Amendment No.1 to Draft Registration Statement
Table of Contents

As confidentially submitted to the Securities and Exchange Commission on June 7, 2018

Registration No. 333-                

 

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

NIO Inc.

(Exact name of Registrant as specified in its charter)

 

 

Not Applicable

(Translation of Registrant’s name into English)

 

 

 

Cayman Islands   3711   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Building 20, No. 56 AnTuo Road, Jiading District

Shanghai, 201804

People’s Republic of China

+86 21 6908 3306

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Z. Julie Gao, Esq.

Will H. Cai, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

c/o 42/F, Edinburgh Tower, The Landmark

15 Queen’s Road Central

Hong Kong

+852 3740-4700

 

Allen Wang, Esq.

Latham & Watkins

18th Floor, One Exchange Square

8 Connaught Place, Central

Hong Kong

+852-2912-2500

 

 

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

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 7(a)(2)(B) of the Securities 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.

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Proposed maximum
aggregate

offering price(2)(3)

 

Amount of

registration fee

Ordinary Shares, par value US$0.00025 per share(1)

  US$   US$

 

 

(1) American depositary shares issuable upon deposit of ordinary shares registered hereby will be registered under a separate registration statement on Form F-6 (Registration No. 333-                ). Each American depositary share represents                ordinary shares.
(2) Includes ordinary shares that are issuable upon the exercise of the underwriters’ over-allotment option. Also includes ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public. These ordinary shares are not being registered for the purpose of sales outside the United States.
(3) Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. We [and the selling shareholders] may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

PROSPECTUS (Subject to Completion)

Issued                 , 2018.

American Depositary Shares

 

LOGO

NIO Inc.

Representing                  Ordinary Shares

 

 

NIO Inc. is offering              American depositary shares, or ADSs, [and the selling shareholders identified in this prospectus are offering              ADSs]. [We will not receive any proceeds from the sale of ADSs by the selling shareholders.] This is our initial public offering and no public market exists for our ADSs or ordinary shares. Each ADS represents              of our ordinary shares, par value US$0.00025 per share. We anticipate that the initial public offering price per ADS will be between US$             and US$             .

 

 

We intend to apply for the listing of our ADSs on the [New York Stock Exchange/ NASDAQ Global Market] under the symbol “NIO.”

We are an “emerging growth company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.

 

 

Investing in our ADSs involves risks. See “Risk Factors” beginning on page 13.

 

 

PRICE US$                 PER ADS

 

 

 

      

Price to

Public

      

Underwriting
Discounts

and

Commissions

      

Proceeds to us

      

[Proceeds to

Selling

Shareholders

 

Per ADS

       US$                      US$                      US$                      US$              

Total

       US$                      US$                      US$                      US$            

[(1) We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting.”]

We [and the selling shareholders] have granted the underwriters the right to purchase up to an additional                ADSs to cover over-allotments at the initial public offering price less the underwriting discount.

Neither the United States Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ADSs to purchasers on             , 2018.

 

 

 

Morgan

Stanley

  

Goldman

Sachs

(Asia) L.L.C.

  

BofA

Merrill

Lynch

   Citigroup   

Credit

Suisse

  

Deutsche

Bank

Securities

  

J.P.

Morgan

  

UBS

Investment

Bank

   

                    , 2018.


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TABLE OF CONTENTS

 

Prospectus Summary

     1  

The Offering

     8  

Summary Consolidated Financial Data

     10  

Risk Factors

     13  

Special Note Regarding Forward-Looking Statements

     59  

Use of Proceeds

     60  

Dividend Policy

     61  

Capitalization

     62  

Dilution

     64  

Exchange Rate Information

     66  

Enforceability of Civil Liabilities

     67  

Corporate History and Structure

     69  

Selected Consolidated Financial Data

     75  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     79  

Industry

     99  

Business

     110  

Regulation

     135  

Management

     151  

Principal [and Selling] Shareholders

     159  

Related Party Transactions

     161  

Description of Share Capital

     162  

Description of American Depositary Shares

     174  

Shares Eligible for Future Sale

     185  

Taxation

     187  

Underwriting

     194  

Expenses Related to this Offering

     205  

Legal Matters

     206  

Experts

     207  

Where You Can Find Additional Information

     208  

Index to Consolidated Financial Statements

     F-1  
 

 

 

You should rely only on the information contained in this prospectus or in any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free writing prospectus. We are offering to sell, and seeking offers to buy, the ADSs, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the ADSs.

We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of the prospectus outside the United States.

Until             , 2018 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to invest in our ADSs. This prospectus contains information from an industry report commissioned by us and prepared by Frost & Sullivan, an independent research firm, to provide information regarding our industry and our market position in China and globally. We refer to this report as the “Frost & Sullivan Report.”

Our Mission

Our mission is to shape a joyful lifestyle by offering premium smart electric vehicles and being the best user enterprise.

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 the 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 ( LOGO ), 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 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 ES8, to the public at our NIO Day event on December 16, 2017 and plan to make deliveries to the users starting from July 2018. The ES8 is a 7-seater all aluminum alloy body, premium electric SUV that offers exceptional performance, functionality and mobility lifestyle. It is equipped with our proprietary electric powertrain system capable of accelerating from zero to 100 km per hour in 4.4 seconds and delivering a New European Driving Cycle driving range of up to 355 km and a maximum range of up to 500 km in a single charge. As of May 31, 2018, we had unfilled reservations for more than 18,000 ES8s with deposits. Of these reservations, approximately 17,000 consisted of reservations for which only an initial fully refundable deposit of RMB5,000 had been made, while approximately 1,000 consisted of reservations for vehicles which had been put into production. Upon signing of a purchase agreement, which is required prior to a vehicle entering into production, the initial RMB5,000 deposit becomes non-refundable and the user must pay an additional RMB40,000 non-refundable deposit.

We plan to launch our second volume manufactured electric vehicle, the ES6, by the end of 2018 and start initial deliveries in the first half of 2019. The ES6 is a 5-seater, high-performance premium electric SUV, set at a lower price point than the ES8 to target a broader customer base.

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 plan to offer a comprehensive, convenient and innovative suite of charging solutions. These solutions include Power Home, our home charging solution, Power Swap, our innovative battery swapping service, Power Mobile, our mobile charging service through charging trucks, and Power Express, our 24-hour on-demand pick-up and drop-off



 

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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 over 214 thousand public charging piles. Beyond charging solutions, we aim to offer comprehensive value-added services to our users, such as statutory and third-party liability 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 planned ES6 and to other future models. Our electric powertrain 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 ADAS system, is enabled by 23 sensors and equipped with the Mobileye EyeQ4 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 extremely 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 and our mobile application. NIO Houses are not only the showrooms for our vehicles, 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 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 championship winning Formula E team.

Market Opportunities

China is the world’s largest passenger vehicle market. The premium segment in this largest market continues to take market share from the entry and mid-range segments, and is expected to continue to grow at a compound annual growth rate, or CAGR, of 12.4% from 2017 to 2022, according to Frost and Sullivan. The SUV segment in China is also expected to outpace industry growth for the next five years, reaching 16.9 million units in 2022, representing a CAGR of 9.4% during the period.

China is also the largest new energy vehicle, or NEV, market in the world and continues to account for more than half of global battery electric vehicle, or BEV, sales. China’s BEV sales are expected to experience more than 40% annualized growth until 2022, according to Frost & Sullivan. We are targeting the premium BEV segment in order to take advantage of the growth opportunities in that segment and our first two vehicles, ES8 and ES6, specifically target the premium SUV segment.



 

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China is a clear leader in the global NEV market and notably skewed to BEVs

The Chinese NEV market benefits from favorable policies and strong government support. China’s NEV market has outperformed the global NEV market significantly, growing at a CAGR of 141.5% from approximately 21.8 thousand units in 2013 to 741.9 thousand units in 2017, according to Frost and Sullivan. During the same period, global NEV sales recorded a CAGR of 16.2%. China is expected to continue to lead the growth of the global NEV market, reaching 3.6 million units in 2022, growing at a CAGR of 37.1% from 2017 to 2022.

NEVs generally include three types: BEVs, hybrid electric vehicles, or HEVs, and plug-in hybrid electric vehicles, or PHEVs. Among these, the BEV is considered the most eco-friendly as a zero emission solution. Recognizing these benefits, the Chinese government favors BEVs to other NEVs and provides BEVs greater incentives. With battery technology improving and charging network expanding, consumer concern over driving range has also lessened, which is another factor contributing to the BEV market growth.

As a result, BEVs have witnessed the fastest growth among all NEV types in the past five years, growing from 13 thousand units in 2013 to 476 thousand units in 2017 at a CAGR of 147.9% in China, as compared to 68.2% in the global market. China had the highest share of BEVs as percentage of NEVs at 64.1% as compared to 27.3 % for the global market in 2017. China has become the largest BEV market globally, accounting for approximately 54.3% of the overall global BEV market in 2017. Frost & Sullivan predicts that over 2.6 million BEVs are expected to be sold in China in 2022, accounting for 64.6% of the global BEV market. During the period from 2017 to 2022, the sales volume of BEVs is expected to grow at a CAGR of 40.8% in China.

Largely unserved premium EV market in China

Among the top 10 BEV brands with the highest sales volumes in 2017, only Tesla was in the premium segment, while the other nine brands were in the entry segment and the average prices post subsidies of those other nine brands were all below RMB170,000, representing a largely unserved premium EV market in China. The following chart shows the China BEV SUV market landscape:

 

LOGO

 

Note: (1) Manufacturer suggested retail price pre subsidies

Source: Frost & Sullivan Report



 

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As the above chart indicates, the ES8 boasts price advantages over the imported premium models, such as Tesla Model X due to cost advantages from localized manufacturing and costs subsidies and the absence of customs duties and purchasing taxes. Currently we believe no premium BEV is available to Chinese consumers at competitive pricing and the ES8 is expected to face limited competition initially from premium BEVs.

Our Competitive Strengths

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

 

    Pioneer in China’s premium EV market;

 

    Redefining EV experience with cutting-edge proprietary technology, visionary engineering and smart connectivity;

 

    Revolutionary and comprehensive charging solutions;

 

    User enterprise advocating a unique and holistic mobility lifestyle;

 

    Strategic partnerships with global best-in-class technology and industrial leaders; and

 

    World-class management, global talent pool and tech savvy investor base.

Our Strategies

We plan to pursue the following growth strategies to expand our business:

 

    Successfully launch future models such as the ES6 timely to target a broader customer base and expand our product lineup;

 

    Build our own manufacturing capacity and continue to optimize manufacturing costs by leveraging a common platform and production flexibility;

 

    Expand our infrastructure and service coverage nationwide to improve user experience;

 

    Continue to focus on technological innovation; and

 

    Create more monetization opportunities during the lifetime ownership.

Our Challenges

We face risks and uncertainties in realizing our business objectives and executing our strategies, including those relating to:

 

    Our ability to develop and manufacture a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven and still evolving;

 

    Our ability to grow manufacturing in collaboration with partners;

 

    Our ability to manufacture, launch and sell electric vehicles meeting customer expectations;

 

    Our ability to provide convenient charging solutions to our customers;

 

    Our ability to satisfy the mandated safety standards relating to motor vehicle;

 

    Our ability to secure supply of raw materials or other components used in our vehicles;


 

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    Our ability to secure sufficient reservations and sales of the ES8;

 

    Our ability to control costs associated with our operations;

 

    Our ability to build our NIO brand; and

 

    Our ability to recruit, train and retained dedicated executive officers, key employees and qualified personnel.

Corporate History and Structure

We were founded in November 2014, as Nextev Inc., and changed our name to NIO Inc. in July 2017. We conduct our operations through our subsidiaries in China, the United States, Germany and the United Kingdom.

In April 2018, we entered into a series of contractual arrangements with Shanghai Anbin Technology Co., Ltd. and Beijing NIO Network Technology Co., Ltd., our VIEs, and their shareholders, to conduct certain future operations in China. In the future, we expect that our in-house vehicle manufacturing will be carried out primarily by Shanghai NIO New Energy Automobile Co., Ltd., or NIO New Energy, which is controlled by us through Shanghai Anbin Technology Co., Ltd. and/or its subsidiaries and we expect Beijing NIO Network Technology Co., Ltd. or Beijing NIO, will focus on value-added telecommunications services, including without limitation, performing internet services, operating our website and mobile application as well as holding certain related licenses. See “Corporate History and Structure.”



 

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The chart below summarizes our corporate structure and identifies our significant subsidiaries, our VIEs and their significant subsidiaries, as of the date of this prospectus:

 

LOGO

Implications of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards.

We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the preceding three-year period, issued more than US$1.07 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the



 

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Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

Corporate Information

Our principal executive offices are located at Building 20, No. 56 AnTuo Road, Jiading District, Shanghai, 201804, People’s Republic of China. Our telephone number at this address is +86 21 6908 3306. Our registered office in the Cayman Islands is located at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.nio.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is [Law Debenture Corporate Services Inc.], located at [801 2nd Avenue, Suite 403, New York, New York 10017].

Conventions that Apply to this Prospectus

Unless otherwise indicated or the context otherwise requires, references in this prospectus to:

 

    “ADAS” are to advanced driver assistance system;

 

    “ADSs” are to our American depositary shares, each of which represents            ordinary shares;

 

    “AI” are to artificial intelligence;

 

    “BEV” are to battery electric passenger vehicles;

 

    “China” or the “PRC” are to the People’s Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, Macau and Taiwan;

 

    “EV” are to electric passenger vehicles;

 

    “ICE” are to internal combustion engine;

 

    “NEV” are to new energy passenger vehicles;

 

    “NIO” “we,” “us,” “our company” and “our” are 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” are to our ordinary shares, par value US$0.00025 per share;

 

    “RMB” and “Renminbi” are to the legal currency of China; and

 

    “US$,” “U.S. dollars,” “USD,” “$,” and “dollars” are to the legal currency of the United States.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.



 

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THE OFFERING

 

Offering price

   We currently estimate that the initial public offering price will be between US$             and US$             per ADS.

ADSs offered by us

                ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).

[ADSs offered by the selling shareholders

  


             ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).]

ADSs outstanding immediately after this offering

  


             ADSs (or              ADSs if the underwriters exercise their over-allotment option in full).

Ordinary shares outstanding immediately after this offering

  


             ordinary shares (or              ordinary shares if the underwriters exercise their over-allotment option in full).

The ADSs

   Each ADS represents              ordinary shares, par value US$0.00025 per share.
   The depositary will hold ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time.
   We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our ordinary shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.
   You may surrender your ADSs to the depositary in exchange for ordinary shares. The depositary will charge you fees for any exchange.
   We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.
   To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus.


 

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Over-allotment option

   We [and the selling shareholders] have granted to the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of              additional ADSs.

Use of proceeds

   We expect that we will receive net proceeds of approximately US$             million from this offering, assuming an initial public offering price of US$             per ADS, which is the midpoint of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
   We intend to use the net proceeds from this offering for (i) research and development of products, services and technology, (ii) selling and marketing and development of sales channels, including NIO Houses, (iii) development of our manufacturing facilities and the roll-out of our supply chain, and (iv) general corporate purposes and working capital. See “Use of Proceeds” for more information.
   [We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.]

Lock-up

   [We, our directors, executive officers, all of our existing shareholders and certain holders of share-based awards have agreed with the underwriters not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus.] See “Shares Eligible for Future Sale” and “Underwriting.”

Directed Share Program

   At our request, the underwriters have reserved for sale, at the initial public offering price, up to an aggregate of            ADSs offered in this offering to some of our directors, officers, employees, business associates and related persons through a directed share program.

Listing

   We intend to apply to have the ADSs listed on the [New York Stock Exchange/NASDAQ Global Market] under the symbol “NIO.” Our ADSs and shares will not be listed on any other stock exchange or traded on any automated quotation system.

Payment and settlement

   The underwriters expect to deliver the ADSs against payment therefor through the facilities of the Depositary Trust Company on            , 2018.

Depositary

  

Custodian

  


 

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following summary consolidated statements of comprehensive loss and cash flow data for the years ended December 31, 2016 and 2017, and summary consolidated balance sheet data as of December 31, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statements of comprehensive loss and cash flow data for the three months ended March 31, 2017 and 2018, and summary consolidated balance sheet data as of March 31, 2018 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. 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. Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

    Year Ended December 31,     Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     RMB     US$     RMB     RMB     US$  
    (in thousands, except for shares and per share data)  

Summary Consolidated Statements of Comprehensive Loss

           

Operating expenses:(1)

           

Research and development(1)

   
(1,465,353

   
(2,602,889

    (414,962     (509,313     (690,650     (110,106

Selling, general and administrative(1)

    (1,137,187    
(2,350,707

    (374,758     (443,262     (773,218     (123,269
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   
(2,602,540

   
(4,953,596

    (789,720     (952,575     (1,463,868     (233,375
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

   
(2,602,540

   
(4,953,596

    (789,720     (952,575     (1,463,868     (233,375

Interest income(1)

   
27,556
 
   
18,970
 
    3,024       1,881       28,437       4,534  

Interest expenses

    (55     (18,084     (2,883           (5,200     (829

Share of losses of equity investee

          (5,375     (857           (833     (133

Investment income

   
2,670
 
   
3,498
 
    558       101              

Other income/(loss), net

   
3,429
 
   
(58,681

    (9,355     (7,796     (87,675     (13,978
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense

    (2,568,940     (5,013,268     (799,233     (958,389     (1,529,139     (243,781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

    (4,314     (7,906     (1,260     (2,182     (1,883     (300
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   
(2,573,254

   
(5,021,174

    (800,493     (960,571     (1,531,022     (244,081
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

    (981,233     (2,576,935     (410,824     (1,094,190     (2,421,129     (385,985

Net loss attributable to non-controlling interests

    36,938      
36,440
 
    5,809       11,309       8,242       1,314  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc.

   
(3,517,549

   
(7,561,669

    (1,205,508     (2,043,452     (3,943,909     (628,752
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (2,573,254     (5,021,174     (800,493     (960,571     (1,531,022     (244,081

Other comprehensive loss

           

Foreign currency translation adjustment, net of nil tax

   
55,493
 
   
(124,374

    (19,828     (12,766     (152,998     (24,390
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income/(loss)

    55,493       (124,374     (19,828     (12,766     (152,998     (24,390
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss

   
(2,517,761

   
(5,145,548

    (820,321     (973,337     (1,684,020     (268,471
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

    (981,233     (2,576,935     (410,824     (1,094,190     (2,421,129     (385,985
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to non-controlling interests

    36,938       36,440       5,809       11,309       8,242       1,314  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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    Year Ended December 31,     Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     RMB     US$     RMB     RMB     US$  
    (in thousands, except for shares and per share data)  

Comprehensive loss attributable to ordinary shareholders of NIO Inc.

   
(3,462,056

   
(7,686,043

    (1,225,336     (2,056,218     (4,096,907     (653,142
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing net loss per share

           

Basic and diluted

    16,697,527       21,801,525       21,801,525       20,515,137       26,561,329       26,561,329  

Net loss per share attributable to ordinary shareholders

           

Basic and diluted

    (210.66     (346.84     (55.29     (99.61     (148.48     (23.67

 

(1) Share-based compensation was allocated in operating expenses as follows:

 

     Year Ended December 31,      Three Months Ended March 31,  
     2016      2017      2017      2018  
     RMB      RMB      US$      RMB      RMB      US$  
     (in thousands)  

Research and development expenses

     14,484        23,210        3,700        5,083        8,920        1,422  

Selling, general and administrative expenses

     62,200        67,086        10,695        18,513        33,200        5,293  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     76,684        90,296        14,395        23,596        42,120        6,715  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents our summary consolidated balance sheet data as of December 31, 2016 and 2017 and March 31, 2018.

 

    As of December 31     As of March 31,  
    2016     2017     2018  
                      Actual     Pro Forma(1)     Pro Forma
As Adjusted(2)
 
    RMB     RMB     US$     RMB     US$     RMB     US$     RMB     US$  
    (in thousands)  

Selected Consolidated Balance Sheet Data:

                 

Cash and cash equivalents

    581,296       7,505,954       1,196,626       5,522,972       880,492       5,522,972       880,492      

Restricted cash

          10,606       1,691       10,523       1,678       10,523       1,678      

Property, plant and equipment, net

    833,004       1,911,013       304,660       2,563,370       408,661       2,563,370       408,661      

Total assets

    1,770,478       10,468,034       1,668,851       9,427,700       1,502,998       9,427,700       1,502,998      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    825,264       2,402,028       382,939       2,935,044       467,915       2,935,044       467,915      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mezzanine equity

    4,861,574       19,657,786       3,133,914       22,157,640       3,532,449                  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ (deficit)/equity

    (3,916,360     (11,591,780     (1,848,002     (15,664,984     (2,497,366     6,492,656       1,035,083      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shares outstanding

    17,773,459       23,850,343       3,802,305       27,656,543       27,656,543       841,525,128       841,525,128      

 

(1) The consolidated balance sheet data as of March 31, 2018 are adjusted on a pro forma basis to give effect to the automatic conversion of all of our outstanding preferred shares into 841,525,128 ordinary shares immediately prior to the completion of this offering.


 

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(2) The consolidated balance sheet data as of March 31, 2018 are adjusted on a pro forma as adjusted basis to give effect to (i) the automatic conversion of all of our outstanding preferred shares into 841,525,128 ordinary shares immediately prior to the completion of this offering; and (ii) the sale of              ordinary shares in the form of ADSs by us in this offering at an initial public offering price of US$             per ADS, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option.

The following table presents our summary consolidated cash flow data for the years ended December 31, 2016 and 2017 and the three months ended March 31, 2017 and 2018.

 

    For the Year Ended December 31,     For the Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     RMB     US$     RMB     RMB     US$  
    (in thousands)  

Summary Consolidated Cash Flow Data:

         

Net cash used in operating activities

    (2,201,564     (4,574,719     (729,319     (1,049,773     (1,559,259     (248,584

Net cash provided by/(used in) investing activities

    117,843       (1,190,273     (189,758     (330,984     (515,917     (82,249

Net cash provided by financing activities

    2,292,704       12,867,334       2,051,356       1,228,864       322,872       51,475  

Effects of exchange rate changes on cash and cash equivalents

    40,539       (168,120     (26,800     1,767       (231,187     (36,856

Net increase in cash and cash equivalents

    249,522       6,934,222       1,105,479       (150,126     (1,983,491     (316,214

Cash, cash equivalents and restricted cash at beginning of the year

    347,109       596,631       95,117       596,631       7,530,853       1,200,595  

Cash, cash equivalents and restricted cash at end of the year

    596,631       7,530,853       1,200,596       446,505       5,547,362       884,381  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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RISK FACTORS

An investment in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ADSs. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ADSs could decline, and you may lose all or part of your investment.

Risks Relating to Our Business

Our ability to develop and manufacture a car of sufficient quality and appeal to customers on schedule and on a large scale is unproven and 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 and in the future in our planned manufacturing plants in China.

Our development and manufacturing of our first volume manufactured vehicle, the ES8, 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, particularly as we plan to eventually commence our own manufacturing in-house;

 

    delays or disruptions in our supply chain; and

 

    other delays and cost overruns.

We plan to begin making deliveries of the ES8 in July 2018. We do not expect to deliver our second planned vehicle, the ES6, until the first half of 2019, and we may not successfully develop the ES6. Our vehicles may not meet customer expectations and our future models, including the ES6, 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.

We have negative cash flows from operation, have not generated revenues and have not been profitable, all of which may continue in the future.

Historically we have not generated revenues and have not been profitable since our inception. We incurred net losses of RMB2,573.3 million, RMB5,021.2 million (US$800.5 million) and RMB1,531.0 million

 

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(US$244.1 million) in 2016, 2017 and three months ended March 31, 2018, respectively. In addition, we had negative cash flows from operating activities of RMB2,201.6 million, RMB4,574.7 million (US$729.3 million) and RMB1,559.3 million (US$248.6 million) in 2016, 2017 and three months ended March 31, 2018, respectively. We have made significant up-front investments in research and development and selling, general and administrative expenses to rapidly develop and expand our business. We expect to continue to invest significantly in research and development and sales and marketing, general and administrative expenses, 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, 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.

We have a limited operating history and face significant challenges as a new entrant into our industry.

We were formed in 2014 and plan to begin making deliveries to the public of our first volume manufactured vehicle, the ES8, in July 2018. We are currently developing our second vehicle, the ES6, for delivery in 2019.

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 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

 

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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.

Manufacturing in collaboration with partners is subject to risks.

We have entered into an arrangement with Jianghuai Automobile Group Co., Ltd., or JAC, for the manufacture of the ES8 for five years. The ES8 is 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 and potentially other future vehicles with us. Pursuant to our arrangement with JAC, we pay JAC for each vehicle produced on a per-vehicle basis monthly for the first three years. We may enter into similar arrangements in the future for other vehicles. We also plan to initially manufacture the ES6 in partnership with JAC at its Hefei manufacturing plant. 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 agreed time of start of production, to the extent the Hefei manufacturing plant incurs any operating losses, we have agreed to compensate JAC for such operating losses. 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. The occurrence of 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 enjoys subsidies from China’s central government and several local governments. 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. According to a newly released announcement by the

 

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Chinese government, the tariff on imported passenger vehicles will be reduced to 15% starting from July 1, 2018. As a result, our pricing advantage could be diminished. On April 17, 2018, the National Development and Reform Commission, or NDRC, held a press conference, announcing that China intends to lift the limits on foreign ownership of auto manufacturers by 2022 for ICE vehicles and in 2018 for EVs. As a result, foreign EV competitors, such as Tesla, could build wholly-owned facilities in China without the need for a domestic joint venture partner. These changes could increase our competition and reduce our pricing advantage.

Our vehicles also benefit from government policies including tariffs on imported cars. For example, China’s central government has announced a phase-out schedule for the subsidies provided for purchasers of certain NEVs, which provides that the amount of subsidies provided for purchasers of certain new energy vehicles in 2019 and 2020 will be reduced by 20% as compared to 2017 levels. Any reduction in national subsidies will also lower the maximum local subsidies that can be provided. Furthermore, China’s central government provides certain local governments with funds and subsidies to support the roll out of a charging infrastructure. See “Regulation—Favorable Government Policies on New Energy Vehicles in the PRC.” These policies are subject to changes 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 electric vehicles, including the ES8, may not perform in line with customers’ expectations. For example, our electric 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 electric 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 electric 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 plan to deliver our vehicles with certain features of our NIO Pilot ADAS system initially disabled and plan to turn on additional features before the end of 2018. 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 ES8. 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.

 

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Any delays in the manufacture and launch of the commercial production vehicles in our pipeline could have a material adverse effect on our business.

We plan to start making deliveries to the public of the ES8 in July 2018, and we are developing our second passenger vehicle, the 5-seater ES6 SUV, which is expected to be delivered in 2019 and we are generally targeting 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 these 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 and launch of the ES8, the ES6 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. 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, and in particular, the ES6.

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 solution, 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

 

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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.

We have received only a limited number of reservations for ES8, all of which may be cancelled.

As of May 31, 2018, we had unfilled reservations for more than 18,000 ES8s with deposits. Of these reservations, approximately 17,000 consisted of reservations for which only an initial fully refundable deposit of RMB5,000 had been made, while approximately 1,000 consisted of reservations for vehicles which had been put into production. Upon signing of the purchase agreement, which is required prior to a vehicle entering into production, the initial RMB5,000 deposit becomes non-refundable and the user must pay an additional RMB40,000 non-refundable deposit. We have experienced cancellations in the past. Our users may cancel their reservations for many reasons outside of our control. 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 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 also expect that we will 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

 

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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.

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 continue 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, we are subject to the risk that our prior models will become obsolete more quickly than expected, potentially reducing our return on investment.

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 our first volume manufactured vehicle, the ES8 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 would 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 assembling 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 also refuse to supply electric vehicle manufacturers to the

 

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extent they determine that the vehicles are not sufficiently safe. We are exposed to multiple risks relating to availability and pricing of lithium-ion cells. These risks include:

 

    the inability or unwillingness of current battery 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, 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 materials costs to us or impact or prospects.

We are dependent on our suppliers, many of whom are our single source suppliers for the components they supply.

The ES8 uses over 1,700 purchased parts which we source from over 160 suppliers, many of whom are currently our single source suppliers for these components, and we expect that this will be similar for the ES6 and any other 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.

Furthermore, qualifying alternate suppliers or developing our own replacements for certain highly customized components of the ES8, 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 and 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 also 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 and NIO Houses as well as other branding initiatives such as our annual NIO Day, Formula E team and other

 

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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.

If any of our executive officers and key employees terminates their 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. 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.

 

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Demand for our electric vehicles may also be affected by factors directly impacting automobile price 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, price competition, additional competitors, 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;

 

    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 single model of vehicle and in the foreseeable future will be significantly dependent on a limited number of models.

Our business will depend substantially on the sales and success of our ES8, which will be our only volume manufactured vehicle in the market for an extended period of time. We expect to add our second model, the ES6 in 2019, followed by our sedan, the ET7 in 2020. Historically, automobile customers have come to expect a variety of vehicles offered in a manufacturer’s fleet and new and improved vehicle models to be introduced

 

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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 plan to provide our users with the option of a battery payment arrangement, where users can make battery payments in installments. For the ES8, there is an RMB100,000 reduction in the purchase price and users adopting this arrangement pay RMB1,280 per month. The monthly installments are payable over 78 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 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.

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 China Compulsory Certification, or CCC, before receiving delivery from the factory, being marketed, or being used in any commercial activity, and such certification is also subject to periodic renewal. The ES8 received CCC certification in December 2017. The ES6 and ET7 have not yet undergone CCC certification but must be certified in the future prior to being marketed. 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 or any future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.

 

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We may be subject to risks associated with autonomous driving technology.

Through NIO Pilot, we will provide enhanced Level 2 autonomous driving functionalities, and through our research and development, we plan to continue to 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. For example, in March 2018, Tesla indicated that its autopilot system was engaged at the time of a fatal accident and an Uber Technologies Inc. self-driving vehicle struck a pedestrian leading to a fatality. 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.

If our vehicles are subject to recalls in the future, we may be subject to adverse publicity, damage to our brand and liability for costs. 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 noncompliant 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 and NIO Houses. 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.

We estimate that if all our current unfilled reservations, for more than 18,000 ES8s as of May 31, 2018, are ultimately converted into orders, we would fulfill such orders within 9 to 12 months following the date of this prospectus. The lead time in fulfilling our initial batch of orders could lead to cancelled orders. In addition, our aim is in the future to manufacture vehicles within 21-28 days from the order date. If we are unable to achieve these targets, 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 decline over the winter season, while sales are generally higher during the spring and summer months. 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

 

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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, 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.

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. We also expect to require significant capital and incur substantial costs in setting up, equipping and improving our future manufacturing plant in Shanghai, which could potentially face cost overruns. 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. In addition, we expect 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 this offering and cash flows from our business activities are insufficient to fund future capital requirements, we may need to seek equity or debt financing. If we require either equity and/or debt financing, 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 current 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

 

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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 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 law, regulation, 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.

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.

Our warranty reserves may be insufficient to cover future warranty claims which could adversely affect our financial performance.

For the initial owner of each ES8, we provide an extended warranty, subject to certain conditions. As require under relevant PRC law, we also provide (i) a bumper to bumper three year or 120,000 kilometers warranty, (ii) for critical EV components (electrical motors, battery and control unit) an eight year or 120,000 kilometers 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 have not yet made deliveries of the ES8, we have no experience with warranty claims regarding our vehicles or with

 

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estimating warranty reserves. As of March 31, 2018, we did not yet have any warranty reserves. We plan to make such reserves once deliveries of the ES8 to users begin and 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.

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 developed countries. 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

 

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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.

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 March 31, 2018, we have 614 registered patents and 1,637 patent applications pending in Hong Kong, Mainland China, European Union and the United States. 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. It is also possible that the intellectual property rights of others could 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 operation. A successful liability claim against us due to injuries suffered by our users could materially and adversely affect our financial conditions, 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 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.

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 shareholders’ approval, we may also 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

 

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business, which in turn could have an adverse effect on our business 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, charging solutions, expansion of our NIO House 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.

If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence in our company and the market price of our ADSs may be adversely affected.

Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.

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 Public Company Accounting Oversight Board, or 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 years ended December 31, 2016 and 2017, we and PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, noted a material weakness in our internal control over financial reporting. 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 SEC. The material weakness resulted in a significant number of adjustments and amendments to our consolidated financial statements and related disclosures under U.S. GAAP.

 

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As a result of the identification of this material weakness, we plan to take measures to remedy this control deficiency. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Internal Control over Financial Reporting.” However, we can give no assurance that our planned remediation will be properly implemented or 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.

Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. Our independent registered public accounting firm conducted an audit of our internal control over financial reporting, such accountant might have identified additional material weaknesses and deficiencies. Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2019. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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 results in delayed delivery of our products, product shortages or other disruptions of our operations.

 

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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.

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 ES8 is 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 such equipment is owned by us, our results of operations could be negatively impacted.

The construction and operation of our own manufacturing plant in Shanghai or other manufacturing facilities are subject to regulatory approvals and may be subject to delays, cost overruns or may not produce expected benefits.

We are developing our own manufacturing facility in Shanghai which we expect to be ready by the end of 2019. Such manufacturing facility is currently being constructed by relevant Shanghai authorities. As a result, such construction is largely outside of our control and could experience delays or other difficulties. We are also building phase two of our manufacturing facilities in Nanjing. Construction projects of this scale are subject to risks and will require significant capital. Any failure to complete these projects on schedule and within budget could adversely impact our financial condition, production capacity and results of operations. Under PRC law, construction projects are subject to broad and strict government supervision and approval procedures, including but not limited to the project approvals and filings, construction land and project planning approval, environment protection approval, the 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 construction projects in question within a specified time frame, fines or the suspension of use of such projects. Any of the foregoing could have a material adverse impact on our operations.

Furthermore, we expect that the construction of our own vehicle manufacturing facility in Shanghai will facilitate our ability to obtain our own EV manufacturing license and potentially benefit from the NEV credit score system in the future. There can be no assurance that the completion of such factory will ensure that we will be able to obtain such license. In addition, to the extent we are unable to successfully complete construction on time or at all, our ability to obtain our own EV manufacturing license and potentially benefit from the NEV credit score system could be adversely affected, which in turn could impact our growth prospects.

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. While we have designed the battery pack to passively contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of our vehicles or other battery

 

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packs that we produce could occur, 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.

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 continuing operation of our information technology and communications systems. Our systems are vulnerable to damage or interruption from, among others, 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 noncompliance 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 UK 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 UK 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.

 

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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.

Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, may materially and adversely affect our business, financial condition and results of operations.

The global financial markets experienced significant disruptions in 2008 and the United States, European and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global financial markets are facing new challenges, including the escalation of the European sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. Federal Reserve and the economic slowdown in the Eurozone in 2014. It is unclear whether these challenges will be contained and what effects they each may have. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including China’s. Economic conditions in China are sensitive to global economic conditions. Recently there have been signs that the rate of China’s economic growth is declining. Any prolonged slowdown in China’s economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and consumer confidence and dramatic changes in business and consumer behaviors. 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.

Our business could be adversely affected by trade tariffs or other trade barriers.

In March 2018, U.S. President Donald J. Trump announced the imposition of tariffs on steel and aluminum entering the United States and recently both China and the U.S. have each threatened to impose additional tariffs. Although we do not currently export any products to the United States, it is not yet clear what impact these tariffs may have or what actions other governments, including the Chinese government may take in retaliation. Although we intend to sell our vehicles only in China in the near future, tariffs could potentially impact our raw material prices. In addition, these developments could have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

 

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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 business operations could be disrupted if any of our employees are suspected of having H1N1 flu, avian flu or another epidemic, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that the outbreak harms the Chinese economy in general.

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.

Risks Relating 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, as amended, and other applicable laws and regulations, foreign ownership of certain areas of businesses are subject to restrictions under current PRC laws and regulations. For example, 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.

We are a Cayman Islands company and our PRC subsidiaries are considered foreign-invested enterprises. To comply with PRC laws and regulations, we aim to conduct certain operations in China through certain PRC entities, including NIO New Energy. NIO Co., Ltd. owns 50% equity interests in NIO New Energy. Our founders Bin Li and Lihong Qin, through holding equity interest 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 financial results as our variable interest entity under U.S. GAAP. We have also entered into a series of contractual arrangements with Beijing NIO, and its shareholders, which enable us to hold all the required ICP and related licenses in China. For a detailed description of these contractual arrangements, see “Corporate History and Structure.”

In the opinion of Han Kun Law Offices, our PRC legal counsel, (i) the ownership structure of NIO Co., Ltd. and our variable interest entities in China, both currently and immediately after giving effect to this offering, does not result in any violation of PRC laws and regulations currently in effect; and (ii) the contractual

 

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arrangements between our wholly-owned subsidiary NIO Co., Ltd., our variable interest entities and their shareholders governed by PRC law 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.

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. In particular, the Ministry of Commerce published a discussion draft of a proposed Foreign Investment Law for public review and comments in January 2015 which, if enacted into law, would represent a major change to the laws and regulations relating to variable interest entity structures. See “—Risks Related to Doing Business in China—Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations”.

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 this offering 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 its 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 shareholders to conduct a portion of our operations in China. For a description of these contractual arrangements, see “Corporate History and Structure.” The 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 VIEs, we would be able to exercise our rights as a shareholder to control our VIEs to

 

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excise 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 Shanghai Anbin and Beijing NIO and their 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 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 “—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese 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 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 Beijing NIO under its equity pledge agreement has been registered with the relevant local branch of State Administration for Market Regulation, or the SAMR, and filing of the equity interest pledges of shareholders of Shanghai Anbin under its equity pledge agreement has been submitted to the relevant local branch of the SAMR for filing. 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 interest 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 takes last priority among creditors.

 

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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, owns 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.

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 gains. There is currently no specific and clear guidance under PRC laws that addresses any conflict between PRC laws and 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 and the value of your investment.

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 its 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 interest 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 any of our variable interest entities’ tax liabilities increase or if it is required to pay late payment fees and other penalties.

 

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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 proceeding.

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 proceeding, 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.

Risks Relating to Doing Business in China

Changes in China’s economic, 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

 

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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.

Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and operations.

The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015. This law, if enacted, would replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft 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 investments. However, substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.

Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered as a foreign-invested enterprise. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as foreign-invested enterprises. However, a foreign-invested enterprise that is subject to foreign investment restrictions, upon market entry clearance, may apply in writing for being treated as a PRC domestic investment if it is ultimately “controlled” by PRC government authorities and its affiliates and/or PRC citizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is considered to be a foreign-invested enterprise, it may be subject to the foreign investment restrictions or prohibitions set forth in a “negative list” to be separately issued by the State Council later. If a foreign-invested enterprise proposes to conduct business in an industry subject to foreign investment “restrictions” in the “negative list,” the foreign-invested enterprise must go through a market entry clearance by the Ministry of Commerce before being established, and it may not conduct business in an industry subject to foreign investment “prohibitions” in the “negative list.” Unless the underlying business of the foreign-invested enterprise falls within the negative list, which calls for market entry clearance by the Ministry of Commerce or its local counterparts, prior approval from the government authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the foreign-invested enterprise.

The “variable interest entity” structure has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “—Risks Related to Our Corporate Structure” and “Our Corporate History and Structure.” Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a “variable interest entity” structure in an industry category that is in the “restriction category” on the “negative list,” the “variable interest entity” structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality, namely, either PRC companies or PRC citizens. Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will

 

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be treated as foreign-invested enterprises and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.

As of the date of this prospectus, no PRC citizen possess or controls more than 50% of the voting power of our company, has the power to secure at least 50% of the seats on our board of directors or has the voting power to exert material influence on the board or our shareholders’ meeting, or has the power to exert decisive influence, via contractual or trust arrangements, over our operations, financial matters or other key aspects of business operations. In the draft Foreign Investment Law, the Ministry of Commerce has not taken a position on what actions must be taken with respect to the existing companies with a “variable interest entity” structure, whether or not these companies are controlled by PRC parties. Moreover, it is uncertain whether the value-added telecommunication service industry, in which our variable interest entities operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as market entry clearance granted by the Ministry of Commerce, to be completed by companies with existing “variable interest entity” structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable foreign-invested enterprises. Aside from an investment implementation report and an investment amendment report that are required for each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

We may be adversely affected by the complexity, uncertainties and changes in PRC regulations on internet-related as well as automotive businesses and companies.

We operate in automotive and internet industry, both of which are extensively regulated by the PRC government. For example, the PRC government imposes foreign ownership restriction and the licensing and permit requirements for companies in the internet industry. Foreign investors may hold no more than a 50% equity interest in a manufacturer of whole automobiles. See “Regulation—Regulation on Foreign Investment in China” and “Regulation—Regulations on Value-added Telecommunications Services.” Recently, the NDRC also unofficially announced that the foreign investment restriction on the production of new energy automobiles will be eased by 2018. These laws, regulations and even such announcement 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.

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 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

 

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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 and automotive industry, particularly the policies relating to new energy vehicles, have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business.

Several PRC regulatory authorities, such as the SAMR, the NDRC, the Ministry of Industry and Information Technology, or the MIIT, and the Ministry of Commerce, or 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 the relevant commerce department within 90 days after the receipt of 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. In addition, the 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, registratons and approvals required for our business or that we will be able to obtain, maintain or renew permits, licenses, registratons and approvals 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 March 31, 2018, 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 “Regulation—Regulation 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—Contractual arrangements in relation to 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 and the value of your investment.”

 

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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.”

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 and 2017, which we refer to as the 2015 Plan, the 2016 Plan and the 2017 Plan, respectively, in this prospectus, for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. 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 ordinary shares which may be issued pursuant to all awards are 46,264,378, 18,000,000 and 10,000,000, respectively. As of the date of this prospectus, awards to purchase an aggregate amount of 60,324,614 ordinary shares under our three stock incentive plans have been granted and are outstanding, excluding awards that were forfeited or cancelled after the relevant grant dates. As a result, a number of awards will become vested once we complete this offering, and we will then record a significant share-based compensation expense on the completion date of this offering. As of March 31, 2018, our unrecognized share-based compensation expenses relating to unvested awards, net of estimated forfeitures, amounted to RMB737.0 million (US$117.5 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.

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.

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.

In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees 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.

 

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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.

Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.

The value of Renminbi 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. In July 2005, the PRC government changed its decades-old policy of pegging the value of Renminbi to the U.S. dollar, and Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange rate between Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. In the fourth quarter of 2016, the Renminbi depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and the Renminbi could 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 Renminbi and the U.S. dollar in the future.

There remains significant international pressure on the PRC government to adopt a more flexible currency policy. Any significant appreciation or depreciation of Renminbi 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 from this initial public offering into Renminbi to pay our operating expenses, appreciation of Renminbi 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 Renminbi 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.

 

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In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

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 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 from this offering 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 “Regulation—Regulations on Foreign Exchange.” These PRC laws and regulations may significantly limit our ability to use Renminbi converted from the net proceeds of this offering 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 USD300 million requires approval from, or filing with, NDRC respectively, and for those non-sensitive investments indirectly by Chinese investors (including PRC individuals) with investment amount over USD300 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 and affect the value of your investment.

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 foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. See “Regulation—Regulations on Foreign Exchange.”

 

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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.

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 “Regulation—Regulations on Foreign Exchange—Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents.”

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 Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC 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 Ministry of Commerce 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 Ministry of Commerce 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 Ministry of Commerce, and prohibit any attempt to bypass a security review, including by structuring the transaction through a proxy or contractual

 

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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 Ministry of Commerce, 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 “Regulation—Regulations on Employment and Social Welfare—Employee Stock Incentive Plan.” We and our PRC resident employees who participate in our share incentive plans will be subject to these regulations when our company becomes publicly 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.

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 RMB30 million for the phase I construction of the Nanjing Advanced Manufacturing Engineering Center and our subsidiary, NIO Co., Ltd., has received aggregate subsidies of RMB35 million for its several research and development projects. 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

 

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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.

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, gains realized on the sale or other disposition of our ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company 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. Any such tax may reduce the returns on your investment in the ADSs.

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 the 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 “Taxation—People’s Republic of China Taxation.” As of December 31, 2017, 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 issued the Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises, or SAT Public

 

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Notice 7. SAT Public Notice 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, SAT Public Notice 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. SAT Public Notice 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 the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income tax.

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 obligation, 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 SAT Public Notice 7 and SAT Bulletin 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

 

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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 may be defective and our right to lease the properties affected by such defects 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 the landlords have not completed the registration of their 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.

The audit report included in this prospectus 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 prospectus, as auditors of companies that are traded publicly in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with U.S. laws and 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.

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.

 

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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.

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 Chinese affiliates of 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.

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 future document productions fail to meet the specified criteria, the SEC retains the authority to impose a variety of additional measures (e.g., imposing penalties such as suspensions, restarting the administrative proceedings).

In the event that the SEC restarts the administrative proceedings, 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 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 Relating to Our ADSs and This Offering

An active trading market for our ordinary shares or our ADSs may not develop and the trading price for our ADSs may fluctuate significantly.

We have applied to list our ADSs on the [New York Stock Exchange/ NASDAQ Global Market]. Prior to the completion of this offering, there has been no public market for our ADSs or our ordinary shares, and we cannot assure you that a liquid public market for our ADSs will develop. If an active public market for our ADSs does not develop following the completion of this offering, the market price and liquidity of our ADSs may be materially and adversely affected. The initial public offering price for our ADSs will be determined by negotiation between us and the underwriters based upon several factors, and the trading price of our ADSs after this offering could decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ADSs.

 

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The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.

The trading price of our ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. A number of Chinese companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these Chinese companies’ securities after their offerings may affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may impact the trading performance of our ADSs, regardless of our actual operating performance.

In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following:

 

    variations in our revenues, earnings and cash flow;

 

    announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;

 

    announcements of new services and expansions by us or our competitors;

 

    changes in financial estimates by securities analysts;

 

    detrimental adverse publicity about us, our services or our industry;

 

    additions or departures of key personnel;

 

    release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and

 

    potential litigation or regulatory investigations.

Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.

In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their 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 and require us to incur significant expenses to defend the suit, which could harm our results of operations. 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 adverse effect on our financial condition and results of operations.

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.

 

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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 after the completion of this offering, 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. The ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. There will be                  ADSs (equivalent to                  ordinary shares) outstanding immediately after this offering, or              ADSs (equivalent to                  ordinary shares) if the underwriters exercise their option to purchase additional ADSs in full. In connection with this offering, we, our officers, directors and existing shareholders [and certain of our option holders] have agreed not to sell any ordinary shares or ADSs for 180 days after the date of this prospectus without the prior written consent of the underwriters, subject to certain exceptions. However, the underwriters may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. 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. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

Because we do not expect to pay dividends in the foreseeable future after this offering, you must rely on price appreciation of our ADSs for return on your investment.

We currently intend to retain most, if not all, of our available funds and any future earnings after this offering 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, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value after this offering or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.

Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase ADSs in this offering, you will pay more for each ADS than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience immediate and substantial dilution of approximately US$         per ADS (assuming that no outstanding options to acquire ordinary shares are exercised). This number represents the difference between (1) our pro forma net tangible book value per ADS of US$         as of December 31, 2017, after giving effect to this offering and (2) the assumed initial public offering price of US$         per ADS, the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus. See “Dilution” for a more complete description of how the value of your investment in our ADSs will be diluted upon the completion of this offering.

 

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We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.

We have not determined a specific use for a portion of the net proceeds of this offering, and our management will have considerable discretion in deciding how to apply these proceeds. You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that will improve our results of operations or increase our ADS price, nor that these net proceeds will be placed only in investments that generate income or appreciate in value.

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 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) at least 75% of its gross income for such year consists of certain types of “passive” income; or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. Based on our current and expected income and assets (taking into account the expected cash proceeds and our anticipated market capitalization following this offering), we do not presently 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 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 second part of the test described above may be determined by reference to the market price of our ADSs. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering.

If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Taxation—United States Federal Income Tax Considerations”) holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”

The approval of the China Securities Regulatory Commission may be required in connection with this offering under PRC law.

The M&A Rules requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and this offering may ultimately require approval from the CSRC. If CSRC approval is required, it is uncertain how long it will take us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, results of operations and financial condition.

Our PRC counsel, Han Kun Law Offices, has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the listing and trading of our ADSs on the [New York Stock Exchange/ NASDAQ Global Market] because (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this

 

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prospectus are subject to this regulation, (ii) the Company established the NIO Co., Ltd., Shanghai NIO Sales and Services Co., Ltd., NIO Energy Investment (Hubei) Co., Ltd., XPT Investment Co., Ltd. and Shanghai XPT Technology Limited, as foreign-invested enterprises by means of direct investment and not through a merger or requisition of the equity or assets of a “PRC domestic company” as such term is defined under the M&A Rule, (iii) no provision in this regulation clearly classifies contractual arrangements as a type of transaction subject to its regulation. However, we cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel, and hence we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of the ADSs. The CSRC or other PRC regulatory agencies also may take actions requiring us, or making it advisable for us, to halt this offering before settlement and delivery of the ADSs offered hereby. Consequently, if you engage in market trading or other activities in anticipation of and prior to settlement and delivery, you do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding such approval requirement could have a material adverse effect on the trading price of the ADSs.

Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

We will adopt amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering. Our new memorandum and articles of association contain provisions 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, 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 ordinary shares and ADSs may be materially and adversely affected.

You may face difficulties in protecting your interests, and your ability to protect your 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 memorandum and articles of association, the Companies Law (2016 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

 

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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 you 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.

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. [Currently, we do not plan to rely on home country practice with respect to any corporate governance matter.] However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Law of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital—Differences in Corporate Law.”

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 you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see “Enforceability of Civil Liabilities.”

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company until the fifth anniversary from the date of our initial listing.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. [However, we have elected to “opt out” of this provision] and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

 

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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 will be 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/ NASDAQ Global Market]. 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.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your ordinary shares.

As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying ordinary shares in accordance with the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying ordinary shares in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and articles of association that will become effective immediately prior to the completion of this offering, the minimum notice period required for convening a general meeting is 14 days. When a general meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your 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 your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.

The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.

Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your 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;

 

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    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 you do not vote at shareholders’ meetings, you cannot prevent our ordinary shares underlying your 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 ordinary shares are not subject to this discretionary proxy.

You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your 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, 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, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.

You may experience dilution of your 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 agreement, 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.

You may be subject to limitations on transfer of your ADSs.

Your 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 agreement, or for any other reason.

 

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We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and [New York Stock Exchange/ NASDAQ Global Market], impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in net revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of the provision that allow us to delay adopting new or revised accounting standards and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

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, 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 adverse effect on our financial condition and results of operations.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” 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 some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are 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 that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:

 

    our goals and strategies;

 

    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; and

 

    relevant government policies and regulations relating to our industry.

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. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Prospectus Summary—Our Challenges,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and other sections in this prospectus. You should read thoroughly this prospectus and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This prospectus 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 and 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 prospectus relate only to events or information as of the date on which the statements are made in this prospectus. 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 prospectus and the documents that we refer to in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately US$                , or approximately US$                if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of US$                per ADS, which is the midpoint of the price range shown on the front page of this prospectus. A US$1.00 increase (decrease) in the assumed initial public offering price of US$                per ADS would increase (decrease) the net proceeds to us from this offering by US$                , assuming the number of ADSs offered by us, as set forth on the front cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees by providing them with equity incentives, and obtain additional capital. We plan to use the net proceeds of this offering as follows:

 

    Approximately US$                for research and development of products, services and technology;

 

    Approximately US$                for selling and marketing and development of sales channels, including NIO Houses;

 

    Approximately US$                for the development of our manufacturing facilities and the roll-out of our supply chain. If such proceeds are not sufficient for such purposes, we expect to finance the remainder using cash on hand and cash from sales of our vehicles; and

 

    Approximately US$                for general corporate purposes and working capital.

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. See “Risk Factors—Risks Related to Our ADSs and This Offering—We have not determined a specific use for a portion of the net proceeds from this offering and we may use these proceeds in ways with which you may not agree.”

Pending any use described above, we plan to invest the net proceeds in short-term, interest-bearing, debt instruments or demand deposits.

In using the proceeds of this offering, we are permitted under PRC laws and regulations as an offshore holding company to provide funding to our PRC subsidiaries only through loans or capital contributions and to our variable interest entities only through loans, subject to satisfaction of applicable government registration and approval requirements. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all. See “Risk Factors—Risks Related to Doing Business in China—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 this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

[We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.]

 

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DIVIDEND POLICY

Following this offering, the payment of dividends will be at the discretion of our board of directors, subject to certain requirements of Cayman Islands law. 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 share premium, and provided always 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 after this offering. 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 from 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 “Regulation—Regulation on Dividend Distributions.”

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 ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Description of American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

 

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CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2018:

 

    on an actual basis;

 

    on a pro forma basis to reflect the automatic conversion of all of our issued and outstanding preferred shares into ordinary shares on a one-for-one basis upon the completion of this offering; and

 

    on a pro forma as adjusted basis to reflect (i) the automatic conversion of all of our issued and outstanding preferred shares into ordinary shares on a one-for-one basis upon the completion of this offering and (ii) the sale of                ordinary shares in the form of ADSs by us in this offering at an assumed initial public offering price of US$                per ADS, which is the midpoint of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise over-allotment option.

You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

    As of March 31,  
    2018     2018     2018     2018  
    RMB     USD     RMB     USD  
               

Pro forma

(unaudited)

   

Pro forma

(unaudited)

 

Preferred Shares:

       

Series A-1 and A-2 convertible redeemable preferred shares (USD0.00025 par value; 295,000,000 authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018 (unaudited))

    6,539,838       1,042,604              

Series A-3 convertible redeemable preferred shares (USD0.00025 par value; 31,720,364 authorized, 24,210,431 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018 (unaudited))

    551,010       87,844              

Series B convertible redeemable preferred shares (USD0.00025 par value; 114,867,321 authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018 (unaudited))

    2,775,589       442,494              

Series C convertible redeemable preferred shares (USD0.00025 par value; 167,142,990 authorized, 166,205,830 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018 (unaudited))

    4,599,745       733,308              

Series D convertible redeemable preferred shares (USD0.00025 par value; 240,000,000 authorized, 213,585,003 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018 (unaudited))

    7,691,458       1,226,199              

Total mezzanine equity

    22,157,640       3,532,449              

Ordinary shares (USD0.00025 par value; 1,151,269,325 shares authorized as of December 31, 2017 and March 31, 2018; 36,727,350 and 37,574,555 shares issued and 23,850,343 and 27,656,543 shares outstanding as of December 31, 2017 and March 31, 2018, respectively; No shares issued and outstanding on a pro-forma basis as of March 31, 2018(unaudited))

    61       10              

Class A Ordinary shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; 560,994,906 shares issued and outstanding on a pro-forma basis as of March 31, 2018(unaudited))

                880       140  

Class B Ordinary Shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 March 31, 2018; 132,030,222 shares issued and outstanding on a pro-forma basis as of March 31, 2018(unaudited))

                207       33  

 

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    As of March 31,  
    2018     2018     2018     2018  
    RMB     USD     RMB     USD  
               

Pro forma

(unaudited)

   

Pro forma

(unaudited)

 

Class C Ordinary Shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 March 31, 2018; 148,500,000 shares issued and outstanding on a pro-forma basis as of March 31, 2018(unaudited))

                233       37  

Treasury shares

    (9,186     (1,464     (9,186     (1,464

Additional paid in capital(2)

    149,352       23,810       22,305,733       3,556,059  

Accumulated other comprehensive (loss)

    (166,920     (26,610     (166,920     (26,610

Accumulated deficit

    (15,655,857     (2,495,912     (15,655,857     (2,495,912
 

 

 

   

 

 

   

 

 

   

 

 

 

Total NIO Inc. Shareholders’ (deficit)/equity

    (15,682,550     (2,500,166     6,475,090       1,032,283  

Total shareholders’ (deficit)/equity(2)

    (15,664,984     (2,497,366     6,492,656       1,035,083  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, mezzanine equity and shareholders’ equity(2)

    9,427,700       1,502,998       9,427,700       1,502,998  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The pro forma as adjusted information discussed above is illustrative only. Our additional paid-in capital, total shareholders’ equity and total capitalization following the completion of this offering are subject to adjustment based on the actual initial public offering price and other terms of this offering determined at pricing.
(2) A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS, which is the midpoint of the estimated range of the initial public offering price shown on the front cover of this prospectus, would increase (decrease) each of additional paid-in capital, total shareholders’ equity, and total capitalization by US$            million.

 

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DILUTION

If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

Our net tangible book value as of March 31, 2018 was approximately US$                , or US$                 per ordinary share as of that date and US$                per ADS. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting net tangible book value per ordinary share, after giving effect to the additional proceeds we will receive from this offering, from the assumed initial public offering price of US$                per ADS, which is the midpoint of the estimated initial public offering price range set forth on the front cover of this prospectus adjusted to reflect the ADS-to-ordinary share ratio, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Without taking into account any other changes in net tangible book value after March 31, 2018, other than to give effect to our sale of the ADSs offered in this offering at the assumed initial public offering price of US$                per ADS, which is the midpoint of the estimated initial public offering price range, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2018 would have been US$                , or US$                per ordinary share and US$                per ADS. This represents an immediate increase in net tangible book value of US$                per ordinary share and US$                per ADS to the existing shareholders and an immediate dilution in net tangible book value of US$                per ordinary share and US$                per ADS to investors purchasing ADSs in this offering. The following table illustrates such dilution:

 

     Per Ordinary Share      Per ADS  

Assumed initial public offering price

   US$                   US$               

Net tangible book value as of March 31, 2018

   US$      US$  

Pro forma net tangible book value after giving effect to the conversion of our preferred shares

   US$      US$  

Pro forma as adjusted net tangible book value after giving effect to the conversion of our preferred shares and this offering

   US$      US$  

Amount of dilution in net tangible book value to new investors in this offering

   US$      US$  

A US$1.00 increase (decrease) in the assumed initial public offering price of US$                per ADS would increase (decrease) our pro forma as adjusted net tangible book value after giving effect to this offering by US$                , the pro forma as adjusted net tangible book value per ordinary share and per ADS after giving effect to this offering by US$                per ordinary share and US$                per ADS and the dilution in pro forma as adjusted net tangible book value per ordinary share and per ADS to new investors in this offering by US$                per ordinary share and US$                per ADS, assuming no change to the number of ADSs offered by us as set forth on the front cover of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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The following table summarizes, on a pro forma as adjusted basis as of March 31, 2018, the differences between existing shareholders and the new investors with respect to the number of ordinary shares (in the form of ADSs or shares) purchased from us, the total consideration paid and the average price per ordinary share and per ADS paid before deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The total number of ordinary shares does not include ordinary shares underlying the ADSs issuable upon the exercise of the over-allotment option granted to the underwriters.

 

     Ordinary Shares Purchased      Total Consideration      Average
Price Per
Ordinary
Share
     Average
Price Per
ADS
 
     Number      Percent      Amount      Percent        

Existing shareholders

         US$                     %      US$                   US$               

New investors

         US$        %      US$      US$  
  

 

 

    

 

 

    

 

 

    

 

 

       

Total

         US$        100.0%        
  

 

 

    

 

 

    

 

 

    

 

 

       

The pro forma as adjusted information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

The discussion and tables above assume no exercise of any share options outstanding nor any request by holders of restricted shares to register their vested restricted shares as of the date of this prospectus. As of the date of this prospectus, there are                ordinary shares issuable upon exercise of outstanding share options at a weighted average exercise price of US$                per share, and additional                ordinary shares are issuable upon requests from holders of restricted shares. To the extent that any of these options are exercised, there will be further dilution to new investors.

 

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EXCHANGE RATE INFORMATION

Our reporting currency is the Renminbi because our business is mainly conducted in China and substantially all of our revenues are denominated in Renminbi. This prospectus contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi into U.S. dollars in this prospectus is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus were made at a rate of RMB6.2726 to US$1.00, the rate in effect as of March 31, 2018. 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, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currency and through restrictions on foreign trade. On June 1, 2018, the rate was RMB6.4180 to US$1.00.

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.

 

     Certified Exchange Rate  

Period

   Period
End
     Average(1)      Low      High  
     (RMB per US$1.00)  

2013

     6.0537        6.1412        6.2438        6.0537  

2014

     6.2046        6.1620        6.2591        6.0402  

2015

     6.4778        6.2827        6.4896        6.1870  

2016

     6.9430        6.6549        6.9580        6.4480  

2017

     6.5063        6.7350        6.9575        6.4773  

November

     6.6090        6.6200        6.6385        6.5967  

December

     6.5063        6.5392        6.6210        6.5063  

2018

           

January

     6.2841        6.4233        6.5263        6.2841  

February

     6.3280        6.3183        6.3471        6.2649  

March

     6.2726        6.5000        6.3583        6.2738  

April

     6.3325        6.3511        6.3610        6.3325  

May

     6.4096        6.3700        6.4175        6.3325  

June (through June 1, 2018)

     6.4180           

 

Source: Federal Reserve Statistical Release

 

(1) Annual averages are calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

 

    political and economic stability;

 

    an effective judicial system;

 

    a favorable tax system;

 

    the absence of exchange control or currency restrictions; and

 

    the availability of professional and support services.

However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include but are not limited to:

 

    the Cayman Islands has a less developed body of securities laws as compared to the United States and these securities laws provide provides significantly less protection to investors as compared to the United States; and

 

    Cayman Islands companies may not have standing to sue before the federal courts of the United States.

Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. A majority of our directors and executive officers are nationals or residents of jurisdictions other than the United States and most of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these individuals, or to bring an action against us or these individuals in the United States, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

We have appointed [Law Debenture Corporate Services Inc.], located at [801 2nd Avenue, Suite 403, New York, New York 10017] as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

We have been informed by Maples and Calder (Hong Kong) LLP that the United States and the Cayman Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of U.S. courts in civil and commercial matters and that a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically enforceable in the Cayman Islands. We have also been advised by Maples and Calder (Hong Kong) LLP that a judgment obtained in any federal or state court in the United States will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (i) is given by a foreign court of competent jurisdiction, (ii) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given, (iii) is final, (iv) is not in respect of taxes, a fine or a penalty, and (v) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

There is uncertainty as to whether the courts of the Cayman Islands would recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Such uncertainty relates to

 

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whether a judgment obtained from the United States courts under the civil liability provisions of the securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company or its directors and officers. Because the courts of the Cayman Islands have yet to rule on whether such judgments are penal or punitive in nature, it is uncertain whether they would be enforceable in the Cayman Islands.

Han Kun Law Offices, our counsel as to PRC law, has advised us that there is uncertainty as to whether the courts of China would:

 

    recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

 

    entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

Han Kun Law Offices has further advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands. Under the PRC Civil Procedures Law, foreign shareholders may originate actions based on PRC law against a company in China for disputes if they can establish sufficient nexus to the PRC for a PRC court to have jurisdiction, and meet other procedural requirements, including, among others, the plaintiff must have a direct interest in the case, and there must be a concrete claim, a factual basis and a cause for the suit.

It will be, however, difficult for U.S. shareholders to originate actions against us in the PRC in accordance with PRC laws because we are incorporated under the laws of the Cayman Islands and it will be difficult for U.S. shareholders, by virtue only of holding our ADSs or ordinary shares, to establish a connection to the PRC for a PRC court to have jurisdiction as required under the PRC Civil Procedures Law.

 

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CORPORATE HISTORY AND STRUCTURE

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 include the following:

2015

 

    In February 2015, we established NIO Nextev Limited (formerly known as Nextev Limited), our wholly-owned subsidiary in Hong Kong. We participated in the inaugural season of the FIA Formula E Championship as the Nextev TCR Formula E Team, and in June 2015, we secured the inaugural FIA Formula E Driver’s Championship. In November 2015, we held the inaugural NIO Formula Students Electric China NIO cup in Shanghai.

 

    In May 2015, NIO Nextev Limited incorporated NIO Co., Ltd. in China to, among other things, be our global headquarters and engage in research and development related activities. In the same month, NIO Nextev Limited established NIO GmbH in Germany as our vehicle design headquarters.

 

    In November 2015, NIO Nextev Limited established NIO USA, Inc. as our headquarters in the United States to design and develop our software and hardware for autonomous driving systems and other advanced technology modules for our vehicles.

 

    In December 2015, we established XPT Limited, or XPT, our wholly-owned subsidiary in Hong Kong, to engage in the development of systems and components used in electric vehicles.

2016

 

    In February 2016, NIO Nextev Limited established NIO Nextev (UK) Limited in the United Kingdom as our Formula E and EP9 electric supercar headquarters. NIO Nextev (UK) Limited also provides engineering support for vehicle development in Shanghai.

 

    In April 2016, NIO Nextev Limited incorporated NIO SPORT Limited in Hong Kong to handle Formula E related business. In April 2016, NIO SPORT Limited purchased the Nextev TCR Formula E Team (now the NIO Formula E Team), which NIO Nextev (UK) Limited operates on behalf of NIO SPORT Limited.

 

    In May 2016, we entered into a manufacturing cooperation agreement with JAC, pursuant to which the JAC-NIO Cooperation Project (New Energy Vehicle) officially launched since the signing of the framework agreement.

 

    In April 2016, XPT established XPT Technology Limited in Hong Kong in charge of intellectual property management of the XPT. In the same month, XPT established XPT Inc. in Delaware, the United States as an operational base in the United States to engage in technology development and cooperation. In May 2016, XPT established Jiangsu Weiran Investment Co., Ltd. as its technology development base in China.

 

    In October 2016, we obtained an autonomous vehicle testing permit in the State of California.

 

    In November 2016, we unveiled our NIO brand and the EP9 at the Saatchi Gallery in London.

2017

 

    In January 2017, we established NIO Power Express Limited, our wholly-owned subsidiary, which later incorporated NIO Energy Investment (Hubei) Co., Ltd. in April 2017 to handle power management related businesses.

 

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    In February 2017, we established NIO User Enterprise Limited, our wholly-owned subsidiary, which incorporated Shanghai NIO Sales and Services Co., Ltd. in March 2017, to handle sales and services of our electric vehicles. In March 2017, we unveiled our vision car, EVE, at South by Southwest 2017 in Austin, Texas. In April 2017, we further unveiled our first volume manufactured passenger car, the ES8, and showcased EP9 and EVE at the 2017 Shanghai International Automobile Industry Exhibition.

 

    In May 2017, our EP9 electric supercar broke the record for fastest lap for a production car around the Nurburgring in Germany after having already broken the records for fastest autonomous lap and fastest lap for a production car around the Circuit of the Americas in Texas, USA.

 

    In November 2017, we opened our first NIO House in Beijing. In December 2017, we held our first NIO Day and introduced the ES8 to a widespread audience and began taking orders for the ES8.

2018

 

    In March 2018, we were in the first batch of companies to obtain a Shanghai Intelligent Connected Vehicle Test License to test seventeen items including, among others, 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.

 

    In April 2018, we entered into a series of contractual arrangements with Shanghai Anbin and Beijing NIO, our VIEs, and their shareholders to conduct certain of our operations in China in the future.

 

    In May 2018, XPT (Nanjing) E-Powertrain Technology Co., Ltd. and Nanjing Punch Powertrain Automatic Transmission Co., Ltd. entered into a joint venture agreement to establish a joint venture to develop, produce and sell gear boxes for new energy vehicles and other components of new energy vehicles, and provide after-sales service.

 

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The chart below summarizes our corporate legal structure and identifies our significant subsidiaries, our VIEs and their significant subsidiaries, as of the date of this prospectus:

 

LOGO

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.

