of cash in accordance with Section
14.07, the Company shall cause the consideration due in respect of the conversion to be paid to the converting Holder on the tenth
Business Day immediately following the related Conversion Date. For the avoidance of doubt, neither the Trustee nor any Agent shall
have any responsibility to deliver ADSs upon conversion of any Note to any person or deal with cash payments in relation to
conversions, except for cash payments in lieu of any fractional ADS.
(b) Subject to Section 14.02(e), before any Holder of a Note shall be entitled to convert a Note as set forth above, such
Holder shall (i) in the case of a Global Note, comply with the procedures of the Euroclear and Clearstream in effect at that time and
complete, manually sign and deliver a duly completed irrevocable notice to the Conversion Agent as set forth in the Form of Notice of
Conversion (or a facsimile thereof) (a “Notice of Conversion”) and (ii) in the case of a Physical Note (1) complete, manually sign and
deliver a duly completed irrevocable Notice of Conversion to the Conversion Agent at the specified office of the Conversion Agent and
state in writing therein the principal amount of Notes to be converted and the name or names (with addresses) in which such Holder
wishes the certificate or certificates for any ADSs to be delivered upon settlement of the Conversion Obligation to be registered, (2)
surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents),
at the specified office of the Conversion Agent and (3) if required, furnish appropriate endorsements and transfer documents. The
Trustee (and if different, the Conversion Agent) shall notify the Company of any conversion pursuant to this Article 14 on the
Conversion Date for such conversion or the date set forth in clause (ii) of Section 14.01(c), as the case may be. No Notice of Conversion
with respect to any Notes may be delivered and no Notes may be surrendered by a Holder for conversion thereof if such Holder has also
delivered a Fundamental Change Repurchase Notice to the Company in respect of such Notes and not validly withdrawn such
Fundamental Change Repurchase Notice in accordance with Section 15.03. A Notice of Conversion shall be deposited in duplicate at the
office of any Conversion Agent on any Business Day from 9:00 a.m. to 3:00 p.m. at the location of the Conversion Agent to which such
Notice of Conversion is delivered. Any Notice of Conversion and any Physical Note (if issued) deposited outside the hours specified or
on a day that is not a Business Day at the location of the Conversion Agent shall for all purposes be deemed to have been deposited with
that Conversion Agent between 9:00 a.m. and 3:00 p.m. on the next Business Day.
If more than one Note shall be surrendered for conversion at one time by the same Holder, the Conversion Obligation with
respect to such Notes shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the
extent permitted thereby) so surrendered. None of the Agents of the Trustee shall have any responsibility whatsoever with respect to the
issuance and delivery of the ADSs to the converting Holder.
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(c) A Note shall be deemed to have been converted (i) in the case of conversion pursuant to Section 14.01(a), immediately
prior to the close of business on the date (the “Conversion Date”) that the Holder has complied with the requirements set forth in
subsection (b) above or (ii) in the case of conversion pursuant to Section 14.01(b), on the tenth (10 ) day after the completion of the
Qualified Equity Financing (the “Qualified Equity Financing Conversion Date”). Notwithstanding clause (ii) in the immediately
preceding sentence, the Person in whose name the certificate for any ADSs deliverable upon conversion made pursuant to Section
14.01(b) is to be registered shall be treated as a holder of record, as between the Company and such holder, of such ADSs as of the close
of business on the date that the Holder has complied with the requirements set forth in subsection (b) above. The Company shall issue or
cause to be issued, and deliver or cause to be delivered to such converting Holder, or such converting Holder’s nominee or nominees,
certificates or a book-entry transfer through Euroclear and Clearstream for the full number of ADSs to which such Holder shall be
entitled in satisfaction of the Company’s Conversion Obligation.
th
(d) In case any Note shall be surrendered for partial conversion, the Company shall execute and instruct the Note Registrar
who shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of
any service charge by the converting Holder but, if required by the Company or Trustee, with payment of a sum sufficient to cover any
transfer tax or similar governmental charge required by law or that may be imposed in connection therewith as a result of the name of the
Holder of the new Notes issued upon such conversion being different from the name of the Holder of the old Notes surrendered for such
conversion.
(e) If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp, issue, transfer or similar tax
due on the delivery of the ADSs upon conversion of the Notes (or the issuance of the underlying Ordinary Shares), unless the tax is due
because the Holder requests such ADSs (or such Ordinary Shares) to be issued in a name other than the Holder’s name, in which case the
Holder shall pay that tax. The Conversion Agent may refuse to deliver the certificates representing the ADSs (or the Ordinary Shares)
being issued in a name other than the Holder’s name until the Trustee receives a sum sufficient to pay any tax that is due by such Holder
in accordance with the immediately preceding sentence. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
(f) Except as provided in Section 14.04, no adjustment shall be made for dividends on any ADSs delivered upon the
conversion of any Note as provided in this Article 14.
(g) Upon the conversion of an interest in a Global Note, the Trustee shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes
effected through any Conversion Agent other than the Trustee.
(h) Upon conversion, a Holder shall not receive any separate cash payment for accrued and unpaid interest, if any, except as
set forth below. The Company’s settlement of the Conversion Obligation shall be deemed to satisfy in full its obligation to pay the
principal
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amount of the Note and accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date or the Qualified Equity
Financing Conversion Date (as the case may be). As a result, accrued and unpaid interest, if any, to, but not including, the relevant
Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be) shall be deemed to be paid in full rather than
cancelled, extinguished or forfeited.
(i) The Person in whose name the certificate for any ADSs delivered upon conversion is registered shall be treated as a
holder of record, as between the Company and such holder, of such ADSs as of the close of business on the relevant Conversion
Date. Upon a conversion of Notes, such Person shall no longer be a Holder of such Notes surrendered for conversion.
(j) The Company shall not issue any Fractional ADS upon conversion of the Notes and shall instead pay cash in lieu of any
Fractional ADS deliverable upon conversion based on the Last Reported Sale Price of the ADSs on the relevant Conversion Date or the
Qualified Equity Financing Conversion Date (as the case may be) (or if such Conversion Date or Qualified Equity Financing Conversion
Date is not a Trading Day, the immediately preceding Trading Day).
(k) In accordance with the Deposit Agreement, the Company shall issue to the ADS Custodian such Ordinary Shares
required for the issuance of the ADSs upon conversion of the Notes, plus written delivery instructions (if requested by the ADS
Depositary or the ADS Custodian) for such ADSs, shall deliver such legal opinions and any other information or documentation and any
additional forms compliant with the procedures of the Depository Trust Company with respect to such conversion of Notes and shall
comply with the Deposit Agreement, as required by the ADS Depositary or the ADS Custodian in connection with each issue of
Ordinary Shares and issuance and delivery of ADSs. Without prejudice to the generality of the preceding sentence, when issuing
Ordinary Shares for purposes of a conversion prior to August 10, 2020 the Company shall confirm in writing to the ADS Depositary that
the conversion is taking place following and in connection with a Qualified Equity Financing and shall specify in such written
confirmation the applicable Qualified Equity Financing Conversion Date.
Section 14.03 [RESERVED]
Section 14.04 Adjustment of Conversion Rate. If the number of Ordinary Shares represented by the ADSs is changed, after the
date of this Indenture, for any reason other than one or more of the events described in this Section 14.04, the Company shall make an
appropriate adjustment to the Conversion Rate and the Qualified Equity Financing Conversion Rate such that the number of Ordinary
Shares represented by the ADSs upon which conversion of the Notes is based remains the same.
Notwithstanding the adjustment provisions described in this Section 14.04, if the Company distributes to holders of the
Ordinary Shares any cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other
assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to
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holders of the ADSs, but, instead, the ADSs shall represent, in addition to Ordinary Shares, such cash, rights, options, warrants, shares of
Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the
Conversion Rate described in this Section 14.04 shall not be made until and unless a corresponding distribution (if any) is made to
holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and
not on the distribution made to the holders of the Ordinary Shares. However, in the event that the Company issues or distributes to all
holders of the Ordinary Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall adjust the
Conversion Rate pursuant to Section 14.04(b) (in the case of Expiring Rights entitling holders of the Ordinary Shares for a period of not
more than 45 calendar days after the announcement date of such issuance to subscribe for or purchase Ordinary Shares or ADSs) or
Section 14.04(c) (in the case of all other Expiring Rights).
For the avoidance of doubt, if any event described in this Section 14.04 results in a change to the number of Ordinary Shares
represented by the ADSs, then such a change shall be deemed to satisfy the Company’s obligation to effect the relevant adjustment to the
Conversion Rate on account of such event to the extent such change produces the same economic result as the adjustment to the
Conversion Rate that would otherwise have been made on account of such event.
The Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the
Company shall not make any adjustments to the Conversion Rate if Holders of the Notes participate (other than in the case of a share
split or share combination), at the same time and upon the same terms as holders of the ADSs and solely as a result of holding the Notes,
in any of the transactions described in this Section 14.04, without having to convert their Notes, as if they held a number of ADSs equal
to the Conversion Rate, multiplied by the principal amount (expressed in thousands) of Notes held by such Holder. Neither the Trustee
nor the Conversion Agent shall have any responsibility to monitor the accuracy of any calculation of any adjustment to the Conversion
Rate and the same shall be conclusive and binding on the Holders, absent manifest error. Notice of such adjustment to the Conversion
Rate shall be given by the Company promptly to the Holders, the Trustee and the Paying Agent and Conversion Agent and shall be
conclusive and binding on the Holders, absent manifest error.
(a) If the Company exclusively issues Ordinary Shares as a dividend or distribution on the Ordinary Shares, or if the
Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date of such dividend or distribution,
or immediately prior to the open
61
of business on the effective date of such share split or share combination, as applicable;
CR1
=
the Conversion Rate in effect immediately after the close of business on such Record Date or immediately after the open of
business on such effective date, as applicable;
OS0
=
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date or immediately
prior to the open of business on such effective date, as applicable; and
OS1
=
the number of Ordinary Shares outstanding immediately after giving effect to such dividend, distribution, share split or share
combination.
Any adjustment made under this Section 14.04(a) shall become effective immediately after the close of business on the Record Date for
such dividend or distribution, or immediately after the open of business on the effective date for such share split or share combination, as
applicable. If any dividend or distribution of the type described in this Section 14.04(a) is declared but not so paid or made, the
Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Ordinary Shares (directly or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to
subscribe for or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than the average of
the Last Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following
formula:
where,
CR0
CR1
OS0
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such issuance;
=
the Conversion Rate in effect immediately after the close of business on such Record Date;
=
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date;
62
X
Y
=
the total number of Ordinary Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or
warrants; and
=
the number of Ordinary Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided
by (ii) the quotient of (a) the average of the Last Reported Sale Prices of the ADSs over the 10 consecutive Trading Day
period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such
rights, options or warrants divided by (b) the number of Ordinary Shares then represented by one ADS.
Any increase made under this Section 14.04(b) shall be made successively whenever any such rights, options or warrants are issued and
shall become effective immediately after the close of business on the Record Date for the ADSs for such issuance. To the extent that
Ordinary Shares or ADSs are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Ordinary Shares actually delivered (directly or in the form of
ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the Conversion Rate that would
then be in effect if such the Record Date for the ADSs for such issuance had not occurred.
For purposes of this Section 14.04(b), in determining whether any rights, options or warrants entitle the holders to subscribe for
or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than such average of the Last
Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such Ordinary
Shares or ADSs, there shall be taken into account any consideration received by the Company for such rights, options or warrants and
any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board
of Directors.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Ordinary
Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which an adjustment was effected
pursuant to Section 14.04(a) or Section 14.04(b), (ii) dividends or distributions paid exclusively in cash as to which an adjustment was
effected pursuant to Section 14.04(d), and (iii) Spin-Offs as to which the provisions set forth below in this Section 14.04(c) shall apply
(any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital
Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the
following formula:
63
where,
CR0
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such
distribution;
CR1
=
the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0
=
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the
Ex-Dividend Date for such distribution; and
FMV =
the fair market value (as determined by the Board of Directors) of the Distributed Property with respect to each outstanding
Ordinary Share (directly or in the form of ADSs) on the Record Date for the ADSs for such distribution.
Any increase made under the foregoing portion of this Section 14.04(c) above shall become effective immediately after the close of
business on the Record Date for the ADSs for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing,
if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note
shall receive, in respect of each US$1,000 principal amount thereof, at the same time and upon the same terms as holders of the ADSs
receive the Distributed Property, the amount and kind of Distributed Property such Holder would have received if such Holder owned a
number of ADSs equal to the Conversion Rate in effect on the Record Date for the ADSs for the distribution.
With respect to an adjustment pursuant to this Section 14.04(c) where there has been a payment of a dividend or other
distribution on the Ordinary Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or similar equity
interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for
trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:
where,
CR0
= the Conversion Rate in effect immediately prior to the close of business on the last Trading Day of the Valuation Period;
64
CR1
= the Conversion Rate in effect immediately after the close of business on the last Trading Day of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the
Ordinary Shares (directly or in the form of ADSs) applicable to one Ordinary Share (determined by reference to the
definition of Last Reported Sale Price as set forth in Section 1.01 as if references therein to the ADSs were to such Capital
Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0
= the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur immediately after the close of business on the last
Trading Day of the Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 14.04(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of Trading Days as
have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the Conversion Date in determining the
Conversion Rate.
For purposes of this Section 14.04(c) (and subject in all respect to Section 14.11), rights, options or warrants distributed by the
Company to all holders of the Ordinary Shares (directly or in the form of ADSs) entitling them to subscribe for or purchase shares of the
Company’s Capital Stock, including Ordinary Shares (either initially or under certain circumstances), which rights, options or warrants,
until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Ordinary Shares
(directly or in the form of ADSs); (ii) are not exercisable; and (iii) are also issued in respect of future issuances of the Ordinary Shares
(directly or in the form of ADSs), shall be deemed not to have been distributed for purposes of this Section 14.04(c) (and no adjustment
to the Conversion Rate under this Section 14.04(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such
rights, options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion
Rate shall be made under this Section 14.04(c). If any such right, option or warrant, including any such existing rights, options or
warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights, options or
warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of
any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights, options or warrants
with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without
exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or
warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was
counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 14.04(c)
was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any
holders
65
thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not
been issued and (y) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal to the per Ordinary Share redemption or purchase price received
by a holder or holders of Ordinary Shares (directly or in the form of ADSs) with respect to such rights, options or warrants (assuming
such holder had retained such rights, options or warrants), made to all holders of Ordinary Shares (directly or in the form of ADSs) as of
the date of such redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated
without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been
issued.
For purposes of Section 14.04(a), Section 14.04(b) and this Section 14.04(c), if any dividend or distribution to which this
Section 14.04(c) is applicable also includes one or both of:
(A) a dividend or distribution of Ordinary Shares (directly or in the form of ADSs) to which Section 14.04(a) is applicable
(the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 14.04(b) is applicable (the “Clause B
Distribution”),
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a
dividend or distribution to which this Section 14.04(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment
required by this Section 14.04(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A Distribution and
Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by
Section 14.04(a) and Section 14.04(b) with respect thereto shall then be made, except that, if determined by the Company (I) the “Record
Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of the Clause C Distribution and
(II) any Ordinary Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be
deemed not to be “outstanding immediately prior to the close of business on such Record Date or immediately after the open of business
on such effective date, as applicable” within the meaning of Section 14.04(a) or “outstanding immediately prior to the close of business
on such Record Date” within the meaning of Section 14.04(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Ordinary Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
where,
66
CR0
CR1
SP0
= the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such dividend
or distribution;
= the Conversion Rate in effect immediately after the close of business on such Record Date;
= the Last Reported Sale Price of the ADSs (divided by the number of Ordinary Shares then represented by one ADS) on the
Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
C
= the amount in cash per Ordinary Share the Company distributes to all or substantially all holders of the Ordinary Shares
(directly or in the form of ADSs).
Any increase pursuant to this Section 14.04(d) shall become effective immediately after the close of business on the Record Date for the
ADSs for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective
as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal
to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, for each US$1,000
principal amount of Notes, at the same time and upon the same terms as holders of the ADSs, the amount of cash that such Holder would
have received if such Holder owned a number of ADSs equal to the Conversion Rate on the Record Date for the ADSs for such cash
dividend or distribution.
(e) If the Company or any of its Subsidiaries or Consolidated Affiliated Entities makes a payment in respect of a tender or
exchange offer for the Ordinary Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration
included in the payment per Ordinary Share exceeds the average of the Last Reported Sale Prices of the ADSs (divided by the number of
Ordinary Shares then represented by one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading
Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall be increased based on the following
formula:
where,
CR0
= the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following,
and including, the Trading Day next succeeding the date such tender or exchange offer expires;
67
CR1
= the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and
including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC
= the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for
Ordinary Shares or ADSs, as the case may be, purchased in such tender or exchange offer;
OS0
OS1
SP1
= the number of Ordinary Shares outstanding immediately prior to the date such tender or exchange offer expires (prior to
giving effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such
tender or exchange offer);
= the number of Ordinary Shares outstanding immediately after the date such tender or exchange offer expires (after giving
effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender
or exchange offer); and
= the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by one
ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date
such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 14.04(e) shall occur at the close of business on the 10th Trading Day
immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in
respect of any conversion within the 10 Trading Days immediately following, and including, the Trading Day next succeeding the
expiration date of any tender or exchange offer, references in this Section 14.04(e) with respect to 10 Trading Days shall be deemed
replaced with such lesser number of Trading Days as have elapsed from, and including, the Trading Day next succeeding the expiration
date of such tender or exchange offer to, and including, the Conversion Date in determining the Conversion Rate. For the avoidance of
doubt, no adjustment to the Conversion Rate under this Section 14.04(e) shall be made if such adjustment would result in a decrease in
the Conversion Rate.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to the Notes
or on the exercise of any other rights, existing as of the date of this Indenture, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for
Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition only excludes any Ordinary Shares,
ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs issued or
granted in accordance with any employee incentive plan of the Company), in each case at a consideration per ADS (on an as-converted
and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the
applicable
68
number of Ordinary Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted
based on the following formula:
where:
CR0
= the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1
= the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A
B
= the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
= the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would
purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then
represented by each ADS; and
C
= the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,
provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued
assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs
are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Ordinary Shares or ADSs
or any securities convertible into or exchangeable for Ordinary Shares or ADSs or the right to purchase Ordinary Shares or ADSs or such
convertible or exchangeable securities.
(h) In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 14.04, and to the extent
permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on
which any of the Company’s securities are then listed, the Company from time to time may increase the Conversion Rate by any amount
for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest,
and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the
Ordinary Shares or the ADSs or rights to purchase Ordinary Shares or ADSs in connection with a dividend or distribution of Ordinary
Shares or ADSs (or rights to acquire Ordinary Shares or ADSs) or similar event.
69
(i) Notwithstanding anything to the contrary in this Article 14, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Ordinary Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in
Ordinary Shares or ADSs under any plan;
(ii) upon the issuance of any Ordinary Shares or ADSs or options or rights to purchase those Ordinary Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company
or any of the Company’s Subsidiaries or Consolidated Affiliated Entities;
(iii) upon the issuance of any Ordinary Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date the Notes were
first issued;
(iv) solely for a change in the par value of the Ordinary Shares; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Article 14 shall be made by the Company and shall be made to the
nearest one-ten thousandth (1/10,000) of an ADS.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee (and
the Conversion Agent if not the Trustee) an Officers’ Certificate setting forth the Conversion Rate after such adjustment and setting forth
a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such
Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume
without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on
which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to each Holder at its last
address appearing on the Note Register of this Indenture. Failure to deliver such notice shall not affect the legality or validity of any
such adjustment.
(l) For purposes of this Section 14.04, the number of Ordinary Shares at any time outstanding shall not include Ordinary
Shares held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any dividend or make
any distribution on Ordinary Shares held in the treasury of the Company (directly or in the form of ADSs), but shall include Ordinary
Shares issuable in respect of scrip certificates issued in lieu of fractions of Ordinary Shares.
(m) For purposes of this Section 14.04, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.
70
Section 14.05 Adjustments of Prices. Whenever any provision of this Indenture requires the Company to calculate the Last
Reported Sale Prices over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any
adjustment to the Conversion Rate that becomes effective pursuant to Section 14.04, or any event requiring an adjustment to the
Conversion Rate pursuant to Section 14.04 where the Record Date, effective date or expiration date, as the case may be, of the event
occurs, at any time during the period when such Last Reported Sale Prices are to be calculated.
Section 14.06 Ordinary Shares to Be Fully Paid. The Company shall provide, free from preemptive rights, out of its
authorized but unissued Ordinary Shares or Ordinary Shares held in treasury, a sufficient number of Ordinary Shares that corresponds to
the number of ADSs due upon conversion of the Notes from time to time as such Notes are presented for conversion (assuming that at
the time of computation of such number of Ordinary Shares, all such Notes would be converted by a single Holder).
Section 14.07 Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Ordinary Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries and Consolidated Affiliated Entities substantially as an entirety or
(iv) any statutory share exchange,
in each case, as a result of which the Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or
assets (including cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of such
Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental
indenture permitted under Section 10.01(f) providing that, at and after the effective time of such Merger Event, the right to convert each
US$1,000 principal amount of Notes shall be changed into a right to convert such principal amount of Notes into the kind and amount of
shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of
ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the
“Reference Property,” with each “unit of Reference Property” meaning the kind and amount of Reference Property that a holder of
one ADS is entitled to receive) upon such Merger Event; provided, however, that at and after the effective time of the Merger Event the
number of ADSs otherwise deliverable upon conversion of the Notes in accordance with Section 14.02 shall
71
instead be deliverable in the amount and type of Reference Property that a holder of that number of ADSs would have been entitled to
receive in such Merger Event.
If the Merger Event causes the Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single
type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Notes
will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the
holders of the ADSs and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the
consideration referred to in clause (i) attributable to one ADS. The Company shall provide written notice to Holders, the Trustee and the
Conversion Agent (if other than the Trustee) of such weighted average as soon as practicable after such determination is made.
Such supplemental indenture described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 14 (it being understood that
no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of Common
Equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property
includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the
Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute
such supplemental indenture, and such supplemental indenture shall contain such additional provisions to protect the interests of the
Holders of the Notes, including the right of Holders to require the Company to repurchase their Notes upon a Fundamental Change
pursuant to Section 15.02, as the Board of Directors shall reasonably consider necessary by reason of the foregoing.
(b) [RESERVED]
(c) The Company shall not become a party to any Merger Event unless its terms are consistent with this Section
14.07. None of the foregoing provisions shall affect the right of a holder of Notes to convert its Notes into ADSs as set forth in Section
14.01 and Section 14.02 prior to the effective date of such Merger Event.
(d) The above provisions of this Section shall similarly apply to successive Merger Events.
Section 14.08 Certain Covenants. (a) The Company covenants that all ADSs delivered upon conversion of Notes, and all
Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from all taxes, liens and
charges with respect to the issue thereof.
(b) The Company covenants that, if any ADSs to be provided for the purpose of conversion of Notes hereunder, or any
Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or
state law before such ADSs may be validly issued upon conversion, the Company will, to the extent then
72
permitted by the rules and interpretations of the Commission, secure such registration or approval, as the case may be.
(c) The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or
automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated
quotation system, any ADSs deliverable upon conversion of the Notes.
(d) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the
conversion of the Notes into ADSs and the issuance, and deposit into the ADS facility, of the Ordinary Shares represented by such
ADSs. The Company also undertakes to maintain, as long as any Notes are outstanding, the effectiveness of a registration statement on
Form F-6 relating to the ADSs and an adequate number of ADSs available for issuance thereunder such that ADSs can be delivered in
accordance with the terms of this Indenture, the Notes and the Deposit Agreement, upon conversion of the Notes. In addition, the
Company further covenants to provide Holders with a reasonably detailed description of the mechanics for the delivery of ADSs upon
conversion of Notes as set forth in the Deposit Agreement upon request.
Section 14.09 Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty
or responsibility to any Holder to determine the Conversion Rate (or any adjustment thereto) or whether any facts exist that may require
any adjustment (including any increase) of the Conversion Rate, or with respect to the nature or extent or calculation of any such
adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind
or amount) of any ADSs, or of any securities, property or cash that may at any time be issued or delivered upon the conversion of any
Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any ADSs or stock certificates or other
securities or property or cash upon the surrender of any Note for the purpose of conversion, the accuracy or inaccuracy of any
mathematical calculation or formulae under this Indenture, whether by the Company or any Person so authorized by the Company for
such purpose under this Indenture or the failure by the Company to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall
be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant
to Section 14.07 relating either to the kind or amount of ADSs or securities or property (including cash) receivable by Holders upon the
conversion of their Notes after any event referred to in such Section 14.07 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 7.01, may accept (without any independent investigation) as conclusive evidence of the correctness
of any such provisions, and shall be protected in relying upon, the Officers’ Certificate (which the Company shall be obligated to file
with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.
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Section 14.10 Notice to Holders Prior to Certain Actions. In case of any:
(a) action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to
Section 14.04 or Section 14.11;
(b) Merger Event; or
(c) voluntary or involuntary dissolution, liquidation or winding-up of the Company or any of its Subsidiaries;
then, in each case (unless notice of such event is otherwise required pursuant to another provision of this Indenture), the Company shall
cause to be filed with the Trustee and the Conversion Agent (if other than the Trustee) and to be mailed to each Holder at its address
appearing on the Note Register, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified,
a notice stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if
a record is not to be taken, the date as of which the holders of Ordinary Shares or ADSs, as the case may be, of record are to be
determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Merger Event,
dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of
Ordinary Shares or ADSs, as the case may be, of record shall be entitled to exchange their Ordinary Shares or ADSs, as the case may be,
for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Merger Event,
dissolution, liquidation or winding-up.
Section 14.11 Stockholder Rights Plans. To the extent that the Company has a rights plan in effect upon conversion of the
Notes, each ADS delivered upon such conversion shall be entitled to receive (either directly or in respect of the Ordinary Shares
underlying such ADSs) the appropriate number of rights, if any, and the certificates representing the ADSs delivered upon such
conversion shall bear such legends, if any, in each case as may be provided by the terms of any such stockholder rights plan, as the same
may be amended from time to time. However, if, prior to any conversion, the rights have separated from the Ordinary Shares underlying
the ADSs in accordance with the provisions of the applicable stockholder rights plan, the Conversion Rate shall be adjusted at the time of
separation as if the Company distributed to all or substantially all holders of the Ordinary Shares Distributed Property as provided in
Section 14.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.
Section 14.12 Termination of Depositary Receipt Program. If the Ordinary Shares cease to be represented by American
Depositary Shares issued under a depositary receipt program sponsored by the Company, all references in this Indenture to the ADSs
shall be deemed to have been replaced by a reference to the number of Ordinary Shares (and other property, if any) represented by the
ADSs on the last day on which the ADSs represented the Ordinary Shares and as if the Ordinary Shares and the other property had been
distributed to holders of the ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to
refer to the Last Reported Sale Price of the Ordinary Shares, and other appropriate
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adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where
currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination
will apply.
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01 [RESERVED]
Section 15.02 Repurchase at Option of Holders Upon a Fundamental Change. (a)If a Fundamental Change occurs at any time,
each Holder shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or
any portion thereof that is equal to US$1,000 or an integral multiple of US$1,000, on the Business Day (the “Fundamental Change
Repurchase Date”) notified in writing by the Company as set forth in Section 15.02(c) that is not less than 20 Business Days or more
than 35 Business Days following the date of the Fundamental Change Company Notice at a repurchase price equal to 100% of the
principal amount thereof and any premium payable hereunder (the “Fundamental Change Repurchase Price”). The Trustee and the
Conversion Agent, Paying Agent or any other agent appointed for such purpose shall have no responsibility to determine the
Fundamental Change Repurchase Price.
(b) Repurchases of Notes under this Section 15.02 shall be made, at the option of the Holder thereof, upon:
(i) delivery to the Paying Agent (or other agent appointed for this purpose) by a Holder of a duly completed notice
(the “Fundamental Change Repurchase Notice”) in the form set forth in Attachment 2 to the Form of Note attached hereto as
Exhibit A, if the Notes are Physical Notes, or in compliance with the procedures of Euroclear and Clearstream for surrendering
interests in global notes, if the Notes are Global Notes, in each case on or before the close of business on the second Business
Day immediately preceding the Fundamental Change Repurchase Date; and
(ii) delivery of the Notes, if the Notes are Physical Notes, to the Trustee at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer) at the Corporate Trust Office,
or book-entry transfer of the Notes, if the Notes are Global Notes, in compliance with the procedures of Euroclear and
Clearstream, in each case such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price
therefor.
The Fundamental Change Repurchase Notice in respect of any Notes to be repurchased shall state:
(i) in the case of Physical Notes, the certificate numbers of the Notes to be delivered for repurchase;
(ii) the portion of the principal amount of Notes to be repurchased, which must be US$1,000 or an integral
multiple thereof; and
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(iii) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and
this Indenture;
provided, however, that if the Notes are Global Notes, the Fundamental Change Repurchase Notice must comply with appropriate
procedures of Euroclear and Clearstream.
Notwithstanding anything herein to the contrary, any Holder delivering to the Trustee the Fundamental Change Repurchase
Notice contemplated by this Section 15.02 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase
Notice at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change
Repurchase Date by delivery of a duly completed written notice of withdrawal to the Trustee in accordance with Section 15.03.
The Trustee shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written
notice of withdrawal thereof.
(c) On or before the 20th calendar day after the occurrence of the effective date of a Fundamental Change, the Company
shall provide to all Holders, the Trustee (and the Conversion Agent, Paying Agent and any other agent appointed for this purpose, in
each case, if other than the Trustee) a written notice (the “Fundamental Change Company Notice”) of the occurrence of the effective
date of the Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. In the case of
Physical Notes, such notice shall be by first class mail or, in the case of Global Notes, such notice shall be delivered in accordance with
the applicable procedures of Euroclear and Clearstream. Simultaneously with providing such notice, the Company shall publish a notice
containing the information set forth in the Fundamental Change Company Notice in a newspaper of general circulation in The City of
New York or publish such information on the Company’s website or through such other public medium as the Company may use at that
time. Each Fundamental Change Company Notice shall specify:
(i) the events causing the Fundamental Change;
(ii) the effective date of the Fundamental Change;
(iii) the last date on which a Holder may exercise the repurchase right pursuant to this Article 15;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) the name and address of the Trustee, the Paying Agent, the Conversion Agent or any other agent appointed for
repurchase, if applicable;
(vii) if applicable, the Conversion Rate;
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(viii) if applicable, that the Notes with respect to which a Fundamental Change Repurchase Notice has been
delivered by a Holder may be converted only if the Holder withdraws the Fundamental Change Repurchase Notice in
accordance with the terms of this Indenture; and
(ix) the procedures that Holders must follow to require the Company to repurchase their Notes.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders’ repurchase rights or affect
the validity of the proceedings for the repurchase of the Notes pursuant to this Section 15.02.
At the Company’s request, the Trustee shall give such notice in the Company’s name and at the Company’s expense; provided,
however, that, in all cases, the text of such Fundamental Change Company Notice shall be prepared by the Company.
(d) Notwithstanding the foregoing, no Notes may be repurchased by the Company on any date at the option of the Holders
upon a Fundamental Change if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on
or prior to such date (except in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental
Change Repurchase Price with respect to such Notes). The Trustee will promptly return to the respective Holders thereof any Physical
Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a default by the Company in the
payment of the Fundamental Change Repurchase Price with respect to such Notes), or any instructions for book-entry transfer of the
Notes in compliance with the procedures of Euroclear and Clearstream shall be deemed to have been cancelled, and, upon such return or
cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been
withdrawn.
Section 15.03 Withdrawal of Fundamental Change Repurchase Notice. (a) A Fundamental Change Repurchase Notice may be
withdrawn (in whole or in part) by means of a duly completed written notice of withdrawal delivered to the Paying Agent (or other agent
appointed for such purpose) in accordance with this Section 15.03 at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date specifying:
(i) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted,
(ii) if Physical Notes have been issued, the certificate number of the Note in respect of which such notice of
withdrawal is being submitted, and
(iii) the principal amount, if any, of such Note that remains subject to the original Fundamental Change Repurchase
Notice, which portion must be in principal amounts of US$1,000 or an integral multiple of US$1,000;
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provided, however, that if the Notes are Global Notes, the notice must comply with appropriate procedures of Euroclear and
Clearstream.
Section 15.04 Deposit of Fundamental Change Repurchase Price. (a) The Company will deposit with the Paying Agent (or
any other agent appointed for this purpose by the Company), or if the Company is acting as its own Paying Agent, set aside, segregate
and hold in trust as provided in Section 4.04) on or prior to 10:00 a.m., New York City time, on the Fundamental Change Repurchase
Date an amount of money sufficient to repurchase all of the Notes to be repurchased at the appropriate Fundamental Change Repurchase
Price. Subject to receipt of funds and/or Notes by the Paying Agent (or other agent appointed for this purpose by the Company) and the
Trustee, as applicable, payment for Notes surrendered for repurchase (and not withdrawn in accordance with Section 15.03) will be made
on the later of (i) the Fundamental Change Repurchase Date (provided the Holder has satisfied the conditions in Section 15.02) and (ii)
the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the
Holder thereof in the manner required by Section 15.02, as applicable, by mailing checks for the amount payable to the Holders of such
Notes entitled thereto as they shall appear in the Note Register; provided, however, that payments to the Common Depositary shall be
made by wire transfer of immediately available funds to the account of the Common Depositary or its nominee. The Paying Agent (or
other agent appointed for this purpose by the Company) shall, promptly after such payment and upon written demand by the Company,
return to the Company any funds in excess of the Fundamental Change Repurchase Price.
(b) If by 10:00 a.m., New York City time, on the Fundamental Change Repurchase Date, the Paying Agent (or other agent
appointed for this purpose by the Company) holds money sufficient to make payment on all the Notes or portions thereof that are to be
repurchased on such Fundamental Change Repurchase Date, then, with respect to the Notes that have been properly surrendered for
repurchase and not validly withdrawn, on such Fundamental Change Repurchase Date, (i) such Notes will cease to be outstanding and
(ii) all other rights of the Holders of such Notes will terminate (other than the right to receive the Fundamental Change Repurchase
Price).
(c) Upon surrender of a Note that is to be repurchased in part pursuant to Section 15.02, the Company shall execute and the
Note Registrar, upon receipt of a Company Order, shall authenticate and deliver to the Holder a new Note in an authorized denomination
equal in principal amount to the unrepurchased portion of the Note surrendered.
Section 15.05 Covenant to Comply with Applicable Laws Upon Repurchase of Notes. In connection with any repurchase offer,
the Company will, if required:
(a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;
(b) file a Schedule TO or other required schedule under the Exchange Act; and
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(c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase
the Notes;
in each case, so as to permit the rights and obligations under this Article 15 to be exercised in the time and in the manner specified in this
Article 15.
ARTICLE 16
BRRD MATTERS
Notwithstanding and to the exclusion of any other term of this Indenture or any other agreements, arrangements, or understanding
between The Bank of New York Mellon SA/NV, Luxembourg Branch and each counterparty, each counterparty acknowledges and
accepts that a BRRD Liability arising under this Indenture may be subject to the exercise of Bail-in Powers by the Relevant Resolution
Authority, and acknowledges, accepts, and agrees to be bound by:
(a) the effect of the exercise of Bail-in Powers by the Relevant Resolution Authority in relation to any BRRD Liability of The Bank
of New York Mellon SA/NV, Luxembourg Branch to each counterparty under this Indenture, that (without limitation) may
include and result in any of the following, or some combination thereof:
(i) the reduction of all, or a portion, of the BRRD Liability or outstanding amounts due thereon;
(ii) the conversion of all, or a portion, of the BRRD Liability into shares, other securities or other obligations of The Bank of
New York Mellon SA/NV, Luxembourg Branch or another person, and the issue to or conferral on each counterparty of
such shares, securities or obligations;
(iii) the cancellation of the BRRD Liability;
(iv) the amendment or alteration of any interest, if applicable, thereon, the maturity or the dates on which any payments are
due, including by suspending payment for a temporary period;
(b) the variation of the terms of this Indenture, as deemed necessary by the Relevant Resolution Authority, to give effect to the
exercise of Bail-in Powers by the Relevant Resolution Authority.
ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.
Section 17.02 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board,
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committee or Officer of the Company shall and may be done and performed with like force and effect by the like board, committee or
officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.
Section 17.03 Addresses for Notices, Etc. Any notice or demand that by any provision of this Indenture is required or permitted
to be given or served by the Trustee or by the Holders on the Company shall be deemed to have been sufficiently given or made, for all
purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804,
People’s Republic of China, Facsimile No.: +86 (21) 3913 0192. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to
The Bank of New York Mellon, London Branch, One Canada Square, London E14 5AL, United Kingdom , Attention: Corporate Trust
Administration – Project Camel (NIO Inc.) Fax: +44 1202 689660, with a copy to The Bank of New York Mellon, Hong Kong Branch,
Level 26, Three Pacific Place, 1 Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852-
2295.3283. Any notice, direction, request or demand hereunder to or upon the Registrar and the Transfer Agent shall be given or served
by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to The Bank of New York Mellon
SA/NV, Luxembourg Branch, Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg, Attention: Project Camel (NIO
Inc.), Fax: +(352) 24524204, with a copy to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific Place, 1
Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852-2295.3283.
All notices and other communications under this Indenture shall be in writing in English.
So long as and to the extent that the Notes are represented by Global Notes and such Global Notes are held by or on behalf of
the Common Depositary, notices to owners of beneficial interests in the Global Notes may be given by delivery of the relevant notice to
the Euroclear and Clearstream for communication by it to entitled account holders.
The Company hereby acknowledges that it is fully aware of the risks associated with transmitting instructions via electronic
methods (including facsimile), and being aware of these risks, authorizes the Trustee to accept and act upon any instruction sent to it or
any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar in the Company's name or in the name of one or more
appropriate authorized signers of the Company via electronic methods (including facsimile). The Trustee shall be entitled to rely on
Section 7.06 of this Indenture when accepting or acting upon any instructions, communications or documents transmitted by facsimile,
and shall not be liable in the event any facsimile transmission is not received, or is mutilated, illegible, interrupted, duplicated,
incomplete, unauthorized or delayed for any reason, including (but not limited to) electronic or telecommunications failure.
Furthermore, notwithstanding the above, if any Trustee receives information or instructions delivered by electronic mail, other
electronic method or other unsecured method of communication believed by it to be genuine and to have been sent by the proper person
or
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persons, the Trustee or any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar shall have (i) no duty or obligation to
verify or confirm that the person who sent such instructions is in fact a person authorized to give instructions or directions on behalf of
the Company and (ii) absent its or their gross negligence or willful misconduct, no liability for any losses, liabilities, costs or expenses
incurred or sustained by any holder, the Company or any other person as a result of such reliance on or compliance with such information
or instructions.
The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to it by first class mail, postage prepaid, at its address as it
appears on the Note Register and shall be sufficiently given to it if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other
Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such
notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
Section 17.04 Governing Law; Jurisdiction. THIS INDENTURE AND EACH NOTE, AND ANY CLAIM,
CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS INDENTURE AND EACH NOTE, SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company irrevocably consents and agrees, for the benefit of the Holders from time to time of the Notes and the Trustee,
that any legal action, suit or proceeding against it with respect to obligations, liabilities or any other matter arising out of or in connection
with this Indenture or the Notes may be brought in the courts of the State of New York or the courts of the United States located in the
Borough of Manhattan, New York City, New York and, until amounts due and to become due in respect of the Notes have been paid,
hereby irrevocably consents and submits to the non-exclusive jurisdiction of each such court in personam, generally and unconditionally
with respect to any action, suit or proceeding for itself in respect of its properties, assets and revenues.
The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this
Indenture brought in the courts of the State of New York or the courts of the United States located in the Borough of Manhattan, New
York City, New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
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Section 17.05 Submission to Jurisdiction; Service of Process. The Company irrevocably appoints Law Debenture Corporate
Service Inc. as its authorized agent in the Borough of Manhattan in the City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Company by the person
serving the same to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804, People’s Republic of China, Facsimile No.
+86 (21) 3913 0192, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The
Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in
full force and effect for a period of five and a half years from the date of this Indenture. If for any reason such agent shall cease to be
such agent for service of process, the Company shall forthwith appoint a new agent of recognized standing for service of process in the
State of New York and deliver to the Trustee a copy of the new agent’s acceptance of that appointment within ten Business Days of such
acceptance. Nothing herein shall affect the right of the Trustee, any agent or any Holder to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the Company in any other court of competent jurisdiction. To the
extent that the Company has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal
process with respect to itself or its property, the Company irrevocably waives such immunity in respect of its obligations hereunder or
under any Note.
Section 17.06 Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any
application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company
shall, if requested by the Trustee, furnish to the Trustee an Officers’ Certificate stating that such action is permitted by the terms of this
Indenture.
Each Officers’ Certificate provided for, by or on behalf of the Company in this Indenture and delivered to the Trustee with
respect to compliance with this Indenture (other than the Officers’ Certificates provided for in Section 4.09) shall include (a) a statement
that the person making such certificate is familiar with the requested action and this Indenture; (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statement contained in such certificate is based; (c) a statement that, in the
judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an
informed judgment as to whether or not such action is permitted by this Indenture; and (d) a statement as to whether or not, in the
judgment of such person, such action is permitted by this Indenture.
Notwithstanding anything to the contrary in this Section 17.06, if any provision in this Indenture specifically provides that the
Trustee shall or may receive an Opinion of Counsel in connection with any action to be taken by the Trustee or the Company hereunder,
the Trustee shall be entitled to, or entitled to request, such Opinion of Counsel.
Section 17.07 Legal Holidays. In any case where any Fundamental Change Repurchase Date, Conversion Date, Qualified
Equity Financing Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on
such date, but may
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be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue in
respect of the delay.
Section 17.08 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed
to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in
any jurisdiction.
Section 17.09 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person,
other than the Holders, the parties hereto, any Paying Agent, any Conversion Agent, any Note Registrar and their successors hereunder,
any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of
this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 17.11 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall
be an original, but such counterparts shall together constitute but one and the same instrument.
Section 17.12 Severability. In the event any provision of this Indenture or in the Notes shall be invalid, illegal or
unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any
way be affected or impaired.
Section 17.13 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 17.14 Force Majeure. In no event shall the Trustee or the Agents be responsible or liable for any failure or delay in the
performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without
limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or
acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being
understood that the Trustee or the Agents, as the case may be, shall use reasonable efforts that are consistent with accepted practices in
the banking industry to resume performance as soon as practicable under the circumstances.
Section 17.15 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all
calculations called for under the Notes. These calculations include, but are not limited to, determinations of the Last Reported Sale
Prices of the ADSs, the
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Conversion Rate of the Notes and any adjustments thereto. The Company shall make all these calculations in good faith and, absent
manifest error, the Company’s calculations shall be final and binding on Holders. The Company shall provide a schedule of its
calculations to each of the Trustee, the Paying Agent and the Conversion Agent, and each of the Trustee, the Paying Agent and the
Conversion Agent is entitled to rely conclusively and without liability upon the accuracy of the Company’s calculations without
independent verification. The Trustee will forward the Company’s calculations to any Holder of Notes upon the prior written request of
that Holder at the sole cost and expense of the Company.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first above written.
NIO INC.
By: /s/ Steven Feng
Name: Steven Feng
Title: Chief Financial Officer
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Trustee
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Paying Agent and Conversion Agent
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG
BRANCH, as Registrar and Transfer Agent
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
[FORM OF FACE OF NOTE]
[INCLUDE FOLLOWING LEGEND IF A GLOBAL NOTE]
EXHIBIT A
[THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AN IS
REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR A NOMINEE OF THE COMMON DEPOSITARY, WHICH
MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS THE OWNER AND HOLDER OF
THIS NOTE FOR ALL PURPOSES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE BANK OF NEW YORK
MELLON, LONDON BRANCH AS COMMON DEPOSITARY (THE "COMMON DEPOSITARY") FOR EUROCLEAR BANK
SA/NV ("EUROCLEAR") AND CLEARSTREAM BANKING S.A. ("CLEARSTREAM") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
THE COMMON DEPOSITARY OR A NOMINEE THEREOF OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO COMMON
DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN
INTEREST HEREIN.
NO AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF NIO INC. (THE “COMPANY”) OR
PERSON THAT HAS BEEN AN AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY
DURING THE THREE IMMEDIATELY PRECEDING MONTHS MAY PURCHASE, OTHERWISE ACQUIRE OR OWN THIS
NOTE, THE AMERICAN DEPOSITARY SHARES DELIVERABLE UPON CONVERSION HEREOF AND THE ORDINARY
SHARES REPRESENTED THEREBY, OR A BENEFICIAL INTEREST HEREIN.]
[INCLUDE FOLLOWING LEGEND IN THE ORIGINALLY ISSUED NOTE AND ANY REPLACEMENT NOTE ISSUED UNTIL
THE DISTRIBUTION COMPLIANCE PERIOD TERMINATION DATE]
[THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND, PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOTE SUBJECT TO, THE
A-1
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.]
PRIOR TO AUGUST 10, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE NOTE SUBSCRIPTION
AGREEMENT BETWEEN NIO INC. AND THE PURCHASER NAMED THEREIN, DATED FEBRUARY 6, 2020 (THE
“SUBSCRIPTION AGREEMENT”). ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE,
HYPOTHECATE OR OTHERWISE TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION
SHALL BE VOID.
A-2
NIO INC.
0% Convertible Senior Note due 2021
[Initially] US$_________
1
No. [_______]
ISIN No. XS2117442272
Common Code 211744227
NIO Inc., a company duly organized and validly existing under the laws of the Cayman Islands (the “Company,” which term
includes any successor company or corporation or other entity under the Indenture referred to on the reverse hereof), for value received
hereby promises to pay to [The Bank of New York Depository (Nominees) Limited] [_______] , or registered assigns, the principal sum
[as set forth in the “Schedule of Exchanges of Notes” attached hereto] [of US$[__________]] , which amount, taken together with the
principal amounts of all other outstanding Notes, shall not exceed US$[(cid:0)] in aggregate at any time, in accordance with the rules and
procedures of Euroclear and Clearstream, on February 4, 2021 as set forth below.
3
4
5
2
This Note shall not bear any interest and the principal amount of this Note will not accrete.
Any Defaulted Amounts shall accrue interest per annum at the rate per annum equal to three percent, subject to the
enforceability thereof under applicable law, from, and including, the relevant payment date to, but excluding, the date on which such
Defaulted Amounts shall have been paid by the Company, at its election, in accordance with Section 2.03(c) of the Indenture.
The Company shall pay or cause the Paying Agent to pay the principal of (including any premium payable) and interest on this
Note, so long as such Note is a Global Note, in immediately available funds to the Common Depositary or its nominee, as the case may
be, as the registered Holder of such Note. As provided in and subject to the provisions of the Indenture, the Company shall pay the
principal of any Notes (other than Notes that are Global Notes) at the office or agency designated by the Company for that purpose. The
Company has initially designated the Bank of New York Mellon, London Branch as its Paying Agent and Conversion Agent and The
Bank of New York Mellon SA/NV, Luxembourg Branch as its Note Registrar and Transfer Agent in respect of the Notes and its agency
in the Borough of Manhattan, The City of New York, as a place where Notes may be presented for payment or for registration of transfer.
1
Include if a Global Note.
2
Include if a Global Note.
3
Include if a Physical Note.
4
Include if a Global Note.
5
Include if a Physical Note.
A-3
Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions
giving the Holder of this Note the right to convert this Note into ADSs on the terms and subject to the limitations set forth in the
Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Note, and any claim, controversy or dispute arising under or related to this Note, shall be construed in accordance
with and governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof).
In the case of any conflict between this Note and the Indenture, the provisions of the Indenture shall control and govern.
This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been
signed manually or by facsimile by the Note Registrar under the Indenture.
[Remainder of page intentionally left blank]
A-4
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
NIO INC.
By:
Name:
Title:
A-5
Dated:
NOTE REGISTRAR’S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG BRANCH
as Note Registrar, certifies that this is one of the Notes described
in the within-named Indenture.
By:
Name:
Title:
A-6
[FORM OF REVERSE OF NOTE]
NIO INC.
0% Convertible Senior Note due 2021
This Note is one of a duly authorized issue of Notes of the Company, designated as its 0% Convertible Senior Notes due 2021
(the “Notes”), limited to the aggregate principal amount of US$70,000,000, all issued or to be issued under and pursuant to an Indenture
dated as of February 10, 2020 (the “Indenture”), between the Company and The Bank of New York Mellon, London Branch as trustee
(the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties, privileges, disclaimers from liability and immunities thereunder of the Trustee, the Company and
the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions
specified in the Indenture.
In the case certain Events of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and
interest on, all Notes may be declared, by either the Trustee or Holders of at least 25% in aggregate principal amount of Notes then
outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions and
certain exceptions set forth in the Indenture. In the case certain Events of Default relating to a bankruptcy (or similar proceeding) with
respect to the Company or a Significant Subsidiary of the Company shall have occurred, the principal of, and interest on, all Notes shall
automatically become immediately due and payable, as set forth in the Indenture.
Subject to the terms and conditions of the Indenture, the Company will make or cause the Paying Agent to make all payments in
respect of the principal amount (and any premium payable) on the Maturity Date and the Fundamental Change Repurchase Price, as the
case may be, to the Holder who surrenders a Note to collect such payments in respect of the Note. The Company will pay or cause the
Paying Agent to pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and
private debts.
Subject to the terms and conditions of the Indenture, the Company will cause to be paid a premium equal to (i) in the case of
any payment of principal to be made on the Maturity Date or pursuant to Section 6.02 of the Indenture, 2.0% of the outstanding principal
amount of the Notes, or (ii) in the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate
interest that would have accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case
may be) over the period starting from (and including) the original date of issuance of the Notes and ending on (and including) the
Fundamental Change Repurchase Date, if the Note were to bear interest at a rate of 2.0% per annum accruing daily and computed on the
basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day
month.
Subject to the terms and conditions of the Indenture, Additional Amounts will be paid in connection with any payments made
and deliveries caused to be made by the Company or any successor to the Company under or with respect to the Indenture and the Notes,
including, but not limited to, payments of principal (including, if applicable, the Fundamental Change Repurchase Price), premium, if
any, payments of interest and deliveries of ADSs or any other
A-7
consideration due on conversion of a Note (together with payments of cash for any Fractional ADS or other consideration) upon
conversion of the Notes to ensure that the net amount received by the beneficial owner of the Notes after any applicable withholding,
deduction or reduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received
by such beneficial owner had no such withholding, deduction or reduction been required.
The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the
Holders of the Notes, and in certain other circumstances, with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures
modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain
exceptions, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of
all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay or cause to be delivered, as the case may be, the principal (including the
Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of and the consideration due upon
conversion of, this Note at the place, at the respective times, at the rate and in the lawful money herein prescribed.
The Notes are issuable in registered form without interest coupons in denominations of US$1,000 principal amount and integral
multiples thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations
provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations,
without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any transfer
or similar tax that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such
exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.
The Company may not redeem the Notes prior to the Maturity Date. No sinking fund is provided for the Notes.
Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to
repurchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of US$1,000 or integral multiples thereof) on
the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price.
Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, prior to the close of business on the
second Business Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is US$1,000 principal
amount of Notes or an integral multiple thereof, into ADSs at the Conversion Rate specified in the Indenture, as adjusted from time to
time as provided in the Indenture.
A-8
Terms used in this Note and defined in the Indenture are used herein as therein defined.
A-9
The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were
written out in full according to applicable laws or regulations:
ABBREVIATIONS
TEN COM = as tenants in common
UNIF GIFT MIN ACT = Uniform Gifts to Minors Act
CUST = Custodian
TEN ENT = as tenants by the entireties
JT TEN = joint tenants with right of survivorship and not as tenants in common
Additional abbreviations may also be used though not in the above list.
A-10
SCHEDULE OF EXCHANGES OF NOTES
NIO INC.
0% Convertible Senior Notes due 2021
SCHEDULE A
6
The initial principal amount of this Global Note is [__________] UNITED STATES DOLLARS
(US$[_______________]). The following increases or decreases in this Global Note have been made:
Amount of
decrease in
principal amount
of this Global Note
Amount of
increase in
principal amount
of this Global Note
Principal amount
of this Global Note
following such
decrease or
increase
Signature of
authorized
signatory of
Trustee
Date of exchange
6
Include if a Global Note.
A-11
ATTACHMENT 1
[FORM OF NOTICE OF CONVERSION]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Conversion Agent
DEUTSCHE BANK TRUST COMPANY AMERICAS, as ADS Depositary
The undersigned registered holder of this Note hereby exercises the option to convert that Note, or the portion thereof (that is
US$1,000 principal amount or an integral multiple thereof) below designated, into ADSs in accordance with the terms of the Indenture
referred to in this Note, and directs that any ADSs deliverable upon such conversion, together with any cash payable for any Fractional
ADS, and any Notes representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof
unless a different name has been indicated below. Terms defined in the Deposit Agreement or the Indenture referred to in this Notice are
used herein as so defined. If any ADSs or any portion of this Note not converted are to be issued in the name of a Person other than the
undersigned, the undersigned will pay all documentary, stamp, issue, transfer or similar taxes, if any, in accordance with Section 14.02(d)
and Section 14.02(e) of the Indenture. Any amount required to be paid to the undersigned on account of interest accompanies this
Notice.
In connection with the conversion of this Note, or the portion hereof below designated, the undersigned acknowledges,
represents to and agrees with the Company that the undersigned is not an “affiliate” (as defined in Rule 144 under the Securities Act) of
the Company and has not been an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company during the three months
immediately preceding the date hereof.
The undersigned hereby instructs the ADS Depositary to register the ADSs in the name of:
1. Name of Beneficial Owner to receive ADSs (English):
2. Address of Beneficial Owner to receive ADSs (English):
3. Name of Registered Holder of the Deposited Shares:
4. Number of Deposited Shares:
5. Number of ADSs to be issued:
6. Beneficial Owner’s Tax ID Number:
7. Contact Name and Tel No/email address:
The undersigned instructs the Depositary to deliver the ADRs representing the ADSs to the following account:
1
ADS Receiving Broker ( * are mandatory fields):
a) DTC Broker Name*:
b) DTC Broker’s Participant Account with DTC *:
c) DTC Broker Contact Name:
d) DTC Broker Contact Tel No/email:
e) Beneficial Owner’s Account # with DTC Broker*:
OR
e) Local Broker Name (have account with DTC Broker)*:
Local Broker Sub-Account # with DTC Broker*:
Local Broker Contact Name:
Local Broker Contact Tel No/email:
ADS Delivering Party:
Name:
Deutsche Bank Trust Company Americas DTC Account: #2655
For any ADS settlement inquiries, please contact DBTCA Broker Desk:
Tel: +1-212-250-9100 (New York) / +44-207-547-6500 (London)
Email: adr@db.com
2
Signature(s)
Dated:
Signature Guarantee
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if ADSs are to be issued other than to
and in the name of the registered holder.
Fill in for registration of ADSs if to be issued other than to and in
the name of the registered holder:
(Name)
(Street Address)
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all):
US$ _________,000
NOTICE: The above signature(s) of the Holder(s) hereof
must correspond with the name as written upon the face of
the Note in every particular without alteration or
enlargement or any change whatever.
Social Security or Other Taxpayer
Identification Number
3
ATTACHMENT 2
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Trustee
The undersigned registered owner of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to
the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the registered holder hereof in accordance with Section 15.02 of the Indenture referred to in
this Note the entire principal amount of this Note, or the portion thereof (that is US$1,000 principal amount or an integral multiple
thereof) below designated.
In the case of Physical Notes, the certificate numbers of the Notes to be repurchased are as set forth below:
Certificate Number(s): ____________________________
Dated:
Signature(s)
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less than all):
US$ ______,000
NOTICE: The above signature(s) of the Holder(s) hereof must
correspond with the name as written upon the face of the Note
in every particular without alteration or enlargement or any
change whatever.
1
[FORM OF ASSIGNMENT AND TRANSFER]
ATTACHMENT 3
For value received ______________________ hereby sell(s), assign(s) and transfer(s) unto _______________ (Please insert social
security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints
_______________ attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Note occurring prior to the Distribution Compliance Period Termination Date, as defined in
the Indenture governing such Note, the undersigned confirms that such Note is being transferred:
☐ To NIO Inc. or a subsidiary thereof; or
☐ Pursuant to a registration statement that has become or been declared effective under the Securities Act of 1933, as amended; or
☐ To a non-U.S. person in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S under the
Securities Act of 1933, as amended; or
☐ Pursuant to an exemption from the registration requirements of the Securities Act.
1
Dated:
Signature(s)
NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
2
EXHIBIT B
I, [Name], [Title], acting on behalf of NIO Inc. (the “Company”) hereby certify that:
[FORM OF AUTHORIZATION CERTIFICATE]
(A) the persons listed below are (i) authorized Officers of the Company for purposes of the Indenture (the “Indenture”) dated as of
February 10, 2020 between the Company and The Bank of New York Mellon, London Branch as trustee, in relation to the 0%
Convertible Senior Notes due 2021 (the “Notes”), (ii) duly elected or appointed, qualified and acting as the holder of the respective
office or offices set forth opposite their names and (iii) the duly authorized persons who executed or will execute the Indenture and the
Notes issued pursuant to the Indenture by their manual or facsimile signatures and were at the time of such execution, duly elected or
appointed, qualified and acting as the holder of the offices set forth opposite their names;
(B) each of the individuals listed below have the authority to receive call backs at the telephone numbers noted below upon request of
The Bank of New York Mellon, London Branch in connection with the Notes issued pursuant to the Indenture;
(C) each signature appearing below is the person’s genuine signature; and
(D) attached hereto as Schedule I is a true, correct and complete specimen of the certificates representing the Notes.
B-1
IN WITNESS WHEREOF, I have hereunto executed and delivered this certificate on behalf of the Company as of the date
indicated.
Dated:
[Name]
By:
Name:
Title:
Name
Title, Fax No.,
Email
Signature
Tel No.
SCHEDULE I
B-2
Exhibit 4.31
NIO Inc.
and
The Bank of New York Mellon, London Branch as Trustee
and
The Bank of New York Mellon, London Branch, as Paying Agent and Conversion Agent
and
The Bank of New York Mellon SA/NV, Luxembourg Branch, as Registrar and Transfer Agent
INDENTURE
dated as of February 19, 2020
US$30,000,000 0% CONVERTIBLE SENIOR NOTES DUE 2021
i
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.01
Definitions
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Designation and Amount
Form of Notes
Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts
Execution, Authentication and Delivery of Notes
Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Temporary Notes
Cancellation of Notes Paid, Converted, Etc.
Common Code and ISIN Numbers
[RESERVED]
Section 3.01
Satisfaction and Discharge
ARTICLE 3
SATISFACTION AND DISCHARGE
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Payment of Principal and Premium
Section 4.01
Section 4.02 Maintenance of Office or Agency
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07
Appointments to Fill Vacancies in Trustee’s Office
Provisions as to Paying Agent
Existence
[RESERVED]
Additional Amounts
ii
PAGE
1
12
12
13
14
15
21
22
22
22
22
23
23
24
24
24
26
26
26
Section 4.08
Section 4.09
Section 4.10
Stay, Extension and Usury Laws
Compliance Certificate; Statements as to Defaults
Further Instruments and Acts
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01
Section 5.02
Lists of Holders
Preservation and Disclosure of Lists
ARTICLE 6
DEFAULTS AND REMEDIES
Events of Default
Acceleration; Rescission and Annulment
[RESERVED]
Payments of Notes on Default; Suit Therefor
Application of Monies Collected by Trustee
Proceedings by Holders
Proceedings by Trustee
Remedies Cumulative and Continuing
Direction of Proceedings and Waiver of Defaults by Majority of Holders
Notice of Defaults and Events of Default
Undertaking to Pay Costs
ARTICLE 7
CONCERNING THE TRUSTEE
Duties and Responsibilities of Trustee
Reliance on Documents, Opinions, Etc.
No Responsibility for Recitals, Etc.
Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes
Monies to Be Held in Trust
Compensation and Expenses of Trustee
Officers’ Certificate as Evidence
Eligibility of Trustee
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section 6.05
Section 6.06
Section 6.07
Section 6.08
Section 6.09
Section 6.10
Section 6.11
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Section 7.08
iii
29
29
30
30
30
30
32
33
33
34
35
36
36
37
37
38
38
41
43
44
44
44
45
45
Section 7.09
Section 7.10
Section 7.11
Section 7.12
Resignation or Removal of Trustee
Acceptance by Successor Trustee
Succession by Merger, Etc.
Trustee’s Application for Instructions from the Company
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Action by Holders
Proof of Execution by Holders
Who Are Deemed Absolute Owners
Company-Owned Notes Disregarded
Revocation of Consents; Future Holders Bound
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
Purpose of Meetings
Call of Meetings by Trustee
Call of Meetings by Company or Holders
Qualifications for Voting
Regulations
Voting
No Delay of Rights by Meeting
ARTICLE 10 SUPPLEMENTAL INDENTURES
Section 10.01
Section 10.02
Section 10.03
Section 10.04
Section 10.05
Supplemental Indentures Without Consent of Holders
Supplemental Indentures with Consent of Holders
Effect of Supplemental Indentures
Notation on Notes
Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01
Section 11.02
Company May Consolidate, Etc. on Certain Terms
Successor Corporation to Be Substituted
iv
46
47
47
48
48
49
49
49
50
50
50
51
51
51
52
52
52
53
54
54
55
55
56
Section 11.03
Opinion of Counsel to Be Given to Trustee
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01
Indenture and Notes Solely Corporate Obligations
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01
Section 14.02
Section 14.03
Section 14.04
Section 14.05
Section 14.06
Section 14.07
Section 14.08
Section 14.09
Section 14.10
Section 14.11
Section 14.12
Conversion Privilege
Conversion Procedure; Settlement Upon Conversion.
[RESERVED]
Adjustment of Conversion Rate
Adjustments of Prices
Ordinary Shares to Be Fully Paid
Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares
Certain Covenants
Responsibility of Trustee
Notice to Holders Prior to Certain Actions
Stockholder Rights Plans
Termination of Depositary Receipt Program
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01
Section 15.02
Section 15.03
Section 15.04
Section 15.05
[RESERVED]
Repurchase at Option of Holders Upon a Fundamental Change
Withdrawal of Fundamental Change Repurchase Notice
Deposit of Fundamental Change Repurchase Price
Covenant to Comply with Applicable Laws Upon Repurchase of Notes
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ARTICLE 16
BRRD MATTERS
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ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01
Section 17.02
Section 17.03
Section 17.04
Section 17.05
Section 17.06
Section 17.07
Section 17.08
Section 17.09
Section 17.10
Section 17.11
Section 17.12
Section 17.13
Section 17.14
Section 17.15
Provisions Binding on Company’s Successors
Official Acts by Successor Corporation
Addresses for Notices, Etc.
Governing Law; Jurisdiction
Submission to Jurisdiction; Service of Process
Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee
Legal Holidays
No Security Interest Created
Benefits of Indenture
Table of Contents, Headings, Etc.
Execution in Counterparts
Severability
Waiver of Jury Trial
Force Majeure
Calculations
Exhibit A
Exhibit B
Form of Note
Form of Authorization Certificate
EXHIBIT
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A-1
B-1
INDENTURE dated as of February 19, 2020 between NIO INC., a Cayman Islands exempted company, PO Box 309, Ugland
House, Grand Cayman, KY1-1104, Cayman Islands, as issuer (the “Company,” as more fully set forth in Section 1.01), THE BANK OF
NEW YORK MELLON, LONDON BRANCH, a banking organization organized and existing under the laws of the State of New York
with limited liability and operating through its branch in London at One Canada Square, London E14 5AL, United Kingdom, as trustee
(the “Trustee”), as paying agent (the “Paying Agent”) and as conversion agent (the “Conversion Agent”) (as more fully set forth in
Section 1.01) and THE BANK OF NEW YORK MELLON, SA/NV, LUXEMBOURG BRANCH, operating through its branch in
Luxembourg at Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg as registrar (the “Registrar”) and as transfer
agent (the “Transfer Agent”) (as more fully set forth in Section 1.01).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 0% Convertible Senior
Notes due 2021 (the “Notes”), offered and sold outside the United States pursuant to Regulation S in an aggregate principal amount not
to exceed US$30,000,000, and in order to provide the terms and conditions upon which the Notes are to be authenticated, issued and
delivered, the Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the
Form of Fundamental Change Repurchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided; and
WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered
by the Note Registrar, as in this Indenture provided, the valid, binding and legal obligations of the Company, and this Indenture a valid
agreement according to its terms, have been done and performed, and the execution of this Indenture and the issuance hereunder of the
Notes have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered,
and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as
otherwise provided below), as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.01. The words “herein,” “hereof,” “hereunder,” and words of similar import
1
refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include
the plural as well as the singular.
“Additional Amounts” shall have the meaning specified in Section 4.07(a).
“ADS” means an American Depositary Share issued pursuant to the Deposit Agreement representing one Ordinary Share of the
Company as of the date of this Indenture, and deposited with the ADS Custodian.
“ADS Custodian” means Deutsche Bank AG, Hong Kong Branch, with respect to the ADSs delivered pursuant to the Deposit
Agreement or any successor entity thereto.
“ADS Depositary” means Deutsche Bank Trust Company Americas, as depositary for the ADSs.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any
specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
“Agents” means the Paying Agent, the Transfer Agent, the Note Registrar and the Conversion Agent.
“applicable taxes” shall have the meaning specified in Section 4.07(a).
“Bail-in Legislation” means in relation to a member state of the European Economic Area which has implemented, or which at
any time implements, the BRRD, the relevant implementing law, regulation, rule or requirement as described in the EU Bail-in
Legislation Schedule from time to time.
“Bail-in Powers” means any Write-down and Conversion Powers as defined in the EU Bail-in Legislation Schedule, in relation
to the relevant Bail-in Legislation.“BNY Mellon Group” shall have the meaning specified in Section 7.02.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the
Trustee.
“BRRD” means Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and
investment firms.
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“BRRD Liability” means a liability in respect of which the relevant Write Down and Conversion Powers in the applicable Bail-
in Legislation may be exercised.
“Business Day” means, with respect to any Note, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in the State of New York, or the Cayman Islands are authorized or obligated by law or executive order to
close.
“Capital Stock” means, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Clause A Distribution” shall have the meaning specified in Section 14.04(c).
“Clause B Distribution” shall have the meaning specified in Section 14.04(c).
“Clause C Distribution” shall have the meaning specified in Section 14.04(c).
"Clearstream" means Clearstream Banking S.A.
“close of business” means 5:00 p.m. (New York City time).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Commission” means the U.S. Securities and Exchange Commission.
"Common Depositary" means the common depositary acting on behalf of Euroclear and Clearstream.
“Common Equity” of any Person means ordinary share capital or common stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection
of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning specified in the first paragraph of this Indenture, and subject to the provisions of Article 11,
shall include its successors and assigns.
“Company Order” means a written order of the Company, signed by an Officer of the Company and delivered to the Trustee
and/or Note Registrar, as applicable.
“Consolidated Affiliated Entity” means, with respect to any Person, any corporation, association or other entity which is or is
required to be consolidated with such Person under Accounting Standards Codification subtopic 810-10, Consolidation: Overall
(including any changes, amendments or supplements thereto) or, if such person prepares its financial statements in accordance with
accounting principles other than the accounting principles generally accepted in the United States of America, the equivalent of
Accounting Standards Codification subtopic 810-10, Consolidation: Overall under such accounting principles.
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“Conversion Agent” shall have the meaning specified in Section 4.02.
“Conversion Date” shall have the meaning specified in Section 14.02(c).
“Conversion Obligation” shall have the meaning specified in Section 14.01.
“Conversion Rate” shall have the meaning specified in Section 14.01.
“Corporate Trust Office” means the corporate trust office of the Trustee at which at any time its corporate trust business shall
be administered, which office at the date hereof is located at The Bank of New York Mellon, London Branch, One Canada Square,
London E14 5AL, United Kingdom, Attention: Corporate Trust Administration – Project Camel (NIO Inc.), Fax: +44 1202 689660, and
shall include a reference to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific Place, 1 Queen’s Road East,
Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852 2295 3283, or such other address as the Trustee may
designate from time to time by notice to the Holders and the Company, or the corporate trust office of any successor trustee (or such
other address as such successor trustee may designate from time to time by notice to the Holders and the Company).
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported
Sale Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading Day
immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall have been
quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this
definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this
definition be deemed to be the amount thereof increased by such similar amount;
and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of a
dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that dividend, the
quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal
to the amount of that dividend per ADS.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
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“Defaulted Amounts” means any amounts on any Note (including, without limitation, the Fundamental Change Repurchase
Price, principal, premium and interest) that are payable but are not punctually paid or duly provided for.
“Deposit Agreement” means the deposit agreement dated as of September 11, 2018 by and among the Company, the ADS
Depositary and the holders and beneficial owners of the ADSs delivered thereunder or, if amended or supplemented as provided therein,
as so amended or supplemented.
“Distributed Property” shall have the meaning specified in Section 14.04(c).
“Distribution Compliance Period Termination Date” shall have the meaning specified in Section 2.05(c).
“EU Bail-in Legislation Schedule” means the document described as such, then in effect, and published by the Loan Market
Association (or any successor person) from time to time at http://www.lma.eu.com/pages.aspx?p=499.
"Euroclear" means Euroclear Bank SA/NV.
“Event of Default” shall have the meaning specified in Section 6.01.
“Ex-Dividend Date” means the first date on which the ADSs trade on the applicable exchange or in the applicable market,
regular way, without the right to receive the issuance, dividend or distribution in question, from the Company or, if applicable, from the
seller of the ADSs on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Ordinary Shares or ADSs that expire on or prior to the
Maturity Date.
“FATCA” shall have the meaning specified in Section 4.07(a)(i)(D).
“Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form
of Note attached hereto as Exhibit A.
“Form of Fundamental Change Repurchase Notice” shall mean the “Form of Fundamental Change Repurchase Notice”
attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.
“Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note
attached hereto as Exhibit A.
“Fractional ADS” shall have the meaning specified in Section 14.02(a).
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“Fundamental Change” shall be deemed to have occurred at the time after the Notes are originally issued if any of the
following occurs:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company,
its Subsidiaries, the employee benefit plans of the Company and its Subsidiaries and any of the Permitted Holders, files a
Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or group has become the direct
or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of (i) the Company’s Common Equity
(including Common Equity held in the form of ADSs) representing more than 50% of the voting power of the Company’s
Common Equity or (ii) more than 50% of the outstanding Ordinary Shares (including Ordinary Shares held in the form of
ADSs); or (B) the Permitted Holders (together with any of their respective Affiliates) have become the direct or indirect
“beneficial owners,” as defined in Rule 13d-3 under the Exchange Act, of Ordinary Shares (including Ordinary Shares held in
the form of ADSs) representing, in the aggregate, more than 65% of the outstanding Ordinary Shares (including Ordinary
Shares held in the form of ADSs), based on any Schedule TO or any schedule, form or report under the Exchange Act disclosing
the same filed by any one or more of the Permitted Holders;
(b) the consummation of (A) any recapitalization, reclassification or change of the Ordinary Shares or the ADSs
(other than changes resulting from a subdivision or combination) as a result of which the Ordinary Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or
merger of the Company, or any similar transaction, pursuant to which the Ordinary Shares or the ADSs will be converted into
cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or
substantially all of the consolidated assets of the Company and its Subsidiaries and Consolidated Affiliated Entities, taken as a
whole, to any Person other than one of the Company’s wholly-owned Subsidiaries; provided, however, that a transaction
described in clause (B) in which the holders of all classes of the Company’s Common Equity immediately prior to such
transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving
corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-a-vis
each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause
(b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the
Company;
(d) the ADSs (or other Common Equity or ADSs in respect of Common Equity underlying the Notes) cease to be
listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
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(e) any change in or amendment to the laws, regulations and rules of the People’s Republic of China or the official
interpretation or official application thereof (a “Change in Law”) that results in (x) the Company, its Subsidiaries and its
Consolidated Affiliated Entities (collectively, the “Company Group”) (as in existence immediately subsequent to such Change
in Law), as a whole, being legally prohibited from operating substantially all of the business operations conducted by the
Company Group (as in existence immediately prior to such Change in Law) as of the last date of the period described in the
Company’s consolidated financial statements for the most recent fiscal quarter and (y) the Company’s being unable to continue
to derive substantially all of the economic benefits from the business operations conducted by the Company Group (as in
existence immediately prior to such Change in Law) in the same manner as reflected in the Company’s consolidated financial
statements for the most recent fiscal quarter;
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change, if at least 90% of
the consideration received or to be received by holders of the ADSs, excluding cash payments for Fractional ADSs, in connection with
such transaction or event consists of shares of Common Equity or ADSs in respect of Common Equity that are listed or quoted on any of
The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective
successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event and as a result of such
transaction or event, the Notes become convertible into such consideration, excluding cash payments for Fractional ADSs and cash
payments made in connection with dissenters' appraisal rights.
“Fundamental Change Company Notice” shall have the meaning specified in Section 15.02(c).
“Fundamental Change Repurchase Date” shall have the meaning specified in Section 15.02(a).
“Fundamental Change Repurchase Notice” shall have the meaning specified in Section 15.02(b)(i).
“Fundamental Change Repurchase Price” shall have the meaning specified in Section 15.02(a).
“Global Note” shall have the meaning specified in Section 2.05(b).
“Holder,” shall mean any Person in whose name at the time a particular Note is registered on the Note Register provided that,
for the purposes of Section 6.01(f) and Section 6.04 only, “Holder” shall include a beneficial owner of any Note who has validly made a
request that its beneficial interest therein be issued as a Physical Note, and thereafter the Company failed to execute, or the Registrar
failed to authenticate and deliver, a Physical Note to that beneficial owner in accordance with Section 2.05(c) within 10 Business Days of
the beneficial owner's request.
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“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
“Last Reported Sale Price” of the ADSs on any date means the closing sale price per ADS (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask
prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the
ADSs are traded. If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last
Reported Sale Price” shall be the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as reported by
OTC Markets Group Inc. or a similar organization. If the ADSs are not so quoted, the “Last Reported Sale Price” shall be the average of
the mid-point of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized
independent investment banking firms selected by the Company for this purpose.
“Maturity Date” means February 4, 2021.
“Merger Event” shall have the meaning specified in Section 14.07(a).
“Note” or “Notes” shall have the meaning specified in the first paragraph of the recitals of this Indenture.
“Note Register” shall have the meaning specified in Section 2.05(a).
“Note Registrar” shall have the meaning specified in Section 2.05(a).
“Notice of Conversion” shall have the meaning specified in Section 14.02(b).
“Officer” means, with respect to the Company, the President, the Chief Executive Officer, the Chief Financial Officer the
Treasurer, the Secretary, any Executive or Senior Vice President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title “Vice President”).
“Officers’ Certificate,” when used with respect to the Company, means a certificate that is delivered to the Trustee and that is
signed by (a) two Officers of the Company or (b) one Officer of the Company and one of any Assistant Treasurer, any Assistant
Secretary or General Counsel or the Controller of the Company. Each such certificate shall include the statements provided for in
Section 17.06 if and to the extent required by the provisions of such Section. One of the Officers giving an Officers’ Certificate pursuant
to Section 4.09 shall be the principal executive, financial or accounting officer of the Company.
“open of business” means 9:00 a.m. (New York City time).
“Opinion of Counsel” means an opinion in writing signed by legal counsel and in a form reasonably acceptable to the Trustee,
who may be counsel to the Company, or other counsel acceptable to the Trustee, that is delivered to the Trustee. Each such opinion shall
include the
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statements provided for in Section 17.06 if and to the extent required by the provisions of such Section 17.06.
“Ordinary Shares” means Class A ordinary shares of the Company, par value US$0.00025 per share, at the date of this
Indenture, subject to Section 14.07.
“outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.04, mean, as of any particular
time, all Notes authenticated and delivered by the Note Registrar under this Indenture, except:
(a) Notes theretofore canceled by the Note Registrar or accepted by the Note Registrar for cancellation;
(b) Notes, or portions thereof, that have become due and payable and in respect of which monies in the necessary
amount shall have been deposited with the Trustee or with any Paying Agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);
(c) Notes that have been paid pursuant to Section 2.06 or Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee
is presented that any such Notes are held by protected purchasers in due course;
(d) Notes converted pursuant to Article 14 and required to be cancelled pursuant to Section 2.08; and
(e) Notes repurchased by the Company pursuant to the third sentence of Section 2.10.
“Paying Agent” shall have the meaning specified in Section 4.02.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation with respect to the Ordinary Shares (including Ordinary Shares held in the form of ADSs) with any of the
aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means an individual, a corporation, a limited liability company, an association, a partnership, a joint venture, a joint
stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof.
“Physical Notes” means permanent certificated Notes in registered form issued in denominations of US$1,000 principal amount
and multiples thereof.
"PRC" means the People's Republic of China and, for the purposes for this Indenture, shall exclude Hong Kong SAR, Macau
SAR and Taiwan.
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“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in
lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note that it replaces.
“Qualified Equity Financing” means a bona fide issuance of equity securities of the Company for fundraising purposes after
the date of this Indenture or to the Maturity Date, excluding any of the following: (i) ADSs issued upon conversion of any Note or any
convertible securities then outstanding, (ii) Ordinary Shares (directly or in the form of ADSs) issued upon share split, share dividend or
any subdivision of Ordinary Shares (directly or in the form of ADSs), (iii) Ordinary Shares (directly or in the form of ADSs) (or options
or warrants therefor) issued to officers, directors, employees and consultants of the Company or issued to the trustee, general partner or
other entity that is to hold the Ordinary Shares (directly or in the form of ADSs), in each case pursuant to a duly approved employee
equity incentive plan, and (iv) shares of the Company issued pursuant to any bona fide acquisition, on arms-length terms, of interests in
or assets of another corporation or entity by the Company as duly approved by the Board of Directors.