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, respectively. 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, respectively. The terms contained in the respective loan agreements are

 

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substantially similar. Pursuant to the loan agreements, the 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 the 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 WFOE entered into equity interest pledge agreements, respectively. The terms contained in the respective equity interest pledge agreements are substantially similar. Pursuant to the equity pledge agreements, those shareholders should pledge 100% equity interest in Shanghai Anbin to the 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, the 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. As of the date of this prospectus, 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 the NIO WFOE entered into an exclusive business cooperation agreement. Pursuant to the exclusive business cooperation agreement, the NIO WFOE has the exclusive right to provide Shanghai Anbin with comprehensive technical support, consulting services and other services. Without prior written consent of the 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 the NIO WFOE service fees, which should be determined by parties through negotiation after considering, among other things, the operation conditions of Shanghai Anbin, contents and value of the services provided by the NIO WFOE. The NIO WFOE will have exclusive and proprietary ownership, rights and interests in any and all intellectual properties 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 the NIO WFOE, the agreement shall remain effective.

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 the NIO WFOE entered into exclusive option agreements, respectively. 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 the 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 the NIO WFOE and the shareholders. Those shareholders further undertake that, without the prior written consent of the NIO WFOE, Shanghai Anbin should

 

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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 the 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 the 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 the NIO WFOE entered into powers of attorney, respectively. 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 the 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, respectively. The terms contained in the respective loan agreements are substantially similar. Pursuant to the loan agreement, the 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 the 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, respectively. The terms contained in the respective equity interest pledge agreements are substantially similar. Pursuant to the equity pledge agreements, those shareholders should pledge 100% equity interest in Beijing NIO to the 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, the power of attorney. If events of default defined therein occur, upon giving written notice to the shareholders, as pledgee, the 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. As of the date of this prospectus, 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 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

 

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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 the NIO WFOE or any other party designated by the NIO WFOE, which shall provide the specific contents, methods, personnel, and fees for specific services. Beijing NIO should pay the NIO WFOE service fees, which should be determined by parties through negotiation after considering, among other things, the operation conditions of Beijing NIO, contents and value of the services provided by the NIO WFOE. The NIO WFOE will have exclusive and proprietary ownership, rights and interests in any and all intellectual properties 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 the 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 the NIO WFOE entered into exclusive option agreements, respectively. 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 the 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 the NIO WFOE and the shareholders. Those shareholders further undertake that, without the prior written consent of the 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 the 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 the NIO WFOE and/or any other person designated by the 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 the NIO WFOE, both currently and immediately after giving effect to this offering, comply with all existing PRC laws and regulations; and

 

    the contractual arrangements between the 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. In particular, in January 2015, the MOFCOM published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “de facto control” in determining whether a company is considered an FIE. Under the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. 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.

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statements of comprehensive loss and cash flow data for the years ended December 31, 2016 and 2017, and selected consolidated balance sheet data as of December 31, 2016 and 2017 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following selected consolidated statements of comprehensive loss and cash flow data for the three months ended March 31, 2017 and 2018, and selected consolidated balance sheet data as of March 31, 2018 have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. 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. Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary Consolidated Financial and Operating Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

    Year Ended December 31,     Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     RMB     US$     RMB     RMB     US$  
    (in thousands, except for shares, per share and per ADS data)  

Selected Consolidated Statements of Comprehensive Loss

         

Operating expenses:(1)

           

Research and development(1)

    (1,465,353     (2,602,889     (414,962     (509,313     (690,650     (110,106

Selling, general and administrative(1)

    (1,137,187     (2,350,707     (374,758     (443,262     (773,218     (123,269
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    (2,602,540     (4,953,596     (789,720     (952,575     (1,463,868     (233,375
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (2,602,540     (4,953,596     (789,720     (952,575     (1,463,868     (233,375

Interest income

    27,556       18,970       3,024       1,881       28,437       4,534  

Interest expenses

    (55     (18,084     (2,883           (5,200     (829

Shares of losses of equity investee

          (5,375     (857           (833     (133

Investment income

    2,670       3,498       558       101              

Other income/(loss), net

    3,429       (58,681     (9,355     (7,796     (87,675     (13,978
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense

    (2,568,940     (5,013,268     (799,233     (958,389     (1,529,139     (243,781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

    (4,314     (7,906     (1,260     (2,182     (1,883     (300
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (2,573,254     (5,021,174     (800,493     (960,571     (1,531,022     (244,081
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

    (981,233     (2,576,935     (410,824     (1,094,190     (2,421,129     (385,985

Net loss attributable to non-controlling interests

    36,938       36,440       5,809       11,309       8,242       1,314  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to ordinary shareholder of NIO Inc.

    (3,517,549     (7,561,669     (1,205,508     (2,043,452     (3,943,909     (628,752
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (2,573,254     (5,021,174     (800,493     (960,571     (1,531,022     (244,081

Other comprehensive loss

           

Foreign currency translation adjustment, net of nil tax

    55,493       (124,374     (19,828     (12,766     (152,998     (24,390
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income/(loss)

    55,493       (124,374     (19,828     (12,766     (152,998     (24,390
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss

    (2,517,761     (5,145,548     (820,321     (973,337     (1,684,020     (268,471
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    Year Ended December 31,     Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     RMB     US$     RMB     RMB     US$  
    (in thousands, except for shares, per share and per ADS data)  

Accretion on convertible redeemable preferred shares to redemption value

    (981,233     (2,576,935     (410,824     (1,094,190     (2,421,129     (385,985
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to non-controlling interests

    36,938       36,440       5,809       11,309       8,242       1,314  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to NIO Inc.

    (3,462,056     (7,686,043     (1,225,336     (2,056,218     (4,096,907     (653,142
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing net loss per share

           

Basic and diluted

    16,697,527       21,801,525       21,801,525       20,515,137       26,561,329       26,561,329  

Net loss per share attributable to ordinary shareholders

           

Basic and diluted

    (210.66     (346.84     (55.29     (99.61     (148.48     (23.67

 

(1) Share-based compensation was allocated in operating expenses as follows:

 

     Year Ended December 31,      Three Months Ended March 31,  
     2016      2017      2017      2018  
     RMB      RMB      US$      RMB      RMB      US$  
     (in thousands)  

Research and development expenses

     14,484        23,210        3,700        5,083        8,920        1,422  

Selling, general and administrative expenses

     62,200        67,086        10,695        18,513        33,200        5,293  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     76,684        90,296        14,395        23,596        42,120        6,715  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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The following table presents our selected consolidated balance sheet data as of December 31, 2016 and 2017 and March 31, 2018.

 

    As of December 31     As of March 31,  
    2016     2017     2018  
          Actual     Actual     Pro Forma(1)     Pro Forma As
Adjusted(2)
 
    RMB     RMB     US$     RMB     US$     RMB     US$     RMB     US$  
    (in thousands)  

Selected Consolidated Balance Sheet Data:

 

Cash and cash equivalents

    581,296       7,505,954       1,196,626       5,522,972       880,492       5,522,972       880,492      

Restricted cash

          10,606       1,691       10,523       1,678       10,523       1,678      

Property, plant and equipment, net

    833,004       1,911,013       304,660       2,563,370       408,661       2,563,370       408,661      

Total assets

    1,770,478       10,468,034       1,668,851       9,427,700       1,502,998       9,427,700       1,502,998      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    825,264       2,402,028       382,939    

 

2,935,044

 

   
467,915
 
    2,935,044       467,915      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mezzanine equity

    4,861,574       19,657,786       3,133,914       22,157,640       3,532,449                  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ (deficit)/equity

    (3,916,360     (11,591,780     (1,848,002     (15,644,984     (2,497,366     6,492,656       1,035,083      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) The consolidated balance sheet data as of March 31, 2018 are on a pro forma basis to give effect to the automatic conversion of all of our outstanding preferred shares into 841,525,128 ordinary shares immediately prior to the completion of this offering.
(2) The consolidated balance sheet data as of March 31, 2018 are adjusted on a pro forma basis to give effect to (i) the automatic conversion of all of our outstanding preferred shares into 841,525,128 ordinary shares immediately prior to the completion of this offering; and (ii) the sale of          ordinary shares in the form of ADSs by us in this offering at an initial public offering price of US$         per ADS, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option.

 

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The following table presents our summary consolidated cash flow data for the years ended December 31, 2016 and 2017 and the three months ended March 31, 2018.

 

     For the Year Ended
December 31,
    For the Three Months
Ended March 31,
 
     2016     2017     2017     2018  
     RMB     RMB     US$     RMB     RMB     US$  
     (in thousands)  

Summary Consolidated Cash Flow Data:

          

Net cash used in operating activities

     (2,201,564     (4,574,719     (729,319     (1,049,773     (1,559,259     (248,584

Net cash provided by/ (used in) investing activities

     117,843       (1,190,273     (189,758     (330,984     (515,917     (82,249

Net cash provided by financing activities

     2,292,704       12,867,334       2,051,356       1,228,864       322,872       51,475  

Exchange rate effect on cash and cash equivalents

     40,539       (168,120     (26,800     1,767       (231,187     (36,856

Net increase in cash and cash equivalents

     249,522       6,934,222       1,105,479       (150,126     (1,983,491     (316,214

Cash, cash equivalents and restricted cash at beginning of the year

     347,109       596,631       95,117       596,631       7,530,853       1,200,595  

Cash, cash equivalents and restricted cash at end of the year

     596,631       7,530,853       1,200,596       446,505       5,547,362       884,381  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors”, “Special Note Regarding Forward-Looking Statements” and elsewhere in this prospectus.

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 the 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 ES8, to the public at our NIO Day event on December 16, 2017 and plan to make deliveries to the users starting from July 2018. The ES8 is a 7-seater all aluminum alloy body, premium electric SUV that offers exceptional performance, functionality and mobility lifestyle. It is equipped with our proprietary e-propulsion system capable of accelerating from zero to 100 km per hour in 4.4 seconds and delivering a New European Driving Cycle driving range of up to 355 km and maximum range of up to 500 km in a single charge. As of May 31, 2018, we had received over 18,000 ES8 reservations with deposits.

We plan to launch our second volume manufactured electric vehicle, the ES6, by the end of 2018 and start initial deliveries in the first half of 2019. The ES6 is a 5-seater, high-performance premium electric SUV, set at a lower price point than the ES8 to target a broader customer base.

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 plan to offer a comprehensive, convenient and innovative suite of charging solutions. These solutions include Power Home, our home charging solution, Power Swap, our innovative battery swapping service, Power Mobile, our mobile charging service through charging trucks, 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 over 214 thousand public charging piles. Beyond charging solutions, we aim to offer comprehensive value-added services to our users, such as statutory and third-party liability insurance through third-party insurers, repair and routine maintenance services, courtesy car during lengthy repairs and maintenance, nationwide roadside assistance, as well as enhanced data packages. We believe these solutions and services, together, will create a holistic user experience throughout the vehicle lifecycle.

We adopt an innovative sales model compared to incumbent automobile manufacturers. We sell our vehicles through our own sales network, including NIO Houses and our mobile application. NIO Houses are not only the showrooms for our vehicles, but also clubhouses for our customers with multiple social functions. Prospective users can place orders in 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 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 championship winning Formula E team.

 

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As of March 31, 2018, we were still in the process of developing the ES8 and other vehicles and had not yet recorded revenues. We expect to begin recording revenues in the second quarter of 2018, and expect that our revenues will mainly consist of revenues from the sales of our 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 revenue from monthly fees under our service package.

The ES8 is manufactured in partnership with JAC at its Hefei manufacturing plant and we also plan to initially manufacture the ES6 in partnership with JAC at the 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 production. 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 “Risk Factors— Manufacturing in collaboration with partners is subject to risks.”

Results of Operations

The following table sets forth a summary of our consolidated statements of operations for the periods indicated:

 

     Year Ended December 31,     Three Months Ended March 31,  
     2016     2017     2017     2018  
     RMB     RMB     US$     RMB     RMB     US$  
     (in thousands)  

Operating expenses:

            

Research and development

     (1,465,353     (2,602,889     (414,962     (509,313     (690,650     (110,106

Selling, general and administrative

     (1,137,187     (2,350,707     (374,758     (443,262     (773,218     (123,269
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     (2,602,540     (4,953,596     (789,720     (952,575     (1,463,868     (233,375
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (2,602,540     (4,953,596     (789,720     (952,575     (1,463,868     (233,375

Interest income

     27,556       18,970       3,024       1,881       28,437       4,534  

Interest expenses

     (55     (18,084     (2,883           (5,200     (829

Share of losses of equity investee

           (5,375     (857           (833     (133

Investment income

     2,670       3,498       558       101              

Other income/(loss), net

     3,429       (58,681     (9,355     (7,796     (87,675     (13,978
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (2,568,940     (5,013,268     (799,233     (958,389     (1,529,139     (243,781
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

     (4,314     (7,906     (1,260     (2,182     (1,883     (300
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (2,573,254     (5,021,174     (800,493     (960,571     (1,531,022     (244,081
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Description of Certain Principal Comprehensive Income Statement Line Items

Operating Expenses

Research and Development Expenses

The following table sets forth the principal components of our research and development expenses by amount and as a percentage of our total research and development expenses for the periods presented.

 

    Year Ended December 31,     Three Months Ended March 31,  
    2016     2017     2017     2018  
    RMB     %     RMB     US$     %     RMB     %     RMB     US$     %  
    (in thousands, except for percentages)        

Design and development expenses

    948,753       64.8       1,455,297       232,009       55.9    

 

276,693

 

    54.3      
296,474
 
    47,265       42.9  

Employee compensation

    451,284       30.8       1,009,455       160,931       38.8       211,498       41.5       341,717       54,478       49.5  

Travel expenses

    27,085       1.8       60,622       9,665       2.3       10,909       2.1       16,842       2,685       2.5  

Depreciation and amortization expenses

    7,819       0.5       38,940       6,208       1.5       6,958       1.4       15,400       2,455       2.2  

Rental and related expenses

    10,485       0.7       12,367       1,972       0.5       2,411       0.5       6,560       1,046       0.9  

Others

    19,927       1.4       26,208       4,178       1.0       844       0.2       13,657       2,177       2.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    1,465,353       100.0       2,602,889       414,963       100.0       509,313       100.0       690,650       110,106       100.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Research and development expenses consist primarily of (i) design and development expenses, which include, among others, consultation fees, outsourcing fees and testing materials and (ii) employee compensation, representing salaries, welfare 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, among others.

Our research and development expenses are mainly driven by our number of 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

The following table sets forth the principal components of our selling, general and administrative expenses by amount and as a percentage of our total selling, general and administrative expenses for the periods presented.

 

    Year Ended December 31,     Three Months ended March 31,  
    2016     2017     2017     2018  
    RMB     %     RMB     US$     %     RMB     %     RMB     US$     %  
    (in thousands, except for percentages)  

Employee compensation

    473,302       41.6       929,928       148,252       39.6       203,766       46.0       365,839       58,323       47.3  

Marketing and promotional expenses

    239,549       21.1       435,901       69,493       18.5       86,184       19.4       82,862       13,210       10.7  

Rental and related expenses

    91,535       8.0       216,111       34,453       9.2       32,354       7.3       85,090       13,565       11.0  

Professional services

    133,368       11.7       189,517       30,213       8.1       51,510       11.6       83,350       13,288       10.8  

Depreciation and amortization expenses

    38,268       3.4       128,918       20,553       5.5       22,280       5.0       49,028       7,816       6.3  

Low value consumable

    21,621       1.9       108,692       17,328       4.6       8,784       2.0       38,496       6,137       5.0  

Travel expenses

    32,572       2.9       71,278       11,363       3.0       9,731       2.2       21,409       3,413       2.8  

Others

    106,972       9.4       270,362       43,102       11.5       28,653       6.5       47,144       7,516       6.1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    1,137,187       100.0       2,350,707       374,757       100.0       443,262       100.0       773,218       123,268       100.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Our selling, general and administrative expenses include (i) employee compensation including salaries, welfares 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 and other rented additional facilities in relation to our charging network 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 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) low value consumables, primarily consisting of, among others, IT consumables, office supplies, sample fees, IT-system related licenses, (vii) traveling expenses, and (viii) others, which includes expenses incurred in connection with our annual NIO Day 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 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 an 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 Investee

Share of losses of equity investee primarily consists of our share of the losses of Suzhou Zenlead XPT New Energy Technologies Co., Ltd., in which, as of December 31, 2017, we held a 35% 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 Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

 

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Investment Income

Investment income primarily consists of gains on trading in short-term investment securities, primarily consisting of structured bank deposits.

Other (Loss)/Income—Net

Other losses and income primarily consist of gains or losses we incur based on movements between the U.S. dollar and the RMB. 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 certain income we received with respect to one-off design and research and development services and rental of office space we have provided primarily to related parties.

Income Tax Expense

Income tax expense primarily consists of current income tax expense, mainly attributable to intra-group income earned by our German subsidiary which is eliminated upon consolidation but was subject to tax in accordance with applicable tax law.

Comparison of Three Months Ended March 31, 2017 and 2018

Research and Development Expenses

Research and development expenses increased by 35.6% from RMB509.3 million in the three months ended March 31, 2017 to RMB690.7 million (US$110.1 million) in the three months ended March 31, 2018, primarily due to (i) a 61.6% increase in employee compensation, which increased from RMB211.5 million in the three months ended March 31, 2017 to RMB341.7 million (US$54.5 million) in the three months ended March 31, 2018, as the number of our research and development employees increased by approximately 90% from March 31, 2017 to March 31, 2018, and (ii) a 7.1% increase in design and development expenses, which increased from RMB276.7 million in the three months ended March 31, 2017 to RMB296.5 million (US$47.3 million) in the three months ended March 31, 2018, as we engaged in trial production of the ES8 and advanced the development of the ES6.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 74.4% from RMB443.3 million in the three months ended March 31, 2017 to RMB773.2 million (US$123.3 million) in the three months ended March 31, 2018, primarily due to, (i) a 79.5% increase in employee compensation with respect to our non-research and development employees, which increased from RMB203.8 million in the three months ended March 31, 2017 to RMB365.8 million (US$58.3 million) in the three months ended March 31, 2018, primarily due to the number of non-research and development employees increasing by approximately 170% from March 31, 2017 to March 31, 2018, in line with the expansion of our business, (ii) a 163.0% increase in rental and related expenses, which increased from RMB32.4 million in the three months ended March 31, 2017 to RMB85.1 million (US$13.6 million) in the three months ended March 31, 2018, as we established our network of NIO Houses and rented additional facilities for our charging network and office space, (iii) increased professional services fees, which increased primarily due to (a) design and consultation expenses incurred in relation to establishment of aforementioned NIO houses, charging network and office space; and (b) outsourcing expenses for IT experts, payroll management and other experts to meet the requirements of our business expansion, (iv) increased depreciation and amortization expenses, resulting from our increased depreciable fixed assets, including leasehold improvements, IT equipment and software, among others, as our business expanded, and (v) increased marketing and promotional expenses as we launched and started taking reservations for our first volume manufactured vehicle, the ES8, in December 2017. The increase was also due to increased low value consumable expenses, primarily attributable to expenses for low value software and licenses as well as sample pieces used by marketing and other supporting functions and increased travel expenses and other expenses.

 

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Loss from Operations

As a result of the foregoing, we incurred a loss from operations of RMB1,463.9 million (US$233.4 million) in the three months ended March 31, 2018, as compared to a loss of RMB952.6 million in the three months ended March 31, 2017.

Interest income

In the three months ended March 31, 2018, we recorded interest income of RMB28.4 million (US$4.5 million) as compared to RMB1.9 million in the three months ended March 31, 2017, primarily due to the interest income received on cash balances deposited with banks in the three months ended March 31, 2018.

Interest expenses

We recorded interest expenses of RMB5.2 million (US$0.8 million) in the three months ended March 31, 2018, primarily due to the increase in our indebtedness for the three months ended March 31, 2018. In the three months ended March 31, 2017, we did not record any interest expenses.

Share of losses of Equity Investee

We recorded share of losses of equity investee of RMB0.8 million (US$0.1 million) in the three months ended March 31, 2018, consisting of our share of the losses of Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

Investment Income

We recorded investment income of RMB0.1 million in the three months ended March 31, 2017. This change was primarily due to income from trading securities in the three months ended March 31, 2017. In the three months ended March 31, 2018, we did not record any investment income.

Other Income/(Loss)—Net

We recorded other losses of RMB87.7 million (US$14.0 million) in the three months ended March 31, 2018, as compared to other losses of RMB7.8 million in the three months ended March 31, 2017, primarily due to the appreciation of RMB against the U.S. dollar. For the three months ended March 31, 2018, we held a significant portion of our cash and cash equivalents in U.S. dollars, while a significant portion of our expenses were incurred in RMB.

Income Tax Expense

In the three months ended March 31, 2018, our income tax expense was RMB1.9 million (US$0.3 million), a decrease of 13.6% from RMB2.2 million in the three months ended March 31, 2017. These income taxes represented income taxes paid with respect to transfer pricing compensation to our operations in Germany.

Net Loss

As a result of the foregoing, we incurred net loss of RMB1,531.0 million (US$244.1 million) in the three months ended March 31, 2018, as compared to a net loss of RMB960.6 million in the three months ended March 31, 2017.

 

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Comparison of 2017 and 2016

Research and Development Expenses

Research and development expenses increased by 77.6% from RMB1,465.4 million in 2016 to RMB2,602.9 million (US$415.0 million) in 2017, primarily due to (i) a 53.4% increase in design and development expenses, which increased from RMB948.8 million in 2016 to RMB1,455.3 million (US$232.0 million) in 2017, as we engaged in trial production of the ES8 and advanced the development of the ES6 and (ii) a 123.7% increase in employee compensation, which increased from RMB451.3 million in 2016 to RMB1,009.5 million (US$160.9 million) in 2017, as the number of our research and development employees increased by approximately 90.0% from December 31, 2016 to December 31, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by 106.7% from RMB1,137.2 million in 2016 to RMB2,350.7 million (US$374.8 million) in 2017, due to, among others, (i) a 96.5% increase in employee compensation with respect to our non-research and development employees, which increased from RMB473.3 million in 2016 to RMB929.9 million (US$148.2 million) in 2017, primarily resulting from our number of non-research and development employees increased by approximately 90.0% from December 31, 2016 to December 31, 2017, in line with the expansion of our business, (ii) an 82.0% increase in marketing and promotional expenses, which increased from RMB239.5 million in 2016 to RMB435.9 million (US$69.5 million) in 2017 as marketing and promotional activities increased, as we prepared to launch of our first volume manufactured vehicle, the ES8, (iii) a 136.2% increase in rental and related expenses, which increased from RMB91.5 million in 2016 to RMB216.1 million (US$34.5 million) in 2017, as we began to establish our network of NIO Houses and rented additional facilities in relation to our charging network and office space and (iv) increased depreciation and amortization expenses, resulting from our increased depreciable assets, including leasehold improvements, IT equipment and software, among others, as our business expanded. The increase was also due to increased low value consumable expenses, travel expenses and other expenses.

Loss from Operations

As a result of the foregoing, we incurred a loss from operations of RMB4,953.6 million (US$789.7 million) in 2017, as compared to a loss of RMB2,602.5 million in 2016.

Interest Income

In 2017, we recorded interest income of RMB19.0 million (US$3.0 million) as compared to RMB27.6 million in 2016, primarily due to a preferred shareholder having delayed its investment payment due in 2016, which resulted in penalties which we recorded as interest income in 2016.

Interest Expense

In 2017, we recorded interest expense of RMB18.1 million (US$2.9 million), as compared to interest expense of RMB55,000 in 2016, primarily due to the increase in our indebtedness in 2017.

Share of losses of Equity Investee

We recorded share of losses of equity investee of RMB5.4 million (US$0.9 million) in 2017, consisting of our share of the losses of Suzhou Zenlead XPT New Energy Technologies Co., Ltd. We did not record any share of losses of equity investee in 2016.

Investment Income

In 2017, we recorded investment income of RMB3.5 million (US$0.6 million) as compared to RMB2.7 million in 2016, primarily due to a larger size of investment in 2017 as compared to 2016.

 

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Other Income/(Loss)—Net

We recorded other losses of RMB58.7 million (US$9.4 million) in 2017, as compared to other income of RMB3.4 million in 2016, primarily due to the appreciation of RMB against the U.S. dollar. In 2017 we held a significant portion of our cash and cash equivalents in U.S. dollars, while a significant portion of our expenses were incurred in RMB.

Income Tax Expense

In 2017, our income tax expense was RMB7.9 million (US$1.3 million), an increase of 83.3% from RMB4.3 million in 2016, primarily due to income taxes paid with respect to transfer pricing compensation to our operations in Germany.

Net Loss

As a result of the foregoing, we incurred net loss of RMB5,021.2 million (US$800.5 million) in 2017, as compared to a net loss of RMB2,573.3 million in 2016.

Taxation

Cayman Islands

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty.

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 brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments.

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.

We are primarily subject to value-added tax at a rate of 6% on the services (research and development services, technology services, information technology services and/or culture and creativity services), in each case less any deductible value-added tax we have already paid or borne. 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 Arrangement between China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority. If our Hong Kong subsidiaries satisfy all the requirements under the tax arrangement and receives 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 our holding company in the Cayman Islands 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%.

 

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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 has 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 50% 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 150% of the costs of the intangible assets.

Selected Quarterly Results of Operations

The following table sets forth our historical unaudited consolidated selected quarterly results of operations for the period indicated.

 

     For the Three Months Ended  
     March 31, 2017     June 30, 2017     September 30, 2017     December 31, 2017     March 31, 2018  
     RMB     RMB     RMB     RMB     RMB  
     ( in thousands)  

Operating expense

          

Research and development expense

     (509,313     (521,940     (747,209     (824,427     (690,650

Selling, general and administrative

     (443,262     (521,101     (540,648     (845,696     (773,218
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operation

     (952,575     (1,043,041     (1,287,857     (1,670,123     (1,463,868

Interest income

     1,881       2,849       4,802       9,438       28,437  

Interest expenses

           (12,681     (2,304     (3,099     (5,200

Share of losses of equity investee

           (2,986     (1,900     (489     (833

Investment income

     101       1,890       1,507              

Other loss, net

     (7,796     (3,839     (13,667     (33,379     (87,675
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (958,389     (1,057,808     (1,299,419     (1,697,652     (1,529,139

Income tax expense

     (2,182     (2,143     (1,256     (2,325     (1,883
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (960,571     (1,059,951     (1,300,675     (1,699,977     (1,531,022
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of March 31, 2018, we had not generated any revenue because we had not yet made deliveries of our first volume manufactured electric vehicle, the ES8, to the public. Our losses were mainly the result of our research and development expenses and selling, general and administrative expenses. As we ramped up the development and manufacture of ES8 in the fourth quarter of 2017, our research and development expenses increased significantly compared with the first quarter of 2017, which was mainly attributable to increased research and development employee compensation and expenses relating to design and production of the ES8. In line with our business expansion, our selling, general administrative expenses also increased in the fourth quarter of 2017 as we hired additional marketing and sales employees, conducted more marketing and promotional activities to prepare for the launch of ES8, and established and expanded our network of NIO Houses, delivery centers and manufacturing factories.

Because of our limited operating history our business has not yet experienced the effects of seasonality, though we may do so in the future. See “Seasonality.”

Liquidity and Capital Resources

In addition to experiencing net losses during the periods presented, we had net cash used in operating activities of RMB2,201.6 million, RMB4,574.7 million (US$729.3 million) and RMB1,559.3 million

 

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(US$248.6 million) in 2016, 2017 and three months ended March 31, 2018, respectively. Our principal sources of liquidity have been cash raised from the issuance of preference shares and banking facilities.

As of March 31, 2018, we had a total of RMB5,523.0 million (US$880.5 million) in cash and cash equivalents. As of March 31, 2018, 21% of our cash and cash equivalents were denominated in Renminbi and held in the PRC, and the other cash and cash equivalents and restricted cash were 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 or other financial institutions, which are unrestricted as to withdrawal and use, and which have original maturities of three months or less.

As of March 31, 2018, we had available banking facilities of RMB3,730 million (US$594.6 million), of which RMB712.9 million (US$113.7 million) was utilized for borrowings and RMB8.4 million (US$1.3 million) for letters of credit.

We believe that our current cash and cash equivalents, available banking facilities, anticipated cash receipts from sales of vehicles and provision of services and proceeds from third-party equity investments in certain of our subsidiaries, will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. 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.

The following table sets forth a summary of our cash flows for the periods indicated.

 

     For the Year Ended
December 31,
    Three months Ended
March 31,
 
     2016     2017     2017     2018  
     RMB     RMB     US$     RMB     RMB     US$  
     (in thousands)  

Summary of Consolidated Cash Flow Data:

          

Net cash used in operating activities

     (2,201,564     (4,574,719     (729,319     (1,049,773     (1,559,259     (248,584

Net cash provided by /(used in) investing activities

     117,843       (1,190,273     (189,758     (330,984     (515,917     (82,249

Net cash provided by financing activities

     2,292,704       12,867,334       2,051,356       1,228,864       322,872       51,475  

Effects of exchange rate changes on cash and cash equivalent

     40,539       (168,120     (26,800     1,767       (231,187     (36,856

Net increase in cash and cash equivalents

     249,522       6,934,222       1,105,479       (150,126     (1,983,491     (316,214

Cash, cash equivalents and restricted cash at beginning of the year

     347,109       596,631       95,117       596,631       7,530,853       1,200,595  

Cash, cash equivalents and restricted cash at end of the year

     596,631       7,530,853       1,200,596       446,505       5,547,362       884,381  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Net cash used in operating activities was RMB1,559.3 million (US$248.6 million) in the three months ended March 31, 2018, primarily attributed to a net loss of RMB1,531.0 million (US$244.1 million), adjusted for (i) non-cash items of RMB199.9 million (US$31.9 million), which primarily consisted of foreign exchange loss

 

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of RMB92.5 million (US$14.8 million), depreciation and amortization of RMB64.4 million (US$10.3 million) and share-based compensation expenses of RMB42.1 million (US$6.7 million) and (ii) a net increase in working capital of RMB228.2 million (US$36.4 million). The net increase in working capital was primarily attributable an increase in prepayments and other current assets of RMB136.2 million (US$21.7 million), consisting primarily of deductible value-added tax and prepaid expenses, an increase in inventories of RMB76.2 million (US$12.2 million), primarily related to purchase of materials, works in progress and finished goods, and an increase in accruals and other liabilities of RMB32.8 million (US$5.2 million), consisting primarily of a loan from an investor repaid in April 2018, salaries and benefits payable and payables for research and development expenses.

Net cash used in operating activities was RMB4,574.7 million (US$729.3 million) in 2017, primarily attributable to a net loss of RMB5,021.2 million (US$800.5 million), adjusted for (i) non-cash items of RMB315.7 million (US$50.3 million), which primarily consisted of depreciation and amortization of RMB167.9 million (US$26.8 million), foreign exchange losses of RMB49.5 million (US$7.9 million) and share-based compensation expenses of RMB90.3 million (US$14.4 million) and (ii) a net increase in working capital of RMB130.7 million (US$20.1 million). The net increase in working capital was primarily attributable to an increase in accruals and other liabilities of RMB603.4 million (US$96.2 million), consisting primarily of payables for research and development expenses, accrued expenses and salaries and benefits payable, and an increase in other non-current liabilities of RMB78.6 million (US$12.5 million), consisting primarily of rental payable and deferred government grants, offset partially by, among others, an increase in prepayment and other current assets of RMB404.8 million (US$64.5 million), which primarily related to deductible value-added tax, prepaid expenses and deposits; an increase in inventories of RMB89.5 million (US$14.3 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 (US$10.6 million).

Net cash used in operating activities was RMB2,201.6 million in 2016, primarily attributable to a net loss of RMB2,573.3 million, adjusted for (i) non-cash items of RMB114.8 million, which primarily consisted of depreciation and amortization of RMB46.1 million and share based compensation expenses of RMB76.7 million and (ii) a net increase in working capital of RMB256.9 million. The net increase in working capital was primarily attributable to an increase in accruals and other liabilities of RMB410.1 million, consisting primarily of payables for research and development expenses, accrued expenses and salaries and benefits payable, and an increase in other non-current liabilities of RMB61.2 million, consisting primarily of deferred rent and deferred government grants, offset partially by, among others, an increase in prepayment and, other current assets of RMB209.8 million, primarily related to deductible value-added taxes and an increase in other non-current assets.

Investing Activities

Net cash used in investing activities was RMB515.9 million (US$82.2 million) in three months ended March 31, 2018, which was primarily attributable to (i) purchase of property, plant and equipment and intangible assets of RMB450.6 million (US$71.8 million) and (ii) loan to related parties of RMB65.3 million (US$10.4 million).

Net cash used in investing activities was RMB1,190.3 million (US$189.8 million) in 2017, which was primarily attributable to (i) purchases of property, plant and equipment and intangible assets of RMB1,113.9 million (US$177.6 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 (US$213.2 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 (US$213.8 million).

Net cash generated from investing activities was RMB117.8 million in 2016, which was primarily attributable to proceeds from sales of held for trading securities of RMB3,118.6 million, consisting of certain short-term liquid investments, partially offset by, among others, purchases of held for trading securities of

 

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RMB2,346.3 million and purchases of property, plant and equipment and intangible assets of RMB654.5 million, relating to the expansion of our research and development capabilities.

Financing Activities

Net cash provided by financing activities was RMB322.9 million (US$51.5 million) in three months ended March 31, 2018, which was attributable to the proceeds from borrowings of RMB229.2 million (US$36.5 million), net proceeds from the issuance of our series D shares of RMB78.7 million (US$12.5 million), and capital injections from non-controlling interests of RMB14.5 million (US$2.3 million).

Net cash provided by financing activities was RMB12,867.3 million (US$2,051.4 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 (US$1,949.2 million), and to a lesser extent the proceeds from borrowings of RMB633.7 million (US$101.0 million), and capital injections from non-controlling interests of RMB13.4 million (US$2.1 million).

Net cash provided by financing activities was RMB2,292.7 million in 2016, which was attributable to the net proceeds from the issuance of our series A and series B preferred shares of RMB2,263.6 million.

Capital Expenditures

We made capital expenditures of RMB654.5 million, RMB1,113.9 million (US$177.6 million) and RMB450.6 million (US$71.8 million) in 2016, 2017 and three months ended March 31, 2018, 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 mould 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. Through May 2018, we incurred capital expenditures of more than RMB60 million in connection with the roll-out of our network of power solutions, including NIO Power Home, Power Express and other solutions. We currently plan to have 40 to 80 swap stations and approximately 400 charging trucks in place by the end of 2018, based on our assessment of user demand. With respect to our Shanghai manufacturing facility, pursuant to our arrangements with certain Shanghai governmental entities, such entities are constructing the Shanghai manufacturing facility, which we plan to lease in the future and we have not incurred capital expenditures in connection with such construction. Once the factory is completed by such entities we plan to purchase and procure our equipment and make improvements to the factory which we expect will involve significant capital expenditures. We expect 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 this offering 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 meet the expected growth of our business.

 

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Borrowings

As of March 31, 2018, our total borrowings, including current borrowings and non-current borrowings, were RMB900.4 million (US$143.5 million), primarily consisting of bank loans and loan from investors. The table below sets forth certain details of our material borrowings as of March 31, 2018:

 

Lender

 

Facility Size

 

Effective Date/

Expiration

 

Amount Outstanding

Bank of Nanjing

  RMB1,000.0 million   May 18, 2017/   RMB543.5 million; interest rate from 4.75% to 5.795%
    May 17, 2022   RMB 0.6 million; interest rate at 4.35%

China Merchants Bank

  RMB200.0 million  

August 16, 2017/

August 15, 2018

  RMB50 million; interest rate 5.22%; matures on January 25, 2021

China CITIC Bank

  RMB100.0 million  

September 28, 2017/

September 27, 2018

  RMB50 million; interest rate 5.22%; matures on February 1, 2021
  RMB200.0 million  

October 27, 2017/

October 26, 2018

  RMB18.8 million; interest rate at 4.87%; matures on June 7, 2018

Zhejiang Merchants Bank

  RMB100.0 million  

December 21, 2017/

December 20, 2018

  N/A

Hangzhou Bank

  RMB50.0 million  

August 21, 2017/

August 20, 2018

  RMB10.0 million; interest rate at 4.57%; matures on June 7, 2018;
      RMB10.0 million; interest rate at 4.57%; matures on February 8, 2019

Nanjing Xingzhi Technology Industry Development Co., Ltd.

  N/A   N/A   RMB37.5 million

Wuhan Donghu New Technology Development Zone Management Committee

  N/A   N/A   RMB150.0 million

China Merchants Bank

  RMB500.0 million  

January 26, 2018/

January 25, 2019

  RMB30.0 million; interest rate at 4.57%; matures on August 11, 2018

Pudong Development Bank

  RMB80.0 million  

March 30, 2018/

March 29, 2019

  N/A

Bank of Shanghai

  RMB1,500 million  

February 1, 2018/

December 15, 2025

  N/A

We are not subject to any material covenants under the agreements described above.

 

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Contractual Obligations

The following table sets forth our contractual obligations as of March 31, 2018:

 

     Payment due by period  
     Total      Less than
1 year
     1 - 2
years
     2 - 3
years
     More than
3 years
 
     (in RMB thousands)  

Capital commitments

     1,767,308        1,714,109        49,868        3,331         

Operating lease obligations

     2,175,791        255,542        295,357        297,694        1,327,198  

Short-term and long-term borrowings

     900,393        430,323        333,023        93,523        43,524  

Interest on borrowings

     110,020        39,503        18,820        5,759        45,938  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,953,512        2,439,477        697,068        400,307        1,416,660  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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 March 31, 2018.

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 and may not provide our management with as much or as accurate or timely information. The Public Company Accounting Oversight Board, or 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 years ended December 31, 2016 and 2017, we and our independent registered public accounting firm, identified one material weakness in our internal control over financial reporting. 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 SEC. The material weakness resulted in a significant number of adjustments and amendments to our consolidated financial statements and related disclosures under U.S. GAAP.

We have implemented and plan to implement a number of measures to address the material weakness. We have hired additional qualified financial and accounting staff with working experience with U.S. GAAP and SEC reporting requirements. We have also 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

 

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audit function as well as engaging an external consulting firm to assist us in assessing our compliance readiness under rule 13a-15 of the Exchange Act and improve overall internal control. 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.

We will continue to implement measures to remediate our internal control deficiencies in order to meet the deadline imposed by Section 404 of the Sarbanes-Oxley Act. We may incur significant costs in the implementation of such measures. However, the implementation of these measures may not fully address the deficiencies in our internal control over financial reporting. See “Risk Factors—Risks Related to Our Business—If we fail to implement an effective internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, holders of our ADSs could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ADSs.”

As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in the assessment of the emerging growth company’s internal control over financial reporting.

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 and staff bonus 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 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 March 31, 2018, although we expect that our VIEs will hold certain significant assets in the future. In the future we expect that our in-house vehicle manufacturing will be carried out primarily by NIO New Energy, which is controlled by us through Shanghai Anbin and/or its subsidiaries and we expect Beijing NIO will focus on value-added telecommunications services, including without limitation, performing internet services, operating our website and mobile application as well as holding certain related licenses.

Off-balance sheet commitments and 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.

 

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Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

Once we begin sales of the ES8, 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 RMB and such other currencies. In addition, the value of your investment in 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 value of the Renminbi 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. In July 2005, the PRC government changed its decades-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the PRC government has allowed the Renminbi to appreciate slowly against the U.S. dollar again, and it has appreciated more than 10% since June 2010. On August 11, 2015, the People’s Bank of China announced plans to improve the central parity rate of the Renminbi against the U.S. dollar by authorizing market-makers to provide parity to the China Foreign Exchange Trading Center operated by the People’s Bank of China with reference to the interbank foreign exchange market closing rate of the previous day, the supply and demand for foreign currencies as well as changes in exchange rates of major international currencies. Effective from October 1, 2016, the International Monetary Fund added Renminbi to its Special Drawing Rights currency basket. Such change and additional future changes may increase volatility in the trading value of the Renminbi against foreign currencies. The PRC government may adopt further reforms of its exchange rate system, including making the Renminbi freely convertible in the future. Accordingly, it is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.

To the extent that we need to convert U.S. dollars or other currencies 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 or other currency for the purpose of making payments to suppliers or 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.

We estimate that we will receive net proceeds of approximately US$             million from this offering if the underwriters do not exercise their option to purchase additional ADSs, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us, based on the initial offering price of US$             per ADS, the midpoint of the estimated initial public offering price range shown on the cover page of this prospectus. Assuming that we convert the full amount of the net proceeds from this offering into Renminbi, a 10% appreciation of the U.S. dollar against the Renminbi, from the exchange rate of RMB6.2726 for US$1.00 as of March 31, 2018 to a rate of RMB6.8999 to US$1.00, would result in an increase of RMB             million in our net proceeds from this offering. Conversely, a 10% depreciation of the U.S. dollar against the RMB, from the exchange rate of RMB6.2726 for US$1.00 as of March 31, 2018 to a rate of RMB5.6453 to US$1.00 would result in a decrease of RMB             million in our net proceeds from this offering.

Interest Rate Risk

We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.

After completion of this offering, we may invest the net proceeds we receive from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree

 

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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 2015, 2016 and 2017 were increases of 1.4%, 2.0% and 1.6%, 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 typically decline over the winter season, while sales are generally higher during the spring and summer months. 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.

Critical Accounting Policies

The consolidated financial statements of the Group have been prepared in accordance with U.S. GAAP. Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below:

Valuation of Stock-Based Awards and Common Stock

Stock-Based Compensation

We grant restricted share units, or RSUs, and share options to eligible employees and nonemployee 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.

Employees’ share-based compensation awards are measured at the grant date fair value of the awards and recognized as expenses (i) immediately at grant date if no vesting conditions are required to be met; or (ii) 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 (iii) for share options granted with service conditions and the occurrence of an initial public offering as a performance condition, cumulative share-based compensation expenses for the options that have satisfied the service condition will be recorded upon the completion of the initial public offering, using the graded-vesting method.

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.

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.

 

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The fair value of each new employee option awarded was estimated on the grant date for the periods below using the Binomial option-pricing model with the following weighted-average assumptions.

 

     2016     2017     March 31,
2018
 

Exercise price (USD)

     0.10-0.61       0.61-2.55       0.10-2.55  

Fair value of the ordinary shares on the date of option grant (USD)

     0.96-1.30       1.30-2.55       2.55-3.38  

Risk-free interest rate

     1.46%-1.78     2.31%-2.40     2.74

Expected term (in years)

     10       10       10  

Expected dividend yield

     0     0     0

Expected volatility

     54     51%-52     51

Expected forfeiture rate (post-vesting)

     5     5     5

If in the future we determine that another method for calculating the fair value of our stock options is more reasonable, or if another method for calculating the above input assumptions is prescribed by authoritative guidance, the fair value calculated for our employee stock options could change significantly.

The Binomial option-pricing model requires inputs such as the risk-free interest rate, expected term and expected volatility. Further, the forfeiture rate also affects the amount of aggregate compensation. These inputs are subjective and generally require significant judgment.

We recorded stock-based compensation of RMB76.7 million, RMB90.3 million and RMB42.1 million during the years ended December 31, 2016 and 2017 and the three months ended March 31, 2018, respectively. As of March 31, 2018, we had (1) RMB32.4 million of unrecognized share-based compensation expenses related to the employee restricted shares granted under the Prime Hubs Plan, which is expected to be recognized over a weighted-average period of 1.74 years; (2) RMB88.7 million 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 2.70 years; (3) RMB611.1 million of unrecognized compensation expenses related to the stock options granted to the Group’s non-NIO US employees with a performance condition of an IPO, out of which unrecognized compensation expenses of RMB164.4 million related to options for which the service condition had been met and are expected to be recognized when the performance target of an IPO is achieved; and (4) RMB4.7 million 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 1.50 years. In future periods, our stock-based compensation expense is expected to increase materially as we issue additional stock-based awards to continue to attract and retain employees and nonemployee directors.

We account for stock options issued to nonemployees also based on their estimated fair value determined using the Binomial option-pricing model. However, the fair value of the equity awards granted to nonemployees is remeasured each period until the awards vest, and the resulting increase in value, if any, is recognized as expense during the period the related services are rendered.

Common Stock Valuation

After our initial public offering, in determining the fair value of the non-vested ordinary shares and restricted share units granted, the closing market price of the underlying shares on the last trading date prior to the grant dates will be applied. Prior to our initial public offering, because there has been no public market for our common stock, our Board of Directors determined the fair value of our common stock by considering a number of objective and subjective factors, including the following:

 

    our sales of convertible preferred stock to unrelated third parties;

 

    our operating and financial performance;

 

    the lack of liquidity of our capital stock;

 

    trends in our industry;

 

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    arm’s length, third-party sales of our stock; and

 

    contemporaneous valuations performed by an unrelated third-party.

There is inherent uncertainty in these estimates and if we had made different assumptions than those used, the amount of our stock-based compensation expense, net loss and net loss per share amounts could have been significantly different. The following table summarizes, by grant date, the number of stock options granted since January 1, 2016 through March 31, 2018, and the associated per share exercise price.

 

Grant Date

   Number of
Options
Granted
     Exercise
Price(US$)
     Fair Value
per Share of
Common
Stock(US$)
     Intrinsic
value at
the Grant
Date(US$thousand)
 

2016 Q1

     24,117,750        0.10 - 0.50        0.96 - 0.99        20,944  

2016 Q2

     5,399,000        0.27        0.99 - 1.15        4,259  

2016 Q4

     24,059,856        0.27 - 0.61        1.25 - 1.30        17,955  

2017 Q1

     1,059,000        0.61 - 2.55        1.30 - 1.32        729  

2017 Q2

     3,390,700        1.32        1.80        1,621  

2017 Q3

     1,971,277        0.61 - 1.32        1.80 - 2.05        1,640  

2017 Q4

     7,039,500        0.61 - 1.80        2.05 - 2.55        5,397  

2018 Q1

     35,890,683        0.10 - 2.55        2.55 - 3.38        24,426  

Prior to our initial public offering, our Board of Directors taking into account independent valuer advice, performed valuations of our common stock for purposes of granting stock options in a manner consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The enterprise value input of our common stock valuations were derived either using fundamental analysis (income and market approaches) or based on a recent round of financing (option pricing approach). The income approach estimates the enterprise value of the company by discounting the expected future cash flows of the company to present value. We have applied discount rates that reflect the risks associated with our cash flow projections and have used venture capital rates of return for companies at a similar stage of development as us, as a proxy for our cost of capital. Our discounted cash flow calculations are sensitive to highly subjective assumptions that we were required to make at each valuation date relating to appropriate discount rates for various components of our business.

 

Valuation Date

   Fair value
per share(US$)
     Discount Rates  

Mar. 31 2015

     0.79         

Sept. 30 2015

     0.72         

Dec. 31 2015

     0.86         

Mar. 10 2016

     0.96         

Mar. 31 2016

     0.99        20

Jun. 30 2016

     1.15         

Jul. 31 2016

     1.21         

Sept. 30 2016

     1.25         

Dec. 31 2016

     1.30         

Jan. 31 2017

     1.32        20

Mar. 31 2017

     1.80         

Jun. 30 2017

     1.80         

Sept. 30 2017

     2.05        17

Dec. 31 2017

     2.55         

Mar. 31, 2018

     3.38        25

 

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The increases in our fair value share from 2015 to March 31, 2018 were primarily the result of the increased equity value of our company as the development of our vehicles advanced and additional funding was received through equity financing.

Our projected cash flows have been primarily derived from our projected ES8 and ES6 revenue streams. In more recent valuations, these cash flow projections take into account the fact that we plan to start selling the ES8 since 2018, and our anticipation of launch of the ES6 in 2018 and commencing deliveries in 2019.

Under the market approach, the total enterprise value of the company is estimated by comparing our business to similar businesses whose securities are actively traded in public markets, or businesses that are involved in a public or private transaction. Prior transactions in our stock are also considered as part of the market approach methodology.

We have selected revenue valuation multiples derived from trading multiples of public companies that participate in the automotive OEM, automotive retail, automotive parts and battery technology industries. These valuation multiples were then applied to the equivalent financial metric of our business, giving consideration to differences between our company and similar companies for such factors as company size and growth prospects.

For those reports that relied on the fundamental analysis, we prepared a financial forecast to be used in the computation of the enterprise value for both the market approach and the income approach. The financial forecasts took into account our past experience and future expectations. The risks associated with achieving these forecasts were assessed in selecting the appropriate discount rate. As discussed below, there is inherent uncertainty in these estimates. Second, we allocated the resulting equity value among the securities that comprise our capital structure using the Option-Pricing Method. The aggregate value of the common stock derived from the Option-Pricing Method was then divided by the number of common shares outstanding to arrive at the per common share value. For those reports before our initial public offering that relied on the recent round of financing, we back-solved for the total equity value such that the value of the instrument sold in the recent round as calculated by the option pricing model was consistent with the observed transaction price.

Valuations that we have performed require significant use of estimates and assumptions. If different estimates and assumptions had been used, our common stock valuations could be significantly different and related stock-based compensation expense may be materially impacted.

Recently issued accounting pronouncements

A list of recently issued accounting pronouncements that are relevant to us is included in note 3 to our consolidated financial statements included elsewhere in this prospectus.

 

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INDUSTRY

China is the largest passenger vehicle and NEV market in the world and continues to account for more than half of global BEV sales. China’s BEV sales are expected to experience more than 40% annualized growth until 2022, according to Frost & Sullivan. Our first two vehicles, ES8 and ES6, target the premium SUV segment, as within the China passenger car market, the premium and the SUV segments are expected to achieve the highest growth during the period from 2017 to 2022 respectively. Currently we believe no premium BEV is available to Chinese consumers at competitive pricing and the ES8 is expected to face limited competition initially from premium BEVs.

In particular, China’s BEV SUV market is currently dominated by domestic players positioned in the entry segment except for the Tesla Model X. As the below chart indicates, although a number of BEV SUV models will be launched to the market in the future in the premium segment, we enjoy cost advantages resulting in a lower manufacturer suggested retail price, or MSRP, as compared to other models.

 

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Note:    (1)   Manufacturer suggested retail price pre subsidies

Source: Frost & Sullivan Report

Growth Trends in China’s Automotive Industry

China is the world’s largest passenger vehicle market and the largest growth contributor to global growth

China is the world’s largest automobile market as measured by sales volume. Driven by economic growth and increasing urbanization, the passenger vehicle industry has grown from 19.0 million sales units in 2013 to 25.7 million units in 2017, representing a CAGR of 7.8%, more than three times of the global market’s CAGR of 2.5% for that period. According to Frost & Sullivan, China’s passenger vehicle sales volume is expected to grow at a CAGR of 5.2% from 2017 to 2022, reaching 33.1 million units in 2022, accounting for 37.4% of the global market as of 2022. China’s expected incremental sales volume of 7.4 million units from 2017 to 2022 represent 86% of the 8.6 million incremental units expected to be sold globally during the same period. Although China is already the largest automobile market in the world, the penetration rate of passenger vehicles as a proportion of its population is still low compared to that in developed countries. In 2017, China’s passenger vehicle penetration was 136 units per 1,000 persons, as compared to 745 units per 1,000 persons in the U.S., which presents significant further growth potential in China’s passenger vehicle market in the future, according to Frost & Sullivan.

 

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The premium segment continues to outgrow the broader China passenger vehicle market

Passenger vehicles can be categorized into three segments, including entry, mid-end, and premium, based on, among others, performance, brand recognition and pricing. The premium segment in China continues to take market share from the entry and mid-range segments, growing at a CAGR of 15.7% from 2013 to 2017. The premium segment is expected to continue to grow at a CAGR of 12.4% from 2017 to 2022, driven by continued expansion of middle class and upper middle class in China, with annual incomes of US$10,000 to US$60,000 and over US$60,000 respectively. According to Frost & Sullivan, the population in the middle class and upper middle class is expected to expand to approximately 502 million in aggregate by 2022. The chart below sets forth the sales volume of passenger vehicles in China categorized by price segment.

 

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Source: Frost & Sullivan Report

 

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The SUV segment has witnessed the fastest growth among passenger vehicle segments

In recent years, the SUV segment has witnessed the fastest growth among all passenger vehicle segments in China. SUV sales volume grew from 3.7 million units in 2013 to 10.8 million units in 2017, representing a CAGR of 30.7%. The SUV segment is expected to continue to outpace industry growth for the next five years, reaching 16.9 million units in 2022, representing a CAGR of 9.4%. This rapid growth reflects consumers’ increasing preference for SUVs which offer a larger interior space, better driving performance under different road conditions. In addition, the lifting of the one-child policy in China is expected to boost family size and the demand for vehicles with more seats, leading to increased demand for SUVs. The chart below sets forth the historical and forecasted sales volume of passenger vehicles in China categorized by model type.

 

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Source: Frost & Sullivan Report

The global and especially China’s NEV markets are expected to continue to experience very high growth

China is a clear leader in the global NEV market

The Chinese NEV market benefits from favorable policies and strong support from the Chinese government. China’s NEV market has outperformed the global NEV market significantly, growing at a CAGR of 141.5% from 22 thousand units in 2013 to 742 thousand units in 2017. During the same period, global NEV sales recorded a CAGR of 16.2%. China is expected to continue to lead the growth of the global NEV market, reaching 3.6 million units in 2022, growing at a CAGR of 37.1% from 2017 to 2022.

China’s NEV penetration rate (calculated as NEV sales volume as a percentage of total passenger vehicle sales volume) is projected to almost quadruple, increasing from 2.9% in 2017 to 10.9% in 2022. The Chinese government is targeting annual sales volume of 2 million units, and an aggregate of 5 million units of NEVs on the road by 2020.

China is notably skewed to BEVs over HEVs and PHEVs

NEVs generally include three types: battery electric vehicles, or BEVs, hybrid electric vehicles, or HEVs and plug-in hybrid electric vehicles or PHEVs. Among these, the BEV is considered the most eco-friendly as a zero emission solution. Recognizing these benefits, the Chinese government favors BEVs to other NEVs and provides BEVs greater incentives. With battery technology improving and charging network expansion, consumer concern over range has also lessened, another factor contributing to BEV growth. In the last five years, BEVs witnessed fast growth, growing from 13 thousand units in 2013 to 476 thousand units in 2017 at a CAGR of 147.9% in China as compared to 68.2% in the global market. The chart below sets forth the historical and forecasted NEV sales volume in China categorized by power type.

 

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Source: Frost & Sullivan Report

The Chinese government’s current policy is designed to promote BEVs and its related technologies. China had the highest share of BEVs as percentage of NEVs at 64.1% as compared to 27.3% for the global market in 2017. China has become the largest BEV market globally, accounting for approximately 54.3% of the overall global BEV market in 2017. Frost & Sullivan predicts that over 2.6 million BEVs are expected to be sold in China in 2022, accounting for 64.6% of the global BEV market. During the period from 2017 to 2022, the sales volume of BEVs is expected to grow at a CAGR of 40.8% in China as compared to 36.0% in global market. The chart below illustrates global BEV sales volume in 2017 and 2022 by major geographic regions.

 

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Source: Frost & Sullivan Report

Smart & connected vehicles rapidly penetrate the automotive industry

Increasing connectivity has accelerated the development and adoption of new services and infotainment inside vehicles. Frost & Sullivan estimates vehicles connectivity penetration globally has doubled in the last five years from 5% in 2013 to 10% in 2017 and is expected to double in the next five years to 20% by 2022. Vehicle connectivity is categorized into four types, namely vehicle to vehicle, or V2V, vehicle to infrastructure, or V2I

 

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vehicle to pedestrian, V2P, and vehicle to cloud, or V2C. According to Frost & Sullivan, the global vehicle connectivity market was a US$38.4 billion market in 2017, with the potential to grow to US$100.2 billion in 2022, representing a CAGR of 21.1%, driven by advancements in autonomous driving and 5G communication technologies. This market includes hardware, telecommunications, telematics services and related services.

Among new vehicle features, autonomous driving currently receives the most attention from traditional OEMs, suppliers and global technology companies who are all competing for leadership in autonomous driving technology. These parties have made significant investments in autonomous driving, all trying to become the first to deliver full autonomous driving where human attention is no longer needed for vehicle operation. Between August 2014 and June 2017, an aggregate of approximately US$80 billion has been raised in over 160 autonomous driving-related fundraising activities. According to Frost & Sullivan, the market size of autonomous driving including sales of related hardware and software products is approximately US37.2 billion in 2017 and is expected to grow significantly to US$285.3 billion in 2022, representing a CAGR of 50.3%. According to Society of Automotive Engineers, or SAE’s autonomous driving level definitions, there are six levels of classification of automation levels with Level 5 being completely autonomous with no human intervention and Level 0 having no autonomous vehicle controls. In terms of penetration, autonomous driving systems at Level 2 (considered as partially self-driving with driving mode-specific execution by a driver assistance system of both steering and acceleration and deceleration) or above is forecasted to be over 14% of the automotive market in 2022 according to Frost & Sullivan.

Artificial intelligence, or AI, is another area that has received a lot of attention. AI is being applied in many different areas, including voice control, gesture recognition, natural language processing and decision-making. The market for AI for automobiles is expected to grow from US$1.1 billion in 2017 to US$6.0 billion by 2022, representing a CAGR of 39.7%.

Competitive Landscape of China’s NEV Market

Largely unserved premium EV market in China

According to Frost & Sullivan, 476 thousand BEVs were sold to Chinese consumers in 2017. Among the top 10 BEV brands with the highest sales volumes in 2017, only Tesla is in the premium segment, while the other nine brands are in the entry segment, and the average prices post subsidies of those other nine brands were all below RMB 170,000. The top 10 best-selling BEV brands in China in 2017 are listed in the chart below.

 

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Source: Frost & Sullivan Report

 

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The ES8 has best-in-class specifications outperforming its competitors

Frost & Sullivan compared the ES8 to its competitors in the premium BEV SUV category in China in several different categories. Currently, competition in the premium BEV SUV category is concentrated to only a small number of participants, including imported premium models while local models are targeting the mass market.

The comparison also includes a PHEV SUV model which is a premium vehicle similar in size to the ES8. Among the vehicles set forth below, the ES8 has the fastest acceleration time from 0 to 100km/h and the highest maximum power output, and it also features the highest autonomous driving level. In terms of electric motors, maximum torque, NEDC driving range and other core features, the ES8 also delivers the best performance, compared to the competition.

 

    SUV Models
    NIO – ES8   Tesla – Model X 75D   Audi Q7 45 e-tron
(PHEV)
  SAIC Roewe
ERX5
  BYD SONG EV300
SUV
  Mercedes-Benz
AMG GLS 63

Type

  BEV   BEV   PHEV(2.0L)   BEV   BEV   ICE

Launch Time

  2017   2016   2017   2017   2017   2017

MSRP (RMB)(1)

  448,000   761,660   854,500   271,800   265,900   1,699,059

Average Consumer Cost (RMB)(2)

 

373,933

 

826,760

 

927,534

 

197,733

 

225,400

 

1,849,023

Length/Width/Height (mm)

  5,022/1,962/1,756   5,037/2,070/1,684   5,071/1,968/1,716   4,554/1,855/1,716   4,565/1,870/1,720   5,162/1,982/1,851

Max No. of Seats

  7   7   5   5   5   7

Electric Motor

  AC asynchronous
motor
  AC asynchronous
motor
  Permanent
magnet
synchronous
motor
  Permanent
magnet
synchronous
motor
  Permanent
magnet
synchronous
motor
  N/A

Horse Power (hp)

  650   525   252   N/A   218   585

Acceleration time from 0 to 100km/h (s)

 

4.4

 

5.2

 

5.9

 

7.8

 

8.9

 

4.6

Top Speed (km/h)

  200   210   228   135   140   250

Capacity of Battery (kWh)

  70   75   17.3   48   48   N/A

Maximum Torque (N.m)

  840   660   350   255   310   760

Maximum Power (kw)

  480   386   185   85   160   430

NEDC Driving Range (km)

  355   406   56(3)   320   300   N/A

Charging Time

  10h (AC
Charging)

1.1h (DC
Charging)

  8h (AC Charging)

75min (DC
Charging)

  10.8h (AC
Charging)

2.5h (DC
Charging)

  7h (AC Charging)

40min 80% (DC
Charging)

  6h (AC Charging)

1.2h (DC
Charging)

  N/A

Electricity Consumption (kWh/km)

 

0.20

 

0.22

 

0.31(4)

 

0.18

 

0.19

 

N/A

Battery Swap Service

  Ö   ×   ×   ×   ×   ×

Autonomous Driving

  Level 2+   Level 2+   Level 2   Level 1   Level 1   Level 2

 

Source: Frost & Sullivan Report

Notes:

(1) According to a newly released announcement by the Chinese government, the tariff on imported passenger vehicles will be reduced to 15%, effective from July 1, 2018.
(2) Average consumer cost for buyers in Beijing, Shanghai, Guangzhou and Shenzhen.
(3) At electric-only mode.
(4) Estimated by dividing the power capacity by the NEDC driving range at electric-only mode.

 

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Clear price advantage enjoyed by locally manufactured NEVs

Locally manufactured NEVs have several structural advantages in the marketplace over imported models due to the absence of customs duty, lower manufacturing costs and the availability of government subsidies. A comparison of the ES8, Tesla Model X, Audi Q7 45 e-tron, and Mercedes-Benz AMG GLS 63, inclusive of government subsidies and taxes is set forth below. The ES8 boasts significant price advantages over the other models due to local manufacturing subsidies and the absence of customs duties and purchasing taxes.

 

     NIO ES8     Tesla
Model X 75D
     Audi Q7
45 e-tron
     Mercedes-Benz
AMG GLS 63
 

Costs (RMB)

                          

Ex-Factory Price

     382,900       566,080        635,080        757,662  

Customs Duty (Ex-Factory Price*15%(1))

           84,912        95,262        113,650  

Consumption Tax (>4L, (Ex-Factory Price + Customs Duty) / (1-40%) ^ 40%)

                         580,875  

VAT ((Ex-Factory Price + Customs Duty + Consumption Tax)*17%)

     65,100       110,668        124,158        246,872  
  

 

 

   

 

 

    

 

 

    

 

 

 

MSRP

     448,000       761,660        854,500        1,699,059  
  

 

 

   

 

 

    

 

 

    

 

 

 

Purchasing Tax (Tesla is excluded in the EV White List, MSRP/(1+VAT 17%)*10%)

           65,100        73,034        145,219  

Vehicle and Vessel Use Tax(2)

                         4,245  

Plate Fee

                         500  

PRC National and Local Subsidies(3)

     (74,067                    
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Consumer Cost

     373,933       826,760        927,534        1,849,023  
  

 

 

   

 

 

    

 

 

    

 

 

 

 

Notes:
1) According to a newly released announcement by the Chinese government, the tariff on imported passenger vehicles will be reduced to 15%, starting from July 1, 2018.
2) As there is no nationwide uniform vehicle and vessel tax standard, the information above uses the average vehicle and vessel use tax in Beijing, Shanghai, Guangzhou and Shenzhen.
3) Average NEV national and local subsidies in Beijing, Shanghai, Guangzhou and Shenzhen.

In addition, local NEV manufacturers benefit from ample manufacturing capacity, faster launch time, better understanding of Chinese consumers as well as low-interest government loans.

Key Drivers for Global and China’s NEV Market Growth

Increasing environmental awareness and tightening emission regulations

Environmental concerns and in particular the “dieselgate” incident which refers to the Volkswagen emissions scandal uncovered in September 2015 have resulted in tightening emission regulations globally and there is a broad consensus that further emission reduction will require higher electrification of the automotive industry. The cost of regulatory compliance for ICE powertrains is rising sharply due to the natural limitations of traditional ICE technologies. In response, global OEMs are aggressively shifting their strategies toward NEVs. Meanwhile, consumers have become more concerned about the impact of goods purchased, both on their personal health as well as on the environment. With more consumers realizing these benefits, zero emission transportation is becoming a popular and widely advocated urban lifestyle, which in turn is driving further development in the NEV market.

 

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Decreasing battery and NEV ownership costs

Improvements in battery technology, coupled with economies of scale by battery suppliers continue to reduce battery production costs. The average cost of lithium-ion batteries has fallen from over US$1,000 per kWh when first developed 20 years ago to below US$270 per kWh today. Such cost is expected to further decrease to around US$150 per kWh by 2022.

 

LOGO

 

Source: Frost & Sullivan Report.

Notes:    1)   The Lithium-ion battery pack price includes battery cells, BMS and battery cooling system
  2) Assuming continued ownership after 6 years and no resale values are considered
  3) Samples of ICE SUV include Audi Q5, Mercedes-Benz GLC-Class, Buick Envision, Volkswagen Tiguan, GAC Trumpchi GS8. Samples of BEV SUV include BYD Song EV300, SAIC ERX5, BYD e6, Tesla Model X, BAIC EX260
  4) Including taxes, insurance, and other fees
  5) Including energy cost and maintenance cost

From the perspective of total cost of ownership, BEVs enjoy significant running cost advantages. ICE vehicles may appear to be cheaper with a lower upfront purchase price. However, according to Frost & Sullivan, BEVs’ battery charging cost is approximately 75% lower than ICE cars’ fuel cost, and their repair and maintenance costs are also significantly lower due to BEV simpler structure and lower maintenance frequency. Based on the total cost of ownership comparison of the selected samples as illustrated in the above chart, Frost & Sullivan concluded that the total cost of ownership of BEVs is generally lower than that of ICEs over a six-year period.

Unique Drivers of NEV penetration in China:

A. Strong Regulatory Push from the Chinese Central Government

China’s strong regulatory push has been one of the strongest drivers of NEV penetration. Since the publication of New Energy Automobile Production Enterprises And Product Access Management Rules by the Ministry of Industry and Information Technology (“MIIT”) in 2009, which officially announced the promotion of the technical development of NEVs and encouragement of automobile manufacturers to invest in developing NEVs, the national government has issued and implemented a series of policies and incentives to drive the NEV market growth including national and local subsidies, taxation benefits and charging infrastructure construction.

In addition, the Chinese government has set ambitious targets for EV adoption with NEV annual sales volume of 2 million units and 5 million NEVs being on the road by 2020. Under the temporary regime proposed by MIIT in September 2017, the NEV quota for companies whose annual production capacity or import volume of traditional energy passenger vehicles exceeds 30,000 will be implemented from 2019 and NEV quota ratio will be required to be achieved 10% in 2019 and 12% in 2020.

 

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B. NEV industry’s strategic importance to China

The automotive industry has been recognized as a strategically important industry to China. It is expected to continue to be a significant contributor to China’s GDP (more than 4%), employment (approximately 4.7 million automotive related workers), taxation (approximately 4.5%) and national retail sales (nearly 25%). However, in the traditional ICE Chinese technology automotive market, foreign brands have dominated and Chinese players have lagged behind global leading peers in terms of, for example, powertrain technologies. However, the incoming NEV market is expected to create a level playing field and allow Chinese companies to play a greater role.

C. Car Plate Restrictions in Major Cities

Due to severe traffic congestion and air pollution, seven cities in China, namely Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, Hangzhou and Guiyang, limit the number of car plates issued to ICE vehicles each year through a lottery or auction process. As such, the probability of obtaining car plates in those cities is very low. The total number of car plate applicants from those cities reached 6.1 million by the end of 2017, representing a huge unmet demand for car ownership. These could potentially be converted to EV prospective buyers given that there are either no limitations on NEV car plates or a much higher probability of obtaining a car plate. In addition, according to Frost & Sullivan, by 2025, over 17 cities in aggregate are expected to restrict the number of car plates for ICE vehicles issued annually. The below table sets forth the average probabilities of obtaining car plates and the number of applicants by the end of 2017 in the aforementioned cities (except Guiyang):

 

City

   Average Probability
of Obtaining Car
Plate
    Number of Applicants By End of 2017
(‘000 persons)
 

Beijing

     0.12     2,839  

Shanghai

     4.49     228  

Guangzhou

     1.46     586  

Shenzhen

     0.81     909  

Tianjin

     0.78     866  

Hangzhou

     0.92     679  

Total

       6,107  

 

Source: Frost & Sullivan Report

 

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Currently Underdeveloped Charging Infrastructure in China Being Targeted for Rapid Improvement

Despite prominent growth during the past five years, the charging network in China is still seen as generally inadequate, not providing enough convenience to potential NEV users. By the end of 2017, there were only 446 thousand public and private charging piles in China of which 214 thousand charging piles were publicly accessible. Although home charging is the most commonly used charging solution in most developed countries, due to electricity wiring system constraints at most residential buildings in China, home charger installment is not feasible for many Chinese users. The map below sets forth the number of public chargers by province as of December 31, 2017.