“Qualified Equity Financing Conversion Date” shall have the meaning specified in Section 14.02(c).
“Qualified Equity Financing Conversion Rate” means the conversion rate equal to US$1,000 divided by the per-share
issuance price applicable to the new issuance of equity securities of the Company in the Qualified Equity Financing (subject to
adjustment as set forth in this Indenture).
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the
Ordinary Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Ordinary Shares (directly or in the form of ADSs) (or such other security) are exchanged for or converted into
any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$3.07 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Indenture and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to under
the provisions in Section 14.04(f).
“Reference Property” shall have the meaning specified in Section 14.07(a).
“Regulation S” means Regulation S under the Securities Act or any successor to such regulation.
“Relevant Jurisdiction” shall have the meaning specified in Section 4.07(a).
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“Relevant Resolution Authority” means the resolution authority with the ability to exercise any Bail-in Powers in relation to
The Bank of New York Mellon SA/NV, Luxembourg Branch.
“Relevant Taxing Jurisdiction” shall have the meaning specified in Section 4.07(a).
“Responsible Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of
the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this Indenture.
“Rule 144” means Rule 144 as promulgated under the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act. Each of the Company’s Consolidated Affiliated Entities will be deemed to be a
“subsidiary” for purposes of the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X.
“Specified Portion” means such portion of the Notes that upon conversion by a Holder will result in a number of ADSs
(assuming delivery of the maximum number of ADSs due upon conversion that do not represent a fractional ADS) to be delivered to
such Holder to equal to (x) seventy five percent (75%), fifty percent (50%) or twenty five percent (25%) multiplied by (y) the number of
ADSs calculated as (i) the aggregate principal amount of the Notes issued on the date of this Indenture divided by (ii) US$1,000 and
multiplied by (A) the Conversion Rate (in the case of conversion of the Notes pursuant to Section 14.01(a)) or (B) the Qualified Equity
Financing Conversion Rate (in the case of conversion of the Notes pursuant to Section 14.01(b)), in each case, in effect immediately
prior to the close of business on the relevant Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be).
“Spin-Off” shall have the meaning specified in Section 14.04(c).
“Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii)
one or more Subsidiaries of such Person.
“Successor Company” shall have the meaning specified in Section 11.01(a).
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“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on the New York Stock Exchange or, if the ADSs (or such other security) are not then listed on the New
York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the ADSs (or such other security) are
then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities exchange, on the principal
other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale Price for the ADSs (or closing sale
price for such other security) is available on such securities exchange or market; provided that if the ADSs (or such other security) are
not so listed or traded, “Trading Day” means a Business Day.
“transfer” shall have the meaning specified in Section 2.05(c) and Section 2.05(e), as applicable.
“Transfer Agent” shall have the meaning specified in Section 4.02.
“Trigger Event” shall have the meaning specified in Section 14.04(c).
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this
Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after the date hereof, the term “Trust
Indenture Act” shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended.
“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor trustee shall have
become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is
then a Trustee hereunder.
“unit of Reference Property” shall have the meaning specified in Section 14.07(a).
“U.S. Person” shall have the meaning as such term is defined under Regulation S.
“Valuation Period” shall have the meaning specified in Section 14.04(c).
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01 Designation and Amount. The Notes shall be designated as the “0% Convertible Senior Notes due 2021.” The
aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is limited to US$30,000,000, except
for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other Notes pursuant to Section
2.05, Section 2.06, Section 2.07, Section 10.04, Section 14.02 and Section 15.04.
Section 2.02 Form of Notes. The Notes and the Note Registrar’s certificate of authentication to be borne by such Notes shall
be substantially in the respective forms set forth in
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Exhibit A, the terms and provisions of which shall constitute, and are hereby expressly incorporated in and made a part of this
Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the Common Depositary, or as may be required to comply with
any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation
system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular Notes are subject.
Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements
as the Officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes
are subject.
Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time be increased or reduced to reflect redemptions,
repurchases, cancellations, conversions, transfers or exchanges permitted hereby. Any endorsement of the Global Note to reflect the
amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Note
Registrar in such manner and upon instructions given by the Holder of such Notes in accordance with this Indenture. Payment of
principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Global Note
shall be made to the Holder of such Note on the date of payment, unless a record date or other means of determining Holders eligible to
receive payment is provided for herein.
Section 2.03 Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts. (a) The Notes shall be
issuable in registered form without coupons in denominations of US$1,000 principal amount and integral multiples thereof. Each Note
shall be dated the date of its authentication and shall not bear regular interest, and the principal amount of the Notes will not accrete.
(b) [RESERVED]
(c) Any Defaulted Amounts shall forthwith cease to be payable to the Holder on the relevant payment date but shall accrue
interest per annum at the rate of three percent per annum, subject to the enforceability thereof under applicable law, from, and including,
such relevant
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payment date, and such Defaulted Amounts together with such interest thereon shall be paid by the Company, at its election in each case,
as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Amounts to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such
Defaulted Amounts, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the
amount of the Defaulted Amounts proposed to be paid on each Note and the date of the proposed payment (which shall be not
less than 25 days after the receipt by the Trustee of such notice, unless the Trustee in its sole discretion shall consent to an
earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Amounts or shall make arrangements satisfactory to the Trustee for such deposit
on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Amounts as in this clause provided. Thereupon the Company shall fix a special record date for the
payment of such Defaulted Amounts which shall be not more than 15 days and not less than 10 days prior to the date of the
proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The
Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such Defaulted Amounts and the special record date
therefor to be mailed, first-class postage prepaid (at the Company’s expense), to each Holder at its address as it appears in the
Note Register, not less than 10 days prior to such special record date. Notice of the proposed payment of such Defaulted
Amounts and the special record date therefor having been so mailed, such Defaulted Amounts shall be paid to the Persons in
whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such special record date
and shall no longer be payable pursuant to the following clause (ii) of this Section 2.03(c).
(ii) The Company may make payment of any Defaulted Amounts in any other lawful manner not inconsistent with
the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for
issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable
by the Trustee.
Section 2.04 Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chief Executive Officer, President, Chief Financial Officer, Treasurer, Secretary or
any of its Executive or Senior Vice Presidents. With the delivery of this Indenture, the Company is furnishing, and from time to time
thereafter may furnish, a certificate substantially in the form of Exhibit B (an “Authorization Certificate”) identifying and certifying the
incumbency and specimen (and/or facsimile) signatures of its active authorized Officers. Until the Trustee receives a subsequent
Authorization Certificate, the Trustee shall be entitled to conclusively rely
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on the last Authorization Certificate delivered to it for purposes of determining the relevant authorized Officers. Typographical and other
minor errors or defects in any signature shall not affect the validity or enforceability of any Note which has been duly authenticated and
delivered by the Note Registrar.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed
by the Company to the Note Registrar for authentication, together with a Company Order for the authentication and delivery of such
Notes, and the Note Registrar in accordance with such Company Order shall authenticate and deliver such Notes, without any further
action by the Company hereunder.
The Company Order shall specify the amount of Notes to be authenticated, the date on which the original issuance of such
Notes is to be authenticated, the date on which the principal of such Notes will be payable and other terms relating to such Notes. The
Note Registrar shall thereupon authenticate and deliver said Notes to or upon the written order of the Company (as set forth in such
Company Order).
The Note Registrar shall have the right to decline to authenticate and deliver any Notes under this Section (a) unless and until it
receives from the Company a Company Order instructing it to so authenticate and deliver such Notes and, if requested by the Note
Registrar, an Officers’ Certificate and an Opinion of Counsel in accordance with Section 17.06 hereof; (b) if the Note Registrar
determines that such action may not lawfully be taken; or (c) if the Note Registrar determines that such action would expose the Note
Registrar to personal liability, unless indemnity and/or security and/or pre-funding satisfactory to the Note Registrar against such liability
is provided to the Note Registrar.
Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note
attached as Exhibit A hereto, executed manually or by facsimile by an authorized officer of the Note Registrar, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Note Registrar upon any Note executed by the
Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
In case any Officer of the Company who shall have signed any of the Notes shall cease to be such Officer before the Notes so
signed shall have been authenticated and delivered by the Note Registrar, or disposed of by the Company, such Notes nevertheless may
be authenticated and delivered or disposed of as though the Person who signed such Notes had not ceased to be such Officer of the
Company; and any Note may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Note,
shall be the Officers of the Company, although at the date of the execution of this Indenture any such Person was not such an Officer.
Section 2.05 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary. (a) The
Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or
agency of the Company
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designated pursuant to Section 4.02, the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form or in any form
capable of being converted into written form within a reasonable period of time. The Bank of New York Mellon SA/NV, Luxembourg
Branch is hereby initially appointed the “Note Registrar” and “Transfer Agent” for the purpose of registering Notes and transfers of
Notes as herein provided. The Company may appoint one or more co-Note Registrars in accordance with Section 4.02.
Prior to the Distribution Compliance Period Termination Date, upon surrender for registration of transfer of any Note to the
Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05(c), the
Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one
or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may
be required by this Indenture. Following the Distribution Compliance Period Termination Date, upon surrender for registration of
transfer of any Note to the Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this
Section 2.05, the Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and not bearing the
restrictive legends required by the second paragraph of Section 2.05(c).
Prior to the Distribution Compliance Period Termination Date, Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding. Following the Distribution Compliance Period Termination Date, Notes may
be exchanged for other Notes of any authorized denominations and of a like aggregate principal amount but not bearing the restrictive
legend required by the second paragraph of Section 2.05(c), upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing
registration numbers not contemporaneously outstanding.
All Notes presented or surrendered for registration of transfer or for exchange, repurchase or conversion shall (if so required by
the Company, the Trustee, the Note Registrar or any co-Note Registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and duly executed, by the Holder thereof or its attorney-in-fact duly
authorized in writing.
No service charge shall be imposed by the Company, the Transfer Agent, the Note Registrar, any co-Note Registrar or the
Paying Agent for any exchange or registration of transfer of Notes, but the Company may require a Holder to pay a sum sufficient to
cover any
16
documentary, stamp, issue, transfer or similar tax required in connection therewith as a result of the name of the Holder of new Notes
issued upon such exchange or registration of transfer being different from the name of the Holder of the old Notes surrendered for
exchange or registration of transfer. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
None of the Company, the Trustee, the Note Registrar or any co-Note Registrar shall be required to exchange or register a
transfer of (i) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof
surrendered for conversion or (ii) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) in accordance
with Article 15.
All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered
upon such registration of transfer or exchange.
The Trustee shall have no responsibility or obligation to any direct or indirect participant or any other Person with respect to the
accuracy of the books or records, or the acts or omissions, of the Common Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any direct or indirect participant or other
Person (other than the Common Depositary and any other registered Holder of Notes) of any notice or the payment of any amount, under
or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under
the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Common Depositary or its
nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through the Common
Depositary subject to the customary procedures of Euroclear and Clearstream. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Common Depositary with respect to its direct or indirect participants.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers
between or among direct or indirect participants in any Global Note) other than to require delivery of such certificates as are expressly
required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
(b) So long as the Notes are eligible for book-entry settlement with Euroclear and Clearstream, unless otherwise required by
law, subject to the fourth paragraph from the end of Section 2.05(c) all Notes shall be represented by one or more Notes in global form
(each, a “Global Note”) registered in the name of the Common Depositary or its nominee. The transfer and exchange of beneficial
interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Common Depositary in
accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of Euroclear and Clearstream.
17
(c) Every Note that bears or is required under this Section 2.05(c) to bear the legend set forth in this Section 2.05(c) shall,
until no longer required by this Section 2.05(c), be subject to the restrictions on transfer set forth in this Section 2.05(c) (including the
legends set forth below), unless such restrictions on transfer shall be eliminated or otherwise waived by written consent of the Company,
and the Holder of each such Note, by such Holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used
in this Section 2.05(c), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any such Note.
Until the date (the “Distribution Compliance Period Termination Date”) that is 40 days after the date hereof, any certificate
evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following
form (unless such Notes have been transferred pursuant to a registration statement that has become or been declared effective under the
Securities Act and that continues to be effective at the time of such transfer, or unless otherwise agreed by the Company in writing, with
notice thereof to the Trustee):
THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOTE SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE
DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
18
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Any certificate evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form (unless otherwise agreed by the Company in writing, with notice thereof to the Trustee):
PRIOR TO AUGUST 10, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE NOTE SUBSCRIPTION
AGREEMENT BETWEEN NIO INC. AND THE PURCHASER NAMED THEREIN, DATED FEBRUARY 14, 2020 (THE
“SUBSCRIPTION AGREEMENT”). ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE,
HYPOTHECATE OR OTHERWISE TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION
SHALL BE VOID.
No transfer of any Note prior to the Distribution Compliance Period Termination Date will be registered by the Note Registrar
unless the applicable box on the Form of Assignment and Transfer has been checked.
The Company shall promptly notify the Trustee and the ADS Depositary in writing upon the occurrence of the Distribution
Compliance Period Termination Date and after a registration statement, if any, with respect to the Notes has been declared effective
under the Securities Act.
Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.05(c)), a Global
Note may not be transferred as a whole or in part except (i) by the Common Depositary to a nominee of the Common Depositary or by a
nominee of the Common Depositary to the Common Depositary or another nominee of the Common Depositary or by the Common
Depositary or any such nominee to a successor Common Depositary or a nominee of such successor Common Depositary and (ii) for
transfers of portions of a Global Note in certificated form made upon request of a member of, or a participant in, the Common Depositary
(for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Common Depositary in
accordance with customary procedures of Euroclear and Clearstream and in compliance with this Section 2.05(c).
19
Initially, each Global Note shall be delivered by or on behalf of the Trustee to, and registered in the name of, the Common
Depositary or its nominee for the accounts of Euroclear and Clearstream.
If (i) the Common Depositary notifies the Company at any time that the Common Depositary is unwilling or unable to continue
as depositary for the Global Notes and a successor depositary is not appointed within 90 days, (ii) either Euroclear or Clearstream, or a
successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or
otherwise) or announces an intention to permanently cease business or does in fact do so, or (iii) an Event of Default with respect to the
Notes has occurred and is continuing and a beneficial owner of any Note requests that its beneficial interest therein be issued as a
Physical Note, the Company shall execute, and the Note Registrar, upon receipt of an Officers’ Certificate and a Company Order for the
authentication and delivery of Notes, shall authenticate and deliver (x) in the case of clause (iii), a Physical Note to such beneficial owner
in a principal amount equal to the principal amount of such Note corresponding to such beneficial owner’s beneficial interest and (y) in
the case of clause (i) or (ii), Physical Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate
principal amount equal to the aggregate principal amount of such Global Notes in exchange for such Global Notes, and upon delivery of
the Global Notes to the Note Registrar such Global Notes shall be canceled.
Physical Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(c) shall be registered in such
names and in such authorized denominations as the Common Depositary, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Note Registrar in writing. Upon execution and authentication, the Note Registrar shall deliver such
Physical Notes to the Persons in whose names such Physical Notes are so registered.
At such time as all interests in a Global Note have been converted, canceled, repurchased, redeemed or transferred, such Global
Note shall be, upon receipt thereof, canceled by the Note Registrar in accordance with standing procedures and existing instructions of
the Common Depositary. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Physical Notes,
converted, canceled, repurchased, redeemed or transferred to a transferee who receives Physical Notes therefor or any Physical Note is
exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing
procedures and existing instructions of the Common Depositary, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Global Note, by the Note Registrar, to reflect such reduction or increase.
None of the Company, the Trustee, the Paying Agent, any agent of the Company or any agent of the Trustee shall have any
responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a
Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(d) [RESERVED]
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(e) Any Note that is repurchased or owned by any Affiliate of the Company may not be resold by such Affiliate unless
registered under the Securities Act or resold pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act in a transaction that results in such Note no longer being a “restricted security” (as defined under Rule
144 under the Securities Act). The Company shall cause any Note that is repurchased or owned by it to be surrendered to the Note
Registrar for cancellation in accordance with Section 2.08.
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon receipt of a Company Order, the Note Registrar shall authenticate and
deliver, a new Note, bearing a registration number not contemporaneously outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall
furnish to the Company and to the Note Registrar such security and/or indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company and to the Note Registrar evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
The Note Registrar may authenticate any such substituted Note and deliver the same upon the receipt of such security and/or
indemnity as the Note Registrar and the Company may require. No service charge shall be imposed by the Company, the Transfer Agent,
the Note Registrar, any co-Note Registrar or the Paying Agent upon the issuance of any substitute Note, but the Company may require a
Holder to pay a sum sufficient to cover any documentary, stamp, issue, transfer or similar tax required in connection therewith as a result
of the name of the Holder of the new substitute Note being different from the name of the Holder of the old Note that became mutilated
or was destroyed, lost or stolen. In case any Note that has matured or is about to mature or has been surrendered for repurchase (and not
withdrawn) in accordance with Article 15 or is about to be converted in accordance with Article 14 shall become mutilated or be
destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or
convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if
the applicant for such payment or conversion shall furnish to the Company and to the Trustee such security and/or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and,
in every case of destruction, loss or theft, evidence satisfactory to the Company, and the Trustee evidence of their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be
found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally
and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and
owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement, payment,
21
redemption, conversion or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement, payment, redemption,
conversion or repurchase of negotiable instruments or other securities without their surrender.
Section 2.07 Temporary Notes. Pending the preparation of Physical Notes, the Company may execute and the Note Registrar
shall, upon receipt of a Company Order, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be
issuable in any authorized denomination, and substantially in the form of the Physical Notes but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Note Registrar upon the same conditions and in substantially the same manner, and
with the same effect, as the Physical Notes. Without unreasonable delay, the Company shall execute and deliver to the Note Registrar
Physical Notes (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered
in exchange therefor, at each office or agency maintained by the Company pursuant to Section 4.02 and the Note Registrar shall upon
receipt of a Company Order authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of
Physical Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged,
the temporary Notes shall in all respects be entitled to the same benefits and subject to the same limitations under this Indenture as
Physical Notes authenticated and delivered hereunder.
Section 2.08 Cancellation of Notes Paid, Converted, Etc. The Company shall cause all Notes surrendered for the purpose of
payment, repurchase, redemption, registration of transfer or exchange or conversion, if surrendered to any Person other than the Note
Registrar (including any of the Company’s agents, Subsidiaries or Affiliates), to be delivered and surrendered to the Note Registrar for
cancellation. All Notes delivered to the Note Registrar shall be canceled promptly by it, and no Notes shall be authenticated in exchange
thereof except as expressly permitted by any of the provisions of this Indenture. The Note Registrar shall dispose of canceled Notes in
accordance with its customary procedures and, after such disposition, shall deliver a certificate of such cancellation and disposition to the
Company, at the Company’s written request in a Company Order.
Section 2.09 Common Code and ISIN Numbers. The Company in issuing the Notes may use "Common Code" or “ISIN”
numbers (if then generally in use), and, if so, the Trustee shall use "Common Code" or “ISIN” numbers in all notices issued to Holders as
a convenience to such Holders; provided that any such notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed
on the Notes. The Company shall promptly notify the Trustee in writing of any change in the “Common Code” or "ISIN" numbers.
Section 2.10 [RESERVED]
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ARTICLE 3
SATISFACTION AND DISCHARGE
Section 3.01 Satisfaction and Discharge. This Indenture shall upon request of the Company contained in an Officers’
Certificate cease to be of further effect, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when (a) (i) all Notes theretofore authenticated and delivered (other than (x) Notes which
have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06 and (y) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 4.04(d)) have been delivered to the Note Registrar for cancellation; or (ii) the
Company has deposited with the Paying Agent or delivered to Holders, as applicable, after the Notes have become due and payable,
whether on the Maturity Date, any Fundamental Change Repurchase Date, upon conversion or otherwise, cash or cash and ADSs (solely
to satisfy the Company’s Conversion Obligation, if applicable), sufficient to pay all of the outstanding Notes and all other sums due and
payable under this Indenture by the Company; and (b) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have
been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee
under Section 7.06 shall survive.
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01 Payment of Principal and Premium. (a) The Company covenants and agrees that it will cause to be paid the
principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of each of the Notes
at the places, at the respective times and in the manner provided herein and in the Notes.
(b) The Company covenants and agrees that it will cause to be paid a premium equal to (i) in the case of any payment of
principal to be made on the Maturity Date or pursuant to Section 6.02, 2.0% of the outstanding principal amount of the Notes, or (ii) in
the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate interest that would have
accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case may be) over the period
starting from (and including) the original date of issuance of the Notes and ending on (and including) the Fundamental Change
Repurchase Date, if the Notes were to bear interest at a rate of 2.0% per annum (accruing daily and computed on the basis of a 360-day
year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day month). For the
avoidance of doubt, any reference in this Indenture of the Notes in any context to the principal shall be deemed to include, without
duplication, the premium contemplated by this Section 4.01(b) to the extent that, in such context, such premium is, was or would be
payable pursuant to this Section 4.01(b).
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Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency (which will be the Corporate Trust Office initially) where the Notes may be surrendered for registration of
transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and
where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust Office, provided, however, that the legal service of
process against the Company shall in no circumstance be made at an office or agency of the Trustee.
The Company may also from time to time designate as co-Note Registrars one or more other offices or agencies where the
Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that
no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such other office or agency. The terms “Paying Agent” and
“Conversion Agent” include any such additional or other offices or agencies, as applicable.
The Company hereby initially designates (i) The Bank of New York Mellon, London Branch as the Paying Agent and
Conversion Agent and the Corporate Trust Office and the office or agency of The Bank of New York Mellon in the Borough of
Manhattan, The City of New York, each shall be considered as one such office or agency of the Company for each of the aforesaid
purposes; and (ii) The Bank of New York Mellon SA/NV, Luxembourg Branch of Vertigo Building – Polaris, 2-4 rue Eugène Ruppert,
L-2453 Luxembourg as the Note Registrar and Transfer Agent.
Section 4.03 Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy
in the office of Trustee, will appoint, in the manner provided in Section 7.09, a trustee, so that there shall at all times be a trustee
hereunder.
Section 4.04 Provisions as to Paying Agent. (a) If the Company shall appoint a Paying Agent other than the Trustee, the
Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 4.04:
(i) that it will hold all sums held by it as such agent for the payment of the principal (including the Fundamental
Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes for the benefit of the Holders of the
Notes;
(ii) that it will give the Trustee prompt notice of any failure by the Company to make any payment of the principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes when
the same shall be due and payable; and
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(iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay
to the Trustee all sums so held.
The Company shall, on or before each due date of the principal (including the Fundamental Change Repurchase Price, if
applicable, and any premium payable hereunder) of the Notes, deposit with the Paying Agent a sum sufficient to pay such principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of any failure to take such action; provided that such deposit must be
received by the Paying Agent by 10:00 a.m., New York City time, one Business Day prior to the relevant due date. The Paying Agent
shall not be bound to make any payment until it has received, in immediately available and cleared funds, an amount which shall be
sufficient to pay, as applicable, the aggregate amount of principal (including the Fundamental Change Repurchase Price, if applicable,
and any premium payable hereunder) of the Notes when such principal shall become due and payable. The Paying Agent shall not be
responsible or liable for any delay in making the payment if it does not receive funds before 10:00 a.m. one Business Day prior to the
payment date. The Company shall use reasonable efforts to procure that, before 10:00 a.m., New York City time, on the second Business
Day before each payment date, the bank effecting payment for it has confirmed by facsimile to the Paying Agent the payment
instructions relating to such payment.
(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the
Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of the Notes, set aside, segregate and hold in
trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the Fundamental Change Repurchase
Price, if applicable, and any premium payable hereunder) so becoming due and will promptly notify the Trustee in writing of any failure
to take such action and of any failure by the Company to make any payment of the principal (including the Fundamental Change
Repurchase Price, if applicable, and any premium payable hereunder) of the Notes when the same shall become due and payable. Upon
an Event of Default under Section 6.01(i) or Section 6.01(j) hereof, the Trustee shall automatically become the Paying Agent.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay, cause to be paid or deliver to the Trustee all sums or
amounts held by the Company in trust or by any Paying Agent as required by this Section 4.04, such sums or amounts to be held by the
Trustee upon the trusts herein contained and upon such payment or delivery by the Company or any Paying Agent to the Trustee, the
Company or such Paying Agent shall be released from all further liability but only with respect to such sums or amounts.
(d) Any money and ADSs deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of principal (including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of any
Note (or, in the case of ADSs, in satisfaction of the Conversion Obligation) and remaining unclaimed for two years after such principal
(including the Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) has become due and payable
or such Conversion Obligation has become due shall be paid or delivered, as the case may be, to the Company on request of the
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Company contained in an Officers’ Certificate, or (if then held by the Company) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such money and ADSs, and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment or delivery, may at the
expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The Borough of Manhattan, The City of New York, notice that such money and ADSs
remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money and ADSs then remaining will be repaid or delivered to the Company.
Section 4.05 Existence. Subject to Article 11, the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence. The Company shall promptly provide the Trustee with written notice of any change
to its name, jurisdiction of incorporation or change to its corporate organization.
Section 4.06 [RESERVED]
Section 4.07 Additional Amounts. (a) All payments and deliveries made by, or on behalf of, the Company or any successor to
the Company under or with respect to this Indenture and the Notes, including, but not limited to, payments of principal (including, if
applicable, the Fundamental Change Repurchase Price), premium, if any, payments of interest, if any, and deliveries of ADSs or any
other consideration due on conversion of a Note (together with payments of cash for any Fractional ADS or other consideration) upon
conversion of the Notes, shall be made without withholding, deduction or reduction for any other collection at source for, or on account
of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied (including any
penalties and interest related thereto) (“applicable taxes”) by or within any jurisdiction in which the Company or any successor to the
Company is, for tax purposes, incorporated, organized or resident or doing business (each, as applicable, a “Relevant Taxing
Jurisdiction”) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a “Relevant
Jurisdiction,” and in each case, any political subdivision or taxing authority thereof or therein) unless such withholding, deduction or
reduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding,
deduction or reduction is so required, the Company or any successor to the Company shall pay or deliver to each Holder such additional
amounts of cash, ADSs or other consideration, as applicable (“Additional Amounts”) as may be necessary to ensure that the net amount
received by the beneficial owner of the Notes after such withholding, deduction or reduction (and after deducting any taxes on the
Additional Amounts) shall equal the amounts that would have been received by such beneficial owner had no such withholding,
deduction or reduction been required; provided that no Additional Amounts shall be payable:
(i) for or on account of:
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(A) any applicable taxes that would not have been imposed but for:
(1) the existence of any present or former connection between the relevant Holder or beneficial
owner of such Note and the Relevant Jurisdiction, other than merely acquiring or holding such Note, receiving
ADSs (together with the payment of cash for any Fractional ADS) or other consideration upon conversion of
such Note or the receipt of payments or the exercise or enforcement of rights thereunder, including, without
limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such
Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in
a trade or business therein or having had a permanent establishment therein;
(2) the presentation of such Note (in cases in which presentation is required) more than 30 days
after the later of the date on which the payment of the principal of (including the Fundamental Change
Repurchase Price, if applicable, and any premium payable hereunder) and interest on, such Note or the
delivery of ADSs (together with payment of cash for any Fractional ADS) upon conversion of such Note
became due and payable pursuant to the terms thereof or was made or duly provided for;
(3) the failure of the Holder or beneficial owner to comply with a timely written request from the
Company or any successor of the Company, addressed to the Holder, to the extent such Holder or beneficial
owner is legally entitled, to provide certification, information, documents or other evidence concerning such
Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Taxing
Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if
and to the extent that due and timely compliance with such request is required by statute, regulation or
administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or
deduction as to which Additional Amounts would have otherwise been payable to such Holder or beneficial
owner; or
(4) the presentation of such Note (in cases in which presentation is required) for payment in the
Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
(B) any estate, inheritance, gift, sale, transfer, personal property or similar applicable tax or any excise or
similar taxes imposed with respect to a transfer;
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(C) any applicable tax that is payable otherwise than by withholding, deduction or reduction for any other
collection at source from payments or deliveries under or with respect to the Notes;
(D) any applicable tax required to be withheld or deducted under Sections 1471 to 1474 of the Code (or
any amended or successor versions of such Sections) (“FATCA”), any regulations or other official guidance
thereunder, any intergovernmental agreement or agreement pursuant to Section 1471(b)(1) of the Code entered into in
connection with FATCA, or any law, regulation or other official guidance enacted in any jurisdiction implementing
FATCA or an intergovernmental agreement; or
(E) any combination of applicable taxes referred to in the preceding clauses (A), (B), (C) or (D); or
(ii) with respect to any payment of the principal of (including the Fundamental Change Repurchase Price, if
applicable, and any premium payable hereunder), and interest on, such Note or the delivery of ADSs (together with payment of
cash for any Fractional ADS) upon conversion of such Note to a Holder, if the Holder is a fiduciary, partnership or person other
than the sole beneficial owner of that payment to the extent that such payment would be required to be included in the income
under the laws of the Relevant Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, a partner or
member of that partnership or a beneficial owner who would not have been entitled to such Additional Amounts had that
beneficiary, settlor, partner, member or beneficial owner been the Holder thereof.
(b) If the Company or its successor becomes obligated to pay Additional Amounts with respect to any payment or delivery
under or with respect to the Notes, the Company or its successor shall deliver to the Trustee and the Paying Agent, if other than the
Trustee, on a date that is at least 30 days prior to the date of that payment or delivery (unless the obligation to pay Additional Amounts
arises after the 30th day prior to that payment date, in which case the Company or its successor shall notify the Trustee and the Paying
Agent promptly thereafter) an Officers’ Certificate stating the fact that Additional Amounts will be payable and the amount estimated to
be so payable. The Officers’ Certificate must also set forth any other information reasonably necessary to enable the Paying Agent or the
Conversion Agent, as the case may be, to pay Additional Amounts to Holders on the relevant payment date. The Trustee and the Paying
Agent shall be entitled to rely solely on such Officers’ Certificate as conclusive proof that such payments are necessary. The Company or
its successor shall provide the Trustee and the Paying Agent with documentation reasonably satisfactory to the Trustee evidencing the
payment of Additional Amounts.
(c) The Company or its successor shall make all withholdings and deductions required by law and shall remit the full
amount deducted or withheld to the relevant tax authority in accordance with applicable law. Upon request, the Company or its successor
shall provide to the Trustee an official receipt or, if official receipts are not obtainable, an Officers’ Certificate evidencing the payment of
any applicable taxes so deducted or withheld. Copies of those receipts
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or other documentation, as the case may be, shall be made available by the Trustee to the Holders of the Notes upon written request.
(d) Any reference in this Indenture or the Notes in any context to the delivery of ADSs (together with payment of cash for
any Fractional ADS) or other consideration upon conversion of any Note or the payment of principal of (including the Fundamental
Change Repurchase Price, if applicable) and any premium or interest, if any, on any Note or any other amount payable with respect to
such Note, shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were
or would be payable with respect to that amount pursuant to this Section 4.07.
(e) Notwithstanding any other provisions, the Company or its successor, the Trustee and the Paying Agent shall be entitled
to make any withholding or deduction pursuant to FATCA.
(f) If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with
respect to the Notes, it will deliver to the Trustee official tax receipts evidencing the remittance to the relevant tax authorities of the
amounts so withheld or deducted.
(g) The foregoing obligations shall survive termination or discharge of this Indenture.
Section 4.08 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law had been enacted.
Section 4.09 Compliance Certificate; Statements as to Defaults. The Company shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) an Officers’ Certificate
stating that a review has been conducted of the Company’s activities under this Indenture and the Company has fulfilled its obligations
hereunder, and whether the authorized Officers thereof have knowledge of any Default by the Company that occurred during the
previous year that is then continuing and, if so, specifying each such Default and the nature thereof.
In addition, the Company shall deliver to the Trustee, as soon as possible, and in any event within 30 days after the Company
becomes aware of the occurrence of any Default if such Default is then continuing, an Officers’ Certificate setting forth the details of
such Default, its status and the action that the Company is taking or proposing to take in respect thereof. The Trustee shall have no
responsibility to take any steps to ascertain whether any Event of Default
29
or Default has occurred, and until (i) a Responsible Officer of the Trustee has received an Officers’ Certificate regarding such an
occurrence, or (ii) the Trustee has received written notice at the Corporate Trust Office from the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding regarding such an occurrence, the Trustee is entitled to assume, without liability, that no
Event of Default or Default has occurred.
Section 4.10 Further Instruments and Acts. The Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01 Lists of Holders. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee,
semi-annually, not more than 15 days after July 26, 2020, and January 26, 2021, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in
order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require
of the names and addresses of the Holders as of a date not more than 15 days (or such other date as the Trustee may reasonably request in
order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as
the Bank of New York Mellon SA/NV, Luxembourg Branch is acting as Note Registrar.
Section 5.02 Preservation and Disclosure of Lists. The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders contained in the most recent list furnished to it as provided in
Section 5.01 or maintained by the Trustee in its capacity as Note Registrar, if so acting. The Trustee may destroy any list furnished to it
as provided in Section 5.01 upon receipt of a new list so furnished.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default. The following events shall be “Events of Default” with respect to the Notes:
(a) [RESERVED]
(b) default in the payment of principal of any Note when due and payable on the Maturity Date, upon any required
repurchase, upon declaration of acceleration or otherwise (including, for the avoidance, the Fundamental Change Repurchase Price, if
applicable, any premium due to the Holders hereunder and Additional Amounts, if any);
(c) failure by the Company to comply with its obligation to convert the Notes in accordance with this Indenture upon
exercise of a Holder’s conversion right and such failure continues for a period of five Business Days;
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(d) failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 15.02(c) when due
and such failure continues for a period of five Business Days;
(e) failure by the Company to comply with its obligations under Article 11;
(f) failure by the Company for 60 days after written notice from the Trustee or by the Trustee at the request of the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding has been received by the Company, or after written notice
from the Holders of at least 25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section
8.04 has been received by the Company (which notice is to be copied to the Trustee in writing), to comply with any of its other
agreements or obligations contained in the Notes or this Indenture;
(g) default by the Company or any Significant Subsidiary of the Company with respect to any mortgage, agreement or other
instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed
in excess of US$50 million (or the foreign currency equivalent thereof) in the aggregate of the Company and/or any such Significant
Subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being
declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated
maturity, upon required repurchase, upon declaration of acceleration or otherwise;
(h) a final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or more (excluding any
amounts covered by insurance) rendered against the Company or any Significant Subsidiary of the Company, which judgment is not
paid, bonded or otherwise discharged or stayed within 60 days after (i) the date on which the right to appeal thereof has expired if no
such appeal has commenced, or (ii) the date on which all rights to appeal have been extinguished;
(i) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Company or any such Significant Subsidiary or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or any such Significant Subsidiary or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due;
(j) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to the Company or such Significant Subsidiary or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or such Significant Subsidiary or
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any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of
30 consecutive days; or
(k) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) have been
suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select market or The NASDAQ Global Market
(or any of their respective successors) for a period of ninety (90) consecutive trading days or for more than one hundred and eighty (180)
trading days in any twelve (12)-month period.
Section 6.02 Acceleration; Rescission and Annulment. If one or more Events of Default shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental
body), then, and in each and every such case (other than an Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to
the Company or any of its Significant Subsidiaries), unless the principal of all of the Notes shall have already become due and payable,
the Trustee may by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding determined in accordance with Section 8.04, by notice in writing to the Company and to the Trustee may, and the Trustee at
the request of such Holders shall (subject to being indemnified and/or secured and/or pre-funded to its satisfaction), declare 100% of the
principal of all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall
automatically be immediately due and payable, notwithstanding anything contained in this Indenture or in the Notes to the contrary. If an
Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to the Company or any of its Significant Subsidiaries occurs
and is continuing, 100% of the principal of all Notes shall become and shall automatically be immediately due and payable without any
action on the part of the Trustee. If an Event of Default occurs and is continuing, all agents of the Company appointed under this
Indenture will be required to act on the direction of the Trustee.
The immediately preceding paragraph, however, is subject to the conditions that if, at any time after the principal of the Notes
shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay the principal
of any and all Notes that shall have become due otherwise than by acceleration (with interest on any overdue principal at the rate of three
percent per annum) and amounts due to the Trustee pursuant to Section 7.06, and if (1) rescission would not conflict with any judgment
or decree of a court of competent jurisdiction and (2) any and all existing Events of Default under this Indenture, other than the
nonpayment of the principal of Notes that shall have become due solely by such acceleration, shall have been cured or waived pursuant
to Section 6.09, then and in every such case (except as provided in the immediately succeeding sentence) the Holders of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults
or Events of Default with respect to the Notes and rescind and annul such declaration and its consequences and such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such
waiver or rescission and annulment
32
shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon. Notwithstanding
anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any Default or Event of Default
resulting from (i) the nonpayment of the principal of any Notes, (ii) a failure to repurchase any Notes when required or (iii) a failure to
pay or deliver, as the case may be, the consideration due upon conversion of the Notes.
Section 6.03 [RESERVED]
Section 6.04 Payments of Notes on Default; Suit Therefor. If an Event of Default described in clause (a) or (b) of Section 6.01
shall have occurred, the Company shall, upon demand of the Trustee acting in its own discretion or at the request of Holders of at least
25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 8.04 and subject to indemnity
and/or security and/or pre-funding satisfactory to the Trustee, or upon demand of the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding determined in accordance with Section 8.04 (which demand is to be in writing, copied to the
Trustee in writing), pay to the Trustee, for the benefit of the Holders of the Notes, the whole amount then due and payable on the Notes
for principal (including, for the avoidance of doubt, the Fundamental Change Repurchase Price, if applicable and any premium payable
hereunder), with interest on any overdue principal at the rate of three percent per annum, and, in addition thereto, such further amount as
shall be sufficient to cover any amounts due to the Trustee under Section 7.06. If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of
the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company
or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the
property of the Company or any other obligor upon the Notes, wherever situated.
In the event there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor
on the Notes under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy
or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such
other obligor, the property of the Company or such other obligor, or in the event of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.04, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and
accrued and unpaid interest, if any, in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other
papers or documents and to take such other actions as it may deem necessary or advisable in order to have the claims of the Trustee
(including any claim for the compensation, properly incurred expenses, properly incurred disbursements and advances of the Trustee, its
agents and counsel) and of the Holders allowed in such judicial proceedings relative to the Company or any
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other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable
or deliverable on any such claims, and to distribute the same after the deduction of any amounts due to the Trustee under Section 7.06;
and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each
of the Holders to make such payments to the Trustee, as administrative expenses, and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any amount due to it for compensation, properly incurred
expenses, advances and properly incurred disbursements, including agents and counsel fees and expenses, and including any other
amounts due to the Trustee under Section 7.06, incurred by it up to the date of such distribution. To the extent that such payment of
compensation, properly incurred expenses, advances and properly incurred disbursements out of the estate in any such proceedings shall
be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends,
monies, securities and other property that the Holders of the Notes may be entitled to receive in such proceedings, whether in liquidation
or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition affecting such Holder or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee
without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name or as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the compensation, properly incurred expenses, properly incurred disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Holders of the Notes parties to any such proceedings.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of any waiver pursuant to Section 6.09 or any rescission and annulment pursuant to Section 6.02 or
for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders, and
the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been
instituted.
Section 6.05 Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 6 with
respect to the Notes shall be applied in the following
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order, at the date or dates fixed by the Trustee for the distribution of such monies, upon presentation of the several Notes, and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:
First, to the payment of all amounts due the Trustee, including to its agents and counsel, under Section 7.06 and any payments
due to the Paying Agent, the Transfer Agent, the Conversion Agent and the Note Registrar;
Second, in case the principal of the outstanding Notes shall not have become due and be unpaid, to the payment of interest on
the Notes in default in the order of the date due of the payments of such interest, with interest (to the extent that such interest is payable
pursuant to the Indenture and has been collected by the Trustee) upon such overdue payments at the rate per annum borne by the Notes at
such time (including, without duplication, any additional interest on such overdue payments pursuant to Section 6.04), such payments to
be made ratably to the Persons entitled thereto;
Third, in case the principal of the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the
payment of the whole amount (including, if applicable, the payment of the Fundamental Change Repurchase Price and any cash due
upon conversion) then owing and unpaid upon the Notes for principal and interest, if any, with interest on the overdue principal and, to
the extent that such interest has been collected by the Trustee, upon overdue installments of interest at the rate of three percent per
annum, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the
payment of such principal (including, if applicable, the Fundamental Change Repurchase Price, any premium due to the Holders
hereunder and the cash due upon conversion) and interest without preference or priority of principal over interest, or of interest over
principal or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the
aggregate of such principal (including, if applicable, the Fundamental Change Repurchase Price); and
Fourth, to the payment of the remainder, if any, to the Company.
Section 6.06 Proceedings by Holders. Except to enforce the right to receive payment of principal (including, if applicable, the
Fundamental Change Repurchase Price and premium due to the Holders hereunder) or interest when due, or the right to receive payment
or delivery of the consideration due upon conversion, no Holder of any Note shall have any right by virtue of or by availing of any
provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Indenture, or
for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, unless:
(a) such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance
thereof, as herein provided;
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(b) Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder;
(c) such Holders shall have offered to the Trustee such security and/or indemnity and/or pre-funding satisfactory to it
against any loss, liability or expense to be incurred therein or thereby;
(d) the Trustee for 30 days after its receipt of such notice, request and offer of security and/or indemnity and/or pre-funding,
shall have neglected or refused to institute any such action, suit or proceeding; and
(e) no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the
Trustee by the Holders of a majority of the aggregate principal amount of the Notes then outstanding within such 30-day period pursuant
to Section 6.09,
it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and
Holder and the Trustee that no one or more Holders shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any other Holder, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section
6.06, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Holder to receive payment
or delivery, as the case may be, of (x) the principal (including the Fundamental Change Repurchase Price, if applicable, and any premium
payable hereunder) of, and (y) the consideration due upon conversion of, such Note, on or after the respective due dates expressed or
provided for in such Note or in this Indenture, or to institute suit for the enforcement of any such payment or delivery, as the case may
be, on or after such respective dates against the Company shall not be impaired or affected without the consent of such Holder.
Section 6.07 Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of
such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce
any other legal or equitable right vested in the Trustee by this Indenture or by law.
Section 6.08 Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.06, all powers and
remedies given by this Article 6 to the Trustee or to
36
the Holders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and
remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any
of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair any such right or power, or shall
be construed to be a waiver of any such Default or Event of Default or any acquiescence therein; and, subject to the provisions of Section
6.06, every power and remedy given by this Article 6 or by law to the Trustee or to the Holders may be exercised from time to time, and
as often as shall be deemed expedient, by the Trustee or by the Holders.
Section 6.09 Direction of Proceedings and Waiver of Defaults by Majority of Holders. The Holders of a majority of the
aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or
with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such
direction. The Trustee may refuse to follow any direction that would involve the Trustee in personal liability, or if it is not provided with
security and/or indemnity and/or pre-funding to its satisfaction, or that the Trustee determines is unduly prejudicial to the rights of any
other Holder. In addition, the Trustee will not be required to expend its own funds under any circumstances. The Holders of a majority
in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 may on behalf of the
Holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a default in the payment
of the principal (including, if applicable, the Fundamental Change Repurchase Price) of the Notes when due that has not been cured
pursuant to the provisions of Section 6.02, (ii) a failure by the Company to pay or deliver, or cause to be delivered, as the case may be,
the consideration due upon conversion of the Notes or (iii) a default in respect of a covenant or provision hereof which under Article 10
cannot be modified or amended without the consent of each Holder of an outstanding Note affected. Upon any such waiver the
Company, the Trustee and the Holders of the Notes shall be restored to their former positions and rights hereunder; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Whenever any Default or
Event of Default hereunder shall have been waived as permitted by this Section 6.09, said Default or Event of Default shall for all
purposes of the Notes and this Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent thereon.
Section 6.10 Notice of Defaults and Events of Default. If a Default or Event of Default occurs and is continuing and is
notified in writing to the Trustee, the Trustee shall, within 90 days after the occurrence and continuance of such Default or Event of
Default, mail to all Holders (at the Company’s expense) as the names and addresses of such Holders appear upon the Note Register,
notice of all Defaults so notified in writing, unless such Defaults shall have been cured or waived before the giving of such notice;
provided that the Trustee shall not be deemed to have knowledge of any occurrence of a Default or Event unless it has received written
notice.
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Except in the case of a Default in the payment of the principal of (including the Fundamental Change Repurchase Price, if applicable,
and any premium payable hereunder) any of the Notes or a Default in the payment or delivery of the consideration due upon conversion,
the Trustee shall be protected in withholding such notice if and so long as the Trustee’s board of directors, a Responsible Officer, an
executive committee or a committee of Responsible Officers of the Trustee (in its sole discretion) in good faith determines that the
withholding of such notice is in the interests of the Holders.
Section 6.11 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note by its acceptance
thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess costs, including
attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this Section 6.11 (to the extent permitted by law) shall not apply to
any suit instituted by or against the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than
10% in principal amount of the Notes at the time outstanding determined in accordance with Section 8.04, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of any Note (including, but not limited to, the Fundamental Change
Repurchase Price with respect to the Notes being repurchased as provided in this Indenture) on or after the due date expressed or
provided for in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Article
14.
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01 Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the
curing or waiver of all Events of Default that may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations will be read into the Indenture against the Trustee. In case
an Event of Default, of which the Trustee has actual written notice, has occurred that has not been cured or waived the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default
occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the
request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding
satisfactory to it against the costs, liabilities or expenses that might be incurred by it in compliance with such request or direction.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its
own grossly negligent failure to act or its own willful misconduct, except that:
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(a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have
occurred:
(i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture,
and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of gross negligence and willful misconduct on the part of the Trustee, as proven in a final
decision of a court of competent jurisdiction, the Trustee may conclusively and without liability rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions that by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy
of any mathematical calculations or other facts, statements, opinions or conclusions stated therein);
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved in a final decision in a court of competent jurisdiction that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority of the aggregate principal amount of the Notes at the time outstanding
determined as provided in Section 8.04 relating to the time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d) whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of this Section;
(e) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any
other matters relating to payment) or notice effected by the Company or any Paying Agent or any records maintained by any co-Note
Registrar with respect to the Notes;
(f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to
be sent to the Trustee, the Trustee may conclusively and without liability rely on its failure to receive such notice as reason to act as if no
such event occurred;
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(g) [RESERVED]
(h) the rights, immunities, privileges, disclaimers from liability and protections (including the right to compensation and
indemnity) afforded to the Trustee pursuant to this Article 7 shall also be afforded to such Note Registrar, Paying Agent, Conversion
Agent or Transfer Agent;
(i) the Trustee shall have no duty to inquire, no duty to determine and no duty to monitor as to the performance of the
Company’s covenants in this Indenture or the financial performance of the Company; the Trustee shall be entitled to assume, until it has
received written notice in accordance with this Indenture, that the Company is properly performing its duties hereunder;
(j) the Trustee shall be under no obligation to enforce any of the provisions of this Indenture unless it is instructed by
Holders of at least 25% of the aggregate principal amount of outstanding Notes and is provided with security and/or indemnity and/or
pre-funding satisfactory to it;
(k) the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request or
direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding satisfactory
to it against any costs, expenses and liabilities that might be incurred by it in compliance with such requests or direction.
(l) before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel prepared
and delivered at the cost of the Company conforming to Section 17.06 and the Trustee and the Agents may rely conclusively on such
certificate or opinion and will not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or
Opinion of Counsel;
(m) in connection with the exercise by it of its trusts, powers, authorities or discretions (including, without limitation, any
modification, waiver, authorization or determination), the Trustee shall have regard to the general interests of the Holders as a class but
shall not have regard to any interests arising from circumstances particular to individual Holders (whatever their number) and in
particular, but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers, authorities or discretions
for individual Holders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise
connected with, or subject to the jurisdiction of, any country, state or territory; and
(n) the Trustee is not obliged to do or omit to do anything which in its reasonable opinion, would or may be illegal or would
constitute a breach of any fiduciary duty or duty of confidentiality, or any law, rule, regulation, or any decree, order or judgment of any
court, or practice, request, direction, notice, announcement or similar action (whether or not having the force of law) of any relevant
government, government agency, regulatory authority, stock exchange or self-regulatory organization to which the Trustee is
subject. The Trustee may
40
without liability to do anything which is, in its reasonable opinion, necessary to comply with any such law, directive or regulations.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.
Section 7.02 Reliance on Documents, Opinions, Etc. Except as otherwise provided in Section 7.01:
(a) the Trustee may conclusively and without liability rely and shall be fully protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, Note, coupon or other paper or document
(whether in its original or facsimile form) believed by it in good faith to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an
Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and require an Opinion of Counsel and any advice of such counsel or Opinion of
Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such
inquiry or investigation;
(e) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or
through agents, delegates, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence
on the part of any agent, delegate, representative, custodian, nominee or attorney appointed by it with due care hereunder;
(f) the permissive rights of the Trustee enumerated herein shall not be construed as duties;
(g) under no circumstances and notwithstanding any contrary provision included herein, neither the Trustee, the Paying
Agent, the Conversion Agent nor the Note Registrar shall be responsible or liable for special, indirect, punitive, or consequential
damages or loss of any
41
kind whatsoever (including, but not limited to, loss of profit) irrespective of whether any of them have been advised of the likelihood of
such loss or damage and regardless of the form of action; this provision shall remain in full force and effect notwithstanding the
discharge of the Notes, the termination of this Indenture or the resignation, replacement or removal of the Trustee, the Paying Agent, the
Conversion Agent and the Note Registrar;
(h) the Trustee, the Paying Agent, the Conversion Agent and the Note Registrar may refrain from taking any action in any
jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be
contrary to any law of that jurisdiction or, to the extent applicable, of New York; furthermore, the Trustee may also refrain from taking
such action if it would otherwise render it liable to any person in that jurisdiction or New York or if, in its opinion based on such legal
advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or in
New York or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power;
(i) the Company understands that The Bank of New York Mellon Corporation is a global financial organization that
operates in and provides services and products to clients through its affiliates, branches, representative offices and/or subsidiaries located
in multiple jurisdictions (collectively, the “BNY Mellon Group” and each a “BNY Mellon Entity”). The BNY Mellon Group may: (i)
use and/or centralize in one or more BNY Mellon Entity in connection with its performance of the functions, duties and services
provided and any other obligations under this Indenture and/or the Notes and in certain other activities (the “Centralized Functions”),
including, without limitation, audit, accounting, tax, administration, risk management, credit, legal, compliance, operation, sales and
marketing, product communication, relationship management, information technology, records and data storage, performance
measurement, data aggregation and the compilation and analysis of information and data regarding the Company (which, for purposes of
this sub-Section 7.02(i), includes the name and business contact information for the employees and representatives of the Company and
any personal data) and the accounts established pursuant to the transactions contemplated in this Indenture and/or the Notes (“Client
Information”); and (ii) use third party service providers to store, maintain and process Client Information (“Outsourced
Functions”). Notwithstanding anything to the contrary contained elsewhere in this Indenture and/or the Notes and solely in connection
with the Centralized Functions and/or Outsourced Functions, the Company consents to the: (i) collection, use and storage of, and
authorizes the BNY Mellon Group to collect, use and store, Client Information within and outside of any jurisdiction, including without
limitation Australia, the European Economic Area, Hong Kong, the PRC, Japan, Singapore, India, the British Virgin Islands and the
United States of America; and (ii) disclosure of, and authorizes the BNY Mellon Group to disclose, Client Information to: (A) any other
BNY Mellon Entity (and their respective officers, directors and employees); and (B) third-party service providers (but solely in
connection with Outsourced Functions) who are required to maintain the confidentiality of Client Information. In addition, the BNY
Mellon Group may aggregate Client Information with other data collected and/or calculated by the BNY Mellon Group, and the BNY
Mellon Group will own all such aggregated data, provided that the BNY Mellon Group shall not distribute the aggregated data in a
format that identifies Client Information with the Company specifically. The Company represents to the BNY Mellon Group that it is
authorized to consent
42
to the foregoing and that the disclosure of Client Information in connection with the Centralized Functions and/or Outsourced Functions
does not violate any relevant data protection legislation. The Company also consents to the disclosure of Client Information to
governmental, tax, regulatory, law enforcement and other authorities in jurisdictions where the BNY Mellon Group operates and
otherwise as required by law, rule, or guideline (including any tax and swap trade data reporting regulations);
(j) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties
hereunder;
(k) the Trustee may request that the Company deliver Officers' Certificates setting forth the names of individuals and their
titles and specimen signatures of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers'
Certificates may be signed by any Person authorized to sign an Officers' Certificate, as the case may be, including any Person specified
as so authorized in any such certificate previously delivered and not superseded;
(l) the Trustee shall not be responsible or liable for any action it takes or omits to take in good faith which it reasonably
believes to be authorized or within its rights or powers;
(m) the Trustee shall not be responsible or liable for any action taken or omitted by it in good faith at the direction, in
accordance with Section 6.09, of the Holders of not less than a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 8.04 as to the time, method and place of conducting any proceeding for any remedy
available to the Trustee or the exercising of any power conferred by this Indenture; and
(n) the Trustee shall not be responsible or any inaccuracy in the information obtained from the Company or for any
inaccuracy or omission in the records which may result from such information or any failure by the Trustee to perform its duties as set
forth herein as a result of any inaccuracy or incompleteness of such information.
Section 7.03 No Responsibility for Recitals, Etc. The recitals, statements, warranties and representations contained herein and
in the Notes (except in the Note Registrar’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the accuracy or correctness of the
same or for any failure by the Company or any other party to disclose events that may have occurred and may affect the significance or
accuracy of such information, or the execution, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in
evidence of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes
or the proceeds of any Notes authenticated and delivered by the Note Registrar in conformity with the provisions of this
Indenture. Notwithstanding the generality of the foregoing, each Holder shall be solely responsible for making its own independent
appraisal of, and investigation into, the financial condition, creditworthiness, condition, affairs, status and nature of the Company, and the
Trustee
43
shall not at any time have any responsibility for the same and each Holder shall not rely on the Trustee in respect thereof.
Section 7.04 Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes. The Trustee, any Paying Agent,
any Conversion Agent or Note Registrar, in its individual or any other capacity, may engage in business and contractual relationships
with the Company or its Affiliates and may become the owner or pledgee of Notes with the same rights it would have if it were not the
Trustee, Paying Agent, Conversion Agent or Note Registrar, and nothing herein shall obligate any of them to account for any profits
earned from any business or transactional relationship.
Section 7.05 Monies to Be Held in Trust. All monies received by the Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received. Money held by the Trustee in trust or by the Paying Agent hereunder need
not be segregated from other funds except to the extent required by law. Neither the Trustee nor the Paying Agent shall be under any
liability for interest on any money received by it hereunder.
Section 7.06 Compensation and Expenses of Trustee. (a) The Company covenants and agrees to pay to the Trustee from time
to time, and the Trustee shall be entitled to, compensation for all services rendered by it hereunder in any capacity (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between
the Trustee and the Company (which sum shall be paid free and clear of deduction and withholding on account of taxation, set-off and
counterclaim), and the Company will pay or reimburse the Trustee upon its request for all properly incurred expenses, disbursements and
advances properly incurred or made by the Trustee in accordance with any of the provisions of this Indenture in any capacity thereunder
(including the compensation and the properly incurred expenses and disbursements of its agents and counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as shall have been caused by its gross negligence or willful
misconduct as proven in a final decision in a court of competent jurisdiction. The Company also covenants to indemnify the Trustee
(which for the purposes of this Section 7.06 shall be deemed to include its officers, directors, agents and employees) in any capacity
under this Indenture (including without limitation as Note Registrar, Transfer Agent, Conversion Agent and Paying Agent) and any other
document or transaction entered into in connection herewith, and to hold it harmless against, any loss, claim, damage, liability or expense
(whether arising from third party claims or claims by or against the Company) incurred without gross negligence or willful misconduct
on the part of the Trustee, its officers, directors, agents or employees, as the case may be, as proven in a final decision of a court of
competent jurisdiction, and arising out of or in connection with the acceptance or administration of this Indenture or in any other capacity
hereunder, including the costs and expenses of defending themselves against any claim of liability in the process of enforcing this
indemnity. The obligations of the Company under this Section 7.06 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a senior claim to which the Notes are hereby made subordinate on
all money or property held or collected by the Trustee, except, subject to the effect of Section 6.05, funds held in trust herewith for the
benefit of the Holders of particular Notes. The Trustee’s right to receive payment of any amounts due under this Section 7.06 shall not
be subordinate to any other
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liability or indebtedness of the Company. The indemnity under this Section 7.06(a) is payable upon demand by the Trustee. The
obligation of the Company under this Section 7.06(a) shall survive the satisfaction and discharge of the Notes, the termination or
discharge of this Indenture and the resignation, replacement or removal or the Trustee. The indemnification provided in this Section
7.06(a) shall extend to the officers, directors, agents and employees of the Trustee. Subject to Section 7.02(e), any negligence or
misconduct of any agent, delegate, attorney or representative, in each case, of the Trustee, shall not affect indemnification of the Trustee.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee and its agents incur
expenses or render services after an Event of Default specified in Section 6.01(i) or Section 6.01(j) occurs, the expenses and the
compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws. If
a Default or Event of Default shall have occurred or if the Trustee finds it expedient or necessary or is requested by the Company and/or
the Holders to undertake duties which are of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties under
this Indenture, the Company will pay such additional remuneration as the Company and the Trustee may separately agree in writing.
(b) The Paying Agent, the Conversion Agent and the Note Registrar shall be entitled to the compensation to be agreed upon
in writing with the Company for all services rendered by it under this Indenture, and the Company agrees promptly to pay such
compensation and to reimburse the Paying Agent, the Conversion Agent and the Note Registrar for its out-of-pocket expenses (including
fees and expenses of counsel) properly incurred by it in connection with the services rendered by it under this Indenture. The Company
hereby agrees to indemnify the Paying Agent, the Conversion Agent and the Note Registrar and their respective officers, directors, agents
and employees and any successors thereto for, and to hold it harmless against, any loss, liability or expense (including fees and expenses
of counsel) properly incurred without gross negligence or willful misconduct on its part arising out of or in connection with its acting as
the Paying Agent, the Conversion Agent and the Note Registrar hereunder. The obligations of the Company under this paragraph (b)
shall survive the payment of the Notes, the termination or discharge of the Indenture and the resignation, replacement or removal of the
Paying Agent, the Conversion Agent and the Note Registrar.
Section 7.07 Officers’ Certificate as Evidence. Except as otherwise provided in Section 7.01, whenever in the administration
of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such Officers’ Certificate shall be full
warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.08 Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least US$50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
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such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 7.09 Resignation or Removal of Trustee. (a) The Trustee may at any time resign by giving 60 days written notice of
such resignation to the Company and by mailing notice thereof to the Holders at their addresses as they shall appear on the Note
Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after
the mailing of such notice of resignation to the Holders, the resigning Trustee may appoint a successor trustee on behalf of and at the
expense of the Company or it may at the expense of the Company petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Holder who has been a bona fide holder of a Note or Notes for at least six months may, subject to the provisions
of Section 6.11, on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.08 and shall fail to resign
after written request therefor by the Company or by any such Holder, or
(ii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in either case, the Company may by a Board Resolution remove the Trustee and appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee, or, subject to the provisions of Section 6.11, any Holder who has been a bona fide holder of a Note or
Notes for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, as determined in
accordance with Section 8.04, may at any time remove the Trustee and nominate a successor trustee that shall be deemed appointed as
successor trustee unless within ten days after notice to the Company of such nomination the Company objects thereto, in
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which case the Trustee so removed or any Holder, upon the terms and conditions and otherwise as in Section 7.09(a) provided, may
petition any court of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of
this Section 7.09 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.10.
Section 7.10 Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 7.09 shall execute,
acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, the
trustee ceasing to act shall, upon payment of any amounts then due to it pursuant to the provisions of Section 7.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a senior claim to which the Notes
are hereby made subordinate on all money or property held or collected by such trustee as such, except for funds held in trust for the
benefit of Holders of particular Notes, to secure any amounts then due to it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this Section 7.10 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 7.08.
Upon acceptance of appointment by a successor trustee as provided in this Section 7.10, each of the Company and the successor
trustee, at the written direction and at the expense of the Company shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the Holders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
Section 7.11 Succession by Merger, Etc. Any corporation or other entity into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the
Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto; provided that in the case of any corporation or other entity
succeeding to all or substantially all of the corporate trust business of the Trustee such corporation or other entity shall be eligible under
the provisions of Section 7.08.
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In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor
note registrar, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any
successor to the Note Registrar may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Note Registrar shall have; provided, however, that the right to adopt the certificate of authentication of
any predecessor note registrar or to authenticate Notes in the name of any predecessor trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 7.12 Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions
from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights
of the Holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or
omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in
such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any
officer that the Company has indicated to the Trustee should receive such application actually receives such application, unless any such
officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any
omission), the Trustee shall have received written instructions in accordance with this Indenture in response to such application
specifying the action to be taken or omitted.
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01 Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage of the
aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified
percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by
Holders in person or by agent or proxy appointed in writing, or (b) by the record of the Holders voting in favor thereof at any meeting of
Holders duly called and held in accordance with the provisions of Article 9, or (c) by a combination of such instrument or instruments
and any such record of such a meeting of Holders. Whenever the Company or the Trustee solicits the taking of any action by the Holders
of the Notes, the Company or the Trustee may fix, but shall not be required to, in advance of such solicitation, a date as the record date
for determining Holders entitled to take such action. The record date if one is selected shall be not more than fifteen days prior to the
date of commencement of solicitation of such action.
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Section 8.02 Proof of Execution by Holders. Subject to the provisions of Section 7.01, Section 7.02 and Section 9.05, proof of
the execution of any instrument by a Holder or its agent or proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be
proved by the Note Register or by a certificate of the Note Registrar. The record of any Holders’ meeting shall be proved in the manner
provided in Section 9.06.
Section 8.03 Who Are Deemed Absolute Owners. The Company, the Trustee, any Paying Agent, any Conversion Agent and
any Note Registrar may deem the Person in whose name a Note shall be registered upon the Note Register to be, and may treat it as, the
absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the
principal of (subject to Section 2.03) such Note, for the purpose of conversion of such Note and for all other purposes; and neither the
Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Note Registrar shall be affected by any notice to the
contrary. All such payments or deliveries so made to any Holder for the time being, or upon its order, shall be valid, and, to the extent of
the sums or ADSs so paid or delivered, effectual to satisfy and discharge the liability for monies payable or ADSs deliverable upon any
such Note. Notwithstanding anything to the contrary in this Indenture or the Notes following an Event of Default, any Holder of a
beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or
any other action of the Common Depositary or any other Person, such Holder’s right to exchange such beneficial interest for a Note in
certificated form in accordance with the provisions of this Indenture and such Holder’s rights under Article 6 of this Indenture.
Section 8.04 Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the
Company, by any Subsidiary or Consolidated Affiliated Entity thereof or by any Affiliate of the Company or any Subsidiary or
Consolidated Affiliated Entity thereof shall be disregarded and deemed not to be outstanding for the purpose of any such determination;
provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or
other action only Notes in respect of which a Responsible Officer is notified in writing shall be so disregarded. Notes so owned that have
been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.04 if the pledgee shall establish its right to
so act with respect to such Notes and that the pledgee is not the Company, a Subsidiary or Consolidated Affiliated Entity thereof or an
Affiliate of the Company or a Subsidiary or Consolidated Affiliated Entity thereof. Within five days of acquisition of the Notes by any
of the above described persons or entities or at the request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’
Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above
described Persons; and, subject to Section 7.01, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of
the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.
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Section 8.05 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage of the aggregate principal amount of the
Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the
Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Note. Except as aforesaid, any such action
taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note
and of any Notes issued in exchange or substitution therefor or upon registration of transfer thereof, irrespective of whether any notation
in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor or upon registration of transfer thereof.
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01 Purpose of Meetings. A meeting of Holders may be called at any time and from time to time pursuant to the
provisions of this Article 9 for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this
Indenture, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders pursuant to any of the provisions of Article 6;
(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 7;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section
10.02; or
(d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal
amount of the Notes under any other provision of this Indenture or under applicable law.
Section 9.02 Call of Meetings by Trustee. The Trustee may (in its sole discretion and without obligation) at any time call a
meeting of Holders to take any action specified in Section 9.01, to be held at such time and at such place as the Trustee shall
determine. Notice of every meeting of the Holders, setting forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and the establishment of any record date pursuant to Section 8.01, shall be mailed to Holders of
such Notes at their addresses as they shall appear on the Note Register. Such notice shall also be mailed to the Company. Such notices
shall be mailed not less than 20 nor more than 90 days prior to the date fixed for the meeting.
Any meeting of Holders shall be valid without notice if the Holders of all Notes then outstanding are present in person or by
proxy or if notice is waived before or after the meeting by
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the Holders of all Notes then outstanding, and if the Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
Section 9.03 Call of Meetings by Company or Holders. In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% of the aggregate principal amount of the Notes then outstanding, shall have requested the Company to call a
meeting of Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Company
shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Trustee or such Holders may
determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 9.01, by mailing
notice thereof as provided in Section 9.02.
Section 9.04 Qualifications for Voting. To be entitled to vote at any meeting of Holders a Person shall (a) be a Holder of one
or more Notes on the record date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a
Holder of one or more Notes on the record date pertaining to such meeting. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the
Trustee and its counsel and any representatives of the Company and its counsel.
Section 9.05 Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable
regulations as it may deem advisable for any meeting of Holders, in regard to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 9.03, in which case the Company or the Holders calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall
be elected by vote of the Holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 8.04, at any meeting of Holders each Holder or proxyholder shall be entitled to one vote for
each US$1,000 principal amount of Notes held or represented by him or her; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Note challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of Notes held by it or instruments in writing as aforesaid duly
designating it as the proxy to vote on behalf of other Holders. Any meeting of Holders duly called pursuant to the provisions of Section
9.02 or Section 9.03 may be adjourned from time to time by the Holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
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Minutes shall be made of all resolutions and proceedings at every meeting and, if purporting to be signed by the chairman of
that meeting or of the next succeeding meeting of Holders of the Notes, shall be conclusive evidence of the matters in them. Until the
contrary is proved every meeting for which minutes have been so made and signed shall be deemed to have been duly convened and held
and all resolutions passed or proceedings transacted at it to have been duly passed and transacted.
Section 9.06 Voting. The vote upon any resolution submitted to any meeting of Holders shall be by written ballot on which
shall be subscribed the signatures of the Holders or of their representatives by proxy and the outstanding principal amount of the Notes
held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 9.02. The record shall show the principal amount of the Notes voting in favor
of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters therein stated.
Section 9.07 No Delay of Rights by Meeting. Nothing contained in this Article 9 shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders under any of the
provisions of this Indenture or of the Notes.
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Holders. The Company, when authorized by the resolutions of the
Board of Directors, and the Trustee, at the Company’s expense and direction, may from time to time and at any time amend or
supplement this Indenture or the Notes for one or more of the following purposes:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to provide for the assumption by a Successor Company of the obligations of the Company under this Indenture and the
Notes pursuant to Article 11;
(c) to add guarantees with respect to the Notes;
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(d) to secure the Notes;
(e) to add to the covenants or Events of Defaults of the Company for the benefit of the Holders or surrender any right or
power conferred upon the Company;
(f) upon the occurrence of any transaction or event described in Section 14.07(a), to (i) provide that the Notes are
convertible into Reference Property, subject to Section 14.02, and (ii) effect the related changes to the terms of the Notes described under
Section 14.07(a), in each case, in accordance with Section 14.07;
(g) to make any change that does not adversely affect the rights of any Holder; or
(h) comply with the rules of the Euroclear and Clearstream.
Upon the written request of the Company, the Trustee is hereby authorized to join with the Company in the execution of any
such amendment or supplement to this Indenture or the Notes, to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects
the Trustee’s own rights, duties or immunities under this Indenture or otherwise. The Trustee shall seek an Officers’ Certificate and an
Opinion of Counsel, at the Company’s expense, that any such amendment or supplement to this Indenture or the Notes is authorized and
permitted by the terms of this Indenture and not contrary to law.
Any amendment or supplement to this Indenture or the Notes authorized by the provisions of this Section 10.01 may be
executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 10.02.
Section 10.02 Supplemental Indentures with Consent of Holders. With the consent (evidenced as provided in Article 8) of the
Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article 8
and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes), the
Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to
time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights
of the Holders; provided, however, that, without the consent of each Holder of an outstanding Note affected, no such supplemental
indenture shall:
(a) reduce the amount of Notes whose Holders must consent to an amendment or waiver;
(b) reduce the rate of or extend the stated time for payment of interest on any Note;
(c) reduce the principal of or extend the Maturity Date of any Note;
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(d) make any change that adversely affects the conversion rights of any Notes;
(e) reduce the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the
Holders the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants,
definitions or otherwise;
(f) make any Note payable in a currency other than U.S. dollars;
(g) change the ranking of the Notes;
(h) impair the right of any Holder to receive payment of principal and interest (if any) on such Holder’s Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Note;
(i) change the Company’s obligation to pay Additional Amounts on any Note; or
(j) make any change in this Article 10 that requires each Holder’s consent or in the waiver provisions in Section 6.02 or
Section 6.09.
Upon the written request of the Company, and upon the filing with the Trustee of evidence of the consent of Holders as
aforesaid and subject to Section 10.05, the Trustee shall join with the Company in the execution of such supplemental indenture unless
(i) the Trustee has not received an Officers’ Certificate and an Opinion of Counsel that such supplemental indenture is authorized and
permitted by the terms of this Indenture and not contrary to law or (ii) such supplemental indenture affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Holders do not need under this Section 10.02 to approve the particular form of any proposed supplemental indenture. It shall be
sufficient if such Holders approve the substance thereof. After any supplemental indenture becomes effective under Section 10.01 or
Section 10.02, the Company shall mail to the Holders a notice briefly describing such supplemental indenture. However, the failure to
give such notice to all the Holders, or any defect in the notice, will not impair or affect the validity of the supplemental indenture.
Section 10.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions
of this Article 10, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 10.04 Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant
to the provisions of this Article 10 may, at the
54
Company’s expense, bear a notation in form approved by the Note Registrar as to any matter provided for in such supplemental
indenture. If the Company or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense,
be prepared and executed by the Company, authenticated by the Note Registrar upon receipt of a Company Order and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.05 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee. In addition to the documents
required by Section 17.06, the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements of this Article 10 and is permitted or authorized by this
Indenture and is not contrary to law.
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 11.02, the Company
shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated assets of the
Company, its Subsidiaries and its Consolidated Affiliated Entities, taken as a whole, to another Person, unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation
organized and existing under the laws of the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor
Company (if not the Company) shall expressly assume, by supplemental indenture all of the obligations of the Company under the Notes
and this Indenture (including, for the avoidance of doubt, the obligation to pay Additional Amounts pursuant to Section 4.07);
(b) if the Company will not be the resulting or surviving corporation, the Company shall have, at or prior to the effective
date of such transaction, delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the execution and
delivery of the supplemental indenture do not conflict with the requirements set forth in the Indenture and that all conditions precedent to
the execution and delivery of such supplemental indenture have been satisfied; and
(c) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing
under this Indenture.
For purposes of this Section 11.01, the sale, conveyance, transfer or lease of all or substantially all of the assets of one or more
Subsidiaries or Consolidated Affiliated Entities of the Company to another Person, which properties and assets, if held by the Company
instead of such Subsidiaries or Consolidated Affiliated Entities, would constitute all or substantially all of the assets of the Company on a
consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the consolidated assets of the
Company to another Person.
55
Section 11.02 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or
lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the principal of all of the Notes (including, for the avoidance of
doubt, any Additional Amounts), the due and punctual delivery or payment, as the case may be, of any consideration due upon
conversion of the Notes (including, for the avoidance of doubt, any Additional Amounts) and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Company, such Successor Company (if not the Company) shall
succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and assets, shall be substituted for the
Company, with the same effect as if it had been named herein as the party of the first part. Such Successor Company thereupon may
cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the Note Registrar; and, upon the order of such Successor
Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Note Registrar
shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and
delivered by the Officers of the Company to the Note Registrar for authentication, and any Notes that such Successor Company
thereafter shall cause to be signed and delivered to the Note Registrar for that purpose. All the Notes so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger,
sale, conveyance or transfer (but not in the case of a lease), upon compliance with this Article 11 the Person named as the “Company” in
the first paragraph of this Indenture (or any successor that shall thereafter have become such in the manner prescribed in this Article 11)
may be dissolved, wound up and liquidated at any time thereafter and, except in the case of a lease, such Person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under this Indenture and the Notes.
In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in
substance) may be made in the Notes thereafter to be issued as may be appropriate.
Section 11.03 Opinion of Counsel to Be Given to Trustee. No consolidation, merger, sale, conveyance, transfer or lease shall be
effective unless the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or lease and any such assumption and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, complies with the provisions of this Article 11, that all conditions
precedent thereto have been satisfied and that the Notes and such supplemental indenture are the legal, valid and binding obligations of
the Successor Company, enforceable against it in accordance with its terms, subject to customary assumptions, qualifications, and
exceptions.
56
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01 Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of any Note,
nor for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any Note, nor because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, employee, agent, Officer or director or Subsidiary, as such, past,
present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Notes.
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01 Conversion Privilege. Subject to and upon compliance with the provisions of this Article 14, each Holder of a
Note shall have the right, at such Holder’s option, (a) to convert all or any Specified Portion of the principal amount of such Note at any
time on or after August 10, 2020 and prior to the close of business on the second Business Day immediately preceding the Maturity Date
into ADSs at an initial conversion rate of 325.733 ADSs (subject to adjustment as provided in this Article 14, the “Conversion Rate”)
per US$1,000 principal amount of Notes, or (b) to convert all or any Specified Portion of the principal amount of such Note at any time
on or after the completion date of any Qualified Equity Financing and prior to the close of business on the tenth (10th) day immediately
following the completion of such Qualified Equity Financing into ADSs at Qualified Equity Financing Conversion Rate per US$1,000
principal amount of Notes (in each case, subject to the settlement provisions of Section 14.02, the “Conversion Obligation”), provided
that no Holder or beneficial owner of a Note shall have the right to receive ADSs on or prior to the Distribution Compliance Period
Termination Date and further provided that if a Holder or a beneficial owner is prevented from receiving any ADSs to which it would
otherwise be entitled pursuant to this Section 14.01, the Company’s obligation to deliver such ADSs shall not be extinguished, and the
Company shall deliver such ADSs within one Business Day following the occurrence of the Distribution Compliance Period Termination
Date in accordance with the last sentence of Section 14.02(c).
Section 14.02 Conversion Procedure; Settlement Upon Conversion.
(a) Upon conversion of any Note, the Company shall cause to be delivered to the converting Holder, in respect of each
US$1,000 principal amount of Notes being converted, a number of ADSs equal to the Conversion Rate or Qualified Equity Financing
Conversion Rate (as the case may be) in effect immediately prior to the close of business on the relevant
57
Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be), together with a cash payment, if applicable, in
lieu of any fractional ADSs (“Fractional ADSs”) (assuming delivery of the maximum number of ADSs due upon conversion that do not
represent a fractional ADS) in accordance with subsection (j) of this Section 14.02, on the third Business Day immediately following the
relevant Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be); provided that, if a Conversion Date
occurs after the Ordinary Shares have been replaced by the Reference Property consisting solely of cash in accordance with Section
14.07, the Company shall cause the consideration due in respect of the conversion to be paid to the converting Holder on the tenth
Business Day immediately following the related Conversion Date. For the avoidance of doubt, neither the Trustee nor any Agent shall
have any responsibility to deliver ADSs upon conversion of any Note to any person or deal with cash payments in relation to
conversions, except for cash payments in lieu of any fractional ADS.
(b) Subject to Section 14.02(e), before any Holder of a Note shall be entitled to convert a Note as set forth above, such
Holder shall (i) in the case of a Global Note, comply with the procedures of the Euroclear and Clearstream in effect at that time and
complete, manually sign and deliver a duly completed irrevocable notice to the Conversion Agent as set forth in the Form of Notice of
Conversion (or a facsimile thereof) (a “Notice of Conversion”) and (ii) in the case of a Physical Note (1) complete, manually sign and
deliver a duly completed irrevocable Notice of Conversion to the Conversion Agent at the specified office of the Conversion Agent and
state in writing therein the principal amount of Notes to be converted and the name or names (with addresses) in which such Holder
wishes the certificate or certificates for any ADSs to be delivered upon settlement of the Conversion Obligation to be registered, (2)
surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents),
at the specified office of the Conversion Agent and (3) if required, furnish appropriate endorsements and transfer documents. The
Trustee (and if different, the Conversion Agent) shall notify the Company of any conversion pursuant to this Article 14 on the
Conversion Date for such conversion or the date set forth in clause (ii) of Section 14.01(c), as the case may be. No Notice of Conversion
with respect to any Notes may be delivered and no Notes may be surrendered by a Holder for conversion thereof if such Holder has also
delivered a Fundamental Change Repurchase Notice to the Company in respect of such Notes and not validly withdrawn such
Fundamental Change Repurchase Notice in accordance with Section 15.03. A Notice of Conversion shall be deposited in duplicate at the
office of any Conversion Agent on any Business Day from 9:00 a.m. to 3:00 p.m. at the location of the Conversion Agent to which such
Notice of Conversion is delivered. Any Notice of Conversion and any Physical Note (if issued) deposited outside the hours specified or
on a day that is not a Business Day at the location of the Conversion Agent shall for all purposes be deemed to have been deposited with
that Conversion Agent between 9:00 a.m. and 3:00 p.m. on the next Business Day.
If more than one Note shall be surrendered for conversion at one time by the same Holder, the Conversion Obligation with
respect to such Notes shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the
extent permitted thereby) so surrendered. None of the Agents of the Trustee shall have any responsibility whatsoever with respect to the
issuance and delivery of the ADSs to the converting Holder.
58
(c) A Note shall be deemed to have been converted (i) in the case of conversion pursuant to Section 14.01(a), immediately
prior to the close of business on the date (the “Conversion Date”) that the Holder has complied with the requirements set forth in
subsection (b) above or (ii) in the case of conversion pursuant to Section 14.01(b), on the tenth (10 ) day after the completion of the
Qualified Equity Financing (the “Qualified Equity Financing Conversion Date”). Notwithstanding clause (ii) in the immediately
preceding sentence, the Person in whose name the certificate for any ADSs deliverable upon conversion made pursuant to Section
14.01(b) is to be registered shall be treated as a holder of record, as between the Company and such holder, of such ADSs as of the close
of business on the date that the Holder has complied with the requirements set forth in subsection (b) above. The Company shall issue or
cause to be issued, and deliver or cause to be delivered to such converting Holder, or such converting Holder’s nominee or nominees,
certificates or a book-entry transfer through Euroclear and Clearstream for the full number of ADSs to which such Holder shall be
entitled in satisfaction of the Company’s Conversion Obligation.
th
(d) In case any Note shall be surrendered for partial conversion, the Company shall execute and instruct the Note Registrar
who shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of
any service charge by the converting Holder but, if required by the Company or Trustee, with payment of a sum sufficient to cover any
transfer tax or similar governmental charge required by law or that may be imposed in connection therewith as a result of the name of the
Holder of the new Notes issued upon such conversion being different from the name of the Holder of the old Notes surrendered for such
conversion.
(e) If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp, issue, transfer or similar tax
due on the delivery of the ADSs upon conversion of the Notes (or the issuance of the underlying Ordinary Shares), unless the tax is due
because the Holder requests such ADSs (or such Ordinary Shares) to be issued in a name other than the Holder’s name, in which case the
Holder shall pay that tax. The Conversion Agent may refuse to deliver the certificates representing the ADSs (or the Ordinary Shares)
being issued in a name other than the Holder’s name until the Trustee receives a sum sufficient to pay any tax that is due by such Holder
in accordance with the immediately preceding sentence. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
(f) Except as provided in Section 14.04, no adjustment shall be made for dividends on any ADSs delivered upon the
conversion of any Note as provided in this Article 14.
(g) Upon the conversion of an interest in a Global Note, the Trustee shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes
effected through any Conversion Agent other than the Trustee.
(h) Upon conversion, a Holder shall not receive any separate cash payment for accrued and unpaid interest, if any, except as
set forth below. The Company’s settlement of the Conversion Obligation shall be deemed to satisfy in full its obligation to pay the
principal
59
amount of the Note and accrued and unpaid interest, if any, to, but not including, the relevant Conversion Date or the Qualified Equity
Financing Conversion Date (as the case may be). As a result, accrued and unpaid interest, if any, to, but not including, the relevant
Conversion Date or the Qualified Equity Financing Conversion Date (as the case may be) shall be deemed to be paid in full rather than
cancelled, extinguished or forfeited.
(i) The Person in whose name the certificate for any ADSs delivered upon conversion is registered shall be treated as a
holder of record, as between the Company and such holder, of such ADSs as of the close of business on the relevant Conversion
Date. Upon a conversion of Notes, such Person shall no longer be a Holder of such Notes surrendered for conversion.
(j) The Company shall not issue any Fractional ADS upon conversion of the Notes and shall instead pay cash in lieu of any
Fractional ADS deliverable upon conversion based on the Last Reported Sale Price of the ADSs on the relevant Conversion Date or the
Qualified Equity Financing Conversion Date (as the case may be) (or if such Conversion Date or Qualified Equity Financing Conversion
Date is not a Trading Day, the immediately preceding Trading Day).
(k) In accordance with the Deposit Agreement, the Company shall issue to the ADS Custodian such Ordinary Shares
required for the issuance of the ADSs upon conversion of the Notes, plus written delivery instructions (if requested by the ADS
Depositary or the ADS Custodian) for such ADSs, shall deliver such legal opinions and any other information or documentation and any
additional forms compliant with the procedures of the Depository Trust Company with respect to such conversion of Notes and shall
comply with the Deposit Agreement, as required by the ADS Depositary or the ADS Custodian in connection with each issue of
Ordinary Shares and issuance and delivery of ADSs. Without prejudice to the generality of the preceding sentence, when issuing
Ordinary Shares for purposes of a conversion prior to August 10, 2020 the Company shall confirm in writing to the ADS Depositary that
the conversion is taking place following and in connection with a Qualified Equity Financing and shall specify in such written
confirmation the applicable Qualified Equity Financing Conversion Date.
Section 14.03 [RESERVED]
Section 14.04 Adjustment of Conversion Rate. If the number of Ordinary Shares represented by the ADSs is changed, after the
date of this Indenture, for any reason other than one or more of the events described in this Section 14.04, the Company shall make an
appropriate adjustment to the Conversion Rate and the Qualified Equity Financing Conversion Rate such that the number of Ordinary
Shares represented by the ADSs upon which conversion of the Notes is based remains the same.
Notwithstanding the adjustment provisions described in this Section 14.04, if the Company distributes to holders of the
Ordinary Shares any cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other
assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to
60
holders of the ADSs, but, instead, the ADSs shall represent, in addition to Ordinary Shares, such cash, rights, options, warrants, shares of
Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the
Conversion Rate described in this Section 14.04 shall not be made until and unless a corresponding distribution (if any) is made to
holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and
not on the distribution made to the holders of the Ordinary Shares. However, in the event that the Company issues or distributes to all
holders of the Ordinary Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall adjust the
Conversion Rate pursuant to Section 14.04(b) (in the case of Expiring Rights entitling holders of the Ordinary Shares for a period of not
more than 45 calendar days after the announcement date of such issuance to subscribe for or purchase Ordinary Shares or ADSs) or
Section 14.04(c) (in the case of all other Expiring Rights).
For the avoidance of doubt, if any event described in this Section 14.04 results in a change to the number of Ordinary Shares
represented by the ADSs, then such a change shall be deemed to satisfy the Company’s obligation to effect the relevant adjustment to the
Conversion Rate on account of such event to the extent such change produces the same economic result as the adjustment to the
Conversion Rate that would otherwise have been made on account of such event.
The Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the
Company shall not make any adjustments to the Conversion Rate if Holders of the Notes participate (other than in the case of a share
split or share combination), at the same time and upon the same terms as holders of the ADSs and solely as a result of holding the Notes,
in any of the transactions described in this Section 14.04, without having to convert their Notes, as if they held a number of ADSs equal
to the Conversion Rate, multiplied by the principal amount (expressed in thousands) of Notes held by such Holder. Neither the Trustee
nor the Conversion Agent shall have any responsibility to monitor the accuracy of any calculation of any adjustment to the Conversion
Rate and the same shall be conclusive and binding on the Holders, absent manifest error. Notice of such adjustment to the Conversion
Rate shall be given by the Company promptly to the Holders, the Trustee and the Paying Agent and Conversion Agent and shall be
conclusive and binding on the Holders, absent manifest error.
(a) If the Company exclusively issues Ordinary Shares as a dividend or distribution on the Ordinary Shares, or if the
Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:
where,
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date of such dividend or distribution,
or immediately prior to the open
61
of business on the effective date of such share split or share combination, as applicable;
CR1
=
the Conversion Rate in effect immediately after the close of business on such Record Date or immediately after the open of
business on such effective date, as applicable;
OS0
=
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date or immediately
prior to the open of business on such effective date, as applicable; and
OS1
=
the number of Ordinary Shares outstanding immediately after giving effect to such dividend, distribution, share split or share
combination.
Any adjustment made under this Section 14.04(a) shall become effective immediately after the close of business on the Record Date for
such dividend or distribution, or immediately after the open of business on the effective date for such share split or share combination, as
applicable. If any dividend or distribution of the type described in this Section 14.04(a) is declared but not so paid or made, the
Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Ordinary Shares (directly or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to
subscribe for or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than the average of
the Last Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following
formula:
where,
CR0
CR1
OS0
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such issuance;
=
the Conversion Rate in effect immediately after the close of business on such Record Date;
=
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date;
62
X
Y
=
the total number of Ordinary Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or
warrants; and
=
the number of Ordinary Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided
by (ii) the quotient of (a) the average of the Last Reported Sale Prices of the ADSs over the 10 consecutive Trading Day
period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such
rights, options or warrants divided by (b) the number of Ordinary Shares then represented by one ADS.
Any increase made under this Section 14.04(b) shall be made successively whenever any such rights, options or warrants are issued and
shall become effective immediately after the close of business on the Record Date for the ADSs for such issuance. To the extent that
Ordinary Shares or ADSs are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Ordinary Shares actually delivered (directly or in the form of
ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the Conversion Rate that would
then be in effect if such the Record Date for the ADSs for such issuance had not occurred.
For purposes of this Section 14.04(b), in determining whether any rights, options or warrants entitle the holders to subscribe for
or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than such average of the Last
Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such Ordinary
Shares or ADSs, there shall be taken into account any consideration received by the Company for such rights, options or warrants and
any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board
of Directors.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Ordinary
Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which an adjustment was effected
pursuant to Section 14.04(a) or Section 14.04(b), (ii) dividends or distributions paid exclusively in cash as to which an adjustment was
effected pursuant to Section 14.04(d), and (iii) Spin-Offs as to which the provisions set forth below in this Section 14.04(c) shall apply
(any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital
Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the
following formula:
63
where,
CR0
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such
distribution;
CR1
=
the Conversion Rate in effect immediately after the close of business on such Record Date;
SP0
=
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the
Ex-Dividend Date for such distribution; and
FMV =
the fair market value (as determined by the Board of Directors) of the Distributed Property with respect to each outstanding
Ordinary Share (directly or in the form of ADSs) on the Record Date for the ADSs for such distribution.
Any increase made under the foregoing portion of this Section 14.04(c) above shall become effective immediately after the close of
business on the Record Date for the ADSs for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing,
if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note
shall receive, in respect of each US$1,000 principal amount thereof, at the same time and upon the same terms as holders of the ADSs
receive the Distributed Property, the amount and kind of Distributed Property such Holder would have received if such Holder owned a
number of ADSs equal to the Conversion Rate in effect on the Record Date for the ADSs for the distribution.
With respect to an adjustment pursuant to this Section 14.04(c) where there has been a payment of a dividend or other
distribution on the Ordinary Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or similar equity
interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for
trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:
where,
CR0
= the Conversion Rate in effect immediately prior to the close of business on the last Trading Day of the Valuation Period;
64
CR1
= the Conversion Rate in effect immediately after the close of business on the last Trading Day of the Valuation Period;
FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the
Ordinary Shares (directly or in the form of ADSs) applicable to one Ordinary Share (determined by reference to the
definition of Last Reported Sale Price as set forth in Section 1.01 as if references therein to the ADSs were to such Capital
Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date
of the Spin-Off (the “Valuation Period”); and
MP0
= the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur immediately after the close of business on the
last Trading Day of the Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion
of this Section 14.04(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of Trading Days
as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the Conversion Date in determining the
Conversion Rate.
For purposes of this Section 14.04(c) (and subject in all respect to Section 14.11), rights, options or warrants distributed by the
Company to all holders of the Ordinary Shares (directly or in the form of ADSs) entitling them to subscribe for or purchase shares of the
Company’s Capital Stock, including Ordinary Shares (either initially or under certain circumstances), which rights, options or warrants,
until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Ordinary Shares
(directly or in the form of ADSs); (ii) are not exercisable; and (iii) are also issued in respect of future issuances of the Ordinary Shares
(directly or in the form of ADSs), shall be deemed not to have been distributed for purposes of this Section 14.04(c) (and no adjustment
to the Conversion Rate under this Section 14.04(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such
rights, options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion
Rate shall be made under this Section 14.04(c). If any such right, option or warrant, including any such existing rights, options or
warrants distributed prior to the date of this Indenture, are subject to events, upon the occurrence of which such rights, options or
warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of
any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights, options or warrants
with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without
exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or
warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was
counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 14.04(c)
was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any
holders
65
thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not
been issued and (y) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal to the per Ordinary Share redemption or purchase price received
by a holder or holders of Ordinary Shares (directly or in the form of ADSs) with respect to such rights, options or warrants (assuming
such holder had retained such rights, options or warrants), made to all holders of Ordinary Shares (directly or in the form of ADSs) as of
the date of such redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated
without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been
issued.
For purposes of Section 14.04(a), Section 14.04(b) and this Section 14.04(c), if any dividend or distribution to which this
Section 14.04(c) is applicable also includes one or both of:
(A) a dividend or distribution of Ordinary Shares (directly or in the form of ADSs) to which Section 14.04(a) is applicable
(the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 14.04(b) is applicable (the “Clause B
Distribution”),
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a
dividend or distribution to which this Section 14.04(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment
required by this Section 14.04(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A Distribution and
Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by
Section 14.04(a) and Section 14.04(b) with respect thereto shall then be made, except that, if determined by the Company (I) the “Record
Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of the Clause C Distribution and
(II) any Ordinary Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be
deemed not to be “outstanding immediately prior to the close of business on such Record Date or immediately after the open of business
on such effective date, as applicable” within the meaning of Section 14.04(a) or “outstanding immediately prior to the close of business
on such Record Date” within the meaning of Section 14.04(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Ordinary Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
where,
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CR0
CR1
SP0
= the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such dividend
or distribution;
= the Conversion Rate in effect immediately after the close of business on such Record Date;
= the Last Reported Sale Price of the ADSs (divided by the number of Ordinary Shares then represented by one ADS) on the
Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
C
= the amount in cash per Ordinary Share the Company distributes to all or substantially all holders of the Ordinary Shares
(directly or in the form of ADSs).
Any increase pursuant to this Section 14.04(d) shall become effective immediately after the close of business on the Record Date for the
ADSs for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective
as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal
to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, for each US$1,000
principal amount of Notes, at the same time and upon the same terms as holders of the ADSs, the amount of cash that such Holder would
have received if such Holder owned a number of ADSs equal to the Conversion Rate on the Record Date for the ADSs for such cash
dividend or distribution.
(e) If the Company or any of its Subsidiaries or Consolidated Affiliated Entities makes a payment in respect of a tender or
exchange offer for the Ordinary Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration
included in the payment per Ordinary Share exceeds the average of the Last Reported Sale Prices of the ADSs (divided by the number of
Ordinary Shares then represented by one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading
Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall be increased based on the following
formula:
where,
CR0
= the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following,
and including, the Trading Day next succeeding the date such tender or exchange offer expires;
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CR1
= the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and
including, the Trading Day next succeeding the date such tender or exchange offer expires;
AC
= the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for
Ordinary Shares or ADSs, as the case may be, purchased in such tender or exchange offer;
OS0
OS1
SP1
= the number of Ordinary Shares outstanding immediately prior to the date such tender or exchange offer expires (prior to
giving effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such
tender or exchange offer);
= the number of Ordinary Shares outstanding immediately after the date such tender or exchange offer expires (after giving
effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such tender
or exchange offer); and
= the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by one
ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date
such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 14.04(e) shall occur at the close of business on the 10th Trading Day
immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in
respect of any conversion within the 10 Trading Days immediately following, and including, the Trading Day next succeeding the
expiration date of any tender or exchange offer, references in this Section 14.04(e) with respect to 10 Trading Days shall be deemed
replaced with such lesser number of Trading Days as have elapsed from, and including, the Trading Day next succeeding the expiration
date of such tender or exchange offer to, and including, the Conversion Date in determining the Conversion Rate. For the avoidance of
doubt, no adjustment to the Conversion Rate under this Section 14.04(e) shall be made if such adjustment would result in a decrease in
the Conversion Rate.
(f) If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to the Notes
or on the exercise of any other rights, existing as of the date of this Indenture, of conversion into, or exchange or subscription for,
Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for
Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition only excludes any Ordinary Shares,
ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs issued or
granted in accordance with any employee incentive plan of the Company), in each case at a consideration per ADS (on an as-converted
and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the
applicable
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number of Ordinary Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted
based on the following formula:
where:
CR0
= the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
CR1
= the Conversion Rate in effect as from the date of issue of the Relevant Securities;
A
B
= the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
= the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would
purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then
represented by each ADS; and
C
= the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,
provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued
assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs
are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights.
(g) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Ordinary Shares or ADSs
or any securities convertible into or exchangeable for Ordinary Shares or ADSs or the right to purchase Ordinary Shares or ADSs or such
convertible or exchangeable securities.
(h) In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 14.04, and to the extent
permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on
which any of the Company’s securities are then listed, the Company from time to time may increase the Conversion Rate by any amount
for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest,
and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the
Ordinary Shares or the ADSs or rights to purchase Ordinary Shares or ADSs in connection with a dividend or distribution of Ordinary
Shares or ADSs (or rights to acquire Ordinary Shares or ADSs) or similar event.
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(i) Notwithstanding anything to the contrary in this Article 14, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Ordinary Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in
Ordinary Shares or ADSs under any plan;
(ii) upon the issuance of any Ordinary Shares or ADSs or options or rights to purchase those Ordinary Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company
or any of the Company’s Subsidiaries or Consolidated Affiliated Entities;
(iii) upon the issuance of any Ordinary Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date the Notes were
first issued;
(iv) solely for a change in the par value of the Ordinary Shares; or
(v) for accrued and unpaid interest, if any.
(j) All calculations and other determinations under this Article 14 shall be made by the Company and shall be made to the
nearest one-ten thousandth (1/10,000) of an ADS.
(k) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee (and
the Conversion Agent if not the Trustee) an Officers’ Certificate setting forth the Conversion Rate after such adjustment and setting forth
a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such
Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume
without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on
which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to each Holder at its last
address appearing on the Note Register of this Indenture. Failure to deliver such notice shall not affect the legality or validity of any
such adjustment.
(l) For purposes of this Section 14.04, the number of Ordinary Shares at any time outstanding shall not include Ordinary
Shares held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any dividend or make
any distribution on Ordinary Shares held in the treasury of the Company (directly or in the form of ADSs), but shall include Ordinary
Shares issuable in respect of scrip certificates issued in lieu of fractions of Ordinary Shares.
(m) For purposes of this Section 14.04, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.
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Section 14.05 Adjustments of Prices. Whenever any provision of this Indenture requires the Company to calculate the Last
Reported Sale Prices over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any
adjustment to the Conversion Rate that becomes effective pursuant to Section 14.04, or any event requiring an adjustment to the
Conversion Rate pursuant to Section 14.04 where the Record Date, effective date or expiration date, as the case may be, of the event
occurs, at any time during the period when such Last Reported Sale Prices are to be calculated.
Section 14.06 Ordinary Shares to Be Fully Paid. The Company shall provide, free from preemptive rights, out of its authorized
but unissued Ordinary Shares or Ordinary Shares held in treasury, a sufficient number of Ordinary Shares that corresponds to the number
of ADSs due upon conversion of the Notes from time to time as such Notes are presented for conversion (assuming that at the time of
computation of such number of Ordinary Shares, all such Notes would be converted by a single Holder).
Section 14.07 Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Ordinary Shares (other than changes resulting from a
subdivision or combination),
(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries and Consolidated Affiliated Entities substantially as an entirety or
(iv) any statutory share exchange,
in each case, as a result of which the Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or
assets (including cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of such
Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental
indenture permitted under Section 10.01(f) providing that, at and after the effective time of such Merger Event, the right to convert each
US$1,000 principal amount of Notes shall be changed into a right to convert such principal amount of Notes into the kind and amount of
shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of
ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the
“Reference Property,” with each “unit of Reference Property” meaning the kind and amount of Reference Property that a holder of
one ADS is entitled to receive) upon such Merger Event; provided, however, that at and after the effective time of the Merger Event the
number of ADSs otherwise deliverable upon conversion of the Notes in accordance with Section 14.02 shall
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instead be deliverable in the amount and type of Reference Property that a holder of that number of ADSs would have been entitled to
receive in such Merger Event.
If the Merger Event causes the Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single
type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Notes
will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the
holders of the ADSs and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the
consideration referred to in clause (i) attributable to one ADS. The Company shall provide written notice to Holders, the Trustee and the
Conversion Agent (if other than the Trustee) of such weighted average as soon as practicable after such determination is made.
Such supplemental indenture described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 14 (it being understood that
no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of Common
Equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property
includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the
Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute
such supplemental indenture, and such supplemental indenture shall contain such additional provisions to protect the interests of the
Holders of the Notes, including the right of Holders to require the Company to repurchase their Notes upon a Fundamental Change
pursuant to Section 15.02, as the Board of Directors shall reasonably consider necessary by reason of the foregoing.
(b) [RESERVED]
(c) The Company shall not become a party to any Merger Event unless its terms are consistent with this Section
14.07. None of the foregoing provisions shall affect the right of a holder of Notes to convert its Notes into ADSs as set forth in Section
14.01 and Section 14.02 prior to the effective date of such Merger Event.
(d) The above provisions of this Section shall similarly apply to successive Merger Events.
Section 14.08 Certain Covenants. (a) The Company covenants that all ADSs delivered upon conversion of Notes, and all
Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from all taxes, liens and
charges with respect to the issue thereof.
(b) The Company covenants that, if any ADSs to be provided for the purpose of conversion of Notes hereunder, or any
Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or
state law before such ADSs may be validly issued upon conversion, the Company will, to the extent then
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permitted by the rules and interpretations of the Commission, secure such registration or approval, as the case may be.
(c) The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or
automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated
quotation system, any ADSs deliverable upon conversion of the Notes.
(d) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the
conversion of the Notes into ADSs and the issuance, and deposit into the ADS facility, of the Ordinary Shares represented by such
ADSs. The Company also undertakes to maintain, as long as any Notes are outstanding, the effectiveness of a registration statement on
Form F-6 relating to the ADSs and an adequate number of ADSs available for issuance thereunder such that ADSs can be delivered in
accordance with the terms of this Indenture, the Notes and the Deposit Agreement, upon conversion of the Notes. In addition, the
Company further covenants to provide Holders with a reasonably detailed description of the mechanics for the delivery of ADSs upon
conversion of Notes as set forth in the Deposit Agreement upon request.
Section 14.09 Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty
or responsibility to any Holder to determine the Conversion Rate (or any adjustment thereto) or whether any facts exist that may require
any adjustment (including any increase) of the Conversion Rate, or with respect to the nature or extent or calculation of any such
adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in
making the same. The Trustee and any other Conversion Agent shall not be accountable with respect to the validity or value (or the kind
or amount) of any ADSs, or of any securities, property or cash that may at any time be issued or delivered upon the conversion of any
Note; and the Trustee and any other Conversion Agent make no representations with respect thereto. Neither the Trustee nor any
Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver any ADSs or stock certificates or other
securities or property or cash upon the surrender of any Note for the purpose of conversion, the accuracy or inaccuracy of any
mathematical calculation or formulae under this Indenture, whether by the Company or any Person so authorized by the Company for
such purpose under this Indenture or the failure by the Company to comply with any of the duties, responsibilities or covenants of the
Company contained in this Article. Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent shall
be under any responsibility to determine the correctness of any provisions contained in any supplemental indenture entered into pursuant
to Section 14.07 relating either to the kind or amount of ADSs or securities or property (including cash) receivable by Holders upon the
conversion of their Notes after any event referred to in such Section 14.07 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Section 7.01, may accept (without any independent investigation) as conclusive evidence of the correctness
of any such provisions, and shall be protected in relying upon, the Officers’ Certificate (which the Company shall be obligated to file
with the Trustee prior to the execution of any such supplemental indenture) with respect thereto.
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Section 14.10 Notice to Holders Prior to Certain Actions. In case of any:
(a) action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to
Section 14.04 or Section 14.11;
(b) Merger Event; or
(c) voluntary or involuntary dissolution, liquidation or winding-up of the Company or any of its Subsidiaries;
then, in each case (unless notice of such event is otherwise required pursuant to another provision of this Indenture), the Company shall
cause to be filed with the Trustee and the Conversion Agent (if other than the Trustee) and to be mailed to each Holder at its address
appearing on the Note Register, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified,
a notice stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if
a record is not to be taken, the date as of which the holders of Ordinary Shares or ADSs, as the case may be, of record are to be
determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Merger Event,
dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of
Ordinary Shares or ADSs, as the case may be, of record shall be entitled to exchange their Ordinary Shares or ADSs, as the case may be,
for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Merger Event,
dissolution, liquidation or winding-up.
Section 14.11 Stockholder Rights Plans. To the extent that the Company has a rights plan in effect upon conversion of the
Notes, each ADS delivered upon such conversion shall be entitled to receive (either directly or in respect of the Ordinary Shares
underlying such ADSs) the appropriate number of rights, if any, and the certificates representing the ADSs delivered upon such
conversion shall bear such legends, if any, in each case as may be provided by the terms of any such stockholder rights plan, as the same
may be amended from time to time. However, if, prior to any conversion, the rights have separated from the Ordinary Shares underlying
the ADSs in accordance with the provisions of the applicable stockholder rights plan, the Conversion Rate shall be adjusted at the time of
separation as if the Company distributed to all or substantially all holders of the Ordinary Shares Distributed Property as provided in
Section 14.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.
Section 14.12 Termination of Depositary Receipt Program. If the Ordinary Shares cease to be represented by American
Depositary Shares issued under a depositary receipt program sponsored by the Company, all references in this Indenture to the ADSs
shall be deemed to have been replaced by a reference to the number of Ordinary Shares (and other property, if any) represented by the
ADSs on the last day on which the ADSs represented the Ordinary Shares and as if the Ordinary Shares and the other property had been
distributed to holders of the ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to
refer to the Last Reported Sale Price of the Ordinary Shares, and other appropriate
74
adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where
currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination
will apply.
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01 [RESERVED]
Section 15.02 Repurchase at Option of Holders Upon a Fundamental Change. (a)If a Fundamental Change occurs at any time,
each Holder shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or
any portion thereof that is equal to US$1,000 or an integral multiple of US$1,000, on the Business Day (the “Fundamental Change
Repurchase Date”) notified in writing by the Company as set forth in Section 15.02(c) that is not less than 20 Business Days or more
than 35 Business Days following the date of the Fundamental Change Company Notice at a repurchase price equal to 100% of the
principal amount thereof and any premium payable hereunder (the “Fundamental Change Repurchase Price”). The Trustee and the
Conversion Agent, Paying Agent or any other agent appointed for such purpose shall have no responsibility to determine the
Fundamental Change Repurchase Price.
(b) Repurchases of Notes under this Section 15.02 shall be made, at the option of the Holder thereof, upon:
(i) delivery to the Paying Agent (or other agent appointed for this purpose) by a Holder of a duly completed notice
(the “Fundamental Change Repurchase Notice”) in the form set forth in Attachment 2 to the Form of Note attached hereto as
Exhibit A, if the Notes are Physical Notes, or in compliance with the procedures of Euroclear and Clearstream for surrendering
interests in global notes, if the Notes are Global Notes, in each case on or before the close of business on the second Business
Day immediately preceding the Fundamental Change Repurchase Date; and
(ii) delivery of the Notes, if the Notes are Physical Notes, to the Trustee at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer) at the Corporate Trust Office,
or book-entry transfer of the Notes, if the Notes are Global Notes, in compliance with the procedures of Euroclear and
Clearstream, in each case such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price
therefor.
The Fundamental Change Repurchase Notice in respect of any Notes to be repurchased shall state:
(i) in the case of Physical Notes, the certificate numbers of the Notes to be delivered for repurchase;
(ii) the portion of the principal amount of Notes to be repurchased, which must be US$1,000 or an integral multiple
thereof; and
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(iii) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and this
Indenture;
provided, however, that if the Notes are Global Notes, the Fundamental Change Repurchase Notice must comply with appropriate
procedures of Euroclear and Clearstream.
Notwithstanding anything herein to the contrary, any Holder delivering to the Trustee the Fundamental Change Repurchase
Notice contemplated by this Section 15.02 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase
Notice at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change
Repurchase Date by delivery of a duly completed written notice of withdrawal to the Trustee in accordance with Section 15.03.
The Trustee shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written
notice of withdrawal thereof.
(c) On or before the 20th calendar day after the occurrence of the effective date of a Fundamental Change, the Company
shall provide to all Holders, the Trustee (and the Conversion Agent, Paying Agent and any other agent appointed for this purpose, in
each case, if other than the Trustee) a written notice (the “Fundamental Change Company Notice”) of the occurrence of the effective
date of the Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. In the case of
Physical Notes, such notice shall be by first class mail or, in the case of Global Notes, such notice shall be delivered in accordance with
the applicable procedures of Euroclear and Clearstream. Simultaneously with providing such notice, the Company shall publish a notice
containing the information set forth in the Fundamental Change Company Notice in a newspaper of general circulation in The City of
New York or publish such information on the Company’s website or through such other public medium as the Company may use at that
time. Each Fundamental Change Company Notice shall specify:
(i) the events causing the Fundamental Change;
(ii) the effective date of the Fundamental Change;
(iii) the last date on which a Holder may exercise the repurchase right pursuant to this Article 15;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) the name and address of the Trustee, the Paying Agent, the Conversion Agent or any other agent appointed for
repurchase, if applicable;
(vii) if applicable, the Conversion Rate;
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(viii) if applicable, that the Notes with respect to which a Fundamental Change Repurchase Notice has been delivered
by a Holder may be converted only if the Holder withdraws the Fundamental Change Repurchase Notice in accordance with the
terms of this Indenture; and
(ix) the procedures that Holders must follow to require the Company to repurchase their Notes.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders’ repurchase rights or affect
the validity of the proceedings for the repurchase of the Notes pursuant to this Section 15.02.
At the Company’s request, the Trustee shall give such notice in the Company’s name and at the Company’s expense; provided,
however, that, in all cases, the text of such Fundamental Change Company Notice shall be prepared by the Company.
(d) Notwithstanding the foregoing, no Notes may be repurchased by the Company on any date at the option of the Holders
upon a Fundamental Change if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on
or prior to such date (except in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental
Change Repurchase Price with respect to such Notes). The Trustee will promptly return to the respective Holders thereof any Physical
Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a default by the Company in the
payment of the Fundamental Change Repurchase Price with respect to such Notes), or any instructions for book-entry transfer of the
Notes in compliance with the procedures of Euroclear and Clearstream shall be deemed to have been cancelled, and, upon such return or
cancellation, as the case may be, the Fundamental Change Repurchase Notice with respect thereto shall be deemed to have been
withdrawn.
Section 15.03 Withdrawal of Fundamental Change Repurchase Notice. (a) A Fundamental Change Repurchase Notice may be
withdrawn (in whole or in part) by means of a duly completed written notice of withdrawal delivered to the Paying Agent (or other agent
appointed for such purpose) in accordance with this Section 15.03 at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date specifying:
(i) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted,
(ii) if Physical Notes have been issued, the certificate number of the Note in respect of which such notice of
withdrawal is being submitted, and
(iii) the principal amount, if any, of such Note that remains subject to the original Fundamental Change Repurchase
Notice, which portion must be in principal amounts of US$1,000 or an integral multiple of US$1,000;
77
provided, however, that if the Notes are Global Notes, the notice must comply with appropriate procedures of Euroclear and
Clearstream.
Section 15.04 Deposit of Fundamental Change Repurchase Price. (a) The Company will deposit with the Paying Agent (or
any other agent appointed for this purpose by the Company), or if the Company is acting as its own Paying Agent, set aside, segregate
and hold in trust as provided in Section 4.04) on or prior to 10:00 a.m., New York City time, on the Fundamental Change Repurchase
Date an amount of money sufficient to repurchase all of the Notes to be repurchased at the appropriate Fundamental Change Repurchase
Price. Subject to receipt of funds and/or Notes by the Paying Agent (or other agent appointed for this purpose by the Company) and the
Trustee, as applicable, payment for Notes surrendered for repurchase (and not withdrawn in accordance with Section 15.03) will be made
on the later of (i) the Fundamental Change Repurchase Date (provided the Holder has satisfied the conditions in Section 15.02) and (ii)
the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the
Holder thereof in the manner required by Section 15.02, as applicable, by mailing checks for the amount payable to the Holders of such
Notes entitled thereto as they shall appear in the Note Register; provided, however, that payments to the Common Depositary shall be
made by wire transfer of immediately available funds to the account of the Common Depositary or its nominee. The Paying Agent (or
other agent appointed for this purpose by the Company) shall, promptly after such payment and upon written demand by the Company,
return to the Company any funds in excess of the Fundamental Change Repurchase Price.
(b) If by 10:00 a.m., New York City time, on the Fundamental Change Repurchase Date, the Paying Agent (or other agent
appointed for this purpose by the Company) holds money sufficient to make payment on all the Notes or portions thereof that are to be
repurchased on such Fundamental Change Repurchase Date, then, with respect to the Notes that have been properly surrendered for
repurchase and not validly withdrawn, on such Fundamental Change Repurchase Date, (i) such Notes will cease to be outstanding and
(ii) all other rights of the Holders of such Notes will terminate (other than the right to receive the Fundamental Change Repurchase
Price).
(c) Upon surrender of a Note that is to be repurchased in part pursuant to Section 15.02, the Company shall execute and the
Note Registrar, upon receipt of a Company Order, shall authenticate and deliver to the Holder a new Note in an authorized denomination
equal in principal amount to the unrepurchased portion of the Note surrendered.
Section 15.05 Covenant to Comply with Applicable Laws Upon Repurchase of Notes. In connection with any repurchase offer,
the Company will, if required:
(a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;
(b) file a Schedule TO or other required schedule under the Exchange Act; and
78
(c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase
the Notes;
in each case, so as to permit the rights and obligations under this Article 15 to be exercised in the time and in the manner specified in this
Article 15.
ARTICLE 16
BRRD MATTERS
Notwithstanding and to the exclusion of any other term of this Indenture or any other agreements, arrangements, or understanding
between The Bank of New York Mellon SA/NV, Luxembourg Branch and each counterparty, each counterparty acknowledges and
accepts that a BRRD Liability arising under this Indenture may be subject to the exercise of Bail-in Powers by the Relevant Resolution
Authority, and acknowledges, accepts, and agrees to be bound by:
(a) the effect of the exercise of Bail-in Powers by the Relevant Resolution Authority in relation to any BRRD Liability of The Bank
of New York Mellon SA/NV, Luxembourg Branch to each counterparty under this Indenture, that (without limitation) may
include and result in any of the following, or some combination thereof:
(i) the reduction of all, or a portion, of the BRRD Liability or outstanding amounts due thereon;
(ii) the conversion of all, or a portion, of the BRRD Liability into shares, other securities or other obligations of The Bank of
New York Mellon SA/NV, Luxembourg Branch or another person, and the issue to or conferral on each counterparty of
such shares, securities or obligations;
(iii) the cancellation of the BRRD Liability;
(iv) the amendment or alteration of any interest, if applicable, thereon, the maturity or the dates on which any payments are
due, including by suspending payment for a temporary period;
(b) the variation of the terms of this Indenture, as deemed necessary by the Relevant Resolution Authority, to give effect to the
exercise of Bail-in Powers by the Relevant Resolution Authority.
ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.
Section 17.02 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board,
79
committee or Officer of the Company shall and may be done and performed with like force and effect by the like board, committee or
officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.
Section 17.03 Addresses for Notices, Etc. Any notice or demand that by any provision of this Indenture is required or permitted
to be given or served by the Trustee or by the Holders on the Company shall be deemed to have been sufficiently given or made, for all
purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804,
People’s Republic of China, Facsimile No.: +86 (21) 3913 0192. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to
The Bank of New York Mellon, London Branch, One Canada Square, London E14 5AL, United Kingdom , Attention: Corporate Trust
Administration – Project Camel (NIO Inc.) Fax: +44 1202 689660, with a copy to The Bank of New York Mellon, Hong Kong Branch,
Level 26, Three Pacific Place, 1 Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852-
2295.3283. Any notice, direction, request or demand hereunder to or upon the Registrar and the Transfer Agent shall be given or served
by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to The Bank of New York Mellon
SA/NV, Luxembourg Branch, Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg, Attention: Project Camel (NIO
Inc.), Fax: +(352) 24524204, with a copy to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific Place, 1
Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852-2295.3283.
All notices and other communications under this Indenture shall be in writing in English.
So long as and to the extent that the Notes are represented by Global Notes and such Global Notes are held by or on behalf of
the Common Depositary, notices to owners of beneficial interests in the Global Notes may be given by delivery of the relevant notice to
the Euroclear and Clearstream for communication by it to entitled account holders.
The Company hereby acknowledges that it is fully aware of the risks associated with transmitting instructions via electronic
methods (including facsimile), and being aware of these risks, authorizes the Trustee to accept and act upon any instruction sent to it or
any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar in the Company's name or in the name of one or more
appropriate authorized signers of the Company via electronic methods (including facsimile). The Trustee shall be entitled to rely on
Section 7.06 of this Indenture when accepting or acting upon any instructions, communications or documents transmitted by facsimile,
and shall not be liable in the event any facsimile transmission is not received, or is mutilated, illegible, interrupted, duplicated,
incomplete, unauthorized or delayed for any reason, including (but not limited to) electronic or telecommunications failure.
Furthermore, notwithstanding the above, if any Trustee receives information or instructions delivered by electronic mail, other
electronic method or other unsecured method of communication believed by it to be genuine and to have been sent by the proper person
or
80
persons, the Trustee or any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar shall have (i) no duty or obligation to
verify or confirm that the person who sent such instructions is in fact a person authorized to give instructions or directions on behalf of
the Company and (ii) absent its or their gross negligence or willful misconduct, no liability for any losses, liabilities, costs or expenses
incurred or sustained by any holder, the Company or any other person as a result of such reliance on or compliance with such information
or instructions.
The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to it by first class mail, postage prepaid, at its address as it
appears on the Note Register and shall be sufficiently given to it if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other
Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such
notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
Section 17.04 Governing Law; Jurisdiction. THIS INDENTURE AND EACH NOTE, AND ANY CLAIM, CONTROVERSY
OR DISPUTE ARISING UNDER OR RELATED TO THIS INDENTURE AND EACH NOTE, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company irrevocably consents and agrees, for the benefit of the Holders from time to time of the Notes and the Trustee,
that any legal action, suit or proceeding against it with respect to obligations, liabilities or any other matter arising out of or in connection
with this Indenture or the Notes may be brought in the courts of the State of New York or the courts of the United States located in the
Borough of Manhattan, New York City, New York and, until amounts due and to become due in respect of the Notes have been paid,
hereby irrevocably consents and submits to the non-exclusive jurisdiction of each such court in personam, generally and unconditionally
with respect to any action, suit or proceeding for itself in respect of its properties, assets and revenues.
The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this
Indenture brought in the courts of the State of New York or the courts of the United States located in the Borough of Manhattan, New
York City, New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
81
Section 17.05 Submission to Jurisdiction; Service of Process. The Company irrevocably appoints Law Debenture Corporate
Service Inc. as its authorized agent in the Borough of Manhattan in the City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Company by the person
serving the same to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804, People’s Republic of China, Facsimile No.
+86 (21) 3913 0192, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The
Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in
full force and effect for a period of five and a half years from the date of this Indenture. If for any reason such agent shall cease to be
such agent for service of process, the Company shall forthwith appoint a new agent of recognized standing for service of process in the
State of New York and deliver to the Trustee a copy of the new agent’s acceptance of that appointment within ten Business Days of such
acceptance. Nothing herein shall affect the right of the Trustee, any agent or any Holder to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the Company in any other court of competent jurisdiction. To the
extent that the Company has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal
process with respect to itself or its property, the Company irrevocably waives such immunity in respect of its obligations hereunder or
under any Note.
Section 17.06 Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any
application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company
shall, if requested by the Trustee, furnish to the Trustee an Officers’ Certificate stating that such action is permitted by the terms of this
Indenture.
Each Officers’ Certificate provided for, by or on behalf of the Company in this Indenture and delivered to the Trustee with
respect to compliance with this Indenture (other than the Officers’ Certificates provided for in Section 4.09) shall include (a) a statement
that the person making such certificate is familiar with the requested action and this Indenture; (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statement contained in such certificate is based; (c) a statement that, in the
judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an
informed judgment as to whether or not such action is permitted by this Indenture; and (d) a statement as to whether or not, in the
judgment of such person, such action is permitted by this Indenture.
Notwithstanding anything to the contrary in this Section 17.06, if any provision in this Indenture specifically provides that the
Trustee shall or may receive an Opinion of Counsel in connection with any action to be taken by the Trustee or the Company hereunder,
the Trustee shall be entitled to, or entitled to request, such Opinion of Counsel.
Section 17.07 Legal Holidays. In any case where any Fundamental Change Repurchase Date, Conversion Date, Qualified
Equity Financing Conversion Date or Maturity Date is not a Business Day, then any action to be taken on such date need not be taken on
such date, but may
82
be taken on the next succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue in
respect of the delay.
Section 17.08 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed
to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in
any jurisdiction.
Section 17.09 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person,
other than the Holders, the parties hereto, any Paying Agent, any Conversion Agent, any Note Registrar and their successors hereunder,
any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of
this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 17.11 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall
be an original, but such counterparts shall together constitute but one and the same instrument.
Section 17.12 Severability. In the event any provision of this Indenture or in the Notes shall be invalid, illegal or
unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any
way be affected or impaired.
Section 17.13 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 17.14 Force Majeure. In no event shall the Trustee or the Agents be responsible or liable for any failure or delay in the
performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without
limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or
acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being
understood that the Trustee or the Agents, as the case may be, shall use reasonable efforts that are consistent with accepted practices in
the banking industry to resume performance as soon as practicable under the circumstances.
Section 17.15 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations
called for under the Notes. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices of the
ADSs, the
83
Conversion Rate of the Notes and any adjustments thereto. The Company shall make all these calculations in good faith and, absent
manifest error, the Company’s calculations shall be final and binding on Holders. The Company shall provide a schedule of its
calculations to each of the Trustee, the Paying Agent and the Conversion Agent, and each of the Trustee, the Paying Agent and the
Conversion Agent is entitled to rely conclusively and without liability upon the accuracy of the Company’s calculations without
independent verification. The Trustee will forward the Company’s calculations to any Holder of Notes upon the prior written request of
that Holder at the sole cost and expense of the Company.
[Remainder of page intentionally left blank]
84
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first above written.
NIO INC.
By: /s/ Steven Feng
Name: Steven Feng
Title: Chief Financial Officer
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Trustee
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Paying Agent and Conversion Agent
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG
BRANCH, as Registrar and Transfer Agent
By: /s/ Vivian Hui
Name: Vivian Hui
Title: Vice President
Signature Page to Indenture
[FORM OF FACE OF NOTE]
[INCLUDE FOLLOWING LEGEND IF A GLOBAL NOTE]
EXHIBIT A
[THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AN IS
REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR A NOMINEE OF THE COMMON DEPOSITARY, WHICH
MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS THE OWNER AND HOLDER OF
THIS NOTE FOR ALL PURPOSES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE BANK OF NEW YORK
MELLON, LONDON BRANCH AS COMMON DEPOSITARY (THE "COMMON DEPOSITARY") FOR EUROCLEAR BANK
SA/NV ("EUROCLEAR") AND CLEARSTREAM BANKING S.A. ("CLEARSTREAM") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
THE COMMON DEPOSITARY OR A NOMINEE THEREOF OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO COMMON
DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN
INTEREST HEREIN.
NO AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF NIO INC. (THE “COMPANY”) OR
PERSON THAT HAS BEEN AN AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY
DURING THE THREE IMMEDIATELY PRECEDING MONTHS MAY PURCHASE, OTHERWISE ACQUIRE OR OWN THIS
NOTE, THE AMERICAN DEPOSITARY SHARES DELIVERABLE UPON CONVERSION HEREOF AND THE ORDINARY
SHARES REPRESENTED THEREBY, OR A BENEFICIAL INTEREST HEREIN.]
[INCLUDE FOLLOWING LEGEND IN THE ORIGINALLY ISSUED NOTE AND ANY REPLACEMENT NOTE ISSUED UNTIL
THE DISTRIBUTION COMPLIANCE PERIOD TERMINATION DATE]
[THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND, PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOTE SUBJECT TO, THE
A-1
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.]
PRIOR TO AUGUST 10, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE NOTE SUBSCRIPTION
AGREEMENT BETWEEN NIO INC. AND THE PURCHASER NAMED THEREIN, DATED FEBRUARY 14, 2020 (THE
“SUBSCRIPTION AGREEMENT”). ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE,
HYPOTHECATE OR OTHERWISE TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION
SHALL BE VOID.
A-2
NIO INC.
0% Convertible Senior Note due 2021
[Initially] US$_________
1
No. [_______]
ISIN No. XS2123241676
Common Code 212324167
NIO Inc., a company duly organized and validly existing under the laws of the Cayman Islands (the “Company,” which term
includes any successor company or corporation or other entity under the Indenture referred to on the reverse hereof), for value received
hereby promises to pay to [The Bank of New York Depository (Nominees) Limited] [_______] , or registered assigns, the principal sum
[as set forth in the “Schedule of Exchanges of Notes” attached hereto] [of US$[__________]] , which amount, taken together with the
principal amounts of all other outstanding Notes, shall not exceed US$30,000,000 in aggregate at any time, in accordance with the rules
and procedures of Euroclear and Clearstream, on February 4, 2021 as set forth below.
2
4
3
5
This Note shall not bear any interest and the principal amount of this Note will not accrete.
Any Defaulted Amounts shall accrue interest per annum at the rate per annum equal to three percent, subject to the
enforceability thereof under applicable law, from, and including, the relevant payment date to, but excluding, the date on which such
Defaulted Amounts shall have been paid by the Company, at its election, in accordance with Section 2.03(c) of the Indenture.
The Company shall pay or cause the Paying Agent to pay the principal of (including any premium payable) and interest on this
Note, so long as such Note is a Global Note, in immediately available funds to the Common Depositary or its nominee, as the case may
be, as the registered Holder of such Note. As provided in and subject to the provisions of the Indenture, the Company shall pay the
principal of any Notes (other than Notes that are Global Notes) at the office or agency designated by the Company for that purpose. The
Company has initially designated the Bank of New York Mellon, London Branch as its Paying Agent and Conversion Agent and The
Bank of New York Mellon SA/NV, Luxembourg Branch as its Note Registrar and Transfer Agent in respect of the Notes and its agency
in the Borough of Manhattan, The City of New York, as a place where Notes may be presented for payment or for registration of transfer.
1
Include if a Global Note.
2
Include if a Global Note.
3
Include if a Physical Note.
4
Include if a Global Note.
5
Include if a Physical Note.
A-3
Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions
giving the Holder of this Note the right to convert this Note into ADSs on the terms and subject to the limitations set forth in the
Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Note, and any claim, controversy or dispute arising under or related to this Note, shall be construed in accordance
with and governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof).
In the case of any conflict between this Note and the Indenture, the provisions of the Indenture shall control and govern.
This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been
signed manually or by facsimile by the Note Registrar under the Indenture.
[Remainder of page intentionally left blank]
A-4
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
NIO INC.
By:
Name:
Title:
A-5
Dated:
NOTE REGISTRAR’S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG BRANCH
as Note Registrar, certifies that this is one of the Notes described
in the within-named Indenture.
By:
Name:
Title:
A-6
[FORM OF REVERSE OF NOTE]
NIO INC.
0% Convertible Senior Note due 2021
This Note is one of a duly authorized issue of Notes of the Company, designated as its 0% Convertible Senior Notes due 2021
(the “Notes”), limited to the aggregate principal amount of US$30,000,000, all issued or to be issued under and pursuant to an Indenture
dated as of February 19, 2020 (the “Indenture”), between the Company and The Bank of New York Mellon, London Branch as trustee
(the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties, privileges, disclaimers from liability and immunities thereunder of the Trustee, the Company and
the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate principal amount, subject to certain conditions
specified in the Indenture.
In the case certain Events of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and
interest on, all Notes may be declared, by either the Trustee or Holders of at least 25% in aggregate principal amount of Notes then
outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions and
certain exceptions set forth in the Indenture. In the case certain Events of Default relating to a bankruptcy (or similar proceeding) with
respect to the Company or a Significant Subsidiary of the Company shall have occurred, the principal of, and interest on, all Notes shall
automatically become immediately due and payable, as set forth in the Indenture.
Subject to the terms and conditions of the Indenture, the Company will make or cause the Paying Agent to make all payments in
respect of the principal amount (and any premium payable) on the Maturity Date and the Fundamental Change Repurchase Price, as the
case may be, to the Holder who surrenders a Note to collect such payments in respect of the Note. The Company will pay or cause the
Paying Agent to pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and
private debts.
Subject to the terms and conditions of the Indenture, the Company will cause to be paid a premium equal to (i) in the case of
any payment of principal to be made on the Maturity Date or pursuant to Section 6.02 of the Indenture, 2.0% of the outstanding principal
amount of the Notes, or (ii) in the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate
interest that would have accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case
may be) over the period starting from (and including) the original date of issuance of the Notes and ending on (and including) the
Fundamental Change Repurchase Date, if the Note were to bear interest at a rate of 2.0% per annum accruing daily and computed on the
basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day
month.
Subject to the terms and conditions of the Indenture, Additional Amounts will be paid in connection with any payments made
and deliveries caused to be made by the Company or any successor to the Company under or with respect to the Indenture and the Notes,
including, but not limited to, payments of principal (including, if applicable, the Fundamental Change Repurchase Price), premium, if
any, payments of interest and deliveries of ADSs or any other
A-7
consideration due on conversion of a Note (together with payments of cash for any Fractional ADS or other consideration) upon
conversion of the Notes to ensure that the net amount received by the beneficial owner of the Notes after any applicable withholding,
deduction or reduction (and after deducting any taxes on the Additional Amounts) will equal the amounts that would have been received
by such beneficial owner had no such withholding, deduction or reduction been required.
The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the
Holders of the Notes, and in certain other circumstances, with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures
modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain
exceptions, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of
all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay or cause to be delivered, as the case may be, the principal (including the
Fundamental Change Repurchase Price, if applicable, and any premium payable hereunder) of and the consideration due upon
conversion of, this Note at the place, at the respective times, at the rate and in the lawful money herein prescribed.
The Notes are issuable in registered form without interest coupons in denominations of US$1,000 principal amount and integral
multiples thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations
provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations,
without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any transfer
or similar tax that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such
exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.
The Company may not redeem the Notes prior to the Maturity Date. No sinking fund is provided for the Notes.
Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to
repurchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of US$1,000 or integral multiples thereof) on
the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price.
Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, prior to the close of business on the
second Business Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is US$1,000 principal
amount of Notes or an integral multiple thereof, into ADSs at the Conversion Rate specified in the Indenture, as adjusted from time to
time as provided in the Indenture.
A-8
Terms used in this Note and defined in the Indenture are used herein as therein defined.
A-9
The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were
written out in full according to applicable laws or regulations:
ABBREVIATIONS
TEN COM = as tenants in common
UNIF GIFT MIN ACT = Uniform Gifts to Minors Act
CUST = Custodian
TEN ENT = as tenants by the entireties
JT TEN = joint tenants with right of survivorship and not as tenants in common
Additional abbreviations may also be used though not in the above list.
A-10
SCHEDULE OF EXCHANGES OF NOTES
NIO INC.
0% Convertible Senior Notes due 2021
SCHEDULE A
6
The initial principal amount of this Global Note is [__________] UNITED STATES DOLLARS
(US$[_______________]). The following increases or decreases in this Global Note have been made:
Amount of
decrease in
principal amount
of this Global Note
Amount of
increase in
principal amount
of this Global Note
Principal amount
of this Global Note
following such
decrease or
increase
Signature of
authorized
signatory of
Trustee
Date of exchange
6
Include if a Global Note.
A-11
ATTACHMENT 1
[FORM OF NOTICE OF CONVERSION]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Conversion Agent
DEUTSCHE BANK TRUST COMPANY AMERICAS, as ADS Depositary
The undersigned registered holder of this Note (ISIN No. XS2123241676; Common Code 212324167) hereby exercises the
option to convert that Note, or the portion thereof (that is US$1,000 principal amount or an integral multiple thereof) below designated,
into ADSs in accordance with the terms of the Indenture referred to in this Note, and directs that any ADSs deliverable upon such
conversion, together with any cash payable for any Fractional ADS, and any Notes representing any unconverted principal amount
hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. Terms defined in the
Deposit Agreement or the Indenture referred to in this Notice are used herein as so defined. If any ADSs or any portion of this Note not
converted are to be issued in the name of a Person other than the undersigned, the undersigned will pay all documentary, stamp, issue,
transfer or similar taxes, if any, in accordance with Section 14.02(d) and Section 14.02(e) of the Indenture. Any amount required to be
paid to the undersigned on account of interest accompanies this Notice.
In connection with the conversion of this Note, or the portion hereof below designated, the undersigned acknowledges,
represents to and agrees with the Company that the undersigned is not an “affiliate” (as defined in Rule 144 under the Securities Act) of
the Company and has not been an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company during the three months
immediately preceding the date hereof.
The undersigned hereby instructs the ADS Depositary to register the ADSs in the name of:
1. Name of Beneficial Owner to receive ADSs (English):
2. Address of Beneficial Owner to receive ADSs (English):
3. Name of Registered Holder of the Deposited Shares:
4. Number of Deposited Shares:
5. Number of ADSs to be issued:
6. Beneficial Owner’s Tax ID Number:
7. Contact Name and Tel No/email address:
The undersigned instructs the Depositary to deliver the ADRs representing the ADSs to the following account:
1
ADS Receiving Broker ( * are mandatory fields):
a) DTC Broker Name*:
b) DTC Broker’s Participant Account with DTC *:
c) DTC Broker Contact Name:
d) DTC Broker Contact Tel No/email:
e) Beneficial Owner’s Account # with DTC Broker*:
OR
e) Local Broker Name (have account with DTC Broker)*:
Local Broker Sub-Account # with DTC Broker*:
Local Broker Contact Name:
Local Broker Contact Tel No/email:
ADS Delivering Party:
Name:
Deutsche Bank Trust Company Americas DTC Account: #2655
For any ADS settlement inquiries, please contact DBTCA Broker Desk:
Tel: +1-212-250-9100 (New York) / +44-207-547-6500 (London)
Email: adr@db.com
2
Dated: ______________________
Signature(s)
Signature Guarantee
Signature(s) must be guaranteed by an eligible Guarantor
Institution (banks, stock brokers, savings and loan associations
and credit unions) with membership in an approved signature
guarantee medallion program pursuant to Securities and Exchange
Commission Rule 17Ad-15 if ADSs are to be issued other than to
and in the name of the registered holder.
Fill in for registration of ADSs if to be issued other than to and in
the name of the registered holder:
(Name)
(Street Address)
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all):
US$ _________,000
NOTICE: The above signature(s) of the Holder(s) hereof must
correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change
whatever.
Social Security or Other Taxpayer
Identification Number
3
ATTACHMENT 2
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Trustee
The undersigned registered owner of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to
the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the registered holder hereof in accordance with Section 15.02 of the Indenture referred to in
this Note the entire principal amount of this Note, or the portion thereof (that is US$1,000 principal amount or an integral multiple
thereof) below designated.
In the case of Physical Notes, the certificate numbers of the Notes to be repurchased are as set forth below:
Certificate Number(s): ____________________________
Dated:
Signature(s)
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less than all):
US$ ______,000
NOTICE: The above signature(s) of the Holder(s) hereof must
correspond with the name as written upon the face of the Note in every
particular without alteration or enlargement or any change whatever.
1
[FORM OF ASSIGNMENT AND TRANSFER]
ATTACHMENT 3
For value received ______________________ hereby sell(s), assign(s) and transfer(s) unto _______________ (Please insert social
security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints
_______________ attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Note occurring prior to the Distribution Compliance Period Termination Date, as defined in
the Indenture governing such Note, the undersigned confirms that such Note is being transferred:
☐ To NIO Inc. or a subsidiary thereof; or
☐ Pursuant to a registration statement that has become or been declared effective under the Securities Act of 1933, as amended; or
☐ To a non-U.S. person in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S under the
Securities Act of 1933, as amended; or
☐ Pursuant to an exemption from the registration requirements of the Securities Act.
1
Dated: ______________________
Signature(s)
NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
2
EXHIBIT B
I, [Name], [Title], acting on behalf of NIO Inc. (the “Company”) hereby certify that:
[FORM OF AUTHORIZATION CERTIFICATE]
(A) the persons listed below are (i) authorized Officers of the Company for purposes of the Indenture (the “Indenture”) dated as of
February 19, 2020 between the Company and The Bank of New York Mellon, London Branch as trustee, in relation to the 0%
Convertible Senior Notes due 2021 (the “Notes”), (ii) duly elected or appointed, qualified and acting as the holder of the respective
office or offices set forth opposite their names and (iii) the duly authorized persons who executed or will execute the Indenture and the
Notes issued pursuant to the Indenture by their manual or facsimile signatures and were at the time of such execution, duly elected or
appointed, qualified and acting as the holder of the offices set forth opposite their names;
(B) each of the individuals listed below have the authority to receive call backs at the telephone numbers noted below upon request of
The Bank of New York Mellon, London Branch in connection with the Notes issued pursuant to the Indenture;
(C) each signature appearing below is the person’s genuine signature; and
(D) attached hereto as Schedule I is a true, correct and complete specimen of the certificates representing the Notes.
B-1
IN WITNESS WHEREOF, I have hereunto executed and delivered this certificate on behalf of the Company as of the date
indicated.
Dated: ______________________
[Name]
By:
Name:
Title:
Name
Title, Fax No.,
Email
Signature
Tel No.
SCHEDULE I
B-2
NIO Inc.
and
Exhibit 4.33
The Bank of New York Mellon, London Branch as Trustee
and
The Bank of New York Mellon, London Branch, as Paying Agent and Conversion Agent
and
The Bank of New York Mellon SA/NV, Luxembourg Branch, as Registrar and Transfer Agent
INDENTURE
dated as of March 11, 2020
US$235,000,000 0% CONVERTIBLE SENIOR NOTES DUE 2021
i
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.01
Definitions
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Designation and Amount
Form of Notes
Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts
Execution, Authentication and Delivery of Notes
Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary
Mutilated, Destroyed, Lost or Stolen Notes
Temporary Notes
Cancellation of Notes Paid, Converted, Etc.
Common Code and ISIN Numbers
Additional Notes; Repurchases
Section 3.01
Satisfaction and Discharge
ARTICLE 3
SATISFACTION AND DISCHARGE
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07
Payment of Principal and Premium
Maintenance of Office or Agency
Appointments to Fill Vacancies in Trustee’s Office
Provisions as to Paying Agent
Existence
[RESERVED]
Additional Amounts
ii
PAGE
1
12
12
13
14
15
20
21
22
22
22
23
23
24
24
24
26
26
26
Section 4.08
Section 4.09
Section 4.10
Stay, Extension and Usury Laws
Compliance Certificate; Statements as to Defaults
Further Instruments and Acts
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01
Section 5.02
Lists of Holders
Preservation and Disclosure of Lists
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section 6.05
Section 6.06
Section 6.07
Section 6.08
Section 6.09
Section 6.10
Section 6.11
Events of Default
Acceleration; Rescission and Annulment
[RESERVED]
Payments of Notes on Default; Suit Therefor
Application of Monies Collected by Trustee
Proceedings by Holders
Proceedings by Trustee
Remedies Cumulative and Continuing
Direction of Proceedings and Waiver of Defaults by Majority of Holders
Notice of Defaults and Events of Default
Undertaking to Pay Costs
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Section 7.06
Section 7.07
Section 7.08
Duties and Responsibilities of Trustee
Reliance on Documents, Opinions, Etc.
No Responsibility for Recitals, Etc.
Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes
Monies to Be Held in Trust
Compensation and Expenses of Trustee
Officers’ Certificate as Evidence
Eligibility of Trustee
iii
29
29
30
30
30
30
32
33
33
35
35
36
36
37
37
38
38
41
43
44
44
44
45
45
Section 7.09
Section 7.10
Section 7.11
Section 7.12
Resignation or Removal of Trustee
Acceptance by Successor Trustee
Succession by Merger, Etc.
Trustee’s Application for Instructions from the Company
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Action by Holders
Proof of Execution by Holders
Who Are Deemed Absolute Owners
Company-Owned Notes Disregarded
Revocation of Consents; Future Holders Bound
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
Purpose of Meetings
Call of Meetings by Trustee
Call of Meetings by Company or Holders
Qualifications for Voting
Regulations
Voting
No Delay of Rights by Meeting
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01
Section 10.02
Section 10.03
Section 10.04
Section 10.05
Supplemental Indentures Without Consent of Holders
Supplemental Indentures with Consent of Holders
Effect of Supplemental Indentures
Notation on Notes
Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01
Section 11.02
Company May Consolidate, Etc. on Certain Terms
Successor Corporation to Be Substituted
iv
46
47
47
48
48
49
49
49
50
50
50
51
51
51
52
52
52
53
54
54
55
55
56
Section 11.03
Opinion of Counsel to Be Given to Trustee
ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01
Indenture and Notes Solely Corporate Obligations
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01
Section 14.02
Section 14.03
Section 14.04
Section 14.05
Section 14.06
Section 14.07
Section 14.08
Section 14.09
Section 14.10
Section 14.11
Section 14.12
Conversion Privilege
Conversion Procedure; Settlement Upon Conversion.
[RESERVED]
Adjustment of Conversion Rate
Adjustments of Prices
Ordinary Shares to Be Fully Paid
Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares
Certain Covenants
Responsibility of Trustee
Notice to Holders Prior to Certain Actions
Stockholder Rights Plans
Termination of Depositary Receipt Program
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
[RESERVED]
Repurchase at Option of Holders Upon a Fundamental Change
Section 15.01
Section 15.02
Section 15.03 Withdrawal of Fundamental Change Repurchase Notice
Section 15.04
Section 15.05
Deposit of Fundamental Change Repurchase Price
Covenant to Comply with Applicable Laws Upon Repurchase of Notes
56
57
57
57
60
60
70
70
70
72
72
73
74
74
74
74
77
77
78
ARTICLE 16
BRRD MATTERS
v
ARTICLE 17
MISCELLANEOUS PROVISIONS
Provisions Binding on Company’s Successors
Official Acts by Successor Corporation
Addresses for Notices, Etc.
Governing Law; Jurisdiction
Submission to Jurisdiction; Service of Process
Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee
Legal Holidays
No Security Interest Created
Benefits of Indenture
Table of Contents, Headings, Etc.
Execution in Counterparts
Severability
Section 17.01
Section 17.02
Section 17.03
Section 17.04
Section 17.05
Section 17.06
Section 17.07
Section 17.08
Section 17.09
Section 17.10
Section 17.11
Section 17.12
Section 17.13 Waiver of Jury Trial
Section 17.14
Section 17.15
Force Majeure
Calculations
Exhibit A
Exhibit B
Form of Note
Form of Authorization Certificate
EXHIBIT
vi
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79
79
80
81
81
82
82
82
82
82
82
83
83
83
A-1
B-1
INDENTURE dated as of March 11, 2020 between NIO INC., a Cayman Islands exempted company, PO Box 309, Ugland
House, Grand Cayman, KY1-1104, Cayman Islands, as issuer (the “Company,” as more fully set forth in Section 1.01), THE BANK OF
NEW YORK MELLON, LONDON BRANCH, a banking organization organized and existing under the laws of the State of New York
with limited liability and operating through its branch in London at One Canada Square, London E14 5AL, United Kingdom, as trustee
(the “Trustee”), as paying agent (the “Paying Agent”) and as conversion agent (the “Conversion Agent”) (as more fully set forth in
Section 1.01) and THE BANK OF NEW YORK MELLON, SA/NV, LUXEMBOURG BRANCH, operating through its branch in
Luxembourg at Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg as registrar (the “Registrar”) and as transfer
agent (the “Transfer Agent”) (as more fully set forth in Section 1.01).
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its 0% Convertible Senior
Notes due 2021 (the “Notes”), offered and sold outside the United States pursuant to Regulation S in an aggregate principal amount not
to exceed US$235,000,000, subject to Section 2.10, and in order to provide the terms and conditions upon which the Notes are to be
authenticated, issued and delivered, the Company has duly authorized the execution and delivery of this Indenture; and
WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note, the Form of Notice of Conversion, the
Form of Fundamental Change Repurchase Notice and the Form of Assignment and Transfer to be borne by the Notes are to be
substantially in the forms hereinafter provided; and
WHEREAS, all acts and things necessary to make the Notes, when executed by the Company and authenticated and delivered
by the Note Registrar, as in this Indenture provided, the valid, binding and legal obligations of the Company, and this Indenture a valid
agreement according to its terms, have been done and performed, and the execution of this Indenture and the issuance hereunder of the
Notes have in all respects been duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are, and are to be, authenticated, issued and delivered,
and in consideration of the premises and of the purchase and acceptance of the Notes by the Holders thereof, the Company covenants and
agrees with the Trustee for the equal and proportionate benefit of the respective Holders from time to time of the Notes (except as
otherwise provided below), as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the
context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective
meanings specified in this Section 1.01. The words “herein,” “hereof,” “hereunder,” and words of similar import
1
refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include
the plural as well as the singular.
“Additional Amounts” shall have the meaning specified in Section 4.07(a).
“ADS” means an American Depositary Share issued pursuant to the Deposit Agreement representing one Ordinary Share of the
Company as of the date of this Indenture, and deposited with the ADS Custodian.
“ADS Custodian” means Deutsche Bank AG, Hong Kong Branch, with respect to the ADSs delivered pursuant to the Deposit
Agreement or any successor entity thereto.
“ADS Depositary” means Deutsche Bank Trust Company Americas, as depositary for the ADSs.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this definition, “control,” when used with respect to any
specified Person means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.
“Agents” means the Paying Agent, the Transfer Agent, the Note Registrar and the Conversion Agent.
“applicable taxes” shall have the meaning specified in Section 4.07(a).
“Bail-in Legislation” means in relation to a member state of the European Economic Area which has implemented, or which at
any time implements, the BRRD, the relevant implementing law, regulation, rule or requirement as described in the EU Bail-in
Legislation Schedule from time to time.
“Bail-in Powers” means any Write-down and Conversion Powers as defined in the EU Bail-in Legislation Schedule, in relation
to the relevant Bail-in Legislation.“BNY Mellon Group” shall have the meaning specified in Section 7.02.
“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it
hereunder.
“Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors, and to be in full force and effect on the date of such certification, and delivered to the
Trustee.
“BRRD” means Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and
investment firms.
2
“BRRD Liability” means a liability in respect of which the relevant Write Down and Conversion Powers in the applicable Bail-
in Legislation may be exercised.
“Business Day” means, with respect to any Note, each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in the State of New York, or the Cayman Islands are authorized or obligated by law or executive order to
close.
“Capital Stock” means, for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that entity.
“Clause A Distribution” shall have the meaning specified in Section 14.04(c).
“Clause B Distribution” shall have the meaning specified in Section 14.04(c).
“Clause C Distribution” shall have the meaning specified in Section 14.04(c).
"Clearstream" means Clearstream Banking S.A.
“close of business” means 5:00 p.m. (New York City time).
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Commission” means the U.S. Securities and Exchange Commission.
"Common Depositary" means the common depositary acting on behalf of Euroclear and Clearstream.
“Common Equity” of any Person means ordinary share capital or common stock of such Person that is generally entitled (a) to
vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection
of the governing body, partners, managers or others that will control the management or policies of such Person.
“Company” shall have the meaning specified in the first paragraph of this Indenture, and subject to the provisions of Article 11,
shall include its successors and assigns.
“Company Order” means a written order of the Company, signed by an Officer of the Company and delivered to the Trustee
and/or Note Registrar, as applicable.
“Consolidated Affiliated Entity” means, with respect to any Person, any corporation, association or other entity which is or is
required to be consolidated with such Person under Accounting Standards Codification subtopic 810-10, Consolidation: Overall
(including any changes, amendments or supplements thereto) or, if such person prepares its financial statements in accordance with
accounting principles other than the accounting principles generally accepted in the United States of America, the equivalent of
Accounting Standards Codification subtopic 810-10, Consolidation: Overall under such accounting principles.
3
“Conversion Agent” shall have the meaning specified in Section 4.02.
“Conversion Date” shall have the meaning specified in Section 14.02(c).
“Conversion Obligation” shall have the meaning specified in Section 14.01.
“Conversion Rate” shall have the meaning specified in Section 14.01.
“Corporate Trust Office” means the corporate trust office of the Trustee at which at any time its corporate trust business shall
be administered, which office at the date hereof is located at The Bank of New York Mellon, London Branch, One Canada Square,
London E14 5AL, United Kingdom, Attention: Corporate Trust Administration – Project Camel III (NIO Inc.), Fax: +44 1202 689660,
and shall include a reference to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific Place, 1 Queen’s Road East,
Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852 2295 3283, or such other address as the Trustee may
designate from time to time by notice to the Holders and the Company, or the corporate trust office of any successor trustee (or such
other address as such successor trustee may designate from time to time by notice to the Holders and the Company).
“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported
Sale Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading Day
immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall have been
quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:
(a) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances do not rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this
definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or
(b) if the ADSs (or the Class A Ordinary Shares) to be issued in such circumstances rank for the dividend in
question, the quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this
definition be deemed to be the amount thereof increased by such similar amount.
“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.
“Defaulted Amounts” means any amounts on any Note (including, without limitation, the Fundamental Change Repurchase
Price, principal, premium and interest) that are payable but are not punctually paid or duly provided for.
“Deposit Agreement” means the deposit agreement dated as of September 11, 2018 by and among the Company, the ADS
Depositary and the holders and beneficial owners of the
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ADSs delivered thereunder or, if amended or supplemented as provided therein, as so amended or supplemented.
“Distributed Property” shall have the meaning specified in Section 14.04(c).
“Distribution Compliance Period Termination Date” shall have the meaning specified in Section 2.05(c).
“EU Bail-in Legislation Schedule” means the document described as such, then in effect, and published by the Loan Market
Association (or any successor person) from time to time at http://www.lma.eu.com/pages.aspx?p=499.
"Euroclear" means Euroclear Bank SA/NV.
“Event of Default” shall have the meaning specified in Section 6.01.
“Ex-Dividend Date” means the first date on which the ADSs trade on the applicable exchange or in the applicable market,
regular way, without the right to receive the issuance, dividend or distribution in question, from the Company or, if applicable, from the
seller of the ADSs on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
“Expiring Rights” means any rights, options or warrants to purchase Ordinary Shares or ADSs that expire on or prior to the
Maturity Date.
“FATCA” shall have the meaning specified in Section 4.07(a)(i)(D).
“Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached as Attachment 3 to the Form
of Note attached hereto as Exhibit A.
“Form of Fundamental Change Repurchase Notice” shall mean the “Form of Fundamental Change Repurchase Notice”
attached as Attachment 2 to the Form of Note attached hereto as Exhibit A.
“Form of Notice of Conversion” shall mean the “Form of Notice of Conversion” attached as Attachment 1 to the Form of Note
attached hereto as Exhibit A.
“Fractional ADS” shall have the meaning specified in Section 14.02(a).
“Fundamental Change” shall be deemed to have occurred at the time after the Notes are originally issued if any of the
following occurs:
(a) (A) a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company,
its Subsidiaries, the employee benefit plans of
5
the Company and its Subsidiaries and any of the Permitted Holders, files a Schedule TO or any schedule, form or report under
the Exchange Act disclosing that such person or group has become the direct or indirect “beneficial owner,” as defined in Rule
13d-3 under the Exchange Act, of (i) the Company’s Common Equity (including Common Equity held in the form of ADSs)
representing more than 50% of the voting power of the Company’s Common Equity or (ii) more than 50% of the outstanding
Ordinary Shares (including Ordinary Shares held in the form of ADSs); or (B) the Permitted Holders (together with any of their
respective Affiliates) have become the direct or indirect “beneficial owners,” as defined in Rule 13d-3 under the Exchange Act,
of Ordinary Shares (including Ordinary Shares held in the form of ADSs) representing, in the aggregate, more than 65% of the
outstanding Ordinary Shares (including Ordinary Shares held in the form of ADSs), based on any Schedule TO or any schedule,
form or report under the Exchange Act disclosing the same filed by any one or more of the Permitted Holders;
(b) the consummation of (A) any recapitalization, reclassification or change of the Ordinary Shares or the ADSs
(other than changes resulting from a subdivision or combination) as a result of which the Ordinary Shares or the ADSs would be
converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or
merger of the Company, or any similar transaction, pursuant to which the Ordinary Shares or the ADSs will be converted into
cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or
substantially all of the consolidated assets of the Company and its Subsidiaries and Consolidated Affiliated Entities, taken as a
whole, to any Person other than one of the Company’s wholly-owned Subsidiaries; provided, however, that a transaction
described in clause (B) in which the holders of all classes of the Company’s Common Equity immediately prior to such
transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving
corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-a-vis
each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause
(b);
(c) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the
Company;
(d) the ADSs (or other Common Equity or ADSs in respect of Common Equity underlying the Notes) cease to be
listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global
Market (or any of their respective successors); or
(e) any change in or amendment to the laws, regulations and rules of the People’s Republic of China or the official
interpretation or official application thereof (a “Change in Law”) that results in (x) the Company, its Subsidiaries and its
Consolidated Affiliated Entities (collectively, the “Company Group”) (as in existence immediately subsequent to such Change
in Law), as a whole, being legally prohibited from operating substantially all of the business operations conducted by the
Company Group (as in
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existence immediately prior to such Change in Law) as of the last date of the period described in the Company’s consolidated
financial statements for the most recent fiscal quarter and (y) the Company’s being unable to continue to derive substantially all
of the economic benefits from the business operations conducted by the Company Group (as in existence immediately prior to
such Change in Law) in the same manner as reflected in the Company’s consolidated financial statements for the most recent
fiscal quarter;
provided, however, that a transaction or event described in clause (b) above shall not constitute a Fundamental Change, if at least 90% of
the consideration received or to be received by holders of the ADSs, excluding cash payments for Fractional ADSs, in connection with
such transaction or event consists of shares of Common Equity or ADSs in respect of Common Equity that are listed or quoted on any of
The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective
successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or event that would otherwise
constitute a Fundamental Change under clause (b) of the definition thereof and as a result of such transaction or event, the Notes become
convertible into such consideration, excluding cash payments for Fractional ADSs and cash payments made in connection with
dissenters’ appraisal rights; and provided further that an event that is not considered a Fundamental Change pursuant to this proviso shall
not be a Fundamental Change solely because such event could also be subject to clause (a) above.
“Fundamental Change Company Notice” shall have the meaning specified in Section 15.02(c).
“Fundamental Change Repurchase Date” shall have the meaning specified in Section 15.02(a).
“Fundamental Change Repurchase Notice” shall have the meaning specified in Section 15.02(b)(i).
“Fundamental Change Repurchase Price” shall have the meaning specified in Section 15.02(a).
“Global Note” shall have the meaning specified in Section 2.05(b).
“Holder,” as applied to any Note, or other similar terms (but excluding the term “beneficial holder”), shall mean any Person in
whose name at the time a particular Note is registered on the Note Register.
“Indenture” means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or
supplemented.
“Last Reported Sale Price” of the ADSs on any date means the closing sale price per ADS (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask
prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the
ADSs are traded. If the ADSs are not listed for trading on a U.S. national or
7
regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be the last quoted bid price for the ADSs in the
over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If the ADSs are not so
quoted, the “Last Reported Sale Price” shall be the average of the mid-point of the last bid and ask prices for the ADSs on the relevant
date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose.
“Maturity Date” means March 5, 2021.
“Merger Event” shall have the meaning specified in Section 14.07(a).
“Note” or “Notes” shall have the meaning specified in the first paragraph of the recitals of this Indenture.
“Note Register” shall have the meaning specified in Section 2.05(a).
“Note Registrar” shall have the meaning specified in Section 2.05(a).
“Notice of Conversion” shall have the meaning specified in Section 14.02(b).
“Officer” means, with respect to the Company, the President, the Chief Executive Officer, the Chief Financial Officer the
Treasurer, the Secretary, any Executive or Senior Vice President or any Vice President (whether or not designated by a number or
numbers or word or words added before or after the title “Vice President”).
“Officers’ Certificate,” when used with respect to the Company, means a certificate that is delivered to the Trustee and that is
signed by (a) two Officers of the Company or (b) one Officer of the Company and one of any Assistant Treasurer, any Assistant
Secretary or General Counsel or the Controller of the Company. Each such certificate shall include the statements provided for in
Section 17.06 if and to the extent required by the provisions of such Section. One of the Officers giving an Officers’ Certificate pursuant
to Section 4.09 shall be the principal executive, financial or accounting officer of the Company.
“open of business” means 9:00 a.m. (New York City time).
“Opinion of Counsel” means an opinion in writing signed by legal counsel and in a form reasonably acceptable to the Trustee,
who may be counsel to the Company, or other counsel acceptable to the Trustee, that is delivered to the Trustee. Each such opinion shall
include the statements provided for in Section 17.06 if and to the extent required by the provisions of such Section 17.06.
“Ordinary Shares” means Class A ordinary shares of the Company, par value US$0.00025 per share, at the date of this
Indenture, subject to Section 14.07.
“outstanding,” when used with reference to Notes, shall, subject to the provisions of Section 8.04, mean, as of any particular
time, all Notes authenticated and delivered by the Note Registrar under this Indenture, except:
8
(a) Notes theretofore canceled by the Note Registrar or accepted by the Note Registrar for cancellation;
(b) Notes, or portions thereof, that have become due and payable and in respect of which monies in the necessary
amount shall have been deposited with the Trustee or with any Paying Agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent);
(c) Notes that have been paid pursuant to Section 2.06 or Notes in lieu of which, or in substitution for which, other
Notes shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Trustee
is presented that any such Notes are held by protected purchasers in due course;
(d) Notes converted pursuant to Article 14 and required to be cancelled pursuant to Section 2.08; and
(e) Notes repurchased by the Company pursuant to the third sentence of Section 2.10.