 

LOGO

In addition, the lack of standardized charging output power, plugs and other specifications as well as incompatibility makes charging more difficult. As a result, approximately 41% of consumers are not willing to purchase BEVs due to the inconvenient charging solutions available, according to a survey by Frost & Sullivan in March 2018. Therefore, building sufficient charging infrastructure and providing convenient charging services are critical to attracting prospective NEV purchasers.

 

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To solve this problem, parties in both public and private sectors, including state-owned electricity companies and automotive OEMs, are heavily investing in building a nationwide charging network to alleviate potential customer concerns. The Chinese government has also targeted constructing over 12,000 charging stations and over 4.8 million charging piles by 2020, according to The Guidelines on EV Charging Infrastructure, 2015-2020 issued by the National Energy Administration. Driven by joint efforts to establish a charging infrastructure system to meet charging demand, the total number of charging piles in China is projected to reach approximately 5.0 million units by 2022, growing at a CAGR of 62.6% and the number of public charging piles is expected to reach 2.1 million by 2022, according to Frost and Sullivan.

 

LOGO

 

Source: Frost & Sullivan Report

In-Car E-commerce Disruptive Market Opportunity

Inside the vehicle, consumers are increasingly enjoying an in-car e-commerce offering. In-car e-commerce refers to the Internet based connected services consisting of information, entertainment, in-car content and online-to-offline, or O2O, service in the vehicle through connectivity among mobile phones, vehicles and service providers. Catering to changing consumption behavior in the digitization age, in-car e-commerce is underpinned by increasing processing capabilities of vehicle processors as well as more advanced infotainment systems installed in the vehicles.

Various internet services have been announced to be launched to accommodate in-car entertainment, information and other O2O demands. In-car O2O services are more convenient and flexible due to significant advantages of mobility. For instance, consumers may do online shopping, online streaming and use other internet services in the car or have merchandise delivered to the trunk. Cross-sector collaborations and partnerships for example between Chinese automobile manufacturers and internet companies serve as an opportunity for the market to grow and develop into new areas.

Given the significant time spent in cars and given increasing autonomous capabilities the ability of the driver to focus on things other than driving in the car, although the current global in-car ecommerce market size is still relatively small at around US$1.4 billion in 2017, it is expected to grow to US$2.9 billion in 2022.

 

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BUSINESS

Our Mission

Our mission is to shape a joyful lifestyle by offering premium smart electric vehicles and being the best user enterprise.

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 the 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 ( LOGO ), 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 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 ES8, to the public at our NIO Day event on December 16, 2017 and plan to make deliveries to the users starting from July 2018. The ES8 is a 7-seater all aluminum alloy body, premium electric SUV that offers exceptional performance, functionality and mobility lifestyle. It is equipped with our proprietary e-propulsion system capable of accelerating from zero to 100 km per hour in 4.4 seconds and delivering a New European Driving Cycle driving range of up to 355 km and a maximum range of up to 500 km in a single charge. As of May 31, 2018, we had unfilled reservations for more than 18,000 ES8s with deposits. Of these reservations, approximately 17,000 consisted of reservations for which only an initial fully refundable deposit of RMB5,000 had been made, while approximately 1,000 consisted of reservations with respect to vehicles which had been put into production. Upon signing of a purchase agreement, which is required prior to a vehicle entering into production, the initial RMB5,000 deposit becomes non-refundable and the user must pay an additional RMB40,000 non-refundable deposit.

We plan to launch our second volume manufactured electric vehicle, the ES6, by the end of 2018 and start initial deliveries in the first half of 2019. The ES6 is a 5-seater, high-performance premium electric SUV, set at a lower price point than the ES8 to target a broader customer base.

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 plan to offer a comprehensive, convenient and innovative suite of charging solutions. These solutions include Power Home, our home charging solution, Power Swap, our innovative battery swapping service, Power Mobile, our mobile charging service through charging trucks, 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 over 214 thousand charging piles. Beyond charging solutions, we aim to offer comprehensive value-added services to our users, such as statutory and third-party liability 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 planned ES6 and to other future models. Our e-propulsion

 

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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 e-propulsion system 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 ADAS system, is enabled by 23 sensors and equipped with the Mobileye EyeQ4 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 extremely 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 and our mobile application. NIO Houses are not only the showrooms for our vehicles, 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 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 championship winning Formula E team.

Our Competitive Strengths

We are focusing on providing smart and connected premium electric vehicles as part of a user-centric mobility lifestyle and we believe the following strengths contribute to our success.

Pioneer in China’s premium EV market

We are strategically positioned in China’s premium EV market, an attractive market segment in which we currently face very limited competition. According to Frost & Sullivan, China’s NEV market is expected to grow from 0.7 million units in 2017 to 3.6 million units in 2022, at a CAGR of 38.8%, driven by favorable government policies, technological advancement and increased consumer spending. Our first volume manufactured vehicle, the ES8, is positioned at the intersection of China’s fastest growing SUV and premium segments. The ES8 boasts best-in-class performance across multiple dimensions including top speed, acceleration, battery range and advanced ADAS and autonomous driving features, all of which clearly differentiate us from our competitors.

Furthermore, as the company with the first-to-market and only premium EV volume-manufactured domestically in China, we believe we have a multi-year lead time in terms of product delivery ahead of our domestic and international competitors in China’s premium EV segment. In addition, the ES8 is more affordable than the EVs of other imported premium brands as a result of the absence of import and purchasing taxes, lower manufacturing costs, other tax benefits as well as national and local subsidies. As of May 31, 2018, we had received over 18,000 ES8 reservations with deposits.

Redefining EV experience with cutting-edge proprietary technology, visionary engineering and smart connectivity

We design EVs that feature cutting-edge proprietary technology and visionary engineering. Our ES8 is a 7-seater, all-wheel-drive SUV equipped with our in-house developed, 480kW dual motor powertrain system,

 

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consisting of high performance e-drive system, high energy density battery pack and highly effective battery management system. The ES8 also uses an aerospace grade full-body aluminum architecture making it light weight. Its innovative, luxurious and spacious interior further improves the driver and passenger experience. The ES8 was designed in accordance with the 5-star rating standards under C-NCAP safety standards and passed numerous strict safety tests. We plan to apply our cutting-edge technology and extensive engineering capabilities to our future models as well. Our technological leadership has also been demonstrated by our well-known EP9 supercar, the world’s fastest electric vehicle, which has set five world records to date.

We are a pioneer in smart connectivity, artificial intelligence, or AI, and enhanced Level 2 autonomous driving functionality. The ES8 is equipped with NIO Pilot, which enables highway pilot, traffic jam pilot and automatic emergency braking. We have the ability to analyze large quantities of driving data to accelerate our autonomous driving technologies and algorithms.

In addition, we believe we have China’s most advanced in-car AI connected assistant, NOMI, which is capable of deep learning and benefits from our cloud computing network. Through NOMI, users are able to use voice control to make phone calls, play music and control systems including navigation, opening and closing windows, climate control, controlling the seat massage function, operating in-car media, controlling the in-car camera (including taking pictures), among others, the mobility experience. Furthermore, we plan to offer OTA updates to our users which allow periodic software and driving solution improvements, leading to better user experience during the EV lifecycle.

Revolutionary and comprehensive charging solutions

We plan to provide our users with a comprehensive range of charging solutions, alleviating the most critical challenge to EV adoption. We aim to provide charging services in most major cities in China. Our innovative “Power Express”, is expected to provide users with 24-hour on-demand charging services including car pick-up and drop-off. We offer users an energy package where these services are accessible for a fixed monthly subscription fee. Our charging solutions will include:

 

    “NIO Power Home”—home chargers where practicable for users;

 

    Access to the nationwide charging network consisting of approximately 214 thousand publicly accessible charging piles as of December 31, 2017. Fees for the usage of these are included in our energy package and we are able to make use of these when providing our valet power express services;

 

    “Power Mobile”—charging trucks offering rapid charging for 100km range within 10 minutes; and

 

    “Power Swap”—battery swapping stations offering battery swapping service within minutes.

Powered by NIO Cloud, real-time data synchronization of our charging and battery swapping network enables us to deploy and deliver charging services faster and more efficiently. In addition, centralized, diagnostics and remote management of batteries allows our users to enjoy better battery performance.

User enterprise advocating a unique and holistic mobility lifestyle

Our “One-click for Service” and “One-click for Power” solutions through a subscription model will offer a wide variety of value-added services including 24-hour customer service, technical support advisors, valet charging, car pick-up/drop-off delivery as well as more traditional services such as repair and maintenance and courtesy car. We believe these service offerings provide one-touch convenience and create a seamless experience for our users throughout the vehicle lifecycle. We directly sell our vehicles to users, which we believe allows us to deliver a more consistent, differentiated and compelling user experience, compared to the traditional franchised distribution model used by our competitors in China. 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 are building an integrated online and offline community, creating, we believe, a unique and interactive mobility lifestyle where users can interact to provide an experience that goes beyond the car. Our mobile application, featuring moment sharing and an online fun shop, has become an active online community. Our mobile application had approximately 410,000 registered users as of May 31, 2018. We believe that our NIO Houses will help to cultivate brand loyalty and promote user engagement, serving as an exclusive user club with multiple social functions. Furthermore, our annual NIO Day with new product launches increases our media exposure and attracts prospective users. On 2017 NIO Day, there were 110 million views and we observed over 7,000 media articles covering the NIO Day which we believe makes it one of the largest electric vehicle launches.

Strategic partnerships with global best-in-class technology and industrial leaders

Our position as a pioneer in our market has attracted global leaders across our supply chain, autonomous driving, infotainment and various value-added services, creating an extensive industry alliance network for us. Our key partners include Tencent, Baidu, Mobileye and CATL. We believe their expertise and know-how broaden our service offering and solidify our technological leadership. For example, we are closely collaborating with Mobileye to develop next generation autonomous driving technology to be used in our vehicles.

In addition, these leading suppliers and partners also allow us to manufacture and deliver our products with high quality standards. In particular, our alliance with JAC to manufacture our ES8 and ES6 models provides us with flexibility, scalability and speed to market, cementing our first mover advantage in the China market, while product design, supply chain management and quality control are managed by us with our engineering team onsite.

World-class management, global talent pool and tech savvy investor base

Our success is led by a visionary management team with a unique combination of internet and automotive experience with a start-up mindset. Our founder and Chairman, Mr. Bin Li, is an experienced entrepreneur in China with extensive expertise and a proven track record of creating innovative and disruptive business models in the mobility and internet space.

Our reputation has enabled us to recruit a global talent pool with specialists in China for user interface development and engineering tailored to Chinese users, in Silicon Valley for software and autonomous driving, and in Munich and the UK for vehicle design and engineering. Our global footprint echoes our premium proposition customized for Chinese consumers and delivers best-in-class standards in respective areas.

In addition, our tech savvy investors provide us with strategic support and long-term funding. For instance, we work with Baidu and Tencent on mapping and cloud services, respectively.

Our Strategies

We are pursuing the following strategies to achieve our mission:

Successfully launch future models such as the ES6 and ET7 timely to target a broader customer base and expand our product lineup

The successful launches of our planned 5-seater SUV ES6, our ET7 sedan and future models are critical in capitalizing on our first mover advantage and capturing electric vehicle market opportunities in China. We are currently on track to complete the design, engineering and component sourcing of ES6 by the end of 2018 and target initial delivery during the first half of 2019. In addition, we are generally targeting to launch a new model every year. At the same time, we intend to launch mid-cycle facelifts on existing models more frequently than industry standards to meet latest user preferences and drive innovations.

 

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Build our own manufacturing capacity and continue to optimize manufacturing costs by leveraging a common platform and production flexibility

Construction has started on our own manufacturing facility in Shanghai in order to expand manufacturing capacity for the ET7 and future models, complementing our JAC manufacturing alliance supplying the ES8 and ES6. We expect that this facility will also facilitate our ability to obtain our own EV manufacturing license and potentially benefit from the NEV credit score system in the future. We aim to obtain our EV manufacturing license within two to three years following the date of this prospectus. We intend to design different models with adaptable platform architecture and electric powertrain systems and maintain standard high-quality control standards across our facilities and achieve cost effectiveness.

Expand our infrastructure and service coverage nationwide to improve user experience

We intend to expand our users’ access to charging infrastructure nationwide and provide more convenient charging solutions to our users. We plan to offer real-time data on the availability of charging piles by uploading and synchronizing data from our own and third party charging networks to our cloud. We plan to continue to build our service network mostly through authorized service centers across China and broaden the service coverage and further enhance user experience.

We plan to expand our distribution network by building more NIO Houses and delivery centers, supported by nationwide logistic network and regional warehousing facilities, in order to meet increasing demand from prospective buyers, particularly in non-tier one cities.

Continue to focus on technological innovations

We intend to continue to attract talent from the world’s top universities, institutions, technology and automotive companies to expand our talent pool and help us drive technological innovation. Meanwhile, we aim to further advance our proprietary E-powertrain system to achieve better battery performance to increase the driving range and shorten the charging time for our cars. We expect to equip our next model ES6 with a higher density battery pack, delivering an approximately 450-kilometer driving range. We are also developing our next generation of E-powertrain system with higher output EDS as well as higher capacity fast charging battery packs. In addition, we intend to leverage our cyber-security technology and OTA platform to build seamless vehicle network and create a mobile living space featuring artificial intelligence and a next-generation digital cockpit and user interface.

Moreover, we plan to develop ADAS with more comprehensive active automated driving, driving support, and alerts and warnings features. We are aiming to launch a model equipped with Level 4 autonomous driving capabilities in the coming years. We intend to further enhance safety and technology features to drive customer satisfaction and interest, which in turn helps expand our market share.

Create more monetization opportunities during the lifetime ownership

We offer an innovative subscription service in the automotive industry consisting of a service package and an energy package to generate recurring revenues beyond the initial car purchase and promote user engagement. We expect to increase the user adoption of these packages by providing more convenient and user-centric services.

In addition, we plan to continue to focus on users’ lifetime engagement to create additional monetization opportunities in every aspect of car ownership, including financing, insurance, repair and maintenance, charging and infotainment. We also plan to establish and develop strategic partnerships with Tencent, JD and other technology leaders in our ecosystem to explore more value-added services empowered by big-data and our cloud architecture, such as “mailbox” service, or last mile express delivery service into the car trunk, and in-car entertainment.

 

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Our Core Values and Commitments

Our business is set up around the following core values and commitments:

 

    Our Vehicles: We aim to provide our users with high-performance vehicles, with design, engineering, manufacturing and delivery all performed to our high-quality standards at a reasonable price point. Our ES8 and other vehicles contain cutting edge technology, including our e-propulsion system which enables the ES8 to accelerate from zero to 100 kilometers per hour (kph) in just 4.4 seconds, all-aluminum body and chassis, enabling high vehicle torsional stiffness and innovative luxury interior. The ES8 is designed to meet the 5-star C-NCAP safety standards set by the China Automotive Technology and Research Center.

 

    Our High-Quality Service: Through one click using our mobile application, our users are able to access an innovative full suite of services, redefining the user experience for car buyers. Our services include our comprehensive and innovative full range of energy solutions, including, among others, home chargers, charging trucks and battery swapping, our service package, through which we aim to provide users with “worry free” vehicle servicing, repair and roadside assistance, in each case, through one click using our mobile application.

 

    Smart Connectivity and Autonomous Driving: Our vehicles are designed with user experience at the forefront. Our ES8 and future vehicles feature artificial intelligence, or AI, using our NOMI system, which is an in-car AI connected assistant capable of deep learning and which is powered by in-car and cloud computing. We also provide a comprehensive ADAS package with NIO Pilot. As we improve our autonomous driving algorithms through research and development, we expect to update existing in-vehicle technology through OTA upgrades.

 

    User Engagement Beyond the Car: We aim to engage with users and create an environment conducive for user interaction both online and offline. By leveraging our annual NIO Day, our mobile application and our NIO Houses, we aim to cultivate the users’ emotional attachment, retain user engagement and build a community of users, fostering loyalty and brand awareness.

Our Vehicles

We design, jointly manufacture and sell our vehicles in China’s premium electric vehicle segment. We expect to begin making deliveries to the public of our first volume manufactured car, the 7-seater ES8 SUV in July 2018 and plan to begin deliveries of our second car, the 5-seater ES6 in the first half of 2019. Following the launch of the ES6, we plan to launch our first sedan, the ET7 in 2020. The ET7 is expected to leverage the platform technologies from the ES8 and ES6 to create an all-wheel drive sedan. As of May 31, 2018, we had unfilled reservations for more than 18,000 ES8s with deposits. Of these reservations, approximately 17,000 consisted of reservations for which only an initial fully refundable deposit of RMB5,000 (representing approximately 1.1% of the base purchase price of the ES8) had been made, while approximately 1,000 consisted of reservations with respect to vehicles which had been put into production. Upon signing of a purchase agreement, which is required prior to a vehicle entering into production, the initial RMB5,000 deposit becomes non-refundable and the user must pay an additional RMB40,000 non-refundable deposit.

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 also plan to upgrade our existing models on an ongoing basis with facelifts for each model around every one or two years and do a major model redesign or upgrade every three years.

We plan to exclusively sell our vehicles in China for the near future.

ES8

The ES8, our first volume manufactured vehicle, is a spacious 7-seater high-performance premium electric SUV. The ES8 was officially launched at our NIO Day event on December 16, 2017, following which we began

 

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taking reservations. We plan to start making deliveries to the public of the ES8 in July 2018 and to significantly ramp up deliveries during the summer of 2018.

With both front and rear motors, the ES8 delivers 480 kilowatts of power and 840 Newton meters of torque to all four wheels. The ES8’s e-propulsion system enables the ES8 to accelerate from zero to 100 km per hour (kph) in just 4.4 seconds. The ES8 is equipped with a 70-kilowatt-hour liquid-cooled battery pack comprised of cutting-edge square cell batteries. The battery pack features an energy density of 135wh/kg and provides an approximately 2,000-charge lifecycle. The ES8 achieves over 500 kilometers of range when constantly running at 60 kph, and the car achieves a New European Driving Cycle, or NEDC, range of 355 kilometers.

With 21 active safety features, the ES8 is designed to meet five-star C-NCAP safety standards. In addition to standard safety features for a vehicle in its class, ES8 also features 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 km per hour to a complete stop is 33.8 meters.

The ES8 is the first car in China to have an all-aluminum body and chassis featuring aerospace grade 7003 series aluminum alloy, enabling a 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.

Together with the launch of the ES8 in 2017, we launched our NIO Pilot system. In the ES8 our NIO Pilot advanced driver assistance system, or 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 EyeQ4 ADAS chip which has a computation capacity eight-times more powerful than its predecessor, the Mobileye EyeQ3.

In addition, the ES8’s sophisticated 4G support and software and hardware suite enables subscribers to enjoy upgraded services through OTA 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 also 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 also provide 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, controlling the in-car camera (including taking pictures), among others. We intend to improve the system and add additional functions through OTA upgrades.

The ES8 has a base price of RMB448,000 before subsidies. Purchasers can purchase additional options including different wheel styles, certain exterior colors, NIO Pilot and NOMI, among others. We are also

 

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producing approximately 10,000 “Founder’s Edition” vehicles, available for RMB548,000 before subsidies, which comes standard with additional features such as the 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, front row ventilated seat), a premium audio system, an enhanced head unit display and additional NIO Pilot functions. Such features can also be added based on user preferences to our standard ES8. A battery payment option is available to buyers, which provides an RMB100,000 reduction in the purchase price of the ES8 and costs RMB1,280 per month for 78 months. To purchase an ES8, a customer is first required to pay a refundable deposit reserving the car, which for the ES8 is RMB5,000, and prior to the user’s ES8 entering into production, a non-refundable deposit of RMB45,000 must be made (which can include the initial RMB5,000 reservation deposit) and is applied towards the purchase price of the vehicle.

ES6

The ES6 is a planned 5-seater high-performance electric premium SUV currently under development and planned for delivery in the first half of 2019. The ES6 is being developed based on the same advanced electric vehicle platform as the ES8. The ES6 will be smaller and more affordable than the ES8, with pricing expected to be approximately RMB80,000 to RMB100,000 less than the ES8. We believe that the ES6 will allow us to target a broader market in the premium SUV segment.

The ES6 is expected to provide both front and rear motors in different combinations and provide similarly attractive performance features as the ES8.

We expect to deploy a new e-propulsion system for the ES6 in the second half of 2019, which will have all-new dual permanent magnet, or PM, motors, which are more energy efficient.

Most of the features and options currently available for the ES8 will be available on the ES6, and we expect that the ES6 will include additional features and increased optionality, allowing users more options with respect to pricing.

Our Power Solutions

Through our NIO Power power solutions, we plan to 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 plan to 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 will be 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 plan to 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 NIO Power Home device and basic installation are initially included in the price of the vehicle though there may be charges in certain circumstances. Users have the option of postponing such installation if installation is not feasible at his or her residence at the time of purchase. Only one NIO Power Home device and installation is included in the price of his or her vehicle and any subsequent device or installation after the first installation is subject to charges. Installation is performed by professional

 

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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 battery of the ES8 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.

To that end, we plan to offer our users our Power Express valet service and other charging solutions, including access to public charging, access to our Power Mobile charging trucks, and battery swapping.

Using our mobile application, a user will be able to arrange to have our team pick up his or her vehicle at the user’s designated parking location. The vehicle will be driven to a nearby battery charging station or battery swap station or a charging truck will be driven to the parking location. The vehicle will be returned to the user once battery charging or swapping is completed. Users will be able to select “immediate service” which will provide the fastest charging option to meet a more urgent charging demand, “reservation service” for scheduled charging services or “idle charging” which will allow 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. Our one-click charging service will be automatically triggered when the vehicle is idle during the specified period. Users will be 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 and travel habits through cloud-based smart scheduling.

We offer our users our energy package, which will provide 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 for up to 15 charges in the 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, and the initial price for such services is set at RMB180 per charge.

Access to Public Charging

Our users are expected to have access to a network of public chargers, which as of December 31, 2017 consisted of over 214 thousand publicly accessible charging piles. These chargers have been installed by both public and private sectors, including state-owned electricity companies and automotive OEMs. Data from over 23,000 public chargers as of March 31, 2018, installed by the third parties, including the China Southern Grid, is synchronized to our cloud so that users can access real time information on the availability and location of these chargers. 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 battery of the ES8 would be charged from approximately 20% to 90% power (or battery) level in seven to eight hours using a normal charger or in approximately 75 minutes using a supercharger.

Fast Charging Trucks (NIO Power Mobile)

Through NIO Power Mobile, we plan to provide charging through charging trucks. We plan to use these charging trucks to supplement our charging network. Users are expected to be able to book NIO Power Mobile

 

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services in advance conveniently through our mobile application. We own fast charging trucks, which have installed our proprietary fast-charging technology.

Our NIO Power Mobile enables an ES8 to run 100 kilometers after charging for ten minutes. We currently plan to have approximately 400 NIO Power Mobile trucks in operation based on user demand by the end of 2018. We plan to initially deploy these trucks in major cities including Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Hangzhou, Nanjing and Suzhou, among others. However we may redeploy based on user demand.

Battery Swapping

We plan to offer our users the ability to arrange for a battery swap for the ES8. 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, battery swapping takes 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.

We initially plan to roll out our battery swapping stations in Beijing, Shanghai, Guangzhou, Shenzhen, Hefei, Chengdu, Nanjing, Suzhou, and Hangzhou by the first half 2018. We plan to add additional cities during the second half of 2018, significantly increasing our number of battery swapping stations by the end of the year.

Our Other Value-Added Service Offerings

Through one click using our mobile application, our users will be able to access a full suite of innovative services, as part of our strategy of redefining user experience. In addition to our NIO Power solutions described above, we offer our users other value-added services through our service package, which can be ordered conveniently through our mobile application.

Service Package

We plan to offer our users a service package, which, at a price initially set at RMB14,800 per year, will provide statutory and third-party liability 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.

Through our service package, we aim to provide users with a “worry free” vehicle ownership experience. Using their mobile application, users will be 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 any necessary repairs.

We plan to 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, pursuant to which we will procure basic mandatory automobile insurance for our users as part of the service package. Users will also be able to supplement this basic insurance coverage with China Taiping Insurance at an additional cost, which will be paid to the insurance provider. We are currently seeking to enter into arrangements with additional insurance providers.

Battery Payment Arrangement

We plan to provide our users with the option of a battery payment arrangement, where users can make battery payments in installments. This reduces the initial purchase price for our vehicles making the pricing more

 

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attractive. For the ES8, there is an RMB100,000 reduction in the purchase price. The battery payment plan initially costs RMB1,280 per month. The monthly installments are payable over 78 months.

Vehicle Financing and License Plate Registration

We currently have agreements with three banks, namely, Bank of China, China Industrial Bank and China Merchants Bank, pursuant to which we assist users in procuring financing when they purchase our vehicles. We assist our users in their application for financing, making the buying process easier. 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 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, 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 March 31, 2018, our vehicle engineering group had 635 employees worldwide, with 547 located in Shanghai, 61 in San Jose, 18 in Oxford and nine in Munich. 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 are focused on advanced development work with our Oxford team also works on complex computer-aided engineering and our Munich team focuses on light-weight material development and vehicle design. 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 interior and exterior.

Our engineering team also emphasizes crash safety. We have run more than 8,400 computer simulations and conducted more than 1,100 physical tests, including three million kilometers of road tests across four continents. Such tests have included performance testing of approximately 140,000 kilometers, durability testing of approximately 1,216,000 kilometers and reliability testing of approximately 1,644,000 kilometers.

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, vehicle control, autonomous driving among others, are cutting-edge and differentiating from our competitors. The ES8 integrates many of these industry-leading technology modules including 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 optimal user experience.

Electric Powertrain (E-propulsion System)

We have developed our own e-propulsion system. The e-propulsion system consists of 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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Our integrated 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 first volume manufactured vehicle, ES8 is equipped with integrated EDS, delivering 480 kilowatts of power. We are also developing new EDS in smaller power installed with permanent magnet motors.

Our lightweight ESS uses high-performance density battery packs and high-strength housing. ES8 is equipped with our proprietary 70-kilowatt-hour liquid cooled battery pack developed and packaged in house, bringing a high energy density of 135wh/kg. Our ESS is high-capacity and has industry-leading thermal management technology and a safety structure design. In addition, our ESS is equipped with state-of-art battery management system, a high-efficiency liquid-cooled design and replacement 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, cell supervising circuits and switch-boxes through wireless updates. We conduct extensive testing to ensure safety, performance, durability and reliability. We also possess the module capability of hard packs, soft packs and cylindrical batteries, with a planned annual production capacity of over seven Gwh.

Our advanced VIS includes a vehicle control unit, or VCU, electric vehicle controller and ADAS system. 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. All 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. The ES8 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 continuously learns the 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 will be 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.

Our OTA 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. OTA updates will enable us to upgrade the operating firmware down to the individual programmable ECU level across the vehicle’s core systems such as

 

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powertrain and ADAS. 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. Thereby, we expect to be able to reduce the cost and time to market of new feature rollouts.

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’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’s high speed Ethernet accelerates our autonomous driving development by uploading relevant video and driving metadata. 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’s ADAS system is built for advanced processing and learning capabilities.

Our ES8 is equipped with NIO Pilot, a comprehensive enhanced level 2 ADAS system that will update with new features over time through high-speed OTA updates. The ES8 is the world’s first vehicle to come equipped with the Mobileye’s EyeQ4 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 an in-built algorithm that we expect to source driving data across the entire vehicle fleet of ES8s. 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 is expected to enable us to validate algorithms against millions of miles of empirical data in a short period of time.

We plan to roll out our ADAS features through OTA updates after going through a rigorous and thorough testing of the features. NIO Pilot features under development include: (i) active automated driving, such as automatic emergency breaking and collision warning, park assist, adaptive cruise control including traffic jam pilot and lane keeping assistant, highway autopilot for lateral and longitudinal support in certain conditions, and summon for limited automated parking scenarios (ii) driving support, including automatic high-beam control and lane keeping assistance, intelligent speed, side collision and lane changing assistance; and (iii) alerts and warnings, including lane departure warning, blind spot detection, front and rear cross-traffic alerts, side distance indication, door opening warning, and driver alert.

We have established autonomous driving research and development centers in Shanghai and San Jose. As of March 2018, we had 176 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 October 2016, we obtained an autonomous vehicle testing permit issued by the State of California and became among the first group of businesses to obtain such a permit. 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 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.

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. To date, our ADAS and automated driving programs have driven over 1,700 hours (over 45,000 miles) to collect data as well as validate features and functionality and continue to add more miles every week.

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.

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, U.S. Our Formula E headquarters and advanced vehicle concepts team are stationed across two United Kingdom offices in London and Oxford.

Shanghai

Our engineering research and development headquarters is in Shanghai, where we had a team of 1,018 research and development personnel as of March 31, 2018. 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.

 

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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 March 31, 2018, the San Jose team consisted of 434 employees, 61 of which are focused on vehicle engineering. We also have a smaller studio in San Francisco with 23 employees focused on user experience and interface. Our teams in San Jose and San Francisco focus on innovation in the areas of: autonomous systems, artificial intelligence, electric powertrain technology, digital systems, cloud architecture, digital cockpit security, user experience, user interface and vehicle engineering.

Munich

Our Munich office is primarily responsible for our product and brand design. As of March 31, 2018, in Munich we had a team with approximately 153 employees, nine of which are focused on vehicle engineering, vehicle interior and exterior design, user experience and user interface design, brand design, supply chain management, and e-powertrain engineering.

United Kingdom

In the U.K. we have a London office which is our performance product research and development center and our Formula E team headquarters. The office is responsible for our cooperation with the FIA Formula E program and U.K. market operations. Our Centre for Innovation and Enterprise is located at the Begbroke Science Park near Oxford and houses our performance program, advanced engineering group and our Formula-E team technical offices. The Formula-E team’s operational base is at Donington Park. We had 18 employees focused on vehicle engineering in the U.K. as of March 31, 2018.

Vehicle Servicing and Warranty Terms

Service, Service Centers and Service Vans

We plan to provide servicing primarily through authorized third party service centers, which provide repair, maintenance and bodywork services. We have a network management team, which is responsible for bringing 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 March 31, 2018, we had 25 authorized service centers across ten cities, including Beijing, Shanghai, Shenzhen, Chengdu, Hefei, Hangzhou, Wuhan, Nanjing, Suzhou and Guangzhou.

We also plan to provide service using our self-owned service vans. We plan to initially deploy more than 30 vans in approximately ten cities which we plan to select based on user demand and significantly increase coverage thereafter based on user demand. We also plan to offer nation-wide roadside assistance services to our users under arrangements with third parties.

New Vehicle Limited Warranty Policy

For the initial owner of each ES8, we are providing an extended warranty subject to certain conditions, among others, including that the extended warranty only applies for the original owner of the vehicle and not for

 

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any subsequent buyers of the vehicle, that the user must service the vehicle only with us or one of our authorized service centers and that 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-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, 50,000-kilometer warranty covering vehicle repair, replacement and refund. See “Risk Factors—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 410,000 registered users as of May 31, 2018.

Mobile Application

Our mobile application is designed to be a portal not only for selling cars where users can make reservations for the ES8 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 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 application allows our users to engage with other users through moment sharing and users can shop for our merchandise and earn NIO Credits. Users have shared more than 210,000 photos using our mobile application. 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

We aim to provide our users with experiences that go beyond the car with our NIO Houses. NIO Houses are intended to function not just as showrooms for our vehicles and services, but also 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. 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 May 31, 2018 have one in Shanghai, two in Beijing, one in Nanjing and one in Guangzhou. We plan to open at least seven more NIO Houses in Shanghai, Hangzhou, Shenzhen, Xi’an, Hefei, Suzhou and Chengdu, and several pop-up NIO Houses in 2018.

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 other types such as NIO House “light” in smaller cities and pop-up NIO Houses. Each NIO House

 

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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.

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:

NIO Day

We held our first “NIO Day” in December 2017 at the Beijing Wukesong Arena, where we introduced the ES8. We plan to hold NIO Day each year on which we introduce our new vehicles and products to users. Our first NIO Day consisted of a presentation by our CEO, Bin Li, who introduced our ES8, charging solutions and other services. The event had 110 million views and produced a significant increase in our social media followers as well as over 7,000 Chinese media reports. 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 have a 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, which helps increase brand awareness. We were the title sponsor for the winning driver in the first Formula E season in 2015.

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 and has a range of 427 kilometers. The EP9 achieved a new lap record at the Nürburgring Nordschliefe where on October 12, 2016, the EP9 lapped the 20.8 kilometer ‘Green Hell’ in 7 minutes and 5.12 seconds, beating the previous electric vehicle lap record held, marking it out as the fastest electric car in the world. On May 12, 2017, the EP9 lapped the 20.8 kilometer ‘Green Hell’ in 6 minutes and 45.90 seconds, breaking its own record. Additionally, in November 2016, it 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 autoshows, 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 have conducted over 500 smaller events since May 2017 engaging we

 

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believe more than 200,000 people. We also have an online store where users, using 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, we have sold over 343,000 pieces of merchandise. We also provide users with NIO Credits to encourage user engagement and for certain positive behavior including a clean safety record for the year. Credits are earned, among other things, through frequent sign-ins to our mobile application, sharing articles from the application to users’ own social media, a welcome pack upon the purchase of a vehicle, and referrals of new vehicle purchasers. Credits can be used both at our online store and at our NIO Houses to purchase merchandise and other items. As of May 31, 2018 approximately 212 million NIO credits had been used at our online store.

Manufacturing, Supply Chain and Quality Control

We view the manufacturers and suppliers we work with as key partners through our vehicle development process. We aim to leverage our partners’ industry expertise to ensure that each vehicle we produce meets our strict quality standards.

Manufacturing

Nanjing Advanced Manufacturing Engineering Center

Our Nanjing Advanced Manufacturing 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. The Nanjing AMTEC pilot line covers the three processes of bodywork, painting and general assembly. As of March 31, 2018, we had approximately 100 full-time employees at our Nanjing Advanced Manufacturing Engineering Center, of which approximately 10% are engineers and the remainder are primarily technicians.

We also use our Nanjing Advanced Manufacturing Engineering Center 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, for the manufacture of the ES8 for five years starting from May 2016, which may be renewed as agreed by JAC and us. JAC is a major state-owned automobile manufacturer in China, with a 50 year history of automotive manufacturing and annual sales of nearly 700,000 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 and potentially other future vehicles with us. This factory has the capability of conducting stamping, welding, painting and 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 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 take a number of steps throughout the entire manufacturing process to

 

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ensure that our vehicles are manufactured in accordance with our standards. These steps include: at the procurement stage, we are responsible for procuring all third party components for our vehicles and apply our quality assurance procedures with respect to suppliers; at the manufacturing stage, we have taken several measures, including: (i) the key tooling equipment, including stamping equipment, body connection equipment and inspection tools at the factory is procured and owned by us, (ii) we have trained certain key supervisory personnel at our Nanjing Advanced Manufacturing Engineering Center. We have implemented operational policies and guidelines as well as quality inspection measures, conducting inspections of both parts and completed vehicles.

Pursuant to our agreement 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 839.6 acres. The factory has pressing facilities which include a high-speed, fully automated, five-sequence pressing line. It uses fully automated operation, real-time monitoring and alarm connection parameters to ensure reliable connection quality, while a total body laser detector is also equipped on the line to monitor the dimensional accuracy of the vehicle body. The factory has state-of-art production facilities and techniques, and also applies environmentally friendly techniques and uses renewable energies. Photovoltaic panels on top of the factory are expected to be installed to make use of solar energy and ground-source heat pumps are expected to be used in the assembly area to provide a temperate working environment. We along with JAC have also put together a high-quality workforce, consisting of experienced management and supervisors from us and JAC and thousands of outstanding front-line employees selected from JAC, providing what we believe to be sufficient manpower for an annual production capacity of 100,000 vehicles within a short period of time, based on running two shifts per day.

As of May 31, 2018, the factory had approximately 1,220 employees, of which approximately 100 were employed by us and the remainder were employed by JAC. Our employees at the factory take on key management and supervisory roles in production, quality control and training.

We estimate that if all our current unfilled reservations, for more than 18,000 ES8s as of May 31, 2018, are ultimately converted into orders, we would fulfill such orders within 9 to 12 months following the date of this prospectus. Our aim is in the future to manufacture vehicles within 21-28 days from the order date.

Powertrain and Battery Pack

We manufacture our powertrain, or e-propulsion system, our battery pack and engine driving system. We established our Advanced Manufacturing Technology Centers, or AMTECs, in Nanjing for pilot production, motors and EDSs, Kunshan for inverters and Changshu for energy storage systems.

Nanjing AMTEC is located in the Nanjing Economic and Technological Development Zone. Its first phase was completed in August 2016. Its plant and ancillary facilities have a building area of 64,000 square meters and mainly produce motor and electric drive 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.

A second phase of Nanjing AMTEC is under construction, with planned production bases and power centers for PM motors, ESS, EDS and inverters, and additional highly automated lines which are expected to be put into operation by the end of 2018. Meanwhile, Nanjing AMTEC has passed the ISO 16949 audit.

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. In Kunshan we have our manufacturing base for inverters.

 

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Our Future Manufacturing Plant

Our own manufacturing facility in Shanghai is currently under construction by certain Shanghai government entities. We expect that this facility will expand our manufacturing capacity for the ET7 and future models, complementing our JAC manufacturing alliance supplying the ES8 and ES6. We expect that this facility will be ready by 2020 and will facilitate our ability to obtain our own EV manufacturing license. To encourage and facilitate our establishment of this factory, we have entered into arrangements with the Shanghai governmental authority and an authorized investment entity pursuant to which such parties have agreed to provide us with certain financing, tax incentives and other support, including constructing the factory.

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 uses over 1,700 purchased parts which we source from over 160 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. For the ES6, we intend to use most of the same core suppliers as those for the ES8, but for certain parts we are still in the process of sourcing suppliers. 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 N.V., which provides its Mobileye EyeQ4 ADAS processor used in the ES8, CATL, which provides battery cells used in the battery pack of the ES8, Continental, which provides its Air Suspension system, Bosch, which provides its iBooster (vacuum-independent electromechanical brake booster which is a key component for electromobility and driver assistance systems) and ADAS hardware (sensors and radars) used in the ES8, ThyssenKrupp, for steering systems, Novelis, for aluminum coils used in the aluminum body panel of the ES8. 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 part 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. auto 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.

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.

 

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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 vehicles 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.

During the product development, many phases of testing vehicles are built to verify our design and production processes. For example, we built more than 200 ES8 testing vehicles in order to conduct a wide range of function and durability tests. The durability test runs ran for more than an aggregate of three million kilometers.

Our first volume manufactured vehicle, the ES8, is 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-in-white, painting, and general assembly are developed in accordance with industry standards. The manufacturing process performance failure mode effect analysis, control plans, and standard operation procedures 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 U.S. automotive industry, across all phases of product development and supplier quality management. We perform quality inspections on materials and components provided by suppliers. We conduct standard inspections and end-of-line tests to ensure that only a high-quality product is delivered to users. 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 online video iQIYI, search engine and map data and mapping technology and Tencent for its Tencent Cloud, QQ music, Keen Lab and for NOMI text to speech.

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.

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. 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

 

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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 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.

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. We expect to receive distribution of profits, if any, after deducting required reserves, 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 auto 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.

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, users are able to purchase vehicles using our mobile application, assisted by our sales representatives at the NIO Houses. Users purchasing outside of our NIO Houses 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.

We have set up a vehicle delivery center in Shanghai, and we are constructing delivery centers in Beijing, Guangzhou, Shenzhen, Chendu, Heifei, Hangzhou, Nanjing, Suzhou and Wuhan. 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;

 

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    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.

We believe that we are strategically positioned in China’s premium electric vehicle market, given the quality and performance of our ES8, and its attractive pricing. Currently the ES8 is the only premium electric vehicle manufactured domestically, which gives us price advantages against imported premium brands due to government electric vehicle subsidies and absence of import taxes.

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, 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 March 31, 2018 we had 614 issued patents and 1,637 pending patent applications, 921 registered trademarks and 1,659 pending trademark applications in the United States, China, Europe and other jurisdictions including more than 120 relating to our e-propulsion system. As of March 31, 2018, we also hold or otherwise have legal right to use 24 registered copyrights for software or work of art and 452 registered domain names, including www.nio.io. We intend to continue to file additional patent applications with respect to our technology.

Employees

As of March 31, 2018, we had 4,878 full-time employees. The following table sets forth the numbers of our employees categorized by function and region as of March 31, 2018.

 

     As of March 31, 2018  

China:

  

User experience (sales and marketing and service)

     1,191  

Product development

     1,155  

Manufacturing

     720  

General administration

     619  

Software design

     512  

Northern California:

  

Research and development

     389  

General administration

     71  

Munich:

  

Design department related

     128  

Non-design/support related (management, HR, legal, finance, administration, purchasing (supply chain), lightweight engineering)

     30  

United Kingdom:

  

London (Management, finance, legal, sponsorship, UK corporate headquarters)

     10  

Oxford (Performance Programme and Engineering)

     53  
  

 

 

 

Total number of employees

     4,878  
  

 

 

 

 

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Our employees have set up a labor union in China according to PRC Labor Law and PRC Labor Union Law. However, no collective bargaining agreement has been put in place. To date we have not experienced any work stoppages, and we consider our relationship with our employees to be good.

Facilities

We do not currently own any of our facilities. The following table sets forth the location, approximate size, primary use and lease term of our major leased facilities:

 

Location(1)

   Approximate Size
(Building) in
Square Meters/
Feet(2)
  

Primary Use

  

Lease Expiration Date

Shanghai, China

   47,987   

Global headquarters and office

  

November 2, 2018 – June 19, 2025

   8,092   

User center (sales, marketing, and customer service)

  

March 14, 2022 – September 30, 2025

   24,566   

Integrated vehicle research and development

  

April 9, 2021 – June 19, 2025

   727   

Power management

  

February 28, 2020 – August 31, 2022

Shenzhen

   13,645   

Sales, marketing, and customer service

  

September 30, 2023 – July 19, 2027

   368   

Power management

  

January 31, 2022 – 31 December 2022

Chengdu

   3,982   

Sales, marketing, and customer service

  

December 31, 2020 – March 31, 2028

   318   

Power management

  

February 28, 2020 – June 30, 2025

Hangzhou

   498   

Office

  

October 5, 2018

   1,221   

Sales, marketing, and customer service

  

June 30, 2023 – December 31, 2023

   492   

Power management

  

November 30, 2021 – October 31, 2022

Nanjing

   163   

Office

  

November 5, 2018

   5,405   

Sales, marketing, and customer service

  

March 31, 2023 – October 31, 2023

   351   

Power management

  

December 31, 2021 – March 31, 2023

Suzhou

   355   

Office

  

May 31, 2018 – May 31, 2021

   8,631   

Sales, marketing, and customer service

  

April 30, 2024 – August 31, 2024

   219   

Power management

  

February 28, 2022 – 31 July 2022

Beijing

   2,966   

Office

  

October 19, 2018 – December 19, 2019

   18,027   

Sales, marketing, and customer service

  

June 30, 2022 – June 30, 2027

   886   

Power management

  

December 19, 2019 – December 31, 2022

Hefei

   45   

Power management

  

February 28, 2023

 

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Location(1)

   Approximate Size
(Building) in
Square Meters/
Feet(2)
  

Primary Use

  

Lease Expiration Date

Guangzhou

   429   

Office

  

August 31, 2018 – October 31, 2020

   1,693   

Sales, marketing, and customer service

  

December 31, 2025

   460   

Power management

  

December 30, 2021 – December 31, 2022

Wuhan

   320   

Office

  

May 6, 2019 – November 14, 2020

Xi’an

   863   

Sales, marketing, and customer service

  

September 30, 2024

Chongqing

   167   

Office

  

May 24, 2019

Ningbo

   286   

Office

  

May 9, 2019

Wenzhou

   327   

Office

  

April 22, 2019

Wuxi

   21   

Office

  

September 30, 2018

San Jose, California

   85,017   

North American headquarters and global software development center

  

September 30, 2023

San Francisco, California

   4,090   

User experience/user interface team

  

Renewable monthly

Munich, Germany

   40,000   

Design headquarters

  

December 2010 – December 2021

Air Street, London (UK)

   2,960   

Management, finance, legal, sponsorship, UK corporate HQ

  

January 2026, break option in January 2021

Begbroke Science Park (Oxford, UK – Rooms 37, 43, 44, 45, 49 and 50)

   5,490   

Formula E / Performance Programme HQ, engineering function

  

August 2019 – August 2020

Donington Park (UK)

   11,187   

Formula E racing garages

  

June 2019

 

Note:    (1)   We also lease a number of facilities for our NIO House locations, office space, service and logistics centers and small areas for battery swap stations in China.
  (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.

Insurance

We maintain property insurance, machinery breakdown insurance, fire insurance, public liability insurance, commercial general liability insurance, employer’s liability insurance and drivers liability insurance. We do not maintain business interruption insurance or key-man insurance. We believe that our insurance coverage is adequate to cover our key assets, facilities and liabilities.

Legal Proceedings

From time to time, we may be involved in legal proceedings in the ordinary course of our business. We are currently not a party to any material legal or administrative proceedings.

 

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REGULATION

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

Regulations Covering the Manufacturing of Pure Electric Passenger Vehicles

On November 30, 2016, the State Council promulgated the Regulations on the Administration of the Approval and Filing of Enterprise Investment Projects, or the Projects Approval Regulations, which became effective on February 1, 2017. Pursuant to the Projects Approval Regulations, the National Development and Reform Commission, or the NDRC, further promulgated the Measures on the Administration of the Approval and Filing of Enterprise Investment Projects on March 8, 2017, which came into effect on April 8, 2017. The Measures on the Administration of the Approval and Filing of Enterprise Investment Projects provides that fixed asset investment projects in connection with national security, the layout of significant production capacity across the country, strategic resources development or significant public interests shall be subject to approvals from the relevant authorities as determined by the Circular of the State Council on Promulgating the Catalogue of Investment Projects Subject to the Approval of the Government (2016 Version), or the Investment Projects Catalogue, issued by the State Council on December 12, 2016 and became effective on the same day. According to the Investment Projects Catalogue, newly-established pure electric passenger vehicles manufacturer enterprises (including existing automobile enterprises switching to manufacture pure electric passenger vehicles) are subject to the approval of a competent investment department of the State Council, the NDRC. Newly-established new energy vehicle manufacturing enterprises must have power systems and other key technologies as well as complete vehicle research and development capabilities, and conform to the Regulations on the Administration of Newly Established Pure Electric Passenger Vehicle Enterprises (defined below) and other relevant requirements.

On June 2, 2015, the NDRC and the Ministry of Industry and Information Technology, or the MIIT promulgated the Regulations on the Administration of Newly Established Pure Electric Passenger Vehicle Enterprises, which became effective on July 10, 2015. Under this Regulation, pure electric passenger vehicle enterprise investment projects are subject to the review of the NDRC. A newly established pure electric passenger vehicle enterprise as well as the vehicle product must meet certain conditions and are subject to the review by the MIIT before it is added to the Announcement of Vehicle Manufacturers and Products issued by the MIIT, or the Manufacturers and Products Announcement, so as to become a qualified manufacturer and vehicle product that are allowed by laws to manufacture and to be sold in the market. Enterprises must establish product consistency management systems to ensure that the products actually manufactured conform to the products listed in the Manufacturers and Products Announcement. Vehicle products entered into the Manufacturers and Products Announcement are required to go through a regular inspection process every three years carried out by MIIT as to whether they are still qualified to stay in the Manufacturers and Products Announcement. Also, the MIIT conducts random inspections in order to assess the satisfaction of the conditions of entry to the Manufacturers and Products Announcement by the newly established enterprises. Failure to satisfy such conditions or the bankruptcy of the enterprise may result in the revocation, deregistration or suspension of the Manufacturers and Products Announcement with respect to such enterprise.

On January 6, 2017, the MIIT promulgated 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. Under the MIIT Admission Rules, new energy vehicles refer to vehicles using new types of power systems and which are fully or primarily reliant on new types of energy, including plug-in hybrid electric vehicles (including extended range electric vehicles), BEVs, and fuel cell vehicles. The MIIT Admission Rules require that a manufacturer of new energy vehicles must meet certain conditions, including, among others, having the capabilities to design, develop and manufacture products and to provide after-sale service and product quality assurance. The MIIT Admission Rules further provide that new energy vehicle products must meet the conditions set forth in the Special Test Items for New Energy Vehicle Products and Relevant Standards thereto, other safety

 

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and technical requirements specified by the MIIT and pass the inspections conducted by a state-recognized testing institution. Once such conditions are met and the application has been approved by the MIIT, the manufacturer becomes a qualified manufacturer and its products will be published in the Manufacturers and Products Announcement by the MIIT. Where any new energy vehicle manufacturer manufactures or sells any model of new energy vehicle without the prior approval of the competent authorities, 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 Automobile Investment Projects

On June 4, 2017, the NDRC and the MIIT issued the Guiding Opinions on Improving the Management of Automobile Investment Projects which became effective on the same day. Pursuant to this guiding opinion, when applying for pure electric passenger vehicle enterprise investment projects (including existing commercial vehicle enterprises manufacturing pure electric passenger vehicles), applicants must comply with the requirements specified in the Regulations on the Administration of Newly Established Pure Electric Passenger Vehicle Enterprises; when applying for new pure electric commercial vehicle enterprise investment projects (including existing passenger vehicle enterprises manufacturing pure electric commercial vehicles), applicants must meet the following conditions: (i) having a professional research and development team with complete research and development experience and the capability to research and develop a whole vehicle, core technologies and corresponding testing and verification capabilities; (ii) constructing a manufacturing system including but not limited to high-performance traction battery systems, driving systems, control systems and the whole vehicle (automobile molding, painting and final assembly); (iii) having capabilities in product quality assurance, marketing and after-sales service and supervision of operation; (iv) having registered trademarks and ownership of a brand of products to be manufactured; and (v) indicators such as the energy consumption of the products to be manufactured and driving range must reach a domestic advanced level.

Regulations on Electric Vehicle Charging Infrastructures

According to the Guidance Opinions of the General Office of the State Council on Accelerating the Promotion and Application of the New Energy Vehicles (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 (effective on September 29, 2015) and the Guidance on the Development of Electric Vehicle Charging Infrastructure (2015-2020) (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 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 product safety of electric vehicle charging infrastructure.

 

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Regulations on Automobile Sales

According to the Administrative Measures on Automobile Sales promulgated by the Ministry of Commerce, or the MOFCOM on April 5, 2017, which became effective on July 1, 2017, automobile suppliers and dealers are required to file with the 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.

Regulations on 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. The product quality supervision department of the State Council is responsible for supervision and administration of recalls of defective automotive products nationwide. In accordance with such administrative provisions, manufacturers of automobile products are required to take measures to eliminate defects in products they sell. Defects refer to instances where a design, manufacturing or identifying flaw is found in a certain batch, model or class of the automobile products that do not meet the national standards and industrial standards that protect a customer’s life or property or impose an unreasonable danger to one’s life or property. 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, lease, or repair of vehicles products discovers any defect in automobile products, it must cease to sell, lease or use the relevant automobile products and must assist manufacturers in the recall of those products. Manufacturers must recall their products through publicly available channels and announce the defects of these products as a precaution to avoid losses and eliminate defects. In addition, for the recalled defective automobile products, manufacturers are required to take proper measures to eliminate defects, including rectification, identification, modification, replacement or returning. 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 its license.

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 conduct investigations 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, 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 PRC promulgated on February 22, 1993 and amended on July 8, 2000 and August 27, 2009, it is prohibited to produce or sell products that do not meet the standards or requirements for safeguarding human health and ensuring human and property safety. Products shall be free from unreasonable dangers threatening human and property safety. Where a defective products causes physical injury to a person or damages to property, the aggrieved party may claim compensation against the producer or the seller of such product. Where anyone produces or sells products that do not comply with the relevant standards safeguarding the health or safety of person and property, the competent authority will order it to cease the production or sale, confiscate the products produced or for sale, and impose a fine. Where illegal earnings are found, the earnings will be confiscated. Where the circumstance is serious, the business license shall be revoked.

 

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Favorable Government Policies on 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 may obtain national subsidies from the government. According to the Financial Support Circular, a purchaser can purchase the new energy vehicle from the seller by paying the original price minus the subsidy amount, and the seller can obtain the subsidy from the government after such new energy vehicle is sold to the purchaser. The Financial Support Circular also provides 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. The Circular on Adjusting the Subsidy Policy provides that local subsidies shall not exceed 50% of the national subsidy amount provided for the purchaser of each new energy vehicle. The Circular on Adjusting the Subsidy Policy further specifies the phase-out schedule for the provision of subsidies: the subsidies for purchasers of certain new energy vehicles (except for fuel cell vehicles) in 2019 and 2020 will be reduced by 20% as compared to 2017 subsidies.

The Circular on Adjusting and Improving the Subsidy Policies for the Promotion the Application of New Energy Vehicles, which was jointly promulgated by the MOF, the MOST, the MIIT and the NDRC on February 12, 2018 and became effective on the same day further adjusts and improves the existing subsidy standards for purchasers of new energy vehicles.

In light of the aforementioned Circular on Adjusting the Subsidy Policy and other relevant regulations, a number of local governments, including, among others, Shanghai, Beijing, Guangzhou, Shenzhen, Chengdu, Nanjing, Hangzhou and Wuhan, have issued policies on local subsidies for purchasers of new energy vehicles. For example, on January 31, 2018, the Development and Reform Commission of Shanghai together with other six local authorities jointly issued the Implementation Rules on Encouraging the Purchase and Use of New Energy Vehicles in Shanghai, pursuant to which local governments may provide local subsidies equal to 50% of the national subsidy amount to the purchaser of qualified pure electric passenger vehicles. Therefore, purchasers of ES8 in the foregoing cities can obtain national subsidies and are also expected to be able to obtain local subsidies after certain application formalities with respect to ES8 are completed by us.

Exemption of Vehicle Purchase Tax

On December 26, 2017, the MOF, the State Administration of Taxation, or 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, pursuant to which, from January 1, 2018 to December 31, 2020, the vehicle purchase tax is exempted for purchases of qualified new energy vehicles that are listed in the Catalogue of New Energy Vehicle Models Exempt from Vehicle Purchase Tax (the “Catalogue”) issued by the MIIT. The Announcement on Exemption of Vehicle Purchase Tax also provides that, for new energy vehicles added to the Catalogue prior to December 31, 2017, the previous policy on exemption of vehicle purchase tax will remain in force for the same period. ES8 was added into the Catalogue (15th batch) on December 19, 2017, thus purchasers of ES8 can enjoy such policy.

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 SAT and MIIT on May 7, 2015, clarifies that pure electric passenger vehicles are not subject to vehicle and vessel tax.

 

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New Energy Vehicle License Plate

In recent years, in order to control the number of motor vehicles, certain cities local governments have issued various regulations or rules to restrict the issuance of vehicle license plates. These local regulations or rules, however, do not apply to the issuance of license plates of 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 for free.

Incentive Policies on Electric Vehicle Charging Infrastructures

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. According to the Circular, the central finance department will provide certain local governments with funds and subsidies for the construction and operation of charging facilities and other relevant fields.

Certain local governments have issued various incentive policies for the construction and operation of charging infrastructures for new energy vehicles. For example, according to the Supporting Measures on Encouraging the Development of Charging Infrastructures of the Electric Vehicles in Shanghai, the constructor of certain non-self-use charging infrastructures could be eligible for subsidies of up to 30% of its investment cost, and the operator of certain non-self-use charging infrastructures could be eligible for subsidies calculated based on electricity output.

Parallel Credits Policy on Vehicle Manufacturers and Importers

On September 27, 2017, the MIIT, the MOF, the MOFCOM, the General Administration of Customs of PRC and the General Administration of Quality Supervision, Inspection and Quarantine of the PRC jointly promulgated the Measure for the Parallel Administration of the Corporate Average Fuel Consumption and New Energy Vehicle Credits of Passenger Vehicle Enterprises, or the Parallel Credits Measure, which took effect on April 1, 2018. Under the Parallel Credits Measure, all vehicle manufacturers and vehicle importers of a certain scale are required to fulfill certain targets with respect to both corporate average fuel consumption credits and new energy vehicles credits, or the NEV credits. NEV credits can be earned by manufacturing or importing new energy vehicles. Excess NEV credits are tradable and may be sold to other enterprises through a credit management system established by the MIIT. As a manufacturer of only new energy vehicles, we may earn NEV credits by manufacturing new energy vehicles through our future manufacturing plant on each vehicle manufactured, and may sell our excess NEV credits to other vehicle manufacturers or importers.

Regulations on Value-added Telecommunications Services

In 2000, the PRC 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 infrastructures. According to the Classified Catalogue of Telecommunications Services, an attachment to the Telecommunications Regulations, most recently updated in December 2015 by 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 the ICP license, from the MIIT or its provincial level counterparts. Otherwise, such operator might be subject to sanctions including corrective orders and warnings from the competent governmental authority, imposition of fines and confiscation of illegal gains and, in the case of significant infringements, orders to close the website.

 

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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 from governmental authorities 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 service 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 and effective as of 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 the networks. The Cyber Security Law further requires internet information service 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 service 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 information protection, such as the requirements on the collection, use, processing, storage and disclosure of personal information, and internet service 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 service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, shutdown of websites or criminal liabilities.

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

 

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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 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.

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.

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 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.

 

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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 aforementioned 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 crowed 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.

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 copyright owner. Infringers of copyright may also subject to fines and/or administrative or criminal liabilities in severe situations.

 

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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 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

On June 28, 2017, the MOFCOM, and the NDRC jointly promulgated the Guidance Catalogue of Industries for Foreign Investment (Revised in 2017), or the Catalogue, which came into effect on July 28, 2017. The Catalogue lists the industries and economic activities in which foreign investment in the PRC is encouraged, restricted or prohibited. Any industry not listed in the Catalogue is a permitted industry. Pursuant to the Catalogue, the productions and sales of battery bags and packs fall within the permitted catalogue. However, the Catalogue also provides that foreign investors shall hold no more than 50% of the equity interest in a manufacturer of the whole automobiles.

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 subsequently amended on December 25, 1999, August 28, 2004, October 27, 2005 and December 28, 2013. The latest amended PRC Company Law became effective on March 1, 2014. 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 Wholly Foreign-owned

 

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Enterprise Law of the PRC, or the WFOE Law, promulgated on April 12, 1986 and amended on October 31, 2000 and September 3, 2016, and the Rules for the Implementation of the WFOE Law, promulgated on December 12, 1990 and amended on April 12, 2001 and February 19, 2014. According to the amendments to the WFOE law in 2016, for wholly foreign-owned enterprise which the special entry management system does not apply to, its establishment, operation duration and extension, separation, merger or other major changes shall be reported for record.

Pursuant to the Provisional Administrative Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises, or the Provisional Measures, promulgated by MOFCOM on October 8, 2016 and amended on July 30, 2017 with effect from the same day, establishment and modifications of foreign invested enterprises which are not subject to the approval under the special entry management measures shall be filed with the delegated commercial authorities.

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 for 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 office. 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, 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 the 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 the 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 the 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

 

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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 the SAFE Circular No.19, for the time being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals 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 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.

The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or the 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 self-discretionary basis. The 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 self-discretionary basis, which applies to all enterprises registered in the PRC.

According to the Provisional Measures, the Administrative Rules on the Company Registration, which was promulgated by the State Council on June 24, 1994, became effective on July 1, 1994 and latest 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 the 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 the 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 forgoing, 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 SAFE. However, such foreign debt must be registered with and recorded by 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

 

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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 SAMR on February 17, 1987 and effective on March 1, 1987, with respect to a sino-foreign equity join 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.

On January 11, 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 the PBOC Notice No. 9. Pursuant to the PBOC Notice No. 9, within a transition period of one year from January 11, 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 the PBOC Notice No. 9, or Notice No. 9 Foreign Debt Mechanism, at their own discretions. The PBOC Notice No. 9 provides that enterprises may conduct independent cross-border financing in RMB or foreign currencies as required. Pursuant to the 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 the specified upper limit, namely: risk-weighted outstanding cross-border financing £ the upper limit of risk-weighted outstanding cross-border financing. Risk-weighted outstanding cross-border financing = S outstanding amount of RMB and foreign currency denominated cross-border financing * maturity risk conversion factor * type risk conversion factor + S outstanding foreign currency denominated cross-border financing * exchange rate risk conversion factor. Maturity risk conversion factor shall be 1 for medium- and long-term cross-border financing with a term of more than one year and 1.5 for short-term cross-border financing with a term of less than one year. Type risk conversion factor shall be 1 for on-balance-sheet financing and 1 for off-balance-sheet financing (contingent liabilities) for the time being. Exchange rate risk conversion factor shall be 0.5. The 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 SAFE in its capital item information system after entering into the relevant cross-border financing contracts and prior to three business day 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 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 SAFE in its information system in the event that the Notice No. 9 Mechanism applies. According to the PBOC Notice No. 9, after a transition period of one year from January 11, 2017, the PBOC and SAFE will determine the cross-border financing administration mechanism for the foreign-invested enterprises after evaluating the overall implementation of the PBOC Notice No. 9. As of the date hereof, neither PBOC nor 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 PBOC and SAFE in the future and what statutory limits will be imposed on us when providing loans to our PRC subsidiaries.

 

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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 the 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 offshore enterprises directly established or indirectly controlled by PRC residents for offshore equity financing of the enterprise assets or interests they hold in China. 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 the 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.

Regulations on dividend distribution

The principal laws and regulations regulating the dividend distribution of dividends by foreign-invested enterprises in the PRC include the Company Law of the PRC, as amended in 2004, 2005 and 2013, 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 Enterprise Income Tax Law of the PRC which was amended on February 24, 2017 and 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

 

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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 and came into effect on January 1, 1994 which were subsequently amended on November 10, 2008 and came into effect on January 1, 2009 and most recently amended on February 6, 2016. 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, 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. 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 VAT. The VAT tax rates generally applicable are simplified as 16%, 10%, 6% and 0%, 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 which do not have an establishment or place of business in the PRC, or which 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.

Pursuant to an 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 Incomes, or the Double Tax 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 Tax 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 the 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 will take effect on April 1, 2018, when determining the applicant’s status of 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 tax exemption on relevant incomes or levy tax at an extremely low rate, will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. This circular further provides that applicants who intend to prove his or her status of 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.

 

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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 real commercial nature which is evidenced by their actual function and risk exposure. According to the 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. The 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 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 the SAT Circular 7. The SAT 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 the employees. Employers are prohibited from forcing employees to work above certain time limit and employers shall pay employees for overtime work in accordance to 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.

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 fulltime 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

 

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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, employers are required to provide their employees in the PRC with welfare benefits covering pension insurance, unemployment insurance, maternity insurance, labor 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 Management of Housing Fund 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 “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, or Circular 7, 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 an 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 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 option 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, requires 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 requires 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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MANAGEMENT

Directors and Executive Officers

The following table sets forth information regarding our directors and executive officers as of the date of this prospectus.

 

Directors and Executive Officers

  

Age

    

Position/Title

Bin Li

     43      Chairman and Chief Executive Officer

Lihong Qin

     44      Director and President

Louis T. Hsieh

     53      Chief Financial Officer

Hesien-Tsong Cheng

     59      Executive Vice President

Padmasree Warrior

     57      Director and Chief Development Officer

Xin Zhou

     48      Vice President

Dongning Wang

     46      Vice President

Feng Shen

     54      Vice President

Tian Cheng

     35      Director

Xiang Li

     36      Director

Liang Li

     46      Director

Hai Wu

     49      Director

Wenjie Wu

     43      Director

Xiangping Zhong

     42      Director

Zhaohui Li

     42      Director

Mr. Bin Li is our founder and has served as chairman of the board and chief executive officer since our inception. Mr. Li currently also serves as chairman of the board of directors at Bitauto Holdings Limited, an 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 C&I Advertising Company Limited 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 1999 and a master’s degree in public policy from Harvard University.

Mr. Louis T. Hsieh has served as our Chief Financial Officer since May 2017. Mr. Hsieh also serves as a non-executive director and senior advisor to the chief executive officer at New Oriental Education and Technology Group, or New Oriental, an NYSE-listed company providing private educational services in China. Mr. Hsieh joined New Oriental in 2005 and served as chief financial officer from 2005 to 2015, as President from 2008 to 2016, and director since 2007. He is also an independent director and chairman of audit committee for each of JD.com, Inc., China’s largest direct sales internet company; YUM China Holdings, an NYSE-listed fast-food restaurant company operating KFC, Pizza Hut, Little Sheep Hot Pot, Taco Bell in China; and Nord Anglia Education, Inc., an NYSE-listed education company. Prior to joining New Oriental, Mr. Hsieh held senior executive positions in private equity and investment banking with UBS Capital (Managing Director and Asia

 

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Tech/Media/Telecom head), JP Morgan (vice president) and Credit Suisse, and served as a corporate and securities law attorney at White & Case LLP. Mr. Hsieh received a bachelor’s degree in industrial engineering and engineering management from Stanford University, a master’s degree in business administration from the Harvard Business School, and a juris doctor degree from the University of California at Berkeley.

Mr. Hesien-Tsong Cheng is our co-founder and has served as our executive vice president and chief executive officer of XPT since July 2015. Prior to joining us, Mr. Cheng served as chairman and chief executive officer at Magneti Marelli China from January 2013 to July 2015. Mr. Cheng served as chairman of Fiat Automotive Finance Co., Ltd. and chairman and chief executive officer of FIAT (China) Business Co., Ltd. from June 2014 to July 2015. Prior to that, Mr. Cheng served as general manager of GAC Fiat Automobiles Co., Ltd. from July 2010 to March 2013. Mr. Cheng received his bachelor’s degree in mechanical engineering from National Cheng Kung University in Taiwan in 1980.

Ms. Padmasree Warrior has served as our chief development officer and chief executive officer of NIO USA, Inc. since December 2015, and our director since March 2016. She also serves as a director of Microsoft Corporation since December 2015 and Spotify Ltd. since June 2017. Prior to joining us, Ms. Warrior worked as chief technology officer and strategy officer at Cisco Systems, Inc. from 2008 to 2015. In addition, she held various positions at Motorola, Inc. from 1984 to 2007, most recently as executive vice president and chief technology officer from 2002 to 2007. Ms. Warrior received her bachelor’s degree in chemical engineering from Indian Institute of Technology in 1982 and master’s degree in chemical engineering from Cornell University in 1984.

Mr. Xin Zhou has served as our vice president since April 2015. 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. 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. Dongning Wang has served as our vice president since September 2015. Prior to joining us, Mr. Wang served as the executive vice president and chief financial officer at Jaguar Land Rover Greater China. Prior to joining Jaguar Land Rover Greater China, he held various senior financial management positions in Daimler Chrysler U.S. headquarters and Asia Pacific region for a total of seven years. From 1995 to 1999, he served as a senior project manager at State Power Corporation of China. Mr. Wang received a bachelor’s degree in engineering mechanics from Tsinghua University in 1995 and a master’s degree in business administration from Wharton Business School in 2002.

Mr. Feng Shen has served as our vice president since December 2017. Mr. Shen worked in several senior management roles, such as president and global chief technology officer at Polestar, president at Volvo Cars, and chairman at China-Sweden Traffic Safety Research Center from 2010 to 2017. Prior to that, Mr. Shen worked as a powertrain manager and technical expert at Ford Motor Company from 1999 to 2010. 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.