“Paying Agent” shall have the meaning specified in Section 4.02.
“Permitted Holders” means Mr. Bin Li and Tencent Holdings Limited, together with any other respective “person” or “group”
subject to aggregation with respect to the Ordinary Shares (including Ordinary Shares held in the form of ADSs) with any of the
aforementioned person and entity under Section 13(d) of the Exchange Act.
“Person” means an individual, a corporation, a limited liability company, an association, a partnership, a joint venture, a joint
stock company, a trust, an unincorporated organization or a government or an agency or a political subdivision thereof.
“Physical Notes” means permanent certificated Notes in registered form issued in denominations of US$1,000 principal amount
and multiples thereof.
"PRC" means the People's Republic of China and, for the purposes for this Indenture, shall exclude Hong Kong SAR, Macau
SAR and Taiwan.
“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.06 in
lieu of or in exchange for a mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note that it replaces.
“Qualified Equity Financing” means a bona fide issuance of equity securities of the Company for fundraising purposes after
the date of this Indenture through September 5, 2020, excluding any of the following: (i) ADSs issued upon conversion of any Note or
any convertible securities then outstanding, (ii) Ordinary Shares (directly or in the form of ADSs) issued upon
9
share split, share dividend or any subdivision of Ordinary Shares (directly or in the form of ADSs), (iii) Ordinary Shares (directly or in
the form of ADSs) (or options or warrants therefor) issued to officers, directors, employees and consultants of the Company or issued to
the trustee, general partner or other entity that is to hold the Ordinary Shares (directly or in the form of ADSs), in each case pursuant to a
duly approved employee equity incentive plan, and (iv) shares of the Company issued pursuant to any bona fide acquisition, on arms-
length terms, of interests in or assets of another corporation or entity by the Company as duly approved by the Board of Directors.
“Qualified Equity Financing Conversion Rate” means the conversion rate equal to US$1,000 divided by the per-share
issuance price applicable to the new issuance of equity securities of the Company in the Qualified Equity Financing.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the
Ordinary Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other
property or in which the Ordinary Shares (directly or in the form of ADSs) (or such other security) are exchanged for or converted into
any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).
“Reference Price” means the higher of (i) US$3.50 per Class A Share, subject to the same adjustment to the Conversion Rate
pursuant to this Indenture and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to under
the provisions in Section 14.04(f).
“Reference Property” shall have the meaning specified in Section 14.07(a).
“Regulation S” means Regulation S under the Securities Act or any successor to such regulation.
“Relevant Jurisdiction” shall have the meaning specified in Section 4.07(a).
“Relevant Resolution Authority” means the resolution authority with the ability to exercise any Bail-in Powers in relation to
The Bank of New York Mellon SA/NV, Luxembourg Branch.
“Relevant Taxing Jurisdiction” shall have the meaning specified in Section 4.07(a).
“Responsible Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the
Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of
the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers,
respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this Indenture.
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“Rule 144” means Rule 144 as promulgated under the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1,
Rule 1-02 of Regulation S-X under the Exchange Act. Each of the Company’s Consolidated Affiliated Entities will be deemed to be a
“subsidiary” for purposes of the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X.
“Spin-Off” shall have the meaning specified in Section 14.04(c).
“Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which
more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii)
one or more Subsidiaries of such Person.
“Successor Company” shall have the meaning specified in Section 11.01(a).
“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be
determined) generally occurs on the New York Stock Exchange or, if the ADSs (or such other security) are not then listed on the New
York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the ADSs (or such other security) are
then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities exchange, on the principal
other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale Price for the ADSs (or closing sale
price for such other security) is available on such securities exchange or market; provided that if the ADSs (or such other security) are
not so listed or traded, “Trading Day” means a Business Day.
“transfer” shall have the meaning specified in Section 2.05(c) and Section 2.05(e), as applicable.
“Transfer Agent” shall have the meaning specified in Section 4.02.
“Trigger Event” shall have the meaning specified in Section 14.04(c).
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended, as it was in force at the date of execution of this
Indenture; provided, however, that in the event the Trust Indenture Act of 1939 is amended after the date hereof, the term “Trust
Indenture Act” shall mean, to the extent required by such amendment, the Trust Indenture Act of 1939, as so amended.
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“Trustee” means the Person named as the “Trustee” in the first paragraph of this Indenture until a successor trustee shall have
become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is
then a Trustee hereunder.
“unit of Reference Property” shall have the meaning specified in Section 14.07(a).
“U.S. Person” shall have the meaning as such term is defined under Regulation S.
“Valuation Period” shall have the meaning specified in Section 14.04(c).
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES
Section 2.01 Designation and Amount. The Notes shall be designated as the “0% Convertible Senior Notes due 2021.” The
aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is limited to US$235,000,000, subject
to Section 2.10 and except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of other
Notes pursuant to Section 2.05, Section 2.06, Section 2.07, Section 10.04, Section 14.02 and Section 15.04.
Section 2.02 Form of Notes. The Notes and the Note Registrar’s certificate of authentication to be borne by such Notes shall
be substantially in the respective forms set forth in Exhibit A, the terms and provisions of which shall constitute, and are hereby
expressly incorporated in and made a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.
Any Global Note may be endorsed with or have incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the Common Depositary, or as may be required to comply with
any applicable law or any regulation thereunder or with the rules and regulations of any securities exchange or automated quotation
system upon which the Notes may be listed or traded or designated for issuance or to conform with any usage with respect thereto, or to
indicate any special limitations or restrictions to which any particular Notes are subject.
Any of the Notes may have such letters, numbers or other marks of identification and such notations, legends or endorsements
as the Officers executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of this Indenture, or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Notes may be
listed or designated for issuance, or to conform to usage or to indicate any special limitations or restrictions to which any particular Notes
are subject.
Each Global Note shall represent such principal amount of the outstanding Notes as shall be specified therein and shall provide
that it shall represent the aggregate principal amount of
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outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be increased or reduced to reflect redemptions, repurchases, cancellations, conversions, transfers or exchanges
permitted hereby. Any endorsement of the Global Note to reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Note Registrar in such manner and upon instructions given by the Holder
of such Notes in accordance with this Indenture. Payment of principal (including the Fundamental Change Repurchase Price, if
applicable) of the Global Note shall be made to the Holder of such Note on the date of payment, unless a record date or other means of
determining Holders eligible to receive payment is provided for herein.
Section 2.03 Date and Denomination of Notes; No Regular Interest; Payments of Defaulted Amounts. (a) The Notes shall be
issuable in registered form without coupons in denominations of US$1,000 principal amount and integral multiples thereof. Each Note
shall be dated the date of its authentication and shall not bear regular interest, and the principal amount of the Notes will not accrete.
(b) [RESERVED]
(c) Any Defaulted Amounts shall forthwith cease to be payable to the Holder on the relevant payment date but shall accrue
interest per annum at the rate of three percent per annum, subject to the enforceability thereof under applicable law, from, and including,
such relevant payment date, and such Defaulted Amounts together with such interest thereon shall be paid by the Company, at its election
in each case, as provided in clause (i) or (ii) below:
(i) The Company may elect to make payment of any Defaulted Amounts to the Persons in whose names the Notes
(or their respective Predecessor Notes) are registered at the close of business on a special record date for the payment of such
Defaulted Amounts, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the
amount of the Defaulted Amounts proposed to be paid on each Note and the date of the proposed payment (which shall be not
less than 25 days after the receipt by the Trustee of such notice, unless the Trustee in its sole discretion shall consent to an
earlier date), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate
amount to be paid in respect of such Defaulted Amounts or shall make arrangements satisfactory to the Trustee for such deposit
on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Amounts as in this clause provided. Thereupon the Company shall fix a special record date for the
payment of such Defaulted Amounts which shall be not more than 15 days and not less than 10 days prior to the date of the
proposed payment, and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The
Company shall promptly notify the Trustee in writing of such special record date and the Trustee, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such Defaulted Amounts and the special record date
therefor to be mailed, first-class postage prepaid (at the Company’s expense), to each Holder at its address as it appears in the
Note Register, not less than 10 days prior to such special record date. Notice of the
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proposed payment of such Defaulted Amounts and the special record date therefor having been so mailed, such Defaulted
Amounts shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the
close of business on such special record date and shall no longer be payable pursuant to the following clause (ii) of this Section
2.03(c).
(ii) The Company may make payment of any Defaulted Amounts in any other lawful manner not inconsistent with
the requirements of any securities exchange or automated quotation system on which the Notes may be listed or designated for
issuance, and upon such notice as may be required by such exchange or automated quotation system, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable
by the Trustee.
Section 2.04 Execution, Authentication and Delivery of Notes. The Notes shall be signed in the name and on behalf of the
Company by the manual or facsimile signature of its Chief Executive Officer, President, Chief Financial Officer, Treasurer, Secretary or
any of its Executive or Senior Vice Presidents. With the delivery of this Indenture, the Company is furnishing, and from time to time
thereafter may furnish, a certificate substantially in the form of Exhibit B (an “Authorization Certificate”) identifying and certifying the
incumbency and specimen (and/or facsimile) signatures of its active authorized Officers. Until the Trustee receives a subsequent
Authorization Certificate, the Trustee shall be entitled to conclusively rely on the last Authorization Certificate delivered to it for
purposes of determining the relevant authorized Officers. Typographical and other minor errors or defects in any signature shall not
affect the validity or enforceability of any Note which has been duly authenticated and delivered by the Note Registrar.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed
by the Company to the Note Registrar for authentication, together with a Company Order for the authentication and delivery of such
Notes, and the Note Registrar in accordance with such Company Order shall authenticate and deliver such Notes, without any further
action by the Company hereunder.
The Company Order shall specify the amount of Notes to be authenticated, the date on which the original issuance of such
Notes is to be authenticated, the date on which the principal of such Notes will be payable and other terms relating to such Notes. The
Note Registrar shall thereupon authenticate and deliver said Notes to or upon the written order of the Company (as set forth in such
Company Order).
The Note Registrar shall have the right to decline to authenticate and deliver any Notes under this Section (a) unless and until it
receives from the Company a Company Order instructing it to so authenticate and deliver such Notes and, if requested by the Note
Registrar, an Officers’ Certificate and an Opinion of Counsel in accordance with Section 17.06 hereof; (b) if the Note Registrar
determines that such action may not lawfully be taken; or (c) if the Note Registrar determines that such action would expose the Note
Registrar to personal liability,
14
unless indemnity and/or security and/or pre-funding satisfactory to the Note Registrar against such liability is provided to the Note
Registrar.
Only such Notes as shall bear thereon a certificate of authentication substantially in the form set forth on the form of Note
attached as Exhibit A hereto, executed manually or by facsimile by an authorized officer of the Note Registrar, shall be entitled to the
benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Note Registrar upon any Note executed by the
Company shall be conclusive evidence that the Note so authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
In case any Officer of the Company who shall have signed any of the Notes shall cease to be such Officer before the Notes so
signed shall have been authenticated and delivered by the Note Registrar, or disposed of by the Company, such Notes nevertheless may
be authenticated and delivered or disposed of as though the Person who signed such Notes had not ceased to be such Officer of the
Company; and any Note may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Note,
shall be the Officers of the Company, although at the date of the execution of this Indenture any such Person was not such an Officer.
Section 2.05 Exchange and Registration of Transfer of Notes; Restrictions on Transfer; Common Depositary. (a) The
Company shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office or in any other office or
agency of the Company designated pursuant to Section 4.02, the “Note Register”) in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. Such register shall be in written form
or in any form capable of being converted into written form within a reasonable period of time. The Bank of New York Mellon SA/NV,
Luxembourg Branch is hereby initially appointed the “Note Registrar” and “Transfer Agent” for the purpose of registering Notes and
transfers of Notes as herein provided. The Company may appoint one or more co-Note Registrars in accordance with Section 4.02.
Prior to the Distribution Compliance Period Termination Date, upon surrender for registration of transfer of any Note to the
Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this Section 2.05(c), the
Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee or transferees, one
or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may
be required by this Indenture. Following the Distribution Compliance Period Termination Date, upon surrender for registration of
transfer of any Note to the Note Registrar or any co-Note Registrar, and satisfaction of the requirements for such transfer set forth in this
Section 2.05, the Company shall execute, and the Note Registrar shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and not bearing the
restrictive legends required by the second paragraph of Section 2.05(c).
15
Prior to the Distribution Compliance Period Termination Date, Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive, bearing such
restrictive legends as may be required by this Indenture. Following the Distribution Compliance Period Termination Date, Notes may be
exchanged for other Notes of any authorized denominations and of a like aggregate principal amount but not bearing the restrictive
legend required by the second paragraph of Section 2.05(c), upon surrender of the Notes to be exchanged at any such office or agency
maintained by the Company pursuant to Section 4.02. Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Note Registrar shall authenticate and deliver, the Notes that the Holder making the exchange is entitled to receive and not bearing
the restrictive legends required by the second paragraph of Section 2.05(c).
All Notes presented or surrendered for registration of transfer or for exchange, repurchase or conversion shall (if so required by
the Company, the Trustee, the Note Registrar or any co-Note Registrar) be duly endorsed, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and duly executed, by the Holder thereof or its attorney-in-fact duly
authorized in writing.
No service charge shall be imposed by the Company, the Transfer Agent, the Note Registrar, any co-Note Registrar or the
Paying Agent for any exchange or registration of transfer of Notes, but the Company may require a Holder to pay a sum sufficient to
cover any documentary, stamp, issue, transfer or similar tax required in connection therewith as a result of the name of the Holder of new
Notes issued upon such exchange or registration of transfer being different from the name of the Holder of the old Notes surrendered for
exchange or registration of transfer. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
None of the Company, the Trustee, the Note Registrar or any co-Note Registrar shall be required to exchange or register a
transfer of (i) any Notes surrendered for conversion or, if a portion of any Note is surrendered for conversion, such portion thereof
surrendered for conversion or (ii) any Notes, or a portion of any Note, surrendered for repurchase (and not withdrawn) in accordance
with Article 15.
All Notes issued upon any registration of transfer or exchange of Notes in accordance with this Indenture shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered
upon such registration of transfer or exchange.
The Trustee shall have no responsibility or obligation to any direct or indirect participant or any other Person with respect to the
accuracy of the books or records, or the acts or omissions, of the Common Depositary or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any direct or indirect participant or other
Person (other than the Common Depositary and any other registered Holder of Notes) of any notice or the payment of any amount, under
or with respect to such Notes. All
16
notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made
only to or upon the order of the registered Holders (which shall be the Common Depositary or its nominee in the case of a Global Note).
The rights of beneficial owners in any Global Note shall be exercised only through the Common Depositary subject to the customary
procedures of Euroclear and Clearstream. The Trustee may rely and shall be fully protected in relying upon information furnished by the
Common Depositary with respect to its direct or indirect participants.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers
between or among direct or indirect participants in any Global Note) other than to require delivery of such certificates as are expressly
required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
(b) So long as the Notes are eligible for book-entry settlement with Euroclear and Clearstream, unless otherwise required by
law, subject to the fourth paragraph from the end of Section 2.05(c) all Notes shall be represented by one or more Notes in global form
(each, a “Global Note”) registered in the name of the Common Depositary or its nominee. The transfer and exchange of beneficial
interests in a Global Note that does not involve the issuance of a Physical Note shall be effected through the Common Depositary in
accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of Euroclear and Clearstream.
(c) Every Note that bears or is required under this Section 2.05(c) to bear the legend set forth in this Section 2.05(c) shall,
until no longer required by this Section 2.05(c), be subject to the restrictions on transfer set forth in this Section 2.05(c) (including the
legends set forth below), unless such restrictions on transfer shall be eliminated or otherwise waived by written consent of the Company,
and the Holder of each such Note, by such Holder’s acceptance thereof, agrees to be bound by all such restrictions on transfer. As used
in this Section 2.05(c), the term “transfer” encompasses any sale, pledge, transfer or other disposition whatsoever of any such Note.
Until the date (the “Distribution Compliance Period Termination Date”) that is 40 days after the date hereof, any certificate
evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following
form (unless such Notes have been transferred pursuant to a registration statement that has become or been declared effective under the
Securities Act and that continues to be effective at the time of such transfer, or unless otherwise agreed by the Company in writing, with
notice thereof to the Trustee):
THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED,
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HYPOTHECATED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOTE SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT
IS 40 DAYS AFTER THE DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
Any certificate evidencing a Note (and all securities issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form (unless otherwise agreed by the Company in writing, with notice thereof to the Trustee):
PRIOR TO SEPTEMBER 5, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE
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NOTE SUBSCRIPTION AGREEMENTS BETWEEN NIO INC. AND THE RELEVANT PURCHASERS NAMED THEREIN,
DATED MARCH 5, 2020. ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE, HYPOTHECATE OR
OTHERWISE TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION SHALL BE VOID.
No transfer of any Note prior to the Distribution Compliance Period Termination Date will be registered by the Note Registrar
unless the applicable box on the Form of Assignment and Transfer has been checked.
The Company shall promptly notify the Trustee and the ADS Depositary in writing upon the occurrence of the Distribution
Compliance Period Termination Date and after a registration statement, if any, with respect to the Notes has been declared effective
under the Securities Act.
Notwithstanding any other provisions of this Indenture (other than the provisions set forth in this Section 2.05(c)), a Global
Note may not be transferred as a whole or in part except (i) by the Common Depositary to a nominee of the Common Depositary or by a
nominee of the Common Depositary to the Common Depositary or another nominee of the Common Depositary or by the Common
Depositary or any such nominee to a successor Common Depositary or a nominee of such successor Common Depositary and (ii) for
transfers of portions of a Global Note in certificated form made upon request of a member of, or a participant in, the Common Depositary
(for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Common Depositary in
accordance with customary procedures of Euroclear and Clearstream and in compliance with this Section 2.05(c).
Initially, each Global Note shall be delivered by or on behalf of the Trustee to, and registered in the name of, the Common
Depositary or its nominee for the accounts of Euroclear and Clearstream.
If (i) the Common Depositary notifies the Company at any time that the Common Depositary is unwilling or unable to continue
as depositary for the Global Notes and a successor depositary is not appointed within 90 days, (ii) either Euroclear or Clearstream, or a
successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or
otherwise) or announces an intention to permanently cease business or does in fact do so, or (iii) an Event of Default with respect to the
Notes has occurred and is continuing and a beneficial owner of any Note requests that its beneficial interest therein be issued as a
Physical Note, the Company shall execute, and the Note Registrar, upon receipt of an Officers’ Certificate and a Company Order for the
authentication and delivery of Notes, shall authenticate and deliver (x) in the case of clause (iii), a Physical Note to such beneficial owner
in a principal amount equal to the principal amount of such Note corresponding to such beneficial owner’s beneficial interest and (y) in
the case of clause (i) or (ii), Physical Notes to each beneficial owner of the related Global Notes (or a portion thereof) in an aggregate
principal amount equal to the aggregate principal amount of such Global Notes in exchange for such Global Notes, and upon delivery of
the Global Notes to the Note Registrar such Global Notes shall be canceled.
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Physical Notes issued in exchange for all or a part of the Global Note pursuant to this Section 2.05(c) shall be registered in such
names and in such authorized denominations as the Common Depositary, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Note Registrar in writing. Upon execution and authentication, the Note Registrar shall deliver such
Physical Notes to the Persons in whose names such Physical Notes are so registered.
At such time as all interests in a Global Note have been converted, canceled, repurchased, redeemed or transferred, such Global
Note shall be, upon receipt thereof, canceled by the Note Registrar in accordance with standing procedures and existing instructions of
the Common Depositary. At any time prior to such cancellation, if any interest in a Global Note is exchanged for Physical Notes,
converted, canceled, repurchased, redeemed or transferred to a transferee who receives Physical Notes therefor or any Physical Note is
exchanged or transferred for part of such Global Note, the principal amount of such Global Note shall, in accordance with the standing
procedures and existing instructions of the Common Depositary, be appropriately reduced or increased, as the case may be, and an
endorsement shall be made on such Global Note, by the Note Registrar, to reflect such reduction or increase.
None of the Company, the Trustee, the Paying Agent, any agent of the Company or any agent of the Trustee shall have any
responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a
Global Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(d) [RESERVED]
(e) Any Note that is repurchased or owned by any Affiliate of the Company may not be resold by such Affiliate unless
registered under the Securities Act or resold pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act in a transaction that results in such Note no longer being a “restricted security” (as defined under Rule
144 under the Securities Act). The Company shall cause any Note that is repurchased or owned by it to be surrendered to the Note
Registrar for cancellation in accordance with Section 2.08.
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes. In case any Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon receipt of a Company Order, the Note Registrar shall authenticate and
deliver, a new Note, bearing a registration number not contemporaneously outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or stolen. In every case the applicant for a substituted Note shall
furnish to the Company and to the Note Registrar such security and/or indemnity as may be required by them to save each of them
harmless from any loss, liability, cost or expense caused by or connected with such substitution, and, in every case of destruction, loss or
theft, the applicant shall also furnish to the Company and to the Note Registrar evidence to their satisfaction of the destruction, loss or
theft of such Note and of the ownership thereof.
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The Note Registrar may authenticate any such substituted Note and deliver the same upon the receipt of such security and/or
indemnity as the Note Registrar and the Company may require. No service charge shall be imposed by the Company, the Transfer Agent,
the Note Registrar, any co-Note Registrar or the Paying Agent upon the issuance of any substitute Note, but the Company may require a
Holder to pay a sum sufficient to cover any documentary, stamp, issue, transfer or similar tax required in connection therewith as a result
of the name of the Holder of the new substitute Note being different from the name of the Holder of the old Note that became mutilated
or was destroyed, lost or stolen. In case any Note that has matured or is about to mature or has been surrendered for repurchase (and not
withdrawn) in accordance with Article 15 or is about to be converted in accordance with Article 14 shall become mutilated or be
destroyed, lost or stolen, the Company may, in its sole discretion, instead of issuing a substitute Note, pay or authorize the payment of or
convert or authorize the conversion of the same (without surrender thereof except in the case of a mutilated Note), as the case may be, if
the applicant for such payment or conversion shall furnish to the Company and to the Trustee such security and/or indemnity as may be
required by them to save each of them harmless for any loss, liability, cost or expense caused by or connected with such substitution, and,
in every case of destruction, loss or theft, evidence satisfactory to the Company, and the Trustee evidence of their satisfaction of the
destruction, loss or theft of such Note and of the ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any Note is destroyed, lost
or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Note shall be
found at any time, and shall be entitled to all the benefits of (but shall be subject to all the limitations set forth in) this Indenture equally
and proportionately with any and all other Notes duly issued hereunder. To the extent permitted by law, all Notes shall be held and
owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement, payment, redemption,
conversion or repurchase of mutilated, destroyed, lost or stolen Notes and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement, payment, redemption,
conversion or repurchase of negotiable instruments or other securities without their surrender.
Section 2.07 Temporary Notes. Pending the preparation of Physical Notes, the Company may execute and the Note Registrar
shall, upon receipt of a Company Order, authenticate and deliver temporary Notes (printed or lithographed). Temporary Notes shall be
issuable in any authorized denomination, and substantially in the form of the Physical Notes but with such omissions, insertions and
variations as may be appropriate for temporary Notes, all as may be determined by the Company. Every such temporary Note shall be
executed by the Company and authenticated by the Note Registrar upon the same conditions and in substantially the same manner, and
with the same effect, as the Physical Notes. Without unreasonable delay, the Company shall execute and deliver to the Note Registrar
Physical Notes (other than any Global Note) and thereupon any or all temporary Notes (other than any Global Note) may be surrendered
in exchange therefor, at each office or agency maintained by the Company pursuant to Section 4.02 and the Note Registrar shall upon
receipt of a Company Order authenticate and deliver in exchange for such temporary Notes an equal aggregate principal amount of
Physical Notes. Such exchange shall be made by the Company at its own expense and without any charge therefor. Until so exchanged,
the temporary Notes shall in all respects be entitled to the same
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benefits and subject to the same limitations under this Indenture as Physical Notes authenticated and delivered hereunder.
Section 2.08 Cancellation of Notes Paid, Converted, Etc. The Company shall cause all Notes surrendered for the purpose of
payment, repurchase, redemption, registration of transfer or exchange or conversion, if surrendered to any Person other than the Note
Registrar (including any of the Company’s agents, Subsidiaries or Affiliates), to be delivered and surrendered to the Note Registrar for
cancellation. All Notes delivered to the Note Registrar shall be canceled promptly by it, and no Notes shall be authenticated in exchange
thereof except as expressly permitted by any of the provisions of this Indenture. The Note Registrar shall dispose of canceled Notes in
accordance with its customary procedures and, after such disposition, shall deliver a certificate of such cancellation and disposition to the
Company, at the Company’s written request in a Company Order.
Section 2.09 Common Code and ISIN Numbers. The Company in issuing the Notes may use "Common Code" or “ISIN”
numbers (if then generally in use), and, if so, the Trustee shall use "Common Code" or “ISIN” numbers in all notices issued to Holders as
a convenience to such Holders; provided that any such notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or on such notice and that reliance may be placed only on the other identification numbers printed
on the Notes. The Company shall promptly notify the Trustee in writing of any change in the “Common Code” or "ISIN" numbers.
Section 2.10 Additional Notes; Repurchases. The Company may, without the consent of the Holders and notwithstanding
Section 2.01, reopen this Indenture and issue additional Notes hereunder with the same terms as the Notes initially issued hereunder
(except for any differences in the issue price, the issue date and interest accrued, if any, and, if applicable, restrictions on transfer in
respect of such additional Notes) in an unlimited aggregate principal amount; provided that if and for as long as any such additional
Notes are not fungible with the Notes initially issued hereunder for U.S. federal income tax or securities law purposes, such additional
Notes shall have a separate ISIN number from the Notes. Prior to the issuance of any such additional Notes, the Company shall deliver to
the Trustee a Company Order, an Officers’ Certificate and an Opinion of Counsel, such Officers’ Certificate and Opinion of Counsel to
cover such matters, in addition to those required by Section 17.06, as the Trustee shall reasonably request. In addition, the Company may,
to the extent permitted by law, and directly or indirectly (regardless of whether such Notes are surrendered to the Company), repurchase
Notes in the open market or otherwise, whether by the Company or through its Subsidiaries or through a private or public tender or
exchange offer or through counterparties to private agreements. The Company shall cause any Notes so repurchased to be surrendered to
the Note Registrar for cancellation in accordance with Section 2.08 and upon receipt of a Company Order, the Note Registrar shall cancel
all Notes so surrendered and such Notes shall no longer be considered outstanding under this Indenture upon their cancellation. The
Company may also enter into cash-settled swaps or other derivatives with respect to the Notes. For the avoidance of doubt, any Notes
underlying such cash-settled swaps or other derivatives shall not be required to be surrendered to the Note Registrar for cancellation in
accordance with Section 2.08 and will
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continue to be considered outstanding for purposes of this Indenture, subject to the provisions of Section 8.04.
ARTICLE 3
SATISFACTION AND DISCHARGE
Section 3.01 Satisfaction and Discharge. This Indenture shall upon request of the Company contained in an Officers’
Certificate cease to be of further effect, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when (a) (i) all Notes theretofore authenticated and delivered (other than (x) Notes which
have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06 and (y) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 4.04(d)) have been delivered to the Note Registrar for cancellation; or (ii) the
Company has deposited with the Paying Agent or delivered to Holders, as applicable, after the Notes have become due and payable,
whether on the Maturity Date, any Fundamental Change Repurchase Date, upon conversion or otherwise, cash or cash and ADSs (solely
to satisfy the Company’s Conversion Obligation, if applicable), sufficient to pay all of the outstanding Notes and all other sums due and
payable under this Indenture by the Company; and (b) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion
of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have
been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee
under Section 7.06 shall survive.
ARTICLE 4
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01 Payment of Principal and Premium. (a) The Company covenants and agrees that it will cause to be paid the
principal (including the Fundamental Change Repurchase Price, if applicable) of each of the Notes at the places, at the respective times
and in the manner provided herein and in the Notes.
(b) The Company covenants and agrees that it will cause to be paid a premium equal to (i) in the case of any payment of
principal to be made on the Maturity Date or pursuant to Section 6.02, 2.0% of the outstanding principal amount of the Notes, or (ii) in
the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate interest that would have
accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case may be) over the period
starting from (and including) the original date of issuance of the Notes and ending on (and including) the Fundamental Change
Repurchase Date, if the Notes were to bear interest at a rate of 2.0% per annum (accruing daily and computed on the basis of a 360-day
year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day month). For the
avoidance of doubt, any reference in this Indenture or the Notes in any context to the principal shall be deemed to include, without
duplication (and assuming such premium is not separately
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referenced), the premium contemplated by this Section 4.01(b) to the extent that, in such context, such premium is, was or would be
payable pursuant to this Section 4.01(b).
Section 4.02 Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency (which will be the Corporate Trust Office initially) where the Notes may be surrendered for registration of
transfer or exchange or for presentation for payment or repurchase (“Paying Agent”) or for conversion (“Conversion Agent”) and
where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust Office, provided, however, that the legal service of
process against the Company shall in no circumstance be made at an office or agency of the Trustee.
The Company may also from time to time designate as co-Note Registrars one or more other offices or agencies where the
Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that
no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such other office or agency. The terms “Paying Agent” and
“Conversion Agent” include any such additional or other offices or agencies, as applicable.
The Company hereby initially designates (i) The Bank of New York Mellon, London Branch as the Paying Agent and Conversion Agent
and the Corporate Trust Office and the office or agency of The Bank of New York Mellon in the Borough of Manhattan, The City of
New York, each shall be considered as one such office or agency of the Company for each of the aforesaid purposes; and (ii) The Bank
of New York Mellon SA/NV, Luxembourg Branch of Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg as the
Note Registrar and Transfer Agent.
Section 4.03 Appointments to Fill Vacancies in Trustee’s Office. The Company, whenever necessary to avoid or fill a vacancy
in the office of Trustee, will appoint, in the manner provided in Section 7.09, a trustee, so that there shall at all times be a trustee
hereunder.
Section 4.04 Provisions as to Paying Agent. (a) If the Company shall appoint a Paying Agent other than the Trustee, the
Company will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 4.04:
(i) that it will hold all sums held by it as such agent for the payment of the principal (including the Fundamental
Change Repurchase Price, if applicable) of the Notes, and accrued and unpaid interest on Defaulted Amounts (if any), for the
benefit of the Holders of the Notes;
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(ii) that it will give the Trustee prompt notice of any failure by the Company to make any payment of the principal
(including the Fundamental Change Repurchase Price, if applicable) of the Notes, and accrued and unpaid interest on Defaulted
Amounts (if any), when the same shall be due and payable; and
(iii) that at any time during the continuance of an Event of Default, upon request of the Trustee, it will forthwith pay
to the Trustee all sums so held.
The Company shall, on or before each due date of the principal (including the Fundamental Change Repurchase Price, if
applicable) of the Notes or accrued and unpaid interest on Defaulted Amounts (if any), deposit with the Paying Agent a sum sufficient to
pay such principal (including the Fundamental Change Repurchase Price, if applicable) or accrued and unpaid interest on Defaulted
Amounts (if any) and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure to take such
action; provided that such deposit must be received by the Paying Agent by 10:00 a.m., New York City time, one Business Day prior to
the relevant due date. The Paying Agent shall not be bound to make any payment until it has received, in immediately available and
cleared funds, an amount which shall be sufficient to pay, as applicable, the aggregate amount of principal (including the Fundamental
Change Repurchase Price, if applicable) of the Notes or accrued and unpaid interest on Defaulted Amounts (if any) when such principal
or interest on Defaulted Amounts shall become due and payable. The Paying Agent shall not be responsible or liable for any delay in
making the payment if it does not receive funds before 10:00 a.m. one Business Day prior to the payment date. The Company shall use
reasonable efforts to procure that, before 10:00 a.m., New York City time, on the second Business Day before each payment date, the
bank effecting payment for it has confirmed by facsimile to the Paying Agent the payment instructions relating to such payment.
(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal (including the
Fundamental Change Repurchase Price, if applicable) of the Notes and accrued and unpaid interest on Defaulted Amounts (if any), set
aside, segregate and hold in trust for the benefit of the Holders of the Notes a sum sufficient to pay such principal (including the
Fundamental Change Repurchase Price, if applicable) and accrued and unpaid interest on Defaulted Amounts so becoming due and will
promptly notify the Trustee in writing of any failure to take such action and of any failure by the Company to make any payment of the
principal (including the Fundamental Change Repurchase Price, if applicable) of the Notes or accrued and unpaid interest on Defaulted
Amounts (if any) when the same shall become due and payable. Upon an Event of Default under Section 6.01(i) or Section 6.01(j)
hereof, the Trustee shall automatically become the Paying Agent.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of
obtaining a satisfaction and discharge of this Indenture, or for any other reason, pay, cause to be paid or deliver to the Trustee all sums or
amounts held by the Company in trust or by any Paying Agent as required by this Section 4.04, such sums or amounts to be held by the
Trustee upon the trusts herein contained and upon such payment or delivery by the Company or any Paying Agent to the Trustee, the
Company or such Paying Agent shall be released from all further liability but only with respect to such sums or amounts.
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(d) Any money and ADSs deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of principal (including the Fundamental Change Repurchase Price, if applicable) of any Note (or, in the case of ADSs, in
satisfaction of the Conversion Obligation), and accrued and unpaid interest on Defaulted Amounts (if any), and remaining unclaimed for
two years after such principal (including the Fundamental Change Repurchase Price, if applicable) or interest on Defaulted Amounts has
become due and payable or such Conversion Obligation has become due shall be paid or delivered, as the case may be, to the Company
on request of the Company contained in an Officers’ Certificate, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such money and ADSs, and all liability of the Company as trustee thereof,
shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment or
delivery, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The Borough of Manhattan, The City of New York, notice that such money
and ADSs remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money and ADSs then remaining will be repaid or delivered to the Company.
Section 4.05 Existence. Subject to Article 11, the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence. The Company shall promptly provide the Trustee with written notice of any change
to its name, jurisdiction of incorporation or change to its corporate organization.
Section 4.06 [RESERVED]
Section 4.07 Additional Amounts. (a) All payments and deliveries made by, or on behalf of, the Company or any successor to
the Company under or with respect to this Indenture and the Notes, including, but not limited to, payments of principal (including, if
applicable, the Fundamental Change Repurchase Price), premium, if any, payments of interest, if any, and deliveries of ADSs or any
other consideration due on conversion of a Note (together with payments of cash for any Fractional ADS or other consideration) upon
conversion of the Notes, shall be made without withholding, deduction or reduction for any other collection at source for, or on account
of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied (including any
penalties and interest related thereto) (“applicable taxes”) by or within any jurisdiction in which the Company or any successor to the
Company is, for tax purposes, incorporated, organized or resident or doing business (each, as applicable, a “Relevant Taxing
Jurisdiction”) or through which payment is made or deemed made (together with each Relevant Taxing Jurisdiction, a “Relevant
Jurisdiction,” and in each case, any political subdivision or taxing authority thereof or therein) unless such withholding, deduction or
reduction is required by law or by regulation or governmental policy having the force of law. In the event that any such withholding,
deduction or reduction is so required, the Company or any successor to the Company shall pay or deliver to each Holder such additional
amounts of cash, ADSs or other consideration, as applicable (“Additional Amounts”) as may be necessary to ensure that the net amount
received by the beneficial owner of the Notes after such
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withholding, deduction or reduction (and after deducting any taxes on the Additional Amounts) shall equal the amounts that would have
been received by such beneficial owner had no such withholding, deduction or reduction been required; provided that no Additional
Amounts shall be payable:
(i) for or on account of:
(A) any applicable taxes that would not have been imposed but for:
(1) the existence of any present or former connection between the relevant Holder or beneficial
owner of such Note and the Relevant Jurisdiction, other than merely acquiring or holding such Note, receiving
ADSs (together with the payment of cash for any Fractional ADS) or other consideration upon conversion of
such Note or the receipt of payments or the exercise or enforcement of rights thereunder, including, without
limitation, such Holder or beneficial owner being or having been a national, domiciliary or resident of such
Relevant Jurisdiction or treated as a resident thereof or being or having been physically present or engaged in
a trade or business therein or having had a permanent establishment therein;
(2) the presentation of such Note (in cases in which presentation is required) more than 30 days
after the later of the date on which the payment of the principal of (including the Fundamental Change
Repurchase Price, if applicable) and interest (if any) on, such Note or the delivery of ADSs (together with
payment of cash for any Fractional ADS) upon conversion of such Note became due and payable pursuant to
the terms thereof or was made or duly provided for;
(3) the failure of the Holder or beneficial owner to comply with a timely written request from the
Company or any successor of the Company, addressed to the Holder, to the extent such Holder or beneficial
owner is legally entitled, to provide certification, information, documents or other evidence concerning such
Holder’s or beneficial owner’s nationality, residence, identity or connection with the Relevant Taxing
Jurisdiction, or to make any declaration or satisfy any other reporting requirement relating to such matters, if
and to the extent that due and timely compliance with such request is required by statute, regulation or
administrative practice of the Relevant Jurisdiction in order to reduce or eliminate any withholding or
deduction as to which Additional Amounts would have otherwise been payable to such Holder or beneficial
owner; or
(4) the presentation of such Note (in cases in which presentation is required) for payment in the
Relevant Jurisdiction, unless such Note could not have been presented for payment elsewhere;
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(B) any estate, inheritance, gift, sale, transfer, personal property or similar applicable tax or any excise or
similar taxes imposed with respect to a transfer;
(C) any applicable tax that is payable otherwise than by withholding, deduction or reduction for any other
collection at source from payments or deliveries under or with respect to the Notes;
(D) any applicable tax required to be withheld or deducted under Sections 1471 to 1474 of the Code (or
any amended or successor versions of such Sections) (“FATCA”), any regulations or other official guidance
thereunder, any intergovernmental agreement or agreement pursuant to Section 1471(b)(1) of the Code entered into in
connection with FATCA, or any law, regulation or other official guidance enacted in any jurisdiction implementing
FATCA or an intergovernmental agreement; or
(E) any combination of applicable taxes referred to in the preceding clauses (A), (B), (C) or (D); or
(ii) with respect to any payment of the principal of (including the Fundamental Change Repurchase Price, if
applicable), and interest (if any) on, such Note or the delivery of ADSs (together with payment of cash for any Fractional ADS)
upon conversion of such Note to a Holder, if the Holder is a fiduciary, partnership or person other than the sole beneficial owner
of that payment to the extent that such payment would be required to be included in the income under the laws of the Relevant
Jurisdiction, for tax purposes, of a beneficiary or settlor with respect to the fiduciary, a partner or member of that partnership or
a beneficial owner who would not have been entitled to such Additional Amounts had that beneficiary, settlor, partner, member
or beneficial owner been the Holder thereof.
(b) If the Company or its successor becomes obligated to pay Additional Amounts with respect to any payment or delivery
under or with respect to the Notes, the Company or its successor shall deliver to the Trustee and the Paying Agent, if other than the
Trustee, on a date that is at least 30 days prior to the date of that payment or delivery (unless the obligation to pay Additional Amounts
arises after the 30th day prior to that payment date, in which case the Company or its successor shall notify the Trustee and the Paying
Agent promptly thereafter) an Officers’ Certificate stating the fact that Additional Amounts will be payable and the amount estimated to
be so payable. The Officers’ Certificate must also set forth any other information reasonably necessary to enable the Paying Agent or the
Conversion Agent, as the case may be, to pay Additional Amounts to Holders on the relevant payment date. The Trustee and the Paying
Agent shall be entitled to rely solely on such Officers’ Certificate as conclusive proof that such payments are necessary. The Company or
its successor shall provide the Trustee and the Paying Agent with documentation reasonably satisfactory to the Trustee evidencing the
payment of Additional Amounts.
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(c) The Company or its successor shall make all withholdings and deductions required by law and shall remit the full
amount deducted or withheld to the relevant tax authority in accordance with applicable law. Upon request, the Company or its successor
shall provide to the Trustee an official receipt or, if official receipts are not obtainable, an Officers’ Certificate evidencing the payment of
any applicable taxes so deducted or withheld. Copies of those receipts or other documentation, as the case may be, shall be made
available by the Trustee to the Holders of the Notes upon written request.
(d) Any reference in this Indenture or the Notes in any context to the delivery of ADSs (together with payment of cash for
any Fractional ADS) or other consideration upon conversion of any Note or the payment of principal of (including the Fundamental
Change Repurchase Price, if applicable) and any premium or interest, if any, on any Note or any other amount payable with respect to
such Note, shall be deemed to include payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were
or would be payable with respect to that amount pursuant to this Section 4.07.
(e) Notwithstanding any other provisions, the Company or its successor, the Trustee and the Paying Agent shall be entitled
to make any withholding or deduction pursuant to FATCA.
(f) If the Company or its successor is required to make any deduction or withholding from any payments or deliveries with
respect to the Notes, it will deliver to the Trustee official tax receipts evidencing the remittance to the relevant tax authorities of the
amounts so withheld or deducted.
(g) The foregoing obligations shall survive termination or discharge of this Indenture.
Section 4.08 Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of on the Notes or interest as
contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this
Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law had been enacted.
Section 4.09 Compliance Certificate; Statements as to Defaults. The Company shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2019) an Officers’ Certificate
stating that a review has been conducted of the Company’s activities under this Indenture and the Company has fulfilled its obligations
hereunder, and whether the authorized Officers thereof have knowledge of any Default by the Company that occurred during the
previous year that is then continuing and, if so, specifying each such Default and the nature thereof.
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In addition, the Company shall deliver to the Trustee, as soon as possible, and in any event within 30 days after the Company
becomes aware of the occurrence of any Default if such Default is then continuing, an Officers’ Certificate setting forth the details of
such Default, its status and the action that the Company is taking or proposing to take in respect thereof. The Trustee shall have no
responsibility to take any steps to ascertain whether any Event of Default or Default has occurred, and until (i) a Responsible Officer of
the Trustee has received an Officers’ Certificate regarding such an occurrence, or (ii) the Trustee has received written notice at the
Corporate Trust Office from the Holders of at least 25% in aggregate principal amount of the Notes then outstanding regarding such an
occurrence, the Trustee is entitled to assume, without liability, that no Event of Default or Default has occurred.
Section 4.10 Further Instruments and Acts. The Company will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.
ARTICLE 5
LISTS OF HOLDERS AND REPORTS BY THE COMPANY AND THE TRUSTEE
Section 5.01 Lists of Holders. The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee,
semi-annually, not more than 15 days after July 26, 2020, and January 26, 2021, and at such other times as the Trustee may request in
writing, within 30 days after receipt by the Company of any such request (or such lesser time as the Trustee may reasonably request in
order to enable it to timely provide any notice to be provided by it hereunder), a list in such form as the Trustee may reasonably require
of the names and addresses of the Holders as of a date not more than 15 days (or such other date as the Trustee may reasonably request in
order to so provide any such notices) prior to the time such information is furnished, except that no such list need be furnished so long as
the Bank of New York Mellon SA/NV, Luxembourg Branch is acting as Note Registrar.
Section 5.02 Preservation and Disclosure of Lists. The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders contained in the most recent list furnished to it as provided in
Section 5.01 or maintained by the Trustee in its capacity as Note Registrar, if so acting. The Trustee may destroy any list furnished to it
as provided in Section 5.01 upon receipt of a new list so furnished.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default. The following events shall be “Events of Default” with respect to the Notes:
(a) default in any payment of interest on Defaulted Amounts or Additional Amounts, if any, on any Note when due and
payable and the default continues for a period of 30 days;
(b) default in the payment of principal of any Note when due and payable on the Maturity Date, upon any required
repurchase, upon declaration of acceleration or otherwise
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(including, for the avoidance, the Fundamental Change Repurchase Price, if applicable, any premium due to the Holders hereunder and
Additional Amounts, if any);
(c) failure by the Company to comply with its obligation to convert the Notes in accordance with this Indenture upon
exercise of a Holder’s conversion right and such failure continues for a period of five Business Days;
(d) failure by the Company to issue a Fundamental Change Company Notice in accordance with Section 15.02(c) when due
and such failure continues for a period of five Business Days;
(e) failure by the Company to comply with its obligations under Article 11;
(f) failure by the Company for 60 days after written notice from the Trustee or by the Trustee at the request of the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding has been received by the Company to comply with any of its
other agreements contained in the Notes or this Indenture;
(g) default by the Company or any Significant Subsidiary of the Company with respect to any mortgage, agreement or other
instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed
in excess of US$50 million (or the foreign currency equivalent thereof) in the aggregate of the Company and/or any such Significant
Subsidiary, whether such indebtedness now exists or shall hereafter be created (i) resulting in such indebtedness becoming or being
declared due and payable or (ii) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated
maturity, upon required repurchase, upon declaration of acceleration or otherwise;
(h) a final judgment for the payment of US$50 million (or the foreign currency equivalent thereof) or more (excluding any
amounts covered by insurance) rendered against the Company or any Significant Subsidiary of the Company, which judgment is not
paid, bonded or otherwise discharged or stayed within 60 days after (i) the date on which the right to appeal thereof has expired if no
such appeal has commenced, or (ii) the date on which all rights to appeal have been extinguished;
(i) the Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to the Company or any such Significant Subsidiary or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of the Company or any such Significant Subsidiary or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due;
(j) an involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking
liquidation, reorganization or other relief with respect to
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the Company or such Significant Subsidiary or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or such Significant
Subsidiary or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 30 consecutive days; or
(k) the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) have been
suspended from trading on any of The New York Stock Exchange, The NASDAQ Global Select market or The NASDAQ Global Market
(or any of their respective successors) for a period of ninety (90) consecutive trading days or for more than one hundred and eighty (180)
trading days in any twelve (12)-month period.
Section 6.02 Acceleration; Rescission and Annulment. If one or more Events of Default shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental
body), then, and in each and every such case (other than an Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to
the Company or any of its Significant Subsidiaries), unless the principal of all of the Notes shall have already become due and payable,
the Trustee may by notice in writing to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding determined in accordance with Section 8.04, by notice in writing to the Company and to the Trustee may, and the Trustee at
the request of such Holders shall (subject to being indemnified and/or secured and/or pre-funded to its satisfaction), declare 100% of the
principal of all the Notes to be due and payable immediately, and upon any such declaration the same shall become and shall
automatically be immediately due and payable, notwithstanding anything contained in this Indenture or in the Notes to the contrary. If an
Event of Default specified in Section 6.01(i) or Section 6.01(j) with respect to the Company or any of its Significant Subsidiaries occurs
and is continuing, 100% of the principal of all Notes shall become and shall automatically be immediately due and payable without any
action on the part of the Trustee. If an Event of Default occurs and is continuing, all agents of the Company appointed under this
Indenture will be required to act on the direction of the Trustee.
The immediately preceding paragraph, however, is subject to the conditions that if, at any time after the principal of the Notes
shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay the principal
of any and all Notes that shall have become due otherwise than by acceleration (with interest on any overdue principal at the rate of three
percent per annum) and amounts due to the Trustee pursuant to Section 7.06, and if (1) rescission would not conflict with any judgment
or decree of a court of competent jurisdiction and (2) any and all existing Events of Default under this Indenture, other than the
nonpayment of the principal of Notes that shall have become due solely by such acceleration, shall have been cured or waived pursuant
to Section 6.09, then and in every such case (except as provided in the immediately succeeding sentence) the Holders of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to the Company and to the Trustee, may waive all Defaults
or Events of Default with
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respect to the Notes and rescind and annul such declaration and its consequences and such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent
thereon. Notwithstanding anything to the contrary herein, no such waiver or rescission and annulment shall extend to or shall affect any
Default or Event of Default resulting from (i) the nonpayment of the principal of any Notes, (ii) a failure to repurchase any Notes when
required or (iii) a failure to pay or deliver, as the case may be, the consideration due upon conversion of the Notes.
Section 6.03 [RESERVED]
Section 6.04 Payments of Notes on Default; Suit Therefor. If an Event of Default described in clause (a) or (b) of Section 6.01
shall have occurred, the Company shall, upon demand of the Trustee acting in its own discretion or at the request of Holders of at least
25% in aggregate principal amount of the Notes then outstanding determined in accordance with Section 8.04 and subject to indemnity
and/or security and/or pre-funding satisfactory to the Trustee, or upon demand of the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding determined in accordance with Section 8.04 (which demand is to be in writing, copied to the
Trustee in writing), pay to the Trustee, for the benefit of the Holders of the Notes, the whole amount then due and payable on the Notes
for principal (including, for the avoidance of doubt, the Fundamental Change Repurchase Price, if applicable), with interest on any
overdue principal at the rate of three percent per annum, and, in addition thereto, such further amount as shall be sufficient to cover any
amounts due to the Trustee under Section 7.06. If the Company shall fail to pay such amounts forthwith upon such demand, the Trustee,
in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid,
may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the
Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or
any other obligor upon the Notes, wherever situated.
In the event there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor
on the Notes under Title 11 of the United States Code, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy
or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such
other obligor, the property of the Company or such other obligor, or in the event of any other judicial proceedings relative to the
Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.04, shall be entitled and
empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and
accrued and unpaid interest on Defaulted Amounts, if any, in respect of the Notes, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents and to take such other actions as it may deem necessary or advisable in order to have the
claims of the Trustee (including any claim for the
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compensation, properly incurred expenses, properly incurred disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or
their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the
same after the deduction of any amounts due to the Trustee under Section 7.06; and any receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, custodian or similar official is hereby authorized by each of the Holders to make such payments to the Trustee,
as administrative expenses, and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay
to the Trustee any amount due to it for compensation, properly incurred expenses, advances and properly incurred disbursements,
including agents and counsel fees and expenses, and including any other amounts due to the Trustee under Section 7.06, incurred by it up
to the date of such distribution. To the extent that such payment of compensation, properly incurred expenses, advances and properly
incurred disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by
a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property that the Holders of the Notes
may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition affecting such Holder or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Notes, may be enforced by the Trustee
without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or
proceeding instituted by the Trustee shall be brought in its own name or as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the compensation, properly incurred expenses, properly incurred disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes.
In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Holders of the Notes parties to any such proceedings.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of any waiver pursuant to Section 6.09 or any rescission and annulment pursuant to Section 6.02 or
for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders, and
the Trustee shall, subject to any determination in such proceeding, be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Company, the Holders, and the Trustee shall continue as though no such proceeding had been
instituted.
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Section 6.05 Application of Monies Collected by Trustee. Any monies collected by the Trustee pursuant to this Article 6 with
respect to the Notes shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such monies,
upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully
paid:
First, to the payment of all amounts due the Trustee, including to its agents and counsel, under Section 7.06 and any payments
due to the Paying Agent, the Transfer Agent, the Conversion Agent and the Note Registrar;
Second, in case the principal of the outstanding Notes shall not have become due and be unpaid, to the payment of interest on
the Notes in default in the order of the date due of the payments of such interest, with interest (to the extent that such interest is payable
pursuant to the Indenture and has been collected by the Trustee) upon such overdue payments at the rate per annum borne by the Notes at
such time (including, without duplication, any additional interest on such overdue payments pursuant to Section 6.04), such payments to
be made ratably to the Persons entitled thereto;
Third, in case the principal of the outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the
payment of the whole amount (including, if applicable, the payment of the Fundamental Change Repurchase Price and any cash due
upon conversion) then owing and unpaid upon the Notes for principal and interest, if any, with interest on the overdue principal and, to
the extent that such interest is payable pursuant to this Indenture and has been collected by the Trustee, upon overdue installments of
interest at the rate of three percent per annum, and in case such monies shall be insufficient to pay in full the whole amounts so due and
unpaid upon the Notes, then to the payment of such principal (including, if applicable, the Fundamental Change Repurchase Price, any
premium due to the Holders hereunder and the cash due upon conversion) and interest without preference or priority of principal over
interest, or of interest over principal or of any installment of interest over any other installment of interest, or of any Note over any other
Note, ratably to the aggregate of such principal (including, if applicable, the Fundamental Change Repurchase Price) and accrued and
unpaid interest; and
Fourth, to the payment of the remainder, if any, to the Company.
Section 6.06 Proceedings by Holders. Except to enforce the right to receive payment of principal (including, if applicable, the
Fundamental Change Repurchase Price and premium due to the Holders hereunder) or interest (if any) when due, or the right to receive
payment or delivery of the consideration due upon conversion, no Holder of any Note shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in equity or at law upon or under or with respect to this
Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder,
unless:
(a) such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance
thereof, as herein provided;
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(b) Holders of at least 25% in aggregate principal amount of the Notes then outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder;
(c) such Holders shall have offered to the Trustee such security and/or indemnity and/or pre-funding satisfactory to it
against any loss, liability or expense to be incurred therein or thereby;
(d) the Trustee for 30 days after its receipt of such notice, request and offer of security and/or indemnity and/or pre-funding,
shall have neglected or refused to institute any such action, suit or proceeding; and
(e) no direction that, in the opinion of the Trustee, is inconsistent with such written request shall have been given to the
Trustee by the Holders of a majority of the aggregate principal amount of the Notes then outstanding within such 30-day period pursuant
to Section 6.09,
it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and
Holder and the Trustee that no one or more Holders shall have any right in any manner whatever by virtue of or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of any other Holder, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders (except as otherwise provided herein). For the protection and enforcement of this Section
6.06, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Indenture and any provision of any Note, the right of any Holder to receive payment
or delivery, as the case may be, of (x) the principal (including the Fundamental Change Repurchase Price, if applicable) of, and (y) the
consideration due upon conversion of, such Note, on or after the respective due dates expressed or provided for in such Note or in this
Indenture, or to institute suit for the enforcement of any such payment or delivery, as the case may be, on or after such respective dates
against the Company shall not be impaired or affected without the consent of such Holder.
Section 6.07 Proceedings by Trustee. In case of an Event of Default, the Trustee may in its discretion proceed to protect and
enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of
such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce
any other legal or equitable right vested in the Trustee by this Indenture or by law.
Section 6.08 Remedies Cumulative and Continuing. Except as provided in the last paragraph of Section 2.06, all powers and
remedies given by this Article 6 to the Trustee or to the Holders shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any
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thereof or of any other powers and remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to
enforce the performance or observance of the covenants and agreements contained in this Indenture, and no delay or omission of the
Trustee or of any Holder of any of the Notes to exercise any right or power accruing upon any Default or Event of Default shall impair
any such right or power, or shall be construed to be a waiver of any such Default or Event of Default or any acquiescence therein; and,
subject to the provisions of Section 6.06, every power and remedy given by this Article 6 or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Holders.
Section 6.09 Direction of Proceedings and Waiver of Defaults by Majority of Holders. The Holders of a majority of the
aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to Notes; provided, however, that (a) such direction shall not be in conflict with any rule of law or
with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such
direction. The Trustee may refuse to follow any direction that would involve the Trustee in personal liability, or if it is not provided with
security and/or indemnity and/or pre-funding to its satisfaction, or that the Trustee determines is unduly prejudicial to the rights of any
other Holder. In addition, the Trustee will not be required to expend its own funds under any circumstances. The Holders of a majority
in aggregate principal amount of the Notes at the time outstanding determined in accordance with Section 8.04 may on behalf of the
Holders of all of the Notes waive any past Default or Event of Default hereunder and its consequences except (i) a default in the payment
of accrued and unpaid interest on Defaulted Amounts, or the principal (including, if applicable, the Fundamental Change Repurchase
Price) of the Notes when due that has not been cured pursuant to the provisions of Section 6.02, (ii) a failure by the Company to pay or
deliver, or cause to be delivered, as the case may be, the consideration due upon conversion of the Notes or (iii) a default in respect of a
covenant or provision hereof which under Article 10 cannot be modified or amended without the consent of each Holder of an
outstanding Note affected. Upon any such waiver the Company, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon. Whenever any Default or Event of Default hereunder shall have been waived as permitted by this Section
6.09, said Default or Event of Default shall for all purposes of the Notes and this Indenture be deemed to have been cured and to be not
continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent
thereon.
Section 6.10 Notice of Defaults and Events of Default. If a Default or Event of Default occurs and is continuing and is
notified in writing to the Trustee, the Trustee shall, within 90 days after the occurrence and continuance of such Default or Event of
Default, mail to all Holders (at the Company’s expense) as the names and addresses of such Holders appear upon the Note Register,
notice of all Defaults so notified in writing, unless such Defaults shall have been cured or waived before the giving of such notice;
provided that the Trustee shall not be deemed to have knowledge of any occurrence of a Default or Event unless it has received written
notice. Except in the case of a Default in the payment of the principal of (including the Fundamental
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Change Repurchase Price, if applicable) any of the Notes or a Default in the payment or delivery of the consideration due upon
conversion, the Trustee shall be protected in withholding such notice if and so long as the Trustee’s board of directors, a Responsible
Officer, an executive committee or a committee of Responsible Officers of the Trustee (in its sole discretion) in good faith determines
that the withholding of such notice is in the interests of the Holders.
Section 6.11 Undertaking to Pay Costs. All parties to this Indenture agree, and each Holder of any Note by its acceptance
thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess costs, including
attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided that the provisions of this Section 6.11 (to the extent permitted by law) shall not apply to
any suit instituted by or against the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than
10% in principal amount of the Notes at the time outstanding determined in accordance with Section 8.04, or to any suit instituted by any
Holder for the enforcement of the payment of the principal of any Note (including, but not limited to, the Fundamental Change
Repurchase Price with respect to the Notes being repurchased as provided in this Indenture) on or after the due date expressed or
provided for in such Note or to any suit for the enforcement of the right to convert any Note in accordance with the provisions of Article
14.
ARTICLE 7
CONCERNING THE TRUSTEE
Section 7.01 Duties and Responsibilities of Trustee. The Trustee, prior to the occurrence of an Event of Default and after the
curing or waiver of all Events of Default that may have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations will be read into the Indenture against the Trustee. In case
an Event of Default, of which the Trustee has actual written notice, has occurred that has not been cured or waived the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent
person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that if an Event of Default
occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under this Indenture at the
request or direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding
satisfactory to it against the costs, liabilities or expenses that might be incurred by it in compliance with such request or direction.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its
own grossly negligent failure to act or its own willful misconduct, except that:
(a) prior to the occurrence of an Event of Default and after the curing or waiving of all Events of Default that may have
occurred:
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(i) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture,
and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of gross negligence and willful misconduct on the part of the Trustee, as proven in a final
decision of a court of competent jurisdiction, the Trustee may conclusively and without liability rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions that by any provisions
hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy
of any mathematical calculations or other facts, statements, opinions or conclusions stated therein);
(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved in a final decision in a court of competent jurisdiction that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a majority of the aggregate principal amount of the Notes at the time outstanding
determined as provided in Section 8.04 relating to the time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d) whether or not therein provided, every provision of this Indenture relating to the conduct or affecting the liability of, or
affording protection to, the Trustee shall be subject to the provisions of this Section;
(e) the Trustee shall not be liable in respect of any payment (as to the correctness of amount, entitlement to receive or any
other matters relating to payment) or notice effected by the Company or any Paying Agent or any records maintained by any co-Note
Registrar with respect to the Notes;
(f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to this Indenture, requires notice to be
sent to the Trustee, the Trustee may conclusively and without liability rely on its failure to receive such notice as reason to act as if no
such event occurred;
(g) [RESERVED]
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(h) the rights, immunities, privileges, disclaimers from liability and protections (including the right to compensation and
indemnity) afforded to the Trustee pursuant to this Article 7 shall also be afforded to such Note Registrar, Paying Agent, Conversion
Agent or Transfer Agent;
(i) the Trustee shall have no duty to inquire, no duty to determine and no duty to monitor as to the performance of the
Company’s covenants in this Indenture or the financial performance of the Company; the Trustee shall be entitled to assume, until it has
received written notice in accordance with this Indenture, that the Company is properly performing its duties hereunder;
(j) the Trustee shall be under no obligation to enforce any of the provisions of this Indenture unless it is instructed by
Holders of at least 25% of the aggregate principal amount of outstanding Notes and is provided with security and/or indemnity and/or
pre-funding satisfactory to it;
(k) the Trustee will be under no obligation to exercise any of its rights or powers under this Indenture at the request or
direction of any of the Holders unless such Holders have offered to the Trustee indemnity and/or security and/or pre-funding satisfactory
to it against any costs, expenses and liabilities that might be incurred by it in compliance with such requests or direction.
(l) before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel
prepared and delivered at the cost of the Company conforming to Section 17.06 and the Trustee and the Agents may rely conclusively on
such certificate or opinion and will not be liable for any action it takes or omits to take in good faith in reliance on such Officers’
Certificate or Opinion of Counsel;
(m) in connection with the exercise by it of its trusts, powers, authorities or discretions (including, without limitation, any
modification, waiver, authorization or determination), the Trustee shall have regard to the general interests of the Holders as a class but
shall not have regard to any interests arising from circumstances particular to individual Holders (whatever their number) and in
particular, but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers, authorities or discretions
for individual Holders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise
connected with, or subject to the jurisdiction of, any country, state or territory; and
(n) the Trustee is not obliged to do or omit to do anything which in its reasonable opinion, would or may be illegal or
would constitute a breach of any fiduciary duty or duty of confidentiality, or any law, rule, regulation, or any decree, order or judgment of
any court, or practice, request, direction, notice, announcement or similar action (whether or not having the force of law) of any relevant
government, government agency, regulatory authority, stock exchange or self-regulatory organization to which the Trustee is
subject. The Trustee may without liability to do anything which is, in its reasonable opinion, necessary to comply with any such law,
directive or regulations.
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None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.
Section 7.02 Reliance on Documents, Opinions, Etc. Except as otherwise provided in Section 7.01:
(a) the Trustee may conclusively and without liability rely and shall be fully protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, Note, coupon or other paper or document
(whether in its original or facsimile form) believed by it in good faith to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an
Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be
evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel and require an Opinion of Counsel and any advice of such counsel or Opinion of
Counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith
and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney at the expense of the Company and shall incur no liability of any kind by reason of such
inquiry or investigation;
(e) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or
through agents, delegates, custodians, nominees or attorneys and the Trustee shall not be responsible for any misconduct or negligence
on the part of any agent, delegate, representative, custodian, nominee or attorney appointed by it with due care hereunder;
(f) the permissive rights of the Trustee enumerated herein shall not be construed as duties;
(g) under no circumstances and notwithstanding any contrary provision included herein, neither the Trustee, the Paying
Agent, the Conversion Agent nor the Note Registrar shall be responsible or liable for special, indirect, punitive, or consequential
damages or loss of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether any of them have been
advised of the likelihood of such loss or damage and regardless of the form of action;
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this provision shall remain in full force and effect notwithstanding the discharge of the Notes, the termination of this Indenture or the
resignation, replacement or removal of the Trustee, the Paying Agent, the Conversion Agent and the Note Registrar;
(h) the Trustee, the Paying Agent, the Conversion Agent and the Note Registrar may refrain from taking any action in any
jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be
contrary to any law of that jurisdiction or, to the extent applicable, of New York; furthermore, the Trustee may also refrain from taking
such action if it would otherwise render it liable to any person in that jurisdiction or New York or if, in its opinion based on such legal
advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or in
New York or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power;
(i) the Company understands that The Bank of New York Mellon Corporation is a global financial organization that
operates in and provides services and products to clients through its affiliates, branches, representative offices and/or subsidiaries located
in multiple jurisdictions (collectively, the “BNY Mellon Group” and each a “BNY Mellon Entity”). The BNY Mellon Group may: (i)
use and/or centralize in one or more BNY Mellon Entity in connection with its performance of the functions, duties and services
provided and any other obligations under this Indenture and/or the Notes and in certain other activities (the “Centralized Functions”),
including, without limitation, audit, accounting, tax, administration, risk management, credit, legal, compliance, operation, sales and
marketing, product communication, relationship management, information technology, records and data storage, performance
measurement, data aggregation and the compilation and analysis of information and data regarding the Company (which, for purposes of
this sub-Section 7.02(i), includes the name and business contact information for the employees and representatives of the Company and
any personal data) and the accounts established pursuant to the transactions contemplated in this Indenture and/or the Notes (“Client
Information”); and (ii) use third party service providers to store, maintain and process Client Information (“Outsourced
Functions”). Notwithstanding anything to the contrary contained elsewhere in this Indenture and/or the Notes and solely in connection
with the Centralized Functions and/or Outsourced Functions, the Company consents to the: (i) collection, use and storage of, and
authorizes the BNY Mellon Group to collect, use and store, Client Information within and outside of any jurisdiction, including without
limitation Australia, the European Economic Area, Hong Kong, the PRC, Japan, Singapore, India, the British Virgin Islands and the
United States of America; and (ii) disclosure of, and authorizes the BNY Mellon Group to disclose, Client Information to: (A) any other
BNY Mellon Entity (and their respective officers, directors and employees); and (B) third-party service providers (but solely in
connection with Outsourced Functions) who are required to maintain the confidentiality of Client Information. In addition, the BNY
Mellon Group may aggregate Client Information with other data collected and/or calculated by the BNY Mellon Group, and the BNY
Mellon Group will own all such aggregated data, provided that the BNY Mellon Group shall not distribute the aggregated data in a
format that identifies Client Information with the Company specifically. The Company represents to the BNY Mellon Group that it is
authorized to consent to the foregoing and that the disclosure of Client Information in connection with the Centralized Functions and/or
Outsourced Functions does not violate any relevant data protection legislation.
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The Company also consents to the disclosure of Client Information to governmental, tax, regulatory, law enforcement and other
authorities in jurisdictions where the BNY Mellon Group operates and otherwise as required by law, rule, or guideline (including any tax
and swap trade data reporting regulations);
(j) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties
hereunder;
(k) the Trustee may request that the Company deliver Officers' Certificates setting forth the names of individuals and their
titles and specimen signatures of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers'
Certificates may be signed by any Person authorized to sign an Officers' Certificate, as the case may be, including any Person specified
as so authorized in any such certificate previously delivered and not superseded;
(l) the Trustee shall not be responsible or liable for any action it takes or omits to take in good faith which it reasonably
believes to be authorized or within its rights or powers;
(m) the Trustee shall not be responsible or liable for any action taken or omitted by it in good faith at the direction, in
accordance with Section 6.09, of the Holders of not less than a majority in aggregate principal amount of the Notes at the time
outstanding determined in accordance with Section 8.04 as to the time, method and place of conducting any proceeding for any remedy
available to the Trustee or the exercising of any power conferred by this Indenture; and
(n) the Trustee shall not be responsible or any inaccuracy in the information obtained from the Company or for any
inaccuracy or omission in the records which may result from such information or any failure by the Trustee to perform its duties as set
forth herein as a result of any inaccuracy or incompleteness of such information.
Section 7.03 No Responsibility for Recitals, Etc. The recitals, statements, warranties and representations contained herein and
in the Notes (except in the Note Registrar’s certificate of authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the accuracy or correctness of the
same or for any failure by the Company or any other party to disclose events that may have occurred and may affect the significance or
accuracy of such information, or the execution, legality, effectiveness, adequacy, genuineness, validity, enforceability or admissibility in
evidence of this Indenture or of the Notes. The Trustee shall not be accountable for the use or application by the Company of any Notes
or the proceeds of any Notes authenticated and delivered by the Note Registrar in conformity with the provisions of this
Indenture. Notwithstanding the generality of the foregoing, each Holder shall be solely responsible for making its own independent
appraisal of, and investigation into, the financial condition, creditworthiness, condition, affairs, status and nature of the Company, and the
Trustee shall not at any time have any responsibility for the same and each Holder shall not rely on the Trustee in respect thereof.
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Section 7.04 Trustee, Paying Agents, Conversion Agents or Note Registrar May Own Notes. The Trustee, any Paying Agent,
any Conversion Agent or Note Registrar, in its individual or any other capacity, may engage in business and contractual relationships
with the Company or its Affiliates and may become the owner or pledgee of Notes with the same rights it would have if it were not the
Trustee, Paying Agent, Conversion Agent or Note Registrar, and nothing herein shall obligate any of them to account for any profits
earned from any business or transactional relationship.
Section 7.05 Monies to Be Held in Trust. All monies received by the Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received. Money held by the Trustee in trust or by the Paying Agent hereunder need
not be segregated from other funds except to the extent required by law. Neither the Trustee nor the Paying Agent shall be under any
liability for interest on any money received by it hereunder.
Section 7.06 Compensation and Expenses of Trustee. (a) The Company covenants and agrees to pay to the Trustee from time
to time, and the Trustee shall be entitled to, compensation for all services rendered by it hereunder in any capacity (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an express trust) as mutually agreed to in writing between
the Trustee and the Company (which sum shall be paid free and clear of deduction and withholding on account of taxation, set-off and
counterclaim), and the Company will pay or reimburse the Trustee upon its request for all properly incurred expenses, disbursements and
advances properly incurred or made by the Trustee in accordance with any of the provisions of this Indenture in any capacity thereunder
(including the compensation and the properly incurred expenses and disbursements of its agents and counsel and of all Persons not
regularly in its employ) except any such expense, disbursement or advance as shall have been caused by its gross negligence or willful
misconduct as proven in a final decision in a court of competent jurisdiction. The Company also covenants to indemnify the Trustee
(which for the purposes of this Section 7.06 shall be deemed to include its officers, directors, agents and employees) in any capacity
under this Indenture (including without limitation as Note Registrar, Transfer Agent, Conversion Agent and Paying Agent) and any other
document or transaction entered into in connection herewith, and to hold it harmless against, any loss, claim, damage, liability or expense
(whether arising from third party claims or claims by or against the Company) incurred without gross negligence or willful misconduct
on the part of the Trustee, its officers, directors, agents or employees, as the case may be, as proven in a final decision of a court of
competent jurisdiction, and arising out of or in connection with the acceptance or administration of this Indenture or in any other capacity
hereunder, including the costs and expenses of defending themselves against any claim of liability in the process of enforcing this
indemnity. The obligations of the Company under this Section 7.06 to compensate or indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall be secured by a senior claim to which the Notes are hereby made subordinate on
all money or property held or collected by the Trustee, except, subject to the effect of Section 6.05, funds held in trust herewith for the
benefit of the Holders of particular Notes. The Trustee’s right to receive payment of any amounts due under this Section 7.06 shall not
be subordinate to any other liability or indebtedness of the Company. The indemnity under this Section 7.06(a) is payable upon demand
by the Trustee. The obligation of the Company under this Section 7.06(a) shall survive the satisfaction and discharge of the Notes, the
termination or discharge of this Indenture
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and the resignation, replacement or removal or the Trustee. The indemnification provided in this Section 7.06(a) shall extend to the
officers, directors, agents and employees of the Trustee. Subject to Section 7.02(e), any negligence or misconduct of any agent, delegate,
attorney or representative, in each case, of the Trustee, shall not affect indemnification of the Trustee.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee and its agents incur
expenses or render services after an Event of Default specified in Section 6.01(i) or Section 6.01(j) occurs, the expenses and the
compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency or similar laws. If
a Default or Event of Default shall have occurred or if the Trustee finds it expedient or necessary or is requested by the Company and/or
the Holders to undertake duties which are of an exceptional nature or otherwise outside the scope of the Trustee’s normal duties under
this Indenture, the Company will pay such additional remuneration as the Company and the Trustee may separately agree in writing.
(b) The Paying Agent, the Conversion Agent and the Note Registrar shall be entitled to the compensation to be agreed upon
in writing with the Company for all services rendered by it under this Indenture, and the Company agrees promptly to pay such
compensation and to reimburse the Paying Agent, the Conversion Agent and the Note Registrar for its out-of-pocket expenses (including
fees and expenses of counsel) properly incurred by it in connection with the services rendered by it under this Indenture. The Company
hereby agrees to indemnify the Paying Agent, the Conversion Agent and the Note Registrar and their respective officers, directors, agents
and employees and any successors thereto for, and to hold it harmless against, any loss, liability or expense (including fees and expenses
of counsel) properly incurred without gross negligence or willful misconduct on its part arising out of or in connection with its acting as
the Paying Agent, the Conversion Agent and the Note Registrar hereunder. The obligations of the Company under this paragraph (b)
shall survive the payment of the Notes, the termination or discharge of the Indenture and the resignation, replacement or removal of the
Paying Agent, the Conversion Agent and the Note Registrar.
Section 7.07 Officers’ Certificate as Evidence. Except as otherwise provided in Section 7.01, whenever in the administration
of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such Officers’ Certificate shall be full
warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 7.08 Eligibility of Trustee. There shall at all times be a Trustee hereunder which shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least US$50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in
45
accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this
Article.
Section 7.09 Resignation or Removal of Trustee. (a) The Trustee may at any time resign by giving 60 days written notice of
such resignation to the Company and by mailing notice thereof to the Holders at their addresses as they shall appear on the Note
Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument, in
duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after
the mailing of such notice of resignation to the Holders, the resigning Trustee may appoint a successor trustee on behalf of and at the
expense of the Company or it may at the expense of the Company petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Holder who has been a bona fide holder of a Note or Notes for at least six months may, subject to the provisions
of Section 6.11, on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.08 and shall fail to resign
after written request therefor by the Company or by any such Holder, or
(ii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,
then, in either case, the Company may by a Board Resolution remove the Trustee and appoint a successor trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee, or, subject to the provisions of Section 6.11, any Holder who has been a bona fide holder of a Note or
Notes for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The Holders of a majority in aggregate principal amount of the Notes at the time outstanding, as determined in
accordance with Section 8.04, may at any time remove the Trustee and nominate a successor trustee that shall be deemed appointed as
successor trustee unless within ten days after notice to the Company of such nomination the Company objects thereto, in which case the
Trustee so removed or any Holder, upon the terms and conditions and otherwise
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as in Section 7.09(a) provided, may petition any court of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of
this Section 7.09 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 7.10.
Section 7.10 Acceptance by Successor Trustee. Any successor trustee appointed as provided in Section 7.09 shall execute,
acknowledge and deliver to the Company and to its predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor trustee, the
trustee ceasing to act shall, upon payment of any amounts then due to it pursuant to the provisions of Section 7.06, execute and deliver an
instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a senior claim to which the Notes
are hereby made subordinate on all money or property held or collected by such trustee as such, except for funds held in trust for the
benefit of Holders of particular Notes, to secure any amounts then due to it pursuant to the provisions of Section 7.06.
No successor trustee shall accept appointment as provided in this Section 7.10 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 7.08.
Upon acceptance of appointment by a successor trustee as provided in this Section 7.10, each of the Company and the successor
trustee, at the written direction and at the expense of the Company shall mail or cause to be mailed notice of the succession of such
trustee hereunder to the Holders at their addresses as they shall appear on the Note Register. If the Company fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
Section 7.11 Succession by Merger, Etc. Any corporation or other entity into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate trust business of the
Trustee (including the administration of this Indenture), shall be the successor to the Trustee hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto; provided that in the case of any corporation or other entity
succeeding to all or substantially all of the corporate trust business of the Trustee such corporation or other entity shall be eligible under
the provisions of Section 7.08.
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In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have
been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor
note registrar, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any
successor to the Note Registrar may authenticate such Notes either in the name of any predecessor trustee hereunder or in the name of the
successor trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Note Registrar shall have; provided, however, that the right to adopt the certificate of authentication of
any predecessor note registrar or to authenticate Notes in the name of any predecessor trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 7.12 Trustee’s Application for Instructions from the Company. Any application by the Trustee for written instructions
from the Company (other than with regard to any action proposed to be taken or omitted to be taken by the Trustee that affects the rights
of the Holders of the Notes under this Indenture) may, at the option of the Trustee, set forth in writing any action proposed to be taken or
omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in
such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any
officer that the Company has indicated to the Trustee should receive such application actually receives such application, unless any such
officer shall have consented in writing to any earlier date), unless, prior to taking any such action (or the effective date in the case of any
omission), the Trustee shall have received written instructions in accordance with this Indenture in response to such application
specifying the action to be taken or omitted.
ARTICLE 8
CONCERNING THE HOLDERS
Section 8.01 Action by Holders. Whenever in this Indenture it is provided that the Holders of a specified percentage of the
aggregate principal amount of the Notes may take any action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action), the fact that at the time of taking any such action, the Holders of such specified
percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by
Holders in person or by agent or proxy appointed in writing, or (b) by the record of the Holders voting in favor thereof at any meeting of
Holders duly called and held in accordance with the provisions of Article 9, or (c) by a combination of such instrument or instruments
and any such record of such a meeting of Holders. Whenever the Company or the Trustee solicits the taking of any action by the Holders
of the Notes, the Company or the Trustee may fix, but shall not be required to, in advance of such solicitation, a date as the record date
for determining Holders entitled to take such action. The record date if one is selected shall be not more than fifteen days prior to the
date of commencement of solicitation of such action.
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Section 8.02 Proof of Execution by Holders. Subject to the provisions of Section 7.01, Section 7.02 and Section 9.05, proof of
the execution of any instrument by a Holder or its agent or proxy shall be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The holding of Notes shall be
proved by the Note Register or by a certificate of the Note Registrar. The record of any Holders’ meeting shall be proved in the manner
provided in Section 9.06.
Section 8.03 Who Are Deemed Absolute Owners. The Company, the Trustee, any Paying Agent, any Conversion Agent and
any Note Registrar may deem the Person in whose name a Note shall be registered upon the Note Register to be, and may treat it as, the
absolute owner of such Note (whether or not such Note shall be overdue and notwithstanding any notation of ownership or other writing
thereon made by any Person other than the Company or any Note Registrar) for the purpose of receiving payment of or on account of the
principal of (subject to Section 2.03) such Note, for the purpose of conversion of such Note and for all other purposes; and neither the
Company nor the Trustee nor any Paying Agent nor any Conversion Agent nor any Note Registrar shall be affected by any notice to the
contrary. All such payments or deliveries so made to any Holder for the time being, or upon its order, shall be valid, and, to the extent of
the sums or ADSs so paid or delivered, effectual to satisfy and discharge the liability for monies payable or ADSs deliverable upon any
such Note. Notwithstanding anything to the contrary in this Indenture or the Notes following an Event of Default, any Holder of a
beneficial interest in a Global Note may directly enforce against the Company, without the consent, solicitation, proxy, authorization or
any other action of the Common Depositary or any other Person, such Holder’s right to exchange such beneficial interest for a Note in
certificated form in accordance with the provisions of this Indenture and such Holder’s rights under Article 6 of this Indenture.
Section 8.04 Company-Owned Notes Disregarded. In determining whether the Holders of the requisite aggregate principal
amount of Notes have concurred in any direction, consent, waiver or other action under this Indenture, Notes that are owned by the
Company, by any Subsidiary or Consolidated Affiliated Entity thereof or by any Affiliate of the Company or any Subsidiary or
Consolidated Affiliated Entity thereof shall be disregarded and deemed not to be outstanding for the purpose of any such determination;
provided that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent, waiver or
other action only Notes in respect of which a Responsible Officer is notified in writing shall be so disregarded. Notes so owned that have
been pledged in good faith may be regarded as outstanding for the purposes of this Section 8.04 if the pledgee shall establish its right to
so act with respect to such Notes and that the pledgee is not the Company, a Subsidiary or Consolidated Affiliated Entity thereof or an
Affiliate of the Company or a Subsidiary or Consolidated Affiliated Entity thereof. Within five days of acquisition of the Notes by any
of the above described persons or entities or at the request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’
Certificate listing and identifying all Notes, if any, known by the Company to be owned or held by or for the account of any of the above
described Persons; and, subject to Section 7.01, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of
the facts therein set forth and of the fact that all Notes not listed therein are outstanding for the purpose of any such determination.
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Section 8.05 Revocation of Consents; Future Holders Bound. At any time prior to (but not after) the evidencing to the
Trustee, as provided in Section 8.01, of the taking of any action by the Holders of the percentage of the aggregate principal amount of the
Notes specified in this Indenture in connection with such action, any Holder of a Note that is shown by the evidence to be included in the
Notes the Holders of which have consented to such action may, by filing written notice with the Trustee at its Corporate Trust Office and
upon proof of holding as provided in Section 8.02, revoke such action so far as concerns such Note. Except as aforesaid, any such action
taken by the Holder of any Note shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Note
and of any Notes issued in exchange or substitution therefor or upon registration of transfer thereof, irrespective of whether any notation
in regard thereto is made upon such Note or any Note issued in exchange or substitution therefor or upon registration of transfer thereof.
ARTICLE 9
HOLDERS’ MEETINGS
Section 9.01 Purpose of Meetings. A meeting of Holders may be called at any time and from time to time pursuant to the
provisions of this Article 9 for any of the following purposes:
(a) to give any notice to the Company or to the Trustee or to give any directions to the Trustee permitted under this
Indenture, or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action
authorized to be taken by Holders pursuant to any of the provisions of Article 6;
(b) to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article 7;
(c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section
10.02; or
(d) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal
amount of the Notes under any other provision of this Indenture or under applicable law.
Section 9.02 Call of Meetings by Trustee. The Trustee may (in its sole discretion and without obligation) at any time call a
meeting of Holders to take any action specified in Section 9.01, to be held at such time and at such place as the Trustee shall
determine. Notice of every meeting of the Holders, setting forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting and the establishment of any record date pursuant to Section 8.01, shall be mailed to Holders of
such Notes at their addresses as they shall appear on the Note Register. Such notice shall also be mailed to the Company. Such notices
shall be mailed not less than 20 nor more than 90 days prior to the date fixed for the meeting.
Any meeting of Holders shall be valid without notice if the Holders of all Notes then outstanding are present in person or by
proxy or if notice is waived before or after the meeting by
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the Holders of all Notes then outstanding, and if the Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
Section 9.03 Call of Meetings by Company or Holders. In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% of the aggregate principal amount of the Notes then outstanding, shall have requested the Company to call a
meeting of Holders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Company
shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Trustee or such Holders may
determine the time and the place for such meeting and may call such meeting to take any action authorized in Section 9.01, by mailing
notice thereof as provided in Section 9.02.
Section 9.04 Qualifications for Voting. To be entitled to vote at any meeting of Holders a Person shall (a) be a Holder of one
or more Notes on the record date pertaining to such meeting or (b) be a Person appointed by an instrument in writing as proxy by a
Holder of one or more Notes on the record date pertaining to such meeting. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the
Trustee and its counsel and any representatives of the Company and its counsel.
Section 9.05 Regulations. Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable
regulations as it may deem advisable for any meeting of Holders, in regard to proof of the holding of Notes and of the appointment of
proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders as provided in Section 9.03, in which case the Company or the Holders calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall
be elected by vote of the Holders of a majority in principal amount of the Notes represented at the meeting and entitled to vote at the
meeting.
Subject to the provisions of Section 8.04, at any meeting of Holders each Holder or proxyholder shall be entitled to one vote for
each US$1,000 principal amount of Notes held or represented by him or her; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Note challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The
chairman of the meeting shall have no right to vote other than by virtue of Notes held by it or instruments in writing as aforesaid duly
designating it as the proxy to vote on behalf of other Holders. Any meeting of Holders duly called pursuant to the provisions of Section
9.02 or Section 9.03 may be adjourned from time to time by the Holders of a majority of the aggregate principal amount of Notes
represented at the meeting, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
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Minutes shall be made of all resolutions and proceedings at every meeting and, if purporting to be signed by the chairman of
that meeting or of the next succeeding meeting of Holders of the Notes, shall be conclusive evidence of the matters in them. Until the
contrary is proved every meeting for which minutes have been so made and signed shall be deemed to have been duly convened and held
and all resolutions passed or proceedings transacted at it to have been duly passed and transacted.
Section 9.06 Voting. The vote upon any resolution submitted to any meeting of Holders shall be by written ballot on which
shall be subscribed the signatures of the Holders or of their representatives by proxy and the outstanding principal amount of the Notes
held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast
at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was mailed as provided in Section 9.02. The record shall show the principal amount of the Notes voting in favor
of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters therein stated.
Section 9.07 No Delay of Rights by Meeting. Nothing contained in this Article 9 shall be deemed or construed to authorize or
permit, by reason of any call of a meeting of Holders or any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Holders under any of the
provisions of this Indenture or of the Notes.
ARTICLE 10
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Holders. The Company, when authorized by the resolutions of the
Board of Directors, and the Trustee, at the Company’s expense and direction, may from time to time and at any time amend or
supplement this Indenture or the Notes for one or more of the following purposes:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to provide for the assumption by a Successor Company of the obligations of the Company under this Indenture and the
Notes pursuant to Article 11;
(c) to add guarantees with respect to the Notes;
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(d) to secure the Notes;
(e) to add to the covenants or Events of Defaults of the Company for the benefit of the Holders or surrender any right or
power conferred upon the Company;
(f) upon the occurrence of any transaction or event described in Section 14.07(a), to (i) provide that the Notes are
convertible into Reference Property, subject to Section 14.02, and (ii) effect the related changes to the terms of the Notes described under
Section 14.07(a), in each case, in accordance with Section 14.07;
(g) to make any change that does not adversely affect the rights of any Holder; or
(h) comply with the rules of the Euroclear and Clearstream.
Upon the written request of the Company, the Trustee is hereby authorized to join with the Company in the execution of any
such amendment or supplement to this Indenture or the Notes, to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects
the Trustee’s own rights, duties or immunities under this Indenture or otherwise. The Trustee shall seek an Officers’ Certificate and an
Opinion of Counsel, at the Company’s expense, that any such amendment or supplement to this Indenture or the Notes is authorized and
permitted by the terms of this Indenture and not contrary to law.
Any amendment or supplement to this Indenture or the Notes authorized by the provisions of this Section 10.01 may be
executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time outstanding,
notwithstanding any of the provisions of Section 10.02.
Section 10.02 Supplemental Indentures with Consent of Holders. With the consent (evidenced as provided in Article 8) of the
Holders of at least a majority of the aggregate principal amount of the Notes then outstanding (determined in accordance with Article 8
and including, without limitation, consents obtained in connection with a repurchase of, or tender or exchange offer for, Notes), the
Company, when authorized by the resolutions of the Board of Directors, and the Trustee, at the Company’s expense, may from time to
time and at any time enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or any supplemental indenture or of modifying in any manner the rights
of the Holders; provided, however, that, without the consent of each Holder of an outstanding Note affected, no such supplemental
indenture shall:
(a) reduce the amount of Notes whose Holders must consent to an amendment or waiver;
(b) reduce the rate of or extend the stated time for payment of interest (if any) on any Note;
(c) reduce the principal of or extend the Maturity Date of any Note;
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(d) make any change that adversely affects the conversion rights of any Notes;
(e) reduce the Fundamental Change Repurchase Price of any Note or amend or modify in any manner adverse to the
Holders the Company’s obligation to make such payments, whether through an amendment or waiver of provisions in the covenants,
definitions or otherwise;
(f) make any Note payable in a currency other than U.S. dollars;
(g) change the ranking of the Notes;
(h) impair the right of any Holder to receive payment of principal and interest (if any) on such Holder’s Notes on or after
the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Note;
(i) change the Company’s obligation to pay Additional Amounts on any Note; or
(j) make any change in this Article 10 that requires each Holder’s consent or in the waiver provisions in Section 6.02 or
Section 6.09.
Upon the written request of the Company, and upon the filing with the Trustee of evidence of the consent of Holders as
aforesaid and subject to Section 10.05, the Trustee shall join with the Company in the execution of such supplemental indenture unless
(i) the Trustee has not received an Officers’ Certificate and an Opinion of Counsel that such supplemental indenture is authorized and
permitted by the terms of this Indenture and not contrary to law or (ii) such supplemental indenture affects the Trustee’s own rights,
duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
Holders do not need under this Section 10.02 to approve the particular form of any proposed supplemental indenture. It shall be
sufficient if such Holders approve the substance thereof. After any supplemental indenture becomes effective under Section 10.01 or
Section 10.02, the Company shall mail to the Holders a notice briefly describing such supplemental indenture. However, the failure to
give such notice to all the Holders, or any defect in the notice, will not impair or affect the validity of the supplemental indenture.
Section 10.03 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture pursuant to the provisions
of this Article 10, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights,
limitation of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
Section 10.04 Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant
to the provisions of this Article 10 may, at the
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Company’s expense, bear a notation in form approved by the Note Registrar as to any matter provided for in such supplemental
indenture. If the Company or the Trustee shall so determine, new Notes so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may, at the Company’s expense,
be prepared and executed by the Company, authenticated by the Note Registrar upon receipt of a Company Order and delivered in
exchange for the Notes then outstanding, upon surrender of such Notes then outstanding.
Section 10.05 Evidence of Compliance of Supplemental Indenture to Be Furnished Trustee. In addition to the documents
required by Section 17.06, the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements of this Article 10 and is permitted or authorized by this
Indenture and is not contrary to law.
ARTICLE 11
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
Section 11.01 Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 11.02, the Company
shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of the consolidated assets of the
Company, its Subsidiaries and its Consolidated Affiliated Entities, taken as a whole, to another Person, unless:
(a) the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation
organized and existing under the laws of the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor
Company (if not the Company) shall expressly assume, by supplemental indenture all of the obligations of the Company under the Notes
and this Indenture (including, for the avoidance of doubt, the obligation to pay Additional Amounts pursuant to Section 4.07);
(b) if the Company will not be the resulting or surviving corporation, the Company shall have, at or prior to the effective
date of such transaction, delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the execution and
delivery of the supplemental indenture do not conflict with the requirements set forth in the Indenture and that all conditions precedent to
the execution and delivery of such supplemental indenture have been satisfied; and
(c) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing
under this Indenture.
For purposes of this Section 11.01, the sale, conveyance, transfer or lease of all or substantially all of the assets of one or more
Subsidiaries or Consolidated Affiliated Entities of the Company to another Person, which properties and assets, if held by the Company
instead of such Subsidiaries or Consolidated Affiliated Entities, would constitute all or substantially all of the assets of the Company on a
consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the consolidated assets of the
Company to another Person.
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Section 11.02 Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or
lease and upon the assumption by the Successor Company, by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual payment of the principal of all of the Notes (including, for the avoidance of
doubt, any Additional Amounts), the due and punctual delivery or payment, as the case may be, of any consideration due upon
conversion of the Notes (including, for the avoidance of doubt, any Additional Amounts) and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Company, such Successor Company (if not the Company) shall
succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and assets, shall be substituted for the
Company, with the same effect as if it had been named herein as the party of the first part. Such Successor Company thereupon may
cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the Note Registrar; and, upon the order of such Successor
Company instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Note Registrar
shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and
delivered by the Officers of the Company to the Note Registrar for authentication, and any Notes that such Successor Company
thereafter shall cause to be signed and delivered to the Note Registrar for that purpose. All the Notes so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this
Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger,
sale, conveyance or transfer (but not in the case of a lease), upon compliance with this Article 11 the Person named as the “Company” in
the first paragraph of this Indenture (or any successor that shall thereafter have become such in the manner prescribed in this Article 11)
may be dissolved, wound up and liquidated at any time thereafter and, except in the case of a lease, such Person shall be released from its
liabilities as obligor and maker of the Notes and from its obligations under this Indenture and the Notes.
In case of any such consolidation, merger, sale, conveyance, transfer or lease, such changes in phraseology and form (but not in
substance) may be made in the Notes thereafter to be issued as may be appropriate.
Section 11.03 Opinion of Counsel to Be Given to Trustee. No consolidation, merger, sale, conveyance, transfer or lease shall be
effective unless the Trustee shall receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or lease and any such assumption and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, complies with the provisions of this Article 11, that all conditions
precedent thereto have been satisfied and that the Notes and such supplemental indenture are the legal, valid and binding obligations of
the Successor Company, enforceable against it in accordance with its terms, subject to customary assumptions, qualifications, and
exceptions.
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ARTICLE 12
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
Section 12.01 Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of any Note,
nor for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture or in any supplemental indenture or in any Note, nor because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, employee, agent, Officer or director or Subsidiary, as such, past,
present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issue of the Notes.
ARTICLE 13
INTENTIONALLY OMITTED
ARTICLE 14
CONVERSION OF NOTES
Section 14.01 Conversion Privilege. Subject to and upon compliance with the provisions of this Article 14, each Holder of a
Note shall have the right, at such Holder’s option, to convert all or any portion with a minimum principal amount of US$10,000,000 and
integral multiples of US$1,000 in excess thereof of such Note at any time on or after September 5, 2020 and prior to the close of business
on the second Business Day immediately preceding the Maturity Date into ADSs at an initial conversion rate of 285.714 ADSs (subject
to adjustment as provided in this Article 14, the “Conversion Rate”) per US$1,000 principal amount of Notes (subject to the settlement
provisions of Section 14.02, the “Conversion Obligation”), provided that no Holder or beneficial owner of a Note shall have the right to
receive ADSs on or prior to the Distribution Compliance Period Termination Date and further provided that nothing in this Section 14.01
shall prevent conversion of a Note by a Holder (or the relevant beneficial owner) if such Person holds less than the minimum principal
amount of the Notes set forth above.
Section 14.02 Conversion Procedure; Settlement Upon Conversion.
(a) Upon conversion of any Note, the Company shall cause to be delivered to the converting Holder, in respect of each
US$1,000 principal amount of Notes being converted, a number of ADSs equal to the Conversion Rate in effect immediately prior to the
close of business on the relevant Conversion Date, together with a cash payment, if applicable, in lieu of any fractional ADSs
(“Fractional ADSs”) (assuming delivery of the maximum number of ADSs due upon conversion that do not represent a fractional ADS)
in accordance with subsection (j) of this Section 14.02, on the third Business Day immediately following the relevant Conversion Date;
provided that, if a Conversion Date occurs after the Ordinary Shares have been replaced by the Reference Property consisting solely of
cash in accordance with Section 14.07, the Company shall cause the consideration due in respect of the conversion to be paid to the
converting Holder
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on the tenth Business Day immediately following the related Conversion Date. For the avoidance of doubt, neither the Trustee nor any
Agent shall have any responsibility to deliver ADSs upon conversion of any Note to any person or deal with cash payments in relation to
conversions, except for cash payments in lieu of any fractional ADS.
(b) Subject to Section 14.02(e), before any Holder of a Note shall be entitled to convert a Note as set forth above, such
Holder shall (i) in the case of a Global Note, comply with the procedures of the Euroclear and Clearstream in effect at that time and
complete, manually sign and deliver a duly completed irrevocable notice to the Conversion Agent as set forth in the Form of Notice of
Conversion (or a facsimile thereof) (a “Notice of Conversion”) and (ii) in the case of a Physical Note (1) complete, manually sign and
deliver a duly completed irrevocable Notice of Conversion to the Conversion Agent at the specified office of the Conversion Agent and
state in writing therein the principal amount of Notes to be converted and the name or names (with addresses) in which such Holder
wishes the certificate or certificates for any ADSs to be delivered upon settlement of the Conversion Obligation to be registered, (2)
surrender such Notes, duly endorsed to the Company or in blank (and accompanied by appropriate endorsement and transfer documents),
at the specified office of the Conversion Agent and (3) if required, furnish appropriate endorsements and transfer documents. The
Trustee (and if different, the Conversion Agent) shall notify the Company of any conversion pursuant to this Article 14 on the
Conversion Date for such conversion. No Notice of Conversion with respect to any Notes may be delivered and no Notes may be
surrendered by a Holder for conversion thereof if such Holder has also delivered a Fundamental Change Repurchase Notice to the
Company in respect of such Notes and not validly withdrawn such Fundamental Change Repurchase Notice in accordance with Section
15.03. A Notice of Conversion shall be deposited in duplicate at the office of any Conversion Agent on any Business Day from 9:00 a.m.
to 3:00 p.m. at the location of the Conversion Agent to which such Notice of Conversion is delivered. Any Notice of Conversion and any
Physical Note (if issued) deposited outside the hours specified or on a day that is not a Business Day at the location of the Conversion
Agent shall for all purposes be deemed to have been deposited with that Conversion Agent between 9:00 a.m. and 3:00 p.m. on the next
Business Day.
If more than one Note shall be surrendered for conversion at one time by the same Holder, the Conversion Obligation with
respect to such Notes shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof to the
extent permitted thereby) so surrendered. None of the Agents of the Trustee shall have any responsibility whatsoever with respect to the
issuance and delivery of the ADSs to the converting Holder.
(c) A Note shall be deemed to have been converted immediately prior to the close of business on the date (the “Conversion
Date”) that the Holder has complied with the requirements set forth in subsection (b) above. The Company shall issue or cause to be
issued, and deliver or cause to be delivered to such converting Holder, or such converting Holder’s nominee or nominees, certificates or a
book-entry transfer through Euroclear and Clearstream for the full number of ADSs to which such Holder shall be entitled in satisfaction
of the Company’s Conversion Obligation.
58
(d) In case any Note shall be surrendered for partial conversion, the Company shall execute and instruct the Note Registrar
who shall authenticate and deliver to or upon the written order of the Holder of the Note so surrendered a new Note or Notes in
authorized denominations in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of
any service charge by the converting Holder but, if required by the Company or Trustee, with payment of a sum sufficient to cover any
transfer tax or similar governmental charge required by law or that may be imposed in connection therewith as a result of the name of the
Holder of the new Notes issued upon such conversion being different from the name of the Holder of the old Notes surrendered for such
conversion.
(e) If a Holder submits a Note for conversion, the Company shall pay any documentary, stamp, issue, transfer or similar tax
due on the delivery of the ADSs upon conversion of the Notes (or the issuance of the underlying Ordinary Shares), unless the tax is due
because the Holder requests such ADSs (or such Ordinary Shares) to be issued in a name other than the Holder’s name, in which case the
Holder shall pay that tax. The Conversion Agent may refuse to deliver the certificates representing the ADSs (or the Ordinary Shares)
being issued in a name other than the Holder’s name until the Trustee receives a sum sufficient to pay any tax that is due by such Holder
in accordance with the immediately preceding sentence. The Company shall pay the ADS Depositary’s fees for issuance of the ADSs.
(f) Except as provided in Section 14.04, no adjustment shall be made for dividends on any ADSs delivered upon the
conversion of any Note as provided in this Article 14.
(g) Upon the conversion of an interest in a Global Note, the Trustee shall make a notation on such Global Note as to the
reduction in the principal amount represented thereby. The Company shall notify the Trustee in writing of any conversion of Notes
effected through any Conversion Agent other than the Trustee.
(h) The Company’s settlement of the Conversion Obligation shall be deemed to satisfy in full its obligation to pay the
principal amount of the Note.
(i) The Person in whose name the certificate for any ADSs delivered upon conversion is registered shall be treated as a
holder of record of such ADSs as of the close of business on the relevant Conversion Date. Upon a conversion of Notes, such Person
shall no longer be a Holder of such Notes surrendered for conversion.
(j) The Company shall not issue any Fractional ADS upon conversion of the Notes and shall instead pay cash in lieu of any
Fractional ADS deliverable upon conversion based on the Last Reported Sale Price of the ADSs on the relevant Conversion Date (or if
such Conversion Date is not a Trading Day, the immediately preceding Trading Day).
(k) In accordance with the Deposit Agreement, the Company shall issue to the ADS Custodian such Ordinary Shares
required for the issuance of the ADSs upon conversion of the Notes, plus written delivery instructions (if requested by the ADS
Depositary or the ADS Custodian) for such ADSs, shall deliver such legal opinions and any other information or documentation and any
additional forms compliant with the procedures of the Depository Trust
59
Company with respect to such conversion of Notes and shall comply with the Deposit Agreement, as required by the ADS Depositary or
the ADS Custodian in connection with each issue of Ordinary Shares and issuance and delivery of ADSs.
Section 14.03 [RESERVED]
Section 14.04 Adjustment of Conversion Rate. If the number of Ordinary Shares represented by the ADSs is changed, after the
date of this Indenture, for any reason other than one or more of the events described in this Section 14.04, the Company shall make an
appropriate adjustment to the Conversion Rate such that the number of Ordinary Shares represented by the ADSs upon which conversion
of the Notes is based remains the same.
Notwithstanding the adjustment provisions described in this Section 14.04, if the Company distributes to holders of the
Ordinary Shares any cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other
assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of the ADSs,
but, instead, the ADSs shall represent, in addition to Ordinary Shares, such cash, rights, options, warrants, shares of Capital Stock or
similar equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the Conversion Rate
described in this Section 14.04 shall not be made until and unless a corresponding distribution (if any) is made to holders of the ADSs,
and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and not on the
distribution made to the holders of the Ordinary Shares. However, in the event that the Company issues or distributes to all holders of
the Ordinary Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall adjust the Conversion
Rate pursuant to Section 14.04(b) (in the case of Expiring Rights entitling holders of the Ordinary Shares for a period of not more than
45 calendar days after the announcement date of such issuance to subscribe for or purchase Ordinary Shares or ADSs) or Section
14.04(c) (in the case of all other Expiring Rights).
For the avoidance of doubt, if any event described in this Section 14.04 results in a change to the number of Ordinary Shares
represented by the ADSs, then such a change shall be deemed to satisfy the Company’s obligation to effect the relevant adjustment to the
Conversion Rate on account of such event to the extent such change produces the same economic result as the adjustment to the
Conversion Rate that would otherwise have been made on account of such event.
The Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the
Company shall not make any adjustments to the Conversion Rate if Holders of the Notes participate (other than in the case of a share
split or share combination), at the same time and upon the same terms as holders of the ADSs and solely as a result of holding the Notes,
in any of the transactions described in this Section 14.04, without having to convert their Notes, as if they held a number of ADSs equal
to the Conversion Rate, multiplied by the principal amount (expressed in thousands) of Notes held by such Holder. Neither the Trustee
nor the Conversion Agent shall have any responsibility to monitor the accuracy of any calculation of any adjustment to the Conversion
Rate and the same shall be
60
conclusive and binding on the Holders, absent manifest error. Notice of such adjustment to the Conversion Rate shall be given by the
Company promptly to the Holders, the Trustee and the Paying Agent and Conversion Agent and shall be conclusive and binding on the
Holders, absent manifest error
(a) If the Company exclusively issues Ordinary Shares as a dividend or distribution on the Ordinary Shares, or if the
Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:
where,
CR0
=
CR1
OS0
OS1
=
=
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date of such dividend or
distribution, or immediately prior to the open of business on the effective date of such share split or share combination, as
applicable;
the Conversion Rate in effect immediately after the close of business on such Record Date or immediately after the open of
business on such effective date, as applicable;
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date or immediately
prior to the open of business on such effective date, as applicable; and
the number of Ordinary Shares outstanding immediately after giving effect to such dividend, distribution, share split or
share combination.
Any adjustment made under this Section 14.04(a) shall become effective immediately after the close of business on the Record Date for
such dividend or distribution, or immediately after the open of business on the effective date for such share split or share combination, as
applicable. If any dividend or distribution of the type described in this Section 14.04(a) is declared but not so paid or made, the
Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.
(b) If the Company issues to all or substantially all holders of the Ordinary Shares (directly or in the form of ADSs) any
rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to
subscribe for or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than the average of
the Last Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including,
61
the Trading Day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the
following formula:
where,
CR0
CR1
OS0
X
Y
=
=
=
=
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such
issuance;
the Conversion Rate in effect immediately after the close of business on such Record Date;
the number of Ordinary Shares outstanding immediately prior to the close of business on such Record Date;
the total number of Ordinary Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or
warrants; and
the number of Ordinary Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided
by (ii) the quotient of (a) the average of the Last Reported Sale Prices of the ADSs over the 10 consecutive Trading Day
period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such
rights, options or warrants divided by (b) the number of Ordinary Shares then represented by one ADS.
Any increase made under this Section 14.04(b) shall be made successively whenever any such rights, options or warrants are issued and
shall become effective immediately after the close of business on the Record Date for the ADSs for such issuance. To the extent that
Ordinary Shares or ADSs are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or
warrants been made on the basis of delivery of only the number of Ordinary Shares actually delivered (directly or in the form of
ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the Conversion Rate that would
then be in effect if such the Record Date for the ADSs for such issuance had not occurred.
For purposes of this Section 14.04(b), in determining whether any rights, options or warrants entitle the holders to subscribe for
or purchase Ordinary Shares (directly or in the form of ADSs) at a price per Ordinary Share that is less than such average of the Last
Reported Sale Prices of the Ordinary Shares or the ADSs, as the case may be (divided by, in the case of the ADSs, the number of
Ordinary Shares then represented by one ADS), for the 10 consecutive Trading Day period ending on, and including, the Trading Day
immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such
62
Ordinary Shares or ADSs, there shall be taken into account any consideration received by the Company for such rights, options or
warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined
by the Board of Directors.
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the
Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Ordinary
Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which an adjustment was effected
pursuant to Section 14.04(a) or Section 14.04(b), (ii) dividends or distributions paid exclusively in cash as to which an adjustment was
effected pursuant to Section 14.04(d), and (iii) Spin-Offs as to which the provisions set forth below in this Section 14.04(c) shall apply
(any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital
Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the
following formula:
where,
CR0
CR1
SP0
=
=
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such
distribution;
the Conversion Rate in effect immediately after the close of business on such Record Date;
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding
the Ex-Dividend Date for such distribution; and
FMV =
the fair market value (as determined by the Board of Directors) of the Distributed Property with respect to each outstanding
Ordinary Share (directly or in the form of ADSs) on the Record Date for the ADSs for such distribution.
Any increase made under the foregoing portion of this Section 14.04(c) above shall become effective immediately after the close of
business on the Record Date for the ADSs for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing,
if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note
shall receive, in respect of each US$1,000 principal amount thereof, at the same time and upon the same terms as holders of the ADSs
receive the Distributed Property, the amount and kind of Distributed Property such
63
Holder would have received if such Holder owned a number of ADSs equal to the Conversion Rate in effect on the Record Date for the
ADSs for the distribution.
With respect to an adjustment pursuant to this Section 14.04(c) where there has been a payment of a dividend or other
distribution on the Ordinary Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or similar equity
interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for
trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:
where,
CR0
CR1
=
=
FMV0 =
the Conversion Rate in effect immediately prior to the close of business on the last Trading Day of the Valuation Period;
the Conversion Rate in effect immediately after the close of business on the last Trading Day of the Valuation Period;
the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the
Ordinary Shares (directly or in the form of ADSs) applicable to one Ordinary Share (determined by reference to the
definition of Last Reported Sale Price as set forth in Section 1.01 as if references therein to the ADSs were to such Capital
Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend
Date of the Spin-Off (the “Valuation Period”); and
MP0
=
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the Valuation Period.
The adjustment to the Conversion Rate under the preceding paragraph shall occur immediately after the close of business on the last
Trading Day of the Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of
this Section 14.04(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of Trading Days as
have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the Conversion Date in determining the
Conversion Rate.
For purposes of this Section 14.04(c) (and subject in all respect to Section 14.11), rights, options or warrants distributed by the
Company to all holders of the Ordinary Shares (directly or in the form of ADSs) entitling them to subscribe for or purchase shares of the
Company’s Capital Stock, including Ordinary Shares (either initially or under certain circumstances), which rights, options or warrants,
until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Ordinary Shares
(directly or in the form of ADSs); (ii) are
64
not exercisable; and (iii) are also issued in respect of future issuances of the Ordinary Shares (directly or in the form of ADSs), shall be
deemed not to have been distributed for purposes of this Section 14.04(c) (and no adjustment to the Conversion Rate under this Section
14.04(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options or warrants shall be deemed
to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section
14.04(c). If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this
Indenture, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the
date of distribution and Record Date with respect to new rights, options or warrants with such rights (in which case the existing rights,
options or warrants shall be deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in
the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type
described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount
for which an adjustment to the Conversion Rate under this Section 14.04(c) was made, (1) in the case of any such rights, options or
warrants that shall all have been redeemed or purchased without exercise by any holders thereof, upon such final redemption or purchase
(x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the Conversion Rate shall
then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a
cash distribution, equal to the per Ordinary Share redemption or purchase price received by a holder or holders of Ordinary Shares
(directly or in the form of ADSs) with respect to such rights, options or warrants (assuming such holder had retained such rights, options
or warrants), made to all holders of Ordinary Shares (directly or in the form of ADSs) as of the date of such redemption or purchase, and
(2) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the
Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.
For purposes of Section 14.04(a), Section 14.04(b) and this Section 14.04(c), if any dividend or distribution to which this
Section 14.04(c) is applicable also includes one or both of:
(A) a dividend or distribution of Ordinary Shares (directly or in the form of ADSs) to which Section 14.04(a) is applicable
(the “Clause A Distribution”); or
(B) a dividend or distribution of rights, options or warrants to which Section 14.04(b) is applicable (the “Clause B
Distribution”),
then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a
dividend or distribution to which this Section 14.04(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment
required by this Section 14.04(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A Distribution and
Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by
Section 14.04(a) and Section 14.04(b) with respect thereto shall then be made, except that, if determined by the
65
Company (I) the “Record Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of the
Clause C Distribution and (II) any Ordinary Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B
Distribution shall be deemed not to be “outstanding immediately prior to the close of business on such Record Date or immediately after
the open of business on such effective date, as applicable” within the meaning of Section 14.04(a) or “outstanding immediately prior to
the close of business on such Record Date” within the meaning of Section 14.04(b).
(d) If any cash dividend or distribution is made to all or substantially all holders of the Ordinary Shares (directly or in the
form of ADSs), the Conversion Rate shall be adjusted based on the following formula:
where,
CR0
CR1
SP0
C
=
=
=
=
the Conversion Rate in effect immediately prior to the close of business on the Record Date for the ADSs for such dividend
or distribution;
the Conversion Rate in effect immediately after the close of business on such Record Date;
the Last Reported Sale Price of the ADSs (divided by the number of Ordinary Shares then represented by one ADS) on the
Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and
the amount in cash per Ordinary Share the Company distributes to all or substantially all holders of the Ordinary Shares
(directly or in the form of ADSs).
Any increase pursuant to this Section 14.04(d) shall become effective immediately after the close of business on the Record Date for the
ADSs for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective
as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal
to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a Note shall receive, for each US$1,000
principal amount of Notes, at the same time and upon the same terms as holders of the ADSs, the amount of cash that such Holder would
have received if such Holder owned a number of ADSs equal to the Conversion Rate on the Record Date for the ADSs for such cash
dividend or distribution.
(e) If the Company or any of its Subsidiaries or Consolidated Affiliated Entities makes a payment in respect of a tender or
exchange offer for the Ordinary Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration
included in
66
the payment per Ordinary Share exceeds the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary
Shares then represented by one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next
succeeding the date such tender or exchange offer expires, the Conversion Rate shall be increased based on the following formula:
where,
CR0
CR1
AC
OS0
=
=
=
=
OS1
=
SP1
=
the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following,
and including, the Trading Day next succeeding the date such tender or exchange offer expires;
the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and
including, the Trading Day next succeeding the date such tender or exchange offer expires;
the aggregate value of all cash and any other consideration (as determined by the Board of Directors) paid or payable for
Ordinary Shares or ADSs, as the case may be, purchased in such tender or exchange offer;
the number of Ordinary Shares outstanding immediately prior to the date such tender or exchange offer expires (prior to
giving effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in
such tender or exchange offer);
the number of Ordinary Shares outstanding immediately after the date such tender or exchange offer expires (after giving
effect to the purchase of all Ordinary Shares or ADSs, as the case may be, accepted for purchase or exchange in such
tender or exchange offer); and
the average of the Last Reported Sale Prices of the ADSs (divided by the number of Ordinary Shares then represented by
one ADS) over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding
the date such tender or exchange offer expires.
The adjustment to the Conversion Rate under this Section 14.04(e) shall occur at the close of business on the 10th Trading Day
immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in
respect of any conversion within the 10 Trading Days immediately following, and including, the Trading Day next succeeding the
expiration date of any tender or exchange offer, references in this Section 14.04(e) with respect to 10 Trading Days shall be deemed
replaced with such lesser number of Trading Days as have elapsed from, and including, the Trading Day next succeeding the expiration
date of such tender or exchange offer to, and including, the Conversion Date in
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determining the Conversion Rate. For the avoidance of doubt, no adjustment to the Conversion Rate under this Section 14.04(e) shall be
made if such adjustment would result in a decrease in the Conversion Rate.
(f) Subject to Section 14.04(g), if and whenever the Company shall issue any Ordinary Shares or ADSs (other than any
issuance pursuant to the Notes or on the exercise of any other rights, existing as of the date of this Indenture, of conversion into, or
exchange or subscription for, Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert
into, exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition only
excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise or exchange for
Ordinary Shares or ADSs issued or granted in accordance with any employee incentive plan of the Company), in each case at a
consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price
per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each ADS) which is less than the
Reference Price, the Conversion Rate shall be adjusted based on the following formula:
where:
CR0
CR1
A
B
=
=
=
=
the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;
the Conversion Rate in effect as from the date of issue of the Relevant Securities;
the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;
the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would
purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then
represented by each ADS; and
C
=
the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,
provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued
assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs
are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights.
(g) Prior to September 5, 2020, if and whenever the Company shall complete any Qualified Equity Financing at a
consideration per ADS (on an as-converted and as-exercised
68
basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of
Ordinary Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted to the
higher of (i) the Qualified Equity Financing Conversion Rate or (ii) the Conversion Rate as adjusted pursuant to Section 14.04(f).
(h) Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Ordinary Shares or ADSs
or any securities convertible into or exchangeable for Ordinary Shares or ADSs or the right to purchase Ordinary Shares or ADSs or such
convertible or exchangeable securities.
(i) In addition to those adjustments required by clauses (a), (b), (c), (d) and (e) of this Section 14.04, and to the extent
permitted by applicable law and subject to the applicable rules of the New York Stock Exchange and any other securities exchange on
which any of the Company’s securities are then listed, the Company from time to time may increase the Conversion Rate by any amount
for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest,
and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the
Ordinary Shares or the ADSs or rights to purchase Ordinary Shares or ADSs in connection with a dividend or distribution of Ordinary
Shares or ADSs (or rights to acquire Ordinary Shares or ADSs) or similar event.
(j) Notwithstanding anything to the contrary in this Article 14, the Conversion Rate shall not be adjusted:
(i) upon the issuance of any Ordinary Shares or ADSs pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in
Ordinary Shares or ADSs under any plan;
(ii) upon the issuance of any Ordinary Shares or ADSs or options or rights to purchase those Ordinary Shares or
ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company
or any of the Company’s Subsidiaries or Consolidated Affiliated Entities;
(iii) upon the issuance of any Ordinary Shares or ADSs pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date the Notes were
first issued;
(iv) solely for a change in the par value of the Ordinary Shares; or
(v) for accrued and unpaid interest, if any.
(k) All calculations and other determinations under this Article 14 shall be made by the Company and shall be made to the
nearest one-ten thousandth (1/10,000) of an ADS.
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(l) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly file with the Trustee (and
the Conversion Agent if not the Trustee) an Officers’ Certificate setting forth the Conversion Rate after such adjustment and setting forth
a brief statement of the facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee shall have received such
Officers’ Certificate, the Trustee shall not be deemed to have knowledge of any adjustment of the Conversion Rate and may assume
without inquiry that the last Conversion Rate of which it has knowledge is still in effect. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on
which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to each Holder at its last
address appearing on the Note Register of this Indenture. Failure to deliver such notice shall not affect the legality or validity of any
such adjustment.
(m) For purposes of this Section 14.04, the number of Ordinary Shares at any time outstanding shall not include Ordinary
Shares held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any dividend or make
any distribution on Ordinary Shares held in the treasury of the Company (directly or in the form of ADSs), but shall include Ordinary
Shares issuable in respect of scrip certificates issued in lieu of fractions of Ordinary Shares.
(n) For purposes of this Section 14.04, the “effective date” means the first date on which the ADSs trade on the applicable
exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.
Section 14.05 Adjustments of Prices. Whenever any provision of this Indenture requires the Company to calculate the Last
Reported Sale Prices over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any
adjustment to the Conversion Rate that becomes effective pursuant to Section 14.04, or any event requiring an adjustment to the
Conversion Rate pursuant to Section 14.04 where the Record Date, effective date or expiration date, as the case may be, of the event
occurs, at any time during the period when such Last Reported Sale Prices are to be calculated.
Section 14.06 Ordinary Shares to Be Fully Paid. The Company shall provide, free from preemptive rights, out of its authorized
but unissued Ordinary Shares or Ordinary Shares held in treasury, a sufficient number of Ordinary Shares that corresponds to the number
of ADSs due upon conversion of the Notes from time to time as such Notes are presented for conversion (assuming that at the time of
computation of such number of Ordinary Shares, all such Notes would be converted by a single Holder).
Section 14.07 Effect of Recapitalizations, Reclassifications and Changes of the Ordinary Shares.
(a) In the case of:
(i) any recapitalization, reclassification or change of the Ordinary Shares (other than changes resulting from a
subdivision or combination),
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(ii) any consolidation, merger, combination or similar transaction involving the Company,
(iii) any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s
Subsidiaries and Consolidated Affiliated Entities substantially as an entirety or
(iv) any statutory share exchange,
in each case, as a result of which the Ordinary Shares would be converted into, or exchanged for, stock, other securities, other property or
assets (including cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of such
Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute with the Trustee a supplemental
indenture permitted under Section 10.01(f) providing that, at and after the effective time of such Merger Event, the right to convert each
US$1,000 principal amount of Notes shall be changed into a right to convert such principal amount of Notes into the kind and amount of
shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of
ADSs equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the
“Reference Property,” with each “unit of Reference Property” meaning the kind and amount of Reference Property that a holder of
one ADS is entitled to receive) upon such Merger Event; provided, however, that at and after the effective time of the Merger Event the
number of ADSs otherwise deliverable upon conversion of the Notes in accordance with Section 14.02 shall instead be deliverable in the
amount and type of Reference Property that a holder of that number of ADSs would have been entitled to receive in such Merger Event.
If the Merger Event causes the Ordinary Shares to be converted into, or exchanged for, the right to receive more than a single
type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Notes
will be convertible shall be deemed to be the weighted average of the types and amounts of consideration actually received by the
holders of the ADSs and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the
consideration referred to in clause (i) attributable to one ADS. The Company shall provide written notice to Holders, the Trustee and the
Conversion Agent (if other than the Trustee) of such weighted average as soon as practicable after such determination is made.
Such supplemental indenture described in the second immediately preceding paragraph shall provide for anti-dilution and other
adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 14 (it being understood that
no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of Common
Equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property
includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the
Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute
such supplemental indenture, and such supplemental indenture shall contain such additional provisions to protect the interests of the
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Holders of the Notes, including the right of Holders to require the Company to repurchase their Notes upon a Fundamental Change
pursuant to Section 15.02, as the Board of Directors shall reasonably consider necessary by reason of the foregoing.
(b) [RESERVED]
(c) The Company shall not become a party to any Merger Event unless its terms are consistent with this Section
14.07. None of the foregoing provisions shall affect the right of a holder of Notes to convert its Notes into ADSs as set forth in Section
14.01 and Section 14.02 prior to the effective date of such Merger Event.
(d) The above provisions of this Section shall similarly apply to successive Merger Events.
Section 14.08 Certain Covenants. (a) The Company covenants that all ADSs delivered upon conversion of Notes, and all
Ordinary Shares represented by such ADSs, will be fully paid and non-assessable by the Company and free from all taxes, liens and
charges with respect to the issue thereof.
(b) The Company covenants that, if any ADSs to be provided for the purpose of conversion of Notes hereunder, or any
Ordinary Shares represented by such ADSs, require registration with or approval of any governmental authority under any federal or
state law before such ADSs may be validly issued upon conversion, the Company will, to the extent then permitted by the rules and
interpretations of the Commission, secure such registration or approval, as the case may be.
(c) The Company further covenants that if at any time the ADSs shall be listed on any national securities exchange or
automated quotation system the Company will list and keep listed, so long as the ADSs shall be so listed on such exchange or automated
quotation system, any ADSs deliverable upon conversion of the Notes.
(d) The Company further covenants to take all actions and obtain all approvals and registrations required with respect to the
conversion of the Notes into ADSs and the issuance, and deposit into the ADS facility, of the Ordinary Shares represented by such
ADSs. The Company also undertakes to maintain, as long as any Notes are outstanding, the effectiveness of a registration statement on
Form F-6 relating to the ADSs and an adequate number of ADSs available for issuance thereunder such that ADSs can be delivered in
accordance with the terms of this Indenture, the Notes and the Deposit Agreement, upon conversion of the Notes. In addition, the
Company further covenants to provide Holders with a reasonably detailed description of the mechanics for the delivery of ADSs upon
conversion of Notes as set forth in the Deposit Agreement upon request.
Section 14.09 Responsibility of Trustee. The Trustee and any other Conversion Agent shall not at any time be under any duty
or responsibility to any Holder to determine the Conversion Rate (or any adjustment thereto) or whether any facts exist that may require
any adjustment (including any increase) of the Conversion Rate, or with respect to the nature or
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extent or calculation of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same. The Trustee and any other Conversion Agent shall not be accountable with
respect to the validity or value (or the kind or amount) of any ADSs, or of any securities, property or cash that may at any time be issued
or delivered upon the conversion of any Note; and the Trustee and any other Conversion Agent make no representations with respect
thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue, transfer or deliver
any ADSs or stock certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion, the
accuracy or inaccuracy of any mathematical calculation or formulae under this Indenture, whether by the Company or any Person so
authorized by the Company for such purpose under this Indenture or the failure by the Company to comply with any of the duties,
responsibilities or covenants of the Company contained in this Article. Without limiting the generality of the foregoing, neither the
Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 14.07 relating either to the kind or amount of ADSs or securities or property
(including cash) receivable by Holders upon the conversion of their Notes after any event referred to in such Section 14.07 or to any
adjustment to be made with respect thereto, but, subject to the provisions of Section 7.01, may accept (without any independent
investigation) as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, the Officers’
Certificate (which the Company shall be obligated to file with the Trustee prior to the execution of any such supplemental indenture)
with respect thereto.
Section 14.10 Notice to Holders Prior to Certain Actions. In case of any:
(a) action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to
Section 14.04 or Section 14.11;
(b) Merger Event; or
(c) voluntary or involuntary dissolution, liquidation or winding-up of the Company or any of its Subsidiaries;
then, in each case (unless notice of such event is otherwise required pursuant to another provision of this Indenture), the Company shall
cause to be filed with the Trustee and the Conversion Agent (if other than the Trustee) and to be mailed to each Holder at its address
appearing on the Note Register, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified,
a notice stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if
a record is not to be taken, the date as of which the holders of Ordinary Shares or ADSs, as the case may be, of record are to be
determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Merger Event,
dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of
Ordinary Shares or ADSs, as the case may be, of record shall be entitled to exchange their Ordinary Shares or ADSs, as the case may be,
for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up. Failure to give such notice,
or any
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defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, Merger Event, dissolution,
liquidation or winding-up.
Section 14.11 Stockholder Rights Plans. To the extent that the Company has a rights plan in effect upon conversion of the
Notes, each ADS delivered upon such conversion shall be entitled to receive (either directly or in respect of the Ordinary Shares
underlying such ADSs) the appropriate number of rights, if any, and the certificates representing the ADSs delivered upon such
conversion shall bear such legends, if any, in each case as may be provided by the terms of any such stockholder rights plan, as the same
may be amended from time to time. However, if, prior to any conversion, the rights have separated from the Ordinary Shares underlying
the ADSs in accordance with the provisions of the applicable stockholder rights plan, the Conversion Rate shall be adjusted at the time of
separation as if the Company distributed to all or substantially all holders of the Ordinary Shares Distributed Property as provided in
Section 14.04(c), subject to readjustment in the event of the expiration, termination or redemption of such rights.
Section 14.12 Termination of Depositary Receipt Program. If the Ordinary Shares cease to be represented by American
Depositary Shares issued under a depositary receipt program sponsored by the Company, all references in this Indenture to the ADSs
shall be deemed to have been replaced by a reference to the number of Ordinary Shares (and other property, if any) represented by the
ADSs on the last day on which the ADSs represented the Ordinary Shares and as if the Ordinary Shares and the other property had been
distributed to holders of the ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to
refer to the Last Reported Sale Price of the Ordinary Shares, and other appropriate adjustments, including adjustments to the Conversion
Rate, will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any other
currency are required, the exchange rate in effect on the date of determination will apply.
ARTICLE 15
REPURCHASE OF NOTES AT OPTION OF HOLDERS
Section 15.01 [RESERVED]
Section 15.02 Repurchase at Option of Holders Upon a Fundamental Change. (a)If a Fundamental Change occurs at any time,
each Holder shall have the right, at such Holder’s option, to require the Company to repurchase for cash all of such Holder’s Notes, or
any portion thereof that is equal to US$1,000 or an integral multiple of US$1,000, on the Business Day (the “Fundamental Change
Repurchase Date”) notified in writing by the Company as set forth in Section 15.02(c) that is not less than 20 Business Days or more
than 35 Business Days following the date of the Fundamental Change Company Notice at a repurchase price equal to 100% of the
principal amount thereof (the “Fundamental Change Repurchase Price”). The Trustee and the Conversion Agent, Paying Agent or any
other agent appointed for such purpose shall have no responsibility to determine the Fundamental Change Repurchase Price.
(b) Repurchases of Notes under this Section 15.02 shall be made, at the option of the Holder thereof, upon:
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(i) delivery to the Paying Agent (or other agent appointed for this purpose) by a Holder of a duly completed notice
(the “Fundamental Change Repurchase Notice”) in the form set forth in Attachment 2 to the Form of Note attached hereto as
Exhibit A, if the Notes are Physical Notes, or in compliance with the procedures of Euroclear and Clearstream for surrendering
interests in global notes, if the Notes are Global Notes, in each case on or before the close of business on the second Business
Day immediately preceding the Fundamental Change Repurchase Date; and
(ii) delivery of the Notes, if the Notes are Physical Notes, to the Trustee at any time after delivery of the
Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer) at the Corporate Trust Office,
or book-entry transfer of the Notes, if the Notes are Global Notes, in compliance with the procedures of Euroclear and
Clearstream, in each case such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price
therefor.
The Fundamental Change Repurchase Notice in respect of any Notes to be repurchased shall state:
(i) in the case of Physical Notes, the certificate numbers of the Notes to be delivered for repurchase;
(ii) the portion of the principal amount of Notes to be repurchased, which must be US$1,000 or an integral multiple
thereof; and
(iii) that the Notes are to be repurchased by the Company pursuant to the applicable provisions of the Notes and this
Indenture;
provided, however, that if the Notes are Global Notes, the Fundamental Change Repurchase Notice must comply with appropriate
procedures of Euroclear and Clearstream.
Notwithstanding anything herein to the contrary, any Holder delivering to the Trustee the Fundamental Change Repurchase
Notice contemplated by this Section 15.02 shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase
Notice at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change
Repurchase Date by delivery of a duly completed written notice of withdrawal to the Trustee in accordance with Section 15.03.
The Trustee shall promptly notify the Company of the receipt by it of any Fundamental Change Repurchase Notice or written
notice of withdrawal thereof.
(c) On or before the 20th calendar day after the occurrence of the effective date of a Fundamental Change, the Company
shall provide to all Holders, the Trustee (and the Conversion Agent, Paying Agent and any other agent appointed for this purpose, in
each case, if other than the Trustee) a written notice (the “Fundamental Change Company Notice”) of the occurrence of the effective
date of the Fundamental Change and of the repurchase right at the option of the Holders arising as a result thereof. In the case of
Physical Notes, such notice shall be by first class mail or, in the case of Global Notes, such notice shall be delivered in accordance
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with the applicable procedures of Euroclear and Clearstream. Simultaneously with providing such notice, the Company shall publish a
notice containing the information set forth in the Fundamental Change Company Notice in a newspaper of general circulation in The
City of New York or publish such information on the Company’s website or through such other public medium as the Company may use
at that time. Each Fundamental Change Company Notice shall specify:
(i) the events causing the Fundamental Change;
(ii) the effective date of the Fundamental Change;
(iii) the last date on which a Holder may exercise the repurchase right pursuant to this Article 15;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) the name and address of the Trustee, the Paying Agent, the Conversion Agent or any other agent appointed for
repurchase, if applicable;
(vii) if applicable, the Conversion Rate;
(viii) if applicable, that the Notes with respect to which a Fundamental Change Repurchase Notice has been
delivered by a Holder may be converted only if the Holder withdraws the Fundamental Change Repurchase Notice in
accordance with the terms of this Indenture; and
(ix) the procedures that Holders must follow to require the Company to repurchase their Notes.
No failure of the Company to give the foregoing notices and no defect therein shall limit the Holders’ repurchase rights or affect
the validity of the proceedings for the repurchase of the Notes pursuant to this Section 15.02.
At the Company’s request, the Trustee shall give such notice in the Company’s name and at the Company’s expense; provided,
however, that, in all cases, the text of such Fundamental Change Company Notice shall be prepared by the Company.
(d) Notwithstanding the foregoing, no Notes may be repurchased by the Company on any date at the option of the Holders
upon a Fundamental Change if the principal amount of the Notes has been accelerated, and such acceleration has not been rescinded, on
or prior to such date (except in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental
Change Repurchase Price with respect to such Notes). The Trustee will promptly return to the respective Holders thereof any Physical
Notes held by it during the acceleration of the Notes (except in the case of an acceleration resulting from a default by the Company in the
payment of the Fundamental Change Repurchase Price with respect to such
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Notes), or any instructions for book-entry transfer of the Notes in compliance with the procedures of Euroclear and Clearstream shall be
deemed to have been cancelled, and, upon such return or cancellation, as the case may be, the Fundamental Change Repurchase Notice
with respect thereto shall be deemed to have been withdrawn.
Section 15.03 Withdrawal of Fundamental Change Repurchase Notice. (a) A Fundamental Change Repurchase Notice may be
withdrawn (in whole or in part) by means of a duly completed written notice of withdrawal delivered to the Paying Agent (or other agent
appointed for such purpose) in accordance with this Section 15.03 at any time prior to the close of business on the second Business Day
immediately preceding the Fundamental Change Repurchase Date specifying:
(i) the principal amount of the Notes with respect to which such notice of withdrawal is being submitted,
(ii) if Physical Notes have been issued, the certificate number of the Note in respect of which such notice of
withdrawal is being submitted, and
(iii) the principal amount, if any, of such Note that remains subject to the original Fundamental Change Repurchase
Notice, which portion must be in principal amounts of US$1,000 or an integral multiple of US$1,000;
provided, however, that if the Notes are Global Notes, the notice must comply with appropriate procedures of Euroclear and
Clearstream.
Section 15.04 Deposit of Fundamental Change Repurchase Price. (a) The Company will deposit with the Paying Agent (or
any other agent appointed for this purpose by the Company), or if the Company is acting as its own Paying Agent, set aside, segregate
and hold in trust as provided in Section 4.04) on or prior to 10:00 a.m., New York City time, on the Fundamental Change Repurchase
Date an amount of money sufficient to repurchase all of the Notes to be repurchased at the appropriate Fundamental Change Repurchase
Price. Subject to receipt of funds and/or Notes by the Paying Agent (or other agent appointed for this purpose by the Company) and the
Trustee, as applicable, payment for Notes surrendered for repurchase (and not withdrawn in accordance with Section 15.03) will be made
on the later of (i) the Fundamental Change Repurchase Date (provided the Holder has satisfied the conditions in Section 15.02) and (ii)
the time of book-entry transfer or the delivery of such Note to the Trustee (or other Paying Agent appointed by the Company) by the
Holder thereof in the manner required by Section 15.02, as applicable, by mailing checks for the amount payable to the Holders of such
Notes entitled thereto as they shall appear in the Note Register; provided, however, that payments to the Common Depositary shall be
made by wire transfer of immediately available funds to the account of the Common Depositary or its nominee. The Paying Agent (or
other agent appointed for this purpose by the Company) shall, promptly after such payment and upon written demand by the Company,
return to the Company any funds in excess of the Fundamental Change Repurchase Price.
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(b) If by 10:00 a.m., New York City time, on the Fundamental Change Repurchase Date, the Paying Agent (or other agent
appointed for this purpose by the Company) holds money sufficient to make payment on all the Notes or portions thereof that are to be
repurchased on such Fundamental Change Repurchase Date, then, with respect to the Notes that have been properly surrendered for
repurchase and not validly withdrawn, on such Fundamental Change Repurchase Date, (i) such Notes will cease to be outstanding and
(ii) all other rights of the Holders of such Notes will terminate (other than the right to receive the Fundamental Change Repurchase
Price).
(c) Upon surrender of a Note that is to be repurchased in part pursuant to Section 15.02, the Company shall execute and the
Note Registrar, upon receipt of a Company Order, shall authenticate and deliver to the Holder a new Note in an authorized denomination
equal in principal amount to the unrepurchased portion of the Note surrendered.
Section 15.05 Covenant to Comply with Applicable Laws Upon Repurchase of Notes. In connection with any repurchase offer,
the Company will, if required:
(a) comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act;
(b) file a Schedule TO or other required schedule under the Exchange Act; and
(c) otherwise comply with all federal and state securities laws in connection with any offer by the Company to repurchase
the Notes;
in each case, so as to permit the rights and obligations under this Article 15 to be exercised in the time and in the manner specified in this
Article 15.
ARTICLE 16
BRRD MATTERS
Notwithstanding and to the exclusion of any other term of this Indenture or any other agreements, arrangements, or understanding
between The Bank of New York Mellon SA/NV, Luxembourg Branch and each counterparty, each counterparty acknowledges and
accepts that a BRRD Liability arising under this Indenture may be subject to the exercise of Bail-in Powers by the Relevant Resolution
Authority, and acknowledges, accepts, and agrees to be bound by:
(a) the effect of the exercise of Bail-in Powers by the Relevant Resolution Authority in relation to any BRRD Liability of The Bank
of New York Mellon SA/NV, Luxembourg Branch to each counterparty under this Indenture, that (without limitation) may
include and result in any of the following, or some combination thereof:
(i) the reduction of all, or a portion, of the BRRD Liability or outstanding amounts due thereon;
(ii) the conversion of all, or a portion, of the BRRD Liability into shares, other securities or other obligations of The Bank of
New York Mellon SA/NV, Luxembourg Branch
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or another person, and the issue to or conferral on each counterparty of such shares, securities or obligations;
(iii) the cancellation of the BRRD Liability;
(iv) the amendment or alteration of any interest, if applicable, thereon, the maturity or the dates on which any payments are
due, including by suspending payment for a temporary period;
(b) the variation of the terms of this Indenture, as deemed necessary by the Relevant Resolution Authority, to give effect to the
exercise of Bail-in Powers by the Relevant Resolution Authority.
ARTICLE 17
MISCELLANEOUS PROVISIONS
Section 17.01 Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the
Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.
Section 17.02 Official Acts by Successor Corporation. Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or Officer of the Company shall and may be done and performed with like
force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole
successor of the Company.
Section 17.03 Addresses for Notices, Etc. Any notice or demand that by any provision of this Indenture is required or permitted
to be given or served by the Trustee or by the Holders on the Company shall be deemed to have been sufficiently given or made, for all
purposes if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until
another address is filed by the Company with the Trustee) to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804,
People’s Republic of China, Facsimile No.: +86 (21) 3913 0192. Any notice, direction, request or demand hereunder to or upon the
Trustee shall be given or served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to
The Bank of New York Mellon, London Branch, One Canada Square, London E14 5AL, United Kingdom , Attention: Corporate Trust
Administration – Project Camel III (NIO Inc.) Fax: +44 1202 689660, with a copy to The Bank of New York Mellon, Hong Kong
Branch, Level 26, Three Pacific Place, 1 Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.:
+852-2295.3283. Any notice, direction, request or demand hereunder to or upon the Registrar and the Transfer Agent shall be given or
served by being deposited postage prepaid by registered or certified mail in a post office letter box addressed to The Bank of New York
Mellon SA/NV, Luxembourg Branch, Vertigo Building – Polaris, 2-4 rue Eugène Ruppert, L-2453 Luxembourg, Attention: Project
Camel III (NIO Inc.), Fax: +(352) 24524204, with a copy to The Bank of New York Mellon, Hong Kong Branch, Level 26, Three Pacific
Place, 1 Queen’s Road East, Hong Kong, Attention: Global Corporate Trust – NIO Inc., Facsimile No.: +852-2295.3283.
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All notices and other communications under this Indenture shall be in writing in English.
So long as and to the extent that the Notes are represented by Global Notes and such Global Notes are held by or on behalf of
the Common Depositary, notices to owners of beneficial interests in the Global Notes may be given by delivery of the relevant notice to
the Euroclear and Clearstream for communication by it to entitled account holders.
The Company hereby acknowledges that it is fully aware of the risks associated with transmitting instructions via electronic
methods (including facsimile), and being aware of these risks, authorizes the Trustee to accept and act upon any instruction sent to it or
any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar in the Company's name or in the name of one or more
appropriate authorized signers of the Company via electronic methods (including facsimile). The Trustee shall be entitled to rely on
Section 7.06 of this Indenture when accepting or acting upon any instructions, communications or documents transmitted by facsimile,
and shall not be liable in the event any facsimile transmission is not received, or is mutilated, illegible, interrupted, duplicated,
incomplete, unauthorized or delayed for any reason, including (but not limited to) electronic or telecommunications failure.
Furthermore, notwithstanding the above, if any Trustee receives information or instructions delivered by electronic mail, other
electronic method or other unsecured method of communication believed by it to be genuine and to have been sent by the proper person
or persons, the Trustee or any Paying Agent, Transfer Agent, Conversion Agent or Note Registrar shall have (i) no duty or obligation to
verify or confirm that the person who sent such instructions is in fact a person authorized to give instructions or directions on behalf of
the Company and (ii) absent its or their gross negligence or willful misconduct, no liability for any losses, liabilities, costs or expenses
incurred or sustained by any holder, the Company or any other person as a result of such reliance on or compliance with such information
or instructions.
The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed to it by first class mail, postage prepaid, at its address as it
appears on the Note Register and shall be sufficiently given to it if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other
Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such
notice to Holders by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification
for every purpose hereunder.
Section 17.04 Governing Law; Jurisdiction. THIS INDENTURE AND EACH NOTE, AND ANY CLAIM, CONTROVERSY
OR DISPUTE ARISING UNDER OR RELATED TO
80
THIS INDENTURE AND EACH NOTE, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
The Company irrevocably consents and agrees, for the benefit of the Holders from time to time of the Notes and the Trustee,
that any legal action, suit or proceeding against it with respect to obligations, liabilities or any other matter arising out of or in connection
with this Indenture or the Notes may be brought in the courts of the State of New York or the courts of the United States located in the
Borough of Manhattan, New York City, New York and, until amounts due and to become due in respect of the Notes have been paid,
hereby irrevocably consents and submits to the non-exclusive jurisdiction of each such court in personam, generally and unconditionally
with respect to any action, suit or proceeding for itself in respect of its properties, assets and revenues.
The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions, suits or proceedings arising out of or in connection with this
Indenture brought in the courts of the State of New York or the courts of the United States located in the Borough of Manhattan, New
York City, New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
Section 17.05 Submission to Jurisdiction; Service of Process. The Company irrevocably appoints Law Debenture Corporate
Service Inc. as its authorized agent in the Borough of Manhattan in the City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Company by the person
serving the same to Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804, People’s Republic of China, Facsimile No.
+86 (21) 3913 0192, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The
Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in
full force and effect for a period of five and a half years from the date of this Indenture. If for any reason such agent shall cease to be
such agent for service of process, the Company shall forthwith appoint a new agent of recognized standing for service of process in the
State of New York and deliver to the Trustee a copy of the new agent’s acceptance of that appointment within ten Business Days of such
acceptance. Nothing herein shall affect the right of the Trustee, any agent or any Holder to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the Company in any other court of competent jurisdiction. To the
extent that the Company has or hereafter may acquire any sovereign or other immunity from jurisdiction of any court or from any legal
process with respect to itself or its property, the Company irrevocably waives such immunity in respect of its obligations hereunder or
under any Note.
Section 17.06 Evidence of Compliance with Conditions Precedent; Certificates and Opinions of Counsel to Trustee. Upon any
application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company
shall, if requested by the Trustee, furnish to the Trustee an Officers’ Certificate stating that such action is permitted by the terms of this
Indenture.
81
Each Officers’ Certificate provided for, by or on behalf of the Company in this Indenture and delivered to the Trustee with
respect to compliance with this Indenture (other than the Officers’ Certificates provided for in Section 4.09) shall include (a) a statement
that the person making such certificate is familiar with the requested action and this Indenture; (b) a brief statement as to the nature and
scope of the examination or investigation upon which the statement contained in such certificate is based; (c) a statement that, in the
judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an
informed judgment as to whether or not such action is permitted by this Indenture; and (d) a statement as to whether or not, in the
judgment of such person, such action is permitted by this Indenture.
Notwithstanding anything to the contrary in this Section 17.06, if any provision in this Indenture specifically provides that the
Trustee shall or may receive an Opinion of Counsel in connection with any action to be taken by the Trustee or the Company hereunder,
the Trustee shall be entitled to, or entitled to request, such Opinion of Counsel.
Section 17.07 Legal Holidays. In any case where any Fundamental Change Repurchase Date, Conversion Date or Maturity
Date is not a Business Day, then any action to be taken on such date need not be taken on such date, but may be taken on the next
succeeding Business Day with the same force and effect as if taken on such date, and no interest shall accrue in respect of the delay.
Section 17.08 No Security Interest Created. Nothing in this Indenture or in the Notes, expressed or implied, shall be construed
to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in
any jurisdiction.
Section 17.09 Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person,
other than the Holders, the parties hereto, any Paying Agent, any Conversion Agent, any Note Registrar and their successors hereunder,
any benefit or any legal or equitable right, remedy or claim under this Indenture.
Section 17.10 Table of Contents, Headings, Etc. The table of contents and the titles and headings of the articles and sections of
this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
Section 17.11 Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall
be an original, but such counterparts shall together constitute but one and the same instrument.
Section 17.12 Severability. In the event any provision of this Indenture or in the Notes shall be invalid, illegal or
unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any
way be affected or impaired.
82
Section 17.13 Waiver of Jury Trial. EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 17.14 Force Majeure. In no event shall the Trustee or the Agents be responsible or liable for any failure or delay in the
performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without
limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or
acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being
understood that the Trustee or the Agents, as the case may be, shall use reasonable efforts that are consistent with accepted practices in
the banking industry to resume performance as soon as practicable under the circumstances.
Section 17.15 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations
called for under the Notes. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices of the
ADSs, the Conversion Rate of the Notes and any adjustments thereto. The Company shall make all these calculations in good faith and,
absent manifest error, the Company’s calculations shall be final and binding on Holders. The Company shall provide a schedule of its
calculations to each of the Trustee, the Paying Agent and the Conversion Agent, and each of the Trustee, the Paying Agent and the
Conversion Agent is entitled to rely conclusively and without liability upon the accuracy of the Company’s calculations without
independent verification. The Trustee will forward the Company’s calculations to any Holder of Notes upon the prior written request of
that Holder at the sole cost and expense of the Company.
[Remainder of page intentionally left blank]
83
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first above written.
NIO INC.
By:
/s/ Steven Feng
Name: Steven Feng
Title: Chief Financial Officer
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Trustee
By:
/s/ Mir Sajid Hussain
Name: Mir Sajid Hussain
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as
Paying Agent and Conversion Agent
By:
/s/ Mir Sajid Hussain
Name: Mir Sajid Hussain
Title: Vice President
Signature Page to Indenture
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG
BRANCH, as Registrar and Transfer Agent
By:
/s/ Mir Sajid Hussain
Name: Mir Sajid Hussain
Title: Vice President
Signature Page to Indenture
[FORM OF FACE OF NOTE]
[INCLUDE FOLLOWING LEGEND IF A GLOBAL NOTE]
EXHIBIT A
[THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AN IS
REGISTERED IN THE NAME OF THE COMMON DEPOSITARY OR A NOMINEE OF THE COMMON DEPOSITARY, WHICH
MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS THE OWNER AND HOLDER OF
THIS NOTE FOR ALL PURPOSES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE BANK OF NEW YORK
MELLON, LONDON BRANCH AS COMMON DEPOSITARY (THE "COMMON DEPOSITARY") FOR EUROCLEAR BANK
SA/NV ("EUROCLEAR") AND CLEARSTREAM BANKING S.A. ("CLEARSTREAM") TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
THE COMMON DEPOSITARY OR A NOMINEE THEREOF OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO COMMON
DEPOSITARY OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN
INTEREST HEREIN.
NO AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF NIO INC. (THE “COMPANY”) OR
PERSON THAT HAS BEEN AN AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY
DURING THE THREE IMMEDIATELY PRECEDING MONTHS MAY PURCHASE, OTHERWISE ACQUIRE OR OWN THIS
NOTE, THE AMERICAN DEPOSITARY SHARES DELIVERABLE UPON CONVERSION HEREOF AND THE ORDINARY
SHARES REPRESENTED THEREBY, OR A BENEFICIAL INTEREST HEREIN.]
[INCLUDE FOLLOWING LEGEND IN THE ORIGINALLY ISSUED NOTE AND ANY REPLACEMENT NOTE ISSUED UNTIL
THE DISTRIBUTION COMPLIANCE PERIOD TERMINATION DATE]
[THIS SECURITY AND THE ORDINARY SHARES REPRESENTED THEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND, PRIOR TO THE DATE THAT IS 40
DAYS AFTER THE DATE HEREOF, MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOTE SUBJECT TO, THE
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REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, THE ACQUIRER:
(1) REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS NOT A U.S.
PERSON AND IS LOCATED OUTSIDE THE UNITED STATES (WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH
RESPECT TO EACH SUCH ACCOUNT AND THAT IT AND ANY SUCH ACCOUNT IS NOT AN AFFILIATE
OF NIO INC. (THE “COMPANY”), AND
(2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE, HYPOTHECATE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST
HEREIN PRIOR TO THE DATE THAT IS 40 DAYS AFTER THE DATE HEREOF, EXCEPT:
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, OR
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE
UNDER THE SECURITIES ACT, OR
(C) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR
(D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.]
PRIOR TO SEPTEMBER 5, 2020, NO BENEFICIAL OWNER THAT PURCHASED A BENEFICIAL INTEREST IN THIS
SECURITY UPON THE ORIGINAL ISSUANCE THEREOF MAY OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST EXCEPT IN ACCORDANCE WITH THE CONVERTIBLE NOTE SUBSCRIPTION
AGREEMENTS BETWEEN NIO INC. AND THE RELEVANT PURCHASERS NAMED THEREIN, DATED MARCH 5,
2020. ANY ATTEMPT BY SUCH BENEFICIAL OWNER TO OFFER, SELL, PLEDGE, HYPOTHECATE OR OTHERWISE
TRANSFER SUCH BENEFICIAL INTEREST IN VIOLATION OF THIS RESTRICTION SHALL BE VOID.
A-2
NIO INC.
0% Convertible Senior Note due 2021
No. [_______]
[Initially] US$_________
1
ISIN No. XS2133392576
Common Code 213339257
NIO Inc., a company duly organized and validly existing under the laws of the Cayman Islands (the “Company,” which term
includes any successor company or corporation or other entity under the Indenture referred to on the reverse hereof), for value received
hereby promises to pay to [The Bank of New York Depository (Nominees) Limited] [_______] , or registered assigns, the principal sum
[as set forth in the “Schedule of Exchanges of Notes” attached hereto] [of US$[__________]] , which amount, taken together with the
principal amounts of all other outstanding Notes, shall not, unless permitted by the Indenture, exceed US$235,000,000 in aggregate at
any time, in accordance with the rules and procedures of Euroclear and Clearstream, on March 5, 2021 as set forth below.
3
5
4
2
Except for Defaulted Amounts, this Note shall not bear any interest and the principal amount of this Note will not accrete.
Any Defaulted Amounts shall accrue interest per annum at the rate per annum equal to three percent, subject to the
enforceability thereof under applicable law, from, and including, the relevant payment date to, but excluding, the date on which such
Defaulted Amounts shall have been paid by the Company, at its election, in accordance with Section 2.03(c) of the Indenture.
The Company shall pay or cause the Paying Agent to pay the principal of (including any premium payable) and interest (if any)
on this Note, so long as such Note is a Global Note, in immediately available funds to the Common Depositary or its nominee, as the
case may be, as the registered Holder of such Note. As provided in and subject to the provisions of the Indenture, the Company shall pay
the principal of and interest (if any) on any Notes (other than Notes that are Global Notes) at the office or agency designated by the
Company for that purpose. The Company has initially designated the Bank of New York Mellon, London Branch as its Paying Agent
and Conversion Agent and The Bank of New York Mellon SA/NV, Luxembourg Branch as its Note Registrar and Transfer Agent in
respect of the Notes and its agency in the
1
Include if a Global Note.
2
Include if a Global Note.
3
Include if a Physical Note.
4
Include if a Global Note.
5
Include if a Physical Note.
A-3
Borough of Manhattan, The City of New York, as a place where Notes may be presented for payment or for registration of transfer.
Reference is made to the further provisions of this Note set forth on the reverse hereof, including, without limitation, provisions
giving the Holder of this Note the right to convert this Note into ADSs on the terms and subject to the limitations set forth in the
Indenture. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Note, and any claim, controversy or dispute arising under or related to this Note, shall be construed in accordance
with and governed by the laws of the State of New York (without regard to the conflicts of laws provisions thereof).
In the case of any conflict between this Note and the Indenture, the provisions of the Indenture shall control and govern.
This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been
signed manually or by facsimile by the Note Registrar under the Indenture.
[Remainder of page intentionally left blank]
A-4
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
NIO INC.
By:
Name:
Title:
A-5
Dated:
NOTE REGISTRAR’S CERTIFICATE OF AUTHENTICATION
THE BANK OF NEW YORK MELLON SA/NV, LUXEMBOURG BRANCH
as Note Registrar, certifies that this is one of the Notes described
in the within-named Indenture.
By:
Name:
Title:
A-6
[FORM OF REVERSE OF NOTE]
NIO INC.
0% Convertible Senior Note due 2021
This Note is one of a duly authorized issue of Notes of the Company, designated as its 0% Convertible Senior Notes due 2021
(the “Notes”), limited to the aggregate principal amount of US$235,000,000, subject to Section 2.10 of the Indenture, all issued or to be
issued under and pursuant to an Indenture dated as of March 11, 2020 (the “Indenture”), between the Company and The Bank of New
York Mellon, London Branch as trustee (the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties, privileges, disclaimers from liability and immunities
thereunder of the Trustee, the Company and the Holders of the Notes. Additional Notes may be issued in an unlimited aggregate
principal amount, subject to certain conditions specified in the Indenture.
In the case certain Events of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of, and
interest (if any) on, all Notes may be declared, by either the Trustee or Holders of at least 25% in aggregate principal amount of Notes
then outstanding, and upon said declaration shall become, due and payable, in the manner, with the effect and subject to the conditions
and certain exceptions set forth in the Indenture. In the case certain Events of Default relating to a bankruptcy (or similar proceeding)
with respect to the Company or a Significant Subsidiary of the Company shall have occurred, the principal of, and interest (if any) on, all
Notes shall automatically become immediately due and payable, as set forth in the Indenture.
Subject to the terms and conditions of the Indenture, the Company will make or cause the Paying Agent to make all payments in
respect of the principal amount on the Maturity Date and the Fundamental Change Repurchase Price, as the case may be, to the Holder
who surrenders a Note to collect such payments in respect of the Note. The Company will pay or cause the Paying Agent to pay cash
amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts.
Subject to the terms and conditions of the Indenture, the Company will cause to be paid a premium equal to (i) in the case of
any payment of principal to be made on the Maturity Date or pursuant to Section 6.02 of the Indenture, 2.0% of the outstanding principal
amount of the Notes, or (ii) in the case of any payment of principal to be made on a Fundamental Change Repurchase Date, the aggregate
interest that would have accrued on the outstanding principal amount of the Notes to be repurchased (or such portion thereof, as the case
may be) over the period starting from (and including) the original date of issuance of the Notes and ending on (and including) the
Fundamental Change Repurchase Date, if the Note were to bear interest at a rate of 2.0% per annum accruing daily and computed on the
basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed in a 30-day
month.
Subject to the terms and conditions of the Indenture, Additional Amounts will be paid in connection with any payments made
and deliveries caused to be made by the Company or any successor to the Company under or with respect to the Indenture and the Notes,
including, but
A-7
not limited to, payments of principal (including, if applicable, the Fundamental Change Repurchase Price), premium, if any, payments of
interest, if any, and deliveries of ADSs or any other consideration due on conversion of a Note (together with payments of cash for any
Fractional ADS or other consideration) upon conversion of the Notes to ensure that the net amount received by the beneficial owner of
the Notes after any applicable withholding, deduction or reduction (and after deducting any taxes on the Additional Amounts) will equal
the amounts that would have been received by such beneficial owner had no such withholding, deduction or reduction been required.
The Indenture contains provisions permitting the Company and the Trustee in certain circumstances, without the consent of the
Holders of the Notes, and in certain other circumstances, with the consent of the Holders of not less than a majority in aggregate
principal amount of the Notes at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures
modifying the terms of the Indenture and the Notes as described therein. It is also provided in the Indenture that, subject to certain
exceptions, the Holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the Holders of
all of the Notes waive any past Default or Event of Default under the Indenture and its consequences.
No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay or cause to be delivered, as the case may be, the principal (including the
Fundamental Change Repurchase Price, if applicable) of and the consideration due upon conversion of, this Note at the place, at the
respective times, at the rate and in the lawful money herein prescribed.
The Notes are issuable in registered form without interest coupons in denominations of US$1,000 principal amount and integral
multiples thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations
provided in the Indenture, Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations,
without payment of any service charge but, if required by the Company or Trustee, with payment of a sum sufficient to cover any transfer
or similar tax that may be imposed in connection therewith as a result of the name of the Holder of the new Notes issued upon such
exchange of Notes being different from the name of the Holder of the old Notes surrendered for such exchange.
The Company may not redeem the Notes prior to the Maturity Date. No sinking fund is provided for the Notes.
Upon the occurrence of a Fundamental Change, the Holder has the right, at such Holder’s option, to require the Company to
repurchase for cash all of such Holder’s Notes or any portion thereof (in principal amounts of US$1,000 or integral multiples thereof) on
the Fundamental Change Repurchase Date at a price equal to the Fundamental Change Repurchase Price.
Subject to the provisions of the Indenture, the Holder hereof has the right, at its option, prior to the close of business on the
second Business Day immediately preceding the Maturity Date, to convert any Notes or portion thereof that is US$1,000 principal
amount of Notes or an
A-8
integral multiple thereof, into ADSs at the Conversion Rate specified in the Indenture, as adjusted from time to time as provided in the
Indenture.
Terms used in this Note and defined in the Indenture are used herein as therein defined.
A-9
The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were
written out in full according to applicable laws or regulations:
ABBREVIATIONS
TEN COM = as tenants in common
UNIF GIFT MIN ACT = Uniform Gifts to Minors Act
CUST = Custodian
TEN ENT = as tenants by the entireties
JT TEN = joint tenants with right of survivorship and not as tenants in common
Additional abbreviations may also be used though not in the above list.
A-10
SCHEDULE OF EXCHANGES OF NOTES
NIO INC.
0% Convertible Senior Notes due 2021
SCHEDULE A
6
The initial principal amount of this Global Note is [__________] UNITED STATES DOLLARS
(US$[_______________]). The following increases or decreases in this Global Note have been made:
Amount of
decrease in
principal amount
of this Global Note
Amount of
increase in
principal amount
of this Global Note
Principal amount
of this Global Note
following such
decrease or
increase
Signature of
authorized
signatory of
Trustee
Date of exchange
6
Include if a Global Note.