Mr. Tian Cheng has served as our director since March 2015. Mr. Cheng is a partner at Shunwei Capital and specializes in evaluating investment opportunities and investing in the technology, media and telecom industry. Prior to joining Shunwei Capital, he served as an associate director of the investment group at Temasek Holdings (Private) Limited from July 2008 to June 2014. Mr. Cheng received a bachelor’s degree in business administration and a master’s degree in management from Fudan University in 2005 and 2008, respectively.

Mr. Xiang Li has served as our director since May 2015. Mr. Li serves as chairman of the board of directors and chief executive officer of Beijing CHJ Information Technology Co., Ltd. Mr. Li was also the founder of

 

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Autohome Inc., an NYSE-listed company, and served as its director from 2008 to 2016, its president from May 2013 to June 2015 and its executive vice president from 2008 to May 2013. Autohome Inc. provides online advertising services to the automotive industry.

Mr. Liang Li has served as our director since March 2015. Mr. Li is a partner of Hillhouse Capital since November 2005. Mr. Li served as a general manager at State Research Internet and Data (Beijing) Co., Ltd. from March 2001 to November 2005. Prior to that, he worked as a vice general manager at State Research Information and Technology Co., Ltd. Mr. Li received a bachelor’s degree and a master’s degree in automation from Tsinghua University in 1993 and 1997, respectively.

Mr. Hai Wu has served as our director since July 2016. Mr. Wu is a managing director of China at Temasek Holdings Advisors (Beijing) Co., Ltd. since May 2014. Mr. Wu has extensive experience in investments and management. Prior to joining Temasek Holdings, 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 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 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 in Rutgers University.

Ms. Wenjie Wu has served as our director since March 2017. Currently, Ms. Wu serves as a managing partner at Baidu Capital and a director of both Xunlei Limited (Nasdaq: XNET) and Kingsoft Corporation Limited (HKEX: 03888). Prior to joining Baidu Capital, Ms. Wu worked in various senior management roles of Ctrip.com International Ltd., including chief strategy officer and chief financial officer, from December 2011 to November 2016. Ms. Wu received a doctoral degree in finance from the University of Hong Kong, a master’s degree in philosophy and finance from the Hong Kong University of Science and Technology, a master’s degree and a bachelor’s degree in economics from Nan Kai University, China. Ms. Wu has been a chartered financial analyst since 2004.

Mr. Xiangping Zhong has served as our director since April 2018. Mr. Zhong currently serves as a general manager of map platform product department and a vice president of mobile internet group of Tencent Holdings Ltd. Mr. Zhong also serves as a director of NAVINFO Polytron Technologies Inc. since April 2017. Prior to that, he served as a general manager of mobile browsing products development at Tencent Holdings Ltd. from 2004 to 2008. Mr. Zhong received a bachelor’s degree from Nanjing University in computer science and technology.

Mr. Zhaohui Li has served as our director since January 2018. Mr. Li works as a managing partner of Tencent Investment and a general manager of the M&A department at Tencent Holdings Ltd. since 2010. From 2008 to 2010, he served as an investment director of Bertelsmann Asia Investment Fund. Mr. Li received a bachelor’s degree from Peking University in 1998 and a master’s degree in business administration from Duke University Fuqua School of Business in 2004.

Board of Directors

Our board of directors will consist of              directors upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part. 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 materially interested provided (a) such director, if his interest in such contract or arrangement is material, 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 the company to borrow money, mortgage its undertaking, property

 

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and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the 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 will establish three committees under the board of directors immediately upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part: 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 will consist of             ,              and             .              will be the chairman of our audit committee. We have determined that             ,              and              satisfy the “independence” requirements of [Section 303A of the Corporate Governance Rules of the NYSE/Rule5605(c)(2) of the Listing Rules of the NASDAQ] and Rule 10A-3 under the Exchange Act. We have determined that              qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be 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

 

    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 will consist of             ,              and             .              will be the chairman of our compensation committee. We have determined that             ,              and              satisfy the “independence” requirements of [Section 303A of the Corporate Governance Rules of the NYSE/ Rule5065(c)(2) of the Listing Rules of the NASDAQ]. The compensation committee will assist 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 will be 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 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 will consist of             ,              and             .              will be the chairperson of our nominating and corporate

 

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governance committee.             ,              and              satisfy the “independence” requirements of [Section 303A of the Corporate Governance Rules of the NYSE/Rule 5605(c)(2) of the Listing Rules of the NASDAQ]. The nominating and corporate governance committee will assist the board of directors 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 will be 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.

Duties of Directors

Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith 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 exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. 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. 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 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 and hold office until such time as they are removed from office by ordinary resolution of the shareholders or by the board. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; or (ii) is found by our company to be or becomes of unsound mind.

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

 

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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. We may also terminate an executive officer’s employment without cause upon three-month advance written notice. 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. The executive officer may resign at any time with a three-month advance written notice.

Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the 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 his or her 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 his or her 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, 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.

Compensation of Directors and Executive Officers

For the fiscal year ended December 31, 2017, we paid an aggregate of RMB18.3 million (US$2.9 million) in cash to our directors and executive officers. 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.

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.

 

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Under the 2015 Plan, 2016 Plan and 2017 Plan, the maximum numbers of ordinary shares which may be issued pursuant to all awards are 46,264,378, 18,000,000 and 10,000,000, respectively. [As of the date of this prospectus, awards to purchase an aggregate amount of 60,324,614 ordinary shares under our three 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, 2016 Plan and 2017 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.

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 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 ten years from the date of grant under 2017 Plan, or five years from the date of grant under 2015 Plan and 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 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 his/her 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 this offering, the grantees shall enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by us for the purpose of this offering, 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 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 this offering.

 

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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 Administrator.

Termination and Amendment of the Plan. Unless terminated earlier or extended before expiration, each of our stock incentive plan 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.

The following table summarizes, as of the date of this prospectus, the awards granted under our 2015 Plan, 2016 Plan and 2017 Plan to several of our executive officers, excluding awards that were forfeited or cancelled after the relevant grant dates.

 

Name

   Ordinary Shares
Underlying Options and
Restricted Shares
     Exercise Price
(US$/Share)
    

Date of Grant

  

Date of Expiration

Bin Li

     15,000,000        2.55      March 1, 2018    February 28, 2028

Louis T. Hsieh

     *        0.1-2.55      February 1, 2018 February 28, 2018    January 31, 2028 February 27, 2028

Padma Warrior

     *        0.27      March 10, 2016    March 9, 2026

Lihong Qing

     *        2.55      February 1, 2018 February 28, 2018    January 31, 2028 February 27, 2028

Xin Zhou

     *        2.55      February 1, 2018 February 28, 2018    January 31, 2028 February 27, 2028

Dongning Wang

     *        0.1-2.55      December 1, 2015 February 1, 2018 February 28, 2018    November 30, 2025 January 31, 2028 February 27, 2028

Hesien-Tsong Cheng

     *        0.1-2.55      December 1, 2015 February 28, 2018    November 30, 2025 February 27, 2028

Feng Shen

     *        1.80-2.55      December 25, 2017 February 1, 2018    December 24, 2027 January 31, 2028

Total

     30,535,008           

 

* Less than one percent of our total outstanding shares.

As of the date of this prospectus, other employees as a group held awards to purchase 34,796,162 ordinary shares of our company, with exercise prices ranging from US$0.10 to US$0.55 per share.

 

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PRINCIPAL [AND SELLING] SHAREHOLDERS

Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of the date of this prospectus by:

 

    each of our directors and executive officers;

 

    each person known to us owning beneficially more than 5% of our ordinary shares; and

 

    [each selling shareholder.]

The calculations in the table below are based on 848,278,519 ordinary shares on an as-converted basis outstanding as of the date of this prospectus, and                Class A ordinary shares,                Class B ordinary shares and                Class C ordinary shares outstanding immediately after the completion of this offering, assuming the underwriters do not exercise their over-allotment option.

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.

 

    Ordinary Shares
Beneficially
Owned Prior to

This Offering
    Ordinary Shares
Beneficially Owned
Immediately After This Offering
 
    Ordinary
shares
    %     Class A
ordinary
shares
    Class B
ordinary
shares
    Class C
ordinary
shares
    Total
ordinary
shares
on an as
converted
basis
    %     % of
aggregate
voting
power
 

Directors and Executive Officers**:

               

Bin Li(1)

    148,500,000       17.5              

Lihong Qin(2)

    *       *              

Louis T. Hsieh(3)

    *       *              

Hesien-Tsong Cheng

                       

Padmasree Warrior(4)

    10,534,724       1.2              

Xin Zhou

    *       *              

Feng Sheng

               

Dongning Wang

    *       *              

Tian Cheng(5)

                       

Xiang Li(6)

    15,000,000       1.8              

Liang Li(7)

                       

Hai Wu(8)

                       

Wenjie Wu(9)

    *       *              

Xiangping Zhong(10)

                       

Zhaohui Li(11)

                       

All Directors and Executive Officers as a Group

    174,893,180       20.6              

Principal [and Selling] Shareholders:

               

Founder vehicles(12)

    148,500,000       17.5              

Tencent entities(13)

    132,030,222       15.6              

Hillhouse entities(14)

    65,368,424       7.7              

 

* Less than 1% of our total outstanding shares.
** 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, 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 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.

 

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(1) Represents 148,500,000 ordinary shares issuable upon the conversion of (i) 122,045,675 series A-1 preferred shares held by Originalwish Limited and (ii) 26,454,325 series A-1 preferred shares held by mobike Global Ltd. Each of Originalwish Limited and mobike Global Ltd. is a company incorporated in British Virgin Islands and beneficially owned by Mr. Bin Li.
(2) 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. Louis T. Hsieh is Tower 2, 37-B, 1 Austin Road West, Kowloon, Hong Kong.
(4) Represents 10,534,728 Class A ordinary shares issuable upon the conversion of (i) 7,509,933 series A-3 preferred shares held by Ms. Padmasree Warrior, (ii) 2,816,188 ordinary shares held by Ms. Padmascree Warrior, and (iii) 208,607 ordinary shares that will be issuable upon exercise of options exercisable within 60 days after the date of this prospectus. The business address of Ms. Padmascree Warrior is 3200 North First Street, San Jose, CA 95134 United States of America.
(5) The business address of Mr. Tian Cheng is Room 801, Block D1, Liangmaqiao DRC Office BLDG, Dongfang East Road 19, Chaoyang District, Beijing, People’s Republic of China.
(6) Represents 15,000,000 Class A ordinary shares issuable upon the conversion of 15,000,000 series A-1 preferred shares held by Energy Lee Limited. Energy Lee Limited is a company incorporated in British Virgin Islands and beneficially owned by Mr. Xiang Li. The business address of Mr. Xiang Li is No.399, Dongxindian, Chaoyang District, Beijing, People’s Republic of China.
(7) The business address of Mr. Liang Li is Floor 28, Building B, PingAn International Financial Center, Chaoyang District, Beijing, People’s Republic of China.
(8) The business address of Mr. Hai Wu is Unit 06, 55F, Fortune Financial Center, No. 5 Dong San Huan Zhong Road, Chaoyang District, Beijing, People’s Republic of China.
(9) The business address of Ms. Wenjie Wu is Room 2705, Block A, Fuxing SOHO Plaza, No. 388 Madang Road, Huangpu District, Shanghai, People’s Republic of China.
(10) The business address of Mr. Xiangping Zhong is 10F, Han’s Laser Building, 9988 Shennan Avenue, Nanshan District, Shenzhen, 518052, People’s Republic of China.
(11) The business address of Mr. Zhaohui Li is 10F, China Technology Trade Center, No. 66 North 4th Ring West Road, Hai Dian District, Beijing, People’s Republic of China.
(12) Represents 148,500,000 ordinary shares issuable upon the conversion of (i) 122,045,675 series A-1 preferred shares held by Originalwish Limited, and (ii) 26,454,325 series A-1 preferred shares held by mobike Global Ltd, which are collectively referred to in this prospectus as Founder Vehicles. Each of Originalwish Limited and mobike Global Ltd. is a company incorporated in British Virgin Islands and beneficially owned by Mr. Bin Li. The registered address of Originalwish Limited and mobike Global Ltd. is Sertus Chanbers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
(13) Represents 132,030,222 ordinary shares issuable upon the conversion of (i) 30,000,000 series A-2 preferred shares and 10,905,125 series B preferred shares held by Mount Putuo Investment Limited, (ii) 25,740,026 series C preferred shares and 61,648,781 series D preferred shares held by Image Frame Investment (HK) Limited and (iii) 3,736,290 series D preferred shares held by TPP Follow-on I Holding D Limited, which are collectively referred to in this prospectus as Tencent entities. Mount Putuo Investment Limited is a company incorporated in British Virgin Islands, and Image Frame Investment (HK) Limited and TPP Follow-on I Holding D Limited are both companies incorporated in Hong Kong. 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 register address of Image Frame Investment (HK) Limited and TPP Follow-on I Holding D Limited is 29/F, Three Pacific Place, No.1 Queen’s Road East, Wanchai, Hong Kong.
(14) Represents 65,368,424 ordinary shares issuable upon the conversion of (i) 50,000,000 series A-2 preferred shares and 3,635,042 series B preferred shares held by Hillhouse NEV Holdings Limited, (ii) 7,997,092 series B-21 preferred shares held by HH RSV-X Holdings Limited and (iii) 3,736,290 series D preferred shares held by HH DYU Holdings Limited. Hillhouse NEV Holdings Limited, HH RSV-X Holdings Limited and HH DYU Holdings Limited are collectively referred as Hillhouse entities. Hillhouse NEV Holdings Limited is wholly owned by Hillhouse Fund II, L.P. Hillhouse Capital Management, Ltd. acts as the sole management company of Hillhouse Fund II, L.P., which is in turn ultimately controlled by Mr. Lei Zhang. The principal business address of Hillhouse NEV Holdings Limited is Citco B.V.I. Limited, Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands.

As of the date of this prospectus, 7,644,439 of our ordinary shares or preferred shares are held by record holders 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.

 

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RELATED PARTY TRANSACTIONS

Contractual Arrangements with our VIEs and their Shareholders

See “Corporate History and Structure.”

Shareholders Agreement

See “Description of Share Capital—History of Securities Issuances.”

Employment Agreements and Indemnification Agreements

See “Management—Employment Agreements and Indemnification Agreements.”

Share Incentive Plan

See “Management—Share Incentive Plans.”

Other Transactions with Related Parties

In 2018, we granted two interest free loans to NIO Capital, an entity affiliated with our founder Bin Li, with principal amount of USD5.0 million each. The loans mature in 6 months. One of the loans can be converted into ordinary shares of a subsidiary of NIO Capital upon maturity at our option. As of March 31, 2018, the loans amounting equivalent to RMB62.9 million were outstanding.

In 2017 and 2018, we received marketing and advertising services from Beijing Xinyi Hudong Guanggao Co., Ltd., Bite Shijie (Beijing) Keji Co., Ltd., or Bite, and Beijing Chehui Hudong Guanggao Co., Ltd.. In 2017 and the three months ended March 31, 2018, we incurred RMB 15.6 million and RMB 3.8 million respectively. Beijing Chehui Hudong Guanggao Co., Ltd., Beijing Xinyi Hudong Guanggao Co., Ltd. and Bite are affiliates of ours.

In 2017 and 2018, we provided administrative support, design and research and development services to 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 and Shanghai NIO Hongling Investment Management Co., Ltd. In 2017 and the three months ended March 31, 2018, we received total service income of RMB21.5 million and RMB 0.9 million respectively.

In 2017, we paid a total of RMB18.3 million 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. Bite is an affiliate of ours.

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 March 31, 2018, a total amount of RMB50.0 million was outstanding.

In 2017, we paid a total of RMB21.7 million on behalf of Baidu Capital L.P., or Baidu, our shareholder, to a third party. In the three months ended March 31, 2018, we further paid a total of RMB7.3 million on behalf of Baidu to a third party. As of March 31, 2018, the amount of RMB29.0 million was outstanding and it has been fully repaid as of the date of this prospectus.

In 2016, we granted an interest-free, unsecured and payable on demand loan in the total amount of RMB1.7 million to Bin Li, our founder and chief executive officer. As of the date of this prospectus, the loan has been fully repaid.

 

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DESCRIPTION OF SHARE CAPITAL

We are a Cayman Islands company and our affairs are governed by our amended & restated memorandum and articles of association, the Companies Law (2018 Revision) of the Cayman Islands, which we refer to as the Companies Law below and the common law by the Cayman Islands.

As of the date of this prospectus, our authorized share capital is US$500,000 divided into 2,000,000,000 shares, with a par value of US$0.00025 each, and (i) 1,151,269,325 are designated as ordinary shares, (ii) 165,000,000 are designated as Series A-1 preferred shares, (iii) 130,000,000 are designated as Series A-2 preferred shares, (iv) 31,720,364 are designated as Series A-3 preferred shares, (v) 114,867,321 are designated as Series B preferred shares, (vi) 167,142,990 are designated as Series C preferred shares, and (vii) 240,000,000 are designated as Series D preferred shares. As of the date of this prospectus, 26,900,001 ordinary shares and 813,868,585 preferred shares are issued and outstanding. All of our issued and outstanding ordinary and preferred shares are fully paid. Immediately prior to the completion of this offering, there will be            ordinary shares outstanding, including a total of              ordinary shares resulting from the automatic conversion of all of our outstanding preferred shares, assuming the underwriters do not exercise the over-allotment option.

Our Post-Offering Amended and Restated Memorandum and Articles

Prior to the completion of this offering, our shareholders will conditionally adopted an amended and restated memorandum and articles of association, which will become effective and replace our current amended and restated memorandum and articles of association in its entirety immediately prior to the completion of this offering. The following are summaries of certain material provisions of the post-offering amended and restated memorandum and articles of association that will become effective immediately prior to completion of this offering, and of the Companies Law, insofar as they relate to the material terms of our ordinary shares.

Objects of Our Company. Under our post-offering 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 ordinary shares are issued in registered form and are issued when registered in our register of shareholders. We may not issue shares to bearer. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our post-offering amended memorandum and restated articles of association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no longer needed. Dividends may also be declared and paid out of share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Law. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit 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. A poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than 10% of the votes attaching to the total ordinary shares which are 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 post-offering amended and restated memorandum and articles of association. Holders of the ordinary shares may, among other things, divide or combine their shares by ordinary resolution.

 

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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 post-offering 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 a majority of our board of directors]. Advance notice of [at least seven 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 post-offering 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 post-offering 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 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; and

 

    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.

 

    a fee of such maximum sum as the [NYSE/ NASDAQ] 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 [NYSE/ NASDAQ], 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 may determine.

Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the

 

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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. 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 or series of shares, the rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or series), whether or not our company is being wound-up, may be varied with the consent in writing of [all the holders of the issued shares of that class or series or with the sanction of a resolution passed by a majority of the votes cast] at a separate meeting of the holders of the shares of the class or series. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

Issuance of Additional Shares. Our post-offering 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 post-offering 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, 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 “Where You Can Find Additional Information.”

 

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Anti-Takeover Provisions. Some provisions of [our post-offering 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 post-offering 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 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 company except that an exempted company:

 

    does not have to file an annual return of its shareholders with the Registrar of Companies;

 

    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).

Differences in Corporate Law

The Companies Law is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutory enactments and accordingly there are significant differences between the Companies Law and the current Companies Act of England. In addition, the Companies Law differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of certain significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.

Mergers and Similar Arrangements. The Companies Law permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (i) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii) a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order

 

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to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The plan must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees otherwise. For this purpose a company is a “parent” of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.

The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.

Save in certain limited circumstances, a shareholder of a Cayman Islands constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his or her shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provide the dissenting shareholder complies strictly with the procedures set out in the Companies Law. The exercise of such dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.

Separate from the statutory provisions relating to mergers and consolidations, the Companies Law also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

 

    the statutory provisions as to the required majority vote have been met;

 

    the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

 

    the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and

 

    the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

The Companies Law also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90.0% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman

 

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Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

If an arrangement and reconstruction is thus approved, or if a tender offer is made and accepted, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative actions in the name of the company to challenge actions where:

 

    a company acts or proposes to act illegally or ultra vires;

 

    the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and

 

    those who control the company are perpetrating a “fraud on the minority.”

Indemnification of Directors and Executive Officers and Limitation of Liability. The Companies law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. [Our post-offering amended and restated memorandum and articles of association provide that that we shall indemnify our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such directors or officer, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.] This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our post-offering amended and restated memorandum and articles of association.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-

 

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dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party, and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to act with skill and care. 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.

Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and [our post-offering amended and restated articles of association provide that our shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.]

Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

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 post-offering amended and restated articles of association allow our shareholders holding in aggregate not less than one-third of all votes attaching to the outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. Other than this right to requisition a shareholders’ meeting, our post-offering amended and restated articles of association do not provide our shareholders with any other right to put proposals before annual general meetings or extraordinary general meetings] [not called by such shareholders]. As a Cayman Islands exempted company, we are not obliged by law to call shareholders’ annual general meetings.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but [our post-offering amended and restated articles of association do not provide for cumulative voting.] As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

 

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Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. [Under our post-offering amended and restated articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders.]

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders.

Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.

Under Companies law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Law and our post-offering amended and restated articles of association, our company may be dissolved, liquidated or wound up by a special resolution of our shareholders.

Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cayman Islands law and our post-offering amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under the Companies Law and our post-offering amended and restated memorandum and articles of association, our memorandum and articles of association may only be amended by a special resolution of our shareholders.

 

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Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our post-offering amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our post-offering amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

History of Securities Issuances

The following is a summary of our securities issuances in the past three years.

Ordinary Shares

On January 6, 2015, one ordinary share was transferred from the subscriber to Originalwish Limited for nominal consideration. On the same day, we issued an aggregate of 199,999,999 ordinary shares for aggregate consideration of US$50,000.0 to Originalwish Limited and Prime Hubs Limited.

On February 15, 2015, we repurchased 150,000,000 ordinary shares for consideration of US37,500.0 from Originalwish Limited.

On March 18, 2015, we re-designated 50,000,000 shares issued to Prime Hubs Limited as ordinary shares.

On September 24, 2015, we repurchased 23,099,999 ordinary shares for consideration of US$5,850,000.0 from Prime Hubs Limited.

Preferred Shares

On March 18, 2015, we issued an aggregate of 150,000,000 series A-1 preferred shares for aggregate consideration of US$150,000,000.0 to Originalwish Limited. On the same day, we issued an aggregate of 80,000,000 series A-2 preferred shares for aggregate consideration of US$80,000,000.0 to Hillhouse NEV Holdings Limited, Shunwei TMT II Limited and Shunwei Growth II Limited.

On May 6, 2015, we issued an aggregate of 15,000,000 series A-1 preferred shares for aggregate consideration of US$5,000,000.0 to Energy Lee Limited and 30,000,000 series A-2 preferred shares for consideration of US$30,000,000.0 to Mount Putuo Investment Limited.

On June 23, 2015, we issued 20,000,000 series A-2 preferred shares for consideration of US$20,000,000.0 to Smart Group Global Limited.

On September 12, 2015, we issued an aggregate of 24,210,431 series A-3 preferred shares for aggregate consideration of US$40,000,000.0 to Sequoia Capital China GF Holdco III-A, Ltd. and Joy Capital I, L.P..

On March 10, 2016, we issued 7,509,933 series A-3 preferred shares for consideration of US$12,407,911.3 to Padmasree Warrior.

On July 21, 2016, we issued an aggregate of 96,692,112 series B preferred shares for aggregate consideration of US$261,000,000.0 to Anderson Investments Pte. Ltd., Hillhouse NEV Holdings Limited, Shunwei TMT II Limited, Shunwei Growth II Limited, Mount Putuo Investment Limited, SCC Growth IV Holdco A, Ltd., Joy Capital I, L.P., Bluestone Company Limited, Magic Stone Alternative Private Equity Fund, L.P., TPG Growth III SF Pte. Ltd., Ultimate Lenovo Limited, Renaissance Era International Private Equity Fund I L.P., Palace Investments Pte. Ltd. and Grandfield Investment Ltd.

On August 19, 2016, we issued an aggregate of 1,817,521 series B preferred shares for aggregate consideration of US$5,000,000.0 to IDG China Venture Capital Fund IV L.P. and IDG China IV Investors L.P.

 

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On September 30, 2016, we issued 5,452,563 series B preferred shares for consideration of US$15,000,000.0 to Bright Sky II, L.P.

On February 8, 2017, we issued 2,908,033 series B preferred shares for consideration of US$8,000,000.0 to ORIENT HONTAI LIMITED. On the same day, we forfeited 1,817,521 series B preferred shares from Renaissance Era International Private Equity Fund I L.P.

On February 9, 2017, we issued an aggregate of 9,814,613 series B preferred shares for aggregate consideration of US$27,000,000.0 to LONG WINNER INVESTMENT LIMITED and HH RSV-X Holdings Limited.

On March 24, 2017, we issued an aggregate of 114,650,712 series C preferred shares for aggregate consideration of US$269,311,333.2 to Baidu Capital L.P., WEST CITY ASIA LIMITED, Haitong International Investment Holdings Limited, Haixia NEV International Limited Partnership, New Margin Capital Hong Kong Co., Limited, Palace Investments Pte. Ltd., Image Frame Investment (HK) Limited, Total Prestige Investment Limited, Zhide EV Investment Limited, Bright Sky II, L.P., TPG Growth III SF Pte. Ltd., Bluestone Company Limited, CEG Smart Travel Co, Limited, IDG China Venture Capital Fund IV L.P. IDG China IV Investors L.P., CYBER TYCOON LIMITED, Honor Best International Limited and Tanzanite Gem Holdings Limited.

On May 3, 2017, we issued an aggregate of 26,739,253 series C preferred shares for aggregate consideration of US$81,000,507.2 to Anderson Investments Pte. Ltd., Ultimate Lenovo Limited, CYBER TYCOON LIMITED, Honor Best International Limited, CHAMPION ELITE GLOBAL LIMITED, CHINA INDUSTRIAL INTERNATIONAL TRUST ASSET MANAGEMENT COMPANY LIMITED, HF Holdings Limited and Tea Leaf Limited.

On July 6, 2017, we issued an aggregate of 24,466,024 series C preferred shares for aggregate consideration of US$71,051,401.0 to Tea Leaf Limited, BLISSFUL DAYS HOLDINGS LIMITED, Guangfa Xinde Capital Management Limited, Bluefuture Fund L.P., UBS AG, London Branch, KEEN EAGLE CAPITAL INVESTMENT LIMITED and China Oceanwide International Asset Management Limited.

On July 20, 2017, we issued 1,287,001 series C preferred shares for consideration of US$321.75 to CMFHK Fortune 100 SPC.

On November 10, 2017, we issued an aggregate of 196,211,257 series D preferred shares for aggregate consideration of US$1,050,300,000.0 to Image Frame Investment (HK) Limited, MORESPARK LIMITED, LEAP PROSPECT LIMITED, Serenity WL Holdings Ltd, SCOTTISH MORTGAGE INVESTMENT TRUST PLC, PACIFIC HORIZON INVESTMENT TRUST PLC, Myriad Opportunities Master Fund Limited, LONE SPRUCE, L.P., Lone Cypress, LTD., ULTRA RESULT HOLDINGS LIMITED, AL NAHDHA INVESTMENT LLC, Al Beed Group, Oldbridge Invest L.L.C., AC Limited, BEST CASTLE LIMITED, HUBEI SCIENCE & TECHNOLOGY INVESTMENT GROUP (HONG KONG) COMPANY LIMITED, WP NIO Investment Partnership, LP, Lezmenia Assets Limited, LAPATHIA HOLDINGS LIMITED, PV Vision Limited, Silver Ridge Fund I Limited Partnership, The Mabel Chan 2012 Family Trust, Magic Stone Special Opportunity Fund IV L.P., Mega Treasure Investment Limited, Tanzanite Gem Holdings Limited, SCC Growth IV Holdco A, Ltd., Joy Next Investment Management Limited, Anderson Investments Pte. Ltd., HH DYU Holdings Limited, TPG Growth III SF Pte. Ltd., Bluestone Company Limited, Bright Sky II, L.P, Diamond Division Limited, WEST CITY ASIA LIMITED, Haixia NEV International Limited Partnership, Palace Investments Pte.Ltd. and KEEN EAGLE CAPITAL INVESTMENT LIMITED.

On November 24, 2017, we issued an aggregate of 11,769,312 series D preferred shares for aggregate consideration of US$63,000,000.0 to Caitong Funds SPC – New Technology Fund Segregated Portfolio, CICC Ehealthcare Investment Limited, CapThrone Investment Limited Partnership and HCM VI Limited.

 

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On December 1, 2017, we issued 4,670,362 series D preferred shares for a consideration of US$25,000,000.0 to STAR AZURE INTERNATIONAL LIMITED.

On December 15, 2017, we issued 934,072 series D preferred shares for consideration of US$5,000,000.0 to Oceanwide Sigma Limited.

On February 24, 2018, we forfeited 937,160 series C preferred shares from CEG Smart Traval Co., Limited.

Option and Restricted Share Grants

We have granted options, restricted shares and other awards to purchase our ordinary shares to certain of our directors, executive officers, employees and consultants. See “Management—Share Incentive Plans.”

Shareholders Agreement and Right of First Refusal and Co-Sale Agreement

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 provide for certain special rights, including right of first refusal, co-sale rights, preemptive rights and contain provision governing board of directors and other corporate governance matters. Those special rights, as well as the corporate governance provisions, will automatically terminate upon the completion of this offering.

Registration Rights

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 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 the 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 the 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.

 

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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 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 or 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’ registrable securities Rule 144 of the Securities Act in any 90-day period.

 

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DESCRIPTION OF AMERICAN DEPOSITARY SHARES

American Depositary Receipts

            , as depositary will issue the ADSs which you will be entitled to receive in this offering. Each ADS will represent an ownership interest in            ordinary shares which we will deposit with the custodian, as agent of the depositary, under the deposit agreement among ourselves, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which they have not distributed directly to you. Unless specifically requested by you, all ADSs will be issued on the books of our depositary in book-entry form and periodic statements will be mailed to you which reflect your ownership interest in such ADSs. In our description, references to American depositary receipts or ADRs shall include the statements you will receive which reflect your ownership of ADSs.

The depositary’s office is located at            .

You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder described in this section. You should consult with your broker or financial institution to find out what those procedures are.

As an ADR holder, we will not treat you as a shareholder of ours and you will not have any shareholder rights. Cayman Islands law governs shareholder rights. Because the depositary or its nominee will be the shareholder of record for the shares represented by all outstanding ADSs, shareholder rights rest with such record holder. Your rights are those of an ADR holder. Such rights derive from the terms of the deposit agreement to be entered into among us, the depositary and all registered holders from time to time of ADSs issued under the deposit agreement. The obligations of the depositary and its agents are also set out in the deposit agreement. Because the depositary or its nominee will actually be the registered owner of the shares, you must rely on it to exercise the rights of a shareholder on your behalf. The deposit agreement and the ADSs are governed by New York law.

The following is a summary of what we believe to be the material terms of the deposit agreement. 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 deposit agreement and the form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to the registration statement of which this prospectus forms apart. You may also obtain a copy of the deposit agreement at the SEC’s Public Reference Room which is located at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-732-0330. You may also find the registration statement and the attached deposit agreement on the SEC’s website at http://www.sec.gov.

Share Dividends and Other Distributions

How will I receive dividends and other distributions on the shares underlying my ADSs?

We may make various types of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it will pay to you the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, after converting any cash received into U.S. dollars and, in all cases, making any necessary deductions provided for in the deposit agreement. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.

 

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Except as stated below, the depositary will deliver such distributions to ADR holders in proportion to their interests in the following manner:

 

    Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof (to the extent applicable), on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain registered ADR holders, and (iii) deduction of the depositary’s expenses in (1) converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. The depositary will hold any cash amounts it is unable to distribute in a non-interest-bearing account for the benefit of the applicable holders and beneficial owners of ADSs until the distribution can be effected or the funds that the depositary holds must be escheated as unclaimed property in accordance with the laws of the relevant states of the United States. If exchange rates fluctuate during a time when the depositary cannot convert a foreign currency, you may lose some or all of the value of the distribution.

 

    Shares. In the case of a distribution in shares, the depositary will issue additional ADRs to evidence the number of ADSs representing such shares. Only whole ADSs will be issued. Any shares which would result in fractional ADSs will be sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.

 

    Rights to Receive Additional Shares. In the case of a distribution of rights to subscribe for additional shares or other rights, if we provide evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or other instruments in the discretion of the depositary representing such rights. However, if we do not furnish such evidence, the depositary may:

 

    sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or

 

    if it is not practicable to sell such rights, do nothing and allow such rights to lapse, in which case ADR holders will receive nothing.

We have no obligation to file a registration statement under the Securities Act in order to make any rights available to ADR holders.

 

    Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i) distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same way it distributes cash.

If the depositary determines that any distribution described above is not practicable with respect to any specific registered ADR holder, the depositary may choose any method of distribution that it deems practicable for such ADR holder, including the distribution of foreign currency, securities or property, or it may retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the ADSs will also represent the retained items.

Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without liability and dealt with by the depositary in accordance with its then current practices.

 

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The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holders.

There can be no assurance that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other securities at a specified price, nor that any of such transactions can be completed within a specified time period.

Deposit, Withdrawal and Cancellation

How does the depositary issue ADSs?

The depositary will issue ADSs if you or your broker deposit shares or evidence of rights to receive shares with the custodian and pay the fees and expenses owing to the depositary in connection with such issuance. In the case of the ADSs to be issued under this prospectus, we will arrange with the underwriters named herein to deposit such shares.

Shares deposited in the future with the custodian must be accompanied by certain delivery documentation and shall, at the time of such deposit, be registered in the name of            , as depositary for the benefit of holders of ADRs or in such other name as the depositary shall direct.

The custodian will hold all deposited shares (including those being deposited by or on our behalf in connection with the offering to which this prospectus relates) for the account of the depositary. ADR holders thus have no direct ownership interest in the shares and only have such rights as are contained in the deposit agreement. The custodian will also hold any additional securities, property and cash received on or in substitution for the deposited shares. The deposited shares and any such additional items are referred to as “deposited securities.”

Upon each deposit of shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement, including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued will, unless specifically requested to the contrary, be part of the depositary’s direct registration system, and a registered holder will receive periodic statements from the depositary which will show the number of ADSs registered in such holder’s name. An ADR holder can request that the ADSs not be held through the depositary’s direct registration system and that a certificated ADR be issued.

How do ADR holders cancel an ADS and obtain deposited securities?

When you turn in your ADR certificate at the depositary’s office, or when you provide proper instructions and documentation in the case of direct registration ADSs, the depositary will, upon payment of certain applicable fees, charges and taxes, deliver the underlying shares to you or upon your written order. At your risk, expense and request, the depositary may deliver deposited securities at such other place as you may request.

The depositary may only restrict the withdrawal of deposited securities in connection with:

 

    temporary delays caused by closing our transfer books or those of the depositary or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends;

 

    the payment of fees, taxes and similar charges; or

 

    compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.

 

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This right of withdrawal may not be limited by any other provision of the deposit agreement.

Record Dates

The depositary may, after consultation with us if practicable, fix record dates for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be):

 

    to receive any distribution on or in respect of shares,

 

    to give instructions for the exercise of voting rights at a meeting of holders of shares,

 

    to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the ADR, or

 

    to receive any notice or to act in respect of other matters all subject to the provisions of the deposit agreement.

Voting Rights

How do I vote?

If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting rights for the shares which underlie your ADSs. As soon as practicable after receiving notice of any meeting or solicitation of consents or proxies from us, the depositary will distribute to the registered ADR holders a notice stating such information as is contained in the voting materials received by the depositary and describing how you may instruct the depositary to exercise the voting rights for the shares which underlie your ADSs. For instructions to be valid, the depositary must receive them in the manner and on or before the date specified. No voting instructions may be deemed given to the depositary to give a discretionary proxy to a person designated by us if no instructions are received by the depositary from you on or before the response date established by the depositary. The depositary will try, as far as is practical, subject to the provisions of and governing the underlying shares or other deposited securities, to vote or to have its agents vote the shares or other deposited securities as you instruct. The depositary will only vote or attempt to vote as you instruct. The depositary will not itself exercise any voting discretion. Furthermore, neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast or for the effect of any vote. Notwithstanding anything contained in the deposit agreement or any ADR, the depositary may, to the extent not prohibited by law or regulations, or by the requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of, or solicitation of consents or proxies from, holders of deposited securities, distribute to the registered holders of ADRs a notice that provides such holders with, or otherwise publicizes to such holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials).

Under our constituent documents the depositary would be able to provide us with voting instructions without having to personally attend meetings in person or by proxy. Such voting instructions may be provided to us via facsimile, email, mail, courier or other recognized form of delivery and we agree to accept any such delivery so long as it is timely received prior to the meeting. We will endeavor to provide the depositary with written notice of each meeting of shareholders promptly after determining the date of such meeting so as to enable it to solicit and receive voting instructions. In general, the depositary will require that voting instructions be received by the depositary no less than five business days prior to the date of each meeting of shareholders. Under the post-offering amended and restated memorandum and articles of association that we expect to adopt, the minimum notice period required to convene a general meeting is seven days. The depositary may not have sufficient time to solicit voting instructions, and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

 

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Notwithstanding the above, we have advised the depositary that under the Cayman Islands law and our constituent documents, each as in effect as of the date of the deposit agreement, voting at any meeting of shareholders is by show of hands unless a poll is (before or on the declaration of the results of the show of hands) demanded. In the event that voting on any resolution or matter is conducted on a show of hands basis in accordance with our constituent documents, the depositary will refrain from voting and the voting instructions (or the deemed voting instructions, as set out above) received by the depositary from holders shall lapse. The depositary will not demand a poll or join in demanding a poll, whether or not requested to do so by holders of ADSs.

There is no guarantee that you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.

Reports and Other Communications

Will ADR holders be able to view our reports?

The depositary will make available for inspection by ADR holders at the offices of the depositary and the custodian the deposit agreement, the provisions of or governing deposited securities, and any written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to the holders of deposited securities.

Additionally, if we make any written communications generally available to holders of our shares, and we furnish copies thereof (or English translations or summaries) to the depositary, it will distribute the same to registered ADR holders.

Fees and Expenses

What fees and expenses will I be responsible for paying?

The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason, US$             for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such deposit to pay such charge.

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADSs or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADSs), whichever is applicable:

a fee of US$             per ADR or ADRs for transfers of certificated or direct registration ADRs;

a fee of up to US$            per ADS for any cash distribution made pursuant to the deposit agreement;

a fee of up to US$            per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);

 

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reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of the depositary’s agents (including, without limitation, the custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which charge shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash distributions);

a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as if they were shares and there would be a fee of five cents per ADS outstanding);

stock transfer or other taxes and other governmental charges;

cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares;

transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of deposited securities; and

expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars.

We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.

Our depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange application and listing fees. Neither the depositary nor we can determine the exact amount to be made available to us because (i) the number of ADSs that will be issued and outstanding, (ii) the level of fees to be charged to holders of ADSs and (iii) our reimbursable expenses related to the ADR program are not known at this time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary.

Payment of Taxes

ADR holders must pay any tax or other governmental charge payable by the custodian or the depositary on any ADS or ADR, deposited security or distribution. If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any cash distributions, or (ii) sell deposited securities (by public or private sale) and deduct the amount owing from the net proceeds of such sale. In either case the ADR holder remains liable for any shortfall. Additionally, if any taxes or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the custodian or the depositary with respect to any ADR, any deposited securities represented by the ADSs evidenced thereby or any distribution

 

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thereon, including, without limitation, any Chinese Enterprise Income Tax owing if the Circular Guoshuifa [2009] No. 82 issued by the Chinese State Administration of Taxation or any other circular, edict, order or ruling, as issued and as from time to time amended, is applied or otherwise, such tax or other governmental charge shall be paid by the holder thereof to the depositary. and by holding or having held an ADR the holder and all prior holders thereof, jointly and severally, agree to indemnify, defend and save harmless each of the depositary and its agents in respect thereof. If any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of transfer, split-up or combination of deposited securities or withdrawal of deposited securities until such payment is made. If any tax or governmental charge is required to be withheld on any cash distribution, the depositary may deduct the amount required to be withheld from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities (by public or private sale) to pay such taxes and distribute any remaining net proceeds to the ADR holders entitled thereto.

By holding an ADR or an interest therein, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their respective directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained.

Reclassifications, Recapitalizations and Mergers

If we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities or (ii) any distributions not made to holders of ADRs or (iii) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the depositary may choose to:

 

    amend the form of ADR;

 

    distribute additional or amended ADRs;

 

    distribute cash, securities or other property it has received in connection with such actions;

 

    sell any securities or property received and distribute the proceeds as cash; or

 

    none of the above.

If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited securities and each ADS will then represent a proportionate interest in such property.

Amendment and Termination

How may the deposit agreement be amended?

We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least 30 days’ notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or otherwise prejudices any substantial existing right of ADR holders. Such notice need not describe in detail the specific amendments effectuated thereby, but must give ADR holders a means to access the text of such amendment. If an ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder is deemed to agree to such amendment and to be bound by the deposit agreement as so amended. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the deposit agreement or the form of ADR to ensure compliance therewith, we and the depositary may amend or supplement the deposit agreement and the ADR at any time in accordance with such changed laws, rules or regulations, which amendment or supplement may take effect before a notice is given

 

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or within any other period of time as required for compliance. No amendment, however, will impair your right to surrender your ADSs and receive the underlying securities, except in order to comply with mandatory provisions of applicable law.

How may the deposit agreement be terminated?

The depositary may, and shall at our written direction, terminate the deposit agreement and the ADRs by mailing notice of such termination to the registered holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have (i) resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders unless a successor depositary shall not be operating under the deposit agreement within 45 days of the date of such resignation, and (ii) been removed as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders of ADRs unless a successor depositary shall not be operating under the deposit agreement on the 90th day after our notice of removal was first provided to the depositary. After termination, the depositary’s only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold or sell distributions received on deposited securities. As soon as practicable after the expiration of six months from the termination date, the depositary will sell the deposited securities which remain and hold the net proceeds of such sales (as long as it may lawfully do so), without liability for interest, in trust for the ADR holders who have not yet surrendered their ADRs. After making such sale, the depositary shall have no obligations except to account for such proceeds and other cash.

Limitations on Obligations and Liability to ADS Holders

Limits on our obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSs

Prior to the issue, registration, registration of transfer, split-up, combination, or cancellation of any ADRs, or the delivery of any distribution in respect thereof, and from time to time, we or the depositary or its custodian may require:

 

    payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of shares or other deposited securities upon any applicable register and (iii) any applicable fees and expenses described in the deposit agreement;

 

    the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law, regulations, provisions of or governing deposited securities and terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and

 

    compliance with such regulations as the depositary may establish consistent with the deposit agreement.

The issuance of ADRs, the acceptance of deposits of shares, the registration, registration of transfer, split-up or combination of ADRs or the withdrawal of shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities is closed or when any such action is deemed advisable by the depositary; provided that the ability to withdrawal shares may only be limited under the following circumstances: (i) temporary delays caused by closing transfer books of the depositary or our transfer books or the deposit of shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws or governmental regulations relating to ADRs or to the withdrawal of deposited securities.

 

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The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective agents. Neither we nor the depositary nor any such agent will be liable if:

 

    any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands, the People’s Republic of China or any other country, or of any governmental or regulatory authority or securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism or other circumstance beyond our, the depositary’s or our respective agents’ control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the deposit agreement or the ADRs provide shall be done or performed by us, the depositary or our respective agents (including, without limitation, voting);

 

    it exercises or fails to exercise discretion under the deposit agreement or the ADR;

 

    it performs its obligations under the deposit agreement and ADRs without gross negligence or bad faith;

 

    it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such advice or information; or

 

    it relies upon any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

Neither the depositary nor its agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs. We and our agents shall only be obligated to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities or the ADRs, which in our opinion may involve us in expense or liability, if indemnity satisfactory to us against all expense (including fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any and all demands or requests for information maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of ADRs, any ADRs or otherwise related to the deposit agreement or ADRs to the extent such information is requested or required by or pursuant to any lawful authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. The depositary shall not be liable for the acts or omissions made by any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of deposited securities or otherwise. Furthermore, the depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or affiliate of            . The depositary and the custodian(s) may use third party delivery services and providers of information regarding matters such as pricing, proxy voting, corporate actions, class action litigation and other services in connection with the ADRs and the deposit agreement, and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of securities. Although the depositary and the custodian will use reasonable care (and cause their agents to use reasonable care) in the selection and retention of such third party providers and local agents, they will not be responsible for any errors or omissions made by them in providing the relevant information or services.

Additionally, none of us, the depositary or the custodian shall be liable for the failure by any registered holder of ADRs or beneficial owner therein to obtain the benefits of credits on the basis of non-U.S. tax paid against such holder’s or beneficial owner’s income tax liability. Neither we nor the depositary shall incur any liability for any tax consequences that may be incurred by holders or beneficial owners on account of their ownership of ADRs or ADSs.

Neither the depositary nor its agents will be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner in which any such vote is cast or for the effect of any such vote. Neither the depositary nor any of its agents shall be liable to registered holders of ADRs or beneficial owners of

 

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interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation, lost profits) of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought.

In the deposit agreement each party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the depositary and/or the company directly or indirectly arising out of or relating to the shares or other deposited securities, the ADSs or the ADRs, the deposit agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law or any other theory).

The depositary may own and deal in any class of our securities and in ADSs.

Disclosure of Interest in ADSs

To the extent that the provisions of or governing any deposited securities may require disclosure of or impose limits on beneficial or other ownership of deposited securities, other shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you agree to comply with all such disclosure requirements and ownership limitations and to comply with any reasonable instructions we may provide in respect thereof. We reserve the right to instruct you to deliver your ADSs for cancellation and withdrawal of the deposited securities so as to permit us to deal with you directly as a holder of shares and, by holding an ADS or an interest therein, you will be agreeing to comply with such instructions.

Books of Depositary

The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall include the depositary’s direct registration system. Registered holders of ADRs may inspect such records at the depositary’s office at all reasonable times, but solely for the purpose of communicating with other holders in the interest of the business of our company or a matter relating to the deposit agreement. Such register may be closed from time to time, when deemed expedient by the depositary.

The depositary will maintain facilities for the delivery and receipt of ADRs.

Pre-release of ADSs

In its capacity as depositary, the depositary shall not lend shares or ADSs; provided, however, that the depositary may issue ADSs prior to the receipt of shares (each such transaction a “pre-release”). The depositary may receive ADSs in lieu of shares (which ADSs will promptly be canceled by the depositary upon receipt by the depositary). Each such pre-release will be subject to a written agreement whereby the person or entity (the “applicant”) to whom ADSs are to be delivered (a) represents that at the time of the pre-release the applicant or its customer owns the shares that are to be delivered by the applicant under such pre-release, (b) agrees to indicate the depositary as owner of such shares in its records and to hold such shares in trust for the depositary until such shares are delivered to the depositary or the custodian, (c) unconditionally guarantees to deliver to the depositary or the custodian, as applicable, such shares, and (d) agrees to any additional restrictions or requirements that the depositary deems appropriate. Each such pre-release will be at all times fully collateralized with cash, U.S. government securities or such other collateral as the depositary deems appropriate, terminable by the depositary on not more than five (5) business days’ notice and subject to such further indemnities and credit regulations as the depositary deems appropriate. The depositary will normally limit the number of ADSs involved in such pre-release at any one time to thirty percent (30%) of the ADSs outstanding (without giving effect to pre-released ADSs outstanding), provided, however, that the depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The depositary may also set limits with respect to the number of ADSs involved in pre-release with any one person on a case-by-case basis as it deems appropriate.

 

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The depositary may retain for its own account any compensation received by it in conjunction with the foregoing. Collateral provided in connection with pre-release transactions, but not the earnings thereon, shall be held for the benefit of the registered holders of ADRs (other than the applicant).

Appointment

In the deposit agreement, each registered holder of ADRs and each person holding an interest in ADSs, upon acceptance of any ADSs (or any interest therein) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:

 

    be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and

 

    appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take such action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and the applicable ADR and ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.

Governing Law

The deposit agreement and the ADRs shall be governed by and construed in accordance with the laws of the State of New York. In the deposit agreement, we have submitted to the jurisdiction of the courts of the State of New York and appointed an agent for service of process on our behalf. Notwithstanding the foregoing, any action based on the deposit agreement or the transactions contemplated thereby may be instituted by the depositary and holders in any competent court in the Cayman Islands, Hong Kong, the People’s Republic of China and/or the United States or through the commencement of an English language arbitration either in New York, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association or in Hong Kong following the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL).

 

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have            ADSs outstanding, representing approximately        % of our outstanding ordinary shares, assuming the underwriters do not exercise their over-allotment option to purchase additional ADSs. All of the ADSs sold in this offering will be freely transferable by persons other than by our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our ADSs in the public market could adversely affect prevailing market prices of our ADSs. Prior to this offering, there has been no public market for our ordinary shares or the ADSs. We intend to apply to list the ADSs on the [New York Stock Exchange/ NASDAQ Global Market], but we cannot assure you that a regular trading market will develop in the ADSs. We do not expect that a trading market will develop for our ordinary shares not represented by the ADSs.

Lock-up Agreements

We have agreed, for a period of 180 days after the date of this prospectus, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, lend or otherwise dispose of, except in this offering, any of our ordinary shares or ADSs or securities that are substantially similar to our ordinary shares or ADSs, including but not limited to any options or warrants to purchase our ordinary shares, ADSs or any securities that are convertible into or exchangeable for, or that represent the right to receive, our ordinary shares, ADSs or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date such lock-up agreement was executed), without the prior written consent of the representatives of the underwriters.

Furthermore, each of our directors, executive officers and existing shareholders and [certain] holders of share-based awards has also entered into a similar lock-up agreement for a period of 180 days from the date of this prospectus, subject to certain exceptions, with respect to our ordinary shares, ADSs and securities that are substantially similar to our ordinary shares or ADSs. These parties collectively own all of our outstanding ordinary shares, without giving effect to this offering.

The restrictions described in the preceding paragraphs will be automatically extended under certain circumstances. See “Underwriting.”

Other than this offering, we are not aware of any plans by any significant shareholders to dispose of significant numbers of our ADSs or ordinary shares. However, one or more existing shareholders or owners of securities convertible or exchangeable into or exercisable for our ADSs or ordinary shares may dispose of significant numbers of our ADSs or ordinary shares in the future. We cannot predict what effect, if any, future sales of our ADSs or ordinary shares, or the availability of ADSs or ordinary shares for future sale, will have on the trading price of our ADSs from time to time. Sales of substantial amounts of our ADSs or ordinary shares in the public market, or the perception that these sales could occur, could adversely affect the trading price of our ADSs.

Rule 144

All of our ordinary shares that will be outstanding upon the completion of this offering, other than those ordinary shares sold in this offering, are “restricted securities” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144 and Rule 701 promulgated under the Securities Act. In general, beginning 90 days after the date of this prospectus, a person (or persons whose shares are aggregated) who at the time of a sale is not, and has not been during the three months preceding the sale, an affiliate of ours and has beneficially owned our restricted securities for at least six months will be entitled to sell the restricted securities without registration under the Securities Act, subject only to the availability of current public information about us, and will be

 

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entitled to sell restricted securities beneficially owned for at least one year without restriction. Persons who are our affiliates and have beneficially owned our restricted securities for at least six months may sell a number of restricted securities within any three-month period that does not exceed the greater of the following:

 

    1% of the then outstanding ordinary shares of the same class, in the form of ADSs or otherwise, which immediately after this offering will equal            ordinary shares, assuming the underwriters do not exercise their over-allotment option; or

 

    the average weekly trading volume of our ordinary shares of the same class, in the form of ADSs or otherwise, during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

Sales by our affiliates under Rule 144 are also subject to certain requirements relating to manner of sale, notice and the availability of current public information about us.

Rule 701

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock plan or other written agreement executed prior to the completion of this offering is eligible to resell those ordinary shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.

 

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TAXATION

The following summary of the material Cayman Islands, PRC and U.S. 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 registration statement, all of which are subject to change. 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 levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. 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 is 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 or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of our 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 ordinary shares or ADSs, nor will gains derived from the disposal of our ordinary shares or ADSs be subject to Cayman Islands income or corporation tax.

No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.

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.

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

 

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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 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 the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or 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 (For Trial Implementation), which became effective in October 2009, 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 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. SAT Public Notice 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 SAT Circular 698 and SAT Public Notice 7, we and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Circular 698 and SAT Public Notice 7 and we may be required to expend valuable resources to comply with SAT Circular 698 and SAT Public Notice 7 or to establish that we should not be taxed under SAT Circular 698 and SAT Public Notice 7. See “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 Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our ADSs or ordinary shares by a U.S. Holder (as defined below) that acquires our ADSs in this offering 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 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 ordinary shares pursuant to any employee share option or otherwise as compensation;

 

    investors that will hold their ADSs or 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 subject to special tax accounting rules as a result of any item of gross income with respect to ADSs or ordinary shares being taken into account in an “applicable financial statement” (as defined in the Code);

 

    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 ordinary shares through such entities.

all of whom 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 ordinary shares.

General

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal income tax purposes:

 

    an individual who is a citizen or resident of the United States;

 

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    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 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 ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ADSs or ordinary shares.

For U.S. federal income tax purposes, it is generally expected that a U.S. Holder of ADSs will 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 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 (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, more than 25% (by value) of the stock.

Although the law in this regard is not entirely clear, we treat our consolidated VIE as being owned by us for U.S. federal income tax purposes because we control its management decisions and are entitled to substantially all of the economic benefits associated with this entity. As a result, we consolidated its 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 VIE 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 the VIE for U.S. federal income tax purposes, and based upon our current and projected income and assets, including the proceeds from this offering, and projections as to the value of our assets, based in part on the projected market value of our ADSs following this offering, we do not expect to be a PFIC for the current taxable year or the foreseeable future. While we do not anticipate being or becoming 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 unbooked intangibles, may be determined by reference to the market price of our ADSs from time to time (which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have taken into account the expected cash proceeds and our anticipated market capitalization following this offering. If our market capitalization subsequently declines, we may be or become classified as a PFIC for the current taxable year or future taxable years. Furthermore, the composition of

 

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our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. 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.

If we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or 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 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 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 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, which we intend to apply to list on the [NYSE/NASDAQ], (but not our ordinary shares) will be readily tradeable on 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”), 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 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 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.

 

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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 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 ordinary shares. Any capital gain or loss will be long-term if the ADSs or 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 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 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 ordinary shares, including the availability of the foreign tax credit under their particular circumstances.

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 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 ordinary shares), and (ii) any gain realized on the sale or other disposition of ADSs or 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 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 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 ordinary shares, will be treated as marketable stock upon their listing on the [NYSE/ NASDAQ]. 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

 

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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 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 ordinary shares if we are or become a PFIC.

 

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UNDERWRITING

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. International plc., Goldman Sachs (Asia) L.L.C., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC are acting as representatives, have severally agreed to purchase, and we [and the selling shareholders] have agreed to sell to them, severally, the number of ADSs indicated below:

 

Name

  

Number of
ADSs

 

Morgan Stanley & Co. International plc.

  

Goldman Sachs (Asia) L.L.C.

  

Citigroup Global Markets Inc. 

  

Credit Suisse Securities (USA) LLC

  

Deutsche Bank Securities Inc. 

  

J.P. Morgan Securities LLC 

  

Merrill Lynch, Pierce, Fenner & Smith

                      Incorporated

  

UBS Securities LLC

  
  

 

 

 

Total:

  
  

 

 

 

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the ADSs subject to their acceptance of the ADSs from us [and the selling shareholders] and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ADSs offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions[, such as lack of material adverse change, or any development involving a prospective material adverse change, in the business, financial condition and results of operations of the Company]. The underwriters are obligated, severally but not jointly, to take and pay for all of the ADSs offered by this prospectus if any such ADSs are taken. However, the underwriters are not required to take or pay for the ADSs covered by the underwriters’ over-allotment option described below.

The underwriters initially propose to offer part of the ADSs directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers. After the initial offering of the ADSs, the offering price and other selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to            additional ADSs at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the ADSs offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional ADSs as the number listed next to the underwriter’s name in the preceding table bears to the total number of ADSs listed next to the names of all underwriters in the preceding table.

 

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The following table shows the per ADS and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us [and the selling shareholders]. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional            ADSs.

 

            Total  
     Per
ADS
     No Exercise      Full
Exercise
 

Public offering price

   US$                   US$                   US$               

Underwriting discounts and commissions to be paid by:

        

Us

   US$                   US$                   US$               

[The selling shareholders

   US$                   US$                   US$ ]              

Proceeds, before expenses, to us

   US$                   US$                   US$               

[Proceeds, before expenses, to selling shareholders

   US$                   US$                   US$ ]              

The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately US$            . We have agreed to reimburse the underwriters for expense relating to clearance of this offering with the Financial Industry Regulatory Authority up to US$            .

The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of ADSs offered by them.

Some of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC.

Morgan Stanley & Co. International plc will offer ADSs in the United States through its registered broker-dealer affiliate in the United States, Morgan Stanley & Co. LLC. The address of Morgan Stanley & Co. International plc is 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom.

Goldman Sachs (Asia) L.L.C. will offer ADSs in the United States through its SEC-registered broker-dealer affiliate in the United States, Goldman Sachs & Co. LLC. The address of Goldman Sachs (Asia) L.L.C. is 68th Floor, Cheung Kong Center, 2 Queens Road, Central, Hong Kong.

Our ADSs have been approved for [listing on the New York Stock Exchange] [quotation on the NASDAQ Global [Market] under the trading symbol “NIO”.

We and our directors, executive officers, and all of our existing shareholders and [certain] holders of share-based awards have agreed that, without the prior written consent of              on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus (the “restricted period”):

 

    offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any of our ordinary shares or ADSs or any securities convertible into or exercisable or exchangeable for our ordinary shares or ADSs;

 

    file any registration statement with the Securities and Exchange Commission relating to the offering of our ordinary shares or ADSs or any securities convertible into or exercisable or exchangeable for our ordinary shares or ADSs; or

 

    enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of our ordinary shares or ADSs.

whether any such transaction described above is to be settled by delivery of our ordinary shares or ADSs or such other securities, in cash or otherwise. In addition, we and each such person agrees that, without the prior written

 

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consent of [●] on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any of our ordinary shares or ADSs or any security convertible into or exercisable or exchangeable for our ordinary shares or ADSs.

The restrictions described in the immediately preceding paragraph to do not apply to:

 

    the sale of ordinary shares or ADSs to the underwriters; or

 

    the issuance by the Company of ordinary shares or ADSs upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing;

 

    transactions by any person other than us relating to our ordinary shares or ADSs or other securities acquired in open market transactions after the completion of the offering of the ADSs; provided that no filing under Section 16(a) of the Securities Exchange Act of 1934, as amended, the Exchange Act, is required or voluntarily made in connection with subsequent sales of our ordinary shares or ADSs or other securities acquired in such open market transactions; or

 

    [the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of ordinary shares or ADSs , provided that (i) such plan does not provide for the transfer of ordinary shares or ADSs during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of ordinary shares or ADSs may be made under such plan during the restricted period].

The representatives, in their sole discretion, may release our ordinary shares and ADSs and other securities subject to the lock-up agreements described above in whole or in part at any time.

In order to facilitate the offering of the ADSs, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the ADSs pursuant to Regulation M of the Securities Act of 1933. Specifically, the underwriters may sell more ADSs than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of ADSs available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing ADSs in the open market. In determining the source of ADSs to close out a covered short sale, the underwriters will consider, among other things, the open market price of ADSs compared to the price available under the over-allotment option. The underwriters may also sell ADSs in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, ADSs in the open market to stabilize the price of the ADSs. These activities may raise or maintain the market price of the ADSs above independent market levels or prevent or retard a decline in the market price of the ADSs. The underwriters are not required to engage in these activities and may end any of these activities at any time. If the representatives of the underwriters purchase the ADSs in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

We[, the selling shareholders] and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

A prospectus in electric format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of ADSs to underwriters for sale to their online brokerage account holders. Internet distributions will be

 

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allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.

Pricing of the Offering

Prior to this offering, there has been no public market for our ordinary shares or the ADSs. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.

[Directed Share Program

At our request, the underwriters have reserved             % of the ADSs being offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, business associates and related persons. If purchased by these persons, these ADSs will be subject to a 180-day lock-up restriction. The number of ADSs available for sale to the general public will be reduced to the extent these individuals purchase such reserved ADSs. Any reserved ADSs that are not so purchased will be offered by the underwriters to the general public on the same basis as the other ADSs offered by this prospectus.]

Selling Restrictions

No action may be taken in any jurisdiction other than the United States that would permit a public offering of the ADSs or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither the prospectus nor any other offering material or advertisements in connection with the ADSs may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a

 

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prospectus, product disclosure statement or other disclosure document under the Corporations Act. Any offer in Australia of the ADSs may only be made to persons, or the Exempt Investors, who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the ADSs without disclosure to investors under Chapter 6D of the Corporations Act. The ADSs applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring ADSs must observe such Australian on-sale restrictions. This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any ADSs recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.

Canada

The securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts, or NI 33-105, the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Cayman Islands

This prospectus does not constitute an invitation or offer to the public in the Cayman Islands of the ADSs, whether by way of sale or subscription. The underwriters have not offered or sold, and will not offer or sell, directly or indirectly, any ADSs in the Cayman Islands.

Dubai International Financial Center

This prospectus relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This prospectus is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt offers. The Dubai Financial Services Authority has not approved this prospectus nor taken steps to verify the information set out in it, and has no responsibility for it. The ADSs which are the subject of the offering contemplated by this prospectus may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the ADSs offered should conduct their own due diligence on the ADSs. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

 

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European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of ADSs which are the subject of the offering contemplated by this prospectus to the public in that Relevant Member State other than:

 

    to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

    to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

 

    in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of ADSs shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any ADSs in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the ADSs to be offered so as to enable an investor to decide to purchase or subscribe for the ADSs, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

France

Neither this prospectus nor any other offering material relating to the ADSs described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or of the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The ADSs have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the ADSs has been or will be:

 

    to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

    to fewer than 100 or, if the relevant member state has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by us for any such offer; or

 

    in any other circumstances falling within Article 3(2) of the Prospectus Directive,

 

    released, issued, distributed or caused to be released, issued or distributed to the public in France; or

 

    used in connection with any offer for subscription or sale of the ADSs to the public in France.

Such offers, sales and distributions will be made in France only:

 

    to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the French Code monétaire et financier;

 

    to investment services providers authorized to engage in portfolio management on behalf of third parties; or

 

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    in a transaction that, in accordance with article L.411-2-II-1° -or-2° -or 3° of the French Code monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne).

The ADSs may be resold directly or indirectly, only in compliance with articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

Germany

This prospectus does not constitute a Prospectus Directive-compliant prospectus in accordance with the German Securities Prospectus Act (Wertpapierprospektgesetz) and does therefore not allow any public offering in the Federal Republic of Germany, or Germany, or any other Relevant Member State pursuant to § 17 and § 18 of the German Securities Prospectus Act. No action has been or will be taken in Germany that would permit a public offering of the ADSs, or distribution of a prospectus or any other offering material relating to the ADSs. In particular, no securities prospectus (Wertpapierprospekt) within the meaning of the German Securities Prospectus Act or any other applicable laws of Germany, has been or will be published within Germany, nor has this prospectus been filed with or approved by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) for publication within Germany.

Each underwriter will represent, agree and undertake (i) that it has not offered, sold or delivered and will not offer, sell or deliver the ADSs within Germany other than in accordance with the German Securities Prospectus Act (Wertpapierprospektgesetz) and any other applicable laws in Germany governing the issue, sale and offering of ADSs, and (ii) that it will distribute in Germany any offering material relating to the ADSs only under circumstances that will result in compliance with the applicable rules and regulations of Germany.

This prospectus is strictly for use of the person who has received it. It may not be forwarded to other persons or published in Germany.

Hong Kong

The ADSs may not be offered or sold in Hong Kong by means of any document other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made under that Ordinance, or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap.32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the ADSs may be issued or may be in the possession of any person for the purpose of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to ADSs which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Israel

This prospectus does not constitute a prospectus under the Israeli Securities Law, 5728-1968, and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters purchasing for their own account, venture capital funds, entities with equity in excess of NIS 50 million and qualified individuals, each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors. Qualified investors may be required to submit written confirmation that they meet the criteria for one of the categories of investors set forth in the prospectus.

 

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Italy

The offering of ADSs has not been registered with the Commissione Nazionale per le Società e la Borsa (“CONSOB”) pursuant to Italian securities legislation and, accordingly, no ADSs may be offered, sold or delivered, nor copies of this prospectus or any other documents relating to the ADSs may not be distributed in Italy except:

 

    to “qualified investors,” as referred to in Article 100 of Legislative Decree No. 58 of February 24, 1998, as amended, or the Decree No. 58, and defined in Article 26, paragraph 1, letter d) of CONSOB Regulation No. 16190 of October 29, 2007, as amended (“Regulation No. 16190”) pursuant to Article 34-ter, paragraph 1, letter. b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended (“Regulation No. 11971”); or

 

    in any other circumstances where an express exemption from compliance with the offer restrictions applies, as provided under Decree No. 58 or Regulation No. 11971.

Any offer, sale or delivery of the ADSs or distribution of copies of this prospectus or any other documents relating to the ADSs in the Republic of Italy must be:

 

    made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with Legislative Decree No. 385 of September 1, 1993, as amended, or the Banking Law, Decree No. 58 and Regulation No. 16190 and any other applicable laws and regulations;

 

    in compliance with Article 129 of the Banking Law, and the implementing guidelines of the Bank of Italy, as amended; and

 

    in compliance with any other applicable notification requirement or limitation which may be imposed, from time to time, by CONSOB or the Bank of Italy or other competent authority.

Please note that, in accordance with Article 100-bis of Decree No. 58, where no exemption from the rules on public offerings applies, the subsequent distribution of the ADSs on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971.

Furthermore, ADSs which are initially offered and placed in Italy or abroad to qualified investors only but in the following year are regularly (“sistematicamente”) distributed on the secondary market in Italy to non-qualified investors become subject to the public offer and the prospectus requirement rules provided under Decree No. 58 and Regulation No. 11971. Failure to comply with such rules may result in the sale of the ADSs being declared null and void and in the liability of the intermediary transferring the ADSs for any damages suffered by such non-qualified investors.

Japan

No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the “FIEL”) has been made or will be made with respect to the solicitation of the application for the acquisition of the ADSs.

Accordingly, the ADSs have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.

 

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For Qualified Institutional Investors (“QII”)

Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ADSs constitutes either a “QII only private placement” or a “QII only secondary distribution” (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ADSs. The ADSs may only be transferred to QIIs.

For Non-QII Investors

Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ADSs constitutes either a “small number private placement” or a “small number private secondary distribution” (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ADSs. The ADSs may only be transferred en bloc without subdivision to a single investor.

PRC

This prospectus has not been and will not be circulated or distributed in the PRC, and the ADSs may not be offered or sold, and will not be offered or sold, directly or indirectly, to any resident of the PRC or to persons for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC. For the purpose of this paragraph, the PRC does not include Taiwan and the Special Administrative Regions of Hong Kong and Macao.