A-11
ATTACHMENT 1
[FORM OF NOTICE OF CONVERSION]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Conversion Agent
DEUTSCHE BANK TRUST COMPANY AMERICAS, as ADS Depositary
The undersigned registered holder of this Note (ISIN No. XS2133392576; Common Code 213339257) hereby exercises the
option to convert that Note, or the portion thereof (that is either a minimum principal amount of US$10,000,000 or an integral multiple of
US$1,000 in excess thereof) below designated, into ADSs in accordance with the terms of the Indenture referred to in this Note, and
directs that any ADSs deliverable upon such conversion, together with any cash payable for any Fractional ADS, and any Notes
representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name
has been indicated below. Terms defined in the Deposit Agreement or the Indenture referred to in this Notice are used herein as so
defined. If any ADSs or any portion of this Note not converted are to be issued in the name of a Person other than the undersigned, the
undersigned will pay all documentary, stamp, issue, transfer or similar taxes, if any, in accordance with Section 14.02(d) and Section
14.02(e) of the Indenture. Any amount required to be paid to the undersigned on account of interest (if any) accompanies this Notice.
In connection with the conversion of this Note, or the portion hereof below designated, the undersigned acknowledges,
represents to and agrees with the Company that the undersigned is not an “affiliate” (as defined in Rule 144 under the Securities Act) of
the Company and has not been an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company during the three months
immediately preceding the date hereof.
The undersigned hereby instructs the ADS Depositary to register the ADSs in the name of:
1. Name of Beneficial Owner to receive ADSs (English):
2. Address of Beneficial Owner to receive ADSs (English):
3. Name of Registered Holder of the Deposited Shares:
4. Number of Deposited Shares:
5. Number of ADSs to be issued:
6. Beneficial Owner’s Tax ID Number:
7. Contact Name and Tel No/email address:
The undersigned instructs the Depositary to deliver the ADRs representing the ADSs to the following account:
1
ADS Receiving Broker ( * are mandatory fields):
a) DTC Broker Name*:
b) DTC Broker’s Participant Account with DTC *:
c) DTC Broker Contact Name:
d) DTC Broker Contact Tel No/email:
e) Beneficial Owner’s Account # with DTC Broker*:
OR
e) Local Broker Name (have account with DTC Broker)*:
Local Broker Sub-Account # with DTC Broker*:
Local Broker Contact Name:
Local Broker Contact Tel No/email:
ADS Delivering Party:
Name:
Deutsche Bank Trust Company Americas DTC Account: #2655
For any ADS settlement inquiries, please contact DBTCA Broker Desk:
Tel: +1-212-250-9100 (New York) / +44-207-547-6500 (London)
Email: adr@db.com
2
Dated:
Signature Guarantee
Signature(s)
Signature(s) must be guaranteed by an eligible Guarantor Institution
(banks, stock brokers, savings and loan associations and credit
unions) with membership in an approved signature guarantee
medallion program pursuant to Securities and Exchange Commission
Rule 17Ad-15 if ADSs are to be issued other than to and in the name
of the registered holder.
Fill in for registration of ADSs if to be issued other than to and in the
name of the registered holder:
(Name)
(Street Address)
(City, State and Zip Code)
Please print name and address
Principal amount to be converted (if less than all):
US$ _________,000
NOTICE: The above signature(s) of the Holder(s) hereof
must correspond with the name as written upon the face of
the Note in every particular without alteration or
enlargement or any change whatever.
Social Security or Other Taxpayer
Identification Number
3
ATTACHMENT 2
[FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE]
To: NIO INC.
THE BANK OF NEW YORK MELLON, LONDON BRANCH, as Trustee
The undersigned registered owner of this Note hereby acknowledges receipt of a notice from NIO Inc. (the “Company”) as to
the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and
requests and instructs the Company to pay to the registered holder hereof in accordance with Section 15.02 of the Indenture referred to in
this Note the entire principal amount of this Note, or the portion thereof (that is US$1,000 principal amount or an integral multiple
thereof) below designated.
In the case of Physical Notes, the certificate numbers of the Notes to be repurchased are as set forth below:
Certificate Number(s): ____________________________
Dated:
Signature(s)
Social Security or Other Taxpayer
Identification Number
Principal amount to be repaid (if less than all): US$ ______,000
NOTICE: The above signature(s) of the Holder(s) hereof must
correspond with the name as written upon the face of the Note in
every particular without alteration or enlargement or any change
whatever.
1
[FORM OF ASSIGNMENT AND TRANSFER]
ATTACHMENT 3
For value received ______________________ hereby sell(s), assign(s) and transfer(s) unto _______________ (Please insert social
security or Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints
_______________ attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.
In connection with any transfer of the within Note occurring prior to the Distribution Compliance Period Termination Date, as defined in
the Indenture governing such Note, the undersigned confirms that such Note is being transferred:
☐ To NIO Inc. or a subsidiary thereof; or
☐ Pursuant to a registration statement that has become or been declared effective under the Securities Act of 1933, as amended; or
☐ To a non-U.S. person in an offshore transaction meeting the requirements of Rule 903 or Rule 904 of Regulation S under the
Securities Act of 1933, as amended; or
☐ Pursuant to an exemption from the registration requirements of the Securities Act.
1
Dated:
Signature(s)
NOTICE: The signature on the assignment must correspond with the name as written upon the face of the Note in every particular
without alteration or enlargement or any change whatever.
2
EXHIBIT B
I, [Name], [Title], acting on behalf of NIO Inc. (the “Company”) hereby certify that:
[FORM OF AUTHORIZATION CERTIFICATE]
(A) the persons listed below are (i) authorized Officers of the Company for purposes of the Indenture (the “Indenture”) dated as of
March 11, 2020 between the Company and The Bank of New York Mellon, London Branch as trustee, in relation to the 0% Convertible
Senior Notes due 2021 (the “Notes”), (ii) duly elected or appointed, qualified and acting as the holder of the respective office or offices
set forth opposite their names and (iii) the duly authorized persons who executed or will execute the Indenture and the Notes issued
pursuant to the Indenture by their manual or facsimile signatures and were at the time of such execution, duly elected or appointed,
qualified and acting as the holder of the offices set forth opposite their names;
(B) each of the individuals listed below have the authority to receive call backs at the telephone numbers noted below upon request of
The Bank of New York Mellon, London Branch in connection with the Notes issued pursuant to the Indenture;
(C) each signature appearing below is the person’s genuine signature; and
(D) attached hereto as Schedule I is a true, correct and complete specimen of the certificates representing the Notes.
B-1
IN WITNESS WHEREOF, I have hereunto executed and delivered this certificate on behalf of the Company as of the date
indicated.
Dated:
[Name]
By:
Name:
Title:
Name
Title, Fax No., Email
Signature
Tel No.
SCHEDULE I
B-2
Exhibit 4.35
NIO CHINA INVESTMENT AGREEMENT
BY AND AMONG
CMG-SDIC CAPITAL MANAGEMENT CO., LTD.
ANHUI PROVINCIAL EMERGING INDUSTRY INVESTMENT CO., LTD.
HEFEI CITY CONSTRUCTION AND INVESTMENT HOLDINGS (GROUP) CO., LTD.
NIO INC.
NIO NEXTEV LIMITED
NIO USER ENTERPRISE LIMITED
NIO POWER EXPRESS LIMITED
AND
NIO (ANHUI) HOLDING CO., LTD.
Hefei, China
April, 2020
TABLE OF CONTENTS
DEFINITIONS AND INTERPRETATION
THE TRANSACTION
PAYMENT OF CAPITAL INCREASE PRICE
CONDITIONS PRCEDENT TO CLOSING
TRANSITION PERIOD
REPRESENTATIONS AND WARRANTIES
INDEMNIFICATION UNDERTAKINGS
POST CLOSING OBLIGATION
TRANSACTION EXPENSES
CONFIDENTIALITY
FORCE MAJEURE
GOVERNING LAW AND DISPUTE RESOLUTION
EFFECTIVENESS, MODIFICATION AND TERMINATION
NOTICES AND DELIVERY
MISCELLANEOUS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Exhibit 1: Shareholding Structure of NIO Inc. before this Transaction
Exhibit 2: Shareholding Structure of NIO Inc. after the Completion of this Transaction
Exhibit 3: List of Restructure Assets
Exhibit 4: Disclosure Letter
Exhibit 5: List of Key Intellectual Properties
Exhibit 6: List of the Core Management Team
Exhibit 7: List of Other Core Personnel of the Target Company and Group Members
2
5
9
15
23
25
27
37
38
42
42
43
43
44
46
47
This NIO China Investment Agreement (this “Agreement”) is made on April 29, 2020 (the “Execution Date”) by
and among:
1. CMG-SDIC Capital Management Co., Ltd., a limited liability company duly established and existing under
the Laws of the People’s Republic of China (“PRC” or “China”, for the purpose of this Agreement,
excluding the Hong Kong Special Administrative Region, the Macao Special Administrative Region and
Taiwan), holding a business license with unified social credit code of 91130600MA094UG35F, and with its
legal representative being GAO Guohua and registered office at West Dong Ao Wei Road, Rongcheng
County, Baoding city, Hebei province (“SDIC”);
2. Anhui Provincial Emerging Industry Investment Co., Ltd., a limited liability company duly established and
existing under the Laws of the PRC, holding a business license with unified social credit code of
9134000032543101X1, and with its legal representative being HUANG Linmu and registered address at
Room 301, Innovation Building, 860 Wangjiang West Road, High-tech District, Hefei City, Anhui Province
(“Anhui High-tech Co.”);
3. Hefei City Construction and Investment Holding (Group) Co., Ltd., a limited liability company duly
established and existing under the Laws of the PRC, holding a business license with unified social credit code
of 91340100790122917R, and with its legal representative being LI Hongzhuo and registered address at No.
229 Wuhan road, Binhu New District, Hefei City, Anhui Province (“Hefei Construction Co.” or the “Hefei
Investor”);
4. NIO Inc., a company duly organized and validly existing under the laws of the Cayman Islands and having its
registered address at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, and currently
listed on the New York Stock Exchange of the United States under the code of NIO (“NIO Inc.”);
5. NIO Nextev Limited, a limited company duly organized and validly existing under the laws of Hong Kong
Special Administrative Region, with company number of 2199750 and its registered address at 30th Floor,
Jardine House, 1 Connaught Place, Central, Hong Kong (“NIO HK”);
6. NIO User Enterprise Limited, a limited company duly organized and validly existing under the laws of Hong
Kong Special Administrative Region, with company number of 2487823 and its registered address at 30th
Floor, Jardine House, 1 Connaught Place, Central, Hong Kong (“UE HK”);
7. NIO Power Express Limited, a limited company duly organized and validly existing under the laws of Hong
Kong Special Administrative Region, with company number of 2472480 and its registered address at 30th
Floor, Jardine House, 1 Connaught Place, Central, Hong Kong (“PE HK”, together with NIO HK and UE
HK,“NIO HK Holding Platforms”, and together with NIO Inc., the “NIO Parties”); and
8. NIO (Anhui) Holding Co., Ltd., a limited liability company duly organized and validly existing under the
laws of the PRC with its unified social credit code of 91340111 MA2RAD3M4R, with its legal representative
being WANG Zhenglin and its registered
3
address at West Susong Road and North Shenzhen Road, Economic and Technological Development Zone,
Hefei City, Anhui Province (the “Target Company” or the “Company”).
The above parties are referred to individually as a “Party” and collectively as the “Parties”.
WHEREAS:
1. NIO Inc. is a well-known company producing intelligent electric vehicles headquartered in China and listed
on the New York Stock Exchange of the United States. It indirectly holds its PRC domestic operation
companies through the NIO HK Holding Platforms. NIO Inc.’s PRC domestic operating entities include NIO
Co., Ltd., Shanghai NIO Sales and Service Co., Ltd., NIO Energy Investment (Hubei) Co., Ltd. and other
companies indirectly controlled by NIO Inc. under the aforesaid PRC domestic operating entities, and mainly
engage in the Main Businesses (as defined below). As of the date hereof, the internal shareholding structure
of NIO Inc. is set forth in Exhibit 1.
2. The Target Company was established on November 28, 2017, with the registered capital of RMB 11 million
as of the date hereof. It is a company wholly controlled by NIO Inc. through NIO HK and NIO UE in China.
The Parties unanimously agree to NIO Inc.’s proposed investment of all of the following equity interests
indirectly held by it into the Target Company: the equity interests of NIO Co., Ltd., Shanghai NIO Sales and
Service Co., Ltd. and NIO Energy Investment (Hubei) Co., Ltd. (the “Equity Assets”, including the interests
of other Group Members directly or indirectly held by the above entities), and investment of the assets
necessary for the operation of the Main Businesses (“Restructure Assets”, see Exhibit 3 for the list of
Restructure Assets) in the Target Company. After investment of the above Restructure Assets into the Target
Company has been completed, the Target Company will become the headquarter of the Group Members
operating the Main Businesses of NIO Inc., and the Target Company will complete the Qualified IPO (as
defined below) within China. The Investors and NIO HK will make monetary contributions to the Target
Company pursuant to this Agreement to complete the equity investment in the Target Company.
3. The NIO Parties shall complete the Asset Contribution and monetary contribution to the Target Company in
accordance with this Agreement. The Investors shall invest in the Target Company in accordance with the
terms and conditions of this Agreement, and, except for the Investors, the other shareholders or relevant
parties of the Target Company shall agree and warrant that the Target Company and its shareholders shall
accept the investment by the Investors in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, based on the principles of equality and mutual benefit and through friendly
consultation, the Parties agree to enter into this Agreement with respect to the investment by the Investors in the
Target Company in accordance with the Contract Law of the People’s Republic of China, the Company Law of the
People’s Republic of China and other relevant PRC laws and regulations.
4
1.1 Unless otherwise specified in this Agreement, the following terms shall have the following meanings:
1 DEFINITIONS AND INTERPRETATION
Transaction
Capital Increase in Cash
means
means
Events of Force Majeure
Restructure Assets
Third Party Transaction
Affiliates
Qualified IPO
the definition in Article 2.1.3 hereof
the monetary investment made by the Investors and the NIO Parties
in the Target Company in accordance with this Agreement
the definition in Article 11.1 hereof
the assets Listed in Exhibit 3 hereto
the definition in Article 5.4 of this Agreement
means
means
means
means with respect to any person (including a corporation, unincorporated
entity or natural person), any other person that directly or indirectly
controls, is controlled by, or is under common control with, such
person; with respect to an individual, his spouse, child, brother,
sister, parent, spouse’s parent, trustee of any trust in which such
individual or an immediate family member of such individual is a
beneficiary or discretionary object, or any entity or company
controlled by such person. For the avoidance of doubt, each
shareholder of the Company shall constitute an Affiliate of the
Company. “Control” means the possession of the power to direct
the management and policies of another person directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise (for the avoidance of doubt, the ownership of
more than 50% of voting securities of another person or the
possession of the power to appoint a majority of the directors shall
be deemed to have control)
the Target Company’s application for initial public offering and
listing has been approved, reviewed, registered and recorded by the
China Securities Regulatory Commission, Shanghai/Shenzhen
Stock Exchange or other overseas securities issuance agencies
acceptable to all Parties, and the Target Company has completed
initial public offering and listing of its shares on a stock exchange
market acceptable to all Parties (listing on the PRC National
Equities Exchange and Quotations System shall not be considered
as a Qualified IPO).
means
Investors
Investor Capital Increase Price
means SDIC, Anhui High-tech Co., Hefei Construction Co. and/or the
actual investing entity designated by the aforesaid persons
the definition in Article 2.1.1.1 hereof
means
5
Increase
SDIC Capital Increase Price
Anhui High-tech Co. Capital
Increase Price
Hefei Investor Capital Increase
Price
NIO Parties Capital
Price
Capital Increase Price
Equity Contribution
AMR Re-registration Completion
Date
Articles of Association
Shareholders’ Agreement
Share Reform
Transition Period
Closing
Closing Date
Transaction Documents
Due Diligence Documents
Special Losses
Changing Party
NIO Overdue Party
Target Company
Asset Contribution
means
means
the definition in Article 2.1.1.1 hereof
the definition in Article 2.1.1.1 hereof
means
the definition in Article 2.1.1.1 hereof
means
the definition in Article 2.1.1.2 hereof
means
means
means
the definition in Article 2.1.1.2 hereof
the definition in Article 2.1.2.1 hereof
the definition in Article 4.11 hereof
the definition in Article 2.5.1 hereof
the definition in Article 2.5.1 hereof
the definition in Article 2.1.2.3 hereof
the definition in Article 5.1 hereof
the definition in Article 3.5 hereof
the definition in Article 3.5 hereof
the definition in Article 2.5.1 hereof
the definition in Article 6.1.20 hereof
the definition in Article 7.2 hereof
the definition in Article 14.3 hereof
the definition in Article 3.3.2 hereof
means
means
means
means
means
means
means
means
means
means
means
means NIO (Anhui) Holding Co., Ltd.
means
Group Members
means
Core Management Team
Execution Date
RMB
Capital Increase Price
Material Agreements
means
means April 29, 2020
means Chinese Yuan
means
means
the contribution of assets by the NIO Parties and the Target
Company in accordance with Article 2.1.2. The shareholding
structure of the Group Members under the Target Company upon
completion of such asset contribution is set forth in Exhibit 2
after the completion of Asset Contribution, the Target Company and
entities directly or indirectly controlled by the Target Company by
mean of equity or contractual control
the senior management of the Target Company as listed in Exhibit 6
the definition in Article 2.1.1 hereof
any contract, agreement or other form of document or arrangement
meeting any of the following requirements: (i) the contract amount
exceeds RMB 100 million; (ii) the contract amount exceeds RMB
6
10 million and the nature of such contract is beyond the scope of the
Main Businesses of the Company; (iii) the contract amount exceeds
RMB 100 million or such contract is a binding strategic cooperation
contract containing exclusive terms, non-competition terms or other
provisions restricting the operation of the Main Businesses of the
Company; (iv) any contract or agreement of any nature between the
Target Company and the Group Members as one party and the Core
Management Team as the other party who are in-service or resigned
within twelve (12) months; (v) any contract, agreement or
arrangement (other than those incurred due to daily business
operations) in connection with the sale or purchase of assets by the
Company with the contract amount exceeding RMB 100 million;
(vi) bonus, pension, retirement pension, share option, commercial
insurance or similar agreements in connection with the Core
Management Team; (vii) external investment contract, agreement,
letter of intent or other arrangements of the Company in which the
contract amount exceeds RMB 100 million; (viii) transfer and
exclusive license agreement of the intellectual properties of the
Company (regardless of whether the Company acts as the transferor,
transferee, licensor or licensee); and (ix) other contracts which may
have material effect on the assets and business of the Company.
means with respect to (i) the Target Company, other Group Members and
the Restructure Assets as a whole, or (ii) the Target Company, any
circumstance as a result of which the Main Businesses is suspended
and cannot be restored for more than one (1) month, or the Main
Businesses is terminated, or the qualification, operation, financial
conditions and other aspects of the Target Company are materially
affected which is adverse to continuous and stable operation, or
otherwise would or could cause losses of more than RMB 100
million.
(i) Manufacturing, sale, purchase, after-sale repair and other
supporting services of finished new-energy automobiles, supporting
products
for energy sources, parts, materials, components,
machinery and equipment, as well as the technical development,
technical services, technical transfer and technical consulting
services relating thereto;
means
7
Material Adverse Effect
Principal Business
(ii) Investing in accordance with the law in the fields in which
foreign investment is allowed by the State; (iii) Providing
enterprises with such services as technical support in the process of
production, sale and market development, staff training and internal
personnel management of enterprises, and assisting the enterprises
in seeking loans and providing guarantees; (iv) Engaging in
research and development of new products and high technologies,
transferring research and development achievements, and providing
corresponding technical services; (v) Providing Investors with
consulting services, and providing affiliated companies with such
consulting services as market information related to investment and
investment policies; and (vi) Wholesale, commission agency and
import and export of goods and technologies of automobile parts
the definition in Article 6.1.5 of this Agreement
means
means within and outside the PRC, any international organization;
national, state, provincial, local or other government; governmental,
regulatory or administrative department, agency or commission or
any court, tribunal or judicial or arbitration institution
the PRC State Administration for Market Regulation and its local
counterparts
means
Balance Sheet Date
Authorities
AMR
1.2 Headings to articles of this Agreement are included herein for convenience only and shall not be taken into
consideration in the interpretation or construction of this Agreement.
1.3 “Hereof”, “herein” and “hereunder” and other similar words refer to this Agreement as a whole instead
of to any particular provision of this Agreement; references to any article are references to article of this
Agreement, unless otherwise indicated.
1.4 “Include”, “includes” or “including” and similar words are not intended to be restrictive and shall be
construed as if followed by the words “without limitation”.
1.5 All terms defined in this Agreement have the defined meanings herein when used in any certificate or
other document made or delivered pursuant hereto, unless otherwise defined therein.
1.6 “Written” and comparable terms refer to printing, typing or other means of visible reproduction, including
electronic media.
1.7 Each of the terms “above” and “below” and similar terms is inclusive of the number concerned.
8
1.8 References to a person are also to its successors and permitted transferees.
1.9 References to any law, agreement, instrument or other document herein shall refer to such law, agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified.
1.10 Any reference to this Agreement or any other agreement shall be construed to include this Agreement or
such other agreement as may be amended, modified, supplemented or novated.
2 THE TRANSACTION
2.1 Transaction Arrangements
2.1.1 Capital Increase in Cash
2.1.1.1 The total value of the Target Company and all of the Restructure Assets that shall be
contributed by the NIO Parties into the Target Company in accordance with this Agreement
(including all the equity interests in NIO Co., Ltd., Shanghai NIO Sales and Service Co.,
Ltd. and NIO Energy Investment (Hubei) Co., Ltd., which shall be contributed by the NIO
HK Holding Platforms into the Target Company, and the other restructure assets that shall
be contributed by the NIO Parties into the Target Company) shall be RMB 17.767.8 billion,
which is 85% of the average of the market value of NIO Inc. based on the stock price of
NIO Inc. in the 30 public trading days prior to April 21, 2020 published by the New York
Stock Exchange. The Parties agree that the Investors shall invest RMB 7 billion (“Investors
Capital Increase Price”) to subscribe for RMB 1,223,776,223.79 newly increased
registered capital of the Target Company, representing 24.10% of equity interests in the
Target Company after the completion of this Transaction, among which:
(i) SDIC shall subscribe for RMB 174,825,174.83 of the Target Company’s newly
increased registered capital at a price of RMB 1,000,000,000.00 (the “SDIC Capital
Increase Price”), representing 3.44% of equity interest in the Target Company after the
completion of this Transaction;
(ii) Anhui High-tech Co. shall subscribe for RMB 174,825,174.83 of the Target Company’s
newly increased registered capital at a price of RMB 1,000,000,000.00 (the “Anhui
High-tech Co. Capital Increase Price”), representing 3.44% of equity interest in the
Target Company after the completion of this Transaction;
(iii) Hefei Investor shall subscribe for RMB 874,125,874.13 of the newly increased
registered capital of the Target Company at a price of RMB 5,000,000,000.00 (the
“Hefei Investor Capital Increase Price”), which represents 17.22% of equity interest in
the Target Company after the completion of this Transaction.
9
Among the Investors Capital Increase Price, RMB 1,223,776,223.79 shall become the newly
increased registered capital of the Target Company and RMB 5,776,223,776.21 shall be included
as surplus in the capital reserves of the Target Company. Specifically:
Name of Shareholder
Capital
Price
Increase
Corresponding
Registered Capital
SDIC
1,000,000,000.00
174,825,174.83
Anhui High-tech Co.
1,000,000,000.00
174,825,174.83
Percentage
of
Equity Interests in
Target
the
Company
after
Completion of the
Transaction
Premium included as
Surplus
the
Capital Reserve
in
3.44%
3.44%
825,174,825.17
825,174,825.17
Hefei Investor
5,000,000,000.00
874,125,874.13
17.22%
4,125,874,125.87
TOTAL
7,000,000,000.00
1,223,776,223.79
24.10%
5,776,223,776.21
2.1.1.2 The Parties agree that UE HK shall subscribe for RMB 744,755,244.76 of the newly
increased registered capital of the Target Company at the price of RMB 4.26 billion
(equivalent to US$ 602.1 million) (the “NIO Parties Capital Increase Price”, together
with the Investors Capital Increase Price, the “Capital Increase Price”) in accordance with
this Agreement, representing 14.68% of equity interest in the Target Company after the
completion of this Transaction, RMB 744,755,244.76 of which shall be the newly increased
registered capital of the Target Company and RMB 3,515,244,755.24 of which shall be
included as surplus in the capital reserves of the Target Company.
2.1.2 Asset Contribution
The Parties agree that the NIO Parties shall carry out Asset Contribution to the Target Company
(the “Asset Contribution”), the Restructure Assets will be invested into the Target Company at
the price of RMB 17,704,785,800.00 to subscribe for RMB 3,095,242,272.71 of the newly
increased registered capital of the Target Company, representing 61.00% of equity interest in
the Target Company after the completion of the Transaction, RMB 3,095,242,272.71 of which
the Target Company and RMB
shall be
14,609,543,527.29 of which shall be included as surplus in the capital reserves of the Target
Company.
increased registered capital of
the newly
In connection with the Asset Contribution, the NIO Parties shall complete the Asset
Contribution in the Target Company through subscription for capital increase by the NIO HK
Holding Platforms, and after the completion of the Transaction, the NIO HK Holding Platforms
shall hold equity interest in the
10
Target Company based on the following percentages. For the avoidance of doubt, the following
table only sets forth the equity interests in the Target Company obtained through the Restructure
Assets contribution by the NIO HK Holding Platforms:
Name of Shareholder
of
Amount
Restructure
Assets
Contribution
Corresponding
Registered Capital
Percentage of Equity
Interests in the Target
after
Company
Completion of
the
Transaction
Premium
included
Surplus
Capital Reserve
in
as
the
NIO Nextev Limited
NIO User Enterprise
Limited
NIO Power Express
Limited
TOTAL
14,491,793,115.73
2,533,530,264.99
49.92%
11,958,262,850.74
2,870,760,400.30
501,881,188.84
342,232,283.97
59,830,818.88
9.90%
1.18%
2,368,879,211.46
282,401,465.09
17,704,785,800.00
3,095,242,272.71
61.00%
14,609,543,527.29
The NIO Parties hereby warrant that:
2.1.2.1 The investment of all equities of NIO Co., Ltd., Shanghai NIO Sales and Service
Co., Ltd. and NIO Energy Investment (Hubei) Co., Ltd. in the Target Company to subscribe
for the corresponding newly increased registered capital (“Equity Contribution”) shall be
completed no later than sixty (60) business days after the date of this Agreement. The date
of such completion shall be the date on which applicable re-registration with the market
supervision and administration authorities is completed.
2.1.2.2 Transfer of the ownership of the Restructure Assets (as listed in Exhibit 3,
excluding the intellectual properties of NIO Co., Ltd.) other than the Equity Contribution to
the Target Company shall be completed no later than one (1) year after the Closing.
2.1.2.3 The Target Company shall be changed from a limited liability company to a
company limited by shares (“Share Reform”) before December 31, 2021 (or at other times
agreed by the Parties). The date of the completion of such Share Reform shall be the date
when the new business license of the Company as a company limited by shares is issued by
local AMR.
to evaluate
2.1.2.4 The NIO Parties shall engage an appraisal agency with securities and futures
operating qualifications
the non-monetary contributions (including all
Restructure Assets) in this Transaction (the evaluation baseline date shall be December 31,
2019). The above evaluation shall be completed before the baseline date of the Target
Company’s Share Reform audit. If the appraisal value of these non-monetary contributions
determined by the appraisal report issued by the appraisal agency at that time is lower than
the
11
value of the non-monetary contribution of the NIO Parties in this Transaction agreed under
this Agreement, the NIO Parties shall make up the difference by cash within thirty (30)
business days as from the date of issuance of such appraisal report. If the NIO Parties fail to
complete the above cash make-up, the Target Company shall make capital reduction to the
NIO Parties based on the appraisal results, so as to ensure that the Target Company's
registered capital is sufficient.
2.1.2.5 Before the Target Company submits an application for Qualified IPO, if it is
necessary to evaluate and review the non-monetary investment assets in accordance with the
relevant laws and regulations, the requirements of the competent regulatory agency or the
listing review authority, the Target Company shall engage an appraisal agency with
securities and futures operating qualifications to evaluate the value of the NIO Parties’ non-
monetary investment in the Transaction at the time of capital contribution. If the appraisal
value of these non-monetary contributions determined in the appraisal at that time is lower
than the price in this Transaction, the NIO Parties shall make up the difference by cash to
ensure that the Qualified IPO be conducted smoothly.
2.1.3 This Transaction
In accordance with this Agreement, after the completion of this Capital Increase in Cash by the
Investors and the NIO Parties and the Asset Contribution by the NIO Parties (this
“Transaction”), the equity structure of the Target Company shall be as set forth in Exhibit 2
hereto.
2.1.4 Termination and Waiver
The NIO Parties hereby waive the pre-emptive right, the right of first refusal and any other
priority rights relating to this Transaction available under applicable PRC laws, the Articles of
Association, any previous agreements entered into among the direct/indirect shareholders of the
Target Company. The NIO Parties warrant that no third party or indirect shareholder shall have
the pre-emptive right, the right of first refusal or any other prior or preemptive rights with
respect to this Transaction.
12
2.2 Equity Structure of the Target Company after the Completion of this Transaction
As of the Closing Date, the registered capital of the Target Company shall be RMB 5,074,773,741.26. The
amount of subscribed registered capital of each shareholder of the Target Company and the shareholding
percentage of the shareholders in the Target Company shall be as follows:
Name of Shareholder
NIO Nextev Limited
NIO User Enterprise Limited
NIO Power Express Limited
SDIC
Anhui High-tech Co.
Hefei Investor
TOTAL
Subscribed
Contribution (RMB)
Capital
Percentage of Subscribed
Capital Contribution
2,539,030,264.99
1,252,136,433.60
59,830,818.88
174,825,174.83
174,825,174.83
874,125,874.13
5,074,773,741.26
50.03%
24.69%
1.18%
3.44%
3.44%
17.22%
100%
2.3 Shareholders’ Rights
2.3.1 As from the Closing Date, the Investors shall become the shareholders of the Target Company
and enjoy shareholder rights in accordance with laws and regulations. The capital reserves,
accumulated undistributed profits and other matters of the Target Company on the date of receipt
of the first capital increase price shall be enjoyed by the then current shareholders of the Target
Company in proportion to their paid-in capital contributions.
2.3.2 As from the Closing Date, the NIO Parties and the Investors shall be entitled to the profits and
bear the losses of the Target Company in proportion to their paid-in capital contributions in
accordance with this Agreement.
2.3.3 The equity interests obtained by the Investors in connection with this Transaction shall be
entitled to various rights granted to the Investors by laws, regulations and the Transaction
Documents. If any rights granted to the Investor under the Transaction Documents cannot be
fully realized due to restrictions imposed by the laws of the PRC, the NIO Parties, the Target
Company and other Group Members shall adopt other methods permitted by the laws of the
PRC to realize the rights and interests of the Investor under the Transaction Documents to the
fullest extent.
13
2.4 Purpose of Increased Capital
Unless otherwise provided in the Transaction Documents or agreed upon by the Parties, the NIO Parties and
the Target Company warrant that the Capital Increase Price under this Transaction shall be fully used for the
development of the Main Businesses of the Target Company and the Group Members. The Capital Increase
Price shall not be possessed or used by the Affiliates of the Target Company, shall not be lent to the
Affiliates of the Target Company or any other third parties for use, shall not be used for investment or
shareholding of financial assets such as stocks and shall not be used to provide security in any form for the
NIO Parties or other shareholders of the Target Company (if any) or any third party.
Without the prior written consent of the Investors, no funding transaction shall exist between the Target
Company and other Group Members, on one hand, and the NIO Parties or the Affiliates of the Target
Company, on the other hand, other than those arising from related-party transactions approved by the
internal competent authorities of the Company.
2.5 Execution of Transaction Documents and Registration of Change
2.5.1 The Parties agree to enter into, in respect of this Transaction, on the date of this Agreement (i)
the NIO China Shareholders Agreement (the “Shareholders Agreement”); (ii) the Articles of
Association of NIO China (the “Articles of Association”); and (iii) other ancillary agreements,
resolutions and other documents which are necessary for the completion of this Transaction or
are executed upon request of the Investors (the above documents and this Agreement
collectively referred to as the “Transaction Documents”).
2.5.2 The NIO Parties and the Target Company shall be responsible for completing the registration
and filing formalities for this transaction with the AMR or other Authorities, for which the
Investors shall provide necessary cooperation. The Parties agree to execute necessary and
reasonable legal documents required by the AMR and other Authorities from time to time to
cause the completion of the registration and/or filing procedures necessary for this Transaction
as soon as practicable.
2.5.3 Matters that relate to this Transaction but are not mentioned in this Agreement and the
Shareholders’ Agreement shall be governed by the Articles of Association and other Transaction
Documents. In the event of any conflict or discrepancy between the Articles of Association and
this Agreement or the Shareholders’ Agreement or in the absence of any specific provision in
the Articles of Association, this Agreement and the Shareholders’ Agreement shall prevail.
14
3 PAYMENT OF CAPITAL INCREASE PRICE
3.1 Payment of Capital Increase Price
3.1.1 Payment of First Installment of Capital Increase Price:
(1) On the fifth (5th) business day after all of the Investor’s closing conditions have been proved
to be satisfied or waived, SDIC shall pay all SDIC Capital Increase Price of RMB
1,000,000,000.00 to the bank account opened by the Target Company, of which RMB
174,825,174.83 shall be included in the registered capital of the Target Company and RMB
825,174,825.17 shall be included in the capital reserves of the Target Company. SDIC may
designate a fund managed by it as the payment entity to pay the capital increase price, and when
the fund managed by SDIC pays RMB 1,000,000,000.00 in full to the bank account opened by
the Target Company, it shall be deemed as the completion of the payment obligation of SDIC
under this Agreement. Upon such completion and provided that the aforementioned fund
managed by SDIC has signed the Joinder Agreement in the form of Exhibit I attached hereto,
such fund managed by SDIC shall enjoy the rights under this Agreement and the Shareholder
Agreement, and shall bear the obligations of SDIC under this Agreement, the Shareholder
Agreement and other Transaction Documents (if applicable);
(2) In principal, on the fifth (5th) business day after all of the Investor’s closing conditions have
been proved to be satisfied or waived, but in no event later than September 30, 2020, Anhui
High-tech Co. shall pay all Anhui High-tech Co. Capital Increase Price of RMB
1,000,000,000.00 to the bank account opened by the Target Company, of which RMB
174,825,174.83 shall be included in the registered capital of the Target Company and RMB
825,174,825.17 shall be included in the capital reserves of the Target Company. Any third party
designated by Anhui High-tech Co. may pay the capital increase price together with Anhui
High-tech Co., and when Anhui High-tech Co. and its designated third party(ies) pay RMB
1,000,000,000.00 in full to the bank account opened by the Target Company, it shall be deemed
as the completion of the payment obligation of Anhui High-tech Co. under this Agreement.
Upon such completion and provided that the aforementioned third party(ies) have signed the
Joinder Agreement in the form of Exhibit I attached hereto in accordance with Article 14.2 of
the Shareholder Agreement, such third party(ies) shall jointly enjoy the rights under this
Agreement and the Shareholder Agreement with Anhui High-tech Co., and shall jointly bear the
obligations of Anhui High-tech Co. under this Agreement, the Shareholder Agreement and other
Transaction Documents (if applicable);
(3) On the fifth (5th) business day after all of the Investor’s closing conditions have been proved
to be satisfied or waived, UE HK shall pay three tenths (3/10) of the NIO Parties’ Capital
Increase Price, i.e., RMB 1.278 billion, to the bank account opened by the Target Company, of
which RMB 223,426,573.43 shall be included in the registered capital of the Target Company
and RMB 1,054,573,426.57 shall be included in the capital reserves of the Target Company;
(4) On the fifth (5th) business day after all of the Investor’s closing conditions have been proved
to be satisfied or waived, Hefei Investor shall pay three tenths (3/10) of the Hefei Investor
Capital Increase Price, i.e., RMB 1.5 billion to the bank account of the Target Company, of
which, RMB 262,237,762.24 shall be included in the registered capital of the Target Company,
and RMB 1,237,762,237.76 shall be included in the capital reserves of the Target Company.
Hefei Investor may designate third party(ies) to participate in the payment of such capital
increase price. Payment by Hefei Investor and its designated third party(ies) of RMB
1,500,000,000.00 in full to the bank account opened by the Target Company shall be deemed as
the completion of the
15
payment obligation of the Hefei Investor under this agreement. Upon such completion and
provided that the aforementioned third party(ies) have signed the Joinder Agreement in the form
of Exhibit I attached hereto in accordance with the provisions of Article 14.2 of the Shareholder
Agreement, such third party(ies) will jointly enjoy the rights under this Agreement and the
Shareholder Agreement with Hefei Investor, and shall jointly bear the obligations of Hefei
Investor under this Agreement, the Shareholder Agreement and other Transaction Documents (if
applicable) in proportion to their actual payment.
Specifically:
Name of Shareholder
First Installment of
Capital
Increase
Price
Corresponding
Registered Capital
Premium
Surplus
Reserve
included
as
the Capital
in
SDIC
1,000,000,000.00
174,825,174.83
825,174,825.17
Anhui High-tech Co.
1,000,000,000.00
174,825,174.83
825,174,825.17
Hefei Investor
1,500,000,000.00
262,237,762.24
1,237,762,237.76
UE HK
TOTAL
1,278,000,000.00
223,426,573.43
1,054,573,426.57
4,778,000,000.00
835,314,685.33
3,942,685,314.67
3.1.2 Payment of the Second Installment of the Capital Increase Price:
(1) UE HK shall pay three tenths (3/10) of the NIO Parties’ Capital Increase Price, i.e., RMB
1.278 billion, to the bank account opened by the Target Company on or before June 30, 2020, of
which RMB 223,426,573.43 shall be included in the registered capital of the Target Company
and RMB 1,054,573,426.57 shall be included in the capital reserves of the Target Company;
(2) Hefei Investor shall pay three tenths (3/10) of the Hefei Investor Capital Increase Price, i.e.,
RMB 1.5 billion, to the bank account of the Target Company on or before June 30, 2020, of
which RMB 262,237,762.24 shall be included in the registered capital of the Target Company,
and RMB 1,237,762,237.76 shall be included in the capital reserves of the Target Company.
Hefei Investor may designate third party(ies) to participate in the payment of such capital
increase price. Payment by Hefei Investor and its designated third party(ies) of RMB
1,500,000,000.00 in full to the bank account opened by the Target Company shall be deemed as
the completion of the payment obligation of the Hefei Investor under this agreement. Upon such
completion and provided that the aforementioned third party(ies) have signed the Joinder
Agreement in the form of Exhibit I attached hereto in accordance with the provisions of Article
14.2 of the Shareholder Agreement, such third party(ies) will jointly enjoy the rights under this
Agreement and the Shareholder Agreement with Hefei Investor, and shall jointly bear the
obligations of Hefei Investor under this Agreement, the Shareholder Agreement and other
Transaction Documents (if applicable) in proportion to their actual payment.
16
Specifically:
Name of Shareholder
Second Installment of
Capital
Increase
Price
Corresponding
Registered Capital
Premium
Surplus
Reserve
included
as
the Capital
in
Hefei Investor
1,500,000,000.00
262,237,762.24
1,237,762,237.76
UE HK
TOTAL
1,278,000,000.00
223,426,573.43
1,054,573,426.57
2,778,000,000.00
485,664,335.67
2,292,335,664.33
3.1.3 Payment of the Third Installment of the Capital Increase Price:
(1) UE HK shall pay one-fifth (1/5) of the NIO Parties’ Capital Increase Price, i.e., RMB 852
million, to the bank account opened by the Target Company on or before September 30, 2020, of
which RMB 148,951,048.94 shall be included in the registered capital of the Target Company,
and RMB 703,048,951.06 shall be included in the capital reserves of the Target Company;
(2) Hefei Investor shall pay one fifth (1/5) of the Hefei Investor Capital Increase Price, i.e.,
RMB 1 billion, to the bank account opened by the Target Company on or before September 30,
2020, of which RMB 174,825,174.83 shall be included in the registered capital of the Target
Company and RMB 825,174,825.17 shall be included in the capital reserves of the Target
Company. Hefei Investor may designate third party(ies) to participate in the payment of such
capital increase price. Payment by Hefei Investor and its designated third party(ies) of RMB
1,000,000,000.00 in full to the bank account opened by the Target Company shall be deemed as
the completion of the payment obligation of the Hefei Investor under this agreement. Upon such
completion and provided that the aforementioned third party(ies) have signed the Joinder
Agreement in the form of Exhibit I attached hereto in accordance with the provisions of Article
14.2 of the Shareholder Agreement, such third party(ies) will jointly enjoy the rights under this
Agreement and the Shareholder Agreement with Hefei Investor, and shall jointly bear the
obligations of Hefei Investor under this Agreement, the Shareholder Agreement and other
Transaction Documents (if applicable) in proportion to their actual payment.
Specifically:
Name of Shareholder
Hefei Investor
UE HK
TOTAL
Third Installment
of
Capital
Increase Price
1,000,000,000.00
Corresponding
Registered Capital
Premium included as Surplus
in the Capital Reserve
174,825,174.83
825,174,825.17
852,000,000.00
148,951,048.94
703,048,951.06
1,852,000,000.00
323,776,223.77
1,528,223,776.23
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3.1.4 Payment of Fourth Installment of Capital Increase Price:
(1) UE HK shall pay one tenth (1/10) of the NIO Parties’ Capital Increase Price, i.e., RMB 426
million, to the bank account opened by the Target Company on or before December 31, 2020, of
which RMB 74,475,524.48 shall be included in the registered capital of the Target Company,
and RMB 351,524,475.52 shall be included in the capital reserves of the Target Company;
(2) Hefei Investor shall pay one tenth (1/10) of the Hefei Investor Capital Increase Price, i.e.,
RMB 500,000,000.00, to the bank account opened by the Target Company on or before
December 31, 2020, of which RMB 87,412,587.41 shall be included in the registered capital of
the Target Company and RMB 412,587,412.59 shall be included in the capital reserves of the
Target Company. Hefei Investor may designate third party(ies) to participate in the payment of
such capital increase price. Payment by Hefei Investor and its designated third party(ies) of
RMB 500,000,000.00 in full to the bank account opened by the Target Company shall be
deemed as the completion of the payment obligation of the Hefei Investor under this agreement.
Upon such completion and provided that the aforementioned third party(ies) have signed the
Joinder Agreement in the form of Exhibit I attached hereto in accordance with the provisions of
Article 14.2 of the Shareholder Agreement, such third party(ies) will jointly enjoy the rights
under this Agreement and the Shareholder Agreement with Hefei Investor, and shall jointly bear
the obligations of Hefei Investor under this Agreement, the Shareholder Agreement and other
Transaction Documents (if applicable) in proportion to their actual payment.
Specifically:
Name of Shareholder
Fourth
Installment
Capital
Price
of
Increase
Corresponding
Registered Capital
Premium included as Surplus
in the Capital Reserve
Hefei Investor
500,000,000.00
87,412,587.41
412,587,412.59
UE HK
TOTAL
426,000,000.00
74,475,524.48
351,524,475.52
926,000,000.00
161,888,111.89
764,111,888.11
3.1.5 Payment of the Fifth Installment of the Capital Increase Price:
(1) UE HK shall pay one tenth (1/10) of the NIO Parties’ Capital Increase Price, i.e., RMB 426
million, to the bank account opened by the Target Company on or before March 31, 2021, of
which RMB 74,475,524.48 shall be included in the registered capital of the Target Company,
and RMB 351,524,475.52 shall be included in the capital reserves of the Target Company;
(2) Hefei Investor shall pay one tenth (1/10) of the Hefei Investor Capital Increase Price, i.e.,
RMB 500,000,000.00, to the bank account opened by the Target
18
Company on or before March 31, 2021, of which RMB 87,412,587.41 shall be included in the
registered capital of the Target Company and RMB 412,587,412.59 shall be included in the
capital reserves of the Target Company. The Parties agree that if the NIO Parties fail to transfer
ownership of the intellectual properties in the Asset Contribution to the Target Company before
March 31, 2021, Hefei Investor will be entitled to delay its payment of the fifth installment
under this Article 3.1.5. After the NIO Parties have completed transfer of the ownership of the
intellectual properties, Hefei Investor shall immediately fulfill its payment obligation in respect
of its fifth installment. Hefei Investor may designate any third party to participate in the payment
of such capital increase price. Payment by Hefei Investor and its designated third party of RMB
500,000,000.00 in full to the bank account opened by the Target Company shall be deemed as
the completion of the payment obligation of the Hefei Investor under this Agreement. Upon such
completion and provided that the aforementioned third party has signed the Joinder Agreement
in the form of Exhibit I attached hereto in accordance with the provisions of Article 14.2 of the
Shareholder Agreement, such third party will jointly enjoy the rights under this Agreement and
the Shareholder Agreement with Hefei Investor, and shall jointly bear the obligations of Hefei
Investor under this Agreement, the Shareholder Agreement and other Transaction Documents (if
applicable) in proportion to their actual payment.
Specifically:
Name of Shareholder
Fifth Installment
of
Capital
Increase Price
Corresponding
Registered Capital
Premium included as Surplus
in the Capital Reserve
Hefei Investor
500,000,000.00
87,412,587.41
412,587,412.59
UE HK
TOTAL
426,000,000.00
74,475,524.48
351,524,475.52
926,000,000.00
161,888,111.89
764,111,888.11
3.1.6 The Investors and UE HK shall pay the Capital Increase Price to the bank account designated by
the Target Company.
3.1.7 The Target Company shall confirm receipt of each installment of the Capital Increase Price in
writing to Investors and UE HK on the date of such receipt.
3.1.8 The Capital Increase Price payable in US Dollars shall be converted into RMB at the middle
exchange rate between US Dollars and RMB of 1:7.0752 released by the People’s Bank of
China on April 21, 2020 and paid to the Target Company upon conversion.
3.2 Post-Closing Auditing
3.2.1 After the completion of the contribution of Equity Assets and before the payment of the first
installment of the Capital Increase Price, the NIO Parties shall conduct a comprehensive audit
on the Target Company and the Restructure Assets (the “Post-Closing Auditing”) to review: (i)
whether the contribution of Equity Assets has been completed and all the Equity Assets have
been fully invested into the Target Company in compliance with relevant regulations; (ii)
whether the financial status of the Target Company and the Restructure Assets has no material
adverse effect from the Balance Sheet Date to the Closing Date; (iii) whether there is no event,
fact, condition, change or other circumstances that have or are reasonably expected to have
material adverse effect on the assets, financial structure, liabilities, technologies, profit prospect
19
and ordinary operation of the Target Company and the Restructure Assets; and (iv) conduct a
comprehensive audit on the balance sheet, profits, cash flow, and other matters with respect to
the Target Company and the Restructure Assets of year 2019 and year 2020 till the benchmark
date of auditing;
3.2.2 The NIO Parties shall immediately conduct Post-Closing Auditing and determine the baseline
date for Post-Closing Auditing within two (2) business days after completion of the contribution
of Equity Assets, and the Target Company shall complete Post-Closing Auditing within forty-
five (45) business days after the Closing and issue to the Investors the Audit Report of the year
of 2019 audited by PwC and for the period ending on the baseline date of auditing.
3.3 If any NIO Party or Investor fails to pay any installment of the Capital Increase Price in accordance with
this Agreement, with respect to any installment of the Capital Increase Price paid by any overdue Party:
3.3.1 From the expiry of the Capital Increase Price payment period to the latest of (i) the completion
of the payment of Capital Increase Price by the overdue Party and/or (ii) the completion of the
Transfer of the unpaid registered capital in accordance with Article 3.3.2 and/or (iii) the
completion of the capital reduction (the date of completion of the transfer of unpaid registered
capital and the date of completion of the capital reduction shall be the date of the completion of
the relevant AMR registration). For each day of delay, such overdue Party shall pay to the Target
Company 0.02% of the unpaid Capital Increase Price as overdue fine. For the avoidance of
doubt, if the NIO Parties fail to transfer the intellectual property rights listed in Exhibit 3 (but
excluding the intellectual property rights under the name of NIO Co., Ltd.) within one (1) year
after the Closing due to intention or negligence, the NIO Parties shall pay the overdue fine to the
Target Company, which shall be 0.02% of the unpaid Capital Increase Price for each day of
delay.
3.3.2 If any NIO Party (the “NIO Overdue Party”) fails to pay any installment of the Capital
Increase Price on time in accordance with this Agreement, then as from sixty (60) days after the
expiry of the Capital Increase Price payment period for such installment or as from the date on
which the NIO Party notifies the Target Company, SDIC, Anhui High-tech Co. and Hefei
Investor in writing of its failure
20
to perform the obligation to pay the Capital Increase Price, SDIC, Anhui High-tech Co. and
Hefei Investor shall have the right to notify the NIO Overdue Party and the Target Company in
writing and request the NIO Overdue Party to transfer the outstanding registered capital
corresponding to the overdue Capital Increase Price to SDIC, Anhui High-tech Co., Hefei
Investor or the third party designated by them free of charge, and SDIC, Anhui High-tech Co.,
Hefei Investor or the third party designated by them shall pay the total subscription price that is
calculated using the subscription price per newly increased registered capital in this Transaction.
The NIO Overdue Party shall, within twenty (20) business days from the date of receiving the
aforesaid written notice, transfer the aforesaid unpaid registered capital to SDIC, Anhui High-
tech Co., Hefei Investor or any third party designated thereby free of charge, and shall complete
the re-registration formalities with AMR and other competent Authorities. If after the transfer,
the transferee cannot pay the capital increase price, SDIC, Anhui High-tech Co. and Hefei
Investor shall be entitled to require the Target Company to decrease such overdue and unpaid
registered capital in accordance with applicable laws and the Articles of Association of the
Target Company. If SDIC, Anhui High-tech Co. and Hefei Investor exercise the rights described
in this Article at the same time, they shall exercise such rights in proportion to their paid-in
capital contributions to the Target Company.
3.3.3 If the NIO Overdue Party fails to pay the Capital Increase Price within sixty (60) days after the
expiry of the Capital Increase Price payment period for such installment, and SDIC, Anhui
High-tech Co. and Hefei Investor choose not to exercise or only partially exercise the right
provided under Article 3.3.2 hereof to request the NIO Overdue Party to transfer the unpaid
registered capital without consideration, then with respect to the part of the unpaid registered
capital that SDIC, Anhui High-tech Co. and Hefei Investor do not exercise the right, SDIC,
Anhui High-tech Co. and Hefei Investor shall have the right to request the Target Company to
decrease such overdue and unpaid registered capital in accordance with applicable laws and the
Articles of Association of the Target Company.
3.3.4 Once the NIO Parties have paid the NIO Parties Capital Increase Price for the current
installment, and have provided the Investors with the bank receipts and other supporting
materials for the current payment, the Investors shall pay their respective installment of the
Capital Increase Price within the corresponding time period specified in this Agreement. The
following circumstances will not be considered as overdue payment by the Investors, and the
Investors do not need to pay an overdue fine:
(1) the NIO Parties fail to make due payment of any installment of NIO Parties Capital Increase
Price, which causes the Investors’ failure to pay the same installment of the Capital Increase
Price in time;
(2) the NIO Parties fail to provide the Investors with bank receipts and other supporting
materials when or after the NIO Parties Capital Increase Price has been paid, which causes the
Investors’ failure to pay the same installment of Capital Increase Price in time; and
21
(3) the NIO Parties fail to transfer the intellectual property rights listed in Exhibit 3 (but
excluding the intellectual property rights under the name of NIO Co., Ltd.) within one (1) year
after the Closing, which causes Hefei Investor’s failure to pay the last installment of its Capital
Increase Price on or before March 31, 2021.
3.3.5 For the avoidance of doubt, exercise by SDIC, Anhui High-tech Co. and Hefei Investor of their
rights set forth in this Article 3.3 shall not release the NIO Overdue Party from any obligation to
pay the overdue fine.
3.4 Capital Verification, Investment Certificate and Register of Shareholders
3.4.1 The Target Company shall, within ten (10) business days after the Investors and the NIO Parties
make each installment payment for the Capital Increase Price in cash, complete the capital
verification for the relevant installment of capital increase and deliver a scanned copy of the
original capital verification report to the Investors and the NIO Parties.
3.4.2 The Target Company shall issue corresponding capital contribution certificates to the Investors
and NIO HK Holding Platforms on the date when the respective installments of Capital Increase
Price are paid and the respective installments of capital contributions of the Restructure Assets
are completed by the Investors and NIO HK Holding Platforms. A capital contribution
certificate shall specify the following items: name of the Target Company, date of establishment,
registered capital, name of shareholders, amount of subscribed capital contribution, amount of
paid-in capital contribution, shareholding ratio, date of payment of capital contribution, serial
number and date of issuance of the capital contribution certificate. The capital contribution
certificates shall be signed by the legal representative of the Target Company and affixed with
the seals of the Target Company.
3.4.3 The Target Company shall register and maintain a register of shareholders, and prepare a new
register of shareholders for this Transaction as of the Closing Date. Such register of
shareholders shall be kept by the board of directors after it is affixed with the seal of the Target
Company, and an original shall be provided to the Investors within five (5) business days after
the Closing Date.
3.5 Closing Date
The date on which the Investors pay the first installment of Capital Increase Price in accordance with the
provisions of Article 3 of this Agreement (“Closing”) shall be referred to as the closing date (the “Closing
Date”).
22
4 CONDITIONS PRCEDENT TO CLOSING
Unless waived by the Investors in writing, the obligations of the Investors to carry out the
Closing shall be subject to the satisfaction of each of the following conditions precedent:
4.1 There is no judgment, award, ruling, decree or injunction of any PRC laws, court, arbitral body or
competent governmental Authorities that restricts, prohibits or cancels this Transaction, nor is there
pending or potential litigation, arbitration, judgment, ruling, ruling or injunction which, in the reasonable,
good faith judgment of the Investors, has had or will have material adverse effect on this Transaction,
including restricting, prohibiting or cancelling this Transaction;
4.2 The Target Company and its existing shareholders as of the Execution Date shall have made resolutions
approving the execution of the Transaction Documents and this Transaction at the shareholders’ meeting,
and the shareholders of the Target Company have waived in writing the applicable right of first refusal
and/or pre-emptive right;
4.3 The Target Company shall have obtained all third party permits for the execution and performance of the
Transaction Documents. The execution and performance of the Transaction Documents will not result in
the breach by the Target Company and other Group Members of any applicable laws of the PRC or any
contracts, agreements or other documents applicable to them;
4.4 Completion by the Target Company and the NIO Parties of the execution of various Transaction
Documents, including this Agreement, the Shareholders’ Agreement, the Articles of Association or the
Amendment to the Articles of Association and other ancillary agreements, resolutions and other
documents necessary for the consummation of this Transaction or reasonably requested by the Investors,
including, without limitation, all filing and registration application materials required by the market
supervision and administration Authorities in connection with this Transaction;
4.5 The representations, representations and warranties made by the Target Company and the NIO Parties
under Article 6 hereof shall continue to be true, complete and accurate, and the covenants required by the
Transaction Documents to be performed on or prior to the Closing Date shall have been performed. There
is no breach of the Transaction Documents;
4.6 The financial condition of the Target Company and the Restructure Assets has no Material Adverse Effect
as from the Balance Sheet Date to the Closing Date;
4.7 The requisite assets of the Target Company and the Group Members in connection with their Main
Businesses are fully kept and all requisite professional technicians have been retained;
4.8 As from the date hereof until the Closing Date, there is no event, fact, condition, change or other
circumstance that has had or is reasonably expected to have Material Adverse Effect on the assets,
financial structure, liabilities, technologies, profit prospect, normal operation and asset contribution of the
Target Company and other Group Members;
4.9 The Core Management Team and other key personnel of the Target Company and the Group Members as
listed in Exhibit 7 (including without limitation the management personnel and key technical personnel of
the Target Company to be disclosed at the time
23
of application for a Qualified IPO by the Target Company) have respectively entered into a letter of
undertaking to warrant that (i) they shall serve at the Target Company or other Group Members until three
(3) years after the Qualified IPO of the Target Company is completed; (ii) they shall not participate in any
competing business, and shall not participate in any competing business through their relatives or other
Affiliates, during their term of office and within two (2) years after they leave the Target Company or
other Group Members; (iii) before the completion of the Qualified IPO of the Target Company, they shall
not directly or indirectly transfer or dispose of the interests or shares (if any) they have at the level of the
Target Company or management/employee share incentive platform; (iv) the Core Management Team and
other key personnel do not act in violation of their non-compete obligation (including any violation action
conducted with any third party);
4.10 each of SDIC and Hefei Investor has nominated one (1) candidate whom has been duly appointed as the
directors of the Target Company, and the board of directors of the Target Company shall have been duly
composed in accordance with the Shareholders’ Agreement and the Articles of Association of the Target
Company;
4.11 Anhui High-tech Co. and Hefei Investor have both obtained their necessary approvals related to state-
owned investment;
4.12 The Target Company shall have completed the re-registration relating to change of its shareholding
structure and directors involved in this Transaction with the AMR (the date on which the re-registration is
completed shall be referred to as the “AMR Re-registration Completion Date”);
4.13 NIO HK Holding Platforms have completed Equity Contribution in accordance with Article 2.1.2 hereof
and PwC has issued to NIO Inc. the audit report for 2019, and except for the following issues, there is no
other non-standard audit opinions: (i) sustainable operation matters; and (ii) internal control deficiencies
related to the lack of financial experts who are sufficiently familiar with US accounting standards;
4.14 The NIO Parties have signed a letter of engagement with PWC to appoint PWC as the auditor for post-
closing auditing matters;
4.15 The Target Company has signed an agreement with the NIO Parties regarding the injection of intellectual
property rights under the Asset Contribution (see Exhibit 3 for details, but excluding the intellectual
property rights of NIO Co., Ltd.) and the use of intellectual property rights during the change of
ownership. Such agreement shall stipulate that the Target Company and Group Members have the right to
use these intellectual property rights free of charge and exclusively before the registration of the change of
ownership of these intellectual property rights is completed in accordance with this Agreement. If the NIO
Parties or its Affiliates are using or intend to use such intellectual property rights, it shall be approved by
the Target Company in accordance with the laws of the PRC, the United States and other countries and a
license agreement shall be signed with the Target Company;
4.16 The NIO Parties have engaged lawyers practicing in the jurisdiction where NIO Inc. is listed to provide an
email regarding (i) legal advice on the approval procedures that are
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required to be performed for this Transaction under the applicable laws and rules of regulatory Authorities
in the jurisdiction where NIO Inc. is listed; and (ii) a brief summary of the progress of the ongoing
securities class action of NIO Inc., and the NIO Parties have engaged lawyers practicing in the jurisdiction
where NIO Inc. is registered to issue a customary Cayman legal opinion for this Transaction; and
4.17 The Target Company and the NIO Parties shall have issued to the Investors a confirmation letter
confirming that all the above conditions precedent, except for those waived by the Investors in writing,
have been satisfied and provided relevant documents evidencing the satisfaction of such conditions
precedent.
5 TRANSITIONAL PERIOD
5.1 During the period from the Execution Date of this Agreement to the Closing Date (the “Transitional
Period”), the Target Company and the other Group Members shall, and the NIO Parties shall cause the
Target Company and the other Group Members to, conduct the business in the ordinary course consistent
with past practice, and shall use their best efforts to preserve intact the assets and business, maintain
business cooperation relationship with existing customers, suppliers and other third parties, retain existing
officers and employees, and maintain the current status (except for normal wear and tear) of all assets and
properties owned or used by the Target Company and the other Group Members.
5.2 During the Transitional Period, subject to the receipt of reasonable prior notice from the Investor and the
normal operation of the Target Company and the other Group Members, during normal business hours of
the Target Company and the other Group Members, the NIO Parties and the Target Company shall provide
the Investors and its Representatives with such information regarding the Target Company and the other
Group Members as reasonably requested by the Investors in connection with this Transaction, including,
without limitation, adequate provision of the books, records, contracts, technical data, personnel data,
management information and other documents of the Target Company by the lawyers, accountants and
other representatives engaged by the Investors, and prudent examination of the financial, assets and
operation status of the Target Company and the other Group Members. In addition, upon occurrence or
expected occurrence of any breach of this Agreement by the NIO Parties or the Target Company, the NIO
Parties and the Target Company shall promptly notify the Investor in writing of such breach.
5.3 During the Transitional Period, the NIO Parties and the Target Company shall promptly notify the
Investors in writing of the following matters and discuss with the Investor about the effect of such matters
on the Target Company and other Group Members so as to ensure the stable operation of the Target
Company and other Group Members in the ordinary course of business consistent with past practice:
5.3.1 Change in the equity structure, financial condition, assets, liabilities, business or operations of
the Target Company and other Group Members that has or is likely to have any Material
Adverse Effect on the Target Company; and
5.3.2 Progress of approval by/registration with governmental Authorities (if applicable).
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5.4 During the Transitional Period, the Target Company and the NIO Parties shall, and shall cause their
Affiliates and advisors, as well as their respective directors, the NIO Parties management and
representatives to, (i) on an exclusive basis, deal with the matters relating to this Transaction jointly with
the Investors and their Affiliates; (ii) not engage in any similar transaction or any other transactions in
conflict with the transactions contemplated in the Transaction Documents (any of such transactions being
referred to as the “Third Party Transaction”); (iii) immediately terminate any discussion or negotiation
with any Person in connection with the Third Party Transaction, and hereafter, refrain from discussing or
negotiating with any Person in connection with the Third Party Transaction or providing any information
to any Person in connection with the Third Party Transaction; and (iv) not encourage any inquiry or
proposal with respect to the possible Third Party Transaction or take any other action to facilitate such
inquiry or proposal. The Investors shall be notified promptly if the Target Company or other Group
Members or the NIO Parties receives any inquiry from any other party in respect of possible Third Party
Transaction.
5.5 Without limiting the normal business operation, unless with the prior written consent of the Investor,
during the Transitional Period, the NIO Parties shall cause the Target Company and the other Group
Members not to, and the Target Company and the other Group Members not to, take the following actions
(except for those relevant to this Transaction):
5.5.1 Increase, decrease, allot, issue, acquire, repay, assign, pledge or redeem any registered capital or
equity;
5.5.2 Take any action that may result in the dilution of the Investor’s equity interest in the Target
Company on the Closing Date by amending its articles of association or through reorganization,
merger, sale of share capital, acquisition, sale of assets or otherwise;
5.5.3 Any sale, lease, transfer, authorization or assignment of any asset exceeding RMB 50 million
individually or in aggregate, except for those conducted in the ordinary course of business in a
manner consistent with past practices;
5.5.4 Any new assumption or incurrence of indebtedness, liability, obligation or expense exceeding
RMB 50 million (or the equivalent thereof in other currencies) in aggregate except in the
ordinary course of business;
5.5.5 Make any capital expenditure in excess of RMB 100 million (or its equivalent) other than in the
ordinary course of business;
5.5.6 Create any mortgage, pledge, security interest or other types of encumbrances on any assets in
excess of RMB 50 million, except in the ordinary course of business;
5.5.7 Declare, pay and make any distribution or declaration of a dividend;
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5.5.8 Entry into any transaction with an Affiliate;
5.5.9 Conduct or become a party to any acquisition;
5.5.10 Incorporation of any subsidiary or acquisition of any equity interest or other interest in any other
entity for consideration in excess of RMB 50 million;
5.5.11 Unless expressly provided for in the Transaction Documents, formulate or adopt any employee
equity incentive plan, or distribute options to or make commitments on distribution options to
employees; or
5.5.12 Agree or commit to do any of the foregoing, including, without limitation, execution of a letter
of intent, commitment letter and letter of consent.
6 REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Target Company and the NIO Parties. Except for the matters
expressly disclosed in the Disclosure Letter attached hereto as Exhibit 4, the Target Company and the NIO
Parties respectively make the following statements, representations and warranties and severally and
jointly ensure that each of the following statements, representations and warranties shall be true, complete
and accurate as of the date hereof, the AMR Re-registration Completion Date and the Closing Date;
provided that the Target Company and the NIO Parties shall have the right to make update and supplement
to the Disclosure Letter attached as Exhibit 4 with respect to any occurrence after the Execution Date on
the AMR Re-registration Completion Date and the Closing Date respectively. The Disclosure Letter refers
to particular sections of this Agreement which are subject to amendment, and shall be read with this
Agreement and form an integral part of this Agreement. The matters of the Target Company and its Group
Members that have or may have Material Adverse Effect as from the Balance Sheet Date to the Execution
Date shall also be disclosed in the Disclosure Letter. The Target Company and the NIO Parties agree that,
for the purpose of the following matters of this Article 6, their statements, representations and warranties
in respect of the matters involving Target Company shall, to the extent applicable, apply to Target
Company and its Group Members at the same time.
6.1.1 Authority. The execution of the Transaction Documents, performance by the Target Company of
all their obligations thereunder and consummation of the transactions thereunder have been fully
and duly authorized by all Transaction Authorities; and the NIO Parties has full capacity for
civil conduct and civil rights to execute the Transaction Documents and perform their
obligations thereunder. Upon execution, the Transaction Documents shall have legal binding
force on the Target Company and the NIO Parties.
6.1.2 Investments. As of the Execution Date, the AMR Re-registration Completion Date or the
Closing Date, if applicable, other than the Group Members, the Target Company have no other
Subsidiaries, partnerships, branches or offices in the PRC or overseas and do not directly or
indirectly hold or own similar interests in any other Persons.
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6.1.3 No Conflict. The execution and performance of the Transaction Documents do not violate or
conflict with any provisions of the articles of association or other constitutional documents of
the Target Company; both the Target Company and the NIO Parties have obtained all the
necessary third party consents or authorizations for the transactions under the Transaction
Documents. the NIO Parties has performed necessary internal and external approval procedures
for this Transaction, and there is no breach of relevant laws and regulations of the NIO Parties’
place of incorporation, place of listing and the registered place of the Target Company, nor is
there any breach of written agreements or covenants between the NIO Parties or its Affiliates
and any other third party. The material agreements or contracts between the Target Company
and its Group Members, the NIO Parties and any other entities will not be terminated or
materially affected by the Transaction Documents due to the execution or performance thereof.
6.1.4 Validly Existing of Target Company and the Group Members. The Target Company and the
Group Members are legally incorporated and validly existing Persons. The registered capital of
the Target Company and its Group Members has been paid in full in a timely manner in
accordance with the provisions of its articles of association, and complies with the requirements
of Chinese laws. There is no failure to pay, delay in payment, false registration, inadequate
capital or withdrawal of registered capital. All of the articles of associations of the Target
Company and the Group Members have been legally and validly registered (if required), and are
valid and enforceable. The business scope specified in the articles of association of the Target
Company and the Group Members is in conformity with the requirements of the PRC Laws. The
Target Company and the Group Members have conducted operation activities in strict
compliance with the business scope set forth in their articles of association and applicable PRC
Laws. All licenses, approvals and permits required for the Target Company and its Group
Members to carry out business activities under the Laws of the PRC have been applied for and
obtained in accordance with law. All such permits are validly existing. The Target Company and
the Group Members have passed the annual inspection (if any) over the licenses and permits of
the Target Company conducted by relevant competent governmental Authorities. The documents
of the Target Company (including minutes of board meetings, shareholders’ meeting/general
meetings, and register of shareholders of the Target Company) have been properly kept and
completely and accurately recorded the matters that shall be recorded in such documents.
6.1.5 Financial Reporting. As of December 31, 2019 (the “Balance Sheet Date”) and the Execution
Date, the AMR Re-registration Completion Date or the Closing Date, if applicable, all audited
accounts and management accounts (including transfer accounts) of the Target Company and the
Group Members have been prepared in accordance with the Laws of the PRC and truly,
completely and accurately reflect the financial and operation conditions of the Target Company
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and the Group Members as of the relevant account dates, and the financial records and data of
the Target Company and the Group Members fully comply with the requirements of the Laws of
the PRC and the PRC Accounting Standards. All documents including books, records of
changes in shareholdings, financial statements and all other records shall be kept and be in the
possession of the Target Company or the Group Members in accordance with the Laws and
commercial practices of the PRC and all major transactions relating to the business of the Target
Company or the Group Members shall be recorded accurately and on file. The Target Company
and the Group Members do not have such problems as off-balance-sheet cash sales income, off-
balance-sheet liabilities, shareholders' occupation of the capital of the Target Company and
material internal control loopholes.
6.1.6 Undisclosed Liabilities. Neither the Target Company nor any Group Member has any other
material liabilities (meaning debts exceeding RMB 50 million in the aggregate) not reflected in
the balance sheet provided to the Investor as of the Balance Sheet Date; the Target Company or
the Group Members have never provided any guarantee or other security for others or created
any mortgage, pledge or other security right on their properties.
6.1.7 Equity Structure. The registered capital structure of the Target Company and the Group
Members as set forth in the articles of association of the Target Company and in the amendments
to the articles of association registered with market supervision and administration authorities on
the Execution Date is fully consistent with the records in Exhibit 1 hereto and the relevant
articles of association of the Target Company and the Group Members provided to the Investor,
and truly, completely and accurately reflects the equity structure of the Target Company and the
Group Members, and there is no false capital contribution. The Target Company and the Group
Members have never committed to or actually issued any equity interests, shares, convertible
bonds, warrants, options or equity interests of the same or similar nature other than the above
shareholder equity interests in any form or to any person. The equity interests in the Target
Company and the Group Members are free and clear of any nominee holding or similar
arrangement, pledge or other security interest of any kind, or Encumbrance or any other third
party rights (including, with respect to the equity interests in any person, any option or
conversion right or pre-emptive right of any nature). The shareholding structure of direct or
indirect equity holders of the Target Company (the equity interest in the Target Company
penetrating through natural persons or governmental Authorities) will not have material adverse
effect on the Target Company’s application for initial public offering of its shares and the initial
public offering and listing of its shares on the PRC stock exchange (other than the PRC National
Equities Exchange and Quotations System). All the registration and filing procedures applicable
to the NIO Parties having obtained the shares and interests in the registered capital of the Target
Company and the Group Members have been completed.
6.1.8 No Change. From the Balance Sheet Date, unless acknowledged by the Investors
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in writing or otherwise provided herein, none of the Target Company and the Group Members
has taken the following actions, unless for the purpose of consummation of this Transaction
(unless the Target Company shall notify the Investor in writing within five (5) days from the
occurrence of such actions):
(1) prepay debts in excess of RMB 50 million cumulatively;
(2) provide guarantee to other persons or create mortgage, pledge and other security rights on its
property;
(3) release debts owed by others exceeding RMB 50 million in the aggregate or waive any right
of claim;
(4) amend any existing material agreement or contract of the Target Company, which is
obviously detrimental to the Target Company;
(5) appoint or dismiss directors, the general manager, the deputy general managers, the finance
controller and other officers of the Company or make substantial amendment to their labor
contracts;
(6) incur any loss, or have any change in its relationship with suppliers, clients or employees,
which will have Material Adverse Effect on the Target Company or the Group Members;
(7) modify the accounting methods, policies or principles and financial accounting rules and
systems of the Target Company, except for the modification required by applicable accounting
standards;
(8) transfer or license other persons to use the intellectual properties of the Target Company
other than in the ordinary course of business of the Target Company and the Group Members;
(9) experience material change in any sales practice or accounting methods of sales, or material
change in employees’ policies, rules or regulations;
(10) experience material adverse change in the financial condition of the Target Company or any
member of the Group, or any transaction or behavior outside the Main Businesses which has
Material Adverse Effect on the Target Company;
(11) adopt any resolutions of shareholders’ meeting or board of directors other than in
connection with the operation of its Main Businesses, except for those adopted for the
performance of matters agreed by the Investor hereunder;
(12) declare, pay or plan to declare or plan to pay any dividend, bonus or other form of
distribution to the shareholders;
(13) (i) sale, mortgage, pledge, lease, transfer and other disposal of assets exceeding RMB 50
million in aggregate outside the course of Main Businesses,
30
except for the bank loan or corresponding provisions of guarantee as approved by the board of
directors of the Company; (ii) dispose of any fixed assets with an original value exceeding
RMB 50 million or agree to the disposal or acquisition of any fixed assets with an original value
exceeding RMB 50 million, waive its control over the assets of any Target Company or member
of the Group with the original value exceeding RMB 50 million in aggregate, and entry into any
contract resulting in the expenditure of fixed assets where the original value of such fixed assets
exceeding RMB 100 million in aggregate; or (iii) any expenditure or purchase of any tangible or
intangible assets (including equity or equity investment in any person) exceeding RMB 100
million in aggregate;
(14) demerger, merger with or acquisition of a third party’s equity interest, assets or business
other than in the ordinary course of business;
(15) breach of the provisions of the statements, representations and warranties under this
Agreement by way of acts or omissions; and
(16) any act or omission that may result in the occurrence of the above circumstances.
6.1.9 Taxes. (i) All Tax Returns required to be filed by the Target Company and the Group Members
with the relevant competent tax Authorities prior to the date hereof have been filed or will be
filed on or prior to the date hereof; (ii) the Company has lawfully paid all Taxes due and payable
pursuant to such returns prior to the date hereof; (iii) the Target Company and the Group
Members have fully assumed or accrued all Tax obligations or Encumbrances which shall be
assumed or accrued by them prior to the date hereof in accordance with the Tax Laws and
Regulations of the PRC; (iv) all Tax matters required to be completed prior to the date hereof
with respect to any transaction relating to the Target Company and the Group Members or for
any period starting on or prior to the date hereof have been completed; (v) no Encumbrance has
been incurred due to any failure to complete any Tax matters in respect of the equity interests
and assets of the Target Company and the Group Members; (vi) there is no pending or potential
Tax dispute, nor have any matters found which may give rise to Tax investigation or Tax dispute
with any Governmental Authority prior to the date hereof; and (vii) the completion of this
Transaction hereunder will not have any material adverse effect on any Tax preference currently
enjoyed by the Target Company and the Group Members at the date hereof. None of the Target
Company and the Group Members has entered into or got involved in, or is a party to or
otherwise gets involved in, any transaction, plan or arrangement in violation of applicable Laws
for the purpose of avoiding or reducing Tax liabilities.
6.1.10 Assets. The Target Company and the Group Members (i) own good and marketable title to all of
their owned properties and assets free and clear of any Encumbrance, and (ii) have legitimate
leasehold interest in their leased properties or assets. The Target Company and the Group
Members own or have
31
the right to use all necessary properties and assets, both tangible and intangible, for the conduct
of their current business. The property and equipment used by the Company in its operation,
except for normal wear and tear, are in good operating condition and repair and satisfy and meet
the current purpose of use.
6.1.11 Related Party Matters. Any existing shareholders of the Target Company and Group Members
(other than the Target Company and the Group Members), directors and Core Management
Team, or to the knowledge of the Target Company and the NIO Parties, the affiliates of such
persons and the Target Company or the Group Members: (i) do not have any contracts or
commitments or any transactions conducted, being conducted or proposed to be conducted; (ii)
are not indebted (other than current payables for salary and welfare benefits), not committed to
providing loans or security directly or indirectly, unilaterally or bilaterally; (iii) have no interest
in or material business relationship with the Target Company or contracts entered into by the
Target Company, including purchase, sale, license, authorization of use, provision of any assets
and services such as products and intellectual property of the Target Company. None of the
directors/Core Management Team of the NIO Parties, the Target Company and the Group
Members, or (to the knowledge of the Target Company and the NIO Parties) the Affiliates of
such directors/Core Management Team members hold any interest in any of the Target Company
or Affiliates of the Group Members, or any business that has relationship or competes with the
Target Company or the Group Members (other than the Target Company and the Group
Members), or in any company in which the Target Company/Group Members have direct or
indirect ownership interest (except for the acquisition of less than 0.1% of the stocks of the listed
Target Company through the public securities market), or controls such company by loan,
agreement or otherwise, or serves as a senior officer or director at any business that has
relationship or competes with the Target Company or the Group Members (other than the Target
Company and the Group Members).
6.1.12 Contracts. The Target Company and the Group Members have provided the Investor with the
copies of some of their material agreements or contracts currently in effect and in conformity
with the originals, and the NIO Parties and the Target Company warrant that such material
agreements or contracts are legal, valid and enforceable, and there is no material breach by the
Target Company or the Group Members or any other Transaction Party.
Neither the Target Company nor any Group Member is a party to or bound by any of the
following contracts, agreements or documents:
(1) contracts, agreements or documents in an amount exceeding RMB 50 million that are not
formed in the ordinary course of business;
(2) contracts, agreements or documents which are not made at arm’s length between
independent Persons;
32
(3) contracts, agreements or documents detrimental to the interests of the Target Company or
Group Members;
(4) contracts, agreements or documents restricting the Target Company or Group Members from
engaging in the Main Businesses operation;
(5) contracts, agreements or documents involving an amount greater than RMB 200 million that
is payable but not yet paid; or
(6) contracts, agreements or documents which have material adverse effect on this Transaction
or will be materially affected by this Transaction and have not been disclosed to the Investors;
6.1.13 Intellectual Property. The Target Company and the Group Members own all legal ownership or
use rights of intellectual properties necessary for the conduct of Main Business (or will inject
Restructure Assets into the Target Company) (including without limitation patents, trademarks,
copyrights, know-how, domain names and trade secrets) (including, in particular, the intellectual
properties listed in Exhibit 5). Such intellectual properties are valid and enforceable in
accordance with law. To the knowledge of the Target Company and the NIO Parties, there is no
issue that may lead to the invalidity or unenforceability of any intellectual property. Neither the
Target Company nor the Group Members have infringed upon or illegally used any intellectual
property in which any third party has any right, title or interest, or have licensed or allowed any
third party to use any intellectual property in which any third party has any right, title or interest;
neither the Target Company nor the Group Members have infringed upon others’ intellectual
property, trade secrets, proprietary information or other similar rights, and there is no pending or
foreseeable claim, dispute or litigation proceedings requiring the Target Company or the Group
Members to make a claim for any infringement upon any third party’s intellectual property, trade
secrets, proprietary information or other similar rights. To the knowledge of the Target Company
and the NIO Parties, there is no infringement by any third party of the intellectual property
lawfully owned by the Target Company or the Group Members. The patents, trademarks,
software copyrights and domain names owned by the Target Company and the Group Members
have been duly registered in accordance with law and are in valid status or proper and effective
protection measures have been taken. Except for the intellectual property to be injected into the
Target Company in the structural reorganization, the NIO Parties or its Affiliates does not hold
any other intellectual property (including without limitation patent, trademark, copyright, non-
patented technology, and domain name) in relation to its Principal Business. Key employees of
the Target Company and Group Members are employed by the Target Company or Group
Members and engage in business activities. To the knowledge of the Target Company and the
NIO Parties, such key employees have not violated any contracts or binding undertakings
(including without limitation confidentiality obligations and non-competition obligations)
entered into with their former employers, and will not constitute infringement upon the
33
legitimate rights of their former employers or other intellectual property rights holders.
6.1.14 Environment, Health and Safety. Since the establishment of the Target Company and the Group
Members, they have complied with all applicable Laws of the PRC concerning environmental
protection, health and safety in connection with their business operations, and there has been no
breach of such Laws of the PRC.
6.1.15 Litigation and Other Legal Proceedings. There is no litigation, arbitration, mediation,
investigation, inquiry and other legal or administrative proceedings which may have a Material
Adverse Effect on the Target Company or the Group Members or materially and adversely affect
the formation, validity and enforceability of the Transaction Documents and the transactions
thereunder, whether completed, pending or foreseeable to occur.
6.1.16 Obey the Laws. The activities of the Target Company and the Group Members have at all times
complied with the valid Laws of the PRC and the requirements of relevant governmental
Authorities in all respects, and do not violate any Laws of the PRC so as to constitute adverse
effect on the Target Company or the Group Members.
6.1.17 Non-competition Restrictions. Any operation activities of the Target Company and Group
Members within the business scope are not subject to any non-competition restrictions of any
nature or with respect to any entities. To the knowledge of the Target Company and the NIO
Parties, there is no agreement, judgment, injunction, order or decree which would reasonably be
expected to restrict or materially and adversely affect the current or future business activities of
the Target Company or Group Members or the conduct of current or proposed business in any
material respect.
6.1.18 Employees.
(1) There is no pending or, to the knowledge or expected to the knowledge of the Target
Company or the Group Members, potential labor dispute or controversy between the Target
Company or the Group Members and its Core Management Team, current or former officers;
and to the knowledge or expected to the knowledge of the Target Company or the Group
Members, there is no potential labor dispute or controversy between any of its Core
Management Team, key technical personnel and other officers and any other business;
(2) The Target Company and the Group Members shall have entered into proper intellectual
property ownership agreements, confidentiality agreements and non-competition agreements
with the Core Management Team and other key technicians;
(3) none of the key directors and management team of the Target Company and the Group
Members serves as a director, officer or supervisor in any other entities, or holds a position
(including part-time) in any other third party entities, or is
34
obligated to provide consulting/advisory services to any entities;
(4) none of the Target Company and the Group Members has any outstanding payable economic
compensation for termination of employment or other similar indemnification or compensation
with respect to employment, in an aggregate amount exceeding RMB 10 million;
(5) The Target Company and the Group Members have fully paid and/or withheld pension,
housing, medical care, unemployment and all other social insurance or employee benefits
payable in accordance with the relevant PRC laws and all relevant laws, agreements and
covenants of the PRC in accordance with the relevant PRC laws, and there is no pending or, to
the knowledge of the Target Company and the Group Members, threatened dispute with respect
to such social insurance or employee benefits;
(6) other than employee benefits, social and pension security, housing fund and economic
compensation for termination of labor contracts as required by the laws of the PRC, the Target
Company and the Group Members have not provided or undertaken to provide to employees any
other employment, severance, dismissal, retirement or pension benefits, security or
compensation;
(7) There is no agreement, covenant or contract restricting the Core Management Team and key
technical personnel of the Target Company and the Group Members to operate, manage or
engage in Main Businesses or hold any equity interest in the Target Company/the Group
Members.
6.1.19 Insurance. The Target Company and the Group Members have purchased insurance consistent
with general commercial practices in connection with their daily business operations; none of
the Target Company and the Group Members has taken action which may result in the invalidity
of such insurance policies or increase of premium rates, nor is there any pending claim against
such insurance policies.
6.1.20 Provision of Information. Prior to the Execution Date hereof, the Target Company and the
Group Members have provided the Investors or the intermediaries engaged by the Investors with
the originals or copies (in the case of copies, such copies are true copies) of all the material
documents (“Due Diligence Documents”) (such as documents, agreements, certificates,
instruments, permits and other written statements and reports) relating to the Target
Company/the Group Members and their Affiliates as required by the Investors or the
intermediaries engaged by the Investors for its legal, financial or commercial due diligence on
the Target Company/the Group Members and their Affiliates to carry out the Transaction. The
Due Diligence Documents are true, accurate and complete, and there is no material omission or
misleading or false representation, information or material which could be reasonably expected
to materially affect the decision made by the Investors on whether to proceed with the
Transaction in accordance with this Agreement.
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6.2 Representations and Warranties of the Investors. The Investors hereby severally but not jointly make the
following representations, representations and warranties to the Target Company and the NIO Parties and
ensures that each of the following representations, representations and warranties shall be true, complete
and accurate as of the Execution Date hereof:
6.2.1 Organization and Permissions. It is a company or limited partnership duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its incorporation and has all
necessary power and authority to enter into this Agreement and the Transaction Documents to
which it is a party, perform its obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby. Its execution and delivery of this Agreement and
the Transaction Documents to which it is a party, performance of its obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate actions for it (if applicable), and it has obtained all
approval, filing and appraisal procedures (including, without limitation, appraisal, examination,
approval and filing in connection with state-owned investment) as required by the Laws and
regulations of the PRC. This Agreement has been, and other Transaction Agreements to which it
is a party will be, duly executed and delivered by it, and, assuming due authorization, execution
and delivery by the other Parties, this Agreement constitutes, and other Transaction Agreements
to which it is a party will upon its execution constitute, its legal, valid and binding obligations,
enforceable against it in accordance with the terms hereof and thereof, unless otherwise
provided in this Agreement.
6.2.2 No Conflicts. Its execution, delivery and performance of this Agreement and the Transaction
Documents to which it is a party do not and will not (i) violate, conflict with, or result in a
default under, if applicable, its articles of association or similar constitutional documents, (ii)
violate or conflict with any Law or Governmental Order applicable to it, or (iii) violate, conflict
with, constitute a default under, or constitute a default under, any document or arrangement to
which it is a party, including any note, bond, mortgage, contract, agreement, lease, sublease,
license, permit or franchise, which will have an adverse effect on its ability to perform its
obligations under this Agreement or other Transaction Documents or consummate the
transactions contemplated hereby or thereby.
6.2.3 No Claim. There is no outstanding claim by or against the Investors or its Affiliates which may
affect the legality, validity or enforceability of this Agreement or any Transaction Document or
the consummation of the transactions contemplated hereby or thereby.
6.2.4 Own funds. The Investors have sufficient internal funds to pay the Capital Increase Price.
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7.1 Indemnity Covenant regarding Breach of Agreement
7 INDEMNIFICATION UNDERTAKINGS
7.1.1 If the Investors incur any losses due to breach of any provisions of this Agreement by any one or
more Parties other than the Investors or breach of any statements, warranties and representations
under Article 6 hereof, the NIO Parties shall indemnify the Investors and bear joint and several
liability for such indemnification. In particular, if such losses are caused expressly by the reason
attributable to one or more Parties, such liabilities shall be borne by the Party or Parties causing
such losses, and the other NIO Parties shall remain jointly and severally liable for such
liabilities.
7.1.2 Subject to Article 7.1 hereof, if the Target Company or the Group Members incur any losses or
their assets are impaired due to the breach of any provisions of this Agreement or the breach of
any terms of the statements, representations and warranties under Article 6 hereof, the loss of the
Investors shall be calculated in proportion to their then actual capital contribution to the Target
Company.
7.1.3 The Investors shall indemnify the Target Company, the Group Members or the NIO Parties
against any losses incurred by the Target Company, the Group Members or the NIO Parties due
to any breach of any provisions of this Agreement by the Investors or the breach of any
provisions of the statements, representations and warranties under Article 6 hereof.
7.2 Indemnification Undertaking for Special Matters: The Parties further agree that, if the Target Company and
other Group Members incur any losses, costs or expenses (“Special Losses”) due to violation of laws and
regulations and the following matters, and the Target Company and other Group Members have failed to
disclose such matters to the Investors in the disclosure letter set forth in Exhibit 4, upon written request by
the Investors, the NIO Parties shall pay the Target Company or the Group Members an amount equal to the
Special Losses in cash within ten (10) business days from the date on which the Investors give a written
notice so as to restore the Target Company or the Group Members to the status as if such matters have not
occurred:
7.2.1 Any tax compliance issues (including but not limited to tax declaration and payment issues,
individual income tax withholding issues, tax preference issues and financial subsidy issues) of the
Group Members prior to the Closing Date, which cause the Group Members to be ordered to pay
any outstanding taxes, refund the financial subsidies, pay the overdue fines and be imposed on
administrative penalty by the competent governmental departments, or cause the Group Members
to incur other losses;
7.2.2 Any compliance issues of the social insurance and housing funds of the Group Members before the
Closing Date, and the labor contract disputes or other labor disputes that may exist between the
Group Members and the employees, which result in the Group Members being ordered to pay any
outstanding social insurance and the housing funds, pay the overdue fines, and be fined or subject
to the administrative penalties by the competent governmental departments, or cause the
37
Group Members to incur other losses;
7.2.3 Any other possible compliance issues of the Group Members prior to the Closing Date, resulting in
the Group Members being ordered to pay overdue fine, fines or administrative penalties by the
competent governmental departments, or cause the Group Members to incur other losses, and the
aforesaid circumstances have caused the material obstacles to the Qualified IPO of the Target
Company;
7.2.4 Any material or document submitted by the NIO Parties or the Group Members to any
Governmental Authority prior to the Closing Date is untrue, inaccurate or incomplete, as a result of
which the Group Members are required by relevant governmental Authorities to pay overdue fine,
penalty or administrative penalty and such circumstances have caused the material obstacle to the
Qualified IPO of the Target Company;
7.2.5 The entitlement to any tax preference or financial subsidy is attributed in whole or in part to any
irregular method, act, omission, fraud or circumvention, and the tax preference or financial subsidy
is required to be refunded;
7.2.6 Any asset losses incurred by the Group Members or any claims, demands or claims made by any
other party against the Group Members due to any dispute and encumbrance in the title of any
assets of the Group Members;
7.2.7 Loss caused by product quality problems of Group Members;
7.2.8 Group Members assume any responsibility, obligation or punishment for violating applicable laws
and regulations before the Closing Date;
7.2.9 Any losses, expenditures, expenses, asset impairments, fines or encumbrances suffered by the
Investors or Group Members, due to fines, litigation, arbitration and other disputes of any of Group
Members which exceed RMB 50 million and are not disclosed by the NIO Parties and/or the Group
Members;
7.2.10 The Target Company and the Group Members are subject to any administrative or criminal
penalties due to insufficient capital contribution, false capital contribution or withdrawal of capital
contribution and/or other legal defects on the part of the NIO Parties;
7.2.11 The Target Company and Group Members suffer any asset impairment, fine or other losses due to
the securities class action matters relating to NIO Inc.; and
7.2.12 Any of NIO Parties or the Target Company violates Article 2.4 hereof and cause losses to the
Investors.
8 POST CLOSING OBLIGATION
8.1 After the Closing, the Target Company and the NIO Parties undertake that, during the performance of this
Agreement, they shall have the obligation to promptly, completely and
38
accurately disclose to the Investors or the Directors appointed by the Investor with respect to their breaches
of the representations, warranties and covenants hereunder.
8.2 Unless acting in accordance with the Transaction Documents or with the prior written consent of the
Investors, the Target Company and the NIO Parties covenant that the Target Company and other Group
Members will at all times:
8.2.1 Carry out operations in the ordinary course, and maintain its normal business partnership with
customers to ensure that the goodwill and operations of the Group Members will not suffer from
the Material Adverse Effect after the Closing Date;
8.2.2 To regulate the related-party transactions, and none of the Affiliates of the Group Members shall
infringe upon the interests of the Group Members through related-party transactions and
dealings;
8.2.3 Perform executed contracts, agreements or other documents relating to the assets and business
of the Group Members in a timely manner;
8.2.4 Guarantee that the Target Company and other Group Members will continue to operate legally,
and obtain and maintain the governmental approval documents and other permits and consents
necessary for their operation; and
8.2.5 Promptly notify the Investor in writing of any event, fact, condition, change or other
circumstances that have had or may have Material Adverse Effect on the Target Company or
other Group Members.
8.3 After the Closing Date, the Target Company shall immediately establish a sound financial system, including
but not limited to financial internal control system, in order to ensure that the internal financial authorization
of the Company is clear, financial data and records are accurate and the financial treatment complies with
the PRC Laws and internal management rules of the Company; and prohibit use of personal accounts for
receipts and payments of the Company.
8.4 The NIO Parties warrant that when NIO Co., Ltd. and Anhui Jianghuai Automobile Group Limited by
Shares sign a supplementary agreement or renew the cooperation agreement for automobile manufacturing
cooperative factories, such agreement shall further specify the mechanism for loss subsidy, assumption and
recovery of product quality liability, and the adjustment mechanism for single vehicle processing costs.
8.5 NIO HK and NIO Energy Investment (Hubei) Co., Ltd. signed an Investment Agreement on the NIO
Energy Project with Wuhan East Lake Technology Development Zone Management Committee in May
2017, agreeing that Hubei Technology Investment Group Co., Ltd. which was designated as the main entity
by Wuhan East Lake Technology Development Zone Management Committee, shall invest RMB 384
million in Wuhan NIO Energy Development Zone Co., Ltd. in the form of equity investment which is debt
investment in nature, and agreeing on the project investment amount, project construction plan and relevant
supporting policies. After the Closing, the NIO Parties shall use its commercially reasonable efforts to
39
further discuss with Wuhan East Lake Technical Development Zone Management Committee regarding the
amendment and modification of the agreement based on actual situations then in order to ensure that the
foregoing circumstances will not have any material effect on the Qualified IPO of the Target Company. If
the NIO Parties violate relevant provisions in the aforesaid Investment Agreement on the NIO Energy
Project which causes losses upon the Target Company and/or the Group Members, the NIO Parties agree to
indemnify for the losses caused thereby, and if any indemnification shall be paid, such indemnification shall
be paid by the NIO Parties without any liability upon the Target Company.
8.6 Weiran (Jiangsu) Investment Co., Ltd. and the relevant investors have entered into the Capital Increase and
Subscription Agreement and the supplementary agreements thereof, setting forth competition and other
terms in connection with its investment in Jiangsu Weiran Automobile Co., Ltd. After the closing, the NIO
Parties guarantee that the business operations of Jiangsu Weiran Automobile Co., Ltd. and Weiran (Jiangsu)
Investment Co., Ltd. will not have a material adverse impact on the Qualified IPO of the Target Company. If
necessary, the assets related to the complete vehicle trial-manufacture of Jiangsu Weiran Automobile Co.,
Ltd. and Weiran (Jiangsu) Investment Co., Ltd. shall be promptly disposed of to ensure that the work
progress of the Qualified IPO of the Target Company will not be affected. Undertaking or explanation letter
including the term of no competition shall be issued in accordance with the requirements of the issuance and
listing review authority, and measures to resolve any competition issue, including but not limited to
deregistration, transfer of the aforesaid two companies, or termination of the competing business of the
aforesaid two companies, shall be taken. If the competition between Jiangsu Weiran Automobile Co., Ltd.
and Weiran (Jiangsu) Investment Co., Ltd. causes any direct economic losses to the Target Company, all
such direct economic losses shall be borne by NIO Inc. without any liability upon the Target Company.
8.7 The NIO Parties and the Target Company shall ensure that the related-party transactions between the Target
Company and its Group Members as one party and their Affiliates as the other party (including but not
limited to the research and development commissioned by NIO USA, Inc., sale of products and technology
license between relevant persons including Jiangsu Weiran Automobile Co., Ltd.) are fair, reasonable and
necessary and shall enter into formal transaction documents for the remaining related-party transactions
within one (1) month after the Closing Date. The NIO Parties and the Target Company shall ensure that if
there is any key intellectual property related to the Main Business of the Target Company and Group
Members that is created in the research and development commission related-party transactions, the
ownership arrangement of such key intellectual property shall be in line with the fairness and
reasonableness principle, and the NIO Parties and the Target Company shall ensure that related-party
transactions regarding any key intellectual property related to the Main Business of the Target Company and
Group Members in the related-party transaction will not have material impact on the Qualified IPO of the
Target Company in China's A-share market. If necessary, rectification shall be carried out in line with
relevant requirements of the issuance and listing review authority to ensure that the Target Company's
Qualified IPO can be conducted smoothly.
8.8 Within three (3) months from the Closing Date, the NIO Parties and the Target Company
40
shall complete the dismantling of the existing VIE structure of Shanghai NIO Automotive New Energy Co.,
Ltd. and shall clean up the relevant historical payments involved in such VIE structure. Within twelve (12)
months as from the Closing Date, the NIO Parties and the Target Company shall specify the treatment of the
existing VIE structure of Beijing NIO Network Technology Co., Ltd. and the relevant historical payments;
provided, however, that they shall ensure that the relevant VIE structure of Beijing NIO Network
Technology Co., Ltd. will not have any material adverse effect on the Qualified IPO of the Target Company.
8.9 The NIO Parties warrant to procure by December 31, 2020 that appointment of the directors and officers of
the NIO Parties and the Target Company has been adjusted to ensure the personnel independence of the
Target Company, that the Core Management Team have entered into employment agreement with the Target
Company or Group Members and hold the position in fact, that the composition of the directors and officers
of the Target Company is competent for the business operation of the Target Company, and has sufficient
decision-making capacity and authority; and that the arrangement of the directors and the officers of the
Target Company shall meet the examination and approval requirements for the Qualified IPO of the Target
Company in China’s A-share market.
8.10 With regard to deficiency in the property rights, use purposes, registration procedures, etc. of the properties
being used by the Target Company and Group Members (if any), the NIO Parties shall make due correction
of such deficiency after the Closing to prevent occurrence of any Material Adverse Effect on the Target
Company’s Qualified IPO arising therefrom.
8.11 The NIO Parties undertake to disclose to Investors the progress of NIO Inc.’s existing securities class action
lawsuits, such as any new litigation, arbitration, administrative penalties, injunctions or other possible
actions against the NIO Parties which may have Material Adverse Effect on the Target Company and Group
Members, the NIO Parties shall promptly inform the Investors of such event after its occurrence.
8.12 The Target Company and the NIO Parties undertake that the ownership and exclusive rights of intellectual
property rights and other Restructure Assets other than Equity Contributions (see Exhibit 3 for details,
excluding intellectual property rights of NIO Co., Ltd.) shall be transferred to the Target Company within
one (1) year after the Closing, which means the Target Company shall become the owner or registrant of all
such Restructure Assets.
8.13 The Target Company and the NIO Parties undertake that the Target Company shall convene the board of
directors and shareholders' meeting as soon as possible after the Closing Date, and review and approve the
appointment of the Core Management Team such as CEO and CFO of the Target Company, formation of
the Target Company's organizational structure and basic management system, and delineation of
management responsibilities and authorities.
8.14 The Target Company and the NIO Parties undertake to change the name of the Target Company to a name
containing the word “NIO China” and registered the name so changed with the AMR within ninety (90)
business days after the Closing.
8.15 The Target Company and the NIO Parties undertake to complete the selection and
41
engagement of relevant intermediaries for listing on the domestic market of the Target Company by
December 31, 2020, including but not limited to sponsors, lawyers and auditors.
9 TRANSACTION EXPENSES
9.1 For the purpose of this Transaction, the lawyers, accountants and other intermediaries engaged by the
Investors shall carry out comprehensive business, legal and financial due diligence on the assets, business
and other aspects of the Group Members at the expense of the Investors.
9.2 Unless otherwise specified in this Agreement or other Transaction Documents, each of the Target Company,
the NIO Parties and the Investors shall be solely responsible for all transaction expenses and taxes and fees
incurred by it as a result of the Transaction.
10 CONFIDENTIALITY
10.1 Unless with the prior written consent of the other Parties or as otherwise provided by this Agreement and
Laws, none of the Parties shall, whether directly or indirectly, disclose, use, or permit its directors,
employees, representatives, agents, consultants and counsels to disclose or use, the following Confidential
Information:
10.1.1 Existence of the Transaction Documents and information relevant to this Transaction;
10.1.2 Any discussions between the Parties regarding the execution and performance of this
Agreement, the terms and conditions of this Agreement or any other information relating to this
Transaction;
10.1.3 Any confidential or proprietary information relating to the other Parties or their Affiliates
obtained by any Party in the course of the negotiation of the Transaction with the other Parties or
the performance of this Agreement.
10.2 The Parties shall be exempted from the confidentiality obligations hereunder in the following circumstances:
10.2.1 Any confidential information may be disclosed to the officers, representatives, agents,
consultants, counsels and other persons who need to know such confidential information for the
purpose of participation of any Party in this Transaction. Subject to such disclosure, such
officers, representatives, agents, consultants, counsels and other persons shall be obliged to keep
the Confidential Information confidential equivalent to the Confidential Information hereunder;
and
10.2.2 If any Confidential Information has entered the public domain through no fault of any Party,
such Party shall no longer be subject to the confidentiality obligations with respect to such
Confidential Information;
42
10.2.3 The relevant information that has been publicly disclosed or that has been disclosed according to
the laws, regulations and/or the requirements of the securities regulatory departments, stock
exchanges and the administrative organs that have handled the record-filing or examination and
approval.
10.3 The Parties hereto mutually agree that any breach of the confidentiality obligation hereunder by any Party
shall constitute a breach by such Party and the non- breaching Party shall have the right to request the
breaching Party to bear liabilities for breach of contract and initiate legal proceedings to request the
cessation of such breach or the adoption of other remedies so as to prevent further breach.
10.4 The confidentiality obligation set forth in this article shall not be terminated by termination of this
Agreement.
11 FORCE MAJEURE
11.1 If a Party encounters earthquake, typhoon, flood, fire, military action, strike, riot, war or other unforeseeable
Force Majeure Event beyond the reasonable control of such Party (each, a “Force Majeure Event”) and
materially impedes its performance of this Agreement, such Party shall immediately notify the other Parties
without undue delay, and provide the other Parties with detailed information and documentary evidence in
respect of such event to explain the reason for its inability to perform or delay in performing all or part of
the obligations hereunder within fifteen (15) days after the notice is given. The Parties shall consult with
each other to seek and implement a solution acceptable to both Parties.
11.2 If an Force Majeure Event occurs, the Party affected by such event shall not be responsible for any damage,
increased costs or losses which any of the other Parties may sustain by reason of the failure or delay of
performance of its obligations under this Agreement and such failure or delay of performance of this
Agreement shall not be deemed a breach of this Agreement. The Party encountering the Force Majeure
Event shall take appropriate means to minimize or mitigate the effect of the Force Majeure Event and, as
soon as practicably possible, attempt to resume performance of the obligation delayed or prevented by the
Force Majeure Event; otherwise, the Party encountering the Force Majeure Event shall not be entitled to
claim delay or relief for its obligations to the extent of the impact.
11.3 In the event that an Force Majeure Event or the effect thereof prevents one or all Parties from performing all
or part of its or their obligations under this Agreement for more than three (3) months, the party not affected
by the Force Majeure Event shall have the right to request termination of this Agreement, release of part of
its or their obligations under this Agreement, or delay the performance of this Agreement.
12 GOVERNING LAW AND DISPUTE RESOLUTION
12.1 The formation of this Agreement, its validity, interpretation, implementation and resolution of any disputes
arising hereunder shall be governed by and construed in accordance with the laws of the PRC.
43
12.2 All disputes arising from the implementation of this Agreement or in connection with this Agreement shall
be resolved by the Parties through friendly consultation. Any dispute that cannot be resolved through
consultation within thirty (30) days after the occurrence of such dispute, any Party shall have the right to
submit the dispute to the China International Economic and Trade Arbitration Commission located in
Beijing for arbitration in accordance with its arbitration rules then in effect. The arbitration tribunal shall
consist of three (3) arbitrators to be appointed in accordance with the arbitration rules. The applicant shall
appoint one (1) arbitrator, the respondent shall appoint one (1) arbitrator, and the third (3rd) arbitrator shall
be appointed by the first two arbitrators through consultation or appointed by the China International
Economic and Trade Arbitration Commission. The arbitration proceedings shall be conducted in Chinese.
The arbitration award shall be final and binding on all Parties.
12.3 During the period when a Dispute is being resolved, the Parties shall continue to have their respective rights
and perform their obligations under this Agreement other than those involved in the Dispute.
13 EFFECTIVENESS, MODIFICATION AND TERMINATION
13.1 Unless otherwise provided hereunder, this Agreement shall become effective upon signature by the legal
representative or authorized representative of each Party and affixation of company seal by each Party.
13.2 Contents related to the capital increase by Hefei Investor shall be implemented after approval by the State-
owned Assets Supervision and Administration Agency of Hefei City. Contents related to the capital increase
by Anhui High-tech Co. shall be implemented after the relevant state-owned assets approval procedures
have been completed.
13.3 If Hefei Investor and Anhui High-tech Co. request to make change to this Agreement in connection with
effecting the procedures necessary to obtain state-owned assets approval, the Parties agree to enter into a
supplement hereto. If there is any inconsistency, such supplement shall prevail.
13.4 This Agreement may be amended or modified by the Parties through mutual consultation. Any amendment
or modification shall be made in writing and become effective upon execution by the Parties hereto.
13.5 If any term of this Agreement is found, held or deemed to be illegal, invalid or unenforceable by an arbitral
body, judicial authority or administrative authority, the validity, legality and enforceability of the remaining
terms shall not be affected or impaired thereby. The Parties agree to amend this Agreement or execute a
supplementary agreement appropriately as the case may be through consultation in good faith to restore the
original intent of this Agreement and the rights or obligations enjoyed or performed by the Parties as
originally set forth herein.
13.6 If relevant terms hereof are amended due to change of relevant laws, regulations or policies or as required
by governmental Authorities, the Parties shall use their respective best efforts to unanimously accept such
amendment and enter into relevant agreements to restore and
44
confirm the rights or obligations that shall be enjoyed or performed by the Parties hereunder in compliance
with the requirements of relevant laws, regulations or policies.
13.7 This Agreement may be terminated by the following means:
13.7.1 The Parties agree to terminate this Agreement in writing and determine the termination effective
date;
13.7.2 Prior to the Closing Date, the Investors shall have the right to terminate this Agreement by
giving a written notice to the other Parties in the event of the occurrence of any of the following
circumstances and shall specify the effective date of such termination in the notice:
(1) The statements, representations or warranties of the Target Company or the NIO Parties are
untrue or have omission in material aspects;
(2) The Target Company or any NIO Party breaches any covenant, statement, representation,
warranty, covenant or any other obligation hereunder, and fails to take effective remedies
satisfactory to the Investors within twenty (20) business days after the Investor gives a written
notice of such breach;
(3) If this Capital Increase in Cash and Equity Contribution fail to be completed within sixty (60)
business days as from the Execution Date hereof or another date agreed by the Parties through
consultation (which is the later of the AMR Re-registration Completion Date and the Closing
Date), because any of the Investor’s closing conditions is proved to be unfulfilled or not
waived by the Investors.
13.8 Effect of Termination.
13.8.1 After this Agreement is terminated in accordance with the above Article 13.5.1, unless otherwise
agreed upon by the Parties, each Party hereto shall refund the considerations received from the
other Parties hereunder based on the principles of fairness, reasonableness, honesty and
credibility and try to restore to the status prior to the execution of this Agreement.
13.8.2 If any of the Investors terminates this Agreement in accordance with the above Article 13.7.2,
and if such Investor has paid the capital increase price to the Target Company then, the Target
Company shall return the capital increase price in full to the Investor and pay the Investor
interest calculated at the interest rate of 8.5% per year (compounded annually). Such interest
shall accrue from the actual payment date of each installment of the Capital Increase Price. If
such interest cannot make up all losses incurred by such Investor, the Target Company shall
make up the same to the Investor. The NIO Parties shall bear joint and several liability for the
return of the above Capital Increase Price and interest accrued thereon.
13.8.3 After termination of this Agreement, all rights and obligations of the Parties
45
hereunder shall terminate. The termination of this Agreement shall not affect the non-defaulting
party’s right to request the defaulting party to pay liquidated damages and compensate for losses.
14 NOTICES AND DELIVERY
14.1 During the term of this Agreement, if the performance of this Agreement is affected due to the change of
laws, regulations and policies, or due to any Party’s loss of its qualification and/or ability to perform this
Agreement, such Party shall assume the obligation to notify the other Parties within a reasonable period of
time.
14.2 The Parties agree that any notice relating to this Agreement shall only be effective if it is delivered in
writing. Delivery in written forms include but are not limited to delivery by courier, mail and email. Any
such notice shall be deemed to have been delivered: (a) by courier or personal delivery, on the date it is
received by the recipient; (b) by registered or certified mail, seven (7) business days after it is sent; and (c)
by e-mail, immediately after the e-mail is successfully sent. Notices shall be deemed effectively given to the
following places or to the following e-mail boxes:
SDIC
Contact: DU Shuo
Mailing Address: [***]
Contact No.: [***]
Email: [***]
Anhui High-tech Co.
Contact: LIU Jingran
Mailing Address: [***]
Contact No.: [***]
Email: [***]
Hefei Construction Co.
Contact: XU Jing
Mailing Address: [***]
Contact No.: [***]
Email: [***]
46
The NIO Parties
Contact: LI Bin
Mailing Address: [***]
Contact No.: [***]
Email: [***]
The Company
Contact: LI Bin
Mailing Address: [***]
Contact No.: [***]
Email: [***]
14.3 If any Party changes the above mailing address or contact information (the “Changing Party”), it shall
notify the other Party within seven (7) days after the occurrence of such change. If the Changing Party fails
to notify the other Party of the same in a timely manner, it shall bear the losses arising from such failure.
15 MISCELLANEOUS
15.1 This Agreement, other Transaction Documents and the exhibits attached hereto shall constitute the entire
agreement of the Parties with respect to this Transaction and supersede any prior agreement, letter of intent,
memorandum of understanding, representations or other obligations (whether written or oral, including
various forms of communication) of the Parties with respect to this Transaction and this Agreement
(including amended or modified agreements or amendments thereto, and the other Transaction Documents)
contains the only and entire agreement of the Parties with respect to the matters hereunder.
15.2 The Exhibits hereto shall be an integral part of this Agreement and shall be supplemental to and have the
same legal effect as the text hereof.
15.3 Subject to the relevant provisions under this Agreement and the Shareholders Agreement, SDIC, Anhui
High-tech Co. and the Hefei Investor shall have the right to transfer all or part of their rights, interests and
obligations under this Agreement to their Affiliates or third parties agreed by the NIO Parties. The relevant
transferee shall acknowledge and agree to the entire contents of this Agreement, and shall re-sign this
agreement with other Parties or sign relevant supplementary agreements or joinder agreements to confirm
their rights and obligations. Regarding the aforementioned transfer, the other Parties to this Agreement
hereby waive their rights of first refusal and any other priority rights that they may have in accordance with
applicable PRC laws, this Agreement, the Shareholders Agreement, Target Company's Articles of
Association, or any other cause.
47
15.4 The Investors’ implementation of this Transaction does not authorize its use of any trademark, trade name,
service mark or logo (or any abbreviation or imitation thereof, including, without limitation, “SDIC”,“SDIC
Merchants” and “SDIC”) of the Investors or their Affiliates. Without the prior written consent of the
Investors, the Target Company and the other Group Members, the NIO Parties and its Affiliates shall not
directly or indirectly represent that any product or service provided by them has been approved or
acknowledged by the Investors or their Affiliates.
15.5 For the purpose of providing the Investors with all the rights, powers and remedies granted hereunder, upon
reasonable request of the Investors from time to time, the other Parties shall take all such further acts and
actions or cause all such further acts and actions to be taken and execute or procure the execution of all such
further documents.
15.6 If any provision in this Agreement is held to be illegal, invalid or unenforceable, in whole or in part,
the legality, validity and enforceability of the remainder of this Agreement shall not be affected. The
Parties shall use their best reasonable efforts in order to substitute the invalid or unenforceable
provision with a valid and enforceable substitute provision that comes as close as possible to the
invalid or unenforceable provision in terms of its intended meaning and that ensures that the
objectives of the invalid or unenforceable provision are as close as possible.
15.7 No failure or delay of any Party to exercise and/or enjoy its rights and/or benefits hereunder shall be
deemed as a waiver of such rights and/or benefits, nor shall any partial exercise of such rights and/or
benefits preclude any future exercise of such rights and/or benefits.
15.8 In the event that a separate agreement is required to be executed in accordance with the form provided by
the governmental Authorities for the purpose of requesting a governmental authority to perform of a certain
act in connection with the Transaction contemplated by this Agreement, this Agreement shall have full
priority over the said separate agreement and such agreement may only be used to request performance of
such specific act from the governmental authority and shall not be used to establish and prove the rights and
obligations of the relevant Parties with respect to the matters stipulated by this Agreement.
15.9 Independence
15.9.1 The Parties agree that each Investor shall have rights and obligations to them respectively in
connection with this Agreement as the Investors and the obligations and liabilities of each
Investor under this Agreement and other Transaction Documents shall be separate but not joint
and several.
15.9.2 If any dispute arises between any of the Investors and any other Party in connection with the
interpretation of this Agreement or other Transaction Documents, the rights and obligations of
such Investor in connection with the matters referred to in this Agreement and other Transaction
Documents to which the Investors relate shall be interpreted separately. The execution,
effectiveness, performance, termination or dispute of this Agreement and the other Transaction
Documents by an Investor will not have any adverse effect on the execution,
48
effectiveness, performance, rescission and dispute of this Agreement and the other Parties.
15.9.3 The waiver of rights or termination of this Agreement by each Investor shall be valid only
within the scope of rights and obligations of such Investor and shall not constitute a waiver of
rights or termination of this Agreement by any other Party.
15.10 This Agreement is written in the Chinese language in ten (10) originals with the same legal effect. Each
Party shall hold one (1) counterpart.
The Parties hereby execute this Agreement as of the date first written above.
[SIGNATURE PAGES FOLLOW]
49
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
Exhibit 4.36
CMG-SDIC Capital Management Co., Ltd.
(Company Chop)
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
50
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
Anhui Provincial Emerging Industry Investment Co., Ltd.
(Company Chop)
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
51
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
HeFei City Construction and Investment Holding (Group) Co., Ltd.
(Company Chop)
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
52
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
NIO Inc.
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
53
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
NIO Nextev Limited
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
54
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
NIO User Enterprise Limited
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
55
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
NIO Power Express Limited
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
56
(This is the Signature Page to the NIO China Investment Agreement)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written
above.
NIO (Anhui) Holding Co., Ltd
(Company Chop)
/s/ Authorized Signatory
By:
Name: Authorized Signatory
Title:
57
Exhibit 4.36
NIO CHINA SHAREHOLDERS AGREEMENT
BY AND AMONG
CMG-SDIC CAPITAL MANAGEMENT CO., LTD.
ANHUI PROVINCIAL EMERGING INDUSTRY INVESTMENT CO., LTD.
HEFEI CITY CONSTRUCTION AND INVESTMENT HOLDING (GROUP) CO., LTD.
AND
NIO INC.
NIO NEXTEV LIMITED
NIO USER ENTERPRISE LIMITED
NIO POWER EXPRESS LIMITED
AND
NIO (ANHUI) HOLDING CO., LTD.
Hefei, China
Date: April 2020
TABLE OF CONTENTS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
DEFINITIONS AND INTERPRETATIONS
SHAREHOLDERS OF THE TARGET COMPANY
OVERVIEW OF THE TARGET COMPANY
PURPOSE AND SCOPE OF BUSINESS OF THE TARGET COMPANY
REGISTERED CAPITAL
PROTECTIVE RIGHTS
RIGHT OF FIRST REFUSAL
RIGHT OF CO-SALE
PRE-EMPTIVE RIGHTS
VALUE ASSURANCE AND ANTI-DILUTION RIGHTS
REDEMPTION RIGHT
LIQUIDATION PREFERENCE
DRAG-ALONG RIGHT
RESTRICTION ON EQUITY TRANSFER
EQUITY INCENTIVE
INFORMATION RIGHTS AND INSECTION RIGHTS
RIGHT TO PARTICIPATE IN RESTRUCTURING
UNDERTAKINGS AND CONVANTS
CORPORATE GOVERNANCE
TAXES, FINANCE, AUDIT AND DISTRIBUTION OF PROFIT
DURATION AND TERMINATION OF THE TARGET COMPANY
FORCE MAJEURE
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
CONFIDENTIALITY
GOVERNING LAW AND DISPUTE RESOLUTION
EFFECTIVENESS, MODIFICATION AND VALIDITY
3
9
10
11
12
15
19
21
22
24
26
30
32
33
34
35
36
36
38
44
45
46
47
48
49
50
BREACH
NOTICES AND DELIVERY
27
28
29 MISCELLANEOUS
Exhibit I: Joinder Agreement
Exhibit II: List of the Core Management Team
Exhibit III: List of the Competitive Entities where the Actual Controller holds Interest
Exhibit IV: List of the NIO Parties Competitors
50
51
52
64
65
66
70
This NIO China Shareholders Agreement (this “Agreement”) dated as of April 29, 2020 (the “Execution Date”)
is made by and among:
1. CMG-SDIC Capital Management Co., Ltd., a limited liability company duly established and existing under
the Laws of the People’s Republic of China (“PRC”, for the purpose of this Agreement, excluding the Hong
Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan), holding a
business license with unified social credit code of 91130600MA094UG35F, and with its legal representative
being GAO Guohua, and registered office at West Dong Ao Wei Road, Rongcheng County, Baoding City,
Hebei Province (“SDIC”);
2. Anhui Provincial Emerging Industry Investment Co., Ltd., a limited liability company duly established and
existing under the Laws of the PRC, holding a business license with unified social credit code of
9134000032543101X1, and with its legal representative being HUANG Linmu and registered address at
Room 301, Innovation Building, No. 860 West Wangjiang Road, High-tech District, Hefei City, Anhui
Province (“Anhui High-tech Co.”);
3. HeFei City Construction and Investment Holding (Group) Co., Ltd., a limited liability company duly
established and existing under the Laws of the PRC, holding a business license with unified social credit code
of 91340100790122917R, and with its legal representative being LI Hongzhuo and registered address at No.
229 Wuhan road, Binhu New District, Hefei City, Anhui Province (“Hefei Construction Co.” or the “Hefei
Investor”; Hefei Investor together with SDIC and Anhui High-tech Co., collectively referred to as the
“Investors”);
4. NIO Inc., a company duly established and validly existing under the Laws of the Cayman Islands, with its
registered address at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, and is
currently listed on the New York Stock Exchange of the United States (NYSE: NIO) (“NIO Inc.”);
5. NIO Nextev Limited, a private company limited by shares duly organized and validly existing under the Laws
of the Hong Kong of the PRC, with its company number of 2199750, and registered office at 30 Floor,
Jardine House, Once Connaught Place, Central, Hong Kong (“NIO HK”);
th
6. NIO User Enterprise Limited, a private company limited by shares duly organized and validly existing under
the laws of the Hong Kong of the PRC, with its company number of 2487823 and registered office at 30
Floor, Jardine House, Once Connaught Place, Central, Hong Kong (“UE HK”);
th
7. NIO Power Express Limited, a private company limited by shares duly organized and validly
existing under the Laws of the Hong Kong of the PRC, with its company number of 2472480 and registered
office at 30 Floor, Jardine House, Once Connaught Place, Central, Hong Kong (“PE HK”, together with
NIO HK and UE HK, the “NIO HK Holding Platforms”; the NIO HK Holding Platforms, together with NIO
Inc., the “NIO Parties”); and
th
8. NIO (Anhui) Holding Co., Ltd., a limited liability company duly established and duly existing under the Laws
of the PRC, holds a business license with unified social credit code of 91340111MA2RAD3M4R, and with its
legal representative being WANG Zhenglin and registered address at West Susong Road and North Shenzhen
Road, Economic and Technological Development District, Hefei City, Anhui Province (the “Target
Company” or the “Company”).
Each of the above parties shall be referred to individually as a “Party” and collectively as the “Parties”.
WHEREAS:
1. As a well-known company prducing smart electric motor vehicles, NIO Inc., with its headquarters in China,
is listed on the New York Stock Exchange of the United States, and indirectly holds equity interests in the
domestic operating entities through the NIO HK Holding Platforms. The domestic operating entities of NIO
Inc. mainly include NIO Co., Ltd., Shanghai NIO Sales and Services Co., Ltd. and NIO Energy Investment
(Hubei) Co., Ltd. and other companies indirectly controlled by NIO Inc. under the aforesaid PRC domestic
operating entities, and mainly engage in the Main Businesses (as defined below). As of the Execution Date,
the internal equity structure of NIO Inc. is set forth in Exhibit I to the Investment Agreement.
2. In accordance with the Investment Agreement in respect of NIO China entered into by and among the
Investors, the NIO Parties and the Target Company dated April 29, 2020 (the “Investment Agreement”), the
Parties agree that the Investors may subscribe for RMB 1,223,776,223.79 newly increased registered capital
of the Target Company with RMB 7 billion (“Investors Capital Increase Price”) in accordance with the
Investment Agreement and obtain 24.10% of equity interests in the Target Company on a fully diluted basis
(i.e., any existing shareholder or any other party has exercised its subscription right, convertible loan or other
rights convertible into any equity interests in the Target Company) after the completion of the capital
increase. In the meantime, the Parties agree that, in accordance with the Investment Agreement, the NIO
Parties shall subscribe RMB 3,839,997,517.47 of the Target Company’s newly increased registered capital
through asset contribution with the value of RMB 17,704,785,800.00 and RMB 4.26 billion (equivalent to
USD 602.1 million) in cash
2 / 65
(collectively, the “NIO Parties Capital Increase Price”, together with the Investors Capital Increase Price,
the “Capital Increase Price”).
3. As one of the conditions precedent to the payment of the Investors Capital Increase Price by the Investors,
the NIO Parties and the Target Company shall enter into this Agreement with the Investors. The Parties
intend to make an agreement on the governance of the Target Company, the rights and obligations of the
Parties and other matters applicable after the completion of this Transaction through this Agreement.
NOW, THEREFORE, based on equality and mutual benefit and in accordance with the Contract Law of the
PRC, the Company Law of the PRC and other relevant PRC Laws and Regulations, with respect to the governance
of the Target Company and the rights and obligations of the Parties and other matters, the Parties hereby agree as
follows:
1.1 Unless otherwise required by the context, the following terms shall have the meanings ascribed to them:
1 DEFINITIONS AND INTERPRETATIONS
This Transaction
Price of this Capital Increase
in Cash
means
means
this Capital Increase in Cash and the asset contribution in
accordance with the Investment Agreement
the price at which the Investors and the NIO Parties subscribe for
the registered capital of the Target Company in this Capital Increase
in Cash, i.e., RMB 5.72 for one (1) Yuan registered capital; the
price shall be determined based on the total value of the Target
Company and the restructured assets that shall be injected by the
NIO Parties into the Target Company in accordance with the
Investment Agreement (including without limitation, all equity
interests in NIO Co., Ltd., Shanghai NIO Sales and Services Co.,
Ltd. and NIO Energy Investment (Hubei) Co., Ltd., which shall be
injected by the NIO HK Holding Platforms into the Target
Company, and the other restructured assets that shall be injected d
by the NIO Parties into the Target Company), which shall be 85%
of the average of the market value of NIO Inc. for thirty (30)
3 / 65
public trading days prior to April 21, 2020 published by the New
York Stock Exchange, i.e., RMB 17.7678 billion
This Capital Increase in
Cash
means
capital increase in cash in the Target Company by the Investors and
the NIO Parties in accordance with the Investment Agreement and
other relevant documents
This Agreement
means
this NIO China Shareholders Agreement and the exhibits or
schedules hereto
Changing Party
means
the definition in Clause 28.2 hereof
Force Majeure
Restructuring
means
the definition in Clause 22.1 hereof
means
the definition in Clause 17 hereof
Laws/Laws and Regulation
means
applicable laws, regulations, departmental rules, local regulations,
local rules, normative documents, treaties concluded, judgments or
orders of any Governmental Authority
Co-Sale Feedback Period
means
the definition in Clause 8.1.1 hereof
Shareholders
means
the definition in Clause 2.1 hereof
Core Management Team
means
the personnel specified in Exhibit II hereof
Redemption Price
means
the definition in Clause 11.2 hereof
Redemption Notice
means
the definition in Clause 11.4.2 hereof
Joinder Agreement
means
the definition in Clause 14.2 hereof
Competing Business
means
the definition in Clause 18.4 hereof
Transaction Documents
means
the articles of
the Investment Agreement,
this Agreement,
association of the Target Company and other agreements or
documents entered into by the Parties in connection with the
transactions contemplated by the Investment Agreement.
4 / 65
Group Members
means
the completion of
the equity capital contribution
in
upon
accordance with the Investment Agreement, the Target Company
and enterprises directly or indirectly controlled by the Target
Company including without limitation through equity investment or
by contract
Controlling Shareholders
means
NIO Inc. and the NIO HK Holding Platforms
Drag-along Party
means
the definition in Clause 13.1 hereof
Drag-along Transaction
means
the definition in Clause 13.1.2 hereof
Drag-along Asset
Transaction
means
the definition in Clause 13.1.2 hereof
Drag-along Notice
means
the definition in Clause 13.1 hereof
US Dollar/USD
means
the lawful currency of the United States of America
Target Company
means
NIO (Anhui) Holding Co., Ltd.
Holdco of the Target
Company
means
the person who directly or indirectly holds equity interest/shares in
the Target Company
Term of the Target Company
means
the definition in Clause 21.1 hereof
Proposed Transfer
means
the definition in Clause 7.1 hereof
Proposed Capital Increase
means
the definition in Clause 9.1 hereof
Platform
Term
means
the definition in Clause 17 hereof
means
the definition in Clause 21.1 hereof
Execution Date
means
April 29, 2020
Qualified IPO
means
the approval/examination/registration/filing of the application for
initial public offering and listing of the Target Company by the
CSRC of the PRC, Shanghai/Shenzhen Stock Exchange or other
overseas securities issuance examination authority recognized by
all Parties, and the initial public offering and listing of shares
5 / 65
of the Target Company on the securities exchange market
recognized by all Parties (for the avoidance of doubt, in no event
shall a Qualified IPO include the listing on the PRC National
Equities Exchange and Quotations System)
Renminbi/RMB
means
the lawful currency of the PRC
Anhui High-tech Co. Capital
Increase Price
means
the definition in Clause 2.1.1.1 of the Investment Agreement
Remaining Property
means
the definition in Clause 12.1 hereof
Actual Controller
means
LI Bin, a PRC citizen, with his
ID card number of
110108197406221836 and address at No. 901, Gate 2, Building 8,
Yard 166, South Xiangshan Road, Shijingshan District, Beijing
Deemed Liquidation Event
means
the definition in Clause 12.5 hereof
Transferee
Investors
means
the definition in Clause 7.1 hereof
means
SDIC, Anhui High-tech Co., Hefei Construction Co. and/or actual
investing entity designated by the aforesaid persons
Investors Subscription Price
means
the definition in Clause 10.1.2 hereof
Investors Capital Increase
Price
Guaranteed Minimum
Return on Investment
means
the definition in Clause 2.1.1 of the Investment Agreement
means
the definition in Clause 12.1 hereof
Capital Increase Price
means
the definition in Clause 2.1.2 of the Investment Agreement
Investment Agreement
means
the Investment Agreement in respect to NIO (Anhui) Holding Co.,
Ltd. and the exhibits or schedules thereto
Equity Interests to be
Purchased by NIO
NIO Parties Capital Increase
Price
means
the definition in Clause 11.4.1 hereof
means
the definition in Clause 2.1.1.2 of the Investment Agreement
6 / 65
NIO Capital Increase Right
means
the definition in Clause 9.2 hereof
Hong Kong
means
the Hong Kong Special Administrative Region of the PRC
Material or Major
means
any act or circumstance which may result in any single or
accumulative losses of more than RMB 50 million suffered by the
Investors
Preferential Distribution
means
the definition in Clause 12.1 hereof
ROFR Holder
means
the definition in Clause 7.1 hereof
Yuan
means
Renminbi yuan (unless the context otherwise requires)
Main Business
means
(i) Manufacturing, sale, purchase, after-sale repair and other
supporting services of finished new-energy automobiles, supporting
products
for energy sources, parts, materials, components,
machinery and equipment, as well as the technical development,
technical services, technical transfer and technical consulting
services relating thereto; (ii) Investing in accordance with the law in
the fields in which foreign investment is allowed by the State; (iii)
Providing enterprises with such services as technical support in the
process of production, sale and market development, staff training
and internal personnel management of enterprises, and assisting the
enterprises
loans and providing guarantees; (iv)
Engaging in research and development of new products and high
technologies, transferring research and development achievements,
and providing corresponding technical services; (v) Providing
Investors with consulting services, and providing affiliated
companies with such consulting services as market information
related to investment and investment policies; and (vi) Wholesale,
commission
in seeking
7 / 65
agency and import and export of goods and technologies of
automobile parts
Capital Increase Feedback
Period
means
the definition in Clause 9.1.2 hereof
Capital Increase Notice
means
the definition in Clause 9.1.1 hereof
Government Authority
means
Governmental Approval
means
any PRC or non-PRC international organization, national, state,
provincial, local, or other government, governmental, regulatory or
administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body
means any approval, authorization, consent, franchise, permit or
registration by any Governmental Authority, or any report, circular,
statement or other correspondences required to be filed with or
submitted to any Governmental Authority
Complete Sale
means
the definition in Clause 13.1 hereof
Transfer Feedback Period
means
the definition in Clause 7.1.2 hereof
Transferring Shareholders
means
the definition in Clause 7.1 hereof
Transfer Notice
means
the definition in Clause 7.1.1 hereof
PRC
CSRC
means
the definition in recitals hereof
means
the China Securities Regulatory Commission
1.2 Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to
them in the Investment Agreement, unless otherwise required by the context of this Agreement.
1.3 “Section”, “Clause” and “Exhibits” mean the clause and section of, and the Exhibit to, this Agreement,
respectively. Any reference to “this Agreement” shall be construed to include its exhibits.
1.4 “Include”, “includes” or “including” and similar words are not intended to be restrictive and shall be
construed as if followed by the words “without limitation”.
8 / 65
1.5 The headings in this Agreement are inserted for the convenience of reference only and shall not be taken
into consideration in the interpretation or construction of this Agreement.
1.6 Any reference to this Agreement or any other agreement shall be construed to include this Agreement or
such other agreement as may be amended, modified, supplemented or novated.
2 SHAREHOLDERS OF THE TARGET COMPANY
2.1 Shareholders of the Target Company
The shareholders of the Target Company (the “Shareholders”) are as follows:
NIO HK: NIO Nextev Limited, a company established and existing under the Laws of
Hong Kong, the PRC, with its office at 30 Floor, Jardine House, Once
Connaught Place, Central, Hong Kong.
th
Authorized Representative: LI Bin
UE HK: NIO User Enterprise Limited, a company established and existing under the
Laws of Hong Kong, the PRC, with its office at 30 Floor, Jardine House, Once
Connaught Place, Central, Hong Kong.
th
Authorized Representative: LI Bin
PE HK: NIO Power Express Limited, a company established and existing under the
Laws of Hong Kong, the PRC, with its office at 30 Floor, Jardine House, Once
Connaught Place, Central, Hong Kong.
th
Authorized Representative: LI Bin
SDIC: CMG-SDIC Capital Management Co., Ltd., a limited liability company duly
established and existing under the Laws of the PRC, holds a business license with
unified social credit code of 91130600MA094UG35F, and with registered office
at West Dong Ao Wei Road, Rongcheng County, Baoding City, Hebei Province.
Legal Representative: GAO Guohua
Anhui High-tech Co.: Anhui Provincial Emerging Industry Investment Co., Ltd., a limited liability
company duly established and existing under
9 / 65
the Laws of the PRC, holds a business license with unified social credit code of
9134000032543101X1, and with its registered office at Room 301, Innovation
Building, No. 860 West Wangjiang Road, High-tech District, Hefei City, Anhui
Province.
Legal Representative: HUANG Linmu
Hefei Investor: HeFei City Construction and Investment Holding (Group) Co., Ltd., a
limited liability company duly established and existing under the Laws of the
license with unified social credit code of
PRC, holds a business
91340100790122917R, and with its registered office at No. 229 Wuhan road,
Binhu New District, Hefei City, Anhui Province.
Legal Representative: LI Hongzhuo
3 OVERVIEW OF THE TARGET COMPANY
3.1 Basic Information of the Target Company
3.1.1 In accordance with the applicable PRC Laws, the Shareholders agree to hold the equity interests
in the Target Company jointly pursuant to the terms and conditions of this Agreement.
3.1.2 The name of the Target Company in Chinese shall be “蔚来(安徽)控股有限公司”.
3.1.3 The name of the Target Company in English shall be “NIO (Anhui) Holding Co., Ltd.”.
3.1.4 The registered address of the Target Company shall be West Susong Road and North Shenzhen
Road, Economic and Technological Development District, Hefei City, Anhui Province.
3.2 Nature of the Target Company
The Target Company is a limited liability company with the status of an enterprise legal person. The
establishment of and conduct of all activities by the Target Company shall comply with the relevant
provisions of the PRC Laws. Its lawful rights and interests shall be protected by the PRC Laws.
3.3 Limited Liability
10 / 65
As the Target Company is a limited liability company under the PRC Laws, it shall be liable to its debts to
the extent of all of its assets. Under any circumstance, the liabilities and risks of each Shareholder of the
Target Company shall be limited to the amount of their respective contributions to the registered capital of
the Target Company expressly subscribed by it under Clause 5.1 below. Furthermore, none of the
Shareholders shall have liability whatsoever, jointly or severally, for any debts or obligations of the Target
Company.
4 PURPOSE AND SCOPE OF BUSINESS OF THE TARGET COMPANY
4.1 Purpose of the Target Company
The purposes of the Shareholders in jointly investing in the Target Company shall be as follows: the
Shareholders are committed to making the Target Company achieve good economic performance through
the operation and management of the business of the Target Company.
4.2 Scope of Business of the Target Company
The business scope of the Target Company is as follows: 1. Investment in the fields in which foreign
investors are allowed by the state; 2. Provision of the following services to the enterprise it invests in as
engaged by such investee in writing: (1) assisting or acting as agent for the enterprise it invests in to
purchase, from both home and abroad, any machinery equipment and office equipment for such enterprise’s
own use, or any material, components and parts needed in manufacturing, and to sell the products
manufactured by the enterprise it invests in at both home and abroad, and to provide after-sale service; (2)
providing the enterprise it invests in with technological support and other services in the process of as
manufacturing, sale and market development of product; (3) establishing scientific research and
development center or department within the territory of the PRC to engage in the research and
development of new products and high technologies, to transfer its research and development achievements,
and to provide corresponding technical services; (4) providing its investors with consulting services, and to
provide its affiliates with consulting services such as market information and investment policies in relation
to its investment; (5) undertaking the outsourcing services of its parent company and affiliates; (6)
providing technical development, technical services, technical transfer and technical consultation services
for finished new-energy automobiles and the relevant parts thereof; wholesale and commission agent
(excluding auction) of automobile parts; import and export of machinery equipment, automobile parts,
goods and technologies; sale, lease, designated driving, repair and maintenance (limited to the operations by
its branches) and after-sale service of automobiles; sale of automobile supplies and accessories, mechanical
equipment, general merchandise, clothing accessories, toys, beverages, gifts and crafts, second-hand
automobiles; operation of charging pile facilities; vehicle insurance agent; design, development, technical
services and consultation of vehicle-mounted system and software; automobile exhibition activities and
marketing; conference, exhibition and catering services; design, production, publication and agent of
domestic advertisements; production and sale of food; and import and export of commodities and
technologies of all kinds (excluding commodities or technology of which export or import
11 / 65
is forbidden or is limited to certain corporation as required by the state) (Business items subject to approval
in accordance with laws shall not be carried out unless approved by relevant authorities).
The business scope of the Target Companies shall be subject to the descriptions on the business license
issued by the Registration Authority.
5.1 Registered Capital
5 REGISTERED CAPITAL
The registered capital of the Target Company shall be RMB 5,074,773,741.26, of which:
5.1.1 NIO HK shall subscribe to RMB 2,539,030,264.99, representing 50.03% of the registered
capital of the Target Company, of which RMB 5,500,000 shall be contributed in cash in RMB
and has been paid up as of the Execution Date hereof; RMB 2,293,891,006.40 shall be
contributed in the form of equity interests in NIO Co., Ltd.; and the remaining RMB
239,639,258.59 shall be contributed in the form of intellectual property rights;
5.1.2 UE HK shall subscribe to RMB 1,252,136,433.60, representing 24.69% of the registered capital
of the Target Company, of which RMB 5,500,000 shall be contributed in cash in RMB and has
been paid up as of the Execution Date hereof; RMB 744,755,244.76 shall be contributed in cash
in USD equivalent; and the remaining RMB 501,881,188.84 shall be contributed in the form of
equity interests in Shanghai NIO Sales and Services Co., Ltd.;
5.1.3 PE HK shall subscribe to RMB 59,830,818.88, which shall be contributed in the form of equity
interests in NIO Energy Investment (Hubei) Co., Ltd., representing 1.18% of the registered
capital of the Target Company;
5.1.4 SDIC or its designated party shall subscribe to RMB 174,825,174.83, which shall be contributed
in cash in RMB, representing 3.44% of the registered capital of the Target Company;
5.1.5 Anhui High-tech Co. shall subscribe to RMB 174,825,174.83, which shall be contributed in cash
in RMB, representing 3.44% of the registered capital of the Target Company; and
5.1.6 Hefei Investor shall subscribe to RMB 874,125,874.13, which shall be contributed in cash in
RMB, representing 17.22% of the registered capital of the Target Company.
5.2 Timing of Capital Contribution
5.2.1 The contribution to the registered capital of the Target Company subscribed for by each of the
shareholders shall be arranged as follows:
12 / 65
Form of Capital Contribution Timing of Capital Contribution
Shareholders
Subscribed
Registered
Capital (RMB,
Yuan)
NIO Nextev
Limited
2,539,030,264.99
NIO User
Enterprise Limited
1,252,136,433.60
NIO Power Express
Limited
59,830,818.88
RMB 5,500,000 of the
registered capital contributed in
cash in Renminbi, which has
been contributed in full as of the
Execution Date hereof;
RMB 2,293,891,006.40 of the
registered capital contributed in
equity interests in NIO Co.,
Ltd.;
RMB 239,639,258.59 of the
registered capital contributed in
intellectual property rights
RMB 5,500,000 of the
registered capital contributed in
cash in Renminbi, which has
been contributed in full as of the
Execution Date hereof;
RMB 744,755,244.76 of the
registered capital contributed in
cash in USD equivalent;
RMB 501,881,188.84 of the
registered capital contributed in
equity interests in Shanghai
NIO Sales and Services Co.,
Ltd.
Contributed in equity interests
in NIO Energy Investment
(Hubei) Co., Ltd.
CMG-SDIC Capital
Management Co.,
Ltd.
174,825,174.83
Contributed in cash in Renminbi
13 / 65
Within one (1) year after the
closing in accordance with the
Investment Agreement
On or before March 31, 2021 in
accordance with the Investment
Agreement
Within sixty (60) working days
after the execution date of the
Investment Agreement
On the fifth (5 ) working day
after all of the Investors’ closing
conditions under the Investment
Agreement have been proved to
be satisfied or waived
th
Subscribed
Registered
Capital (RMB,
Yuan)
Form of Capital Contribution Timing of Capital Contribution
174,825,174.83
Contributed in cash in Renminbi
Shareholders
Anhui Provincial
Emerging Industry
Investment Co.,
Ltd.
In principle, on the fifth (5 )
th
working day after all of the
Investors’ closing conditions
under the Investment Agreement
have been proved to be satisfied
or waived; and shall in no event
be later than September 30, 2020
On or before March 31, 2021 in
accordance with the Investment
Agreement
/
Hefei Investor
874,125,874.13
Contributed in cash in Renminbi
Total
5,074,773,741.26
/
th
5.2.2 In principle, Anhui High-tech Co. shall, on the fifth (5 ) working day after all of the Investors’
closing conditions have been proved to be satisfied or waived and shall in no event be later than
September 30, 2020, pay all Anhui High-tech Co. Capital Increase Price of RMB
1,000,000,000.00 to a bank account opened by the Target Company, of which, RMB
174,825,174.83 shall be accounted for as registered capital of the Target Company, and RMB
825,174,825.17 shall be accounted for as the capital reserve of the Target Company. Each
Shareholder agrees that, any third party designated by Anhui High-tech Co. may jointly pay the
Anhui High-tech Co. Capital Increase Price with Anhui High-tech Co. under the Investment
Agreement. When Anhui High-tech Co. and its designated third party accumulatively pay
RMB 1,000,000,000.00 to the bank account opened by the Target Company, it shall be deemed
as the completion of the payment obligation of Anhui High-tech Co. under Clause 3.3.1 of the
Investment Agreement and the contribution obligation of registered capital of the Target
Company under this Agreement. Upon completion of such payment obligation, such third party
shall jointly enjoy the rights hereunder with Anhui High-tech Co., and shall jointly bear the
obligations of Anhui High-tech Co. under this Agreement and other Transaction Documents (if
applicable), provided that the third party has executed the Exhibit I (Joinder Agreement) hereto
in accordance with Clause 14.2 hereof.
5.2.3 Each Shareholder agrees that, Hefei Investor may designate a third party to make payment of
Hefei Investor capital increase price under the Investment Agreement, and due payment of each
installment of the capital increase price by such third party designated by Hefei Investor shall be
deemed completion of each installment of capital contribution payment obligation of Hefei
Investor under the Investment
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Agreement. Upon completion of such payment obligation, such third party shall jointly enjoy
the rights hereunder with Hefei Investor, and shall jointly bear the obligations of Hefei Investor
under this Agreement and other Transaction Documents (if applicable) in proportion to the paid-
in capital contribution, provided that the third party has executed the Exhibit I (Joinder
Agreement) hereto in accordance with Clause 14.2 hereof.
5.2.4 Each Shareholder agrees that, SDIC may designate a fund managed by it to make payment of
SDIC capital increase price under the Investment Agreement, and due payment of the SDIC
capital increase price by such fund managed by SDIC shall be deemed the completion of the
payment obligation of SDIC under the Investment Agreement. Upon completion of such
payment obligation, such third party shall enjoy the rights under this Agreement, and shall bear
the obligations of SDIC under this Agreement and other Transaction Documents (if applicable),
provided that the third party has executed the Exhibit I (Joinder Agreement) hereto in
accordance with Clause 14.2 hereof.
5.2.5 Upon completion of the contributions to the registered capital of the Target Company by the
Shareholders in accordance with the articles of association and the Investment Agreement, all
such contributions shall become the sole property of the Target Company.
6.1 Protective Rights
6 PROTECTIVE RIGHTS
6.1.1 During the period in which the Investors hold equity interests in the Target Company,
resolutions in respect of the following matters of major importance to the Target Company shall
require approval by more than three-fourths (3/4) of the directors before the same is submitted to
the Shareholders’ meeting for resolution:
(1) any amendment to the articles of association of the Target Company;
(2) any increase or decrease in the registered capital of the Target Company; and
(3) any merger, split-off, dissolution and/or change of corporate form of the Target Company.
6.1.2 During the period in which the Investors hold equity interests in the Target Company,
resolutions in respect of the following matters material to the Target Company shall be adopted
by affirmative votes of not less than three-fourths (3/4) of the directors of the Target Company
before implementation (if such matters shall be submitted to the Shareholders’ meeting for
resolution as required by relevant Laws and Regulations or the articles of association of the
Target Company, such matters shall be submitted to the Shareholders’ meeting for resolution and
approval before implementation, and the following matters shall
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not be directly submitted to the Shareholders’ meeting for resolution without resolution and
approval by the Board of Directors):
(1) any merger, split-off, dissolution and liquidation of the Target Company, or the Target
Company applying for its bankruptcy and restructuring, and/or any decision on change of
corporate form of the Target Company;
(2) termination of the Main Business of the Target Company or any change to its current
Main Business;
(3) any equity financing plan of the Target Companies, or any increase, decrease or
cancellation of any authorized share capital, issued shares or registered capital of the
Target Companies, or any issuance, distribution, purchase or redemption of any
shares/equity interests or convertible securities, or any share warrants, or issuance of
options or any other matters that may result in the future issuance of new shares or the
dilution of the ownership percentage of the Investors in the Target Company;
(4) any related-party transaction beyond the annual budget between the Target Company
and any of its affiliate whose financial statement is not included in a consolidated
statement of the Target Company, in excess of RMB 100 million for a single transaction
or RMB 200 million in aggregate within one (1) year;
(5) any borrowing or any other security arrangement by the Target Company and/or any of
its controlled subsidiaries beyond the bank credit granted prior to the Transaction or
beyond the annual budget approved by the Shareholders’ meeting or the Board of
Directors of the Target Company after the Transaction, in excess of RMB 100 million for
a single loan or RMB 200 million in aggregate within one (1) fiscal year;
(6) any contract beyond the annual budget between the Target Company and any third party
whose financial statement is not included in a consolidated statement of the Target
Company out of the ordinary course of business of the Target Company, in excess of
RMB 100 million;
(7) any expenditure or payment beyond the annual budget including construction projects,
establishment of any subsidiary or acquisition of equity interest in other companies, in
excess of RMB 100 million for an expenditure or payment or RMB 200 million in
aggregate within one (1) fiscal year;
(8) any non-controlling long-term equity investment or any disposal of such investment
made by the Target Company beyond the annual budget, in excess of 200 million for a
single investment or disposal or in aggregate within any one (1) fiscal year;
(9) any sale or disposal of assets or equity interests to any third party whose
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financial statement is not included in a consolidated statement of the Target Company, in
excess of RMB 200 million;
(10) any lending of money in any form (including without limitation, inter-lending and bridge
loan for purposes rather than operation) to any third party whose financial statement is
not included in a consolidated statement of the Target Company;
(11) any provision of guarantee, mortgage, pledge and security of any kind to any third party
whose financial statement is not included in a consolidated statement of the Target
Company;
(12) any sale, transfer, license, pledge or disposition of any kind of any material brand,
trademark, patent, copyright, non-patent technology or other intellectual properties of the
Target Company and/or its controlled subsidiaries to any third party whose financial
statement is not included in a consolidated statement of the Target Company;
(13) formulation and submission of any proposal of any amendment to the articles of
association of the Target Company to the Shareholders’ meeting for its approval;
(14) formulation and submission of any proposal of any adjustment to the number and
composition of the Board of Directors of the Target Company to the Shareholders’
meeting for approval;
(15) any merger, Deemed Liquidation Event, drag-along event involving the Target Company
and any other matter that may result in change of control of the Target Company;
(16) determination of the application time of listing, percentage of issuance and stock
exchange in connection with the Qualified IPO of the Target Company; and
(17) amendment or change of the rights and pre-emptive rights of the Investors hereunder, or
any restriction on such rights, or enabling any other Shareholders to enjoy rights more
favorable than or equivalent to those of the Investors.
6.1.3 During the period in which the Investors hold equity interests in the Target Company,
resolutions in respect of the following matters material to the Target Company shall be adopted
by affirmative votes of not less than two-thirds (2/3) of the directors of the Target Company
before implementation (if such matters shall be submitted to the Shareholders’ meeting for
resolution as required by relevant Laws and Regulations or the articles of association of the
Target Company, such matters shall be submitted to the Shareholders’ meeting for resolution and
approval before implementation, and the following matters shall not be directly submitted to the
Shareholders’ meeting for resolution without
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resolution and approval by the Board of Directors):
(1) approval of the annual budget and final accounts of the Target Company; and
(2) appointment or removal of CEO and CFO of the Target Company.
6.1.4 During the period in which the Investors hold equity interests in the Target Company,
resolutions in respect of the following matters of major importance to the Target Company shall
be adopted by not less than one-half (1/2) of the directors of the Target Company before
implementation (if such matters shall be submitted to the Shareholders’ meeting for resolution as
required by relevant Laws and Regulations or the articles of association of the Target Company,
such matters shall be submitted to the Shareholders’ meeting for resolution and approval before
implementation, and the following matters shall not be directly submitted to the Shareholders’
meeting for resolution without resolution and approval by the Board of Directors):
(1) to amend and approve the adoption of material accounting policies or change the fiscal
year, and select and change the auditing firm among the “Big Four” accounting firms
(i.e., PwC, DTT, KPMG and EY);
(2) to distribute profits to the Shareholders and converse capital reserve into share capital;
and
(3) to establish, amend or implement any equity incentive plan/employee stock ownership
plan of the Target Company.
6.1.5 During the preparation and formulation of the annual budget of the Target Company, the
Investors shall be entitled to arrange observers to make observations and provide suggestions.
Prior to the completion of the Qualified IPO of the Target Company, in respect of the annual
budget, the annual final accounts, selection and appointment of CEO and CFO of the Target
Company and other related matters, the directors nominated by the NIO Parties and the directors
nominated by the Investors shall carry out a full consultation before such matters are formally
submitted to the Board of Directors or the Shareholders’ meeting for resolution.
6.1.6 The aforesaid protective right mechanism shall apply to other Group Members, and none of such
Group Members shall engage in the aforesaid matters without the prior written review and
approval by the Target Company in accordance with the aforesaid provisions.
6.2 Unless otherwise agreed in the Transaction Documents, the aforesaid clauses shall become void
automatically as of the date of the acceptance of the application for the Qualified IPO of the Target
Company. However, if such application for the Qualified IPO of the Target Company fails to be approved
by the examination authority of the CSRC or relevant stock exchanges, or the Target Company fails to be
listed on relevant stock exchanges, the full
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validity of such provision entitling rights to the Investors shall restore automatically and immediately.
6.3 The Parties hereto agree to amend the articles of association of the Target Company in accordance with
this Clause.
7.1 Grant and Exercise of the Right of First Refusal
7 RIGHT OF FIRST REFUSAL
Prior to the Qualified IPO of the Target Company and as long as the Investors hold equity interests in the
Target Company, if the NIO Parties intend to indirectly transfer its equity interests in / shares of the Target
Company to any third party other than its affiliate (“Transferee”) by transferring the equity interests in the
Holdco of the Target Company, or if any Shareholders of the Target Company intends to transfer its equity
interests in / shares of in the Target Company to any non-affiliated third party except for the Investors
(“Proposed Transfer”), the NIO Parties shall give a prior written notice to the other Shareholders of the
Target Company, which shall specify the terms and conditions of the Proposed Transfer or proposed
disposal. Each of the other Shareholders of the Target Company (“ROFR Holder”) shall have the right of
first refusal to purchase the equity interests in / shares of the Target Company under the same conditions in
proportion to their then respective ratio of paid-in capital contribution (each of the aforesaid Shareholder
who intends to transfer equity interests shall be referred to individually as a “Transferring Shareholder”).
7.1.1 If any Transferring Shareholder intends to transfer, directly or indirectly, any registered capital
of the Target Company held by it, it shall give a written notice (“Transfer Notice”) to the ROFR
Holders fifteen (15) working days before it enters into any binding agreement with such
transferee with respect to the Proposed Transfer. The Transfer Notice shall include, without
limitation, the number and price of the registered capital to be transferred, and the payment
method of the price.
7.1.2 The ROFR Holders shall reply, in writing within fifteen (15) working days (“Transfer
Feedback Period”) following the receipt of the aforesaid Transfer Notice, whether they opt to
exercise the right of first refusal and the amount of registered capital to be purchased by them.
If any ROFR Holder fails to reply within such Transfer Feedback Period, it shall be deemed to
have waived the right of first refusal, consented to the Proposed Transfer, and waived the co-sale
right enjoyed by it (if any).
If any ROFR Holder proposes to exercise the right of first refusal, it shall purchase all or part of
the equity interests to be transferred at the proposed transfer price and on other same terms and
conditions. If the total number of the equity interests to be transferred of which the ROFR
Holder propose to exercise the right of first refusal is in excess of the number of the equity
interests to be transferred, the maximum number of the equity interests to be transferred
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which each ROFR Holder is entitled to purchase shall be equal to the product of the equity
interests to be transferred multiplied by a fraction, of which the numerator is the total registered
capital of the Target Company held by such ROFR Holder as of the date of the Transfer Notice,
and the denominator is the total registered capital of the Target Company then held by all ROFR
Holders that have elected to exercise the right of first refusal as of the date of the Transfer
Notice. The delivery of a written notice from the ROFR Holders exercising the right of first
refusal shall constitute a formal agreement between the Transferring Shareholders and such
ROFR Holders in respect of sell and purchase all or part of the equity interests to be transferred
(the amount of which to be subject to the adjustment as described above, if necessary) at the
proposed transfer price and in accordance with other applicable terms and conditions set forth in
the Transfer Notice. However, to clarify the transaction arrangement and facilitation of the
change registration with competent administration for market regulation, the parties shall
cooperate to enter into a written contract in accordance with the formal agreement between
them.
7.1.3 If the ROFR Holders waive the right of first refusal in writing during the Transfer Feedback
Period or fails to response within the Transfer Feedback Period, the Proposed Transfer shall be
completed within thirty (30) working days from the earlier of the occurrence of the forgoing
circumstances (the completion date shall be the date on which the re-registration with competent
administration for market regulation is completed, if applicable); if the Proposed Transfer is not
completed within such period, the Transferring Shareholders shall re-issue a Transfer Notice in
accordance with Clause 7.1.1 hereof and the ROFR Holders shall have the right of first refusal
and the right of co-sale (if applicable) with respect to such transfer.
7.1.4 If (a) any ROFR Holder waives the right of first refusal in writing during the Transfer Feedback
Period, or (b) any ROFR Holder fails to response within the Transfer Feedback Period, or (c)
any ROFR Holder elects to exercise the right of first refusal under Clause 7.1.2 above but does
not purchase all of the equity interests to be transferred, after the expiration of the Transfer
Feedback Period, the Transferring Shareholders may sell the equity interests to be transferred
(or, under the circumstance (c) above, the remaining equity interests to be transferred of which
the ROFR Holders are not exercised) to the Transferee at a price and on terms and conditions
not less favorable than that of the Proposed Transfer and those set forth in the Transfer Notice.
7.1.5 If the Investors agree to acquire the NIO Parties’ equity interest in the Holdco of the Target
Company in accordance with this clause and after the Qualified IPO of the Target Company, the
NIO Parties undertake to procure, when the Investors decide to exit from the Target Company,
the Holdco of the Target Company to sell the shares of the Target Company indirectly held by
the Investors at an amount calculated on a basis of ratio of the Investors’ interest in the Holdco
of the Target Company, and cooperate with the Investors in completing the procedures for
capital reduction by the Holdco of the Target Company; or the
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NIO Parties or any third party designated by them shall acquire the interests of the Holdco of the
Target Company held by the Investors at a price calculated on a basis of sales price of the shares
of the Target Company by the Holdco of the Target Company.
7.2 Infringement on the Right of First Refusal and the Remedies
If the Proposed Transfer infringes the ROFR Holders’ right of first refusal:
7.2.1 The Proposed Transfer shall be invalid, and none of the Parties shall cooperate in any manner on
the registration or filing with the competent administration for market regulation and commerce
bureau in respect of the Proposed Transfer;
7.2.2 The Transferee of the Proposed Transfer is not entitled to any right and interest as a shareholder
of the Target Company; and
7.2.3 For the purpose of this Agreement, if the Transferring Shareholder intending to make the
Proposed Transfer fails to give the Transfer Notice in accordance with Clause 7.1.1 hereof, or if
there is material difference or material omission in the conditions of the Proposed Transfer from
those given in the Transfer Notice, it shall constitute an infringement of the ROFR Holders’
right of first refusal.
8.1 Grant and Exercise of Co-sale Right
8 RIGHT OF CO-SALE
As long as the Investors hold equity interests in the Target Company, if the NIO Parties intend to directly or
indirectly conduct a Proposed Transfer and the Investor fails to exercise the right of first refusal in
accordance with Clause 7 hereof, such Investors shall have the co-sale right, i.e., the right to sell the
registered capital of the Target Company held by them at the same price and on the same terms and
conditions in accordance with this Agreement.
8.1.1 The Investors reply in writing within fifteen (15) working days (“Co-Sale Feedback Period”)
from the date of receipt of the Transfer Notice of the Proposed Transfer from the Transferring
Shareholders, stating whether they intend to exercise the co-sale right and the amount of the
registered capital proposed to be co-sold. If such Investors fail to reply within such time limit,
they shall be deemed to have waived the co-sale right enjoyed by them.