Qatar

The ADSs have not been and will not be offered, sold or delivered at any time, directly or indirectly, in the State of Qatar (“Qatar”) in a manner that would constitute a public offering. This prospectus has not been reviewed or approved by or registered with the Qatar Central Bank, the Qatar Exchange or the Qatar Financial Markets Authority. This prospectus is strictly private and confidential, and may not be reproduced or used for any other purpose, nor provided to any person other than the recipient thereof.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of ADSs may not be circulated or distributed, nor may the ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than

 

    to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA,

 

    to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or

 

    otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

 

    Where the ADSs are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

    a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

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    a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the ADSs pursuant to an offer made under Section 275 of the SFA except:

 

  (i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

  (ii) where no consideration is or will be given for the transfer;

 

  (iii) where the transfer is by operation of law;

 

  (iv) as specified in Section 276(7) of the SFA; or

 

  (v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

Switzerland

This prospectus is not intended to constitute an offer or solicitation to purchase or invest in the ADSs described herein. The ADSs may not be publicly offered, sold or advertised, directly or indirectly, in, into or from Switzerland and will not be listed on the SIX Swiss Exchange or on any other exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the ADSs constitutes a prospectus as such term is understood pursuant to article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange or any other regulated trading facility in Switzerland, and neither this prospectus nor any other offering or marketing material relating to the ADSs may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, nor the Company nor the ADSs have been or will be filed with or approved by any Swiss regulatory authority. The ADSs are not subject to the supervision by any Swiss regulatory authority, e.g., the Swiss Financial Markets Supervisory Authority FINMA, and investors in the ADSs will not benefit from protection or supervision by such authority.

Taiwan

The ADSs have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that require a registration, filing or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer or sell the ADSs in Taiwan.

United Arab Emirates (Excluding the Dubai International Financial Center)

The ADSs have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates, or U.A.E., other than in compliance with the laws of the U.A.E. Prospective investors in the Dubai International Financial Centre should have regard to the specific selling restrictions on prospective investors in the Dubai International Financial Centre set out below.

The information contained in this prospectus does not constitute a public offer of ADSs in the U.A.E. in accordance with the Commercial Companies Law (Federal Law No. 8 of 1984 of the U.A.E., as amended) or

 

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otherwise and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or the Dubai Financial Services Authority, or DFSA. If you do not understand the contents of this prospectus, you should consult an authorized financial adviser. This prospectus is provided for the benefit of the recipient only, and should not be delivered to, or relied on by, any other person.

United Kingdom

Each of the underwriters severally represents, warrants and agrees as follows:

 

    it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”), received by it in connection with the issue or sale of the ADSs in circumstances in which Section 21(1) of the FSMA does not apply to us; and

 

    it has complied with, and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the ADSs in, from or otherwise involving the United Kingdom.

 

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EXPENSES RELATED TO THIS OFFERING

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commission, that we expect to incur in connection with this offering. With the exception of the SEC registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee, and the [New York Stock Exchange/ NASDAQ Global Market] market entry and listing fee, all amounts are estimates.

 

SEC Registration Fee

   US$               

FINRA Filing Fee

  

[New York Stock Exchange/ NASDAQ Global Market] Market Entry and Listing Fee

  

Printing and Engraving Expenses

  

Legal Fees and Expenses

  

Accounting Fees and Expenses

  

Miscellaneous

  
  

 

 

 

Total

   US$  
  

 

 

 

 

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LEGAL MATTERS

We are being represented by Skadden, Arps, Slate, Meagher & Flom LLP with respect to certain legal matters as to United States federal securities and New York State law. The underwriters are being represented by Latham & Watkins LLP with respect to certain legal matters as to United States federal securities and New York State law. The validity of the ordinary shares represented by the ADSs offered in this offering will be passed upon for us by Maples and Calder (Hong Kong) LLP. Certain legal matters as to PRC law will be passed upon for us by Han Kun Law Offices and for the underwriters by Grandall Law Firm (Shanghai). Skadden, Arps, Slate, Meagher & Flom LLP may rely upon Maples and Calder (Hong Kong) LLP with respect to matters governed by Cayman Islands law and Han Kun Law Offices with respect to matters governed by PRC law. Latham & Watkins LLP may rely upon Han Kun Law Offices with respect to matters governed by PRC law.

 

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EXPERTS

The financial statements as of December 31, 2016 and 2017, and for each of the two years in the two year period ended December 31, 2017 and the related financial statement schedule included in this prospectus, have been audited by PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements and financial statement schedule have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The offices of PricewaterhouseCoopers Zhong Tian LLP are located at 11/F PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu District, Shanghai 200021, the People’s Republic of China.

 

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed a registration statement, including relevant exhibits, with the SEC on Form F-1 under the Securities Act with respect to the underlying ordinary shares represented by the ADSs to be sold in this offering. We have also filed a related registration statement on Form F-6 with the SEC to register the ADSs. This prospectus, which constitutes a part of the registration statement on Form F-1, does not contain all of the information contained in the registration statement. You should read our registration statements and their exhibits and schedules for further information with respect to us and our ADSs.

Immediately upon the effectiveness of the registration statement on Form F-1 of which this prospectus forms a part, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be obtained over the internet at the SEC’s website at www.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of documents, upon payment of a duplicating fee, by writing to the SEC.

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to furnish the depositary with our annual reports, which will include a review of operations and annual audited consolidated combined 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, if we so 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.

 

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

     Page  

Consolidated Financial Statements

  

Report of Independent Registered Public Accounting Firm

     F-2  

Consolidated Balance Sheets as of December 31, 2016 and 2017

     F-3  

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2016 and 2017

     F-6  

Consolidated Statements of Shareholders’ Deficit for the Years Ended December 31, 2016 and 2017

     F-7  

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 and 2017

     F-9  

Notes to Consolidated Financial Statements

     F-11  

Unaudited Interim Condensed Consolidated Balance Sheets as of December 31, 2017 and March 31, 2018

     F-50  

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2017 and 2018

     F-53  

Unaudited Interim Condensed Consolidated Statements of Shareholders’ Deficit for the Three Months Ended March 31, 2017 and 2018

     F-54  

Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2018

     F-56  

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

     F-57  

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of NIO Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of NIO Inc. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive loss, of shareholders’ deficit and of cash flows for each of the two years in the period ended December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers Zhong Tian LLP

PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

April 27, 2018

We have served as the Company’s auditor since 2015.

 

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NIO INC.

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

 

     As of December 31,  
     2016      2017      2017  
     RMB      RMB      USD  
                   Note 2(e)  

ASSETS

        

Current assets:

        

Cash and cash equivalents

     581,296        7,505,954        1,196,626  

Restricted cash

            10,606        1,691  

Amounts due from related parties

     1,680        29,556        4,712  

Inventories

            89,464        14,263  

Prepayments and other current assets

     292,051        674,425        107,518  
  

 

 

    

 

 

    

 

 

 

Total current assets

     875,027        8,310,005        1,324,810  
  

 

 

    

 

 

    

 

 

 

Non-current assets:

        

Long-term restricted cash

     15,335        14,293        2,279  

Property, plant and equipment, net

     833,004        1,911,013        304,660  

Intangible assets, net

     6,345        4,457        711  

Long-term investments

            47,125        7,513  

Amounts due from related parties

            50,000        7,971  

Other non-current assets

     40,767        131,141        20,907  
  

 

 

    

 

 

    

 

 

 

Total non-current assets

     895,451        2,158,029        344,041  
  

 

 

    

 

 

    

 

 

 

Total assets

     1,770,478        10,468,034        1,668,851  
  

 

 

    

 

 

    

 

 

 

LIABILITIES

        

Current liabilities:

        

Short-term borrowings

            28,787        4,589  

Trade payable

            234,011        37,307  

Amounts due to related parties

     20,837        40,069        6,388  

Taxes payable

     20,405        30,055        4,791  

Accruals and other liabilities

     685,323        1,285,592        204,953  
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     726,565        1,618,514        258,028  
  

 

 

    

 

 

    

 

 

 

Non-current liabilities:

        

Long-term borrowings

     37,500        642,401        102,414  

Other non-current liabilities

     61,199        141,113        22,497  
  

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     98,699        783,514        124,911  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     825,264        2,402,028        382,939  
  

 

 

    

 

 

    

 

 

 

Commitments and contingencies (Note 24)

        

 

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NIO INC.

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

 

     As of December 31,  
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

MEZZANINE EQUITY

      

Series A-1 and A-2 convertible redeemable preferred shares (USD0.00025 par value; 295,000,000 authorized, issued and outstanding as of December 31, 2016 and 2017)

     2,810,189       5,011,731       798,988  

Series A-3 convertible redeemable preferred shares (USD0.00025 par value; 31,720,364 authorized, 24,210,431 issued and outstanding as of December 31, 2016 and 2017)

     306,678       427,129       68,094  

Series B convertible redeemable preferred shares (USD0.00025 par value; 114,867,321 authorized as of December 31, 2016 and 2017; 102,144,675 and 114,867,321 issued and outstanding as of December 31, 2016 and 2017, respectively)

     2,014,903       2,294,980       365,874  

Series C convertible redeemable preferred shares (USD0.00025 par value; nil and 167,142,990 authorized, nil and 166,205,830 issued and outstanding as of December 31, 2016 and 2017, respectively)

           4,454,596       710,167  

Series D convertible redeemable preferred shares (USD0.00025 par value; nil and 240,000,000 authorized, nil and 213,585,003 issued and outstanding as of December 31, 2016 and 2017, respectively)

           7,547,760       1,203,291  

Receivable from a holder of Series A-1 convertible redeemable preferred shares

     (270,196            

Receivable from a holder of Series D convertible redeemable preferred shares

           (78,410     (12,500
  

 

 

   

 

 

   

 

 

 

Total mezzanine equity

     4,861,574       19,657,786       3,133,914  
  

 

 

   

 

 

   

 

 

 

 

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NIO INC.

CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

 

     As of December 31,  
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

SHAREHOLDERS’ DEFICIT

      

Ordinary shares (USD0.00025 par value; 1,558,412,315 and 1,151,269,325 shares authorized as of December 31, 2016 and 2017, respectively; 32,003,810 and 36,727,350 shares issued and 17,773,459 and 23,850,343 shares outstanding as of December 31, 2016 and 2017, respectively)

     52       60       10  

Treasury shares

     (9,186     (9,186     (1,464

Additional paid in capital

     70,850       131,907       21,029  

Accumulated other comprehensive income/(loss)

     110,452       (13,922     (2,219

Accumulated deficit

     (4,076,945     (11,711,948     (1,867,161
  

 

 

   

 

 

   

 

 

 

Total NIO Inc. shareholders’ (deficit)/equity

     (3,904,777     (11,603,089     (1,849,805
  

 

 

   

 

 

   

 

 

 

Non-controlling interests

     (11,583     11,309       1,803  
  

 

 

   

 

 

   

 

 

 

Total shareholders’ (deficit)/equity

     (3,916,360     (11,591,780     (1,848,002
  

 

 

   

 

 

   

 

 

 

Total liabilities, mezzanine equity and shareholders’ (deficit)/equity

     1,770,478       10,468,034       1,668,851  
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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NIO INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(All amounts in thousands, except for share and per share data)

 

     For the Year ended December 31,  
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

Operating expenses:

      

Research and development

     (1,465,353     (2,602,889     (414,962

Selling, general and administrative

     (1,137,187     (2,350,707     (374,758
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     (2,602,540     (4,953,596     (789,720
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (2,602,540     (4,953,596     (789,720

Interest income

     27,556       18,970       3,024  

Interest expenses

     (55     (18,084     (2,883

Share of losses of equity investee

           (5,375     (857

Investment income

     2,670       3,498       558  

Other income/(loss), net

     3,429       (58,681     (9,355
  

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (2,568,940     (5,013,268     (799,233
  

 

 

   

 

 

   

 

 

 

Income tax expense

     (4,314     (7,906     (1,260
  

 

 

   

 

 

   

 

 

 

Net loss

     (2,573,254     (5,021,174     (800,493
  

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

     (981,233     (2,576,935     (410,824

Net loss attributable to non-controlling interests

     36,938       36,440       5,809  
  

 

 

   

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc.

     (3,517,549     (7,561,669     (1,205,508
  

 

 

   

 

 

   

 

 

 

Net loss

     (2,573,254     (5,021,174     (800,493

Other comprehensive loss

      

Foreign currency translation adjustment, net of nil tax

     55,493       (124,374     (19,828
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income/(loss)

     55,493       (124,374     (19,828
  

 

 

   

 

 

   

 

 

 

Total comprehensive loss

     (2,517,761     (5,145,548     (820,321

Accretion on convertible redeemable preferred shares to redemption value

     (981,233     (2,576,935     (410,824

Net loss attributable to non-controlling interests

     36,938       36,440       5,809  
  

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to ordinary shareholders of NIO Inc.

     (3,462,056     (7,686,043     (1,225,336
  

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing net loss per share

      

Basic and diluted

     16,697,527       21,801,525       21,801,525  

Net loss per share attributable to ordinary shareholders

      

Basic and diluted

     (210.66     (346.84     (55.29

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

NIO INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(All amounts in thousands, except for share and per share data)

 

   

 

Ordinary shares

   

 

Treasury Shares

    Additional
paid in
capital
    Accumulated
other
comprehensive
income/(loss)
    Accumulated
deficit
    Total
shareholders’
deficit
    Non-
Controlling
interests
    Total
equity
 
    Shares     Par value     Shares     Amount              

Balance as of December 31, 2015

    28,900,001       47       (18,400,000     (9,186     13,748       54,959       (559,396     (499,828           (499,828

Accretion on Series A-1 and A-2 convertible redeemable preferred shares to redemption value

                                        (798,481     (798,481           (798,481

Accretion on Series A-3 convertible redeemable preferred shares to redemption value

                                        (29,983     (29,983           (29,983

Accretion on Series B convertible redeemable preferred shares to redemption value

                                        (152,769     (152,769           (152,769

Grant of restricted shares

    3,103,809       5       (3,103,809                             5             5  

Vesting of restricted shares

        7,273,458             39,104                   39,104             39,104  

Share-based compensation

                            17,998                   17,998             17,998  

Capital injection by non-controlling interests

                                                    25,355       25,355  

Foreign currency translation adjustment

                                  55,493             55,493             55,493  

Net loss

                                        (2,536,316     (2,536,316     (36,938     (2,573,254
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2016

    32,003,810       52       (14,230,351     (9,186     70,850       110,452       (4,076,945     (3,904,777     (11,583     (3,916,360
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-7


Table of Contents

NIO INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(All amounts in thousands, except for share and per share data)

 

   

 

Ordinary shares

   

 

Treasury Shares

    Additional
paid in
capital
    Accumulated
other
comprehensive
income/(loss)
    Accumulated
deficit
    Total
shareholders’
deficit
    Non-
Controlling
interests
    Total
equity
 
    Shares     Par value     Shares     Amount              

Balance as of December 31, 2016

    32,003,810       52       (14,230,351     (9,186     70,850       110,452       (4,076,945     (3,904,777     (11,583     (3,916,360

Accretion on Series A-1 and A-2 convertible redeemable preferred shares to redemption value

                                        (2,205,227     (2,205,227           (2,205,227

Accretion on Series A-3 convertible redeemable preferred shares to redemption value

                                        (120,451     (120,451           (120,451

Accretion on Series B convertible redeemable preferred shares to redemption value

                                        (40,011     (40,011           (40,011

Accretion on Series C convertible redeemable preferred shares to redemption value

                                        (56,283     (56,283           (56,283

Accretion on Series D convertible redeemable preferred shares to redemption value

                                        (154,963     (154,963           (154,963

Grant of restricted shares

    2,000,000       3       (2,000,000                             3             3  

Exercise of stock options

    2,723,540       5                   6,207                   6,212             6,212  

Vesting of restricted shares

                3,353,344             24,723                   24,723             24,723  

Share-based compensation

                            30,127                   30,127             30,127  

Capital injection by non-controlling interests

                                                    13,376       13,376  

Acquisition of additional interests in subsidiaries from non-controlling interests

                                        (73,334     (73,334     45,956       (27,378

Foreign currency translation adjustment

                                  (124,374           (124,374           (124,374

Net loss

                                        (4,984,734     (4,984,734     (36,440     (5,021,174
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2017

    36,727,350       60       (12,877,007     (9,186     131,907       (13,922     (11,711,948     (11,603,089     11,309       (11,591,780
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

NIO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands, except for share and per share data)

 

     For the Year ended December 31,  
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Net loss

     (2,573,254     (5,021,174     (800,493

Adjustments to reconcile net loss to net cash used in operating activities:

      

Depreciation and amortization

     46,087       167,858       26,761  

Foreign exchange (gain)/loss

     (5,540     49,503       7,892  

Share-based compensation expenses

     76,684       90,296       14,395  

Investment income

     (2,670     (3,498     (558

Share of losses of equity investee

           5,375       857  

Loss on disposal of property, plant and equipment

     267       6,192       987  

Changes in operating assets and liabilities:

      

Prepayments and other current assets

     (209,784     (404,762     (64,529

Inventories

           (89,464     (14,263

Other non-current assets

     (20,286     (66,698     (10,633

Taxes payable

     15,633       9,650       1,538  

Accruals and other liabilities

     410,100       603,374       96,192  

Other non-current liabilities

     61,199       78,629       12,535  
  

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

     (2,201,564     (4,574,719     (729,319
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

      

Purchase of property, plant and equipment and intangible assets

     (654,455     (1,113,893     (177,581

Purchase of held for trading securities

     (2,346,261     (1,337,413     (213,215

Sale of held for trading securities

     3,118,559       1,340,911       213,773  

Acquisitions of equity investees

           (52,500     (8,370

Acquisition of additional interests in subsidiaries from non-controlling interests

           (27,378     (4,365
  

 

 

   

 

 

   

 

 

 

Net cash provided by/(used in) investing activities

     117,843       (1,190,273     (189,758
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

      

Repurchase of ordinary shares

     (8,408            

Proceeds from exercise of stock options

           6,207       990  

Proceeds from issuance of series A convertible redeemable preferred shares, net of issuance costs

     401,477       273,686       43,632  

Proceeds from issuance of series B convertible redeemable preferred shares, net of issuance costs

     1,862,135       240,066       38,272  

Proceeds from issuance of series C convertible redeemable preferred shares, net of issuance costs

           4,398,313       701,195  

Proceeds from issuance of series D convertible redeemable preferred shares, net of issuance costs

           7,314,387       1,166,085  

Capital injection from non-controlling interests

           13,376       2,132  

Proceeds from borrowings

     37,500       633,688       101,025  

Proceeds from issuance of convertible promissory note

           312,624       49,840  

Repayment of convertible promissory note

           (325,013     (51,815
  

 

 

   

 

 

   

 

 

 

 

F-9


Table of Contents

NIO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands, except for share and per share data)

 

     For the Year ended December 31,  
     2016      2017     2017  
     RMB      RMB     USD  
                  Note 2(e)  

Net cash provided by financing activities

     2,292,704        12,867,334       2,051,356  
  

 

 

    

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     40,539        (168,120     (26,800

NET INCREASE IN CASH AND CASH EQUIVALENTS

     249,522        6,934,222       1,105,479  

Cash, cash equivalents and restricted cash at beginning of the year

     347,109        596,631       95,117  
  

 

 

    

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of the year

     596,631        7,530,853       1,200,596  
  

 

 

    

 

 

   

 

 

 

NON-CASH FINANCING ACTIVITIES

       

Issuance of series D convertible redeemable preferred shares

            85,553       13,639  

Capital injection from non-controlling interests in the form of net assets

     25,355               
  

 

 

    

 

 

   

 

 

 
     25,355        85,553       13,639  
  

 

 

    

 

 

   

 

 

 

Supplemental Disclosure

       

Interest paid

     55        12,389       1,975  

Income taxes paid

            1,349       215  

The accompanying notes are an integral part of these consolidated financial statements.

 

F-10


Table of Contents

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 ES8 through strategic collaboration with other Chinese vehicle manufacturers. The Group also plans to offer energy and service packages to its users. As of December 31, 2016 and 2017, its primary operations are conducted in the People’s Republic of China (“PRC”) and mainly focused on research and development activities. The Company’s principal subsidiaries and VIEs are as follows:

 

Subsidiaries

   Equity
interest held
    

Place and Date of incorporation

or date of acquisition

  

Principal activities

NIO NextEV Limited (“NIO HK”) (formerly known as
NextEV Limited)

     100%      Hong Kong, February 2015    Investment holding

NIO GmbH (formerly known as NextEV GmbH)

     100%      Germany, May 2015    Design and technology development

NIO Co., Ltd. (“NIO SH”) (formerly known as NextEV Co., Ltd.)

     100%      Shanghai, PRC, May 2015    Headquarter and technology development

NIO USA, Inc. (“NIO US”)

(formerly known as NextEV USA, Inc.)

     100%      United States, November 2015    Technology development

XPT Limited (“XPT”)

     100%      Hong Kong, December 2015    Investment holding

NIO NextEV (UK) Limited (formerly known as NextEV (UK) Limited)

     100%      United Kingdom, February 2016    Marketing and technology development

NIO Sport Limited (“NIO Sport”) (formerly known as NextEV NIO Sport Limited)

     100%      Hong Kong, April 2016    Racing management

XPT Technology Limited (“XPT Technology”)

     100%      Hong Kong, April 2016    Investment holding

XPT Inc. (“XPT US”)

     100%      United States, April 2016    Technology development

XPT (Jiangsu) Investment Co., Ltd. (“XPT Jiangsu”)

     100%      Jiangsu, PRC, May 2016    Investment holding

Shanghai XPT Technology Limited

     100%      Shanghai, PRC, May 2016    Technology development

XPT (Nanjing) E-Powertrain Technology Co., Ltd.

     100%      Nanjing, PRC, July 2016    Manufacturing of E-Powertrain

XPT (Nanjing) Energy Storage System Co., Ltd. (“XPT NJES”)

     100%      Nanjing, PRC, October 2016    Manufacturing of battery pack

NextEV Power Express Limited
(“PE HK)

     100%      Hong Kong, January 2017    Investment holding

 

F-11


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Subsidiaries

   Equity
interest held
    

Place and Date of incorporation

or date of acquisition

  

Principal activities

NextEV User Enterprise Limited
(“UE HK”)

     100%      Hong Kong, February 2017    Investment holding

Shanghai NIO Sales and Services
Co., Ltd. (“UE CNHC”)

  

 

100%

 

  

Shanghai, PRC, March 2017

  

 

Investment holding and sales and after sales management

NIO Energy Investment (Hubei)
Co., Ltd. (“PE CNHC”)

     100%      Wuhan PRC, April 2017    Investment holding

Wuhan NIO Energy Co., Ltd. (“PE WHJV”)

     100%      Wuhan, PRC, May 2017    Investment holding

XTRONICS (Nanjing) Automotive Intelligent Technologies Co.,Ltd. (“XPT NJWL”)

     50%      Nanjing, PRC, June 2017    Manufacturing of components

 

VIE

   Economic
interest held
   

Place and Date of incorporation

or date of acquisition

Prime Hubs Limited (“Prime Hubs”)

     100   BVI, October 2014

NIO Technology Co., Ltd. (“NIO SHTECH”) (formerly known as Shanghai NextEV Technology Co., Ltd.)

     100   Shanghai, PRC, November 2014

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.

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. As of December 31, 2016 and 2017, 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, 2016 and 2017, Prime Hubs held 26,900,001 ordinary shares of the Company.

 

F-12


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Liquidity

The Group has been incurring losses from operations since inception. The Group incurred net losses of RMB2,573,254 and RMB5,021,174 in the years ended December 31, 2016 and 2017, respectively. Accumulated deficit amounted to RMB4,076,945 and RMB11,711,948 as of December 31, 2016 and 2017, respectively. Net cash used in operating activities was approximately RMB2,201,564 and RMB4,574,719 for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2017, the Group’s working capital was RMB6,691,491.

The Group’s liquidity is based on its ability to generate cash from operating activities, obtain capital financing from equity interest investors and borrow funds on favorable economic terms to fund its general operations and capital expansion needs. The Group’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows. As of December 31, 2017, the Group’s balance of cash and cash equivalents was RMB7,505,954. In addition, up to the date of this report, the Company has entered into loan facility agreements with several banks in China for a total principal amount of RMB3,730 million, which will be due by May 17, 2022. Moreover, the Group can adjust the pace of its operation expansion and control the operating expenses of the Group.

Based on cash flows projection from operating and financing activities and existing balance of cash and cash equivalents, management is of the opinion that the Group has sufficient funds for sustainable operations and it will be able to meet its payment obligations from operations and debt related commitments for the next twelve months from the issuance of the consolidated financial statements. Based on the above considerations, the Group’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.

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.

 

F-13


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 US 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, the valuation and recognition of share-based compensation arrangements, depreciable lives of property, equipment and software, useful life of intangible assets, assessment for impairment of long-lived assets and intangible assets, inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, valuation of deferred tax assets 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 (“USD”), 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.

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)/income 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 convertible redeemable preferred shares and shareholders’ deficit. Total foreign currency translation adjustment (gains)/losses were RMB(55,493) and RMB124,374 for the years ended December 31, 2016 and 2017, respectively. The grant-date fair value of the Group’s share-based compensation expenses is reported in USD as the respective valuation is conducted in USD as the shares are denominated in USD.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

(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 USD as of and for the year ended December 31, 2017 are solely for the convenience of the reader and were calculated at the rate of USD1.00 = RMB6.2726, 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 March 30, 2018. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into USD at that rate on March 31, 2018, 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, trade payable, amounts due to related parties, short-term borrowings, taxes payable, accruals and other liabilities. As of December 31, 2016 and 2017, the carrying values of these financial instruments are approximated to their fair values due to the short-term maturity of these instruments.

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.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 and cash equivalents

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.

(h) Restricted cash

Cash that is restricted as to withdrawal for use or pledged as security is reported separately on the face of the Consolidated Balance Sheets, and is not included in the total cash and cash equivalents in the Consolidated Statements of Cash Flows. 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.

(i) Inventories

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.

Should estimates of future selling prices or production costs change, additional and potentially material increases to this reserve may be required. A small change in the estimates may result in a material charge to the reported financial results.

(j) 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

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 operations and comprehensive loss. Subsequent changes in their fair values and interest are recognized in the statements of comprehensive loss.

(k) 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:

 

   

Useful lives

Motor vehicles

  5 years

Production facilities

  10 years

Computer and electronic equipment

  3 years

Purchased software

  3 years

R&D equipment

  5 years

Office equipment

  5 years

Leasehold improvements

  Shorter of the estimated useful life or remaining lease term

Others

  3 to 5 years

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.

(l) 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:

 

   

Useful lives

License

  3 years

Domain names and others

  5 years

The estimated useful lives of amortized intangible assets are reassessed if circumstances occur that indicate the original estimated useful lives have changed.

(m) Long-term investments

As of December 31, 2017, the Group’s long-term investments was accounted for using equity method. Investments in entities in which the Group can exercise significant influence and holds an investment in voting

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 cost. 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.

(n) 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. No impairment charge was recognized for the years ended December 31, 2016 and 2017.

(o) Revenue recognition

The Group did not generate revenue in 2016 and 2017. It launched the first volume manufactured electric vehicle, the ES8, to the public in December 2017 and will start making deliveries to users in June 2018. The Group’s revenue is expected to be primarily derived from sales of the electrical vehicles and provision of charging solutions and service packages to its users.

(p) Customer incentives

The Group offers customer loyalty program points as customer incentives. For customer incentives offered where prior purchase is not required, the Group accounts for them as selling and marketing expense when the points are generated. Unredeemed incentives are recorded in other current liabilities in the consolidated balance sheet until they are redeemed for merchandise. The Group estimates liabilities under the customer loyalty program based on accumulated customer incentives, and the estimate of probability of redemption in accordance with the historical redemption pattern. As the Group currently does not have sufficient historical information for now to determine point forfeitures or breakage, the Group recorded estimated liabilities for all points earned by customers. As of December 31, 2016 and 2017, liabilities recorded related to membership points are nil and RMB16,460, respectively.

(q) 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 Dec 31, 2016 and 2017, advertising costs totalled RMB4,095 and RMB63,427, respectively.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

(r) 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.

(s) 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 professional services fees, rental and other general corporate related expenses.

(t) 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 RMB105,955 and RMB231,070 for the years ended December 31, 2016 and 2017, respectively.

(u) 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.

(v) 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

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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, 2016 and 2017.

(w) Share-based compensation

The Company grants restricted shares (“RS”) 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.

Employees’ share-based compensation awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at 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 initial public offering (“IPO”) as performance condition, cumulative share-based compensation expenses for the options that have satisfied the service condition will be recorded upon the completion of the IPO, using the graded vesting method; or d) for share options where the underlying share is liability within the scope of ASC 480, using graded vesting method, net of estimated forfeitures, over the vesting period, and remeasure 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. 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.

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 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. 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 regarding a number of complex and subjective variables, 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.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 option and records share-based compensation expenses only for those awards that are expected to vest.

(x) 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)/income, which mainly consists of the foreign currency translation adjustment that have been excluded from the determination of net loss.

(y) Leases

Leases are classified at the inception date as either a capital lease or an operating lease. As the lessee, a lease is a capital lease if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease.

All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. The Group has not capitalized leases for the years ended December 31, 2016 and 2017. Payments made under operating lease to the lessors are charged to the consolidated statement of comprehensive loss on a straight-line basis over the lease period. Operating lease expenses recorded in the accompanying consolidated statements of comprehensive loss amounted to RMB102,020 and RMB228,478 for the years ended December 31, 2016 and 2017, respectively.

(z) Dividends

Dividends are recognized when declared. No dividends were declared for the years ended December 31, 2016 and 2017, respectively.

(aa) 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

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 option (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.

(ab) 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.

(ac) Revision to previously issued financial statements

These financial statements as of and for the year ended December 31, 2016 are being revised to correct errors primarily related to:

(1) limited recourse loan provided to an executive by the Company for the issuance of Series A-3 convertible redeemable preferred shares (“Series A-3 Preferred Shares”), which was previously accounted for as non-current receivables with an amount of RMB80,809. It has been revised to account for the limited recourse loan as an option provided to the executive to purchase the Series A-3 Preferred Shares. Accordingly, share based compensation expenses amounting to RMB19,581 should be recognized in the Company’s consolidated financial statements for the year ended December 31, 2016;

(2) costs of software to be sold, leased, or marketed, amounting to RMB59,052, which was previously capitalized by the Group. The Group has revised its consolidated financial statements for the year ended December 31, 2016 to expense the software development costs due to the capitalization criteria was not met;

The impact of these revisions on the previously issued consolidated financial statements are not material.

3. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606).” This guidance supersedes current guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For publicly-traded business entities that follow U.S. GAAP, the deferral results in the new revenue standards’ being effective for fiscal years, and interim periods within those fiscal years,

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Group has not started to generate revenue yet, therefore, there will be no impact when it is adopted in 2018.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The main objective of this update is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. ASU 2016-01 changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. The guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Further, in March 2018, the FASB issued “Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which provides further guidance on adjustments for observable transaction for equity securities without a readily determinable fair value and clarification on fair value option for liabilities instruments. ASU 2016-01 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017. Early adoption by public entities is permitted only for certain provisions. The Company is in the process of evaluating the impact of ASU 2016-01 on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU is effective for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The ASU will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The Group is currently evaluating the impact that the adoption of this standard will have on its financial condition and results from operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based payment transactions specifically related to the tax effects associates with share-based compensation, an accounting policy election to determine how forfeitures are recorded and a change in the presentation requirements in the statement of cash flows. Non-public companies are also granted two additional optional provisions that would provide a practical expedient for determining the expected term and a one-time opportunity to change the measurement basis for all liability-classified awards to intrinsic value. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Group is currently evaluating the impact that the adoption of this standard will have on its financial condition and results from operations.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Group does not expect the adoption to have a material impact on its consolidated financial statements.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 trade receivable. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2016 and 2017, 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.

(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 RMB83,153 and RMB914,460 as of December 31, 2016 and 2017, 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:

 

     December 31,
2016
     December 31,
2017
 

Raw materials

            44,061  

Work in process

            22,262  

Merchandise

            23,141  
  

 

 

    

 

 

 

Total

            89,464  
  

 

 

    

 

 

 

Raw materials and work in process as of December 31, 2017 are mainly used for research and development purpose and will be expensed when incurred.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Merchandise inventory includes branded merchandise of NIO which can be redeemed by deducting membership rewards points of customer loyalty program in the Group’s application store.

6. Prepayments and Other Current Assets

Prepayments and other current assets consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Deductible VAT input

     152,457        456,774  

Prepaid expenses

     102,326        185,401  

Deposits

     8,534        12,582  

Other receivables

     28,734        19,668  
  

 

 

    

 

 

 

Total

     292,051        674,425  
  

 

 

    

 

 

 

Prepaid expenses mainly consist of prepaid rental for offices and NIO Houses, and prepaid expenses for R&D services provided by suppliers.

7. Property, Plant and Equipment, Net

Property and equipment and related accumulated depreciation were as follows:

 

     December 31,
2016
     December 31,
2017
 

Construction in process

     465,064        1,016,643  

Leasehold improvements

     199,947        413,368  

Computer and electronic equipment

     83,585        178,534  

Purchased software

     55,814        135,775  

R&D equipment

     52,991        173,741  

Production facilities

            134,080  

Office equipment

     20,699        33,288  

Motor vehicles

     1,624        19,681  

Others

            27,331  
  

 

 

    

 

 

 

Subtotal

     879,724        2,132,441  

Less: Accumulated depreciation

     (46,720      (221,428
  

 

 

    

 

 

 

Total property and equipment, net

     833,004        1,911,013  
  

 

 

    

 

 

 

The Group recorded depreciation expenses of RMB45,013 and RMB165,960 for the years ended December 31, 2016 and 2017, respectively.

 

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Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

8. Intangible Assets, Net

Intangible assets and related accumulated amortization were as follows:

 

     December 31, 2016      December 31, 2017  
     Gross carrying
value
     Accumulated
amortization
    Net carrying
value
     Gross carrying
value
     Accumulated
amortization
    Net carrying
value
 

Domain names and others

     4,319        (213     4,106        4,230        (1,017     3,213  

License

     3,100        (861     2,239        3,199        (1,955     1,244  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangible assets, net

     7,419        (1,074     6,345        7,429        (2,972     4,457  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The Group recorded amortization expenses of RMB1,074 and RMB1,898 for the years ended December 31, 2016 and 2017, respectively.

As of December 31, 2017, amortization expenses related to the intangible assets for future periods are estimated to be as follows:

 

     Year ended December 31,  
     2018      2019      2020      2021      2022      2023 and
thereafter
 

Amortization expenses

     2,035        993        815        614                

9. Other Non-current Assets

Other non-current assets consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Prepayments for purchase of property and equipment

     16,604        110,316  

Long-term deposits

     24,163        20,734  

Others

            91  
  

 

 

    

 

 

 

Total

     40,767        131,141  
  

 

 

    

 

 

 

Long-term deposit mainly consists of rental deposit for offices and NIO Houses which will not be collectible within one year.

10. Short-term Borrowings

Short-term borrowings consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Short-term borrowings

            28,787  
  

 

 

    

 

 

 

In December 2017, the Group entered into a loan agreement totaling RMB10,000 and bearing interest at 4.57% per annum with the maturity date of June 7, 2018.

 

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Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

In December 2017, the Group entered into another loan agreement totaling RMB18,787 and bearing interest at 4.87% per annum with the maturity date of June 7, 2018.

11. Accruals and Other Liabilities

Accruals and other liabilities consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Payables for purchase of property and equipment

     190,681        410,726  

Payable for R&D expenses

     248,172        247,923  

Accrued expenses

     126,384        199,087  

Salaries and benefits payable

     74,772        225,302  

Advance from customers

            68,439  

Payables for marketing events

            37,933  

Interest payables

            24,320  

Payables for traveling

     7,012        10,678  

Other payables

     38,302        61,184  
  

 

 

    

 

 

 

Total

     685,323        1,285,592  
  

 

 

    

 

 

 

12. Long-term Borrowings

Long-term borrowings consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Bank loan

            454,901  

Loan from joint investor

     37,500        187,500  
  

 

 

    

 

 

 

Total

     37,500        642,401  
  

 

 

    

 

 

 

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 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, 2017, the aggregated draw amounted to RMB454,901 and the loan interest payable to Bank of Nanjing was RMB718 with an effective interest rate of 4.75% which is the current market rate. The loan was guaranteed by Nanjing Xingzhi as an incentive for XPT NJES to continue doing business in the respective region. There is no restrictive financial covenants attached to the loan.

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 a joint venture entity (the

 

F-27


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

“PE WHJV”). Wuhan Donghu subscribed for RMB384,000 paid in capital in PE WHJV with 49% of the shares. As of December 31, 2017, Wuhan Donghu injected RMB150,000 in cash to PE WHJV. 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.

13. Other Non-Current Liabilities

Other non-current liabilities consist of the following:

 

     December 31,
2016
     December 31,
2017
 

Deferred construction allowance

     14,652        61,771  

Rental payable

     26,425        48,926  

Deferred government grants

     19,644        30,416  

Others

     478         
  

 

 

    

 

 

 

Total

     61,199        141,113  
  

 

 

    

 

 

 

Rental payable represents the difference between the straight-line rental expenses and the actual rental fee paid for long term rental agreements.

14. Research and Development Expenses

Research and development expenses consist of the following:

 

     Year ended December 31,  
     2016      2017  

Design and development expenses

     948,753        1,455,297  

Employee compensation

     451,284        1,009,455  

Travel expenses

     27,085        60,622  

Depreciation and amortization expenses

     7,819        38,940  

Rental and related expenses

     10,485        12,367  

Others

     19,927        26,208  
  

 

 

    

 

 

 

Total

     1,465,353        2,602,889  
  

 

 

    

 

 

 

 

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Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

15. Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of the following:

 

     Year ended December 31,  
     2016      2017  

Employee compensation

     473,302        929,928  

Marketing and promotional expenses

     239,549        435,901  

Rental and related expenses

     91,535        216,111  

Professional services

     133,368        189,517  

Depreciation and amortization expenses

     38,268        128,918  

Low value consumable

     21,621        108,692  

Travel expenses

     32,572        71,278  

Others

     106,972        270,362  
  

 

 

    

 

 

 

Total

     1,137,187        2,350,707  
  

 

 

    

 

 

 

16. Acquisition and Investment in Equity Investees

On June 1, 2017, the Company entered into an agreement with the minority shareholder of NIO Sport for the purchase of the remaining 45% shares of NIO Sport at total consideration of USD4,000 and GBP200 (RMB28,417 equivalent in total). The Company recorded the difference between the carrying amount of the non-controlling interest and the consideration paid in accumulated deficit.

17. Convertible Promissory Note

On February 16, 2017, the Company issued convertible promissory note (“the Note”) in the aggregated principal amount of USD48,000 (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 USD100,000 (“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 USD2.751 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 USD1,800 (RMB12,389 equivalent).

18. 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 USD1.00 per share for cash of USD165,000. 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

 

F-29


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

USD1.00 per share for cash of USD130,000. In September 2015, the Company issued 24,210,431 shares of Series A-3 Preferred Shares for USD1.6522 per share for cash of USD40,000. 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 USD2.751 per share for cash of USD316,000.

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 USD3.885 per share for cash of USD645,709.

In November and December 2017, the Company issued 211,156,415 shares of Series D convertible redeemable preferred shares (“Series D Preferred Shares”) for USD5.353 per share for cash of USD1,130,320. USD12,000 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 USD26,000 was incurred for the Series D Preferred Shares financing. The Company paid 50% of the commission in cash amounted USD13,000 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.

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 USD0.00025 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 USD301, USD189, USD208, USD1,782, USD1,489 and USD764 (RMB1,892, RMB1,177, RMB1,296, RMB11,857, RMB10,039 and RMB5,149, 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;

 

F-30


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

    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, 2016 and 2017.

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.

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.

 

F-31


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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.

 

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Table of Contents

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 December 31, 2021, the earliest redemption date. According to the redemption price calculation described above, the Company recognized accretion of the Preferred Shares amounted to RMB981,233 and RMB2,576,935 during the years ended December 31, 2016 and 2017, respectively.

The Company’s convertible redeemable preferred shares activities for the year ended December 31, 2016 and 2017 are summarized below:

 

    Series A-1 & A-2     Series A-3     Series B     Series C     Series D     Total  
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
 

Balances as of January 1, 2016

    295,000,000       1,340,034       24,210,431       276,695                                           319,210,431       1,616,729  

Proceeds from Series A-1 Preferred Shares

          401,478                                                             401,478  

Issuance of preferred shares

                            102,144,675       1,862,134                               102,144,675       1,862,134  

Accretion on convertible redeemable preferred shares to redemption value

          798,481             29,983             152,769                                     981,233  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2016

    295,000,000       2,539,993       24,210,431       306,678       102,144,675       2,014,903                               421,355,106       4,861,574  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds from Series A-1 Preferred Shares

          266,511                                                             266,511  

Issuance of preferred shares

                            12,722,646       240,066       166,205,830       4,398,313       213,585,003       7,314,387       392,513,479       11,952,766  

Accretion on convertible redeemable preferred shares to redemption value

          2,205,227             120,451             40,011             56,283             154,963             2,576,935  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2017

    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  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

19. Ordinary Shares

Upon inception, each ordinary share was issued at a par value of USD0.00025 per share. Various numbers of ordinary shares were issued to share-based compensation award recipients. As of December 31, 2017, the authorized share capital of the Company is US$500 divided into 2,000,000,000 shares, comprising of: 1,151,269,325 ordinary shares, 165,000,000 Series A-1 Preferred Shares, 130,000,000 Series A-2 Preferred Shares, 31,720,364 Series A-3 Preferred Shares, 114,867,321 Series B Preferred Shares, 167,142,990 Series C Preferred Shares, 240,000,000 Series D Preferred Shares, each at a par value of USD0.00025 per share.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

As of December 31, 2016 and 2017, 1,558,412,315 and 1,151,269,325 ordinary shares were authorized, respectively, 32,003,810 and 36,727,350 shares were issued and 17,773,459 and 23,850,343 shares were outstanding as of December 31, 2016 and 2017, respectively.

20. Share-based Compensation

Compensation expenses recognized for share-based awards granted by the Company were as follows:

 

     Year Ended December 31,  
     2016      2017  

Research and development expenses

     14,484        23,210  

Selling, general and administrative expenses

     62,200        67,086  
  

 

 

    

 

 

 

Total

     76,684        90,296  
  

 

 

    

 

 

 

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, 2016 and 2017.

(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 under the Prime Hubs Plan:

(i) Employees

 

Employees

   Number of Shares
Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested as of December 31, 2015

     13,450,000        0.72  

Vested

     (3,362,500      0.72  

Forfeited

     (1,687,500      0.72  
  

 

 

    

 

 

 

Unvested as of December 31, 2016

     8,400,000        0.72  
  

 

 

    

 

 

 

Granted

     2,000,000        2.05  

Vested

     (3,133,329      0.84  

Forfeited

     (208,333      0.72  
  

 

 

    

 

 

 

Unvested as of December 31, 2017

     7,058,338        1.04  
  

 

 

    

 

 

 

 

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Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

For the years ended December 31, 2016 and 2017, total share-based compensation expenses recognized for the employee restricted shares granted under the Prime Hubs Plan were RMB8,435 and RMB20,572, respectively.

As of December 31, 2016 and 2017, there were RMB33,251 and RMB37,651 of unrecognized share-based compensation expenses related to the employee restricted shares granted under the Prime Hubs Plan. Such unrecognized expenses are expected to be recognized over a weighted-average period of 2.14 and 1.69 years, respectively, as of December 31, 2016 and 2017.

(ii) Non-Employees

 

Non-Employees

   Number of Shares
Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested as of December 31, 2015

     2,950,000        1.25  

Vested

     (2,950,000      1.25  
  

 

 

    

 

 

 

Unvested as of December 31, 2016 and 2017

             
  

 

 

    

 

 

 

In January 2017, the Company agreed to repurchase 250,000 vested Prime Hubs restricted shares from a non-employee with total cash consideration of RMB1,686.

For the years ended December 31, 2016 and 2017, total share-based compensation expenses recognized for the non-employee restricted shares granted the Prime Hubs Plan were RMB24,532 and nil, respectively.

As of December 31, 2016, all share-based compensation expenses related to the non-employee restricted shares granted the Prime Hubs Plan had 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 share options to the Group’s non-NIO US employees and both share options and restricted shares to the employees of NIO US. 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 and 2017, the Board of Directors further approved the 2016 Stock Incentive Plan (the “2016 Plan”) and the 2017 Stock Incentive Plan (the “2017 Plan”). The 2016 and 2017 Plans have the same terms as 2015 Plan.

As of December 31, 2016 and 2017, the Group had not recognized any share-based compensation expenses for options granted to the non-NIO US employees of the Group, because the Company is unable to determine if it is probable that the performance conditions will be satisfied until the event occurs. As a result, the share-based compensation expenses for these options that are only exercisable upon the occurrence of the Company’s initial

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

public offering will be recognized using the graded-vesting method upon the consummation of the initial public offering. 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.

(i) Share Options

The following table summarizes activities of the Company’s share options under the 2015, 2016 and 2017 Plans:

 

     Number of
Options
Outstanding
    Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual Life
     Aggregate
Intrinsic
Value
 
           USD      In Years      USD  

Outstanding as of December 31, 2015

                          

Granted

     53,576,606       0.32                

Cancelled

     (945,346     0.39                

Expired

     (7,706     0.10                
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of December 31, 2016

     52,623,554       0.32        8.30        51,506  
  

 

 

   

 

 

    

 

 

    

 

 

 

Granted

     13,460,477       1.46                

Exercised

     (2,723,540     0.39                

Cancelled

     (5,236,562     0.44                

Expired

     (348,015     0.25                
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of December 31, 2017

     57,775,914       0.57        8.52        114,299  
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest as of December 31, 2016

     50,782,627                     49,245  

Exercisable as of December 31, 2016

     1,297,535                     1,336  

Vested and expected to vest as of December 31, 2017

     55,832,678                     107,299  

Exercisable as of December 31, 2017

     5,089,894                     11,070  

The weighted-average grant date fair value for options granted under the Company’s 2015, 2016 and 2017 Plans during the years ended December 31, 2016 and 2017 was USD0.90 and USD1.21, respectively, computed using the binomial option pricing model.

The total share-based compensation expenses recognized for share options during the years ended December 31, 2016 and 2017 was RMB17,998 and RMB30,126 respectively.

The fair value of each option granted under the Company’s 2015, 2016 and 2017 Plans during 2016 and 2017 was estimated on the date of each grant using the binomial option pricing model with the assumptions (or ranges thereof) in the following table:

 

     2016      2017  

Exercise price (USD)

     0.10-0.61        0.61-2.55  

Fair value of the ordinary shares on the date of option grant (USD)

     0.96-1.30        1.30-2.55  

Risk-free interest rate

     1.46%-1.78%        2.31%-2.40%  

Expected term (in years)

     10        10  

Expected dividend yield

     0%        0%  

Expected volatility

     54%        51%-52%  

Expected forfeiture rate (post-vesting)

     5%        5%  

 

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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, 2016 and 2017, there were RMB106,675 and RMB58,444 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 3.37 and 2.53 years, respectively.

As of December 31, 2016 and 2017, there were RMB192,340 and RMB275,473 of unrecognized compensation expenses related to the stocks options granted to the Group’s non-NIO US employees with a performance condition of an IPO, out of which, unrecognized compensation expenses of RMB54,529 and RMB138,884 related to options for which the service condition had been met and are expected to be recognized when the performance target of an IPO is achieved.

(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 under the 2015 plan:

 

     Number of Restricted
Shares Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested at December 31, 2015

             

Granted

     3,103,809        0.96  

Vested

     (960,958      0.96  

Forfeited

     (305,464      0.96  
  

 

 

    

 

 

 

Unvested at December 31, 2016

     1,837,387        0.96  
  

 

 

    

 

 

 

Vested

     (470,015      0.96  

Forfeited

     (254,395      0.96  
  

 

 

    

 

 

 

Unvested at December 31, 2017

     1,112,977        0.96  
  

 

 

    

 

 

 

As of December 31, 2016 and 2017, there were RMB11,735 and RMB6,095 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 2.75 and 1.75 years, respectively.

Share-based compensation expenses of RMB6,137 and RMB4,151 related to restricted shares granted to the employees of NIO US was recognized for the years ended December 31, 2016 and 2017, respectively.

(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

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Shares of the Company at the price of USD1.6522 per share, which equals to the purchase price paid for the 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 USD12,408 with an interest rate of 1.8% compounded semiannually to 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 date of her employment. 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.

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:

 

     2016      2017  

Exercise price

     1.83        1.82  

Fair value of the Preferred Shares on the measurement date

     1.80        2.70  

Risk-free interest rate

     2%        2%  

Remaining life (in years)

     4.75        3.64  

Expected dividend yield

     0%        0%  

Expected volatility

     47-51%        47-48%  

Share-based compensation expenses related to the Award of RMB19,582 and RMB35,446 was recognized for the years ended December 31, 2016 and 2017, respectively.

21. 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%.

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

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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 150% 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 50% 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 in the years ended December 31, 2016 and 2017 are as follows:

 

     For the
Year ended December 31,
 
     2016     2017  

United States

     42.84     42.84

United Kingdom

     20.00     19.25

Germany

     32.98     32.98

Composition of income tax expense for the periods presented are as follows:

 

     For the
Year ended December 31,
 
     2016      2017  

Current income tax expense

     4,314        7,906  
  

 

 

    

 

 

 

 

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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 periods presented are as follows:

 

     For the
Year ended December 31,
 
   2016      2017  

Loss before income tax expense

     (2,568,940      (5,013,268

Income tax expense computed at PRC statutory income tax rate of 25%

     (642,235      (1,253,318

Non-deductible expenses

     91,915        91,093  

Foreign tax rates differential

     52,495        (74,531

Additional 50% tax deduction for qualified research and development expenses

     (46,527      (93,513

Tax exempted interest income

     (52      (845

Effect of U.S. tax law change

            165,898  

US tax credits

     (5,716      (52,185

Prior year adjustments

     3,594        (10,293

Tax benefit not utilized

     550,840        1,235,600  
  

 

 

    

 

 

 

Income tax expense

     4,314        7,906  
  

 

 

    

 

 

 

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.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

The Group’s deferred tax assets consist of the following components:

 

     As of December 31,  
     2016      2017  

Deferred tax assets

             

Net operating loss carry-forwards

     567,844        1,620,535  

Accrued expenses

     39,174        84,320  

Advertising expenses in excess of deduction limit

     9,118        65,737  

Tax credit carry-forwards

     13,735        60,624  

Property, plant and equipment, net

     28,849        27,463  

Deferred rent

     9,478        8,699  

Deferred Revenue

     2,411         

Intangible assets

     1,643        7,104  

Share-based compensation

     637        4,106  

Unrealized foreign exchange loss

            55  
  

 

 

    

 

 

 

Total deferred tax assets

     672,889        1,878,643  
  

 

 

    

 

 

 

Less: Valuation allowance

     (672,889      (1,878,643
  

 

 

    

 

 

 

Total deferred tax assets, net

             
  

 

 

    

 

 

 

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:

 

     As of December 31,  
     2016      2017  

Valuation allowance

             

Balance at beginning of the year

            672,889  

Additions

     672,889        1,205,754  
  

 

 

    

 

 

 

Balance at end of the year

     672,889        1,878,643  
  

 

 

    

 

 

 

The Group has tax losses arising in Mainland China of RMB4,620,424 that will expire in one to four years for deduction against future taxable profit.

 

Loss expiring in 2019

     4  

Loss expiring in 2020

     186,827  

Loss expiring in 2021

     1,335,168  

Loss expiring in 2022

     3,098,425  
  

 

 

 

Total

     4,620,424  
  

 

 

 

The Group has tax losses arising in Hong Kong and United Kingdom of RMB705,077 for which could be carried forward indefinitely against future taxable income.

The Group has tax losses arising in United States of RMB22,960, RMB232,429 and RMB894,771 that will expire in eighteen, nineteen and twenty years for deduction against future taxable income.

 

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NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017. The Group is required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring the Group’s U.S. deferred tax assets and liabilities as well as reassessing the net realizability of the deferred tax assets and liabilities. The Tax Act did not give rise to any material impact on the consolidated balance sheets and consolidated statements of comprehensive loss due to the Group’s historical worldwide loss position and the full valuation allowance provided against the Group’s net U.S. deferred tax assets.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows the Group to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. Since the Tax Act was enacted late in the fourth quarter of 2017 (and ongoing guidance and accounting interpretations are expected over the next 12 months), the Group considers the accounting of deferred tax re-measurements and other items to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. The Group expects to complete the analysis within the measurement period in accordance with SAB 118. The Group does not expect any subsequent adjustments to have any material impact on the consolidated balance sheets or consolidated statements of comprehensive loss due to our historical worldwide loss position and the full valuation allowance provided against the Group’s net U.S. deferred tax assets.

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, 2017.

22. 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, 2016 and 2017 as follows:

 

     For the year ended
December 31,
 
     2016     2017  

Numerator:

    

Net loss

     (2,573,254     (5,021,174

Accretion on convertible redeemable preferred shares to redemption value

     (981,233     (2,576,935

Net loss attributable to non-controlling interests

     36,938       36,440  
  

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc. for basic/dilutive net loss per share

     (3,517,549     (7,561,669
  

 

 

   

 

 

 

Denominator:

    

Weighted-average number of ordinary shares outstanding — basic and diluted

     16,697,527       21,801,525  
  

 

 

   

 

 

 

Basic and diluted net loss per share attributable to ordinary shareholders of
NIO Inc.

     210.66       346.84  
  

 

 

   

 

 

 

For the years ended December 31, 2016 and 2017, 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

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

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, 2016 and 2017 as their effects would be anti-dilutive.

For the years ended December 31, 2016 and 2017, the Company had potential ordinary shares, including non-vested restricted shares, options granted and Preferred Shares. As the Group incurred losses for the years ended December 31, 2016 and 2017, these potential ordinary shares were anti-dilutive and excluded from the calculation of diluted net loss per share of the Company. The weighted-average numbers of non-vested restricted shares, options granted and Preferred Shares excluded from the calculation of diluted net loss per share of the Company were 12,198,170, 26,311,777 and 369,222,548 as of December 31, 2016, 8,323,591, 27,495,737 and 593,611,970 as of December 31, 2017, respectively.

23. Related Party Balances and Transactions

The principal related parties with which the Group had transactions during the years presented are as follows:

 

Name of Entity or Individual

  

Relationship with the Company

Bin Li

  

Principal Shareholder, Chairman of the Board and Chief Executive Officer

Lihong Qin

  

Principal Shareholder, Director and President of the Company

Baidu Capital L.P.

  

Shareholder

Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

  

Affiliate

Hubei Changjiang Nextev New Energy Investment Management Co., Ltd.

  

Controlled by Principal Shareholder

Jiangsu Xindian Automotive Co., Ltd.

  

Controlled by Principal Shareholder

Beijing CHJ Information Technology Co., Ltd.

  

Controlled by Principal Shareholder

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

  

Controlled by Principal Shareholder

Hubei Changjiang Nextev New Energy Industry Development Capital Partnership (Limited Partnership)

  

Controlled by Principal Shareholder

Beijing Chehui Hudong Guanggao Co., Ltd.

  

Affiliate

Beijing Xinyi Hudong Guanggao Co., Ltd.

  

Affiliate

Bite Shijie (Beijing) Keji Co., Ltd.

  

Affiliate

(a) The Group entered into the following significant related party transactions:

(i) Provision of service

For the years ended December 31, 2016 and 2017, service income was primarily generated from property management and miscellaneous research and development services the Group provided to its related parties.

 

     For the
Year ended December 31,
 
   2016      2017  

Hubei Changjiang Nextev New Energy Investment Management Co.,Ltd.

            11,121  

Beijing CHJ Information Technology Co., Ltd.

            4,588  

Hubei Changjiang Nextev New Energy Industry Development Capital Partnership (Limited Partnership)

            4,015  

Jiangsu Xindian Automotive Co., Ltd.

            1,785  
  

 

 

    

 

 

 
            21,509  
  

 

 

    

 

 

 

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

(ii) Acceptance of marketing and advertising service

 

     For the
Year ended December 31,
 
     2016      2017  

Beijing Xinyi Hudong Guanggao Co., Ltd.

            8,021  

Bite Shijie (Beijing) Keji Co., Ltd.

            6,987  

Beijing Chehui Hudong Guanggao Co., Ltd.

            544  
  

 

 

    

 

 

 
            15,552  
  

 

 

    

 

 

 

(iii) Loan to related party

 

     For the
Year ended December 31,
 
     2016      2017  

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

            50,000  
  

 

 

    

 

 

 

(iv) Cost of manufacturing consignment

 

     For the
Year ended December 31,
 
     2016      2017  

Suzhou Zenlead XPT New Energy Technologies Co.,Ltd.

            18,324  
  

 

 

    

 

 

 

(v) Purchase of property and equipment

 

     For the
Year ended December 31,
 
     2016      2017  

Bite Shijie (Beijing) Keji Co., Ltd.

            2,960  
  

 

 

    

 

 

 

(vi) Payment on behalf of related parties

 

     For the
Year ended December 31,
 
     2016      2017  

Baidu Capital L.P.

            21,671  
  

 

 

    

 

 

 

 

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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

 

     As of December 31,  
     2016      2017  

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

            50,000  

Baidu Capital L.P.

            21,671  

Beijing CHJ Information Technology Co., Ltd.

            3,624  

Bin Li

     1,680        1,680  

Jiangsu Xindian Automotive Co., Ltd.

            1,627  

Hubei Changjiang Nextev New Energy Investment Management Co., Ltd.

            954  
  

 

 

    

 

 

 

Total

     1,680        79,556  
  

 

 

    

 

 

 

(ii) Amounts due to related parties

 

     As of December 31,  
     2016      2017  

Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

            19,466  

Bin Li

     15,170        14,289  

Lihong Qin

     5,667        5,338  

Beijing Chehui Hudong Guanggao Co., Ltd.

            576  

Beijing Xinyi Hudong Guanggao Co., Ltd.

            400  
  

 

 

    

 

 

 

Total

     20,837        40,069  
  

 

 

    

 

 

 

24. Commitment and Contingencies

(a) Capital commitments

Capital expenditures contracted for at the balance sheet dates but not recognized in the Group’s consolidated financial statements are as follows:

 

     As of December 31,  
     2016      2017  

Property and equipment

     1,020,637        1,250,612  

Leasehold improvements

            470,600  
  

 

 

    

 

 

 

Total

     1,020,637        1,721,212  
  

 

 

    

 

 

 

(b) Operating lease commitments

The Group leases certain office premises and buildings under non-cancelable leases. Rental expenses under operating leases for the years ended December 31, 2016 and 2017 were RMB102,020 and RMB228,478 respectively.

 

F-45


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

As of December 31, 2016 and 2017, the Group had remaining outstanding commitments non-cancelable agreements in respect to its operating leases as follows:

 

     As of December 31,  
     2016      2017  

Within one year

     127,819        233,486  

1 to 2 years

     139,442        261,846  

2 to 3 years

     132,029        278,278  

More than 3 years

     538,654        1,296,315  
  

 

 

    

 

 

 

Total

     937,944        2,069,925  
  

 

 

    

 

 

 

25. Subsequent Events

On March 28, 2018, the outstanding consideration of RMB78,410 (USD12,000 equivalent) for Series D Preferred Shares was paid in full by the investor.

On April 10, 2018, NIO SH provided an interest free shareholder loan to one of the Series C Preferred Shareholders of the Company with principal amount of RMB703,956. The loan will be due on May 27, 2018 without interest.

26. 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, 2017.

 

F-46


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Condensed Balance Sheets

 

     As of December 31,  
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

ASSETS

      

Current assets:

      

Cash and cash equivalents

     79,691       23,270       3,710  

Amounts due from related parties

     20,837       1,243,251       198,203  

Prepayments and other current assets

     19,917       1,642       262  
  

 

 

   

 

 

   

 

 

 

Total current assets

     120,445       1,268,163       202,175  
  

 

 

   

 

 

   

 

 

 

Non-current assets:

      

Investments in subsidiaries and VIEs

     893,700       6,977,051       1,112,306  
  

 

 

   

 

 

   

 

 

 

Total non-current assets

     893,700       6,977,051       1,112,306  
  

 

 

   

 

 

   

 

 

 

Total assets

     1,014,145       8,245,214       1,314,481  
  

 

 

   

 

 

   

 

 

 

LIABILITIES

      

Current liabilities:

      

Amounts due to related parties

     37,766       135,490       21,600  

Accruals and other liabilities

     19,582       55,027       8,773  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     57,348       190,517       30,373  
  

 

 

   

 

 

   

 

 

 

Total liabilities

     57,348       190,517       30,373  
  

 

 

   

 

 

   

 

 

 

MEZZANINE EQUITY

      

Series A-1 and A-2 convertible redeemable preferred shares

     2,810,189       5,011,731       798,988  

Series A-3 convertible redeemable preferred shares

     306,678       427,129       68,094  

Series B convertible redeemable preferred shares

     2,014,903       2,294,980       365,874  

Series C convertible redeemable preferred shares

           4,454,596       710,167  

Series D convertible redeemable preferred shares

           7,547,760       1,203,291  

Receivable from a holder of Series A-1 convertible redeemable preferred shares

     (270,196            

Receivable from a holder of Series D convertible redeemable preferred shares

           (78,410     (12,500
  

 

 

   

 

 

   

 

 

 

Total mezzanine equity

     4,861,574       19,657,786       3,133,914  
  

 

 

   

 

 

   

 

 

 

SHAREHOLDERS’ DEFICIT

      

Ordinary shares

     52       60       10  

Treasury shares

     (9,186     (9,186     (1,464

Additional paid in capital

     70,850       131,907       21,029  

Accumulated other comprehensive income/(loss)

     110,452       (13,922     (2,219

Accumulated deficit

     (4,076,945     (11,711,948     (1,867,160
  

 

 

   

 

 

   

 

 

 

Total shareholders’ deficit

     (3,904,777     (11,603,089     (1,849,804
  

 

 

   

 

 

   

 

 

 

Total liabilities, mezzanine equity and shareholders’ deficit

     1,014,145       8,245,214       1,314,483  
  

 

 

   

 

 

   

 

 

 

 

F-47


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Condensed Statements of Comprehensive Loss

 

     For the
Year ended December 31,
 
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

Operating expenses:

      

Selling, general and administrative

     (24,684     (52,518     (8,373
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     (24,684     (52,518     (8,373
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (24,684     (52,518     (8,373

Interest income

     24,309       2,391       381  

Interest expense

           (12,389     (1,975

Equity in loss of subsidiaries and VIEs

     (2,539,323     (4,924,897     (785,144

Investment income

     2,670       3,498       558  

Other income/(loss), net

     712       (819     (131
  

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (2,536,316     (4,984,734     (794,684
  

 

 

   

 

 

   

 

 

 

Income tax expense

                  
  

 

 

   

 

 

   

 

 

 

Net loss

     (2,536,316     (4,984,734     (794,684
  

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

     (981,233     (2,576,935     (410,824
  

 

 

   

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc.

     (3,517,549     (7,561,669     (1,205,508
  

 

 

   

 

 

   

 

 

 

 

F-48


Table of Contents

NIO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except for share and per share data)

 

Condensed Statements of Cash Flows

 

     For The
Year ended December 31,
 
     2016     2017     2017  
     RMB     RMB     USD  
                 Note 2(e)  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Net cash used in operating activities

     (2,540,639     (4,920,905     (784,508
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

      

Proceeds from sale of trading securities

     3,118,559       1,340,911       213,773  

Purchase of held for trading securities

     (2,346,261     (1,337,413     (213,215

Acquisitions of equity investees

     (669,433     (6,223,178     (992,121
  

 

 

   

 

 

   

 

 

 

Net cash provided by/(used in) investing activities

     102,865       (6,219,680     (991,563
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

      

Proceeds from exercise of stock options

           6,207       990  

Proceeds from issuance of convertible promissory note

           312,624       49,840  

Repaymemt of convertible promissory note

           (325,013     (51,815

Proceeds from issuance of convertible redeemable preferred shares, net of issuance costs

     2,260,444       11,093,377       1,768,545  

Net cash provided by financing activities

     2,260,444       11,087,195       1,767,560  
  

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     (7,323     (3,031     (483
  

 

 

   

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (184,654     (56,421     (8,994

Cash and cash equivalents at beginning of the year

     264,344       79,691       12,704  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of the year

     79,691       23,270       3,710  
  

 

 

   

 

 

   

 

 

 

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.

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-49


Table of Contents

NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

 

     As of December 31,
2017
     As of March 31,  
        2018      2018      2018      2018  
     RMB      RMB      USD      RMB      USD  
                   Note 2(e)      Pro forma
(Note 24)
     Note 2(e)
Pro forma
(Note 24)
 

ASSETS

              

Current assets:

              

Cash and cash equivalents

     7,505,954        5,522,972        880,492        5,522,972        880,492  

Restricted cash

     10,606        10,523        1,678        10,523        1,678  

Amounts due from related parties

     29,556        94,465        15,059        94,465        15,059  

Inventories

     89,464        165,694        26,416        165,694        26,416  

Prepayments and other current assets

     674,425        797,891        127,203        797,891        127,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     8,310,005        6,591,545        1,050,848        6,591,545        1,050,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets:

              

Long-term restricted cash

     14,293        13,867        2,211        13,867        2,211  

Property, plant and equipment, net

     1,911,013        2,563,370        408,661        2,563,370        408,661  

Intangible assets, net

     4,457        3,882        619        3,882        619  

Long-term investments

     47,125        46,292        7,380        46,292        7,380  

Amounts due from related parties

     50,000        50,000        7,971        50,000        7,971  

Other non-current assets

     131,141        158,744        25,308        158,744        25,308  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current assets

     2,158,029        2,836,155        452,150        2,836,155        452,150  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     10,468,034        9,427,700        1,502,998        9,427,700        1,502,998  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES

              

Current liabilities:

              

Short-term borrowings

     28,787        69,370        11,059        69,370        11,059  

Trade payable

     234,011        213,314        34,007        213,314        34,007  

Amounts due to related parties

     40,069        23,659        3,772        23,659        3,772  

Taxes payable

     30,055        35,285        5,625        35,285        5,625  

Accruals and other liabilities

     1,285,592        1,604,893        255,858        1,604,893        255,858  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     1,618,514        1,946,521        310,321        1,946,521        310,321  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Non-current liabilities:

              

Long-term borrowings

     642,401        831,023        132,485        831,023        132,485  

Other non-current liabilities

     141,113        157,500        25,109        157,500        25,109  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total non-current liabilities

     783,514        988,523        157,594        988,523        157,594  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     2,402,028        2,935,044        467,915        2,935,044        467,915  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Commitments and contingencies (Note 23)

              

 

F-50


Table of Contents

NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

     As of December 31,
2017
    As of March 31,  
       2018      2018      2018      2018  
     RMB     RMB      USD      RMB      USD  
                  Note 2(e)      Pro forma
(Note 24)
     Note 2(e)
Pro forma
(Note 24)
 

MEZZANINE EQUITY

             

Series A-1 and A-2 convertible redeemable preferred shares (USD0.00025 par value; 295,000,000 authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     5,011,731       6,539,838        1,042,604                

Series A-3 convertible redeemable preferred shares (USD0.00025 par value; 31,720,364 authorized, 24,210,431 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     427,129       551,010        87,844                

Series B convertible redeemable preferred shares (USD0.00025 par value; 114,867,321 authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     2,294,980       2,775,589        442,494                

Series C convertible redeemable preferred shares (USD0.00025 par value; 167,142,990 authorized, 166,205,830 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     4,454,596       4,599,745        733,308                

Series D convertible redeemable preferred shares (USD0.00025 par value; 240,000,000 authorized, 213,585,003 issued and outstanding as of December 31, 2017 and March 31, 2018; no shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     7,547,760       7,691,458        1,226,199                

Receivable from a holder of Series D convertible redeemable preferred shares

     (78,410                           
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total mezzanine equity

     19,657,786       22,157,640        3,532,449                
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

F-51


Table of Contents

NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

     As of December 31,
2017
    As of March 31,  
       2018     2018     2018     2018  
     RMB     RMB     USD     RMB     USD  
                 Note 2(e)     Pro forma
(Note 24)
    Note 2(e)
Pro forma
(Note 24)
 

SHAREHOLDERS’ DEFICIT

          

Ordinary shares (USD0.00025 par value; 1,151,269,325 shares authorized as of December 31, 2017 and March 31, 2018; 36,727,350 and 37,574,555 shares issued and 23,850,343 and 27,656,543 shares outstanding as of December 31, 2017 and March 31, 2018, respectively; No shares issued and outstanding on a pro-forma basis as of March 31, 2018)

     60       61       10              

Class A Ordinary shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 and March 31, 2018; 560,994,906 shares issued and outstanding on a pro-forma basis as of March 31, 2018)

                       880       140  

Class B Ordinary Shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 March 31, 2018; 132,030,222 shares issued and outstanding on a pro-forma basis as of March 31, 2018)

                       207       33  

Class C Ordinary Shares (USD0.00025 par value; No shares authorized, issued and outstanding as of December 31, 2017 March 31, 2018; 148,500,000 shares issued and outstanding on a pro-forma basis as of March 31, 2018)

                       233       37  

Treasury shares

     (9,186     (9,186     (1,464     (9,186     (1,464

Additional paid in capital

     131,907       149,352       23,810       22,305,733       3,556,059  

Accumulated other comprehensive (loss)

     (13,922     (166,920     (26,610     (166,920     (26,610

Accumulated deficit

     (11,711,948     (15,655,857     (2,495,912     (15,655,857     (2,495,912
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total NIO Inc. shareholders’ (deficit)/equity

     (11,603,089     (15,682,550     (2,500,166     6,475,090       1,032,283  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-controlling interests

     11,309       17,566       2,800       17,566       2,800  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ (deficit)/equity

     (11,591,780     (15,664,984     (2,497,366     6,492,656       1,035,083  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities, mezzanine equity and shareholders’ equity

     10,468,034       9,427,700       1,502,998       9,427,700       1,502,998  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-52


Table of Contents

NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(All amounts in thousands, except for share and per share data)

 

     For the Three Months ended March 31,  
     2017     2018     2018  
     RMB     RMB     USD  
                 Note 2(e)  

Operating expenses:

      

Research and development

     (509,313     (690,650     (110,106

Selling, general and administrative

     (443,262     (773,218     (123,269
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     (952,575     (1,463,868     (233,375
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (952,575     (1,463,868     (233,375

Interest income

     1,881       28,437       4,534  

Interest expenses

           (5,200     (829

Share of losses of equity investee

           (833     (133

Investment income

     101              

Other loss, net

     (7,796     (87,675     (13,978
  

 

 

   

 

 

   

 

 

 

Loss before income tax expense

     (958,389     (1,529,139     (243,781
  

 

 

   

 

 

   

 

 

 

Income tax expense

     (2,182     (1,883     (300
  

 

 

   

 

 

   

 

 

 

Net loss

     (960,571     (1,531,022     (244,081
  

 

 

   

 

 

   

 

 

 

Accretion on convertible redeemable preferred shares to redemption value

     (1,094,190     (2,421,129     (385,985

Net loss attributable to non-controlling interests

     11,309       8,242       1,314  
  

 

 

   

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc.