8.1.2 Each Investor shall be entitled to simultaneously transfer to such third party all or part of its
equity interest in / shares of the Target Company at the same price and under the same
conditions under the same conditions in proportion to their respective shareholding percentage at
the time. If more than two Investors propose to exercise the co-sale right, the number of the
registered capital of which each Investor exercising the co-sale right shall be equal to the
product of the registered capital of the Target Company proposed to be transferred by the
Transferring Shareholders to the Transferee multiplied by a fraction, of which
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the numerator is the total registered capital of the Target Company then held by such Investor
exercising the co-sale right as of the date of the Transfer Notice, and the denominator is the total
registered capital of the Target Company then held by all the Investors that have elected to
exercise the co-sale right and the Transferring Shareholders as of the date of the Transfer
Notice. If the equity interests in / shares of the Target Company that the NIO Parties and the
Investors intend to sell exceed the equity interests Holdco of/shares proposed to be transferred to
such third party, the Investors shall have the right of priority to sell the equity interests/shares to
such third party. If the subject matter of the Proposed Transfer is the equity interest in the
Holdco of the Target Company, the amount of the equity interests to be sold of which the
Investors exercising co-sale right shall be calculated on a basis of the number of equity interest
in / shares of the Target Company representing the subject matter of the Proposed Transfer.
8.1.3 If, in any Proposed Transfer, the Transferee does not agree to purchase the equity interest held
by the Investors in the Target Company, and as a result of which the Investors are unable to
exercise the co-sale right, the Proposed Transfer shall be terminated and shall not continue.
8.1.4 If any Investor waives the co-sale right in writing during the Co-Sale Feedback Period or fails to
response within the Co-Sale Feedback Period, the Proposed Transfer shall be completed within
thirty (30) working days from the earlier of the occurrence of the forgoing circumstances (the
completion date shall be the date on which the re-registration with competent administration for
market regulation is completed, if applicable); if the Proposed Transfer is not completed within
such period, the Transferring Shareholders shall give a new Transfer Notice in accordance with
Clause 7.1.1 hereof and the Investors shall have the co-sale right with respect to such transfer.
8.2 Infringement on the Co-Sale Rights and the Remedies
If the Proposed Transfer infringes the Investors’ co-sale right:
8.2.1 The Proposed Transfer shall be invalid, and none of the Parties shall cooperate in any manner on
the registration or filing with the competent administration for market regulation and commerce
bureau in respect of the Proposed Transfer;
8.2.2 The Transferee of the Proposed Transfer is not entitled to any right and interest as a shareholder
of the Target Company; and
8.2.3 For the purpose of this Agreement, if the Transferring Shareholder intending to make the
Proposed Transfer fails to give the Transfer Notice in accordance with Clause 7.1.1 hereof, or if
there is material difference or material omission in the conditions of the Proposed Transfer from
those given in the Transfer Notice, it shall constitute an infringement of the Investors’ co-sale
right.
9 PRE-EMPTIVE RIGHTS
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9.1 Grant and Exercise of the Pre-emptive Right
In the event of increase in the registered capital of the Target Company (“Proposed Capital Increase”), the
Shareholders shall have the pre-emptive right to subscribe for the newly increased registered capital or
newly issued shares of the Target Company in proportion to their respective ratio of paid-in capital
contribution under the same conditions.
9.1.1 The Target Company shall give a written notice (“Capital Increase Notice”) to each
Shareholder fifteen (15) working days before it enters into any binding agreement or convenes a
Board’s meeting and/or Shareholders’ meeting in respect of the Proposed Capital Increase,
which shall specify, including without limitation, the amount of the registered capital to be
increased, the price of the Proposed Capital Increase, and the payment method of price of the
registered capital to be increased. If two or more Shareholders with pre-emptive right propose
to exercise the pre-emptive rights, the maximum amount of the registered capital for which each
Shareholder is entitled to subscribe shall be the product of the newly increased registered capital
of the Target Company multiplied by a fraction, of which the numerator is the total paid-in
capital contribution to the Target Company then held by such Shareholder exercising the pre-
emptive right as of the date of the Capital Increase Notice issued by the Target Company, and
the denominator is the total paid-in capital contribution to the Target Company then held by all
Shareholders that have elected to exercise the pre-emptive right as of the date of the Capital
Increase Notice issued by the Target Company.
9.1.2 Each Shareholder shall reply in writing within fifteen (15) working days (“Capital Increase
Feedback Period”) after the receipt of the aforesaid Capital Increase Notice whether it elects to
exercise the pre-emptive right and the amount of the registered capital to be subscribed for by it.
If any Shareholder fails to reply within the Capital Increase Feedback Period, it shall be deemed
to have waived the pre-emptive right.
9.1.3 If any Shareholder waives the pre-emptive right in writing during the Capital Increase Feedback
Period set forth in Clause 9.1.1 or fails to make response during the Capital Increase Feedback
Period, the Proposed Capital Increase shall be completed within thirty (30) working days after
the earlier of the occurrence of the foregoing circumstances (the completion date shall be the
date on which the re-registration with competent administration for market regulation is
completed); if the Proposed Capital Increase is not completed within such period, the Target
Company shall re-issue a Capital Increase Notice in accordance with Clause 9.1.1 hereof and
such Shareholder shall obtain the pre-emptive right with respect to such capital increase.
9.2 During the period from the Execution Date hereof to December 31, 2021, the NIO Parties shall have the
right to unilaterally subscribe for the then newly increased registered capital of the Target Company at the
Price of this Capital Increase in Cash by investing in not more than USD 600 million in addition to this
Capital Increase in Cash (“NIO’s Capital
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Increase Right”). The NIO Parties shall have the right to designate any of its affiliates to exercise the
NIO Capital Increase Right. With respect to the newly increased registered capital of the Target Company
to be subscribed for with such capital increase price of USD 600 million, each of the Investors hereby
unconditionally and irrevocably waives any pre-emptive right under this Clause 9 and any other priority
rights under relevant Laws. After the completion of such capital increase, the shareholding percentage of
each Shareholder in the Target Company shall be adjusted accordingly.
9.3 Infringement on the Pre-emptive Right and the Remedies
If the Proposed Capital Increase infringes the Shareholders’ pre-emptive right:
9.3.1 The Proposed Capital Increase shall be invalid, and none of the Parties shall cooperate in any
manner on the registration or filing with the competent administration for market regulation and
commerce bureau in respect of the Proposed Capital Increase;
9.3.2 The subscriber to the registered capital of the Target Company in respect of the Proposed Capital
Increase is not entitled to any right and interest as a shareholder of the Target Company; and
9.3.3 For the purpose of this Agreement, if the Target Company fails to give the Capital Increase
Notice in accordance with Clause 9.1.1 hereof, or if there is material difference or material
omission in the conditions of the Proposed Capital Increase from those given in the Capital
Increase Notice, it shall constitute an infringement of the Shareholders’ pre-emptive right.
10 VALUE ASSURANCE AND ANTI-DILUTION RIGHTS
10.1 Value Assurance
10.1.1 Without prejudice to the NIO’s Capital Increase Right set forth in Clause 9.2, without prior
written consent of the Investors, the Target Company shall not issue any new shares or increase
its registered capital that may result in dilution of the percentage of the Investors’ shareholding
or equity interest in any form prior to the Qualified IPO of the Target Company.
10.1.2 After the closing of this Transaction and prior to the date on which the Target Company obtains
the guidance filing notice in connection with the Qualified IPO from the provincial securities
regulatory bureau at the place where the Target Company is located, if the Investors consent in
writing to the issuance of new shares or increase in the registered capital of the Target Company,
the NIO Parties shall guarantee that the price of the subsequent financing shall not be lower than
the Price of this Capital Increase in Cash that the Investors paid (“Investors Subscription
Price”).
10.2 Anti-dilution Compensation
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If the final price or cost paid by any Investor (including the existing Shareholders and any newly joined
shareholders) in any new round of investment of the Target Company in the future (either by means of
equity interest transfer or capital increase) is lower than the Investors Subscription Price in accordance with
certain agreement or arrangement entered into by and among the Target Company, the NIO Parties and the
persons acting in concert with the Target Company and the NIO Parties, the Investors Subscription Price
shall be re-calculated based on the following formula:
P2 = P1 × (A + B) ÷ (A + C),
Of which,
P2 = the Investors Subscription Price after the adjustment;
P1 = the initial Investors Subscription Price;
A = the registered capital of the Target Company prior to the above mentioned capital increase on a
fully diluted basis (i.e., assuming that each Shareholder or any other party has exercised its
subscription right, convertible loan or other rights convertible into any equity interest in the Target
Company);
B = the registered capital of the Target Company that can be acquired at P1 price with the above
mentioned capital increase;
C = the registered capital of the Target Company actually increased in the above mentioned capital
increase.
The Investors shall have the right to re-calculate the amount of the registered capital of the Target Company
that they are entitled to, based on the adjusted Investors Subscription Price. To the extent permitted by
Laws, the difference between such amount and the registered capital of the Target Company that the
Investors subscribe for in accordance with the Investment Agreement shall be made up by the Target
Company and the NIO Parties as follows: (i) the additional issuance of equity interests by the Target
Company to the Investors at the lowest price permitted by applicable Laws; and (ii) the transfer by the NIO
Parties of their equity interests in the Target Company to the Investors at the lowest price permitted by
applicable Laws. If such compensation is made by means of subclause (i) above, the subscription price for
the equity interests that the Investors shall pay to the Target Company shall be borne by the NIO Parties.
Other expenses and costs incurred in the process of compensation (if any) shall be borne by the NIO Parties.
10.3 Implementation of the Anti-dilution Compensation
The implementation of anti-dilution compensation shall be fully completed within one hundred and twenty
(120) days after the date on which the Investors exercise the anti-dilution right in accordance with Clause
10.2 hereof and notify the NIO Parties in writing (if additional time is required due to the performance of
any public procedure such as appraisal and/or bidding, auction or listing in respect of the transfer of state-
owned assets, such time shall not be included in one hundred and twenty (120) days). The completion date
shall be the date on which the registration with competent administration for market regulation is
completed.
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10.4 Anti-dilution Compensation Overdue Penalty
If the NIO Parties fail to fully implement the anti-dilution compensation within the period specified in
Clause 10.3 hereof, the NIO Parties shall pay the overdue penalty to the Investors from the first day of such
delay. The overdue penalty shall be calculated at the rate of 0.02% of the outstanding amount of cash
compensation payable for each day of such delay.
11.1 Triggering Events of Investor Redemption Right
11 REDEMPTION RIGHT
Upon the occurrence of any of the following events, the Investors shall obtain a redemption right, i.e., the
right to request NIO Inc. or the NIO HK Holding Platforms to redeem all or part of the equity interest then
held by the Investors in the Target Company. The Target Company shall assume an unlimited joint and
several liabilities for the performance of the redemption obligations of NIO Inc. and the NIO HK Holding
Platforms, and shall cause the Actual Controller to give a written undertaking of using his reasonable efforts
to cause NIO Inc. and the NIO HK Holding Platforms to perform the redemption obligations hereunder:
11.1.1 Within sixty (60) months following the date on which the Target Company receives first
installment of capital increase price from the Investors in full, the Target Company fails to
complete the Qualified IPO;
11.1.2 Within forty-eight (48) months following the date on which the Target Company receives first
installment of capital increase price from the Investors in full, the Target Company fails to
submit an application for the Qualified IPO;
11.1.3 The NIO Parties or the Target Company has significant concealment, misleading, false statement
or suspected fraud in the process of information disclosure for this Transaction;
11.1.4 The NIO Parties’ capital contribution in the Target Company and the Group Members is false,
fraudulent or has been withdrawn, or there is a Material breach in any provision in the formally
executed Transaction Documents or any representations, warranties or undertakings thereunder
by the NIO Parties and / or the Target Company;
11.1.5 The Actual Controller of the Target Company and the core management team of the Target
Company as listed in Exhibit II (“Core Management Team”) encounter Material integrity
problems, which lead to the Material internal control loopholes in the Target Company,
including without limitation, the off-balance-sheet sales income in cash which is unknown to the
Investors, misappropriation of funds and unfair related-party transactions; or the Target
Company has Material internal control loopholes, which cause Material adverse impact on the
Target Company, even though such loopholes are not caused by the Actual Controller or the
Core Management Team of the Target Company
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intentionally;
11.1.6 There are major changes in the current Main Business of the Target Company as agreed in the
Transaction Documents, or any license and permit of the Target Company necessary for
operating such current Main Business is rescinded or the Target Company is not able to obtain
and maintain such license or permit;
11.1.7 The Target Company breaches the provisions with respect to the use of the Capital Increase
Price as agreed in the Investment Agreement;
11.1.8 There is a change of the Actual Controller of the Target Company or the actual controller of NIO
Inc. due to any circumstance;
11.1.9 More than half of the Core Management Team resigns within two (2) years prior to the date of
submission of the application for the Qualified IPO by the Target Company;
11.1.10 Any triggering event for redemption of the equity interests agreed between the
Shareholders of the Target Company (except for the Investors) and the Target Company occurs,
or any triggering event for redemption of the equity interests agreed between the aforesaid
Shareholders and the NIO Parties occurs, and such Shareholders request the Target Company or
the NIO Parties to redeem their equity interests in the Target Company;
11.1.11 Any triggering event for redemption of the equity interests agreed between the shareholders
of NIO Inc. and NIO Inc. occurs, or shareholders of NIO Inc. request NIO Inc. or the actual
controller of NIO Inc. to redeem the shares held by them, provided that the performance of
such redemption obligations may result in change of the actual controller of NIO Inc. or the
Target Company;
11.1.12 The Target Company or any of its creditors applies to a PRC court for bankruptcy and
reorganization of the Target Company; or NIO Inc. or any of its creditors applies to a competent
judicial authority for bankruptcy and reorganization of NIO Inc., which may result in change of
the actual controller of NIO Inc. or the Actual Controller of the Target Company;
11.1.13 NIO HK fails to transfer all intellectual property rights which are non-monetary capital
contribution set forth in the Investment Agreement to the Target Company due to any willful or
negligent conduct of the NIO Parties within one (1) year after the closing of this investment;
11.1.14 As of March 31, 2021, the NIO Parties fail to pay to the Target Company their capital
increase price in cash (i.e., RMB 4.26 billion) in full; and
11.1.15 The annual sale of the Target Company is less than 20,000 vehicles for two (2) consecutive
years following the date on which the Target Company receives first installment of capital
increase price from the Investors in full.
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11.2 Price of Redemption
If the Investors obtain the redemption right upon the occurrence of any of the circumstances set forth in
Clause 11.1 hereof, and they request NIO Inc. and/or the NIO HK Holding Platforms to redeem all or part
of the equity interest in the Target Company then they held, the price of redemption (“Redemption Price”)
shall be: with respect to each Investor, the sum of the total amount of the investment price paid by the
Investors to the Target Company for the purpose of acquiring the equity interest in the Target Company plus
an investment income calculated at a compound interest rate of 8.5% per annum on basis of the total
amount of the investment price (for purpose of calculation, one year shall be calculated as 360 days, and if
the time period is less than one year, it shall be calculated based on actual days); in particular, with respect
to each Investor, if the investment prices paid by such Investor are paid to the Target Company in
installment, the amount of the forging investment income of each installment of the investment price shall
be calculated from the actual capital injection date of such batch of investment price. The Redemption
Price shall be paid in cash.
The Investors shall have pari-passu redemption right. The Investors shall be entitled to the aforesaid
Redemption Price by requesting NIO Inc. and/or the NIO HK Holding Platforms to purchase the equity
interest held by the Investors in the Target Company.
11.2.1 NIO Inc. or the NIO HK Holding Platforms shall complete the payment of the Redemption Price
within one hundred and twenty (120) days from the date of receipt of the Investor’s notice
requesting to exercise the redemption right, the Party obliged to pay the Redemption Price shall
pay additional overdue penalty to the Investors. The overdue penalty shall be calculated at the
rate of 0.02% of the outstanding amount of cash compensation payable for each day of delay.
The relevant parties shall otherwise agree on the time of redemption through consultation, if
additional time is required due to the performance of any public procedure such as appraisal
and/or bidding, auction or listing in respect of the transfer of state-owned assets, or the
performance of any mandatory procedures of announcement in respect of the reduction in
registered capital in the Target Company.
11.2.2 If NIO Inc. or the NIO HK Holding Platforms fail to pay the Redemption Price and the overdue
penalty in full within one hundred and twenty (120) days from the receipt of the notice of the
Investors requesting to exercise the redemption right, the Investors shall have the right to
transfer all or part of the equity interest in the Target Company held by it to any third party at
any time, and all the then-current Shareholders, the Target Company and the Actual Controller
of the Target Company shall cooperate with such transfer. Notwithstanding the foregoing, if
NIO Inc. or the NIO HK Holding Platforms fail to comply with the provision in respect of the
redemption right, and if the Investors intend to transfer the equity interest in / shares of the
Target Company to any NIO Parties Competitor, the Investors shall give a prior notice to the
NIO Parties and consult with the NIO Parties in respect of the same, and the NIO Parties shall
have the right of first refusal under the same conditions.
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Under the circumstance that the NIO Parties elect not to exercise the right of first refusal or fail
to notify the Investors in writing of its exercise of the right of first refusal within five (5) days
after the receipt of the notice, the Investors may transfer their equity interest in /shares of the
Target Company to such NIO Parties Competitor. For the avoidance of doubt, unless expressly
indicated by the Investors in writing, no negotiation or execution of any legal document or
performance of any closing obligation thereunder by the Investors in respect of the transfer of
equity interests / shares to any third party shall be deemed as a waiver of their rights of claiming
obligations of the redemption in accordance with the provision of redemption right hereof
against any entity who has the redemption obligations. If the price received by the Investors for
the transfer of equity interest/shares in the Target Company to a third party under this clause is
less than the Redemption Price and overdue penalty entitled to the Investors in accordance with
Clause 11.2, NIO Inc. or the NIO HK Holding Platforms shall make up the shortfall in cash to
the Investors within thirty (30) days from the date on which the Investors and the third party
enter into relevant equity transfer agreement.
11.2.3 If NIO Inc. or the NIO HK Holding Platforms fail to pay the Redemption Price in full within
one hundred and twenty (120) days from the receipt of the notice of the Investors requesting to
exercise the redemption right, the Investors shall have the right to give a notice to the Target
Company requesting the Target Company to assume joint and several liability with NIO Inc. or
the NIO HK Holding Platforms in respect of the payment of the Redemption Price and overdue
penalty under Clause 11 hereof, and the Target Company shall complete the payment within
thirty (30) days after receipt of the notice as required.
11.3 If, after the completion of this Transaction, the Investors intend to acquire more equity interests in /shares
of the Target Company by means of capital increase or transfer of equity interests / shares, the
Redemption Price of such further increased equity interests / shares shall be agreed by the relevant parties
through negotiations.
11.4 The NIO Parties’ Redemption Right
11.4.1 The Parties agree that, prior to the date on which the Target Company is converted into a
company limited by shares for the purpose of the Qualified IPO of the Target Company, the NIO
Parties and/or any third party designated by them shall have the right to redeem half of the
equity interests in the Target Company held by Hefei Investor after this Investment (“Equity
Interests to be Purchased by NIO”).
11.4.2 The NIO Parties and/or any third party designated by them shall have the right to give a written
notice (“Redemption Notice”) at any time to Hefei Investor to request Hefei Investor to sell all
or part of their equity interests to the NIO Parties and/or any third party designated by the NIO
Parties. The Redemption Notice shall specify the amount of equity interests in the Target
Company requested to be redeemed by each of the NIO Parties and/or any third party designated
by the
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NIO Parties, provided that the total number shall not exceed the Equity Interests to be Purchased
by NIO.
11.4.3 The Parties agree that if the NIO Parties and/or any third party designated by the NIO Parties
exercise(s) the aforesaid redemption right, the redemption price shall be the higher of the
following: (a) the amount of the total paid-in capital increase price in respect of the equity
interests to be purchased by the NIO Parties and/or their designated third party plus the
investment income calculated at a simple interest rate of 10% per annum (the amount of the
investment income of each installment of the investment price shall be calculated from the
actual capital injection date of such installment of investment price); and (b) the value of the
equity interests to be redeemed by the NIO Parties and/or their designated third party determined
based on the valuation of the Target Company in the then latest round of financing.
12.1 Guaranteed Minimum Return on Investment
12 LIQUIDATION PREFERENCE
If the Target Company is to be liquidated due to bankruptcy, reorganization, dissolution, merger, split-off,
acquisition or any other reasons, after the Target Company has paid up expenses and costs in all kinds, all
debts and taxes in accordance with Laws, the Target Company shall first distribute such Remaining
Property to the Investors in cash (“Remaining Property”), and the amount of the Remaining Property
which shall be distributed first to the Investors shall be the higher of (“Allocation Priority Amount”): (1)
the amount of Remaining Property to be distributed to the Investors in proportion to their respective paid-in
capital contribution to the Target Company; or (2) the sum of the total amount of the investment price paid
by the Investors to the Target Company for the purpose of acquiring the equity interest in the Target
Company plus an investment income calculated at a compound interest rate of 8.5% per annum on basis of
the total amount of the investment price (“Guaranteed Minimum Investment Return”). If the
Remaining Property of the Target Company is not sufficient to be distributed among the Investors according
to the Allocation Priority Amount of the Investors, the Target Company shall distribute the Remaining
Property among the Investors in proportion to the Investors’ respective Allocation Priority Amounts.
12.2 Audit of Remaining Property
The Parties unanimously agree that, in the event of the liquidation of the Target Company, an accounting
firm recognized by the Parties shall be engaged to audit the balance sheet and property list prepared by the
Target Company, and the book value of the Remaining Property shall be subject to the audit results of the
auditor so appointed.
12.3 Distribution of Remaining Property
If the Investors have received the Allocation Priority Amount in full, the remaining property of the Target
Company distributable to its Shareholders in accordance with the Laws shall be distributed to the other
Shareholders of the Target Company in proportion to
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their respective shareholding percentages.
12.4 Compensation of Insufficient Distribution
If the Allocation Priority Amount received by the Investors in accordance with Clause 12.1 is less than the
Guaranteed Minimum Investment Return, NIO Inc. and the NIO HK Holding Platforms shall compensate
the Investors in cash with the amount they obtained in the liquidation. The amount of such compensation
equals to the Guaranteed Minimum Investment Return minus the amount the Investors obtained in the
liquidation. If the aggregate amounts obtained by NIO Inc. and the NIO HK Holding Platforms in the
liquidation are not sufficient to make up the difference between the Guaranteed Minimum Investment
Return and the amount the Investors obtained in the liquidation, the Investors shall be entitled to the amount
which NIO Inc. and the NIO HK Holding Platforms should have obtained in the liquidation in proportion to
the Investors' respective Allocation Priority Amount.
12.5 Deemed Liquidation Event
Any of the following events shall be deemed as the liquidation of the Target Company (“Deemed
Liquidation Event”):
12.5.1 Any merger, split-off, acquisition, reorganization, equity transfer, share swap, capital and share
increase or other similar one or a series of transactions of the Target Company, which may result
in change of control of the Target Company (subject to a legal opinion issued by a law firm
recognized by the NIO Parties and the Investors and affixed with the official chop of such firm);
12.5.2 Any sale, transfer, lease or disposal of all or substantially all of the business or assets of the
Target Company (or a series of transactions that may result in sale, transfer, lease or disposal of
all or substantially all of the business or assets of the Target Company); and
12.5.3 Exclusive and irrevocable license to a third Party all or substantially all of the intellectual
property of the Target Company.
12.6 Distributions in a Deemed Liquidation Event
In case of a Deemed Liquidation Event, the Investors shall have the right to require the Target Company
and/or all Shareholders of the Target Company to realize in substance the policies of distribution set forth in
Clause 12.1 and Clause 12.3 hereof in a reasonable manner in accordance with Laws and Regulations, so as
to ensure the priority liquidation right of the Investors or the distribution of the Guaranteed Minimum
Investment Return. In the event that the total consideration received by the Investors in such Deemed
Liquidation Events is not sufficient to realize the Guaranteed Minimum Investment Return of the Investors,
NIO Inc. and the NIO HK Holding Platforms undertake to compensate separately the shortfall to the
Investors in cash, and to assume joint and several liabilities for such compensation.
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12.7 Application of Conflicts of Agreement
Notwithstanding the provisions of this Clause 12, upon occurrence of the events set forth in Clause 13, the
Parties agree and acknowledge that the relevant transaction consideration shall be allocated in the manner
described in Clause 13.
13.1 Exercise of Drag-along Right
13 DRAG-ALONG RIGHT
If the Investors fail to exit through exercising the redemption right set forth in Clause 11 hereof due to any
breach or other fault or negligence of the NIO Parties, and if the third party intends to purchase more than
fifty percent (50%) of equity interest in the Target Company or all or substantially all/most of the assets or
business of the Target Company (collectively, the “Co-Sale”), then the Investors that individually or in the
aggregate hold more than two-thirds (2/3) of the then total equity interests held by all Investors in this
Transaction (the “Drag-along Party”) shall have the right to give a written notice (“Drag-along Notice”)
to the NIO Parties, which shall specify the basic information of such third party, the number of equity
interest or description of assets that they intend to purchase, the proposed purchase price and other material
terms and conditions, and request the NIO Parties, together with the Drag-along Party, to sell to such third
party the assets of the Target Company or equity interests in the Target Company respectively held by them
at the same price and under the same conditions:
13.1.1 If a third party intends to purchase the equity interest in the Target Company, the NIO Parties
shall have the right to decide and notify the Drag-along Party in writing within thirty (30) days
after the receipt of the Drag-along Notice whether they elect to purchase all of the Target
Company’s equity interests held by the Drag-along Party at the proposed purchase price and on
other equivalent terms and conditions, and to deliver a written decision to the Drag-along
Party. Such written decision shall constitute a contract between the NIO Parties and the Drag-
along Party for the acquisition of all of the Drag-along Party’s equity interest in the Target
Company. If, upon the expiration of the forgoing thirty (30)-day period, or if the NIO Parties
reply in writing not to exercise their first refusal right, the Drag-along Party shall have the right
to request the NIO Parties to sell, together with the Drag-along Party, their respective equity
interest in the Target Company that such third party intends to purchase at the same price and
under the same conditions (“Drag-along Equity Interest Transaction”). If the consideration
obtained by each Drag-along Party through the Drag-Along Equity Interest Transaction is less
than the Redemption Price receivable by such Drag-along Party, all transaction consideration
obtained by the NIO Parties through the Drag-along Equity Interest Transaction shall be
distributed to each Drag-along Party in proportion to the Redemption Price receivable by such
Drag-along Party in order to make up the shortfall.
13.1.2 If a third party intends to purchase the assets of the Target Company, the Drag-along Party shall
have the right to request the Target Company to sell to such
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third party the assets of the Target Company that such third party intends to purchase at the
proposed purchase price and on other terms and conditions (“Drag-along Assets Transaction”,
together with the Drag-along Equity Transaction, the “Drag-along Transaction”). After such
third party has paid up the consideration for the Drag-along Assets Transaction in full to the
Target Company, the Target Company shall redeem all equity interests held by each Drag-along
Party in the Target Company. In consideration of such payment, the Target Company shall pay
to each Drag-along Party with transaction consideration for the Drag-along Assets in proportion
to the shareholding percentage on the basis of Redemption Price that each Drag-along Party
shall receive. If the consideration received by each Drag-along Party through the Drag-along
Asset Transaction is less than the Redemption Price receivable by such Drag-along Party, all
transaction consideration obtained by the NIO Parties through the Drag-along Asset Transaction
shall be distributed to each Drag-along Party in proportion to the Redemption Price receivable
by such Drag-along Party so as to make up the shortfall.
13.2 The NIO Parties shall use their best efforts to cooperate with the Drag-along Party to consummate the Drag-
along Transaction, including without limitation, to vote in favor of such Drag-along Transaction at the
Shareholders’ (general) meeting and the Board meeting, to execute all necessary resolutions and documents
at the request of the Drag-along Party or take all reasonable actions as the Drag-along Party considers
necessary, and to make representations and warranties customary for transactions to the third party in the
relevant transaction documents in connection with the Drag-along Transaction.
If the consideration obtained by the Investors through the above Drag-along Transaction is less than the
Redemption Price, all transfer prices obtained through the Drag-along Transaction shall be distributed to the
Investors in proportion to the respective Redemption Price to which the Investors shall be entitled.
14.1 Consent Right to Equity Transfer
14 RESTRICTION ON EQUITY TRANSFER
Prior to the completion of the Qualified IPO of the Target Company, without prior written consent of the
Investors or unless otherwise agreed in the Transaction Documents, the NIO Parties shall not, directly or
indirectly, transfer, pledge or otherwise dispose the equity interests in / shares of the Target Company if
such act may cause the total (direct and indirect) shareholding percentage of NIO Inc. in the Target
Company to be decreased to less than 60%. For the avoidance of doubt, (a) the NIO Parties have the right
to transfer, pledge or otherwise dispose not more than 15% of the direct and indirect equity interests in the
Target Company, without prior written consent of the Investor; and (b) provided that without prejudice to
the foregoing, the NIO Parties have the right to transfer all or part of its equity interests in the Target
Company to any of its affiliates without prior written consent of the Investors, and the Investors agree to
waive their respective right of first refusal, co-sale right and other pre-emptive rights hereunder with
respect to such transfer.
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Prior to the completion of the Qualified IPO of the Target Company, unless otherwise approved by the
Board of Directors of the Target Company, the NIO Parties shall use their best efforts to cause the equity
interests in the Target Company or shares of the management / employee shareholding platform directly or
indirectly held by the Core Management Team, and the equity interests in the Target Company directly or
indirectly held by the NIO HK Holding Platforms, not to be transferred or disposed of during such period
prior to the completion of the Qualified IPO of the Target Company.
14.2 Consent to Transaction Documents
Unless otherwise provided in this Agreement or other Transaction Documents, on the date on which any
new shareholder of the Target Company becomes a shareholder of the Target Company in the future in
accordance with the PRC Laws, such new shareholder shall execute a binding joinder agreement in the form
set forth in the Exhibit I hereto (“Joinder Agreement”) to become a party hereto, and shall acknowledge
the arrangements under this Agreement and other Transaction Documents and consent to the restrictions
imposed by this Agreement and other Transaction Documents.
15.1 Principles of Equity Incentive
15 EQUITY INCENTIVE
The Investors encourage the Target Company to maintain the stability of its management team by adopting
equity incentives, provided that unless with prior written consent of the Investors, the equity incentives
carried out by the Target Company at any time shall satisfy the following requirements:
15.1.1 The equity incentive plan shall not cause any material adverse effect on the Qualified IPO of the
Target Company, including without limitation, that adoption of equity incentive plan shall not
cause the number of direct or indirect shareholders of the Target Company (excluding the
shareholders of NIO Inc.) to exceed 200, and shall not cause any instability in the shareholding
structure of the Target Company.
15.1.2 The equity incentive plan shall be subject to review and approval by the Board of Directors of
the Target Company in accordance with Clause 6.1.3 hereof. The equity incentive plan shall
include, without limitation, the equity incentive prices, shares for the equity incentive scheme,
the scope of the eligible participants, and restrictions on transfer of the equity interests acquired
by the participants through the equity incentive plan. Without the consent of the Investors, the
equity of the Target Company obtained by the participants of the equity incentive scheme shall
not be transferred prior to the completion of the Qualified IPO of the Target Company. For the
avoidance of doubt, the NIO Parties warrant that the aforesaid equity incentive plan will not
cause the shareholding ratio of NIO Inc. in the Target Company (in the aggregate directly and
indirectly) to be decreased to less than 60%.
15.2 Method of Equity Incentive
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Subject to Clause 15.1 hereof, if equity incentives are realized through transfer of equity interests from one
or more existing Shareholder(s) of the Target company to the equity incentive participants or the employee
stock ownership platform, the transfer price shall be not lower than the audited net asset value per share of
the Target Company as of the end of the then most recent period and shall satisfy the relevant provisions of
the CSRC and the applicable stock exchange. If the Target Company intends to realize the equity incentives
by issuing new shares to the equity incentive participant or on the employee shareholding platform, the new
shares to be issued by the Target Company for the purpose of equity incentives shall not exceed 10% of the
audited registered capital / share capital of the Target Company after the completion of this Transaction, and
the capital increase price shall be not lower than the net asset value per share of the Target Company as of
the end of the then most recent period and shall satisfy the relevant regulations of the CSRC.
16 INFORMATION RIGHTS AND INSECTION RIGHTS
16.1 Information Provision
As long as the Investors hold equity interests in the Target Company, the Target Company shall, and the
NIO Parties shall cause the Target Company to, deliver the following documents in connection with the
Target Company in accordance with the requirements of the Investors:
16.1.1 Within one hundred and twenty (120) days after the end of each fiscal year, submit to the
Investors an annual consolidated audit report which has been prepared by a PRC accounting
firm recognized by the Investors in accordance with the PRC accounting standards;
16.1.2 Within sixty (60) after the end of each semi-year, submit to the Investors an unaudited
consolidated semi-annual financial statement prepared in accordance with the PRC accounting
standards;
16.1.3 Within thirty (30) days after the end of each quarter, submit to the Investors an unaudited
quarterly financial statement prepared in accordance with the PRC accounting standards;
16.1.4 A work report (if any), a business plan and budget of the Target Company for the new year and
other documents, and the use of the capital subscription funds in this Transaction;
16.1.5 Other information, statistical data, transaction, business operation and financial data as may be
required to which the Shareholders are entitled in accordance with the Laws and Regulations of
the PRC, subject to a reasonable request in advance in a manner without any interference to the
normal operation of the Target Company.
16.2 Authenticity, Accuracy and Completeness of Information
The legal representative of the Target Company shall verify and confirm that all the
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information provided to the Shareholders is true and correct and does not have any misleading effect. The
financial statements provided by the Target Company to the Investors shall cover the consolidated financial
statements of the Target Company and its subsidiaries, and shall have at least the current profit and loss
statement, cash flow statement and balance sheet.
16.3 Provision of Equity Financing Information
Upon request of the Investors, the Target Company shall promptly provide the Investors with the latest
version of the Investment Agreement, documents relevant to the Subsequent Financing, management of the
Target Company and other matters, including the Articles of Association signed and sealed by the Parties
and filed with competent Governmental Authority.
16.4 Collection of Accounting Information
During the working hours, the Investors may inspect, in a reasonable way, the properties, real properties,
financial books and operation records of the Target Company and discuss the business, finance and
conditions of the Target Company with its officers, provided that the Investors give a prior notice and do not
interfere the normal business of the Target Company. The Investors shall have the right to make proposals
to the Senior Officers of the Company through the directors nominated by them.
17 RIGHT TO PARTICIPATE IN RESTRUCTURING
After the Investors become the Shareholders of the Target Company, if the Target Company and its directly or
indirectly controlled enterprises undertakes any restructuring (“Restructuring”) and the NIO Parties intend to
change the listing company from the Target Company to another platform company after the completion of the
Restructuring, the plan of the aforesaid Restructuring shall be subject to the written consent of the Investors (for
the avoidance of doubt, this provision shall not apply to any Restructuring carried out for the purpose of the
separate listing of the enterprises directly or indirectly controlled by the Target Company after the Qualified IPO
of the Target Company). The Investors shall have the right to participate in such Restructuring, and to replace
their directly or indirectly held equity interests in the Target Company with the equity interests in such platform to
ensure that the Investors will continue to hold the same interests as those in the Target Company and its directly or
indirectly controlled enterprises prior to the Restructuring.
The NIO Parties and the Target Company hereby respectively covenant and warrant to the Investors as follows:
18 UNDERTAKINGS AND CONVANTS
18.1 Non-mandatory Commitment
The Target Company and the NIO Parties covenant that the Investors shall not make any covenant in
relation to the listing of the Target Company that is not expressly required by the Laws and Regulations, and
neither shall they take any obligation in relation to the listing of the Target Company that is not expressly
required by the Laws and Regulations; in
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particular, the Investors shall not make any covenant in respect of the performance or profits of the Target
Company due to the listing of the Target Company.
18.2 Cooperation Obligation
In the event that the Investment Agreement and/or this Agreement does not specify any party or parties of
the Target Company or the NIO Parties as the subject of obligations in respect of a certain act, right or
obligation of the Investors, the Target Company or the NIO Parties undertake to make the best reasonable
efforts to cooperate.
18.3 Indemnification Commitment
Each of the Target Company or the NIO Parties shall perform this Agreement and other Transaction
Documents in good faith, and if any party or parties of the Target Company or the NIO Parties violate any
provision of this Agreement or other Transaction Documents, such Party or Parties shall be held liable for
any damages that may be caused to the Investors, and the other Parties except for the Investors shall assume
the joint and several liabilities with respect to such damages.
18.4 Non-Competition
The Controlling Shareholders undertake that unless otherwise agreed by the Investors in writing in advance,
the Controlling Shareholders shall, and shall cause the Actual Controller to, devote sufficient working time
and energy to the operation of the Target Company, and use best efforts to promote the development of the
Target Company and seek profits for the Target Company, and not to take any part-time job or invest in any
other company with the same or similar business type as the Main Business of Target Company, and to
strictly comply with the relevant provisions of the Company Law of the PRC on non-competition of
directors and senior management; from the closing date until the expiration of two (2) years from the date
on which the Actual Controller ceases to hold neither any direct or indirect interest in the Target Company
nor any position in the Target Company, without the prior written consent of the Investors, the Controlling
Shareholders shall not, and shall cause the Actual Controller not to, directly or indirectly engage in any
business similar to or competing with the Main Business of the Target Company (“Competing Business”),
or directly or indirectly hold any interest in any entity that engages in a Competing Business with the Target
Company or its subsidiaries (“Competing Entity”), or engage in any activity detrimental to the interests of
the Target Company, including without limitation:
18.4.1 To have a controlling stake in, or indirectly control, any Competing Entity, or hold more than
5% of the equity in any Competing Entity (for the avoidance of doubt, the following
circumstances are not in violation of the non-competition provisions in this Clause 18.4: (i) to
hold less than 5% of the equity in any Competing Entity; (ii) without affecting the Qualified IPO
of the Target Company, to hold interests in any overseas Competing Entity, provided the
products of such overseas Competing Entity are not sold to the mainland of China; and (iii) as
set forth in Exhibit III, the Actual Controller has directly or
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indirectly held interests in the Competing Entity as of the Execution Date of this Agreement);
18.4.2 To provide any loan, customer information, advice or any other form of assistance to any
Competing Entity;
18.4.3 To directly or indirectly obtain benefits from any Competing Business or any Competing Entity;
18.4.4 To solicit, in any manner, customers relating to any business of the Target Company or its
subsidiaries, or to deal with or attempt to deal with customers relating to the Main Business of
the Target Company or its subsidiaries, regardless of whether such customers are customers of
the Target Company or its subsidiaries prior to or after the closing date;
18.4.5 To employ any member of the Core Management Team who resigns from the Target Company
or its subsidiaries as of the closing date in any manner through any individual or organization
which is directly or indirectly controlled by them or in which they have an interest; and
18.4.6 To solicit, in any manner, the employment of any employee then employed by the Target
Company or its subsidiaries.
18.5 Qualified IPO
18.5.1 The Target Company shall, within sixty (60) months from the date of receipt of all first
installment of the capital increase price from the Investors, obtain the approval, registration or
filing of the CSRC, the Shanghai Stock Exchange, the Shenzhen Stock Exchange or any other
overseas securities issuance examination institutions unanimously recognized by the Parties, and
the initial public offering and listing of shares of the Target Company on the securities exchange
market unanimously recognized by the Parties. For the avoidance of doubt, for the purposes of
this Agreement, the listing of the Target Company on the PRC National Equities Exchange and
Quotations (the “New Third Board”) shall not be deemed as Qualified IPO.
18.5.2 All the Shareholders shall proactively take reasonable efforts, cooperate with the Target
Company to take all necessary actions (including but not limited to cooperate with the Target
Company in clearing any material obstacle to the Qualified IPO) and cooperate with the
application for the Qualified IPO in accordance with the then effective Laws and regulatory
policies of listing.
19.1 Shareholders’ Meeting
19 CORPORATE GOVERNANCE
19.1.1 The Shareholders’ meeting of the Target Company shall be attended by all Shareholders and
shall be the highest authority of the Target Company.
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19.1.2 Shareholders’ meetings are composed of regular meetings and extraordinary meetings. The
regular Shareholders’ meetings shall be convened at least once a year. An extraordinary
Shareholders’ Meeting shall be convened if so proposed by the Shareholders representing more
than one-tenth (1/10) of the voting rights, or more than one-third (1/3) of the directors, or the
supervisors.
19.1.3 The Shareholders’ meeting shall be convened by the Board of Directors and chaired by the
chairman; where the chairman is unable or fails to perform his/her duties, the Shareholders’
meeting shall be chaired by a director appointed by more than half of the Board of Directors. If
the Board of Directors is unable or fails to convene the Shareholders’ meeting, the meeting shall
be convened and presided over by the supervisors. If the supervisors fail to convene and
preside over the Shareholders’ meeting, the Shareholders representing more than one-tenth
(1/10) of the voting rights may convene and preside over such meeting. A notice of the
Shareholders’ meeting shall be given to all Shareholders at least fifteen (15) days before the
convening of such meeting, unless all Shareholders agree to waive such noticing period.
19.1.4 The Shareholders’ meeting shall maintain complete and correct minutes of its meetings
including copies of all meeting notices. The minutes of the Shareholders’ meeting and the
resolutions adopted by the Shareholders’ meeting shall be recorded by a secretary for a meeting
designated by the Shareholders’ meeting and shall be circulated among all of the shareholders
within ten (10) days after the close of each meeting. All resolutions of the Shareholders’
meeting shall be signed by all voting Shareholders, and minutes of the Shareholders’ meeting
shall be filed by the secretary and kept in the Shareholders’ meeting minutes book of the Target
Company.
19.1.5 Resolutions of the Shareholders’ meeting may be adopted by written resolution by the
Shareholders, provided that such a resolution is sent to each Shareholder.
19.2 Board of Directors
19.2.1 The Execution Date of this Agreement shall be the date of establishment of the board of
directors (the “Board of Directors” or “Board”).
19.2.2 The Parties unanimously agree that the Board of Directors of the Target Company shall consist
of seven (7) directors; the Investors shall be entitled to jointly nominate two (2) directors
(“Investor Directors”), of which SDIC shall be entitled to nominate one (1) Investor Director,
and Hefei Investor shall be entitled to nominate one (1) Investor Director; and the NIO Parties
shall be entitled to nominate five (5) directors. If the aggregate percentage of equity interests in
the Target Company held by the Investors in the Target Company is lower than five percent
(5%), the Investors shall not be entitled to nominate any director. The Parties agree to vote in
favor of the election of the above nomination at the Shareholders’ Meeting convened to approve
this Transaction in accordance with Clause 4.2 of the Investment Agreement so that the person
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so nominated shall be elected as the directors of the Target Company.
19.2.3 The remuneration to the directors in such capacity and their proxies shall be paid by their
nominating Parties. The costs incurred by the directors or their proxies in connection with
attending Board meetings and performing their obligations as the directors of the Target
Company shall be reimbursed by the Target Company in Renminbi or U.S. Dollars based on
vouchers permissible under the PRC accounting standards. All directors, including the
chairman, shall perform their duties and responsibilities in accordance with the relevant
provisions contained in this Agreement and the articles of association. Each director shall
faithfully fulfil his or her duties in accordance with the provisions of this Agreement and the
Articles of Association, and refrain from any action that would conflict with the interests of the
Target Company.
19.2.4 Each of the directors shall serve a term of office of three (3) years, and may serve consecutive
terms if re-selected. The Parties agree and undertake that if a director nominated by the
Investors or the NIO Parties resigns or is dismissed, or if the seat of the Board becomes vacant
due to other reasons, the Investors or the NIO Parties shall have the right to nominate another
successor and the Parties undertake to in favor of the election of the above nomination as the
director of the Target Company at the Shareholders’ Meeting. The replacement shall serve on
the Board for the remaining term of the replaced director. The Target Company shall file such
change with the registration authority if such filing is so required under the then applicable PRC
Law.
19.2.5 The Board of Directors shall have one (1) chairman. The chairman shall be appointed by the
NIO Parties from the directors nominated by the NIO Parties. The chairman of the Board of
Directors shall be the legal representative of the Target Company and shall have the following
powers and authorities: convening and presiding over meetings of the Board of Directors; and
other powers and authorities granted by the Board of Directors, this Agreement or the articles of
association.
19.2.6 If a matter requires approval of the Board of Directors in accordance with this Agreement or the
articles of association, the chairman shall not be authorized to take any action or sign any
document on behalf of the Target Company in respect of such matter unless and until it has been
duly approved by the Board of Directors.
19.2.7 When the chairman is unable to perform his or her duties (including convening and presiding
over Board meetings) for any reason, he or she shall designate another director to act on his or
her behalf.
19.2.8 The Board of Directors shall convene at least one (1) meeting each quarter, and the Target
Company shall hold a regular meeting within twenty (20) working days after the end of each
quarter. Any one (1) director of the Target Company shall have the right to propose an
extraordinary Board meeting in writing, and
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the chairman of the Board shall convene an extraordinary Board meeting within twenty (20)
days after the receipt of such proposal.
19.2.9 The Board of Directors shall maintain complete and correct minutes of its meetings in Chinese,
including copies of all meeting notices. The minutes of the Board meeting and the resolutions
adopted by the Board meeting shall be recorded by a secretary for the meeting designated by the
Board and shall be circulated among all of the directors within twenty (20) days after the close
of each meeting. All resolutions of the Board meeting shall be signed by all voting directors,
and minutes of the Board meeting shall be filed by the secretary and kept in the Board meeting
minutes book of the Target Company. The nomination, election and replacement of directors
shall be recorded in the Board meeting minutes.
19.2.10 The management of the Target Company shall submit quarterly work reports to the Board
of Directors on regular basis. The contents of a quarterly work report shall include but not be
limited to information pertaining to any related-party transactions and any provision of
guarantee of the Target Company, any bank credit and borrowings, any external investment or
Major expenditure, any disposal of Major assets, execution of any Material contracts that is not
related to Main Business, execution of any contract in relation to intellectual property rights and
etc.
19.2.11 When casting votes on board resolutions, each director shall have one (1) vote.
19.2.12 The quorum for a duly convened board meeting shall be at least one-half (1/2) of all the
directors present in person (including attending via videoconference or other electronic means)
or by proxy. In the absence of a quorum, any resolutions passed at a Board meeting shall be
invalid and have no effect.
19.2.13 Notwithstanding any other provision to the contrary, resolutions may be passed without a
Board meeting if in writing and executed by all directors or a majority of the directors on the
Board (as the case may be) as provided for in Clause 6.1.2, provided that the proposed resolution
is delivered to each of the directors
19.2.14 Resolutions of the Board shall require the affirmative votes of more than half of Directors
(the term “more than” referred to herein shall be inclusive of the number immediately following
thereto) (provided that, for the matters as provided in Clauses 6.1.1 and 6.1.2, such matters shall
only be adopted or submitted for the review by the Shareholders’ meeting upon affirmative
votes of more than three-fourths (3/4) of the directors the directors shall require the unanimous
approval of more than three-fourths (3/4) of the directors; for the matters as provided in Clause
6.1.3, such matters shall only be adopted or submitted for the review by the Shareholders’
meeting upon affirmative votes of
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more than two-third (2/3) of the directors; for the matters as provided in Clause 6.1.4, such
matters shall only be adopted or submitted for the review by the Shareholders’ meeting upon
affirmative votes of more than one-half (1/2) of the directors). If any independent director will
serve on the board of Target Company or if the number of directors of the Target Company
increases in the future, the Parties agree to renegotiate the special voting mechanism. If required
by any of the constitutional documents of NIO Inc., or any Law or regulatory rules applicable to
NIO Inc. (including, without limitation, securities regulation Laws of the U.S. or the applicable
regulatory rules of the U.S. Securities and Exchange Commission), the above matters submitted
to the Board of Directors of the Target Company for decision shall be otherwise submitted to the
Board meeting or the general meeting of NIO Inc. for consideration and resolution.
19.2.15 All Board meetings shall be convened and presided over by the chairman or a director, as
the case may be. The chairman shall give a written notice of a Board meeting to each director
ten (10) working days (or such other period as agreed to by the Investors in writing) in advance,
which shall specify the time, venue and agenda of the meeting. The chairman shall deliver
documents relevant to a Board meeting, if any, to each of the directors at least ten (10) days
prior to the meeting. Meetings of the Board may be conducted in person or in the form of
telephone conference or video conference as long as each participant is able to hear the other
participants clearly and each director so participating shall be deemed to be present at such
meeting. Each director shall have the right to appoint a proxy in writing to attend the meeting,
who may be another director of the Board, and the proxy so appointed shall have the right to
attend the meeting of the Board and vote on the matters under consideration on behalf of the
director who appointed him or her. Any proxy so appointed shall have the same rights as the
director who appointed him or her, and one proxy may represent more than one director. Such
proxy shall have one vote for each director he or she represents and an additional vote if he or
she is also a director in his or her own right. The chairman shall have the same right of one vote
as accorded to each of the other directors. If a Board meeting fails to achieve the quorum set
forth in Clause 19.2.12, such Board meeting shall be adjourned to the fifth (5 ) working day
after the originally scheduled meeting date.
th
19.2.16 All reasonable costs incurred by the directors in connection with attending Board meetings
shall be borne by the Target Company. The Investor Directors shall be protected and
indemnified by the Target Company to the fullest extent possible under applicable Laws,
including without limitation from any liability to any third party resulting from their respective
performance of duties.
19.3 Supervisors
19.3.1 The Target Company shall have two (2) supervisors, of which Anhui High-tech Co. shall be
entitled to nominate one (1) supervisor, and the NIO Parties shall be entitled to nominate one (1)
supervisor. The directors and the Senior Officers
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of the Target Company shall not act as the supervisors of the Target Company. The supervisor
shall serve a term of office of three (3) years, and may serve consecutive terms if re-nominated
by such original nominating Party and re-approved by the Shareholders’ meeting.
19.3.2 The supervisors shall exercise their corresponding power in accordance with the relevant
provisions of the PRC Laws and the articles of association of the Target Company.
19.4 Operation and Management Organization
19.4.1 The Target Company shall have one (1) chief executive officer (“CEO”). The day-to-day
management and operation of the Target Company shall be carried out by the CEO in
accordance with the policies adopted by the Board of Directors from time to time. The CEO
shall be directly responsible to the Board of Directors.
19.4.2 The CEO of the Target Company shall be nominated by the NIO Parties and appointed by the
Board of Directors. The CEO shall serve a term of office of three (3) years, and may serve
consecutive terms upon re-nomination and re-appointment. The CEO may be dismissed and
replaced by the Board of Directors.
19.4.3 The Target Company shall have one (1) chief financial officer who shall be responsible for
internal control and tax matters in respect of finance, accounting and finance (“CFO”). The
CFO of the Target Company shall be nominated by the NIO Parties and appointed by the Board
of Directors. In case the CFO is unable to perform his or her duties properly, the Board of
Directors may dismiss him or her in accordance with the relevant PRC Laws and the labor
contract between the Target Company and the CFO.
19.4.4 The powers and responsibilities of the CEO and the CFO of the Target Company and all
management personnel (collectively, the “Senior Officers”) and the organizational table
indicating the reporting relationship of each Senior Officers are determined by the articles of
association and other internal management documents of the Target Company.
19.4.5 In order to enable the CEO to manage the Target Company duly and effectively, the chairman or
the Board of Directors, as the case may be, shall issue appropriate written authorizations to the
CEO to take actions or sign contracts, agreements or other documents on behalf of the Target
Company within the scope of power conferred upon him under this Agreement, the articles of
association or any Board resolutions.
19.4.6 The CEO, CFO and other Senior Officers of the Target Company shall be exempted from
personal liabilities and indemnified by the Target Company for acts performed in a normal
manner within their respective capacity and authorization, except for claims or charges resulting
from any intentional or
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grossly negligent acts or omissions, or any fraud, graft or serious dereliction of duties.
20 TAXES, FINANCE, AUDIT AND DISTRIBUTION OF PROFIT
20.1 Taxes
The Target Company shall pay taxes in accordance with the relevant PRC Laws applicable to the Target
Company.
20.2 Individual Income Tax
All employees of the Target Company shall pay individual income tax in accordance with the Individual
Income Tax Law of the PRC and other applicable PRC Laws.
20.3 Financial Accounting System
20.3.1 The Target Company shall establish its financial and accounting systems in accordance with the
PRC accounting standards and other relevant PRC Laws, which shall be submitted to the Board
of Directors for approval.
20.3.2 The Target Company shall adopt the accrual basis and debit and credit method for bookkeeping
and shall prepare complete and accurate monthly, quarterly and annual financial statements in
accordance with the PRC accounting standards.
20.3.3 The Target Company shall adopt calendar year as its fiscal year, commencing on January 1 and
ending on December 31 of each year.
20.3.4 Renminbi shall be adopted as the currency of accounts of the Target Company. The Target
Company shall also record accounts in currencies actually used in payments and receipts where
such payments and receipts in cash, bank deposits, other funds, credits and debts, and gains and
expenses are not in Renminbi.
20.3.5 All accounting vouchers, books and statements prepared by the Target Company shall be written
in Chinese.
20.4 Auditing
The Target Company shall engage its external auditor in accordance with Clause 6.1.4(1). The external
auditor shall audit the Target Company’s accounts and prepare an audit report in accordance with the PRC
accounting standards, which report shall be submitted by the CEO and the CFO to the Board of Directors
for approval. All necessary documents and account books of the Target Company shall be provided to the
external auditor. The external auditor shall agree to keep all information obtained during the course of such
auditing confidential.
20.5 Banking and Foreign Exchange
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The Target Company shall open Renminbi and foreign exchange bank accounts (if necessary) after receipt
of its business license. All foreign exchange matters of the Target Company shall be handled in accordance
with relevant PRC Laws in respect of foreign exchange.
20.6 Reserve Funds and Loss Recovery
The Target Company shall pay taxes and retain reserve funds in accordance with relevant PRC Laws. If the
Target Company incurs any loss in any previous year, the profit of the current year shall first be used to
make up such loss. No profits shall be distributed or reinvested unless and until (a) the losses of any
previous year have been fully made up and (b) all reserve funds have been retained in accordance with
relevant PRC Law. Any remaining distributable profit of the Target Company of the previous year that has
been retained by the Target Company and not been used for reinvestment can be distributed together with
the distributable profits of the current year.
21 DURATION AND TERMINATION OF THE TARGET COMPANY
21.1 Duration of the Target Company and Term of this Agreement
The duration of the Target Company shall be fifty (50) years from its incorporation date (“Duration of the
Target Company”).
The term of this Agreement shall be from the effective date hereof to the expiration or early termination
date of the Duration of the Target Company (“Term”), which may be renewable upon mutual agreement of
the Parties.
21.2 Extension of the Term
The Parties shall hold consultations to discuss the extension of the Term at least one (1) year prior to the
expiration of the Term. If the Parties agree to extend the Term, an application for relevant procedures shall
be submitted to the registration authority in accordance with applicable Laws.
21.3 Events of Early Termination
This Agreement may be terminated and the Target Company dissolved prior to the expiration of the Term
upon the occurrence of any of the following events and in accordance with the following provisions:
21.3.1 by either Party, if the Target Company is unable to continue operation during any fiscal year due
to an event of Force Majeure and such situation has existed for a period of one hundred and
eighty (180) days or more;
21.3.2 by either Party, upon approval by the Shareholders’ Meeting, if the Target Company becomes
bankrupt or insolvent, or any of its Major assets (including, without limitation, working capital,
any operation license, permit or Governmental Approval) necessary for the conduct of its
operation activities is
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not obtained, or is withdrawn, forfeited, revoked or expropriated by any Governmental
Authority, or becomes invalid or has expired and is not renewed, as a result of which the Target
Company is unable to conduct normal operation activities or is unable to attain its business
objectives;
21.3.3 by the Investors in any event of any Deemed Liquidation Event set forth in Clause 12.5; and
21.3.4 if the Parties unanimously agree that, the termination of the Target Company is in the best
interests of the Parties, and approved by the Shareholders’ meeting.
21.4 Shareholders’ Meeting to Discuss Early Termination or Dissolution
21.4.1 Upon the occurrence of any of the events of early termination set forth in Clause 21.3 above,
either Party may request that a Shareholders’ Meeting be convened to discuss the early
termination of this Agreement. The Board shall convene a Shareholders’ Meeting within twenty
(20) days of the receipt of such a request in accordance with the provisions regarding the
Shareholders’ Meetings.
21.4.2 At the Shareholders’ meeting, the Shareholders shall use their best efforts to reach a solution
acceptable to all the Parties. If the Shareholders are unable to reach a solution acceptable to all
Shareholders at the Shareholders’ Meeting, the Shareholders shall vote unanimously to dissolve
and liquidate the Target Company.
21.5 Effect of the Termination
If the Target Company fails to renew upon expiration or this Agreement is early terminated in accordance
with Clauses 21.3 and 21.4 above, this Agreement shall become void with no further force and effect (for
the avoidance of doubt, if the termination of the Target Company is due to the fact that the NIO Parties
intend to take a platform company other than the Target Company as the listing company after the
completion of the Restructuring in accordance with Clause 17 hereof, the Investors shall be ensured to have
the same rights under the Transaction Documents in the new platform company), and the Target Company
shall be liquidated and dissolved, and the Shareholders’ Meeting shall establish a liquidation committee to
carry out the liquidation of the Target Company in accordance with relevant PRC Laws and this
Agreement. However, no termination of this Agreement pursuant to Clauses 21.3 and 21.4 above shall have
an effect on any right of a Party to claim compensation for losses or receive indemnification due to any
breach of any representations, warranties, covenants or obligations hereunder prior to the termination of this
Agreement. Furthermore, Clause 12 (Liquidation Preference), this Clause 21.5 (Effect of Termination),
Clause 24 (Confidentiality) and Clause 29 (Miscellaneous) shall survive the termination of this Agreement.
22.1 Events of Force Majeure
22 FORCE MAJEURE
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An event of force majeure (“Force Majeure”) shall mean any act or event which is reasonably
unforeseeable and unavoidable and which is beyond the control of the affected Party, including, without
limitation, earthquake, typhoon, flood, or other acts of nature, fire, war, riots, terrorist acts or any other
unforeseeable or unavoidable act or event which is generally accepted as Force Majeure in international
commercial practice.
22.2 Occurrence of Force Majeure Events
If either Party has been prevented from performing its obligations or responsibilities under this Agreement
because of an event of Force Majeure, it shall notify the other Parties in writing within thirty (30) days after
the occurrence of such event, provide the other Parties with detailed information concerning the event of
Force Majeure and documents evidencing such event, including documentary evidence issued by
government authorities or judicial authorities or any other competent authorities, explaining the reason for
its inability to perform, and act to mitigate damages, if possible.
22.3 Disclaimer of Liability
If an event of Force Majeure occurs, none of the Parties shall be liable for any damage, increased costs, or
losses that the other Parties may sustain because of the failure or delay of performance of any of its
obligations under this Agreement, and such failure or delay shall not be deemed a breach of this
Agreement. The Party encountering the Force Majeure event shall take appropriate means to minimize or
mitigate the effects of Force Majeure and, as soon as practicably possible, attempt to resume performance of
the obligation affected by Force Majeure.
23 REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Each of the Parties hereby represents and warrants to the other Parties that, as of the effective date hereof:
23.1 Existence, Authority and Enforceability
It has the power and authority to execute this Agreement and to perform its obligations hereunder. It is an
entity duly organized and validly existing under the Law of the jurisdiction of incorporation, or an
individual with full capacity for civil conduct; except Hefei Investor, it has completed all decision-making
procedures necessary for its execution of this Agreement. Unless otherwise agreed in this Agreement, this
Agreement has been duly executed by it, and constitutes its lawful, valid and binding obligations,
enforceable against it in accordance with its terms upon the execution of this Agreement.
23.2 No Conflict
Its execution and delivery of this Agreement, and the performance of the obligations hereunder will not (a)
conflict with, or result in a breach of any provision of its constitutional documents; (b) result in any breach,
contradiction, default or event of default of, or trigger any acceleration or termination of rights or any
additional payment
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obligations under, the terms of any contract, agreement or license to which it is a party or by which its
assets or operations are bound or affected; or (c) violate any Law applicable to it.
24.1 General Obligations
24 CONFIDENTIALITY
Unless with the prior written consent of the other Parties or as otherwise provided by this Agreement and
Laws, none of the Parties shall, whether directly or indirectly, disclose, use, or permit its directors,
employees, representatives, agents, advisors and counsel to disclose or use, the following confidential
information:
24.1.1 existence of the Transaction Documents and information in connection with this Transaction;
24.1.2 any discussions between the Parties regarding the execution and performance of this Agreement,
the terms and conditions of this Agreement or any other information in connection with this
Transaction; and
24.1.3 any non-public information relating to the other Parties or any of their affiliates obtained by
either Party in the negotiation of the Transaction with the other Parties or the performance of this
Agreement.
24.2 Special Exemptions
The Parties shall be exempted from the above confidentiality obligations under the following circumstances:
24.2.1 any confidential information may be disclosed to the officers, representatives, agents,
consultants, counsel and other persons of any Party during this Transaction on the need-to-know
basis, provided that such officers, representatives, agents, consultants, counsel and other persons
have assumed the confidentiality obligations with respect to such confidential information;
24.2.2 if any confidential information has been disclosed by any third party and becomes available to
the public which is not attributable to or arises out of any Party, the confidentiality obligations
with respect to such confidential information do not apply to such Party; and
24.2.3 any information has been publicly disclosed or any information has been disclosed in
accordance with any Laws, regulations and/or the requirements of any security regulatory
authority, any stock exchanges and any administrative authority that is responsible for filing,
examination and approval.
24.3 Remedies
The Parties agree that if either Party breaches the confidentiality obligation hereunder, such
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Party shall be in breach of this Agreement, and the other Parties shall have the right to make claim against
the defaulting Party for liability for breach of contract and initiate legal proceedings to prevent such
infringement or take other remedies to prevent further infringement.
24.4 Survival
The confidentiality obligation under this clause shall survive the termination of this Agreement.
25 GOVERNING LAW AND DISPUTE RESOLUTION
25.1 Governing Law
The formation, validity, interpretation, execution of this Agreement and resolution of any disputes arising
hereunder shall be governed by and construed in accordance with the Laws of the PRC.
25.2 Arbitration
25.2.1 Any dispute, controversy, difference or claim arising out of or relating to this Agreement shall
be resolved by the Parties in dispute through amicable consultation. If the Parties fail to resolve
such dispute within sixty (60) days of the date of the written notice given by a Party to the
relevant other Parties indicating the existence of the dispute or requesting the commencement of
negotiation, any Party may refer the dispute to arbitral institution.
25.2.2 Any dispute arising out of performance of this Agreement or relating to this Agreement shall be
submitted to the China International Economic and Trade Arbitration Commission (“CIETAC”)
for arbitration in Beijing in accordance with the arbitration rules of CIETAC effective at the time
of application for arbitration. The arbitration proceedings shall be conducted in Chinese.
25.2.3 The arbitration tribunal shall consist of three (3) arbitrators to be appointed in accordance with
the arbitration rules. The applicant and the respondent shall each appoint one (1) arbitrator, and
the two (2) arbitrators so appointed by the parties shall agree upon the third arbitrator or the
CIETAC shall appoint the third arbitrator.
25.2.4 The arbitration award shall be final and binding on the parties to the arbitration.
25.2.5 The losing Party shall be liable for the costs of the arbitration, all costs and expenses of the
arbitration proceedings and all costs and expenses in relation to the enforcement of any arbitral
award. The arbitral tribunal shall rule upon the costs of the parties not expressly provided for in
this section.
25.3 Continued Performance
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The Parties shall continue to perform the rights and obligations under this Agreement during the negotiation
and arbitration period, other than the disputed matter.
26 EFFECTIVENESS, MODIFICATION AND VALIDITY
26.1 Effectiveness
This Agreement shall come into force and become binding on the Parties upon the execution by the
individuals and the respective authorized representatives of foreign entities among the Parties and the
execution by the legal representatives or the respective authorized representatives of the Chinese entities and
the affixation of their respective company chops, and after the Investment Agreement comes into force and
the Investors have become the shareholder of the Target Company, unless otherwise agreed in this
Agreement.
26.2 Amendments in Writing
This Agreement may be amended or modified by the Parties through mutual consultation. Any amendment
or modification shall be made in writing and become effective upon execution by the Parties hereto.
26.3 Supplemental Agreement
If Hefei Investor and Anhui High-tech Co. intend to amend the provisions of this Agreement during the
implementation of the state-owned assets examination and approval process, the Parties agree to enter into a
separate supplemental agreement to reach an agreement. In case of any inconsistency, such supplemental
agreement shall prevail.
26.4 Validity
If any provisions of this Agreement shall be held, declared or deemed to be illegal, invalid or incapable of
being enforced by any arbitral tribunal, judicial or administrative authority, the legality, validity and
enforceability of all the other provisions of this Agreement shall not be affected or impaired. The Parties
agrees to modify this Agreement or to enter into a supplemental agreement as appropriate through
consultation in good faith so as to restore the original intent of this Agreement and the rights or obligations
that shall be enjoyed or performed by the Parties as initially agreed in this Agreement.
If any provisions of this Agreement shall be amended due to changes of relevant Laws, regulations or
policies or as required by any Governmental Authority, the Parties shall use their best efforts to reach an
agreement on such amendment and enter into relevant agreements so as to restore and confirm the rights or
obligations that shall be enjoyed or performed by the Parties as agreed in this Agreement under the
requirements of relevant Laws, regulations or policies.
27.1 Events of Breach
27 BREACH
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The Parties hereto shall strictly comply with the provisions of this Agreement. Each of the following events
shall constitute an event of breach:
27.1.1 either Party hereto fails to perform or duly and fully perform any of its obligations or covenants
hereunder; or
27.1.2 any of the representations, covenants, undertakings or warranties given by either Party hereto
under this Agreement is materially untrue, inaccurate or incomplete.
27.2 Damages for Breach
The Parties agree that, unless otherwise agreed in this Agreement, in the event of a breach of this Agreement,
the defaulting Party shall indemnify the non-defaulting Party from and against any losses that may be
incurred by non-defaulting Party arising out of the defaulting Party’s breach.
27.3 Other Remedies
The damages for breach shall not affect the right of the non-defaulting Party to require the breaching party to
continue to perform this Agreement or terminate this Agreement.
28.1 Notices
28 NOTICES AND DELIVERY
The Parties agree that any notices relating to this Agreement shall only be effective if it is given in writing.
Delivery in written form includes without limitation to delivery by way of facsimile, courier, registered mail
and email. All such notices shall be deemed to have been given or received (a) on the date when the
recipient receives the notice if delivered by courier or personal delivery; (b) on the seventh (7 ) working
day after it is sent if delivered by registered mail; and (c) upon successfully delivery if sent by email. All
notices shall be deemed effectively given if delivered or sent to the following addresses or email addresses:
th
If to the Investors:
SDIC
Attention: DU Shuo
Address: [***]
Telephone: [***]
Email: [***]
Anhui High-tech Co.
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Attention: LIU Jingran
Address: [***]
Telephone: [***]
Email: [***]
Hefei Construction Co.
Attention: XU Jing
Address: [***]
Telephone: [***]
Email: [***]
If to the NIO Parties:
Attention: LI Bin
Address: [***]
Telephone: [***]
Email: [***]
If to the Target Company:
Attention: LI Bin
Address: [***]
Telephone: [***]
Email: [***]
28.2 Change of Information
If either Party changes its above mailing address or contact information (the “Changing Party”), it shall
notify the other Parties within seven (7) days after the occurrence of such change. If the Changing Party fails
to notify the other Parties of the same in a timely manner, it shall bear the losses arising from such failure.
29.1 Entire Agreement
29 MISCELLANEOUS
This Agreement, the other Transaction Documents and the exhibits attached hereto shall constitute the entire
agreement of the Parties with respect to this Transaction and shall
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supersede all prior written or oral agreements, letter of intent, memorandum of understanding,
representations or other obligations of the Parties with respect to this Transaction (including all forms of
communication), and this Agreement (including any amendments or modifications thereto and the other
Transaction Documents) contains the sole and entire agreement of the Parties with respect to the subject
matters hereof.
29.2 No Authorization
Nothing in the Investors’ implementation of this Transaction shall constitute an authorization of the Investors
of the use of any trademark, tradename, service trademark or logo of the Investors or its affiliates (any
abbreviated or imitative forms of the foregoing, including without limitation “SDIC” and “CMG-SDIC”).
Without prior written consent of the Investors, none of the Target Company, the NIO Parties or any of their
affiliates shall directly or indirectly represent that any goods or services provided by it have been approved
or recognized by any Investors or any of their affiliates.
29.3 Further Action
For the purpose of maintaining and protecting the rights, powers and remedies of the Investors hereunder, the
other Parties shall take all such further acts and actions or cause all such further acts and actions to be taken
and execute or procure the execution of all such further documents, as may be reasonably required by the
Investors from time to time,
29.4 Severability
If any provision of this Agreement is illegal, invalid or incapable of being enforced, in whole or in part, the
legality, validity and enforceability of all the other provisions of this Agreement shall not be affected. The
Parties shall, to the extent reasonable, use their best efforts replace the invalid or unenforceable provision
with a valid and enforceable provision that corresponds as far as possible to the spirit and purpose of the
invalid or unenforceable provision.
29.5 No Waiver
No failure or delay by either Party hereto to exercise and/or enjoy its rights and/or benefits hereunder shall
be deemed as a waiver of such rights and/or benefits, nor shall any partial exercise of such rights and/or
benefits preclude any future exercise of such rights and/or benefits. Any waiver by either Party of any
provision of this Agreement shall not be construed as a waiver of any other provisions of this Agreement, nor
shall such waiver be construed as a waiver of such provision with respect to any other event or
circumstances, whether in the past, at present or in future. Furthermore, the remedies provided in this
Agreement be cumulative and not exclusive of any provided by Laws.
29.6 Assignment
Subject to relevant provisions of this Agreement, the Investors shall have the right to assign or transfer its
equity interest in the Target Company and the rights, interests and obligations hereunder to any third party
except for the competitors of the NIO Parties set forth in Exhibit
53 / 65
IV (the “NIO Parties Competitors”). In the event that the license or consent of any Party hereto is required
for such transfer, such Party shall give its utmost cooperation. In particular, SDIC, Anhui High-tech Co. and
Hefei Investor have the right to transfer all or part of their rights, interests and obligations under this
Agreement to any of their affiliates or any third party agreed by the NIO Parties, and the relevant transferee
shall recognize and consent to all provisions of this Agreement, and together with the original contracting
parties, to re-enter into this Agreement or a supplementary agreement or joining agreement to clarify the
rights, interests and obligations of the transferee under this Agreement. In respect of such transfer, the other
Parties to this Agreement hereby waive their respective pre-emptive rights and any other prior right or right
of priority that they may be entitled to in accordance with applicable PRC Laws, this Agreement, the articles
of association of the Target Company or any other matters. Unless otherwise agreed in this Agreement, none
of the Parties shall assign or transfer any of its rights, benefits or obligations under this Agreement without
the prior written consent of the other Parties. No assignment of rights, benefits or obligations in violation of
this section shall be valid.
This Agreement shall be binding upon, inure to the benefit of and be effective for the Parties and their
respective successors and assigns permitted hereunder. In addition, unless otherwise set forth herein, no
third party is intended to be a beneficiary of this Agreement.
29.7 Costs and Expenses
Any costs, expenses or fees of any nature incurred by either Party in connection with the preparation and
execution of this Agreement and the articles of association shall be borne by the incurring Party, unless the
Parties agree in writing that such costs, expenses or fees shall be borne by the Target Company.
29.8 No Agency
Nothing in this Agreement shall be construed to constitute either Party the agent or partner of the other
Parties. On no account may either Party create (or hold itself out to third person as being able to create) any
binding obligation on behalf of the other Parties without the prior written consent of the Parties.
29.9 Governmental Format Provisions
In the event that a separate agreement is executed in accordance with the forms of any Governmental
Authority is required for the purpose of requesting performance of a specific act by any Governmental
Authority with respect to the Transaction contemplated by this Agreement, this Agreement shall have full
priority over this Agreement and such agreement may only be used to request performance of such specific
act from any Governmental Authority and shall not be used to create and prove the rights and obligations of
the relevant parties with respect to the matters stipulated by this Agreement.
29.10 Suspending and Restoring the Effectiveness
The Parties agree and acknowledge that, the effectiveness of provisions in Clause 6, Clause 7, Clause 8,
Clause 9, Clause 10, Clause 11, Clause 12, Clause 13 and Clause 14 hereof shall
54 / 65
be suspended on the date of acceptance of the application for Qualified IPO of the Target Company, and
rights and obligations of all the Shareholders of the Target Company shall be subject to the provisions of the
then effective articles of association of the Target Company. If the application for Qualified IPO of the
Target Company is revoked, rejected, disapproved or declined, or if the application for the Qualified IPO of
the Target Company is approved, registered or filed but the Qualified IPO fails to be completed within the
period of relevant approval documents, the effectiveness of such provisions in Clause 6, Clause 7, Clause 8,
Clause 9, Clause 10, Clause 11, Clause 12, Clause 13 and Clause 14 hereof shall restore, and the
effectiveness of such provisions shall be deemed that they have never become suspended. If a breach of
agreement occurs during the suspension period due to the purpose of this Clause, the non-defaulting Party
shall have the right to claim against the defaulting Party for breach of contract and for damage.
29.11 Priority
In case of conflict between any provisions of this Agreement and the articles of association or other
Transaction Documents, this Agreement shall prevail.
29.12 Counterparts and Languages
This Agreement shall be written in Chinese and be executed in eight (8) originals, each of which shall have
the same legal effect. Each Party shall hold one (1) original.
[SIGNATURE PAGES FOLLOW]
55 / 65
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
CMG-SDIC Capital Management Co., Ltd.
(Company Chop)
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
Anhui Provincial Emerging Industry Investment Co.,
Ltd.
(Company Chop)
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
HeFei City Construction and Investment Holding
(Group) Co., Ltd.
(Company Chop)
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
NIO Inc.
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
NIO User Enterprise Limited
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
NIO Power Express Limited
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
(This is the Signature Page to the Shareholders Agreement in Respect of NIO China)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by their duly authorized
representatives as of the date first written above.
NIO (Anhui) Holding Co., Ltd
(Company Chop)
By: /s/ Authorized Signatory
Name: Authorized Signatory
Title:
List of Principal Subsidiaries and Consolidated Variable Interest Entities
Exhibit 8.1
Subsidiaries:
NIO Nextev Limited
NIO User Enterprise Limited
XPT Limited
NIO Power Express Limited
XPT Inc.
NIO Performance Engineering Limited
NIO GmbH
NIO USA, Inc.
XPT Technology Limited
NIO Co., Ltd.
Shanghai NIO Sales and Services Co., Ltd.
XPT (Jiangsu) Investment Co., Ltd.
NIO Energy Investment (Hubei) Co., Ltd.
XPT (Jiangsu) Automotive Technology Co., Ltd.
Shanghai NIO Energy Technology Co., Ltd.
Wuhan NIO Energy Co., Ltd.
XPT (Nanjing) E-Powertrain Technology Co., Ltd.
XPT (Nanjing) Energy Storage System Co., Ltd.
XTRONICS (Nanjing) Automotive Intelligence Technologies Co., Ltd.
Shanghai XPT Technology Co., Ltd.
Consolidated variable interest entities and their subsidiaries:
Beijing NIO Network Technology Co., Ltd.
Shanghai Anbin Technology Co., Ltd.
NIO Technology Co., Ltd.
Shanghai NIO New Energy Automobile Co., Ltd.
Place of Incorporation
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Delaware
United Kingdom
Germany
California
Hong Kong
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
PRC
Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Bin Li, certify that:
1.
2.
3.
4.
5.
(a)
(b)
(c)
(d)
(a)
(b)
I have reviewed this annual report on Form 20-F of NIO Inc. (the “Company”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods
presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting; and
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons
performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: May 14, 2020
/s/ Bin Li
By:
Name: Bin Li
Title: Chief Executive Officer
Exhibit 12.2
Certification by the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Wei Feng, certify that:
1.
2.
3.
4.
5.
(a)
(b)
(c)
(d)
(a)
(b)
I have reviewed this annual report on Form 20-F of NIO Inc. (the “Company”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods
presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting; and
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons
performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: May 14, 2020
/s/ Wei Feng
By:
Name: Wei Feng
Title: Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the Annual Report of NIO Inc. (the “Company”) on Form 20-F for the fiscal year ended December
31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bin Li, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
as amended; and
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: May 14, 2020
/s/ Bin Li
By:
Name: Bin Li
Title: Chief Executive Officer
Certification by the Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the Annual Report of NIO Inc. (the “Company”) on Form 20-F for the fiscal year ended December
31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wei Feng, Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
as amended; and
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
Date: May 14, 2020
/s/ Wei Feng
By:
Name: Wei Feng
Title: Chief Financial Officer
Consent of Independent Registered Public Accounting Firm
Exhibit 15.1
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-229952) of NIO Inc. of our
report dated May 14, 2020 relating to the financial statements and the effectiveness of internal control over financial reporting, which
appears in this Form 20-F.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
May 14, 2020
Exhibit 15.2
May 14, 2020
Building 20, No. 56 AnTuo Road, Anting Town, Jiading District
Shanghai 201804, People’s Republic of China
Dear Sir/Madam:
We hereby consent to the reference of our name under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Corporate Structure” and “Item 4. Information on the Company—C. Organizational Structure” in NIO Inc.’s Annual Report on Form 20-
F for the year ended December 31, 2019 (the “Annual Report”), which will be filed with the Securities and Exchange Commission (the
“SEC”) on the date hereof, and further consent to the incorporation by reference, in NIO Inc.’s registration statement on Form S-8 (File
No. 333-229952), of the summary of our opinion under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Corporate Structure” and “Item 4. Information on the Company—C. Organizational Structure” in the Annual Report.
We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated
thereunder.
Very truly yours,
/s/ Han Kun Law Offices
Han Kun Law Offices