     (2,043,452     (3,943,909     (628,752
  

 

 

   

 

 

   

 

 

 

Net loss

     (960,571     (1,531,022     (244,081

Other comprehensive loss

      

Foreign currency translation adjustment, net of nil tax

     (12,766     (152,998     (24,390
  

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     (12,766     (152,998     (24,390
  

 

 

   

 

 

   

 

 

 

Total comprehensive loss

     (973,337     (1,684,020     (268,471

Accretion on convertible redeemable preferred shares to redemption value

     (1,094,190     (2,421,129     (385,985

Net loss attributable to non-controlling interests

     11,309       8,242       1,314  
  

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to ordinary shareholders of NIO Inc.

     (2,056,218     (4,096,907     (653,142
  

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares used in computing net loss per share

      

Basic and diluted

     20,515,137       26,561,329       26,561,329  

Net loss per share attributable to ordinary shareholders

      

Basic and diluted

     (99.61     (148.48     (23.67

The accompanying notes are an integral part of these consolidated financial statements.

 

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NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(All amounts in thousands, except for share and per share data)

 

   

 

Ordinary shares

   

 

Treasury Shares

    Additional
paid in
capital
    Accumulated
other
comprehensive
income/(loss)
    Accumulated
deficit
    Total
shareholders’
deficit
    Non-
Controlling
interests
    Total
equity
 
    Shares     Par value     Shares     Amount              

Balance as of December 31, 2016

    32,003,810       52       (14,230,351     (9,186     70,850       110,452       (4,076,945     (3,904,777     (11,583     (3,916,360

Accretion on Series A-1 and A-2 convertible redeemable preferred shares to redemption value

                                        (1,019,848     (1,019,848           (1,019,848

Accretion on Series A-3 convertible redeemable preferred shares to redemption value

                                        (40,755     (40,755           (40,755

Accretion on Series B convertible redeemable preferred shares to redemption value

                                        (31,800     (31,800           (31,800

Accretion on Series C convertible redeemable preferred shares to redemption value

                                        (1,787     (1,787           (1,787

Exercise of stock options

    249,547       1                   440                   441             441  

Vesting of restricted shares

                2,473,994             7,259                   7,259             7,259  

Share-based compensation

                            6,443                   6,443             6,443  

Foreign currency translation adjustment

                                  (12,766           (12,766           (12,766

Net loss

                                        (949,262     (949,262     (11,309     (960,571
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2017

    32,253,357       53       (11,756,357     (9,186     84,992       97,686       (6,120,397     (5,946,852     (22,892     (5,969,744
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

   

 

Ordinary shares

   

 

Treasury Shares

    Additional
paid in
capital
    Accumulated
other
comprehensive
loss
    Accumulated
deficit
    Total
shareholders’
deficit
    Non-
Controlling
interests
    Total
equity
 
    Shares     Par value     Shares     Amount              

Balance as of December 31, 2017

    36,727,350       60       (12,877,007     (9,186     131,907       (13,922     (11,711,948     (11,603,089     11,309       (11,591,780

Accretion on Series A-1 and A-2 convertible redeemable preferred shares to redemption value

                                        (1,528,107     (1,528,107           (1,528,107

Accretion on Series A-3 convertible redeemable preferred shares to redemption value

                                        (123,881     (123,881           (123,881

Accretion on Series B convertible redeemable preferred shares to redemption value

                                        (480,609     (480,609           (480,609

Accretion on Series C convertible redeemable preferred shares to redemption value

                                        (145,149     (145,149           (145,149

Accretion on Series D convertible redeemable preferred shares to redemption value

                                        (143,383     (143,383           (143,383

Exercise of stock options

    847,205       1                   443                   444             444  

Vesting of restricted shares

                2,958,995             5,886               5,886             5,886  

Share-based compensation

                            11,116                   11,116             11,116  

Acquisition of additional interests in subsidiaries from non-controlling interests

                                                    14,499       14,499  

Foreign currency translation adjustment

                                  (152,998           (152,998           (152,998

Net loss

                                        (1,522,780     (1,522,780     (8,242     (1,531,022
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2018

    37,574,555       61       (9,918,012     (9,186     149,352       (166,920     (15,655,857     (15,682,550     17,566       (15,664,984
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

NIO INC.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(All amounts in thousands, except for share and per share data)

 

     For the Three months ended March 31,  
     2017     2018     2018  
     RMB     RMB     USD  
                 Note 2(e)  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Net loss

     (960,571     (1,531,022     (244,081

Adjustments to reconcile net loss to net cash used in operating activities:

      

Depreciation and amortization

     29,238       64,428       10,271  

Foreign exchange loss

     4,586       92,536       14,752  

Share-based compensation expenses

     23,596       42,120       6,715  

Investment income

     (101            

Share of losses of equity investee

           833       133  

Changes in operating assets and liabilities:

      

Prepayments and other current assets

     (30,747     (136,227     (21,718

Inventories

     (2,064     (76,230     (12,153

Other non-current assets

     (67,384     (5,387     (859

Taxes payable

     (184     5,322       848  

Accruals and other liabilities

     (61,552     (32,779     (5,226

Other non-current liabilities

     15,410       17,147       2,734  
  

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

     (1,049,773     (1,559,259     (248,584
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

      

Purchase of property, plant and equipment and intangible assets

     (278,585     (450,575     (71,832

Purchase of trading securities

     (137,692            

Sale of held for trading securities

     137,793              

Loan to related parties

           (65,342     (10,417

Acquisitions of equity investees

     (52,500            
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (330,984     (515,917     (82,249
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

      

Proceeds from exercise of stock options

           443       71  

Proceeds from issuance of series A convertible redeemable preferred shares, net of issuance costs

     266,511              

Proceeds from issuance of series B convertible redeemable preferred shares, net of issuance costs

     240,210              

Proceeds from issuance of series C convertible redeemable preferred shares, net of issuance costs

     409,519              

Proceeds from collection of receivable from a holder of Series D convertible redeemable preferred shares

           78,725       12,551  

Capital injection from non-controlling interests

           14,499       2,312  

Proceeds from borrowings

           229,205       36,541  

Proceeds from issuance of convertible promissory note

     312,624              
  

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     1,228,864       322,872       51,475  
  

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     1,767       (231,187     (36,856

NET INCREASE IN CASH AND CASH EQUIVALENTS

     (150,126     (1,983,491     (316,214

Cash, cash equivalents and restricted cash at beginning of the period

     596,631       7,530,853       1,200,595  
  

 

 

   

 

 

   

 

 

 

Cash, cash equivalents and restricted cash at end of the period

     446,505       5,547,362       884,381  
  

 

 

   

 

 

   

 

 

 

Supplemental Disclosure

      

Interest paid

           7,187       1,146  

Income taxes paid

           115       18  

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED 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 ES8 through strategic collaboration with other Chinese vehicle manufacturers. The Group also plans to offer energy and service packages to its users. As of December 31, 2017 and March 31, 2018, its primary operations are conducted in the People’s Republic of China (“PRC”) and mainly focused on research and development activities. The Company’s principal subsidiaries and VIEs are as follows:

 

Subsidiaries

   Equity
interest held
   

Place and Date of incorporation

or date of acquisition

  

Principal activities

NIO NextEV Limited (“NIO HK”) (formerly known as
NextEV Limited)

     100   Hong Kong, February 2015    Investment holding

NIO GmbH (formerly known as NextEV GmbH)

     100   Germany, May 2015    Design and technology development

NIO Co., Ltd. (“NIO SH”) (formerly known as NextEV Co., Ltd.)

     100   Shanghai, PRC, May 2015    Headquarter and technology development

NIO USA, Inc. (“NIO US”) (formerly known as NextEV USA, Inc.)

     100   United States, November 2015    Technology development

XPT Limited (“XPT”)

     100   Hong Kong, December 2015    Investment holding

NIO NextEV (UK) Limited (formerly known as NextEV (UK) Limited)

    
100

  United Kingdom, February 2016    Marketing and technology development

NIO Sport Limited (“NIO Sport”) (formerly known as NextEV NIO Sport Limited)

     100   Hong Kong, April 2016    Racing management

XPT Technology Limited (“XPT Technology”)

     100   Hong Kong, April 2016    Investment holding

XPT Inc. (“XPT US”)

     100   United States, April 2016    Technology development

XPT (Jiangsu) Investment Co., Ltd. (“XPT Jiangsu”)

     100   Jiangsu, PRC, May 2016    Investment holding

Shanghai XPT Technology Limited

     100   Shanghai, PRC, May 2016    Technology development

XPT (Nanjing) E-Powertrain Technology Co., Ltd.

     100   Nanjing, PRC, July 2016    Manufacturing of E-Powertrain

XPT (Nanjing) Energy Storage System Co., Ltd. (“XPT NJES”)

     100   Nanjing, PRC, October 2016    Manufacturing of battery pack

NextEV Power Express Limited
(“PE HK)

     100   Hong Kong, January 2017    Investment holding

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

Subsidiaries

   Equity
interest held
   

Place and Date of incorporation

or date of acquisition

  

Principal activities

NextEV User Enterprise Limited
(“UE HK”)

     100   Hong Kong, February 2017    Investment holding

Shanghai NIO Sales and Services
Co., Ltd. (“UE CNHC”)

    
100

 

Shanghai, PRC, March 2017

   Investment holding and sales and after sales management

NIO Energy Investment (Hubei)
Co., Ltd. (“PE CNHC”)

     100   Wuhan PRC, April 2017    Investment holding

Wuhan NIO Energy Co., Ltd. (“PE WHJV”)

     100   Wuhan, PRC, May 2017    Investment holding

XTRONICS (Nanjing) Automotive Intelligent Technologies Co.,Ltd. (“XPT NJWL”)

     50   Nanjing, PRC, June 2017    Manufacturing of components

 

VIE

   Economic
interest held
   

Place and Date of incorporation

or date of acquisition

Prime Hubs Limited (“Prime Hubs”)

     100   BVI, October 2014

NIO Technology Co., Ltd. (“NIO SHTECH”) (formerly known as Shanghai NextEV Technology Co., Ltd.)

     100   Shanghai, PRC, November 2014

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.

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. As of December 31, 2017 and March 31, 2018, 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, 2017 and March 31, 2018, Prime Hubs held 26,900,001 ordinary shares of the Company.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

Liquidity

The Group has been incurring losses from operations since inception. The Group incurred net losses of RMB960,571 and RMB1,531,022 for the three months ended March 31, 2017 and 2018, respectively. Accumulated deficit amounted to RMB11,711,948 and RMB15,655,857 as of December 31, 2017 and March 31, 2018, respectively. Net cash used in operating activities was approximately RMB1,049,773 and RMB1,559,259 for the three months ended March 31, 2017 and 2018, respectively. As of December 31, 2017 and March 31, 2018, the Group’s working capital was RMB6,691,491 and RMB4,645,024.

The Group’s liquidity is based on its ability to generate cash from operating activities, obtain capital financing from equity interest investors and borrow funds on favorable economic terms to fund its general operations and capital expansion needs. The Group’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing cash flows. As of December 31, 2017 and March 31, 2018, the Group’s balance of cash and cash equivalents was RMB7,505,954 and RMB5,522,972. In addition, up to the date of this report, the Company has entered into loan facility agreements with several banks in China for a total principal amount of RMB3,730 million, which will be due by May 17, 2022. Moreover, the Group can adjust the pace of its operation expansion and control the operating expenses of the Group.

Based on cash flows projection from operating and financing activities and existing balance of cash and cash equivalents, management is of the opinion that the Group has sufficient funds for sustainable operations and it will be able to meet its payment obligations from operations and debt related commitments for the next twelve months from the issuance of the unaudited interim condensed consolidated financial statements. Based on the above considerations, the Group’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.

2. Summary of Significant Accounting Policies

(a) Basis of presentation

The accompanying unaudited interim condensed consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes normally included in the annual financial statements prepared in accordance with U.S. GAAP. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted consistent with Article 10 of Regulation S-X. In the opinion of management, the Group’s unaudited interim condensed consolidated financial statements and accompanying notes include all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the Group’s financial position as of March 31, 2018, and results of operations and cash flows for the three months ended March 31, 2017 and 2018. Interim results of operations are not necessarily indicative of the results for the full year or for any future period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2017, and related notes included in the Group’s audited consolidated financial statements. The financial information as of December 31, 2017 presented in the unaudited interim condensed consolidated financial statements is derived from the audited consolidated financial statements as of December 31, 2017.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

Significant accounting policies followed by the Group in the preparation of the accompanying unaudited interim condensed consolidated financial statements are summarized below.

(b) Principles of consolidation

The unaudited interim condensed 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 unaudited interim condensed consolidated financial statements.

(c) Use of estimates

The preparation of the unaudited interim condensed consolidated financial statements in conformity with US 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 unaudited interim condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include, but are not limited to, the valuation and recognition of share-based compensation arrangements, depreciable lives of property, equipment and software, useful life of intangible assets, assessment for impairment of long-lived assets and intangible assets, inventory valuation for excess and obsolete inventories, lower of cost and net realizable value of inventories, valuation of deferred tax assets 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 (“USD”), 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.

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

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

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 convertible redeemable preferred shares and shareholders’ deficit. Total foreign currency translation adjustment losses were RMB12,766 and RMB152,998 for the three months ended March 31, 2017 and 2018, respectively. The grant-date fair value of the Group’s share-based compensation expenses is reported in USD as the respective valuation is conducted in USD as the shares are denominated in USD.

(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 USD as of and For the three months ended March 31, 2018 are solely for the convenience of the reader and were calculated at the rate of USD1.00 = RMB6.2726, 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 March 30, 2018. No representation is made that the RMB amounts represent or could have been, or could be, converted, realized or settled into USD at that rate on March 31, 2018, or at any other rate.

(f) Cash, cash equivalents and restricted cash

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:

 

     December 31,
2017
     March 31,
2018
 

Cash and cash equivalents

     7,505,954        5,522,972  

Restricted cash

     10,606        10,523  

Long-term restricted cash

     14,293        13,867  
  

 

 

    

 

 

 

Total

     7,530,853        5,547,362  
  

 

 

    

 

 

 

(g) 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.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

The estimated useful lives are as follows:

 

   

Useful lives

Motor vehicles

  5 years

Production facilities

  10 years

Computer and electronic equipment

  3 years

Purchased software

  3 years

R&D equipment

  5 years

Office equipment

  5 years

Leasehold improvements

  Shorter of the estimated useful life or remaining lease term

Others

  3 to 5 years

Depreciation for mould 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.

(h) 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 three months ended March 31, 2017 and 2018, advertising costs totalled RMB2,633 and RMB10,209, respectively.

(i) 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 RMB47,231 and RMB86,301 for the three months ended March 31, 2017 and 2018, respectively.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

3. Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606).” This guidance supersedes current guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. In August 2015, the FASB issued ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. For publicly-traded business entities that follow U.S. GAAP, the deferral results in the new revenue standards’ being effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Group has not started to generate revenue yet, therefore, there was no impact upon adoption in 2018.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The main objective of this update is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. ASU 2016-01 changes how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. The guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Further, in March 2018, the FASB issued “Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which provides further guidance on adjustments for observable transaction for equity securities without a readily determinable fair value and clarification on fair value option for liabilities instruments. ASU 2016-01 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017. Early adoption by public entities is permitted only for certain provisions. The adaption of ASU 2016-01 has no impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU is effective for reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The ASU will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The ASU requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The Group is currently evaluating the impact that the adoption of this standard will have on its financial condition and results from operations.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies the accounting for share-based payment transactions specifically related to the tax effects associates with share-based compensation, an accounting policy election to determine how forfeitures are recorded and a change in the presentation requirements in the statement of cash flows. Non-public companies are also granted two additional optional provisions that would provide a practical expedient for determining the expected term and a one-time opportunity to change the measurement basis for all liability-classified awards to intrinsic value. There was no significant impact upon adoption in 2018.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). The ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard should be applied to each period presented using a retrospective transition method. The adoption of this standard does not have a material impact on the Group’s consolidated financial statements, but resulted in restricted cash being included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows.

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 trade receivable. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates. As of December 31, 2017 and March 31, 2018, 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.

(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 RMB914,460 and RMB1,158,937 as of December 31, 2017 and March 31, 2018, 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.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

5. Inventory

Inventory consists of the following:

 

     December 31,
2017
     March 31,
2018
 

Raw materials

     44,061        146,787  

Work in process

     22,262        1,537  

Merchandise

     23,141        17,370  
  

 

 

    

 

 

 

Total

     89,464        165,694  
  

 

 

    

 

 

 

Raw materials and work in process as of December 31, 2017 and March 31, 2018 are mainly used for research and development purpose and will be expensed when incurred.

Merchandise inventory includes branded merchandise of NIO which can be redeemed by deducting membership rewards points of customer loyalty program in the Group’s application store.

6. Prepayments and Other Current Assets

Prepayments and other current assets consist of the following:

 

     December 31,
2017
     March 31,
2018
 

Deductible VAT input

     456,774        557,752  

Prepaid expenses

     185,401        206,220  

Deposits

     12,582        15,658  

Other receivables

     19,668        18,261  
  

 

 

    

 

 

 

Total

     674,425        797,891  
  

 

 

    

 

 

 

Prepaid expenses mainly consist of prepaid rental for offices and NIO Houses, and prepaid expenses for R&D services provided by suppliers.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

7. Property, Plant and Equipment, Net

Property and equipment and related accumulated depreciation were as follows:

 

     December 31,
2017
     March 31,
2018
 

Construction in process

     1,016,643        663,171  

Mould & Tooling

     2,619        853,663  

Leasehold improvements

     413,368        503,306  

Computer and electronic equipment

     178,534        205,730  

Purchased software

     135,775        147,696  

R&D equipment

     173,741        207,860  

Production facilities

     134,080        151,961  

Office equipment

     33,288        33,394  

Motor vehicles

     19,681        46,072  

Others

     24,712        37,588  
  

 

 

    

 

 

 

Subtotal

     2,132,441        2,850,441  

Less: Accumulated depreciation

     (221,428      (287,071
  

 

 

    

 

 

 

Total property and equipment, net

     1,911,013        2,563,370  
  

 

 

    

 

 

 

The Group recorded depreciation expenses of RMB28,752 and RMB63,992 for the three months ended March 31, 2017 and March 31, 2018, respectively.

8. Intangible Assets, Net

Intangible assets and related accumulated amortization were as follows:

 

     December 31, 2017      March 31, 2018  
     Gross carrying
value
     Accumulated
amortization
    Net carrying
value
     Gross carrying
value
     Accumulated
amortization
    Net carrying
value
 

Domain names and others

     4,230        (1,017     3,213        4,077        (1,177     2,900  

License

     3,199        (1,955     1,244        3,213        (2,231     982  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangible assets, net

     7,429        (2,972     4,457        7,290        (3,408     3,882  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The Group recorded amortization expenses of RMB486 and RMB436 for the three months ended March 31, 2017 and 2018, respectively.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

9. Other Non-current Assets

Other non-current assets consist of the following:

 

     December 31,
2017
     March 31,
2018
 

Prepayments for purchase of property and equipment

     110,316        132,532  

Long-term deposits

     20,734        26,122  

Others

     91        90  
  

 

 

    

 

 

 

Total

     131,141        158,744  
  

 

 

    

 

 

 

Long-term deposit mainly consists of rental deposit for offices and NIO Houses which will not be collectible within one year.

10. Short-term Borrowings

Short-term borrowings consist of the following:

 

     Maturity
Date
     Principal
Amount
     Interest Rate
Per Annum
     December 31,
2017
     March 31,
2018
 

Bank loan I—VI

     2018/6/7 - 2019/2/8        69,370        4.35% - 4.87%        28,787        69,370  

11. Accruals and Other Liabilities

Accruals and other liabilities consist of the following:

 

     December 31,
2017
     March 31,
2018
 

Payables for purchase of property and equipment

     410,726        699,059  

Payables for R&D expenses

     247,923        178,164  

Accrued expenses

     199,087        91,984  

Salaries and benefits payable

     225,302        245,205  

Advance from customers

     68,439        104,097  

Payables for marketing events

     37,933        62,711  

Interest payables

     24,320        32,430  

Payables for traveling

     10,678        1,288  

Payables to investors

            135,032  

Other payables

     61,184        54,923  
  

 

 

    

 

 

 

Total

     1,285,592        1,604,893  
  

 

 

    

 

 

 

Payable to investors includes loan from investors with no fixed term and no interest incurred. The balance as of March 31, 2018 was repaid in full on April 3, 2018.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

12. Long-term Borrowings

Long-term borrowings consist of the following:

 

     December 31,
2017
     March 31,
2018
 

Bank loan

     454,901        643,523  

Loan from joint investor

     187,500        187,500  
  

 

 

    

 

 

 

Total

     642,401        831,023  
  

 

 

    

 

 

 

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 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 March 31, 2018, the aggregated draw amounted to RMB543,523 and the loan interest payable to Bank of Nanjing was RMB854 with an effective interest rate of 4.75%~5.80% which is the current market rate. The loan was guaranteed by Nanjing Xingzhi as an incentive for XPT NJES to continue doing business in the respective region. There is no restrictive financial covenants attached to the loan.

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 a joint venture entity (the “PE WHJV”). Wuhan Donghu subscribed for RMB384,000 paid in capital in PE WHJV with 49% of the shares. As of December 31, 2017, Wuhan Donghu injected RMB150,000 in cash to PE WHJV. 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.

On August 16, 2017, the Group entered into a loan agreement with China Merchants Bank of a facility amount of RMB200,000 with a maturity date of August 15, 2018. As of March 31, 2018, the aggregated draw amounted to RMB50,000 subject to a floating interest rate of 10% 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 loan is 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.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

13. Other Non-Current Liabilities

Other non-current liabilities consist of the following:

 

     December 31,
2017
     March 31,
2018
 

Deferred construction allowance

     61,771        60,211  

Rental payable

     48,926        67,199  

Deferred government grants

     30,416        30,090  
  

 

 

    

 

 

 

Total

     141,113        157,500  
  

 

 

    

 

 

 

Rental payable represents the difference between the straight-line rental expenses and the actual rental fee paid for long term rental agreements.

14. Research and Development Expenses

Research and development expenses consist of the following:

 

     Three months ended March 31,  
     2017      2018  

Design and development expenses

     276,693        296,474  

Employee compensation

     211,498        341,717  

Travel expenses

     10,909        16,842  

Depreciation and amortization expenses

     6,958        15,400  

Rental and related expenses

     2,411        6,560  

Others

     844        13,657  
  

 

 

    

 

 

 

Total

     509,313        690,650  
  

 

 

    

 

 

 

15. Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of the following:

 

     Three Months ended March 31,  
     2017      2018  

Employee compensation

     203,766        365,839  

Marketing and promotional expenses

     86,184        82,862  

Rental and related expenses

     32,354        85,090  

Professional services

     51,510        83,350  

Depreciation and amortization expenses

     22,280        49,028  

Low value consumable

     8,784        38,496  

Travel expenses

     9,731        21,409  

Others

     28,653        47,144  
  

 

 

    

 

 

 

Total

     443,262        773,218  
  

 

 

    

 

 

 

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

16. Convertible Promissory Note

On February 16, 2017, the Company issued convertible promissory note (“the Note”) in the aggregated principal amount of USD48,000 (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 USD100,000 (“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 USD2.751 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 USD1,800 (RMB12,389 equivalent).

17. 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 USD1.00 per share for cash of USD165,000. 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 USD1.00 per share for cash of USD130,000. In September 2015, the Company issued 24,210,431 shares of Series A-3 Preferred Shares for USD1.6522 per share for cash of USD40,000. 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 USD2.751 per share for cash of USD316,000.

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 USD3.885 per share for cash of USD645,709.

In November and December 2017, the Company issued 211,156,415 shares of Series D convertible redeemable preferred shares (“Series D Preferred Shares”) for USD5.353 per share for cash of USD1,130,320. USD12,000 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 USD26,000 was incurred for the Series D Preferred Shares financing. The Company paid 50% of the commission in cash amounted USD13,000 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.

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 USD0.00025 per share.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

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 USD301, USD189, USD208, USD1,782, USD1,489 and USD890 (RMB1,892, RMB1,177, RMB1,296, RMB11,857, RMB10,039 and RMB5,961, 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, 2017 and March 31, 2018.

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.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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

 

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(All amounts in thousands, except for share and per share data)

 

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.

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 December 31, 2021, the earliest redemption date. According to the redemption price calculation described above, the Company recognized accretion of the Preferred Shares amounted to RMB1,094,190 and RMB2,421,129 during the three months ended March 31, 2017 and 2018, respectively.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

The Company’s convertible redeemable preferred shares activities for the three months ended March 31, 2017 and 2018 are summarized below:

 

    Series A-1 & A-2     Series A-3     Series B     Series C     Series D     Total  
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
    Number of
shares
    Amount
(RMB)
 

Balances as of December 31, 2016

    295,000,000       2,539,993       24,210,431       306,678       102,144,675       2,014,903                               421,355,106       4,861,574  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds from Series A-1 Preferred Shares

          266,511                                                             266,511  

Issuance of preferred shares

                            12,722,646       240,210       113,713,552       409,519                   126,436,198       649,729  

Accretion on convertible redeemable preferred shares to redemption value

          1,019,848             40,755             31,800             1,787                         1,094,190  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2017

    295,000,000       3,826,352       24,210,431       347,433       114,867,321       2,286,913       113,713,552       411,306                   547,791,304       6,872,004  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2017

    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  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Proceeds from Series A-1 Preferred Shares

                                                          78,725             78,725  

Issuance of preferred shares

                                                                       

Accretion on convertible redeemable preferred shares to redemption value

          1,528,107             123,881             480,609             145,149             143,383             2,421,129  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2018

    295,000,000       6,539,838       24,210,431       551,010       114,867,321       2,775,589       166,205,830       4,599,745       213,585,003       7,691,458       813,868,585       22,157,640  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

18. Ordinary Shares

Upon inception, each ordinary share was issued at a par value of USD0.00025 per share. Various numbers of ordinary shares were issued to share-based compensation award recipients. As of December 31, 2017 and March 31, 2018, the authorized share capital of the Company is US$500 divided into 2,000,000,000 shares, comprising of: 1,151,269,325 ordinary shares, 165,000,000 Series A-1 Preferred Shares, 130,000,000 Series A-2 Preferred Shares, 31,720,364 Series A-3 Preferred Shares, 114,867,321 Series B Preferred Shares, 167,142,990 Series C Preferred Shares, 240,000,000 Series D Preferred Shares, each at a par value of USD0.00025 per share.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

As of December 31, 2017 and March 31, 2018, 1,151,269,325 ordinary shares were authorized, 36,727,350 and 37,574,555 shares were issued and 23,850,343 and 27,656,543 shares were outstanding as of December 31, 2017 and March 31, 2018, respectively.

19. Share-based Compensation

Compensation expenses recognized for share-based awards granted by the Company were as follows:

 

     Three Months ended March 31,  
     2017      2018  

Research and development expenses

     5,083        8,920  

Selling, general and administrative expenses

     18,513        33,200  
  

 

 

    

 

 

 

Total

     23,596        42,120  
  

 

 

    

 

 

 

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 three months ended March 31, 2017 and 2018.

(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 under the Prime Hubs Plan:

(i) Employees

 

Employees

   Number of Shares
Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested as of December 31, 2016

     8,400,000        0.72  
  

 

 

    

 

 

 

Vested

     (2,685,416      0.72  
  

 

 

    

 

 

 

Unvested as of March 31, 2017

     5,714,584        0.72  
  

 

 

    

 

 

 

Unvested as of December 31, 2017

     7,058,338        1.04  
  

 

 

    

 

 

 

Vested

     (2,799,998      0.78  
  

 

 

    

 

 

 

Unvested as of March 31, 2018

     4,258,340        1.21  
  

 

 

    

 

 

 

 

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(All amounts in thousands, except for share and per share data)

 

For the three months ended March 31, 2017 and 2018, total share-based compensation expenses recognized for the employee restricted shares granted under the Prime Hubs Plan were RMB6,195 and RMB4,922, respectively.

As of December 31, 2017 and March 31, 2018, there were RMB37,651 and RMB32,398 of unrecognized share-based compensation expenses related to the employee restricted shares granted under the Prime Hubs Plan. Such unrecognized expenses are expected to be recognized over a weighted-average period of 1.69 and 1.74 years, respectively, as of December 31, 2017 and March 31, 2018.

(ii) Non-Employees

 

Non-Employees

   Number of Shares
Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested as of December 31, 2016

                 —                    —  
  

 

 

    

 

 

 

Vested

             
  

 

 

    

 

 

 

Unvested as of March 31, 2017

             
  

 

 

    

 

 

 

Unvested as of December 31, 2017

             
  

 

 

    

 

 

 

Vested

             
  

 

 

    

 

 

 

Unvested as of March 31, 2018

             
  

 

 

    

 

 

 

In January 2017, the Company agreed to repurchase 250,000 vested Prime Hubs restricted shares from a non-employee with total cash consideration of RMB1,686.

For the three months ended March 31, 2017 and 2018, total share-based compensation expenses recognized for the non-employee restricted shares granted the Prime Hubs Plan were nil.

(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 share options to the Group’s non-NIO US employees and both share options and restricted shares to the employees of NIO US. 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 and 2017, the Board of Directors further approved the 2016 Stock Incentive Plan (the “2016 Plan”) and the 2017 Stock Incentive Plan (the “2017 Plan”). The 2016 and 2017 Plans have the same terms as 2015 Plan.

 

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(All amounts in thousands, except for share and per share data)

 

As of December 31, 2017 and March 31, 2018, the Group had not recognized any share-based compensation expenses for options granted to the non-NIO US employees of the Group, because the Company is unable to determine if it is probable that the performance conditions will be satisfied until the event occurs. As a result, the share-based compensation expenses for these options that are only exercisable upon the occurrence of the Company’s initial public offering will be recognized using the graded-vesting method upon the consummation of the initial public offering. 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.

(i) Share Options

The following table summarizes activities of the Company’s share options under the 2015, 2016 and 2017 Plans for three months ended March 31, 2017 and 2018:

 

     Number of
Options
Outstanding
    Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual Life
     Aggregate
Intrinsic
Value
 
           USD      In Years      USD  

Outstanding as of December 31, 2016

     52,623,554       0.32        8.30        51,506  
  

 

 

   

 

 

    

 

 

    

 

 

 

Granted

     1,059,000       0.62                

Exercised

     (249,547     0.27                

Cancelled

     (2,184,549     0.28                

Expired

     (17,048     0.10                
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of March 31, 2017

     51,231,410       0.33        8.41        77,355  
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of December 31, 2017

     57,775,914       0.57        8.52        114,299  
  

 

 

   

 

 

    

 

 

    

 

 

 

Granted

     35,890,683       2.38                

Exercised

     (847,205     0.47                

Cancelled

     (818,549     1.09                

Expired

     (183,814     0.34                
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of March 31, 2018

     91,817,029       1.28        8.99        197,318  
  

 

 

   

 

 

    

 

 

    

 

 

 

Vested and expected to vest as of March 31, 2017

     49,142,590                     73,646  

Exercisable as of March 31, 2017

     2,092,589                     3,184  

Vested and expected to vest as of March 31, 2018

     88,382,286                     188,327  

Exercisable as of March 31, 2018

     5,492,980                     17,492  
  

 

 

   

 

 

    

 

 

    

 

 

 

The weighted-average grant date fair value for options granted under the Company’s 2017 and 2018 Plans during the three months ended March 31, 2017 and 2018 was USD0.33 and USD1.28, respectively, computed using the binomial option pricing model.

The total share-based compensation expenses recognized for share options during the three months ended March 31, 2017 and 2018 was RMB6,443 and RMB11,116 respectively.

 

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(All amounts in thousands, except for share and per share data)

 

The fair value of each option granted under the Company’s 2017 and 2018 Plans during the three months ended March 31, 2017 and 2018 was estimated on the date of each grant using the binomial option pricing model with the assumptions (or ranges thereof) in the following table:

 

     Three Months ended March  
     2017      2018  

Exercise price (USD)

     0.61-2.55        0.10-2.55  

Fair value of the ordinary shares on the date of option grant (USD)

     1.30-2.55        1.30-3.38  

Risk-free interest rate

     2.31%-2.40%        2.74%  

Expected term (in years)

     10        10  

Expected dividend yield

     0%        0%  

Expected volatility

     51%-52%        51%  

Expected forfeiture rate (post-vesting)

     5%        5%  

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, 2017 and March 31, 2018, there were RMB58,444 and RMB88,674 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 2.53 and 2.70 years, respectively.

As of December 31, 2017 and March 31, 2018, there were RMB275,473 and RMB611,127 of unrecognized compensation expenses related to the stocks options granted to the Group’s non-NIO US employees with a performance condition of an IPO, out of which, unrecognized compensation expenses of RMB138,884 and RMB164,381 related to options for which the service condition had been met and are expected to be recognized when the performance target of an IPO is achieved.

(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.

 

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(All amounts in thousands, except for share and per share data)

 

The following table summarizes activities of the Company’s restricted shares under the 2015 plan:

 

     Number of Restricted
Shares Outstanding
     Weighted Average
Grant Date Fair Value
 
            USD  

Unvested at December 31, 2016

     1,837,387        0.96  
  

 

 

    

 

 

 

Vested

     (164,357      0.96  

Forfeited

     (83,062      0.96  
  

 

 

    

 

 

 

Unvested at March 31, 2017

     1,589,968        0.96  
  

 

 

    

 

 

 

Unvested at December 31, 2017

     1,112,977        0.96  
  

 

 

    

 

 

 

Vested

     (158,997      0.96  

Forfeited

            0.96  
  

 

 

    

 

 

 

Unvested at March 31, 2018

     953,980        0.96  
  

 

 

    

 

 

 

As of December 31, 2017 and March 31, 2018, there were RMB6,095 and RMB4,746 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 1.75 and 1.50 years, respectively.

Share-based compensation expenses of RMB1,064 and RMB964 related to restricted shares granted to the employees of NIO US was recognized for the three months ended March 31, 2017 and 2018, respectively.

(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 USD1.6522 per share, which equals to the purchase price paid for the 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 USD12,408 with an interest rate of 1.8% compounded semiannually to 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 date of her employment. 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.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

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:

 

     Three Months ended March 31  
     2017      2018  

Exercise price

     1.82        1.78  

Fair value of the Preferred Shares on the measurement date

     2.70        3.51  

Risk-free interest rate

     2%        2%  

Remaining life (in years)

     4.40        2.18  

Expected dividend yield

     0%        0%  

Expected volatility

     48%        36%  

Share-based compensation expenses related to the Award of RMB9,894 and RMB25,118 was recognized for the three months ended March 31, 2017 and 2018, respectively.

20. 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%.

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

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

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 150% 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 50% 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 in the three months ended March 31, 2017 and 2018 are as follows:

 

     For the
Three Months ended March 31,
 
     2017     2018  

United States

     42.84     29.84

United Kingdom

     19.25     19.00

Germany

     32.98     32.98

Composition of income tax expense for the periods presented are as follows:

 

     For the
Three Months ended March 31,
 
     2017      2018  

Current income tax expense

     2,182        1,883  
  

 

 

    

 

 

 

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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 periods presented are as follows:

 

     For the
Three Months ended March 31,
 
     2017      2018  

Loss before income tax expense

     (958,389      (1,529,139

Income tax expense computed at PRC statutory income tax rate of 25%

     (239,597      (382,285

Non-deductible expenses

     27,793        18,761  

Foreign tax rates differential

     (8,286      17,855  

Additional 50% tax deduction for qualified research and development expenses

     (14,118      (5,649

Tax exempted interest income

     (273      (2,994

US tax credits

     (10,221      (10,359

Tax benefit not utilized

     246,884        366,554  
  

 

 

    

 

 

 

Income tax expense

     2,182        1,883  
  

 

 

    

 

 

 

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.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

The Group’s deferred tax assets consist of the following components:

 

     As of December 31,      As of March 31,  
     2017      2018  

Deferred tax assets

             

Net operating loss carry-forwards

     1,620,535        1,973,917  

Accrued expenses

     84,320        44,828  

Advertising expenses in excess of deduction limit

     65,737        72,880  

Tax credit carry-forwards

     60,624        68,368  

Property, plant and equipment, net

     27,463        34,330  

Deferred rent

     8,699        3,527  

Deferred Revenue

            719  

Intangible assets

     7,104        8,907  

Share-based compensation

     4,106        3,951  

Unrealized foreign exchange loss

     55        55  
  

 

 

    

 

 

 

Total deferred tax assets

     1,878,643        2,211,482  
  

 

 

    

 

 

 

Less: Valuation allowance

     (1,878,643      (2,211,482
  

 

 

    

 

 

 

Total deferred tax assets, net

             
  

 

 

    

 

 

 

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:

 

     As of December 31,      As of March 31,  
     2017      2018  

Valuation allowance

             

Balance at beginning of the period

     672,889        1,878,643  

Additions

     1,205,754        332,839  
  

 

 

    

 

 

 

Balance at end of the period

     1,878,643        2,211,482  
  

 

 

    

 

 

 

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017. The Group is required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring the Group’s U.S. deferred tax assets and liabilities as well as reassessing the net realizability of the deferred tax assets and liabilities. The Tax Act did not give rise to any material impact on the consolidated balance sheets and consolidated statements of comprehensive loss due to the Group’s historical worldwide loss position and the full valuation allowance provided against the Group’s net U.S. deferred tax assets.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows the Group to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. Since the Tax Act was enacted late in the fourth quarter of 2017 (and ongoing guidance and accounting interpretations are expected over the next 12 months), the Group considers the accounting of deferred tax

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

re-measurements and other items to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. The Group expects to complete the analysis within the measurement period in accordance with SAB 118. The Group does not expect any subsequent adjustments to have any material impact on the consolidated balance sheets or consolidated statements of comprehensive loss due to our historical worldwide loss position and the full valuation allowance provided against the Group’s net U.S. deferred tax assets.

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 March 31, 2018.

21. 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 three months ended March 31, 2017 and 2018 as follows:

 

     For the three months ended
March 31,
 
     2017     2018  

Numerator:

    

Net loss

     (960,571     (1,531,022

Accretion on convertible redeemable preferred shares to redemption value

     (1,094,190     (2,421,129

Net loss attributable to non-controlling interests

     11,309       8,242  
  

 

 

   

 

 

 

Net loss attributable to ordinary shareholders of NIO Inc. for basic/dilutive net loss per share

     (2,043,452     (3,943,909
  

 

 

   

 

 

 

Denominator:

    

Weighted-average number of ordinary shares outstanding — basic and diluted

     20,515,137       26,561,329  
  

 

 

   

 

 

 

Basic and diluted net loss per share attributable to ordinary shareholders of
NIO Inc.

     (99.61     (148.48
  

 

 

   

 

 

 

For the three months ended March 31, 2017 and 2018, 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 three months ended March 31, 2017 and 2018 as their effects would be anti-dilutive.

For the three months ended March 31, 2017 and 2018, the Company had potential ordinary shares, including non-vested restricted shares, options granted and Preferred Shares. As the Group incurred losses for the three months ended March 31, 2017 and 2018, these potential ordinary shares were anti-dilutive and excluded from the calculation of diluted net loss per share of the Company. The weighted-average numbers of non-vested restricted shares, options granted and Preferred Shares excluded from the calculation of diluted net loss per share of the Company were 8,552,103, 49,720,434 and 467,741,387 as of March 31, 2017, 6,490,313, 69,505,035 and 813,868,585 as of March 31, 2018 respectively.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

22. Related Party Balances and Transactions

The principal related parties with which the Group had transactions during the years presented are as follows:

 

Name of Entity or Individual

  

Relationship with the Company

Bin Li

  

Principal Shareholder, Chairman of the Board and Chief Executive Officer

Lihong Qin

  

Principal Shareholder, Director and President of the Company

Baidu Capital L.P.

  

Shareholder

Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

  

Affiliate

NIO Capital

  

Controlled by Principal Shareholder

Hubei Changjiang Nextev New Energy Investment Management Co., Ltd.

  

Controlled by Principal Shareholder

Jiangsu Xindian Automotive Co., Ltd.

  

Controlled by Principal Shareholder

Beijing CHJ Information Technology Co., Ltd.

  

Controlled by Principal Shareholder

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

  

Controlled by Principal Shareholder

Shanghai NIO Hongling Investment Management Co., Ltd

  

Controlled by Principal Shareholder

Hubei Changjiang Nextev New Energy Industry Development Capital Partnership (Limited Partnership)

  

Controlled by Principal Shareholder

Beijing Chehui Hudong Guanggao Co., Ltd.

  

Affiliate

Beijing Xinyi Hudong Guanggao Co., Ltd.

  

Affiliate

Bite Shijie (Beijing) Keji Co., Ltd.

  

Affiliate

(a) The Group entered into the following significant related party transactions:

(i) Provision of service

For the three months ended March 31, 2017 and 2018, service income was primarily generated from property management and miscellaneous research and development services the Group provided to its related parties.

 

     For the
Three Months ended March 31,
 
     2017      2018  

Shanghai NIO Hongling Investment Management Co., Ltd

            900  
  

 

 

    

 

 

 

(ii) Acceptance of marketing and advertising service

 

     For the
Three Months ended March 31,
 
     2017      2018  

Beijing Chehui Hudong Guanggao Co., Ltd.

            2,830  

Bite Shijie (Beijing) Keji Co., Ltd.

     2,319        575  

Beijing Xinyi Hudong Guanggao Co., Ltd.

     28        412  
  

 

 

    

 

 

 
     2,347        3,817  
  

 

 

    

 

 

 

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

(iii) Loan to related party

 

     For the
Three Months ended March 31,
 
     2017      2018  

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

     50,000         
  

 

 

    

 

 

 

(iv) Cost of manufacturing consignment

 

     For the
Three Months ended March 31,
 
     2017      2018  

Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

            9,586  
  

 

 

    

 

 

 

(v) Payment on behalf of related parties

 

     For the Three
Months ended March 31,
 
     2017      2018  

Baidu Capital L.P.

            7,332  
  

 

 

    

 

 

 

(vi) Loan to related parties

 

     For the
Three Months ended March 31,
 
     2017      2018  

NIO Capital

            62,882  
  

 

 

    

 

 

 

On January 12, 2018, the Group granted two interest free loans to NIO Capital, with principal amount of USD5,000 each. The loans mature in 6 months. One of the loan can be converted into ordinary shares of a subsidiary of NIO Capital upon maturity at the option of the Group.

(vii) Purchase of property and equipment

 

     For the
Three Months ended March 31,
 
     2017      2018  

Bite Shijie (Beijing) Keji Co., Ltd.

     1,329         
  

 

 

    

 

 

 

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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

 

     As of December 31,      As of March 31,  
     2017      2018  

Ningbo Meishan Free Trade Port Zone Weilan Investment Co., Ltd.

     50,000        50,000  

Baidu Capital L.P.

     21,671        29,003  

Beijing CHJ Information Technology Co., Ltd.

     3,624         

Bin Li

     1,680        1,680  

 

     As of December 31,      As of March 31,  
     2017      2018  

Jiangsu Xindian Automotive Co., Ltd.

     1,627         

Hubei Changjiang Nextev New Energy Investment Management Co., Ltd.

     954         

NIO Capital

            62,882  

Shanghai Weilan Hongling Investment Management Co., Ltd

            900  
  

 

 

    

 

 

 

Total

     79,556        144,465  
  

 

 

    

 

 

 

(ii) Amounts due to related parties

 

     As of December 31,      As of March 31,  
     2017      2018  

Suzhou Zenlead XPT New Energy Technologies Co., Ltd.

     19,466        23,659  

Bin Li

     14,289         

Lihong Qin

     5,338         

Beijing Chehui Hudong Guanggao Co., Ltd.

     576         

Beijing Xinyi Hudong Guanggao Co., Ltd.

     400         
  

 

 

    

 

 

 

Total

     40,069        23,659  
  

 

 

    

 

 

 

23. Commitment and Contingencies

(a) Capital commitments

Capital expenditures contracted for at the balance sheet dates but not recognized in the Group’s consolidated financial statements are as follows:

 

     As of December 31,      As of March 31,  
     2017      2018  

Property and equipment

     1,250,612        1,275,276  

Leasehold improvements

     470,600        492,032  
  

 

 

    

 

 

 

Total

     1,721,212        1,767,308  
  

 

 

    

 

 

 

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

(b) Operating lease commitments

The Group leases certain office premises and buildings under non-cancelable leases. Operating lease expenses recorded in the accompanying consolidated statements of comprehensive loss amounted to RMB31,925 and RMB91,650 for the three months ended March 31, 2017 and 2018, respectively. As of December 31, 2017 and March 31, 2018, the Group had remaining outstanding commitments non-cancelable agreements in respect to its operating leases as follows:

 

     As of December 31,      As of March 31,  
     2017      2018  

Within one year

     233,486        255,542  

1 to 2 years

     261,846        295,357  

2 to 3 years

     278,278        297,694  

More than 3 years

     1,296,315        1,327,198  
  

 

 

    

 

 

 

Total

     2,069,925        2,175,791  
  

 

 

    

 

 

 

24. Unaudited Pro-forma Balance Sheet and Net Loss per Share for Conversion of the Preferred Shares

Immediately prior to the completion of a planned IPO of the Company, the holders of the Preferred Shares of the Company intends to convert the Preferred Shares into ordinary shares on a one-for-one basis. Each fully paid Preferred Shares held by Tencent will be converted into the same number of fully paid Ordinary Shares to be re-designated as Class B Ordinary Shares, each fully paid Preferred Shares held by the Originalwish Limited and Mobike Global Ltd. will be converted into the same number of fully paid Ordinary Shares to be re-designated as Class C Ordinary Shares, while each of the other fully paid Preferred Shares will be converted into the same number of fully paid Ordinary Shares to be re-designated as Class A Ordinary Shares, based on the applicable Preferred Share Conversion Price then in effect respectively. Holders of Class A Ordinary Shares, Class B Ordinary Shares and Class C Ordinary Shares have the same rights, except for voting rights. 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 while holders of Class C ordinary shares are entitled to eight votes per share.

The unaudited pro-forma balance sheet as of March 31, 2018 presents an adjusted financial position as if the Series A-1 and A-2, A3, B, C and D convertible redeemable preferred shares had been converted into ordinary shares as of December 31, 2017 at the conversion ratio of one for one.

 

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NIO INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

The unaudited pro-forma net loss per share for the three months ended March 31, 2017 and 2018 after giving effect to the conversion of the Preferred Shares into ordinary shares as of the inception of the year at the conversion ratio of one-for-one is as follows:

 

     For the Three
Months
Ended

March 31,
2018
 
     RMB  

Numerator:

  

Net loss attributable to the Company’s ordinary shareholders

     (3,943,909

Pro-forma effect of conversion of the Series A-1 and A-2 convertible redeemable preferred shares

     1,528,107  

Pro-forma effect of conversion of the Series A-3 convertible redeemable preferred shares

     123,881  

Pro-forma effect of conversion of the Series B convertible redeemable preferred shares

     480,609  

Pro-forma effect of conversion of the Series C convertible redeemable preferred shares

     145,149  

Pro-forma effect of conversion of the Series D convertible redeemable preferred shares

     143,383  
  

 

 

 

Pro-forma net loss attributable to the Company’s ordinary shareholders - Basic and diluted

     (1,522,780
  

 

 

 

Denominator:

  

Weighted-average ordinary shares outstanding for calculation of pro-forma basic and diluted net loss per ordinary share

     26,561,329  

Pro-forma effect of conversion of the Series A-1 and A-2 convertible redeemable preferred shares

     295,000,000  

Pro-forma effect of conversion of the Series A-3 convertible redeemable preferred shares

     24,210,431  

Pro-forma effect of conversion of the Series B convertible redeemable preferred shares

     114,867,321  

Pro-forma effect of conversion of the Series C convertible redeemable preferred shares

     166,205,830  

Pro-forma effect of conversion of the Series D convertible redeemable preferred shares

     213,585,003  
  

 

 

 

Denominator for pro-forma basic and diluted net loss per ordinary share calculation

     840,429,914  
  

 

 

 

Pro-forma basic and diluted net loss per ordinary share attributable to the Company’s Ordinary shareholders

     (1.81

The effects of all outstanding share options with a performance condition of an IPO and the related share based compensation expenses were excluded from the computation of diluted pro-forma net loss per share for the three months ended March 31, 2018 because they are contingent upon the completion of an initial public offering by the Company and that contingency have not been resolved.

25. Subsequent Events

In the second quarter of 2018, the Group entered into a series of contractual arrangements with Shanghai Anbin and Beijing NIO, our VIEs, and their shareholders to conduct certain of our operations in China in the future.

In the second quarter of 2018, XPT (Nanjing) E-Powertrain Technology Co., Ltd. and Nanjing Punch Powertrain Automatic Transmission Co., Ltd. entered into a joint venture agreement to establish a joint venture to develop, produce and sell gear box and other components of new energy vehicles, and provision of after-sales service. Pursuant to the joint venture agreement, the Group has agreed to invest 50% of the registered capital of the joint venture. The total registered capital of the joint venture is RMB60,000.

 

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NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(All amounts in thousands, except for share and per share data)

 

In the second quarter of 2018, the Group, an entity associated with Mr. Bin Li, NIO Capital, Guangqi New Energy Automobile Co., Ltd. and Guangzhou Automobile Group Co., Ltd, jointly established a joint venture company, GAC-Nio New Energy Vehicle Technology Co., Ltd. to mainly engage in electric vehicle and parts development, sales and services. Pursuant to the joint venture agreement, the Group has agreed to invest 22.5% of the registered capital of the joint venture. The total registered capital of the joint venture is RMB500,000.

In the second quarter of 2018, the total amount of the non-recourse loan, which included USD12,408 of principal and USD511 of interest were fully repaid by the Borrower.

In the second quarter of 2018, the Group entered into an agreement with Nanjing Xingzhi Technology Industry Development Co., Ltd., under which the Group agreed to purchase Xingzhi’s shareholding in XPT NJES at a price of RMB41,773.

In the second quarter of 2018, XPT Limited and XPT (Jiangsu) Investment Co., Ltd. entered into a reorganization agreement to set up a new company as a wholly owned subsidiary of XPT (Jiangsu) Investment Co., Ltd., and pursuant to such agreement, XPT Limited has agreed to transfer its shareholding in XPT Technology Limited and its subsidiaries to such new company. In addition, XPT Limited and XPT (Jiangsu) Investment Co., Ltd. entered into an investment agreement with certain third party strategic investors, pursuant to which the third party strategic investors, subject to certain closing conditions, will make cash contributions up to RMB1,800,000 into such new company, which represents a maximum of 27.48% shareholding of the new company.

 

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Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

The post-offering amended and restated memorandum and articles of association that we expect to adopt and to become effective immediately prior to the completion of this offering provide that we shall indemnify our directors and officers (each an indemnified person) against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such indemnified person, other than by reason of such person’s own dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such indemnified person in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere.

Pursuant to the indemnification agreements the form of which is filed as Exhibit 10.4 to this registration statement, 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 such a director or officer.

The underwriting agreement, the form of which will be filed as Exhibit 1.1 to this registration statement, will also provide indemnification for us and our officers and directors for certain liabilities.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.

During the past three years, we have issued the following securities. We believe that each of the following issuances was exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act regarding transactions not involving a public offering or in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were involved in these issuances of securities.

 

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

Prime Hubs Limited

  January 6, 2015   26,900,001 ordinary shares   US$6,725.0

Originalwish Limited

  March 18, 2015   122,045,675 series A-1 preferred shares   US$122,045,675

Hillhouse NEV Holdings Limited

  March 18, 2015   50,000,000 series A-2 preferred shares   US$50,000,000.0

Shunwei TMT II Limited

  March 18, 2015   10,000,000 series A-2 preferred shares   US$10,000,000.0

mobike Global Ltd.

  March 18, 2015   26,454,325 series A-1 preferred shares   US$26,454,325.0

HCM VI Limited

  March 18, 2015   1,500,000 series A-1 preferred shares   US$1.0

 

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Table of Contents

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

Shunwei Growth II Limited

  March 18, 2015   20,000,000 series A-2 preferred shares   US$20,000,000.0

Energy Lee Limited

  May 6, 2015   15,000,000 series A-1 preferred shares   US$15,000,000.0

Mount Putuo Investment Limited

  May 6, 0215   30,000,000 series A-2 preferred shares   US$30,000,000.0

Smart Group Global Limited

  June 23, 2015   20,000,000 series A-2 preferred shares   US$20,000,000.0

Sequoia Capital China GF HoldcoIII-A, Ltd.

 

September 12, 2015

 

18,157,895 series A-3 preferred shares

 

US$30,000,000.0

Joy Capital I, L.P.

  September 12, 2015   6,052,536 series A-3 preferred shares   US$10,000,000.0

Padmasree Warrior

  March 10, 2016   7,509,933 series A-3 preferred shares   US$12,407,911.3

Anderson Investments Pte. Ltd.

  July 21, 2016   21,810,251 series B preferred shares   US$60,000,000.0

Hillhouse NEV Holdings Limited

  July 21, 2016   3,635,042 series B preferred shares   US$10,000,000.0

Shunwei TMT II Limited

  July 21, 2016   3,635,042 series B preferred shares   US$10,000,000.0

Shunwei Growth II Limited

  July 21, 2016   7,270,083 series B preferred shares   US$20,000,000.0

Mount Putuo Investment Limited

  July 21, 2016   10,905,125 series B preferred shares   US$30,000,000.0

SCC Growth IV Holdco A, Ltd.

  July 21, 2016   3,635,042 series B preferred shares   US$10,000,000.0

Joy Capital I, L.P.

  July 21, 2016   1,817,521 series B preferred shares   US$5,000,000.0

Bluestone Company Limited

  July 21, 2016   10,905,125 series B preferred shares   US$30,000,000.0

Magic Stone Alternative Private Equity Fund, L.P.

 

July 21, 2016

 

3,432,680 series B preferred shares

 

US$9,443,303.0

TPG Growth III SF Pte. Ltd.

  July 21, 2016   5,452,563 series B preferred shares   US$15,000,000.0

Ultimate Lenovo Limited

  July 21, 2016   5,452,563 series B preferred shares   US$15,000,000.0

Renaissance Era International Private Equity Fund I L.P.

 

July 21, 2016

 

1,817,521 series B preferred shares

 

US$5,000,000.0

Palace Investments Pte. Ltd.

  July 21, 2016   1,817,521 series B preferred shares   US$5,000,000.0

 

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Table of Contents

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

Grandfield Investment Ltd.

  July 21, 2016   5,816,067 series B preferred shares   US$16,000,000.0

IDG China Venture Capital Fund IV L.P.

 

August 19, 2016

 

1,611,232 series B preferred shares

 

US$4,432,500.0

IDG China IV Investors L.P.

  August 19, 2016   206,289 series B preferred shares   US$567,500.0

Bright Sky II, L.P.

  September 30, 2016   5,452,563 series B preferred shares   US$15,000,000.0

ORIENT HONTAI LIMITED

  February 8, 2017   2,908,033 series B preferred shares   US$8,000,000.0

LONG WINNER INVESTMENT LIMITED

 

February 9, 2017

 

1,817,521 series B preferred shares

 

US$5,000,000.0

HH RSV-X Holdings Limited

  February 9, 2017   7,997,092 series B preferred shares   US$22, 000,000.0

Magic Stone Special Opportunity Fund V L.P.

 

July 21, 2016

 

7,472,455 series B preferred shares

 

US$40,000,000.0

Baidu Capital L.P.

  March 24, 2017   25,740,026 series C preferred shares   US$6,435.0

West City Asia Limited

  March 24, 2017   2,574,003 series C preferred shares   US$10,000,000.0

Haitong International Investment Holdings Limited.

 

March 24, 2017

 

2,574,003 series C preferred shares

 

US$10,000,000.0

Haixia NEV International Limited Partnership

 

March 24, 2017

 

5,148,005 series C preferred shares

 

US$20,000,000.0

New Margin Capital Hong Kong Co., Limited

 

March 24, 2017

 

2,574,003 series C preferred shares

 

US$10,000,000.0

Palace Investments Pte. Ltd.

  March 24, 2017   1,287,001 series C preferred shares   US$5,000,000.0

Image Frame Investment (HK) Limited

  March 24, 2017   25,740,026 series C preferred shares   US$100,000,000.0

Total Prestige Investment Limited

  March 24, 2017   1,750,322 series C preferred shares   US$6,800,000.0

Zhide EV Investment Limited

  March 24, 2017   2,574,003 series C preferred shares   US$10,000,000.0

Bright Sky II, L.P.

  March 24, 2017   2,574,003 series C preferred shares   US$10,000,000.0

TPG Growth III SF Pte. Ltd.

  March 24, 2017   1,673,102 series C preferred shares   US$6,500,000.0

Bluestone Company Limited

  March 24, 2017   7,722,008 series C preferred shares   US$30,000,000.0

CEG Smart Travel Co., Limited

  March 24, 2017   2,923,844 series C preferred shares   US$11,359,369.2

 

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Table of Contents

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

IDG China Venture Capital Fund IV L.P.

 

March 24, 2017

 

228,185 series C preferred shares

 

US$886,500.0

IDG China IV Investors L.P.

  March 24, 2017   29,215 series C preferred shares   US$113,500.0

CYBER TYCOON LIMITED

  March 24, 2017   4,385,929 series C preferred shares   US$17,039,333.0

Honor Best International Limited

  March 24, 2017   8,771,858 series C preferred shares   US$34,078,667.0

Tanzanite Gem Holdings Limited

  March 24, 2017   15,444,016 series C preferred shares   US$60,000,000.0

Anderson Investments Pte. Ltd.

  May 3, 2017   10,296,010 series C preferred shares   US$40,000,000.0

Ultimate Lenovo Limited

  May 3, 2017   7,722,007 series C preferred shares   US$30,000,000.0

CYBER TYCOON LIMITED

  May 3, 2017   676,276 series C preferred shares   US$2,627,333.0

Honor Best International Limited

  May 3, 2017   1,352,553 series C preferred shares   US$5,254,667.0

CHAMPION ELITE GLOBAL LIMITED

 

May 3, 2017

 

257,400 series C preferred shares

 

US$1,000,000.0

CHINA INDUSTRIAL INTERNATIONAL TRUST ASSET MANAGEMENT COMPANY LIMITED

 

May 3, 2017

 

3,861,004 series C preferred shares

 

US$15,000,000.0

HF Holdings Limited

  May, 3, 2017   2,574,003 series C preferred shares   US$10,000,000.0

Tea Leaf Limited

  May 3, 2017   7,979,408 series C preferred shares   US$31,000,000.0

BLISSFUL DAYS HOLDINGS LIMITED

 

July 6, 2017

 

1,029,601 series C preferred shares

 

US$257.0

Guangfa Xinde Capital Management Limited

 

July 6, 2017

 

1,300,000 series C preferred shares

 

US$5,050,500.0

Bluefuture Fund L.P.

  July 6, 2017   3,861,004 series C preferred shares   US$5,000,000.0

UBS AG, London Branch

  July 6, 2017   5,148,005 series C preferred shares   US$20,000,000.0

KEEN EAGLE CAPITAL INVESTMENT LIMITED

 

July 6, 2017

 

2,574,003 series C preferred shares

 

US$10,000,000.0

 

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Table of Contents

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

China Oceanwide International Asset Management Limited

 

July 6, 2017

 

2,574,003 series C preferred shares

 

US$10,000,000.0

CMFHK Fortune 100 SPC

  July 20, 2017   1,287,001 series C preferred shares   US$321.8

Image Frame Investment (HK) Limited

  November 10, 2017   61,648,781 series D preferred shares   US$330,000,000.0

TPP Follow-on I Holding D Limited

  November 10, 2017   3,736,290 series D preferred shares   US$20,000,000.0

LEAP PROSPECT LIMITED

  November 10, 2017   29,890,318 series D preferred shares   US$160,000,000.0

Serenity WL Holdings Ltd.

  November 10, 2017   5,604,435 series D preferred shares   US$30,000,000.0

SCOTTISH MORTGAGE INVESTMENT TRUST PLC

 

November 10, 2017

 

4,670,361 series D preferred shares

 

US$25,000,000.0

PACIFIC HORIZON INVESTMENT TRUST PLC

 

November 10, 2017

 

467,037 series D preferred shares

 

US$2,500,000.0

Myriad Opportunities Master Fund Limited

 

November 10, 2017

 

4,670,362 series D preferred shares

 

US$25,000,000.0

LONE SPRUCE, L.P.

  November 10, 2017   138,243 series D preferred shares   US$740,003.9

Lone Cypress, LTD.

  November 10, 2017   3,598,047 series D preferred shares   US$18,539,996.1

ULTRA RESULT HOLDINGS LIMITED

 

November 10, 2017

 

2,802,217 series D preferred shares

 

US$15,000,000.0

AL NAHDHA INVESTMENT LLC

  November 10, 2017   2,120,345 series D preferred shares   US$11,350,000.0

Al Beed Group

  November 10, 2017   467,036 series D preferred shares   US$2,500,000.0

Oldbridge Invest L.L.C.

  November 10, 2017   28,022 series D preferred shares   US$150,000.0

AC Limited

  November 10, 2017   1,868,145 series D preferred shares   US$10,000,000.0

BEST CASTLE LIMITED

  November 10, 2017   5,604,435 series D preferred shares   US$30,000,000.0

HUBEI SCIENCE & TECHNOLOGY INVESTMENT GROUP (HONG KONG) COMPANY LIMITED

 



November 10, 2017

 

 

5,604,435 series D preferred shares

 

 

US$30,000,000.0

WP NIO Investment Partnership, LP

  November 10, 2017   3,736,290 series D preferred shares   US$20,000,000.0

 

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Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

Lezmenia Assets Limited

  November 10, 2017   1,401,109 series D preferred shares   US$7,500,000.0

LAPATHIA HOLDINGS LIMITED

  November 10, 2017   1,401,108 series D preferred shares   US$7,500,000.0

PV Vision Limited

  November 10, 2017   6,538,507 series D preferred shares   US$35,000,000.0

Silver Ridge Fund I Limited Partnership

 

November 10, 2017

 

934,072 series D preferred shares

 

US$5,000,000.0

The Mabel Chan 2012 Family Trust

  November 10, 2017   373,629 series D preferred shares   US$2,000,000.0

Magic Stone Special Opportunity Fund IV L.P.

 

November 10, 2017

 

597,806 series D preferred shares

 

US$3,200,000.0

Mega Treasure Investment Limited

  November 10, 2017   1,120,887 series D preferred shares   US$6,000,000.0

Tanzanite Gem Holdings Limited

  November 10, 2017   12,329,756 series D preferred shares   US$66,000,000.0

SCC Growth IV Holdco A, Ltd.

  November 10, 2017   934,072 series D preferred shares   US$5,000,000.0

Joy Next Investment Management Limited

 

November 10, 2017

 

2,241,774 series D preferred shares

 

US$12,000,000.0

Anderson Investments Pte. Ltd.

  November 10, 2017   9,340,724 series D preferred shares   US$50,000,000.0

HH DYU Holdings Limited

  November 10, 2017   3,736,290 series D preferred shares   US$20,000,000.0

TPG Growth III SF Pte. Ltd.

  November 10, 2017   1,214,294 series D preferred shares   US$6,500,000.0

Bluestone Company Limited

  November 10, 2017   4,670,362 series D preferred shares   US$25,000,000.0

Bright Sky II, L.P.

  November 10, 2017   4,670,362 series D preferred shares   US$25,000,000.0

Diamond Division Limited

  November 10, 2017   523,081 series D preferred shares   US$2,800,000.0

WEST CITY ASIA LIMITED

  November 10, 2017   653,851 series D preferred shares   US$3,500,000.0

Haixia NEV International Limited Partnership

 

November 10, 2017

 

5,604,435 series D preferred shares

 

US$30,000,000.0

Palace Investments Pte.Ltd.

  November 10, 2017   896,710 series D preferred shares   US$4,800,000.0

 

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Table of Contents

Securities/Purchaser

 

Date of Issuance

 

Number of Securities

 

Consideration

KEEN EAGLE CAPITAL INVESTMENT LIMITED

 

November 10, 2017

 

373,629 series D preferred shares

 

US$2,000,000.0

Caitong Funds SPC – New Technology Fund Segregated Portfolio

 

November 24, 2017

 

4,670,362 series D preferred shares

 

US$25,000,000.0

CICC Ehealthcare Investment Limited

  November 24, 2017   2,802,217 series D preferred shares   US$15,000,000.0

CapThrone Investment Limited Partnership

 

November 24, 2017

 

1,868,145 series D preferred shares

 

US$10,000,000.0

HCM VI Limited

  November 24, 2017   2,428,588 series D preferred shares   US$13,000,000.0

STAR AZURE INTERNATIONAL LIMITED

 

December 1, 2017

 

4,670,362 series D preferred shares

 

US$25,000,000.0

Oceanwide Sigma Limited

  December 15, 2017   934,072 series D preferred shares   US$5,000,000.0

Directors, executive officers and employees and consultants of our company

 

Various dates

 

Options to purchase 60,324,614 ordinary shares

 

Services to our company

ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a) Exhibits

See Exhibit Index beginning on page II-10 of this registration statement.

The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosure that was made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosure of material information regarding material contractual provisions is required to make the statements in this registration statement not misleading.

 

(b) Financial Statement Schedules

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.

 

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Table of Contents

ITEM 9. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining any liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

  (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

  (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

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Table of Contents
  (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

  (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

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Table of Contents

NIO Inc.

Exhibit Index

 

Exhibit

Number

  

Description of Document

  1.1*    Form of Underwriting Agreement
  3.1    Tenth Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect
  3.2*    Form of Eleventh Amended and Restated Memorandum and Articles of Association of the Registrant (effective immediately prior to the closing of this offering)
  4.1*    Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3)
  4.2*    Registrant’s Specimen Certificate for Ordinary Shares
  4.3*    Form of Deposit Agreement, among the Registrant, the depositary and the holders and beneficial owners of American Depositary Shares issued thereunder
  4.4    Shareholders Agreement between the Registrant and other parties thereto dated November 10, 2017
  5.1*    Opinion of Maples and Calder (Hong Kong) LLP regarding the validity of the ordinary shares being registered and certain Cayman Islands tax matters
  8.1*    Opinion of Maples and Calder (Hong Kong) LLP regarding certain Cayman Islands tax matters (included in Exhibit 5.1)
  8.2*    Opinion of Han Kun Law Offices regarding certain PRC tax matters (included in Exhibit 99.2)
10.1    2015 Share Incentive Plan
10.2    2016 Share Incentive Plan
10.3    2017 Share Incentive Plan
10.4*    Form of Indemnification Agreement between the Registrant and its directors and executive officers
10.5*    Form of Employment Agreement between the Registrant and its executive officers
10.6*    English translation of Manufacture Cooperation Agreement between the registrant and Jianghuai Automobile Group Co., Ltd. dated May 25, 2016
10.7    English translation of Power of Attorney among shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. dated April 19, 2018
10.8    English translation of Loan Agreements among shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. dated April 19, 2018
10.9    English translation of Equity Interest Pledge Agreements among shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. dated April 19, 2018
10.10    English translation of Exclusive Business Cooperation Agreements among shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. dated April 19, 2018
10.11    English translation of Exclusive Option Agreements among shareholders of Shanghai Anbin, Shanghai Anbin and NIO Co., Ltd. dated April 19, 2018
10.12    English translation of Power of Attorney among shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. dated April 19, 2018

 

II-10


Table of Contents

Exhibit

Number

  

Description of Document

10.13    English translation of Loan Agreements among shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. dated April 19, 2018
10.14    English translation of Equity Interest Pledge Agreements among shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. dated April 19, 2018
10.15    English translation of Exclusive Business Cooperation Agreements among shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. dated April 19, 2018
10.16    English translation of Exclusive Option Agreements among shareholders of Beijing NIO, Beijing NIO and NIO Co., Ltd. dated April 19, 2018
21.1    Significant Subsidiaries of the Registrant
23.1*    Consent of PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm
23.2*    Consent of Maples and Calder (Hong Kong) LLP (included in Exhibit 5.1)
23.3*    Consent of Han Kun Law Offices (included in Exhibit 99.2)
24.1*    Powers of Attorney (included on signature page)
99.1*    Code of Business Conduct and Ethics of the Registrant
99.2*    Opinion of Han Kun Law Offices regarding certain PRC law matters
99.3*    Consent of Frost & Sullivan

 

* To be filed by amendment.

 

II-11


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Shanghai, China, on            , 2018.

 

NIO INC.
By:  

 

  Name: Bin Li
  Title: Chairman of the Board of Directors
            and Chief Executive Officer

 

II-12


Table of Contents

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints each of Bin Li and Louis T. Hsieh as attorneys-in-fact with full power of substitution for him or her in any and all capacities to do any and all acts and all things and to execute any and all instruments which said attorney and agent may deem necessary or desirable to enable the registrant to comply with the Securities Act of 1933, as amended (the “Securities Act”), and any rules, regulations and requirements of the Securities and Exchange Commission thereunder, in connection with the registration under the Securities Act of ordinary shares of the registrant (the “Shares”), including, without limitation, the power and authority to sign the name of each of the undersigned in the capacities indicated below to the Registration Statement on Form F-1 (the “Registration Statement”) to be filed with the Securities and Exchange Commission with respect to such Shares, to any and all amendments or supplements to such Registration Statement, whether such amendments or supplements are filed before or after the effective date of such Registration Statement, to any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act, and to any and all instruments or documents filed as part of or in connection with such Registration Statement or any and all amendments thereto, whether such amendments are filed before or after the effective date of such Registration Statement; and each of the undersigned hereby ratifies and confirms all that such attorney and agent shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

 

                 , 2018

Bin Li

   Chairman of the Board of
Directors and Chief Executive Officer (Principal Executive Officer)
 

 

                 , 2018

Lihong Qin

   Director  

 

                 , 2018

Padmasree Warrior

   Director  

 

                 , 2018

Tian Cheng

   Director  

 

                 , 2018

Xiang Li

   Director  

 

                 , 2018

Liang Li

   Director  

 

                 , 2018

Hai Wu

   Director  

 

                 , 2018

Wenjie Wu

   Director  

 

                 , 2018

Xiangping Zhong

   Director  

 

II-13


Table of Contents

Signature

  

Title

 

Date

 

                 , 2018

Zhaohui Li

   Director  

 

                 , 2018

Louis T. Hsieh

   Chief Financial Officer (Principal Financial and Accounting Officer)  

 

II-14


Table of Contents

SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of NIO Inc. has signed this registration statement or amendment thereto in New York on             , 2018.

 

Authorized U.S. Representative
By:  

 

Name:  
Title:  

 

II-15

EX-3.1

Exhibit 3.1

Execution Version

TENTH AMENDED AND RESTATED

MEMORANDUM

AND

ARTICLES OF ASSOCIATION

OF

NIO INC.

(adopted by special resolution dated November 10, 2017)

INCORPORATED IN THE CAYMAN ISLANDS


THE COMPANIES LAW (AS AMENDED)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

TENTH AMENDED AND RESTATED MEMORANDUM OF

ASSOCIATION

OF

NIO INC.

(Adopted by special resolution passed on November 10, 2017)

 

1. The name of the Company is NIO Inc.

 

2. The Registered Office of the Company shall be situated at the offices of Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite #5-204, 23 Lime Tree Bay Avenue, P.O. Box 2547, Grand Cayman, KY1-1104, Cayman Islands, or such other place in the Cayman Islands as the Directors may from time to time decide, being the registered office of the Company.

 

3. The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by Section 7(4) of the Companies Law (as amended) or as the same may be amended from time to time, or any other law of the Cayman Islands. Such objects shall include, but without limitation, the following:

 

  (a) (i) To carry on the business of an investment company and to act as promoters and entrepreneurs and to carry on business as financiers, capitalists, concessionaires, merchants, brokers, traders, dealers, agents, importers and exporters and to undertake and carry on and execute all kinds of investment, financial, commercial, mercantile, trading and other operations.

(ii) To carry on whether as principals, agents or otherwise howsoever the business of realtors, developers, consultants, estate agents or managers, builders, contractors, engineers, manufacturers, dealers in or vendors of all types of property including services.

 

  (b) To exercise and enforce all rights and powers conferred by or incidental to the ownership of any shares, stock, obligations or other securities including without prejudice to the generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some special proportion of the issued or nominal amount thereof, to provide managerial and other executive, supervisory and consultant services for or in relation to any company in which the Company is interested upon such terms as may be thought fit.

 

-1-


  (c) To purchase or otherwise acquire, to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with real and personal property and rights of all kinds and, in particular, mortgages, debentures, produce, concessions, options, contracts, patents, annuities, licenses, stocks, shares, bonds, policies, book debts, business concerns, undertakings, claims, privileges and choses in action of all kinds.

 

  (d) To subscribe for, conditionally or unconditionally, to underwrite, issue on commission or otherwise, take, hold, deal in and convert stocks, shares and securities of all kinds and to enter into partnership or into any arrangement for sharing profits, reciprocal concessions or cooperation with any person or company and to promote and aid in promoting, to constitute, form or organize any company, syndicate or partnership of any kind, for the purpose of acquiring and undertaking any property and liabilities of the Company or of advancing, directly or indirectly, the objects of the Company or for any other purpose which the Company may think expedient.

 

  (e) To stand surety for or to guarantee, support or secure the performance of all or any of the obligations of any person, firm or company whether or not related or affiliated to the Company in any manner and whether by personal covenant or by mortgage, charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital or by any such method and whether or not the Company shall receive valuable consideration therefor.

 

  (f) To engage in or carry on any other lawful trade, business or enterprise which may at any time appear to the Directors or the Company capable of being conveniently carried on in conjunction with any of the aforementioned businesses or activities or which may appear to the Directors or the Company likely to be profitable to the Company.

In the interpretation of this Memorandum of Association in general and of this Clause 3 in particular no object, business or power specified or mentioned shall be limited or restricted by reference to or inference from any other object, business or power, or the name of the Company, or by the juxtaposition of two or more objects, businesses or powers and that, in the event of any ambiguity in this clause or elsewhere in this Memorandum of Association, the same shall be resolved by such interpretation and construction as will widen and enlarge and not restrict the objects, businesses and powers of and exercisable by the Company.

 

-2-


4. Except as prohibited or limited by the Companies Law (as amended), the Company shall have full power and authority to carry out any object and shall have and be capable of from time to time and at all times exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in doing in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects and whatever else may be considered by it as incidental or conducive thereto or consequential thereon, including, but without in any way restricting the generality of the foregoing, the power to make any alterations or amendments to this Memorandum of Association and the Articles of Association of the Company considered necessary or convenient in the manner set out in the Articles of Association of the Company, and the power to do any of the following acts or things, viz:

to pay all expenses of and incidental to the promotion, formation and incorporation of the Company; to register the Company to do business in any other jurisdiction; to sell, lease or dispose of any property of the Company; to draw, make, accept, endorse, discount, execute and issue promissory notes, debentures, bills of exchange, bills of lading, warrants and other negotiable or transferable instruments; to lend money or other assets and to act as guarantors; to borrow or raise money on the security of the undertaking or on all or any of the assets of the Company including uncalled capital or without security; to invest monies of the Company in such manner as the Directors determine; to promote other companies; to sell the undertaking of the Company for cash or any other consideration; to distribute assets in specie to Members of the Company; to make charitable or benevolent donations; to pay pensions or gratuities or provide other benefits in cash or kind to Directors, officers, employees, past or present and their families; to purchase Directors and officers liability insurance and to carry on any trade or business and generally to do all acts and things which, in the opinion of the Company or the Directors, may be conveniently or profitably or usefully acquired and dealt with, carried on, executed or done by the Company in connection with the business aforesaid PROVIDED THAT the Company shall only carry on the businesses for which a license is required under the laws of the Cayman Islands when so licensed under the terms of such laws.

 

5. The Company is a company limited by shares. The liability of each Member is limited to the amount from time to time unpaid on such Member’s shares.

 

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6. The authorised share capital of the Company is US$500,000 divided into 2,000,000,000 shares, comprising of: (i) 1,151,269,325 ordinary shares of a nominal or par value of US$0.00025 each, (ii) 165,000,000 Series A-1 Preferred Shares of a nominal or par value of US$0.00025 each, (iii) 130,000,000 Series A-2 Preferred Shares of a nominal or par value of US$0.00025 each, (iv) 31,720,364 Series A-3 Preferred Shares of a nominal or par value of US$0.00025 each, (v) 114,867,321 Series B Preferred Shares of a nominal or par value of US$0.00025 each, (vi) 167,142,990 Series C Preferred Shares of a nominal or par value of US$0.00025 each, and (v) 240,000,000 Series D Preferred Shares of a nominal or par value of US$0.00025 each, with power for the Company insofar as is permitted by law, to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Companies Law (as amended) and the Articles of Association and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference or otherwise shall be subject to the powers hereinbefore contained.

 

7. If the Company is registered as exempted, its operations will be carried on subject to the provisions of Section 163 of the Companies Law (as amended) and, subject to the provisions of the Companies Law (as amended) and the Articles of Association, it shall have the power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

 

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THE COMPANIES LAW (As Amended)

OF THE CAYMAN ISLANDS

COMPANY LIMITED BY SHARES

NINTH AMENDED AND RESTATED ARTICLES OF ASSOCIATION

OF

NIO INC.

(Adopted by special resolution passed on November 10, 2017)

 

1. In these Articles Table A in the Schedule to the Statute does not apply and, unless there be something in the subject or context inconsistent therewith,

 

Additional Closing”                has the same meaning as in the Purchase Agreement.
Additional Shares    shall bear the meaning set forth in Article 8(c)(iii)(B) hereto.
Affiliate    has the same meaning as in the Shareholders Agreement.
Articles    means these Articles as originally framed or as from time to time altered by Special Resolution.
Approved Sale    has the same meaning as in the Shareholders Agreement.
Auditors    means the persons for the time being performing the duties of auditors of the Company.
Baidu Capital    means BAIDU CAPITAL L.P., an exempted limited partnership duly registered and validly existing under the laws of Cayman Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
Benchmark Shares    means, with respect to a holder of Preferred Shares, the number of Preferred Shares held by such holder of Preferred Shares as of the Initial Closing Date as defined in the Shareholders Agreement(as converted or reclassified from time to time in accordance with these articles).

 

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Blissful Days”    means Blissful Days Holdings Limited (福日控股有限公司), a British business company duly incorporated and validly existing under the Laws of the British Virgin Islands
Bluefuture    means Bluefuture Fund L.P., an exempted limited partnership duly incorporated and validly existing under the Laws of the Cayman Islands.
Bluestone    means BLUESTONE COMPANY LIMITED, a company limited by shares duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Board” and “Board of Directors    means the board of directors of the Company.
Bright Sky    means BRIGHT SKY II, L.P., an exempted limited partnership duly registered and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Business    means the business of the Group Companies, which is research and development, design, manufacturing, and sales of new energy automobiles (electric cars) and/or the components and accessory products related thereto, the provision of related services, the establishment and operation of charging networks, and other business as may be approved by the Board or the Members of the Company in accordance with these Articles and the Shareholders Agreement from time to time.
Business Day    means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by law to be closed in the Cayman Islands, the PRC or Hong Kong
Champion Elite    means Champion Elite Global Limited (冠傑環球有限公司), a BVI business company duly registered and validly existing under the Laws of the British Virgin Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.

 

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ChinaEquity    means CHINAEQUITY SMART TRAVEL CO., LTD., a limited liability company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
CIB    means Tea Leaf Limited, an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands.
CIIT    means CHINA INDUSTRIAL INTERNATIONAL TRUST ASSET MANAGEMENT COMPANY LIMITED (兴业国信资产管理有限公司) a limited liability company duly registered and validly existing under the Laws of the PRC, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
Closing    has the same meaning as in the Purchase Agreement.
Company    means the above-named Company.
Control Documents    has the same meaning as in the Purchase Agreement.
Control Documents Termination    means a termination of the Control Documents that has a materially adverse effect on the condition, business or prospects of the Company.
Covered Persons    shall bear the meaning set forth in Article 138 hereto.
debenture    means debenture stock, mortgages, bonds and any other such securities of the Company whether constituting a charge on the assets of the Company or not.
Deemed Liquidation    shall bear the meaning set forth in Article 8(b)(vii) hereto.
Directors    means all of the directors for the time being of the Company.
Electronic Record    has the same meaning as in the Electronic Transactions Law.
Electronic Transactions Law    means the Electronic Transactions Law (2003 Revision) of the Cayman Islands.

 

-3-


Energy    means ENERGY LEE LIMITED, a business company with limited liability duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-1 Preferred Shares as of the date of adoption of these Articles.
Equity Securities    means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, profits interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, note, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any contract providing for the acquisition of any of the foregoing.
Excluded Opportunity    shall bear the meaning set forth in Article 138 hereto.
Exempted Securities    shall bear the meaning set forth in Article 8(c)(iii)(E) hereto.
Fair Market Value    shall bear the meaning set forth in Article 8(b)(viii) hereto.
Founder Vehicles    means, collectively, mobike Global and Originalwish.
Four Votes    shall bear the meaning set forth in Article 79 hereto.
Golden Brick    means GOLDEN BRICK CAPITAL PRIVATE EQUITY FUND II L.P., an exempted limited partnership duly registered and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares as of the date of adoption of these Articles.
Grandfield    means GRANDFIELD INVESTMENT LTD., an exempted company duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares as of the date of adoption of these Articles.

 

-4-


Group Company    means each of the Company and its Subsidiaries (including NIO Nextev Limited (formerly known as Nextev Limited), XPT Limited, XPT Technology Limited, XPT, Inc., NIO Co., Ltd., Shanghai XPT Technology Co., Ltd., XPT (Jiangsu) Investment Co., Ltd., (formerly known as “XPT Investment Co. Ltd.”) XPT (Nanjing) E-Powertrain Technology Co., Ltd., XPT (Nanjing) Energy Storage System Co., Ltd., NIO Technology Co., Ltd., Nextev User Enterprise Limited, Shanghai NIO Sales and Service Co., Ltd. (formerly known as Shanghai Weilai Auto Distribution Service Co. Ltd.), Nextev Power Express Limited, NIO Energy Investment (Hubei) Co. (formerly known as “Nextev Energy Investment (Hubei) Co.”), Ltd., Shanghai NIO Energy Technology Co., Ltd. (formerly known as “Shanghai Nextev Energy Technology Co., Ltd.”), Wuhan NIO Energy Co., Ltd. (formerly known as “Wuhan Nextev Energy Co., Ltd.”), Beijing Libite Auto Technology Co., Ltd., Xtronics (Nanjing) Automotive Intelligent Technology Co. Ltd., NIO USA, Inc. (formerly known as Nextev USA, Inc.), NIO GmbH (formerly known as Nextev GmbH), NIO Nextev (UK) Ltd (formerly known as Nextev (UK) Limited), other Subsidiaries set out on Schedule III of the Purchase Agreement, and other Subsidiaries to be established from time to time), and “Group” or “Group Companies” refers to all of Group Companies collectively.
Guangfa    means Guangfa Xinde Capital Management Limited, a corporation duly incorporated under and validly existing under the Laws of the British Virgin Islands.
Haitong    means HAITONG INTERNATIONAL INVESTMENT HOLDINGS LIMITED, a limited liability company duly incorporated and validly existing under the laws of British Virgin Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
Haixia    means HAIXIA NEV INTERNATIONAL LIMITED PARTNERSHIP, a limited partnership company duly incorporated and validly existing under the laws of Cayman Islands, and a holder of Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.

 

-5-


Hammer Capital    means Leap Prospect Limited, a British Virgin Islands company wholly owned by Hammer Capital (Private Equity) SPC – Leap Prospect SP, and a holder of Series D Preferred Shares as of the date of adoption of these Articles.
Hanfor    means HF Holdings Limited, an exempted company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
Hillhouse    means collectively (1) HH DYU HOLDINGS LIMITED, an exempted company with limited liability duly incorporated and validly existing under the laws of the Cayman Islands, (2) Hillhouse NEV, and (3) HH.
Hillhouse NEV    means HILLHOUSE NEV HOLDINGS LIMITED, an exempted company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-2 Preferred Shares and Series B Preferred Shares as of the date of adoption of these Articles.
HH    HH RSV-X HOLDINGS LIMITED, an exempted company with limited liability duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares as of the date of adoption of these Articles
Honor Best    means HONOR BEST INTERNATIONAL LIMITED, a company with limited liability duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
Image Frame    means IMAGE FRAME INVESTMENT (HK) LIMITED, a limited liability company duly incorporated and validly existing under the laws of Hong Kong, and a holder of Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.

 

-6-


IDG   

means collectively

 

(1) IDG CHINA VENTURE CAPITAL FUND IV L.P., an exempted limited partnership registered and validly existing under the laws of the Cayman Islands, and (2) IDG CHINA IV INVESTORS L.P., an exempted limited partnership registered and validly existing under the laws of the Cayman Islands, which are the holders of Series B Preferred Shares as of the date of adoption of these Articles; and

 

(3) IDG CHINA VENTURE CAPITAL FUND IV L.P., an exempted limited partnership registered and validly existing under the laws of the Cayman Islands, (4) IDG CHINA IV INVESTORS L.P., an exempted limited partnership registered and validly existing under the laws of the Cayman Islands, and (5) CYBER TYCOON LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands, which are the holders of Series C Preferred Shares as of the date of adoption of these Articles.

Joy Capital    means JOY CAPITAL I, L.P., an exempted limited partnership duly registered and validly existing under the laws of the Cayman Islands, and a holder of Series A-3 Preferred Shares and Series B Preferred Shares as of the date of adoption of these Articles.
Keen Eagle    means Keen Eagle Capital Investment Limited (銳鷹創富有限公司) a limited liability company duly incorporated and validly existing under the Laws of Hong Kong, and a holder of Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Key Employees    has the same meaning as in the Purchase Agreement.
Lenovo    means ULTIMATE LENOVO LIMITED, a limited liability company duly incorporated and validly existing under the laws of British Virgin Islands, and a holder of Series B Preferred Shares and Series C Preferred Shares as of the date of adoption of these Articles.
Liquidation    shall bear the meaning set forth in Article 8(b)(vii) hereto.
Liquidation Events    shall bear the meaning set forth in Article 8(b)(vii) hereto.

 

-7-


Loan and Security Agreement    The Loan and Security Agreement dated March 10, 2016 by and between the Company and Padmasree Warrior, pursuant to which the Company provided a loan to Padmasree Warrior, and Padmasree Warrior pledged to the Company and granted to the Company a first-priority lien upon 7,509,933 Series A-3 Preferred Shares held by Padmasree Warrior.
Long Winner    means LONG WINNER INVESTMENT LIMITED, a limited company duly incorporated and validly existing under the laws of Hong Kong, and a holder of Series B Preferred Shares as of the date of adoption of these Articles.
Magic Stone    means MAGIC STONE ALTERNATIVE PRIVATE EQUITY FUND, L.P., an exempted limited partnership duly organized and validly existing under the laws of the Cayman Islands, and a holder of Series B Preferred Shares as of the date of adoption of these Articles.
Majority Preferred Holders    means the holders of at least 75% of the voting power of the then outstanding Preferred Shares (voting together as a single class and calculated on an as-converted basis).
Majority Series A Preferred Holders    means the holders of at least a majority of the voting power of the then outstanding Series A Preferred Shares (voting together as a single class and calculated on an as-converted basis).
Majority Series B Preferred Holders    means the holders of at least a majority of the voting power of the then outstanding Series B Preferred Shares (voting together as a single class and calculated on an as-converted basis).
Majority Series C Preferred Holders    means the holders of at least a majority of the voting power of the then outstanding Series C Preferred Shares (voting together as a single class and calculated on an as-converted basis).
Majority Series D Preferred Holders    means the holders of at least a majority of the voting power of the then outstanding Series D Preferred Shares (voting together as a single class and calculated on an as-converted basis).
Material Group Subsidiaries    has the same meaning as in the Shareholders Agreement.
Member    shall bear the meaning as ascribed to it in the Statute.

 

-8-


mobike Global    means mobike Global Ltd., a business company with limited liability duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-1 Preferred Shares as of the date of adoption of these Articles.
month    means calendar month.
Mount Putuo    means MOUNT PUTUO INVESTMENT LIMITED, an exempted company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-2 Preferred Shares and Series B Preferred Shares as of the date of adoption of these Articles.
Morespark    means MORESPARK LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong, and a holder of Series D Preferred Shares as of the date of adoption of these Articles.
New Margin Capital    means NEW MARGIN CAPITAL HONG KONG CO., LIMITED (聯創資本(香港)有限公司), a limited liability company duly incorporated and validly existing under the laws of Hong Kong, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
New Issue Price    shall bear the meaning set forth in Article 8(c)(iii)(B) hereto.
Oceanwide    means China Oceanwide International Asset Management Limited (中泛國際資產管理有限公司), a BVI business company duly incorporated and validly existing under the Laws of the British Virgin Islands.
Ordinary Resolution   

means a resolution (subject to Article 8(d) and Schedule A hereto):

 

(a) passed by the Members holding at least fifty percent (50%) of the voting power of the then outstanding shares of the Company, vote in person or, where proxies are allowed, by proxy at a general meeting of the Company; or

 

(b) approved in writing by the Members holding at least ninety percent (90%) of the voting power of the then outstanding shares of the Company in one or more instruments each signed by one or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments if more than one, is executed.

 

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Ordinary Share    means a voting, redeemable ordinary share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement, and, immediately upon closing of a Qualified IPO.
Ordinary Share Equivalents    any Equity Security that by its terms is convertible into or exchangeable or exercisable for Ordinary Shares or other share capital of the Company, including without limitation the Preferred Shares.
Orient Hontai    means ORIENT HONTAI LIMITED, a business company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series B Preferred Shares as of the date of adoption of these Articles.
Originalwish    means ORIGINALWISH LIMITED, a business company with limited liability duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-1 Preferred Shares as of the date of adoption of these Articles.
paid-up    means paid-up and/or credited as paid-up.
Padmasree Warrior    means Padmasree Warrior, a U.S. citizen and a holder of Series A-3 Preferred Shares as of the date of adoption of these Articles.
Palace    means PALACE INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the laws of Republic of Singapore, and a holder of Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Person    means any individual, natural person, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity.

 

-10-


PRC    means the People’s Republic of China, but solely for the purposes of these Articles, excluding the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan.
Preferred Shares    means the Series A-1 Preferred Shares, the Series A-2 Preferred Shares, the Series A-3 Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares and/or the Series D Preferred Shares.
Preferred Share Conversion Price    means the Series A Conversion Price, the Series B Conversion Price, the Series C Conversion Price and/or the Series D Conversion Price, where applicable.
Preferred Share Dividend Preference    shall bear the meaning set forth in Article 8(a)(i)(D) hereto.
Preferred Share Original Issue Price    means the Series A Original Issue Price, the Series B Original Issue Price, the Series C Original Issue Price and/or the Series D Original Issue Price, where applicable.
Preferred Share Preferential Dividend    shall bear the meaning set forth in Article 8(a)(ii) hereto.
Preferred Share Redemption Price    means the applicable Series A Redemption Price, Series B Redemption Price, Series C Redemption Price and/or Series D Redemption Price (depends on the circumstances).
Prime Hubs    means PRIME HUBS LIMITED, a business company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands and a holder of the Ordinary Shares as of the date of adoption of these Articles.
Prime Hubs Grantee    has the same meaning as in the Purchase Agreement.
Prime Hubs Shares    has the same meaning as in the Purchase Agreement.
Purchase Agreement    means the Series D Preferred Share Purchase Agreement entered into by and among the Company, certain Group Companies, Prime Hubs, Founder Vehicles, and certain Series D Investors on November 10, 2017, as duly amended, restated or supplemented from time to time.

 

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Qualified IPO    means a firm commitment underwritten registered initial public offering by the Company of its Ordinary Shares (or securities of the Company representing the Ordinary Shares) on Hong Kong Stock Exchange, Nasdaq, New York Stock Exchange or other internationally recognized stock exchange, as approved by the Majority Preferred Holders, pursuant to a registration statement (or any analogous document, if applicable) that is filed with and declared effective in accordance with the securities laws of relevant jurisdiction, at a public offering price (prior to customary underwriters’ commissions and expenses) that values the Company at least US$6 billion on a fully diluted basis immediately prior to the completion of such offering, with gross proceeds to the Company in excess of US$1 billion, or otherwise approved by the Majority Preferred Holders.
registered office    means the registered office for the time being of the Company.
Right of First Refusal & Co-Sale Agreement    the Fifth Amended and Restated Right of First Refusal & Co-Sale Agreement entered into by and among the Company and all of the Members on November 10, 2017, as amended, restated or supplemented from time to time.
Seal    means the common seal of the Company and includes every duplicate seal.
Secretary    includes an Assistant Secretary and any Person appointed to perform the duties of Secretary of the Company.
Sequoia    means SEQUOIA CAPITAL CHINA GF HOLDCO III-A, LTD., an exempted company duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series A-3 Preferred Shares as of adoption of these Articles.
SCC    means SCC GROWTH IV HOLDCO A, LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands, and a holder of Series B Preferred Shares and Series D Preferred Shares as of adoption of these Articles.

 

-12-


Series A Conversion Price    means (i) with respect to the Series A-1 Preferred Shares and the Series A-2 Preferred Shares, initially US$1.00, and (ii) with respect to the Series A-3 Preferred Shares, initially US$1.6522, each subject to adjustment as provided in Article 8(c)(iii).
Series B Conversion Price    means with respect to the Series B Preferred Shares, initially US$2.751, subject to adjustment as provided in Article 8(c)(iii).
Series C Conversion Price    means with respect to the Series C Preferred Shares, initially US$3.885, subject to adjustment as provided in Article 8(c)(iii).
Series D Conversion Price    means with respect to the Series D Preferred Shares, initially US$5.353, subject to adjustment as provided in Article 8(c)(iii).
Series A Original Issue Price    means (i) with respect to the Series A-1 Preferred Shares and the Series A-2 Preferred Shares, US$1.00 per share, and (ii) with respect to the Series A-3 Preferred Shares, US$1.6522 per share.
Series B Original Issue Price    means with respect to the Series B Preferred Shares, US$2.751 per share.
Series C Original Issue Price    means with respect to the Series C Preferred Shares, US$3.885 per share.
Series D Original Issue Price    means with respect to the Series D Preferred Shares, US$5.353 per share.
Series A Original Issue Date    means the date of issuance of the relevant Series A Preferred Shares, (i) with respect to each Founder Vehicle, Hillhouse NEV and Shunwei, March 18, 2015; (ii) with respect to Energy and Mount Putuo, May 6, 2015; (iii) with respect to Smart Group, June 23, 2015; (iv) with respect to Sequoia and Joy Capital, September 12 2015; and (v) with respect to Padmasree Warrior, March 10, 2016.
Series B Original Issue Date    means the date of issuance of the relevant Series B Preferred Shares, (i) with respect to Temasek, TPG, Bluestone, Hillhouse NEV, Shunwei, Mount Putuo, SCC, Joy Capital, Magic Stone, Golden Brick, Palace, Grandfield, and Lenovo, July 21, 2016; (ii) with respect to IDG (except for Cyber Tycoon Limited), August 19, 2016; (iii) with respect to Bright Sky, September 30, 2016, and (iv) with respect to Long Winner, HH and Orient Hontai, February 9, 2017.

 

-13-


Series C Original Issue Date    means the date of issuance of the relevant Series C Preferred Shares, with respect to Baidu Capital, West City, WP, Haixia, Haitong, New Margin Capital, Image Frame, Palace, Total Prestige, Bright Sky, TPG, Bluestone, Zhide, ChinaEquity, IDG and Honor Best, March 24, 2017.
Series D Original Issue Date    means the date of issuance of the relevant Series D Preferred Shares to the relevant Series D Investor.
Series A Preferred Shares    means Series A-1 Preferred Shares, Series A-2 Preferred Shares and/or Series A-3 Preferred Shares.
Series A Preferred Share Dividend Preference    shall bear the meaning set forth in Article 8(a)(i)(D) hereto.
Series A Liquidation Preference    shall bear the meaning set forth in Article 8(b)(v) hereto.
Series A-1 Preferred Share    means a voting, redeemable and convertible Series A-1 Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.
Series A-2 Investor    means each or any of Hillhouse NEV, Shunwei, Mount Putuo, Smart Group, and any Person who purchases Series A-2 Preferred Shares from time to time, as long as such investor continues to hold any Series A- 2 Preferred Shares.
Series A-2 Preferred Share    means a voting, redeemable and convertible Series A-2 Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.
Series A-3 Investor    means each or any of Sequoia, Joy Capital, Padmasree Warrior, and any Person who purchases Series A-3 Preferred Shares from time to time, as long as such investor continues to hold any Series A-3 Preferred Shares.
Series A-3 Liquidation Preference    shall bear the meaning set forth in Article 8(b)(iv) hereto.

 

-14-


Series A-3 Preferred Share    means a voting, redeemable and convertible Series A-3 Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.
Series B Liquidation Preference    shall bear the meaning set forth in Article 8(b)(iii) hereto.
Series B Preferred Share Dividend Preference    shall bear the meaning set forth in Article 8(a)(i)(C) hereto.
Series B Preferred Share    means a voting, redeemable and convertible Series B Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.
Series B Investor    means each or any of Temasek, TPG, Bluestone, Hillhouse NEV, Shunwei, Mount Putuo, SCC, Joy Capital, Magic Stone, Orient Hontai, Golden Brick, Palace, Grandfield, Lenovo, IDG (except for Cyber Tycoon Limited), Bright Sky, HH and Long Winner, and any Person who purchases Series B Preferred Shares from time to time, as long as such investor continues to hold any Series B Preferred Shares.
Series C Preferred Share    means a voting, redeemable and convertible Series C Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.
Series C Preferred Share Dividend Preference    shall bear the meaning set forth in Article 8(a)(i)(B) hereto.
Series C Liquidation Preference    shall bear the meaning set forth in Article 8(b)(ii) hereto.

 

-15-


Series C Investor    means each or any of Baidu Capital, West City, WP, Haixia, Haitong, New Margin Capital, Image Frame, Palace, Total Prestige, Bright Sky, TPG, Bluestone, Zhide, ChinaEquity, IDG, Honor Best, Temasek, Lenovo, Champion Elite, CIIT, Guangfa, Bluefuture, Hanfor, CIB, Blissful Days, UBS, Keen Eagle, Oceanwide and any Person who purchases Series C Preferred Shares from time to time, as long as such investor continues to hold any Series C Preferred Shares.
Series D Preferred Share    means a voting, redeemable and convertible Series D Preferred Share in the capital of the Company, par value of US$0.00025 per share, having the rights, powers, privileges and restrictions set forth in these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement
Series D Preferred Share Dividend Preference    shall bear the meaning set forth in Article 8(a)(i)(A) hereto.
“Series D Liquidation Preference    shall bear the meaning set forth in Article 8(b)(i) hereto.
Series D Investor    means each or any of Image Frame, Morespark, Hammer Capital and any Person who purchases Series D Preferred Shares from time to time, as long as such investor continues to hold any Series D Preferred Shares.
Series A Redemption Price    shall bear the meaning set forth in Article 18(IV) hereto.
Series A Redemption Requestor    shall bear the meaning set forth in Article 18(IV) hereto.
Series B Redemption Price    shall bear the meaning set forth in Article 18(III) hereto.
Series B Redemption Requestor    shall bear the meaning set forth in Article 18(III) hereto.
Series C Redemption Price    shall bear the meaning set forth in Article 18(II) hereto.
“Series C Redemption Requestor    shall bear the meaning set forth in Article 18(II) hereto.
Series D Redemption Price    shall bear the meaning set forth in Article 18(I) hereto.

 

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Series D Redemption Requestor    shall bear the meaning set forth in Article 18(I) hereto.
Series D Transaction Documents    means the “Series D Transaction Documents” defined in the Purchase Agreement.
Shanghai Nextev    means a wholly owned subsidiary of NIO Nextev Limited established under the laws of the PRC.
share    means an Ordinary Share, Series A Preferred Share, Series B Preferred Share, Series C Preferred Share, Series D Preferred Shares or all of them, and includes a fraction of a share.
Shareholders Agreement    the Fifth Amended and Restated Shareholders Agreement entered into by and among the Company, the other existing Group Companies and all of the Members on November 10, 2017, as amended, restated or supplemented from time to time.
Smart Group    means SMART GROUP GLOBAL LIMITED, a business company duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series A-2 Preferred Shares as of the date of adoption of these Articles.
Shunwei    means collectively (1) SHUNWEI TMT II LIMITED, an exempted company duly incorporated and validly existing under the laws of the British Virgin Islands, and (2) SHUNWEI GROWTH II LIMITED, an exempted company duly incorporated and validly existing under the laws of the British Virgin Islands, and holders of Series A-2 Preferred Shares and Series B Preferred Shares as of the date of adoption of these Articles.
Special Resolution   

means a resolution passed in accordance with Section 60 of the Companies Law, being a resolution (subject to Article 8(d) and Schedule A hereto):

 

(a) passed by the Members holding at least two thirds (2/3) of the voting power of the then outstanding shares of the Company, as vote in person or, where proxies are allowed, by proxy at a general meeting of the Company of which notice specifying the intention to propose the resolution as a Special Resolution has been duly given, or

 

 

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(b) approved in writing by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the Special Resolution so adopted shall be the date on which the instrument or the last of such instruments if more than one, is executed;

 

save that for the purposes of approving any matter identified in Schedule A to these Articles that the Statute requires to be passed by a Special Resolution, in computing the majority needed to approve such Special Resolution on a poll, regard shall be had to the number of votes to which each Member is entitled by virtue of Article 8(d)(ii).

Statute    means the Companies Law of the Cayman Islands as amended and every statutory modification or re-enactment thereof for the time being in force.
Stock Incentive Plans    means (i) the 2015 Stock Incentive Plan and the 2016 Stock Incentive Plan of the Company, which set forth the rules for the grant of stock options, restricted shares and other awards to the employees, directors and consultants of the Group Companies (both U.S. citizens or non-U.S. citizens), (ii) the 2015 Stock Incentive Plan U.S. CEO Subplan, which sets forth the rules for the grant of stock options, restricted shares and other awards to the chief executive officer of the US Company, and (iii) any other stock option plans or equity incentive plans as may be adopted by the Company in accordance with these Articles and the Shareholders Agreement.
Subsidiary    with respect to any given Person, any other Person that is Controlled directly or indirectly by such given Person; where “Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person.

 

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Temasek    means ANDERSON INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the laws of Republic of Singapore, and a holder of Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Tencent    means, collectively, Image Frame, Mount Putuo, Morespark and any other Affiliate of Tencent, to the extent that it holds any Preferred Shares and/or Ordinary Shares.
Tencent Shareholding Threshold    shall bear the meaning set forth in Article 8(b)(viii) hereto.
Total Prestige    means TOTAL PRESTIGE INVESTMENT LIMITED, a limited liability company duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.
TPG    means TPG GROWTH III SF PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore, and a holder of Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
Trade Sale   

means any the following events:

 

(1) any consolidation, merger, amalgamation, or other business combination or corporate reorganization of the Company (and/or other Group Company(ies) collectively operating majority of the Business, collectively, the “Major Group Companies”) with or into any Person (collectively, the “Restructuring Event”), resulting in a change in ownership or control of the Company and/or the Major Group Companies in which the Persons holding securities with voting power in the Company and/or the Major Group Companies (as the case may be) immediately before such Restructuring Event own and control shares and securities representing less than fifty percent (50%) of the total combined voting power of the outstanding share capital of the surviving business entity immediately after such Restructuring Event, except that the Company’s ultimate shareholding structure immediately after such Restructuring Event is the same as that immediately before such Restructuring Event; or

 

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(2) a sale, transfer, exclusive license, lease or other disposition of all or substantially all of the assets (including Intellectual Property) of the Group Companies (or any series of related transactions resulting in such sale, transfer, exclusive license, lease or other disposition of all or substantially all of the assets of the Group Companies), except that such transferee, licensee or lessee’s ultimate shareholding structure immediately after such event is the same as that of the Company immediately before such event; or

 

(3) a sale, transfer or other disposition of a majority of the issued and outstanding share capital or securities possessing more than fifty percent (50%) of the total combined voting power of the Company and/or of the Major Group Companies, except that such transferee’s ultimate shareholding structure immediately after such event is the same as that of the Company immediately before such event.

UBS    means UBS AG, London Branch, a company duly incorporated and validly existing under the Laws of the Switzerland and registered as a branch in England and Wales Branch No. BR004507 at 5 Broadgate, London EC2M 2QS.
West City    means WEST CITY ASIA LIMITED, a company limited by shares duly incorporated and validly existing under the laws of the British Virgin Islands, and a holder of Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
WP    means TANZANITE GEM HOLDINGS LIMITED, a limited liability company duly incorporated and validly existing under the laws of British Virgin Islands, and a holder of Series C Preferred Shares and Series D Preferred Shares as of the date of adoption of these Articles.
written” and “in writing    include all modes of representing or reproducing words in visible form.
Zhide    means ZHIDE EV INVESTMENT LIMITED, a limited liability company duly incorporated and validly existing under the laws of the Cayman Islands, and a holder of Series C Preferred Shares as of the date of adoption of these Articles.

 

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Words importing the singular number only include the plural number and vice-versa.

Words importing the masculine gender only include the feminine gender.

Words importing persons only include corporations.

Any requirements as to delivery under the Articles include delivery in the form of an Electronic Record.

Any requirements as to execution or signature under the Articles including the execution of the Articles themselves can be satisfied in the form of an electronic signature as defined in the Electronic Transactions Law.

Sections 8 and 19(3) of the Electronic Transactions Law shall not apply.

 

2. The business of the Company may be commenced as soon after incorporation as the Directors shall see fit, notwithstanding that part only of the shares may have been allotted.

 

3. The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company including the expenses of registration.

CERTIFICATES FOR SHARES

 

4.    (a)        Certificates representing shares of the Company shall be in such form as shall be determined by the Directors. Such certificates may be under Seal. All certificates for shares shall be consecutively numbered or otherwise identified and shall specify the shares to which they relate. The name and address of the Person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered in the register of Members of the Company. All certificates surrendered to the Company for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled. The Directors may authorize certificates to be issued with the Seal and authorized signature(s) affixed by some method or system of mechanical process.

 

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  (b) Every Person whose name is entered as a Member in the register of Members shall be entitled without payment to receive within two months after allotment or lodgment of transfer (or within such other period as the conditions of issue shall provide) one certificate for all his shares or several certificates each for one or more of his shares upon payment of fifty cents (US$0.50) for every certificate after the first or such less sum as the Directors shall from time to time determine, PROVIDED THAT in respect of a share or shares held jointly by several Persons, the Company shall not be bound to issue more than one certificate and delivery of a certificate for a share to one of the several joint holders shall be sufficient delivery to all such holders.

 

  (c) Each existing or replacement certificate for shares of the Company shall bear the following legend:

“THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN FIFTH AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (AS AMENDED FROM TIME TO TIME) BY AND AMONG THE SHAREHOLDERS, THE COMPANY AND CERTAIN OTHER PARTIES THERETO. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY.”

The Company may annotate its register of Members with an appropriate, corresponding legend. At such time as any share is no longer subject to the Right of First Refusal & Co-Sale Agreement, the Company shall, at the request of the holder of such share, issue replacement certificates for such share without such legend.

 

5. Notwithstanding Article 4 of these Articles, if a share certificate is defaced, lost or destroyed, it may be renewed on payment of a fee of one dollar (US$1.00) or such less sum and on such terms (if any) as to evidence and indemnity and the payment of the expenses incurred by the Company in investigating evidence, as the Directors may prescribe.

ISSUE OF SHARES

 

6. Subject to the provisions, if any, in the Memorandum of Association, these Articles (including Article 8(d) and Schedule A) and to any direction that may be given by the Company in general meeting and without prejudice to any special rights previously conferred on the holders of existing shares, the Directors may allot, issue, grant options over or otherwise dispose of shares of the Company (including fractions of a share) with or without preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise and to such Persons, at such times and on such other terms as they think proper. Notwithstanding any provision to the contrary contained in these Articles of Association, the Company shall be precluded from issuing bearer shares or bearer warrants, coupons or certificates.

 

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7. The rights and restrictions attaching to the Ordinary Shares are as follows:

 

  (a) Income

Holders of Ordinary Shares shall be entitled to such dividends as the Directors may in their absolute discretion lawfully declare, following payment of all dividends due on shares ranking in priority to the Ordinary Shares (including for the avoidance of doubt the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares), PROVIDED THAT no dividend shall be declared to the holders of Ordinary Shares unless such dividend has also been declared to the holders of Series A Preferred Shares, the holders of Series B Preferred Shares, the holders of Series C Preferred Shares and the holders of Series D Preferred Shares (who shall participate in such dividend as if the Series A Preferred Shares, or the Series B Preferred Shares, or the Series C Preferred Shares, or the Series D Preferred Shares held by them had been converted into Ordinary Shares at the then applicable Series A Conversion Price, or the then applicable Series B Conversion Price, or the then applicable Series C Conversion Price, or the then applicable Series D Conversion Price as the case may be).

 

  (b) Capital

On a return of capital upon a Liquidation, Trade Sale or a Control Documents Termination in accordance with Article 8(b) below, following the payment of all amounts due on shares ranking in priority to the Ordinary Shares (including for the avoidance of doubt the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares), the Company’s remaining assets available for distribution among the Members shall be distributed amongst the holders of the Ordinary Shares on a pro rata basis.

 

  (c) Attendance at General Meetings and Voting

Holders of Ordinary Shares have the right to receive notice of, attend, speak and vote at general meetings of the Company. Each Ordinary Share shall be entitled to one vote.

 

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8. The rights and restrictions attaching to the Preferred Shares are as follows:

 

  (a) Dividends

 

  (i) Subject to the provisions of these Articles (including Article 8(d) and Schedule A) and the applicable Statute, the Board may from time to time declare dividends and other distributions on the outstanding shares of the Company and authorize payment of the same out of the funds of the Company legally available therefor. As to the dividend payment,

 

  (A) the Series D Preferred Shares shall rank pari passu among themselves and senior and prior to the Series C Preferred Shares, the Series B Preferred Shares, the Series A Preferred Shares and the Ordinary Shares (the “Series D Preferred Share Dividend Preference”)

 

  (B) the Series C Preferred Shares shall rank pari passu among themselves and senior and prior to the Series B Preferred Shares, the Series A Preferred Shares and the Ordinary Shares (the “Series C Preferred Share Dividend Preference”);

 

  (C) the Series B Preferred Shares shall rank pari passu among themselves and senior and prior to the Series A Preferred Shares and the Ordinary Shares (the “Series B Preferred Share Dividend Preference”); and

 

  (D) the Series A Preferred Shares shall rank pari passu among themselves and senior and prior to the Ordinary Shares (the “Series A Preferred Share Dividend Preference”, and together with the Series D Preferred Dividend Preference, Series C Preferred Share Dividend Preference and the Series B Preferred Share Dividend Preference, the “Preferred Share Dividend Preference”).

 

  (ii) If and only if the Directors resolve to declare a dividend payable to the Members out of funds legally available for distribution, each holder of Preferred Shares shall be entitled to receive, subject to the Preferred Share Dividend Preference, a non-cumulative preferential dividend no less than as calculated at the annual rate of 5% (inclusive) of the applicable Preferred Share Original Issue Price on each Preferred Share held by such holder, for each calendar year such Preferred Share is outstanding (or pro rata for a partial year) (the “Preferred Share Preferential Dividend”). If the Preferred Share Preferential Dividend has not been paid in full when due, the Company shall not pay any dividends or distributions on the Ordinary Shares or any other securities of the Company until such time as the Preferred Share Preferential Dividend has been paid in full with respect to all amounts then due.

 

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  (iii) In addition to the Preferred Share Preferential Dividend, in case of payment of dividends on any Ordinary Shares, holders of the Preferred Shares shall also be entitled to receive dividends declared on Ordinary Shares, subject to the Preferred Share Dividend Preference, on an as-converted basis.

 

  (b) Liquidation Distribution: upon the Liquidation of the Company, the assets of the Company legally available for distribution among Members shall be applied in the following order and manner:

 

  (i) First, be applied in payment of the following amounts on each outstanding Series D Preferred Share held by the Members thereof, prior and in preference to any payment or distribution of any assets of the Company to the holders of Series C Preferred Shares, Series B Preferred Shares, Series A Preferred Shares, Ordinary Shares and any other class of shares of the Company:

 

  (A) an amount equal to the higher of (1) 100% of the Series D Original Issue Price of such Series D Preferred Share, and (2) the amount that would be payable on such Series D Preferred Share if such Series D Preferred Share is converted into Ordinary Share(s) immediately before such Liquidation; and

 

  (B) the amount of all declared but unpaid dividends on such Series D Preferred Share based on such holder’s pro rata portion of the total number of the Series D Preferred Shares.

(such amounts on Series D Preferred Shares referred to this Section 8(b)(i), the “Series D Liquidation Preference”).

If, upon any Liquidation, the assets of the Company legally available for distribution shall be insufficient to permit the payment of the Series D Liquidation Preference in full to all holders of all outstanding Series D Preferred Shares, then all of the assets legally available for distribution shall be distributed among and paid to the holders of the outstanding Series D Preferred Shares (on a pari passu basis) in accordance with this Article 8(b)(i), ratably among such holders in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit such payment in full.

 

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  (ii) Second, be applied in payment of the following amounts on each outstanding Series C Preferred Share held by the Members thereof, prior and in preference to any payment or distribution of any assets of the Company to the holders of Series B Preferred Shares, Series A Preferred Shares, Ordinary Shares and any other class of shares of the Company:

 

  (A) an amount equal to the higher of (1) 100% of the Series C Original Issue Price of such Series C Preferred Share, and (2) the amount that would be payable on such Series C Preferred Share if such Series C Preferred Share is converted into Ordinary Share(s) immediately before such Liquidation; and

 

  (B) the amount of all declared but unpaid dividends on such Series C Preferred Share based on such holder’s pro rata portion of the total number of the Series C Preferred Shares.

(such amounts on Series C Preferred Shares referred to this Section 8(b)(ii), the “Series C Liquidation Preference”).

If, upon any Liquidation, after payment of the Series D Liquidation Preference, the remaining assets of the Company legally available for distribution shall be insufficient to permit the payment of the Series C Liquidation Preference in full to all holders of all outstanding Series C Preferred Shares, then all of the assets legally available for distribution shall be distributed among and paid to the holders of the outstanding Series C Preferred Shares (on a pari passu basis) in accordance with this Article 8(b)(ii), ratably among such holders in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit such payment in full.

 

  (iii) Third, be applied in payment of the following amounts on each outstanding Series B Preferred Share held by the Members thereof, prior and in preference to any payment or distribution of any assets of the Company to the holders of Series A Preferred Shares, Ordinary Shares and any other class of shares of the Company:

 

  (A) an amount equal to the higher of (1) 100% of the Series B Original Issue Price of such Series B Preferred Share, and (2) the amount that would be payable on such Series B Preferred Share if such Series B Preferred Share is converted into Ordinary Share(s) immediately before such Liquidation; and

 

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  (B) the amount of all declared but unpaid dividends on such Series B Preferred Share based on such holder’s pro rata portion of the total number of the Series B Preferred Shares.

(such amounts on Series B Preferred Shares referred to this Section 8(b)(iii), the “Series B Liquidation Preference”).

If upon any Liquidation, after payment of the Series D Liquidation Preference and the Series C Liquidation Preference, the remaining assets of the Company legally available for distribution shall be insufficient to permit the payment of the Series B Liquidation Preference in full to all holders of all outstanding Series B Preferred Shares, then all of the remaining assets legally available for distribution shall be distributed among and paid to the holders of the outstanding Series B Preferred Shares (on a pari passu basis) in accordance with this Article 8(b)(iii), ratably among such holders in proportion to the amounts that would be payable to such holders if such remaining assets were sufficient to permit such payment in full.

 

  (iv) Fourth, be applied in payment of the following amounts on each outstanding Series A-3 Preferred Share held by the Members thereof, prior and in preference to any payment or distribution of any assets of the Company to the holders of Series A-2 Preferred Shares, Series A-1 Preferred Shares, Ordinary Shares and any other class of shares of the Company:

 

  (A) an amount equal to the higher of (1) 100% of the Series A Original Issue Price of such Series A-3 Preferred Share, and (2) the amount that would be payable on such Series A-3 Preferred Share if such Series A-3 Preferred Share is converted into Ordinary Share(s) immediately before such Liquidation; and

 

  (B) the amount of all declared but unpaid dividends on such Series A-3 Preferred Share based on such holder’s pro rata portion of the total number of the Series A-3 Preferred Shares.

(such amounts on Series A-3 Preferred Shares referred to this Section 8(b)(iv), the “Series A-3 Liquidation Preference”).

 

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If upon any Liquidation, after payment of the Series D Liquidation Preference, the Series C Liquidation Preference and the Series B Liquidation Preference, the remaining assets of the Company legally available for distribution shall be insufficient to permit the payment of the Series A-3 Liquidation Preference in full to all holders of all outstanding Series A-3 Preferred Shares, then all of the remaining assets legally available for distribution shall be distributed among and paid to the holders of the outstanding Series A-3 Preferred Shares (on a pari passu basis) in accordance with this Article 8(b)(iv), ratably among such holders in proportion to the amounts that would be payable to such holders if such remaining assets were sufficient to permit such payment in full.

 

  (v) Fifth, be applied in payment of the following amount on each outstanding Series A-2 Preferred Share and each outstanding Series A-1 Preferred Share (on pari passu basis) held by the Members thereof, prior and in preference to any payment or distribution of any assets of the Company to any other class of shares of the Company ranking junior to the Series A-1 Preferred Shares and the Series A-2 Preferred Shares (including but not limited to the Ordinary Shares):

 

  (A) an amount equal to the higher of (1) 100% of the Series A Original Issue Price of such Series A-2 Preferred Share and such Series A-1 Preferred Share, and (2) the amount that would be payable on such Series A-2 Preferred Share or such Series A-1 Preferred Share if such Series A-2 Preferred Share or such Series A-1 Preferred Share is converted into Ordinary Share(s) immediately before such Liquidation (as the case may be); and

 

  (B) the amount of all declared but unpaid dividends on such Series A-2 Preferred Share and such Series A-1 Preferred Share based on such holder’s pro rata portion of the total number of the Series A-2 Preferred Shares and the Series A-1 Preferred Shares.

(such amounts on Series A-2 Preferred Shares and Series A-1 Preferred Shares referred to this Section 8(b)(v), the “Series A Liquidation Preference”).

 

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If upon any Liquidation, after payment of the Series D Liquidation Preference, the Series C Liquidation Preference, the Series B Liquidation Preference and the Series A-3 Liquidation Preference, the remaining assets of the Company legally available for distribution shall be insufficient to permit the payment of the Series A Liquidation Preference in full to all holders of all outstanding Series A-1 Preferred Shares and Series A-2 Preferred Shares, then all of the remaining assets legally available for distribution shall be distributed among and paid to the holders of the outstanding Series A-1 Preferred Shares and Series A-2 Preferred Shares (on a pari passu basis) in accordance with this Article 8(b)(v), ratably among such holders in proportion to the amounts that would be payable to such holders if such remaining assets were sufficient to permit such payment in full.

 

  (vi) Finally, after full payment of the Series D Liquidation Preference, Series C Liquidation Preference, the Series B Liquidation Preference, the Series A-3 Liquidation Preference and the Series A Liquidation Preference to all holders of 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.

 

  (vii) The following events shall be treated as a liquidation (“Liquidation”) unless waived by the Majority Series A Preferred Holders, the Majority Series B Preferred Holders, the Majority Series C Preferred Holders and the Majority Series D Preferred Holders: the voluntary or involuntary liquidation of the Major Group Companies under any applicable bankruptcy, insolvency or reorganization legislation or the dissolution or winding up of Major Group Companies, or any appointment of an administrator or a receiver over all or substantially all assets of Major Group Companies. A Trade Sale or a Control Documents Termination shall be deemed to be a Liquidation for purposes of these Articles unless the Majority Series A Preferred Holders, the Majority Series B Preferred Holders, the Majority Series C Preferred Holders and the Majority Series D Preferred Holders otherwise agree in writing and have notified the Company of such agreement in accordance with these Articles. Any cash payment or issuance or distribution of securities or other property to the Company’s Members in connection with a Trade Sale or a Control Documents Termination deemed to be a Liquidation (a “Deemed Liquidation”, together with Liquidation, the “Liquidation Events”) shall be distributed and allocated among the holders of Shares in the same order and manner as provided in Articles 8(b)(i)-(vi).

 

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  (viii) Upon the occurrence of a Liquidation Event, the Company may distribute assets or securities other than cash to the Members, in which case, the holders of Preferred Shares shall be entitled (in the absence of alternative arrangements to give effect to Articles 8(b)(i)-(vi) that are agreed in writing by the Majority Series A Preferred Holders, the Majority Series B Preferred Holders, the Majority Series C Preferred Holders and the Majority Series D Preferred Holders) to receive such assets or securities, or to receive a cash payment from the Company in the amount that they would have received in connection with a Liquidation Event, based upon the Fair Market Value of such assets or securities as of the completion of such Liquidation Event, where, the “Fair Market Value” of any assets or securities (other than cash) shall be determined in good faith by the Board of Directors (including by at least one director appointed by the holder(s) of the Series A Preferred Shares, one director appointed by holder(s) the Series B Preferred Shares, one director appointed by holder(s) of the Series C Preferred Shares and one director appointed by holder(s) of the Series D Preferred Shares); provided that, if any holder of Preferred Shares objects in writing to any such determination within 30 days after receiving notice thereof from the Company, such Fair Market Value shall be determined at the Company’s expense by an internationally recognized appraiser chosen by the Board of Directors (including at least one director appointed by the holders of the Series A Preferred Shares, the director appointed by Temasek, the director appointed by Baidu Capital and the director appointed by Tencent, for so long as Temasek or Baidu Capital (as applicable) shall hold at least 50% of its Benchmark Shares, and Tencent holds no less than 46,000,000 Preferred Shares (as converted or reclassified from time to time), which number shall be adjusted for any stock split, stock dividend, combination or other recapitalization or reclassification effected after the Initial Closing Date (the “Tencent Shareholding Threshold”)); and provided further that the Fair Market Value of any securities listed on a securities exchange shall be the average closing price of such securities on such exchange for the five trading days ending on the third day prior to such distribution, with an appropriate discount (to be determined by an appraiser as provided above) in the event that such securities are subject to any lock-up or other restriction on resale under applicable securities laws, exchange rules or contractual arrangements.

 

  (ix) Any securities or other property issued or distributed to holders of the Company’s capital stock in connection with a Liquidation Event shall be valued for purposes of this Article 8(b) at Fair Market Value.

 

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  (c) Conversion

 

  (i) Optional Conversion. Each fully paid Series D Preferred Share may be converted, at any time and from time to time after the applicable Series D Original Issue Date, at the option of the holder thereof, into the number of fully paid and non-assessable Ordinary Shares equal to (x) the Series D Original Issue Price divided by (y) the Series D Conversion Price then in effect.

Each fully paid Series C Preferred Share may be converted, at any time and from time to time after the applicable Series C Original Issue Date, at the option of the holder thereof, into the number of fully paid and non-assessable Ordinary Shares equal to (x) the Series C Original Issue Price divided by (y) the Series C Conversion Price then in effect.

Each fully paid Series B Preferred Share may be converted, at any time and from time to time after the applicable Series B Original Issue Date, at the option of the holder thereof, into the number of fully paid and non-assessable Ordinary Shares equal to (x) the Series B Original Issue Price divided by (y) the Series B Conversion Price then in effect.

Each fully paid Series A Preferred Share may be converted, at any time and from time to time after the applicable Series A Original Issue Date, at the option of the holder thereof, into the number of fully paid and non-assessable Ordinary Shares equal to (x) the applicable Series A Original Issue Price divided by (y) the applicable Series A Conversion Price then in effect.

 

  (ii) Mandatory Conversion. (A) Immediately prior to the completion of a Qualified IPO, each fully paid Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class A Ordinary Shares based on the applicable Preferred Share Conversion Price then in effect, as the case may be, except that the Preferred Shares and Ordinary Shares beneficially owned by Tencent and the Founder Vehicles shall be converted into such Ordinary Shares in accordance with Article 67.

 

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(B) At any time, upon written consent of the holder(s) of a majority of the outstanding Series D Preferred Shares, each Series D Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) based on the Series D Conversion Price then in effect; upon written consent of the holder(s) of a majority of the outstanding Series C Preferred Shares, each Series C Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) based on the Series C Conversion Price then in effect; upon written consent of the holder(s) of a majority of the outstanding Series B Preferred Shares, each Series B Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) based on the Series B Conversion Price then in effect; upon written consent of the holder(s) of a majority of the outstanding Series A-3 Preferred Shares, each Series A-3 Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) based on the applicable Series A Conversion Price then in effect; upon written consent of the holder(s) of a majority of the outstanding Series A-2 Preferred Shares and Series A-1 Preferred Shares (voting together as one class on an as-converted basis), each fully paid Series A-2 Preferred Share and Series A-1 Preferred Shares shall be converted into the number of fully paid and non-assessable Ordinary Share(s) based on the applicable Series A Conversion Price then in effect.

 

  (iii) Anti-Dilution.

 

  (A) If the Company shall at any time or from time to time, prior to the conversion of any Preferred Shares: (1) subdivide or split up the issued Ordinary Shares into a larger number of shares; (2) combine, consolidate or redeem the issued Ordinary Shares into a smaller number of shares; (3) conduct any capital reorganization; or any reclassification of the Ordinary Shares; or (4) issue and allot fully paid Ordinary Shares or securities of the Company pursuant to a capitalization of profits or reserves, or distribution of profits; then the applicable Preferred Share Conversion Price as in effect immediately prior thereto shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holders of any outstanding Preferred Shares thereafter converted shall be entitled to receive the number of Ordinary Shares or securities of the Company and other consideration that such holders would have owned or been entitled to receive upon the effectiveness of such sub-division, share split, combination, consolidation, reorganization, reclassification, capitalization or contribution, had such Preferred Shares been converted immediately prior to the effectiveness of such sub-division, share split, combination, consolidation, reorganization, reclassification, capitalization or contribution. All such adjustments shall be made whenever any of the events described above occurs and shall become effective at the close of business on the day upon which such corporate action becomes effective.

 

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  (B) Subject to Article 8(c)(iii)(D) and (E), if the Company shall at any time or from time to time prior to the conversion of a series of Preferred Shares, issue or sell any Equity Securities (“Additional Shares”) for a consideration per Ordinary Share (on an as-converted basis) (the “New Issue Price”) that is less than the Preferred Share Conversion Price with respect to such series of Preferred Shares in effect on the date on which the Company fixes the offering price for the Additional Shares, then, and in such case, the Preferred Share Conversion Price with respect to such series of Preferred Shares in effect immediately prior to such issuance shall be reduced, concurrently with such issuance, to the New Issue Price. In case of issuance of Ordinary Share Equivalent, the New Issue Price shall be equal to (x) the sum of the price for such Ordinary Share Equivalent plus any additional consideration payable (without regard to any anti-dilution adjustment) upon the conversion, exchange or exercise of such Ordinary Share Equivalent divided by (y) the number of Ordinary Share or Preferred Share, as applicable, into which such Ordinary Share Equivalent is initially convertible or exercisable.

The adjustment to a Preferred Share Conversion Price shall be made whenever such Additional Shares are issued (PROVIDED HOWEVER, that no further adjustment in the Preferred Share Conversion Price shall be made upon the subsequent exercise, conversion or exchange, as applicable, of the Ordinary Share Equivalents pursuant to the terms of such Ordinary Share Equivalents, in case the Additional Shares are Ordinary Share Equivalents), and shall become effective immediately following such issuance. In determining the price per Ordinary Share in the case of the issuance of any Ordinary Share Equivalent, the value of all non-cash consideration shall be determined based on the Fair Market Value of such consideration.

 

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  (C) For the purpose of making any adjustment to the Preferred Share Conversion Price or number of Ordinary Shares issuable upon conversion of any Preferred Shares, as provided in Article 8(c)(iii)(B) above:

 

  (1) to the extent it consists of cash, the consideration received by the Company for any issue or sale of securities shall be computed at the net amount of cash received by the Company after deduction of any expenses payable directly or indirectly by the Company and any underwriting or similar commissions, compensations, discounts or concessions paid or allowed by the Company in connection with such issue or sale;

 

  (2) to the extent it consists of property other than cash, consideration other than cash received by the Company for any issue or sale of securities shall be computed at the Fair Market Value thereof, as determined in good faith by the Directors as of the date of the adoption of the resolution specifically authorizing such issue or sale, irrespective of any accounting treatment of such property; and

 

  (3) if the Equity Securities exercisable, convertible or exchangeable for the Additional Shares are issued or sold together with other stock or securities or other assets of the Company for consideration which covers both, the consideration received for such issue or sale shall be computed as that portion of the consideration received which is reasonably determined in good faith by the Directors to be allocable to such Additional Shares.

 

  (D) Subject to Article 8(c)(iii)(E), if the Company distributes to all holders of Ordinary Shares (1) any shares of the Company (other than Ordinary Shares) or evidences of indebtedness or cash or other assets (excluding regular cash dividends or distributions paid from retained earnings of the Company and dividends or distributions referred to in Article 8(c)(iii)(A) but including any crediting of shares as fully paid), or (2) rights, options or warrants to subscribe for or purchase any of its securities (excluding those referred to in Article 8(c)(iii)(B)), then in each such case, the holders of the Preferred Shares shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of Ordinary Shares into which such Preferred Shares are convertible as of the record date fixed for the determination of the holders of Ordinary Shares entitled to receive such distribution or the effective date of such distribution. Payment of such proportionate share to the holders of the Preferred Shares shall be made whenever any such distribution is made to the holders of Ordinary Shares. If any such distribution is not made or if any or all of such rights, options or warrants expire or terminate without having been exercised, the Preferred Share Conversion Price then in effect shall be appropriately adjusted, where applicable.

 

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  (E) The provisions of Article 8(c)(iii)(B) and (D) shall not apply to the following Equity Securities (the “Exempted Securities”):

 

  (1) Ordinary Shares (and/or options or warrants therefore) (including any of such Shares which are repurchased) issued to officers, directors, employees and consultants of the Group Companies pursuant to the Stock Incentive Plans approved in accordance with these Articles and the Shareholders Agreement;

 

  (2) any Equity Securities issued pursuant to the Purchase Agreement and any Ordinary Shares issued upon the conversion of the Preferred Shares authorized under these Articles;

 

  (3) any Equity Securities issued upon the exercise of any option of the Company issued prior to the Initial Closing;

 

  (4) any Equity Securities issued pursuant to any transaction with any strategic partners as approved by the Majority Preferred Holders and/or the Board in accordance with these Articles and the Shareholders Agreement, provided that if such strategic partner is any of the holders of Preferred Shares or any of their respective Affiliates, such holder of Preferred Shares and the director appointed by such holder of Preferred Shares, as applicable, shall abstain from all voting in the general meetings, Board meetings or resolutions in relation to the transactions described under this Article 8(e)(iii)(E)(4), as applicable, and provided further that in case the Equity Securities are issued in such transaction at a price per share less than the then applicable Conversion Price of any series of Preferred Shares (except Series A-1 Preferred Shares and Series A-2 Preferred Shares), such transaction shall also be approved by the holders of a majority of the outstanding Preferred Shares in such series;

 

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  (5) any Equity Securities issued pursuant to any transaction with any financial institutions or lessors in connection with loans, credit arrangements, equipment financings or similar transactions, provided that such transaction has been approved by the Majority Preferred Holders and/or the Board in accordance with these Articles and the Shareholders Agreement, provided that if such financial institution or lessor is any of the holders of Preferred Shares or any of their respective Affiliates, such holder of Preferred Shares and the director appointed by such holder of Preferred Shares, as applicable, shall abstain from all voting in the general meetings, Board meetings or resolutions in relation to the transactions described under this Article 8(e)(iii)(E)(5), as applicable, and provided further that in case the Equity Securities are issued in such transaction at a price per share less than the then applicable Conversion Price of any series of Preferred Shares (except Series A-1 Preferred Shares and Series A-2 Preferred Shares), such transaction shall also be approved by the holders of a majority of the outstanding Preferred Shares in such series;

 

  (6) any Equity Securities issued in connection with any share split, share dividend, reclassification or other similar event in which all holders of Preferred Shares are entitled to participate on a pro rata basis;

 

  (7) any Equity Securities issued pursuant to the acquisition of another corporation or entity by the Company by consolidation, merger, purchase of assets, or other reorganization in which the Company acquires, in a single transaction or a series of related transactions, all or substantially all assets of such other corporation or entity, or fifty percent (50%) or more of the equity ownership or voting power of such other corporation or entity, provided that such acquisition or reorganization has been approved by the Majority Preferred Holders and/or the Board in accordance with these Articles and the Shareholders Agreement, and provided further that in case the Equity Securities are issued in such acquisition or reorganization at a price per share less than the then applicable Conversion Price of any series of Preferred Shares (except Series A-1 Preferred Shares and Series A-2 Preferred Shares), such acquisition or reorganization shall also be approved by the holders of a majority of the outstanding Preferred Shares in such series; or

 

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  (8) any Equity Securities issued pursuant to a Qualified IPO.

 

  (F) Notwithstanding any other provision of this Article 8(c)(iii), no adjustment in the Preferred Share Conversion Price shall actually be made until the cumulative effect of the adjustments called for by this Article 8(c)(iii) since the date of the last change in the Preferred Share Conversion Price would change the Preferred Share Conversion Price by more than one percent. However, once the cumulative effect would result in a change of more than one percent, then the Preferred Share Conversion Price shall be adjusted to reflect all adjustments called for by this Article 8(c) and not previously made. Notwithstanding the first sentence of this Article 8(c)(iii)(F), any adjustment postponed pursuant to such sentence shall be made no later than immediately prior to the date of any conversion of the Preferred Share.

 

  (G) The new Preferred Share Conversion Price shall be adjusted to the nearest cent.

 

  (H) The new Preferred Share Conversion Price adjusted pursuant to this Article 8(c)(iii) shall become effective from the date of the issue of Additional Shares.

 

  (I) Whenever the Preferred Share Conversion Price is adjusted as herein provided, the Company shall forthwith prepare and keep at its registered office a certificate signed by any Director stating the adjusted Preferred Share Conversion Price and showing in detail the facts requiring such adjustment, and notice thereof shall be mailed to the respective holders of Preferred Shares as set out in the register of Members of the Company no later than ten (10) days after such adjustment is made.

 

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  (J) In case any event shall occur as to which the other provisions of this Article 8(c)(iii) are not strictly applicable, but the failure to make any adjustment to the Preferred Share Conversion Price would not fairly protect the conversion rights of the Preferred Shares in accordance with the essential intent and principles hereof, then, in each such case, the Board, in good faith, shall determine the appropriate adjustment to be made, on a basis consistent with the essential intent and principles established in this Article 8(c)(iii), necessary to preserve, without dilution, the conversion rights of the Preferred Shares. If the Majority Series D Preferred Holders with respect to the Series D Preferred Shares, the Majority Series C Preferred Holders with respect to the Series C Preferred Shares, the Majority Series B Preferred Holders with respect to the Series B Preferred Shares or the Majority Series A Preferred Holders with respect to the Series A Preferred Shares shall reasonably and in good faith disagree with such determination by the Board, then the Board shall appoint an internationally recognized investment banking firm, which shall give their opinion as to the appropriate adjustment, if any, on the basis described above. Upon receipt of such opinion, the Board will promptly mail a copy thereof to each holder of such series of Preferred Shares and shall make the adjustments described therein.

 

  (iv) Conversion Notice. In the case of an optional conversion as described in Article 8(c)(i), the conversion right shall be exercisable by a holder of Preferred Shares by delivery to the Company or its authorized agent of a conversion notice in such form as the Directors may from time to time determine (together with any original share certificate(s) relating to such Preferred Shares and any evidence the Directors may require to prove the title of the Person exercising the right to convert), requiring the Company to convert some or all of his Preferred Shares in accordance with these Articles. A conversion notice once given may not be withdrawn without the Company’s written consent.

 

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  (v) Effectiveness. Conversion shall take place: (A) in the case of an optional conversion as described in Article 8(c)(i), at the close of business on the date of delivery of the conversion notice together with the evidence described in Article 8(c)(iv) to the Company (or if such date is not a Business Day, then on the next succeeding Business Day), and (B) in the case of an automatic conversion as described in Article 8(c)(ii), at the close of business on the Business Day immediately preceding the date of completion of the Qualified IPO (in the case of Article 8(c)(ii)(A) or at the close of business on the date of delivery of written consent (in the case of Article 8(c)(ii)(B).

Conversions made pursuant to Article 8(c) may be made by way of (at the option of the holder of the Preferred Shares but to the extent permitted by the applicable law): (1) redemption of the Preferred Shares to be converted and the issue of the corresponding number of Ordinary Shares as calculated in accordance with the provisions of Article 8(c), in which case, all Preferred Shares to be converted by way of redemption shall be cancelled on the date that appropriate entry or entries are made on the Company’s register of Members both in respect of any redeemed and cancelled Preferred Shares and the issue of the Ordinary Shares, or (ii) re-designation of such Preferred Shares, or in such other manner and on such terms as the Board may determine to offer to the holders of the Preferred Shares.

 

  (vi) Cancellation of Shares. On the date of conversion of any Preferred Share the holder of such shares to be converted shall cease to be entitled to any rights in respect of that share (except for the right of such holder to receive Ordinary Shares and (if applicable), together with any accrued or declared but unpaid dividends on the Preferred Shares that have been converted) and accordingly his name shall be removed from the register of Members as the holder of such Preferred Share, and the Preferred Shares which are converted shall not be reissued as part of such series and will be canceled promptly upon the conversion thereof.

 

  (vii) Rights Attaching to New Shares. The Ordinary Shares to which the holder of Preferred Shares is entitled in exercising his right to convert:

 

  (A) shall be credited as fully paid;

 

  (B) shall rank pari passu in all respects and form one class with the Ordinary Shares then in issue; and

 

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  (C) entitle the holder to be paid an appropriate proportion of all dividends and other distributions declared, made or paid on Ordinary Shares in respect of the calendar year in which the relevant conversion date falls, but not in respect of an earlier financial year.

 

  (viii) Certificates. A certificate for new Ordinary Shares shall be sent within four weeks of the relevant conversion date to each holder without charge, with a new certificate for any balance of unconverted Preferred Shares, comprised in the surrendered certificate and, if appropriate, a check in respect of a fractional entitlement.

 

  (ix) Fractional Shares. If more than one Preferred Share is to be converted at any one time by the same holder, the aggregate number of Ordinary Shares to be issued to the same person will be calculated on the basis of the aggregate number of Preferred Shares to be converted. Fractions of Ordinary Shares will not be issued on conversion from Preferred Shares. Fractions of Ordinary Shares will be rounded up to the nearest whole number of Ordinary Shares.

 

  (x) Stamp Duties. The Company shall pay all documentary, stamp or other similar taxes and any incidental expenses attributable to the issuance or delivery of the Ordinary Shares or other shares or securities or consideration upon conversion of any of the Preferred Shares, including, without limitation, any expenses of computing the adjustments provided for herein. However, the Company shall not be required to pay any documentary, stamp or other taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of the Preferred Shares in respect of which such shares are being issued.

 

  (d) Attendance at General Meetings and Voting

 

  (i) Holders of Preferred Shares have the right, in the same manner as the holders of Ordinary Shares, to receive notice of, attend, speak and vote as a single class with the Ordinary Shares at a general meeting. Each holder present in person or by proxy or (being a corporation) by a representative, is entitled to exercise the number of votes which he would have been entitled to exercise if all the Preferred Shares held by him had been converted into Ordinary Shares immediately before the holding of the general meeting at the conversion rate then applicable.

 

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  (ii) Notwithstanding anything else contained in these Articles, the Company shall not take, permit to occur, approve, authorize, or agree or commit to do any of the acts described in Schedule A Part (I), whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by the Majority Preferred Holders, which shall include the approvals by Tencent for so long as the number of the Preferred Shares (as converted or reclassified from time to time) held by Tencent does not fall below the Tencent Shareholding Threshold and by the Founder Vehicles; provided however that, where the Statute requires a Special Resolution to approve any of the acts specified in Schedule A Part (I), in computing the majority on a poll for the purposes of passing such a Special Resolution at a meeting of Members, the Majority Preferred Holders, which shall include the approvals by Tencent for so long as the number of the Preferred Shares (as converted or reclassified from time to time) held by Tencent does not fall below the Tencent Shareholding Threshold and by the Founder Vehicles, shall have the voting rights equal to all Members who voted in favor of the Special Resolution plus one.

 

  (iii) Notwithstanding anything else contained in these Articles and without prejudicing the generality of the Article 8(d)(ii) above, the Company shall not take, permit to occur, approve, authorize, or agree or commit to do any of the acts described in Schedule A Part (II), whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by the Majority Preferred Holders, provided however that, where the Statute requires a Special Resolution to approve any of the acts specified in Schedule A Part (II), in computing the majority on a poll for the purposes of passing such a Special Resolution at a meeting of Members, the Majority Preferred Holders, shall have the voting rights equal to all Members who voted in favor of the Special Resolution plus one.

 

9. The Preferred Shares shall rank pari passu with each other, except for where these Articles (including without limitation Article 8, Article 18 and Article 19) and the Series D Transaction Documents expressly provide otherwise. The Preferred Shares rank senior to and in preference of the Ordinary Shares and all other share classes of the Company in all respects.

 

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10. The Directors shall at all times reserve and keep available and free of preemptive rights out of its authorized share capital a sufficient number of unissued Ordinary Shares solely for the purpose of issuing Ordinary Shares upon conversion of any Preferred Shares. If at any time the number of authorized but unissued shares is not sufficient to issue such shares, then the Directors and the Members shall as soon as practicable take all such action as may be necessary to increase the authorized share capital of the Company so such number and amount shall be sufficient for such purpose.

 

11. No fractional shares will be issued and the number of shares to be issued shall be rounded up to the nearest whole share from any fraction resulting from any calculation under Article 8.

 

12. The Company shall maintain a register of its Members.

TRANSFER OF SHARES

 

13. The instrument of transfer of any share shall be in writing and shall be executed by or on behalf of the transferor and the transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register in respect thereof.

 

14. The Directors may not decline to register any transfer of shares unless such registration of transfer would be contrary to any provisions in the Memorandum of Association, these Articles, the Statute, the Shareholders Agreement or the Right of First Refusal & Co-Sale Agreement or any other agreement binding on the Company. If the Directors refuse to register a transfer they shall notify the transferee within five (5) Business Days of such refusal, providing a detailed explanation of the reason therefore. The Directors shall register any transfer of shares that complies with these Articles, the Shareholders Agreement and the Right of First Refusal & Co-Sale Agreement.

 

15. RESERVED.

REDEEMABLE SHARES

 

16. Subject to the provisions of the Statute, the Memorandum of Association and these Articles (including Schedule A), all shares are issued on the basis that they are redeemable on the terms and in the manner set forth in these Articles.

 

17. Subject to the provisions of the Statute, the Memorandum of Association and these Articles, the Company may purchase its own shares (including fractions of a share), including any redeemable share, PROVIDED THAT the manner of such purchase has first been authorised by the Company in general meeting and may make payment therefor in any manner authorised by the Statute, including out of capital.

 

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REDEMPTION

 

18. Subject to the Statute and notwithstanding Article 17:

 

  (I) upon the request by any holder of outstanding Series D Preferred Shares (the “Series D Redemption Requestor”), the Company shall redeem all of the outstanding Series D Preferred Shares held by such Series D Redemption Requestor out of funds legally available therefor including capital, at any time after the earliest to occur of (a) December 31, 2021, if no Qualified IPO 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 the Members, (c) the early termination of employment or service contracts of no less than 30% of the Key Employees (or subsequent persons holding their respective positions) with the Group Companies during any six-month period (excluding any early termination with Cause (as defined under the Shareholders Agreement)) which has resulted in Material Adverse Effect (as defined in the Purchase Agreement) with respect to the Business of the Group Companies as a whole, (d) termination or disruption (which has not been resumed within 90 days) of the Business of the Group Companies 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 Series A Redemption Requestor, Series B Redemption Requestor, Series C Redemption Requestor, or any other Series D Redemption Requestor has requested the Company to redeem its shares in any Redemption Event by delivery of a notice in accordance with Article 19. Subject to the Statute, the redemption amount payable for each Series D Preferred Share (the “Series D Redemption Price”) will be an amount equal to the greater of (x) 100% of the Series D Original Issue Price, plus all accrued but unpaid dividends thereon up to the date of redemption and interest on the Series D Original Issue Price compounded at the rate of 8% per annum, proportionally adjusted for share subdivisions, share dividends, reorganizations, reclassifications, consolidations, mergers or similar transactions, and (y) the Fair Market Value of such Series D Preferred Shares at the date of redemption. The redemption right of the Series D Preferred Shares shall be senior and in preference to, and shall be satisfied before, the redemption right of the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares and any other securities of the Company.

 

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  (II) upon the request by any holder of outstanding Series C Preferred Shares (the “Series C Redemption Requestor”), the Company shall redeem all of the outstanding Series C Preferred Shares held by such Series C Redemption Requestor out of funds legally available therefor including capital, at any time after the earliest to occur of (a) any Redemption Event, and (b) any Series A Redemption Requestor, Series B Redemption Requestor, any Series D Redemption Requestor or any other Series C Redemption Requestor has requested the Company to redeem its shares in any Redemption Event by delivery of a notice in accordance with Article 19. Subject to the Statute, the redemption amount payable for each Series C Preferred Share (the “Series C Redemption Price”) will be an amount equal to the greater of (x) 100% of the Series C Original Issue Price, plus all accrued but unpaid dividends thereon up to the date of redemption and interest on the Series C Original Issue Price compounded at the rate of 8% per annum, proportionally adjusted for share subdivisions, share dividends, reorganizations, reclassifications, consolidations, mergers or similar transactions, and (y) the Fair Market Value of such Series C Preferred Shares at the date of redemption. The redemption right of the Series C Preferred Shares shall be senior and in preference to, and shall be satisfied before, the redemption right of the Series A Preferred Shares, Series B Preferred Shares and any other securities of the Company (other than the Series D Preferred Shares).

 

  (III) upon the request by any holder of outstanding Series B Preferred Shares (the “Series B Redemption Requestor”), the Company shall redeem all of the outstanding Series B Preferred Shares held by such Series B Redemption Requestor out of funds legally available therefor including capital, at any time after the earliest to occur of (a) any Redemption Event, and (b) if any Series A Redemption Requestor, Series C Redemption Requestor, Series D Redemption Requestor or any other Series B Redemption Requestor has requested the Company to redeem its shares in any Redemption Event by delivery of a notice in accordance with Article 19. Subject to the Statute, the redemption amount payable for each Series B Preferred Share (the “Series B Redemption Price”) will be an amount equal to the greater of (x) 100% of the applicable Series B Original Issue Price, plus all accrued but unpaid dividends thereon up to the date of redemption and interest on the applicable Series B Original Issue Price compounded at the rate of 8% per annum, proportionally adjusted for share subdivisions, share dividends, reorganizations, reclassifications, consolidations, mergers or similar transactions, and (y) the Fair Market Value of such Series B Preferred Shares at the date of redemption. The redemption right of the Series B Preferred Shares shall be senior and in preference to, and shall be satisfied before, the redemption right of the Series A Preferred Shares and any other securities of the Company (other than the Series C Preferred Shares and Series D Preferred Shares).

 

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  (IV) upon the request by any holder of outstanding Series A Preferred Shares (the “Series A Redemption Requestor”), the Company shall redeem all of the outstanding Series A Preferred Shares held by such Series A Redemption Requestor out of funds legally available therefor including capital, at any time after the earliest to occur of (a) any Redemption Event, and (b) if any Series B Redemption Requestor, Series C Redemption Requestor, Series D Redemption Requestor or any other Series A Redemption Requestor has requested the Company to redeem its shares in any Redemption Event by delivery of a notice in accordance with Article 19. Subject to the Statute, the redemption amount payable for each Series A Preferred Share (the “Series A Redemption Price”) will be an amount equal to the greater of (x) 100% of the applicable Series A Original Issue Price, plus all accrued but unpaid dividends thereon up to the date of redemption and interest on the applicable Series A Original Issue Price compounded at the rate of 8% per annum, proportionally adjusted for share subdivisions, share dividends, reorganizations, reclassifications, consolidations, mergers or similar transactions, and (y) the Fair Market Value of such Series A Preferred Shares at the date of redemption. The redemption right of Series A-3 Preferred Shares shall be senior and in preference to, and shall be satisfied before, the redemption right of the Series A-2 Preferred Shares, the Series A-1 Preferred Shares and any other securities of the Company (other than the Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares). The redemption right of the Series A-2 Preferred Shares and redemption right of the Series A-1 Preferred Shares shall be pari passu with each other.

 

19.      (a) If requested for redemption in accordance with Article 18, a Series A Redemption Requestor, a Series B Redemption Requestor, a Series C Redemption Requestor or a Series D Redemption Requestor (as the case may be) shall give a written notice of redemption with respect to the Preferred Shares requested to be redeemed (the “Redemption Shares”, and each a “Redemption Share”) to the Company, by hand or by mail to the business address of the Company (the date of receipt of such notice by the Company, the “Redemption Start Date”), which notice shall state the date after the Redemption Start Date on which the Redemption Shares are required to be redeemed (the “Redemption Date”), provided, however, that the Redemption Date shall be no earlier than fifteen (15) days after the Redemption Start Date and no later than ninety (90) days after Redemption Start Date. Upon receipt of any redemption request from a Series A Redemption Requestor, a Series B Redemption Requestor, a Series C Redemption Requestor or a Series D Redemption Requestor, the Company shall promptly give written notice of the redemption request to each non-requesting holder of the Preferred Shares, stating the existence of such request, the number of Redemption Shares, the applicable Preferred Share Redemption Price, the Redemption Date and the mechanics of redemption, and then, subject to Article 18 above, each such non-requesting holder of the Preferred Shares shall (subject to the provisions of these Articles) be entitled to request to have up to all of its own Preferred Shares included as the Redemption Shares and redeemed simultaneously with those of the Series A Redemption Requestors, and/or the Series B Redemption Requestors, and/or the Series C Redemption Requestors, and/or the Series D Redemption Requestors, as the case maybe, and if so requested, such non-requesting holder of the Preferred Shares shall become a Series A Redemption Requestor, or a Series B Redemption Requestor, or a Series C Redemption Requestor, or a Series D Redemption Requestor as the case may be.

 

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  (b) The Company shall redeem all of the Redemption Shares, and pay the Series D Redemption Price in full to each Series D Redemption Requestor, the Series C Redemption Price in full to each Series C Redemption Requestor, the Series B Redemption Price in full to each Series B Redemption Requestor and the Series A Redemption Price in full to each Series A Redemption Requestor on or before the relevant Redemption Date, provided, however, that in any event, the Company shall (1) first redeem the Series D Preferred Shares requested to be redeemed and pay to the Series D Redemption Requestor(s) the full amount of the Series D Redemption Price on such Series D Preferred Share subject to redemption, (2) after full payment of the Series D Redemption Price, redeem the Series C Preferred Shares requested to be redeemed and pay to the Series C Redemption Requestor(s) the full amount of the Series C Redemption Price on such Series C Preferred Share subject to redemption, (3) after full payment of the Series D Redemption Price and the Series C Redemption Price, redeem the Series B Preferred Shares requested to be redeemed and pay to the Series B Redemption Requestor(s) the full amount of the Series B Redemption Price on such Series B Preferred Share subject to redemption, (4) after full payment of the Series D Redemption Price, the Series C Redemption Price and the Series B Redemption Price, redeem the Series A-3 Preferred Shares requested to be redeemed and pay to the Series A Redemption Requestor(s) who are Series A-3 Investors the full amount of the Series A Redemption Price for such Series A-3 Preferred Share subject to redemption, and (5) after full payment of the Series D Preferred Shares, the Series C Redemption Price, the Series B Redemption Price and the Series A Redemption Price (with respect to the Series A Redemption Requestor(s) who are Series A-3 Investors), redeem the Series A-2 Preferred Shares and the Series A-1 Preferred Shares requested to be redeemed and pay to the Series A Redemption Requestor(s) who are Series A-2 Investors or Series A-1 Investors the full amount of the Series A Redemption Price for such Series A-2 Preferred Share and Series A-1 Preferred Shares subject to redemption.

 

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  (c) If on the Redemption Date, the Company fails or is unable due to a rule of law or lack of sufficient fund to pay in full the Series A Redemption Price, Series B Redemption Price, Series C Redemption Price and Series D Redemption Price for all the Redemption Shares, then the funds that are legally available shall nonetheless: (1) first, be used to redeem each of the Series D Preferred Shares requested to be redeemed, and pay the Series D Redemption Price thereon in full (provided that if the Company’s funds are insufficient to allow full payment of the Series D Redemption Price with respect to all of the Series D Preferred Shares required to be redeemed, such funds shall apply on a pro rata basis with respect to the Series D Preferred Shares requested to be redeemed); (2) second, after the payment in full of the Series D Redemption Price for each Series D Preferred Share requested to be redeemed, be used to redeem each of the Series C Preferred Shares requested to be redeemed, and pay the Series C Redemption Price thereon in full (provided that if the Company’s funds are insufficient to allow full payment of the Series C Redemption Price with respect to all of the Series C Preferred Shares required to be redeemed, such funds shall apply on a pro rata basis with respect to the Series C Preferred Shares requested to be redeemed); (3) third, after the payment in full of the Series D Redemption Price for each Series D Preferred Share requested to be redeemed and the payment in full of the Series C Redemption Price for each Series C Preferred Share requested to be redeemed, be used to redeem each of the Series B Preferred Shares requested to be redeemed, and pay the Series B Redemption Price thereon in full (provided that if the Company’s funds are insufficient to allow full payment of the Series B Redemption Price with respect to all of the Series B Preferred Shares required to be redeemed, such funds shall apply on a pro rata basis with respect to the Series B Preferred Shares requested to be redeemed), (4) fourth, after the payment in full of the Series D Redemption Price for each Series D Preferred Share requested to be redeemed, the payment in full of the Series C Redemption Price for each Series C Preferred Share requested to be redeemed and the payment in full of the Series B Redemption Price for each Series B Preferred Share requested to be redeemed, be used to redeem each of the Series A-3 Preferred Shares requested to be redeemed, and pay the Series A Redemption Price thereon in full (provided that if the Company’s remaining funds are insufficient to allow full payment of the Series A Redemption Price with respect to all of the Series A-3 Preferred Shares required to be redeemed, such funds shall apply on a pro rata basis with respect to the Series A-3 Preferred Shares requested to be redeemed); (5) fifth, after the payment in full of the Series D Redemption Price for each Series D Preferred Share requested to be redeemed, the payment in full of the Series C Redemption Price for each Series C Preferred Share requested to be redeemed, the payment in full of the Series B Redemption Price for each Series B Preferred Share requested to be redeemed and the payment in full of the Series A Redemption Price for each Series A-3 Preferred Share requested to be redeemed, be used to redeem each of the Series A-2 Preferred Shares and Series A-1 Preferred Shares requested to be redeemed in a pro-rata manner in accordance with the relative full amounts owed thereon, and pay the Series A Redemption Price thereon in full (provided that if the Company’s remaining funds are insufficient to allow full payment of the Series A Redemption Price with respect to all of the Series A-2 Preferred Shares and Series A-1 Preferred Shares required to be redeemed, such funds shall apply in a pro-rata manner in accordance with the relative full amounts owed with respect to the Series A-2 Preferred Shares and Series A-1 Preferred Shares requested to be redeemed); and (6) any shortfall shall be paid and applied from time to time out of legally available funds immediately as and when such funds become legally available against each outstanding Redemption Share in accordance with the relative remaining amounts owed thereon pursuant to this Article 19. Without limiting any rights of the holders of any Preferred Shares herein, or are otherwise available under applicable law, the balance of any Redemption Shares with respect to which the Company has become obligated to pay the applicable amount of Preferred Share Redemption Price but which it has not paid in full shall continue to have all the powers, designations, preferences and participating, optional, and other special rights (including, without limitation, rights to dividends) which such shares had prior to such date, until the redemption payment has been paid in full with respect to such shares.

 

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20. Before any holder of Redemption Shares shall be entitled to redeem its shares under the provisions of Article 18, such holder shall surrender his or her original certificate or certificates representing such Redemption Shares to be redeemed to the Company in the manner and at the place designated by the Directors for that purpose, and thereupon the applicable Preferred Share Redemption Price shall be immediately payable to such holder in accordance with these Articles and each such certificate shall be cancelled. In the event that less than all the shares represented by any such certificate are redeemed, a new certificate shall be promptly issued representing the unredeemed shares. Upon cancellation of the certificate representing such Redemption Shares to be redeemed and full payment of the applicable Preferred Share Redemption Price for such Redemption Shares, all dividends on such Redemption Shares shall cease to accrue and all rights of the holders thereof, without interest, shall cease and terminate and such Redemption Shares shall cease to be issued shares of the Company.

 

21. If the Company fails (for whatever reason) to redeem any Redemption Shares on its due date for redemption then, as from such date until the date on which the same are redeemed, the Company shall neither declare or pay any dividend nor otherwise make any distribution of or otherwise decrease its profits available for distribution. If the Preferred Share Redemption Price for all of the Preferred Shares to be redeemed is not paid in full within three (3) months after the Redemption Date (or the last Redemption Date if there are more than one) and the related Preferred Share Redemption Price is due and payable pursuant to these Articles, the Series A Redemption Requestors, the Series B Redemption Requestors, the Series C Redemption Requestors and the Series D Redemption Requestors (whose Redemption Shares have not been fully redeemed) shall have the right (subject to applicable law), during the period from the expiration of such three-month period to the date on which the applicable Preferred Share Redemption Price for all of the Redemption Shares to be redeemed is paid in full, to require the Company to, and the Company shall, take all actions necessary in order to enable the Company to be legally able to pay the full amount of such Preferred Share Redemption Price, including borrowing funds, selling assets or capital stock of any Group Company, distributing available dividends, applying for and obtaining approval for reduction of capital of any Group Company or liquidating and making liquidation distributions, and/or causing any Group Company to do any of the foregoing. To the extent permitted by applicable law, such Preferred Share Redemption Price shall be payable in US dollars outside of the PRC in immediately available funds.

 

22. To the extent permitted by law, the Company shall ensure that the profits of each Subsidiary of the Company for the time being available for distribution shall be paid to it by way of dividend if and to the extent that, but for such payment, the Company would not itself otherwise have sufficient profits available for distribution to make any redemption of Redemption Shares required to be made pursuant to Article 18.

VARIATION OF RIGHTS OF SHARES

 

23. Without prejudice to and in addition to other provisions in these Articles (including Article 8(d) and Schedule A), if at any time the share capital of the Company is divided into different classes or series of shares, the rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or series) may not (whether or not the Company is being wound-up) be varied, cancelled or adversely amended unless with the consent in writing of the holders of not less than three-fourths (3/4) of the issued shares of that class or series, or with the sanction of a Special Resolution passed at a general meeting of the holders of the shares of that class or series.

 

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Notwithstanding anything to the contrary in these Articles (including the foregoing paragraph of this Article 23 and Article 8, Article 18, Article 19 and Schedule A) and any other Series D Transaction Document and for the avoidance of doubt, the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series D Preferred Shares under Article 8, and Articles 18 through 22 are different from those of any other classes or series of Preferred Shares, and therefore any amendment, variation, change or cancellation of any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series D Preferred Shares under Article 8 and Articles 18 through 22 are subject to the prior written consent of the Majority Series D Preferred Holders. Notwithstanding anything to the contrary in these Articles (including the foregoing paragraph of this Article 23 and Article 8, Article 18, Article 19 and Schedule A) and any other Series D Transaction Document and for the avoidance of doubt, the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series C Preferred Shares under Article 8, and Articles 18 through 22 are different from those of any other classes or series of Preferred Shares, and therefore any amendment, variation, change or cancellation of any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series C Preferred Shares under Article 8 and Articles 18 through 22 are subject to the prior written consent of the Majority Series C Preferred Holders. Notwithstanding anything to the contrary in these Articles (including the foregoing paragraph of this Article 23 and Article 8, Article 18, Article 19 and Schedule A) and any other Series D Transaction Document and for the avoidance of doubt, the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series B Preferred Shares under Article 8, and Articles 18 through 22 are different from those of any other classes or series of Preferred Shares, and therefore any amendment, variation, change or cancellation of any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series B Preferred Shares under Article 8 and Articles 18 through 22 are subject to the prior written consent of the Majority Series B Preferred Holders. Notwithstanding anything to the contrary in these Articles (including the foregoing paragraph of this Article 23 and Article 8(d) and Schedule A) and any other Series D Transaction Document and for the avoidance of doubt, the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series A-3 Preferred Shares under Article 8(c), and Articles 18 through 22 are different from those of any other classes or series of Series A Preferred Shares, and therefore any amendment, variation, change or cancellation of any of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of the Series A-3 Preferred Shares under Article 8(b), Article 8(c), and Articles 18 through 22 are subject to the prior written consent of the holder of a majority of the outstanding Series A-3 Preferred Shares.

 

24. The provisions of these Articles relating to general meetings shall apply to every such general meeting of the holders of one class of shares except that the necessary quorum shall be one person holding or representing by proxy at least one-third of the issued shares of the class.

 

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25. The rights conferred upon the holders of a series of the Preferred Shares shall be deemed varied or abrogated by, inter alia:

 

  (a) any amendment or change of the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of the holders of, such series of the Preferred Shares;

 

  (b) any action that authorizes, creates or issues shares of any class ranking as regards participation in the Company’s profits or assets in priority to such series of the Preferred Shares;

 

  (c) any action that reclassifies any issued shares of any class ranking as regards participation in the Company’s profits or assets in priority to such series of the Preferred Shares; and

 

  (d) any amendment to these Articles of Association that materially and adversely affects the rights of the holders of such series of the Preferred Shares.

 

26. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

COMMISSION ON SALE OF SHARES

 

27. The Company may in so far as the Statute from time to time permits pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares of the Company. Such commissions may be satisfied by the payment of cash or the lodgment of fully or partly paid-up shares or partly in one way and partly in the other. The Company may also on any issue of shares pay such brokerage as may be lawful.

NON-RECOGNITION OF TRUSTS

 

28. No Person shall be recognized by the Company as holding any share upon any trust and the Company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future, or partial interest in any share, or any interest in any fractional part of a share, or (except only as is otherwise provided by these Articles or the Statute) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder.

LIEN ON SHARES

 

29. The Company shall have a first and paramount lien and charge on all shares (whether fully paid-up or not) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not) by such Member or his estate, either alone or jointly with any other Person, whether a Member or not, but the Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. The registration of a transfer of any such share (other than, for so long as any sums owed by Padmasree Warrior to the Company are outstanding, the 7,509,933 Series A-3 Preferred Shares registered under the name of Padmasree Warrior) shall operate as a waiver of the Company’s lien (if any) thereon. The Company’s lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof.

 

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30. Other than (for so long as any sums owed by Padmasree Warrior to the Company under the Loan and Security Agreement are outstanding) the 7,509,933 Series A-3 Preferred Shares registered under the name of Padmasree Warrior (which may be sold or disposed by the Company at any time after occurrence of the Event of Default as defined and described in the Loan and Security Agreement), the Company may sell, in such manner as the Directors think fit, any shares on which the Company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of 14 days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder or holders for the time being of the share, or the person, of which the Company has notice, entitled thereto by reason of his death or bankruptcy.

 

31. To give effect to any such sale the Directors may authorize some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

 

32. The proceeds of such sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the Person entitled to the shares at the date of the sale.

CALL ON SHARES

 

33.      (a) The Directors may from time to time make calls upon the Members in respect of any monies unpaid on their shares (whether on account of the nominal value of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed terms. Any such calls shall not be less than one (1) month from the date fixed for the payment of the last preceding call, and each Member shall (subject to receiving at least fourteen (14) days’ notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on the shares. A call may be revoked or postponed as the Directors may determine, PROVIDED THAT the Director appointed by the Member whose shares are subject to such call shall abstain from all discussions and voting of the Board in relation to such call. A call may be made payable by installments.

 

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  (b) A call shall be deemed to have been made at the time when the resolution of the Directors authorizing such call was passed PROVIDED THAT the Director appointed by the Member whose shares are subject to such call shall not be entitled to vote on such resolution, and a simple majority of the remaining Directors shall have the power and authority to pass such a resolution.

 

  (c) The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

 

34. If a sum called in respect of a share is not paid before or on a day appointed for payment thereof, the Persons from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate not exceeding ten percent (10%) per annum as the Directors may determine, but the Directors shall be at liberty to waive payment of such interest either wholly or in part.

 

35. Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium or otherwise, shall for the purposes of these Articles be deemed to be a call duly made, notified and payable on the date on which by the terms of issue the same becomes payable, and in the case of non-payment all the relevant provisions of these Articles as to payment of interest forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.

 

36. The Directors may, on the issue of shares, differentiate between the holders as to the amount of calls or interest to be paid and the times of payment.

 

37.      (a) The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the monies uncalled and unpaid upon any shares held by him, and upon all or any of the monies so advanced may (until the same would but for such advances, become payable) pay interest at such rate not exceeding (unless the Company in general meeting shall otherwise direct) seven percent (7%) per annum, as may be agreed upon between the Directors and the Member paying such sum in advance.

 

  (b) Subject to Article 8(a)(iv), no such sum paid in advance of calls shall entitle the Member paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment, become presently payable.

 

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COMPANY CALL RIGHT

 

38.      (a) Subject to the Purchase Agreement, if a Member fails to pay any call or installment of a call or to make any payment required by the terms of issue on the day appointed for payment thereof, the Directors (excluding the Director(s) appointed by the Member whose shares are subject to the forfeiture hereunder) may, at any time thereafter during such time as any part of the call, installment or payment remains unpaid, give notice requiring payment of so much of the call, installment or payment as is unpaid, together with any interest which may have accrued and all expenses that have been incurred by the Company by reason of such non-payment. Such notice shall name a day (not earlier than the expiration of fourteen (14) days from the date of giving of the notice) on or before the day appointed for the payment as specified in the Purchase Agreement, and shall state that, in the event of non-payment at or before the time appointed the shares in respect of which such notice was given will be liable to be forfeited.

 

  (b) If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors (excluding the Director appointed by the Member whose shares are subject to the forfeiture) to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before the forfeiture.

 

  (c) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Directors (excluding the Director appointed by the Member whose shares are subject to the call) think fit and at any time before a sale or disposition the forfeiture may be canceled on such terms as the Directors (excluding the Director appointed by the Member whose shares are subject to the call) think fit.

 

39. A Person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares, and the liability of such Person to pay to the Company any monies (including the consideration of the forfeited shares and any interest or penalty thereon) in respect of the forfeited shares shall cease.

 

40. A certificate in writing under the hand of one Director or the Secretary of the Company that a share in the Company has been duly forfeited on a date stated in the declaration shall be conclusive evidence of the fact therein stated as against all Persons claiming to be entitled to the share. The Company may receive the consideration given for the share on any sale or disposition thereof and may execute a transfer of the share in favor of the Person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share.

 

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41. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium as if the same had been payable by virtue of a call duly made and notified.

REGISTRATION OF EMPOWERING INSTRUMENTS

 

42. The Company shall be entitled to charge a fee not exceeding one dollar (US$l.00) on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument.

TRANSMISSION OF SHARES

 

43. In case of the death of a Member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognized by the Company as having any title to his interest in the shares, but nothing herein contained shall release the estate of any such deceased holder from any liability in respect of any shares which had been held by him solely or jointly with other Persons.

 

44.     (a) Any Person becoming entitled to a share in consequence of the death or bankruptcy or liquidation or dissolution of a Member (or in any other way than by transfer) may, upon such evidence being produced as may from time to time be required by the Directors and subject as hereinafter provided, elect either to be registered himself as holder of the share or to make such transfer of the share to such other Person nominated by him as the deceased or bankrupt Person could have made and to have such Person registered as the transferee thereof, but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that Member before his death or bankruptcy as the case may be.

 

  (b) If the Person so becoming entitled shall elect to be registered himself as holder he shall deliver or send to the Company a notice in writing signed by him stating that he so elects.

 

45. A Person becoming entitled to a share by reason of the death or bankruptcy or liquidation or dissolution of the holder (or in any other case than by transfer) shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a Member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company PROVIDED HOWEVER that the Directors may at any time give notice requiring any such Person to elect either to be registered himself or to transfer the share and if the notice is not complied with within ninety (90) days the Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the share until the requirements of the notice have been complied with.

 

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AMENDMENT OF MEMORANDUM OF ASSOCIATION, ALTERATION OF SHARE CAPITAL & CHANGE OF LOCATION OF REGISTERED OFFICE

 

46.      (a) Subject to and in so far as permitted by the provisions of the Statute and these Articles (including Article 8(d) and Schedule A), the Company may from time to time by Special Resolution alter or amend its Memorandum of Association with respect to any objects, powers or other matters specified therein PROVIDED THAT the Company may by Ordinary Resolution:

 

  (i) increase the share capital by such sum to be divided into shares of such amount or without nominal or par value as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine;

 

  (ii) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

 

  (iii) by subdivision of its existing shares or any of them divide the whole or any part of its share capital into shares of smaller amount than is fixed by the Memorandum of Association or into shares without nominal or par value;

 

  (iv) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any Person.

 

  (b) All new shares created hereunder shall be subject to the same provisions with reference to the payment of calls, liens, transfer, transmission, forfeiture and otherwise as the shares in the original share capital.

 

  (c) Without prejudice to these Articles hereof and subject to the provisions of the Statute and these Articles (including Article 8(d) and Schedule A), the Company may by Special Resolution reduce its share capital and any capital redemption reserve fund.

 

  (d) Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of its registered office.

 

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CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE

 

47A. A Member will not be entitled to notice of or to participate in or vote at any meeting of Members or any adjournment thereof, or to any rights and privileges provided in these Articles, and will not be subject to any obligations and restrictions provided in these Articles, in connection with any shares, until and unless it/he/she has been entered into the register of Members as a holder of such shares.

 

47. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any dividend, or in order to make a determination of Members for any other proper purpose, the Directors of the Company may provide that the register of Members shall be closed for transfers for a stated period but not to exceed in any case 40 days. If the register of Members shall be so closed for the purpose of determining Members entitled to notice of or to vote at a meeting of Members such register shall be so closed for at least ten (10) days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the register of Members.

 

48. In lieu of or apart from closing the register of Members, the Directors may fix in advance a date as the record date for any such determination of Members entitled to notice of or to vote at a meeting of the Members and for the purpose of determining the Members entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such dividend fix a subsequent date as the record date for such determination.

 

49. If the register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of or to vote at a meeting of Members or Members entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this section, such determination shall apply to any adjournment thereof.

GENERAL MEETING

 

50.      (a) Subject to paragraph (c) hereof, the Company shall within one year of its incorporation and in each year of its existence thereafter hold a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as the Directors shall appoint and if no other time and place is prescribed by them, it shall be held at the registered office on the second Wednesday in December of each year at ten o’clock in the morning.

 

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  (b) At these meetings the report of the Directors (if any) shall be presented.

 

  (c) If the Company is exempted as defined in the Statute it may but shall not be obliged to hold an annual general meeting.

 

51.      (a) The Directors may whenever they think fit, and they shall on the requisition of Members of the Company holding at the date of the deposit of the requisition not less than one-tenth (1/10) of such of the paid-up capital of the Company as at the date of the deposit carries the right of voting at general meetings of the Company, proceed to convene a general meeting of the Company.

 

  (b) The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office of the Company and may consist of several documents in like form each signed by one or more requisitionists.

 

  (c) If the Directors do not within twenty-one (21) days from the date of the deposit of the requisition duly proceed to convene a general meeting, the requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration of three months after the expiration of the said twenty-one (21) days.

 

  (d) A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors.

NOTICE OF GENERAL MEETINGS

 

52. At least fifteen (15) days’ notice shall be given of an annual general meeting or any other general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business and shall be given in manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company PROVIDED THAT a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether or not the provisions of Article 51 have been complied with, be deemed to have been duly convened if it is so agreed:

 

  (a) in the case of a general meeting called as an annual general meeting, by the Members entitled to attend and vote thereat or their proxies holding not less than ninety percent (90%) of the issued and outstanding shares of the Company (or their proxies); and

 

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  (b) in the case of any other general meeting, by a majority in number of the Members having a right to attend and vote at the meeting, being a majority together holding not less than eighty-five percent (85%) of the issued and outstanding shares of the Company (or their proxies).

 

53. The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a meeting by any Person entitled to receive notice shall not invalidate the proceedings of that meeting.

PROCEEDINGS AT GENERAL MEETINGS

 

54. No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business; Members holding at least fifty percent (50%) of the outstanding share capital in the Company (including the holders of at least eighty percent (80%) of the voting power of the then outstanding Preferred Shares) present in person or by proxy shall be a quorum for a general meeting, provided that a general meeting shall be adjourned to the same time and place at least five (5) Business Days later if the quorum stated above is not present at such general meeting due to absence of any Series A-2 Investor or any Series A-3 Investor or any Series B Investor or any Series C Investor or any Series D Investor in person or by proxy, and if at such adjourned general meeting, a quorum is still not present within forty-five minutes from the time appointed for the meeting due to the absence of the same Series A-2 Investor or the same Series A-3 Investor or the same Series B Investor or the same Series C Investor or the same Series D Investor in person or by proxy, then the presence of such Series A-2 Investor, such Series A-3 Investor, such Series B Investor and/or such Series C Investor and/or such Series D Investor (as the case may be) in person or by proxy shall not be required for the quorum for this adjourned general meeting.

 

55. A resolution (which is a Special Resolution) in writing (in one or more counterparts) signed by all Members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorized representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. A resolution (which is an Ordinary Resolution) in writing (in one or more counterparts) signed by the Members holding at least ninety percent (90%) of the voting power of the then outstanding shares of the Company, who for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorized representatives), shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held.

 

56. Subject to Article 54, if within forty-five minutes from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved and in any other case it shall stand adjourned to the time and the place as set forth in Article 54 or to such other time or such other place as the Directors may determine.

 

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57. The Chairman, if any, of the Board of Directors shall preside as Chairman at every general meeting of the Company, or if there is no such Chairman, or if he shall not be present within fifteen minutes after the time appointed for the holding of the meeting, or is unwilling to act, the Directors present shall elect one of their number to be Chairman of the meeting.

 

58. If at any general meeting no Director is willing to act as Chairman or if no Director is present within fifteen minutes after the time appointed for holding the meeting, the Members present shall choose one of their number to be Chairman of the meeting.

 

59. The Chairman may, with the consent of any general meeting duly constituted hereunder, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a general meeting is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting; save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned general meeting.

 

60. At any general meeting a resolution put to the vote of the meeting shall be decided on a poll.

 

61. [Reserved]

 

62. [Reserved]

 

63. The result of the poll shall be deemed to be the resolution of the general meeting.

 

64. In the case of an equality of votes, the Chairman of the general meeting shall not be entitled to a second or casting vote.

 

65. A poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the Chairman of the general meeting directs and any business other than that upon which a poll has been demanded or is contingent thereon may be proceeded with pending the taking of the poll.

VOTES OF MEMBERS

 

66. Subject to these Articles (including but not limited to any rights or restrictions for the time being attached to any class or classes of shares (including the voting rights provided by Article 8(d)(ii))), on a poll, every Member of record present in person or by proxy shall have one (1) vote for each Ordinary Share held by such Member (on an as-converted basis).

 

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67. Immediately prior to the completion of a Qualified IPO of the Company,

 

  (a) except for the Ordinary Shares and Preferred Shares beneficially owned by Tencent and the Founder Vehicles, each fully paid Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class A Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by the other Members shall be designated as class A Ordinary Share, as the case may be. Each class A Ordinary Share shall be entitled to one (1) vote on all matters subject to the vote at general meetings of the Company;

 

  (b) each fully paid Preferred Share held by Tencent shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class B Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by Tencent shall be designated as class B Ordinary Share, as the case may be. Each class B Ordinary Share shall be entitled to four (4) votes on all matters subject to the vote at general meetings of the Company; and

 

  (c) each fully paid Preferred Share held by the Founder Vehicles shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class C Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by the Founder Vehicles shall be designated as class C Ordinary Share, as the case may be. Each class C Ordinary Share shall be entitled to eight (8) votes on all matters subject to the vote at general meetings of the Company.

 

68. In the case of joint holders of record the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of Members.

 

69. A Member of unsound mind, or in respect of whom an order has been made by any court, having jurisdiction in lunacy, may vote, on a poll, by his committee, receiver, curator bonis, or other person in the nature of a committee, receiver or curator bonis appointed by that court, and any such committee, receiver, curator bonis or other persons may vote by proxy.

 

70. No Member shall be entitled to vote at any general meeting unless he is registered as a shareholder of the Company on the record date for such meeting nor unless all calls or other sums presently payable by him in respect of shares in the Company have been paid.

 

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71. No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at such general meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the general meeting whose decision shall be final and conclusive.

 

72. On a poll, votes may be given either personally or by proxy.

PROXIES

 

73. The instrument appointing a proxy shall be in writing and shall be executed under the hand of the appointor or of his attorney duly authorized in writing, or, if the appointor is a corporation under the hand of an officer or attorney duly authorized in that behalf. A proxy need not be a Member of the Company.

 

74. The instrument appointing a proxy shall be deposited at the registered office of the Company or at such other place as is specified for that purpose in the notice convening the meeting no later than the time for holding the meeting, or adjourned meeting PROVIDED THAT the Chairman of the Meeting may at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited upon receipt of telex, cable or telecopy confirmation from the appointor that the instrument of proxy duly signed is in the course of transmission to the Company.

 

75. The instrument appointing a proxy may be in any usual or common form and may be expressed to be for a particular meeting or any adjournment thereof or generally until revoked.

 

76. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given PROVIDED THAT no intimation in writing of such death, insanity, revocation or transfer as aforesaid shall have been received by the Company at the registered office before the commencement of the general meeting, or adjourned meeting at which it is sought to use the proxy.

 

77. Any corporation which is a Member of record of the Company may in accordance with its Articles or in the absence of such provision by resolution of its Directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the corporation which he represents as the corporation could exercise if it were an individual Member of record of the Company.

 

78. Shares of its own capital belonging to the Company or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time.

 

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DIRECTORS

 

79. The Company shall have a Board of Directors consisting of not more than eleven (11) Directors, with the composition of the Board determined as follows: (a) each of Hillhouse NEV, Shunwei, and Energy (for as long as such Person continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) Director on the Board; (b) the Founder Vehicles (for as long as they continue to hold any Series A Preferred Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, three (3) Directors on the Board; (c) Temasek (for as long as it continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) Director on the Board; (d) Baidu Capital (for as long as it continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) Director on the Board; (e) Tencent (for so long as the number of the Preferred Shares (as converted or reclassified from time to time) held by Tencent does not fall below the Tencent Shareholding Threshold) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, two (2) Directors on the Board (each a “Tencent Director”) and, for the avoidance of doubt, for so long as Tencent holds any Preferred Shares (as converted or reclassified from time to time), Tencent shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) Tencent Director on the Board (the Directors referred to in (a), (b), (c), (d) and (e) above, each an “Investor Director,” and collectively, the “Investor Directors”), and (f) Prime Hubs (for as long as it continues to hold any shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) Director (the “Ordinary Director”) on the Board. Smart Group (for as long as it continues to hold any Series A Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) observer to the Board. Sequoia (for as long as it continues to hold any Series A Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) observer to the Board. Bluestone (for as long as it continues to hold any Series B Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) observer to the Board. IDG (for as long as it continues to hold any Series C Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) observer to the Board. WP (for as long as it continues to hold any Series C Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Member, one (1) observer to the Board. Each observer on the Board shall have the right to attend any Board meetings of the Company only on a non-voting capacity.

 

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The Investor Directors appointed by the Founder Vehicles shall collectively have four (4) votes on any matter submitted for approval of the Board (“Four Votes”), and among the Four Votes, Padmasree Warrior (as long as she holds any Series A-3 Preferred Shares and remains an Investor Director) (or any other Director appointed by the Founder Vehicles to replace Padmasree Warrior, in case Padmasree Warrior ceases to be an Investor Director) shall have one vote, and LI Bin (as long as he remains an Investor Director) shall have the remaining of the Four Votes, provided that if the Investor Directors appointed by the Founder Vehicles shall only have one vote, LI Bin shall have such one vote. Each other Director shall have one (1) vote on any matter submitted for approval of the Board.

 

80. Subject to these Articles (including Schedule A), the remuneration to be paid to the Directors shall be such remuneration as determined by the members of the compensation committee. Such remuneration shall be deemed to accrue from day to day. Subject to these Articles (including Schedule A), the Directors shall also be entitled to be paid their traveling, hotel and other expenses properly incurred by them in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or general meetings of the Company, or otherwise in connection with the business of the Company, or to receive a fixed allowance in respect thereof as may be determined by the Directors from time to time, or a combination partly of one such method and partly the other.

 

81. The Directors may by resolution award special remuneration to any Director of the Company undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity shall be in addition to his remuneration as a Director.

 

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82. A Director or alternate Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the Directors may determine.

 

83. A Director or alternate Director may act by himself or his firm in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or alternate Director.

 

84. A shareholding qualification for Directors may be fixed by the Company in general meeting, but unless and until so fixed no qualification shall be required.

 

85. A Director or alternate Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company.

 

86. No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is so interested as aforesaid PROVIDED HOWEVER that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him or the alternate Director appointed by him at or prior to its consideration and any vote thereon.

 

87. A general notice or disclosure to the Directors or otherwise contained in the minutes of a Meeting or a written resolution of the Directors or any committee thereof that a Director or alternate Director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure under Article 85 and after such general notice it shall not be necessary to give special notice relating to any particular transaction.

 

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ALTERNATE DIRECTORS

 

88. A Director who expects to be unable to attend Directors’ Meetings because of absence, illness or otherwise may appoint any person to be an alternate Director to act in his stead and such appointee whilst he holds office as an alternate Director shall, in the event of absence therefrom of his appointor, be entitled to attend meetings of the Directors and to vote thereat and to do, in the place and stead of his appointor, any other act or thing which his appointor is permitted or required to do by virtue of his being a Director as if the alternate Director were the appointor (including signing resolutions of the Directors passed in written form), other than appointment of an alternate to himself, and he shall ipso facto vacate office if and when his appointor ceases to be a Director or removes the appointee from office. Any appointment or removal under this Article shall be effected by notice in writing under the hand of the Director making the same.

POWERS AND DUTIES OF DIRECTORS

 

89. The business of the Company shall be managed by the Directors (or a sole Director if only one is appointed) who may pay all expenses incurred in promoting, registering and setting up the Company, and may exercise all such powers of the Company as are not from time to time by the Statute or by these Articles or such regulations, being not inconsistent with the aforesaid, prescribed by the Company in general meeting required to be exercised by the Company in general meeting PROVIDED HOWEVER that no regulations made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made.

 

90. The Directors may from time to time and at any time by powers of attorney appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorneys as the Directors may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

 

91. All checks, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in such manner as the Directors shall from time to time by resolution determine.

 

92. The Directors shall cause minutes to be made in books provided for the purpose:

 

  (a) of all appointments of officers made by the Directors;

 

  (b) of the names of the Directors (including those represented thereat by an alternate or by proxy) present at each meeting of the Directors and of any committee of the Directors;

 

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  (c) of all resolutions and proceedings at all meetings of the Company and of the Directors and of committees of Directors.

 

93. Subject to these Articles (including Schedule A), the Directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or to his widow or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.

 

94. Subject to these Articles (including Schedule B), the Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof and to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party.

MANAGEMENT

 

95. The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the three next following paragraphs shall be without prejudice to the general powers conferred by this paragraph.

PROCEEDINGS OF DIRECTORS

 

96. Except as otherwise provided by these Articles (including Schedule B), the Directors shall meet together for the dispatch of business, convening, adjourning and otherwise regulating their meetings as they think fit. Questions arising at any meeting shall be decided in accordance with Schedule B, the vote of an alternate Director not being counted if his appointor be present at such meeting. In case of an equality of votes, the matter shall be determined in accordance with Schedule B.

 

97. Meetings of Directors shall be called in accordance with Schedule B, provided that, if notice is given in person, by cable, telex or telecopy the same shall be deemed to have been given on the day it is delivered to the Directors or transmitting organization as the case may be. The provisions of Article 51 shall apply mutatis mutandis with respect to notices of meetings of Directors.

 

98. The quorum necessary for the transaction of the business of the Directors shall be as stated in Schedule B. For the purposes of this Article 98, an alternate Director or proxy appointed by a Director shall be counted in a quorum at a meeting at which the Director appointing him is not present.

 

99. Subject to these Articles (including Schedule B), the continuing Directors may act notwithstanding any vacancy in their body, PROVIDED THAT if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose.

 

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100. Subject to these Articles (including Schedule B), the Directors may elect a Chairman of their Board and determine the period for which he is to hold office; but if no such Chairman is elected, or if at any meeting the Chairman is not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the meeting.

 

101. Subject to these Articles (including Schedule B), the Directors may delegate any of their powers to committees consisting of such member or members of the Board of Directors (including Alternate Directors in the absence of their appointors) as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors. Without limiting the foregoing, the Directors shall establish an Audit Committee and a Compensation Committee, as further described in Schedule B.

 

102. Subject to these Articles (including Schedule B), a committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined (including in the case of a deadlock) in the same manner as provided in these Articles for meetings of the Board of Directors.

 

103. All acts done by any meeting of the Directors or of a committee of Directors (including any person acting as an alternate Director) shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or alternate Director, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director or alternate Director as the case may be.

 

104. Subject to these Articles (including Schedule B), members of the Board of Directors or of any committee thereof may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. A resolution in writing (in one or more counterparts), signed by all the Directors for the time being or all the members of a committee of Directors (an alternate Director being entitled to sign such resolution on behalf of his appointor) shall be as valid and effectual as if it had been passed at a meeting of the Directors or committee as the case may be duly convened and held.

 

105.    (a) A Director may be represented at any meetings of the Board of Directors by a proxy appointed by him in which event the presence or vote of the proxy shall for all purposes be deemed to be that of the Director.

 

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  (b) The provisions of Articles 69-72 shall mutatis mutandis apply to the appointment of proxies by Directors.

VACATION OF OFFICE OF DIRECTOR

 

106. The office of a Director shall be vacated if he or she gives notice in writing to the Company that he or she resigns the office of Director, if he or she dies or if he or she is found a lunatic or becomes of unsound mind, or if he or she is removed by the Member or Members that originally appointed him her pursuant to Article 79. Any vacancy on the Board occurring because of the death or resignation of a Director shall be filled by the vote or written consent of the Member or Members that originally entitled to appoint such Director pursuant to Article 79.

APPOINTMENT AND REMOVAL OF DIRECTORS

 

107. The Directors of the Company may only be appointed as provided in Article 79.

 

108. Subject to Article 79, any Director appointed pursuant to Article 79 may be removed from the Board only upon the vote or written consent of the Member or Members entitled to appoint such Director pursuant to Article 79. Any Member or Members entitled to appoint any individual to be elected as a Director on the Board shall have the exclusive right at any time or from time to time to remove any such Director occupying such position and to fill any vacancy caused by the death, disability, retirement, resignation or removal of any Director occupying such position.

PRESUMPTION OF ASSENT

 

109. A Director of the Company who is present at a meeting of the Board of Directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the Minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action.

 

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SEAL

 

110. The Company may, if the Directors so determine, have a Seal which shall, subject to Article 112 hereof, only be used by the authority of the Directors or of a committee of the Directors authorized by the Directors in that behalf and every instrument to which the Seal has been affixed shall be signed by one person who shall be either a Director or the Secretary or Secretary- Treasurer or some person appointed by the Directors for the purpose.

 

111. The Company may have a duplicate Seal or Seals each of which shall be a facsimile of the Common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used.

 

112. A Director, Secretary or other officer or representative or attorney may without further authority of the Directors affix the Seal of the Company over his signature alone to any document of the Company required to be authenticated by him under Seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever.

OFFICERS

 

113. The Company may have a President, a Secretary or Secretary-Treasurer appointed by the Directors who may also from time to time appoint such other officers as they consider necessary, all for such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors from time to time prescribe.

DIVIDENDS, DISTRIBUTIONS AND RESERVE

 

114. Subject to the Statute and these Articles (including Schedule A), the Directors may from time to time declare dividends (including interim dividends) and distributions on shares of the Company outstanding and authorize payment of the same out of the funds of the Company lawfully available therefor.

 

115. The Directors may, before declaring any dividends or distributions, set aside such sums as they think proper as a reserve or reserves which shall at the discretion of the Directors, be applicable for any purpose of the Company and pending such application may, at the like discretion, be employed in the business of the Company.

 

116. No dividend or distribution shall be payable except out of the profits of the Company, realized or unrealized, or out of the share premium account or as otherwise permitted by the Statute.

 

117. Subject to the rights of Persons, if any, entitled to shares with special rights as to dividends or distributions (including those set forth under Article 8(a)), if dividends or distributions are to be declared on a class of shares, they shall be declared and paid according to the amounts paid or credited as paid on each of the shares of such class outstanding on the record date for such dividend or distribution as determined in accordance with these Articles.

 

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118. The Directors may deduct from any dividend or distribution payable to any Member all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

 

119. The Directors may declare that any dividend or distribution be paid wholly or partly by the distribution of specific assets and in particular of paid up shares, debentures, or debenture stock of any other company or in any one or more of such ways and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors.

 

120. Any dividend, distribution, interest or other monies payable in cash in respect of shares may be paid by check or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the holder who is first named on the register of Members or to such Person and to such address as such holder or joint holders may in writing direct. Every such check or warrant shall be made payable to the order of the Person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends, bonuses, or other monies payable in respect of the share held by them as joint holders.

 

121. No dividend or distribution shall bear interest against the Company.

CAPITALIZATION

 

122. Subject to these Articles (including Schedule A), the Company may upon the recommendation of the Directors by Ordinary Resolution authorize the Directors to capitalize any sum standing to the credit of any of the Company’s reserve accounts (including share premium account and capital redemption reserve fund) or any sum standing to the credit of profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their behalf in paying up in full unissued shares for allotment and distribution credited as fully paid up to and amongst them in the proportion aforesaid. In such event the Directors shall do all acts and things required to give effect to such capitalization, with full power to the Directors to make such provisions as they think fit for the case of shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned). The Directors may authorize any Person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalization and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned.

 

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BOOKS OF ACCOUNT

 

123. The Directors shall cause proper books of account (including, where applicable, material underlying documentation including contracts and invoices) to be kept with respect to all sums of money received and expended by the Company and the matters in respect of which the receipt or expenditure takes place, all sales and purchases of goods by the Company and the assets and liabilities of the Company. Such books of account must be retained for a minimum period of five years from the date on which they are prepared. Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the Company’s affairs and to explain its transactions.

 

124. The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by Statute or authorized by the Directors or by the Company in general meeting or in accordance with these Articles (including Article 8(d) and Schedule A).

 

125. The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law.

AUDIT

 

126. Subject to these Articles (including Article 8(d) and Schedule A), the Company may at any annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the next annual general meeting and may fix his or their remuneration.

 

127. Subject to these Articles (including Schedule B), the Directors may before the first annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the first annual general meeting unless previously removed by an Ordinary Resolution of the Members in general meeting in which case the Members at that meeting may appoint Auditors. Subject to these Articles (including Schedule B), the Directors may fill any casual vacancy in the office of Auditor but while any such vacancy continues the surviving or continuing Auditor or Auditors, if any, may act. The remuneration of any Auditor appointed by the Directors under this Article may be fixed by the Directors.

 

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128. Every Auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and Officers of the Company such information and explanation as may be necessary for the performance of the duties of the auditors.

 

129. Auditors shall at the next annual general meeting following their appointment and at any other time during their term of office, upon request of the Directors or any general meeting of the Members, make a report on the accounts of the Company in general meeting during their tenure of office.

NOTICES

 

130. Notices shall be in writing and may be given by the Company to any Member either personally or by sending it by courier, post, cable, telex, fax or e-mail to him or to his address as shown in the register of Members (or where the notice is given by e-mail by sending it to the e-mail address provided by such Member). Any notice, if posted from one country to another, is to be sent by airmail.

 

131. Where a notice is sent by courier, service of the notice shall be deemed to be effected by delivery of the notice to a courier company, and shall be deemed to have been received on the third day (not including Saturdays or Sundays or public holidays) following the day on which the notice was delivered to the courier. Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre paying and posting a letter containing the notice, and shall be deemed to have been received on the fifth day (not including Saturdays or Sundays or public holidays in the Cayman Islands) following the day on which the notice was posted. Where a notice is sent by cable, telex or fax, service of the notice shall be deemed to be effected by properly addressing and sending such notice and shall be deemed to have been received on the same day that it was transmitted. Where a notice is given by e-mail service shall be deemed to be effected by transmitting the e-mail to the e-mail address provided by the intended recipient and shall be deemed to have been received on the same day that it was sent, and it shall not be necessary for the receipt of the e-mail to be acknowledged by the recipient.

 

132. A notice may be given by the Company to the Person or Persons which the Company has been advised are entitled to a share or shares in consequence of the death or bankruptcy of a Member in the same manner as other notices which are required to be given under the Articles and shall be addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the Persons claiming to be so entitled, or at the option of the Company by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

 

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133. Notice of every general meeting shall be given in any manner authorised by the Articles to every holder of shares carrying an entitlement to receive such notice on the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the register of Members and every Person upon whom the ownership of a share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a Member where the Member but for his death or bankruptcy would be entitled to receive notice of the meeting, and no other Person shall be entitled to receive notices of general meetings.

WINDING UP

 

134. Subject to these Articles (including Article 8(b) and Schedule A), if the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Statute, divide amongst the Members in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability.

 

135. Subject to these Articles (including Article 8(b) and Schedule A), if the Company shall be wound up, and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. Subject to these Articles (including Article 7(b), Article 8(b) and Schedule A), if in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the Members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. This Article is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions.

 

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INDEMNITY

 

136. The Directors and officers for the time being of the Company and any trustee for the time being acting in relation to any of the affairs of the Company and their heirs, executors, administrators and personal representatives respectively shall be indemnified out of the assets of the Company from and against all actions, proceedings, costs, charges, losses, damages and expenses which they or any of them shall or may incur or sustain by reason of any act done or omitted in or about the execution of their duty in their respective offices or trusts, except such (if any) as they shall incur or sustain by or through their own willful neglect or default respectively and no such Director, officer or trustee shall be answerable for the acts, receipts, neglects or defaults of any other Director, officer or trustee or for joining in any receipt for the sake of conformity or for the solvency or honesty of any banker or other Persons with whom any monies or effects belonging to the Company may be lodged or deposited for safe custody or for any insufficiency of any security upon which any monies of the Company may be invested or for any other loss or damage due to any such cause as aforesaid or which may happen in or about the execution of his office or trust unless the same shall happen through the willful neglect or default of such Director, Officer or trustee.

FINANCIAL YEAR

 

137. Unless the Directors otherwise prescribe, the financial year of the Company shall end on 31st December in each year and, following the year of incorporation, shall begin on 1st January in each year.

CORPORATE OPPORTUNITY

 

138. The Company renounces any interest or expectancy of the Company in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Company who is not an employee of any Group Company, or (ii) any holder of Preferred Shares or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of any Group Company (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Company.

AMENDMENTS OF ARTICLES

 

139. Subject to the Statute and these Articles (including Article 8(d) and Schedule A), the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part.

 

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TRANSFER BY WAY OF CONTINUATION

 

140. If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the Statute and with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.

 

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SCHEDULE A

Acts of the Group Companies Requiring

Approval of the Majority Preferred Holders

(I)

(i) any amendment or change of the rights, preferences, privileges, or powers of or concerning, or the limitations or restrictions provided for the benefit of, any Preferred Shares, or any amendment of the Charter Documents of the Company or any Material Group Subsidiary;

(ii) any action that authorizes, creates or issues any Ordinary Shares or Preferred Shares after the Initial Closing (other than: (1) the issuance of Series D Preferred Shares pursuant to the Purchase Agreement, (2) the issuance of Ordinary Shares upon conversion of the Preferred Shares, and (3) the issuance of Ordinary Shares (or options or warrants therefor) pursuant to the Stock Incentive Plans); any action that authorizes, creates or issues any class or series of Equity Securities having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, superior to or on a parity with any Preferred Shares, or any Equity Securities convertible into, exchangeable for, or exercisable into any Equity Securities having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, superior to or on a parity with any series of Preferred Shares, and any action that reclassifies any outstanding shares into shares having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, senior to or on a parity with any series of Preferred Shares;

(iii) any approval of the liquidation, winding up, bankruptcy, dissolution of any Group Company or the commitment to any of the foregoing; any filing by or against any Group Company for the appointment of a receiver, administrator or other form of external manager of any Group Company;

(iv) any approval of the corporate reorganization, merger, consolidation, or split of any Group Company, any Trade Sale, or the commitment to any of the foregoing;

(v) any acquisition of a majority of the shares, voting power, business or assets of any other corporation or entity, or any investment in any other corporation or entity in excess of US$30,000,000 (individually or in aggregate in a series of related transactions in any financial year);

(vi) any repurchase or redemption or cancellation of any Equity Securities of any Group Company (other than pursuant to: (1) the Series D Transaction Documents, (2) any repurchase right of the Company under the Stock Incentive Plans approved in accordance with these Articles and the Shareholders Agreement, (3) the Loan and Security Agreement, and (4) the offer letter dated November 23, 2015 for the engagement of Padmasree Warrior as chief development officer of the Company);

 

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(vii) any increase, decrease or alteration of the authorized or issued share capital or registered capital of any Group Company (other than (1) the increase of capital of any Group Company using the proceeds from the issuance and sale of the Series D Preferred Shares in accordance with Section 8.3 of the Purchase Agreement, and (2) the increase of capital of any Group Company by another Group Company which holds 100% equity in the first Group Company), or any transfer of the Equity Securities of any Group Company (other than (1) the transfer of Equity Securities of the Company which complies with the Right of First Refusal & Co-Sale Agreement or the Stock Incentive Plans, (2) the equity restructuring of Beijing Libite Auto Technology Co., Ltd. as described under the Purchase Agreement, and (3) the transfer or disposal of Padmasree Warrior’s shares pursuant to the Loan and Security Agreement);

(viii) any change of the size, composition or voting arrangement of the board of directors of any Group Company and the manner in which the directors of each Group Company are appointed, except in compliance with these Articles and the Shareholders Agreement;

(ix) (1) establishment of any Subsidiary other than a Subsidiary that is wholly owned, directly or indirectly, by NIO Inc., or divestiture or sale of an interest in a Subsidiary; or (2) restatement or amendment to, or termination of, the Control Documents between Shanghai Nextev and Shanghai NIO Technology Co., Ltd., or (3) execution of, restatement or amendment to, or termination of, any control documents between Shanghai Nextev and Beijing Libite Auto Technology Co., Ltd (or any other affiliate of the Company) which provide contractual control to Shanghai Nextev over Beijing Libite Auto Technology Co., Ltd. (or such affiliate of the Company) and allow Shanghai Nextev to consolidate the financial statements of Beijing Libite Auto Technology Co., Ltd (or such affiliate of the Company) (except for (A) the equity restructuring and the execution of control documents with respect to Beijing Libite Auto Technology Co., Ltd pursuant to Section 8.13 of the Purchase Agreement, and (B) any amendment and restatement to the control documents between Shanghai Nextev and Beijing Libite Auto Technology Co., Ltd. (or any other affiliate of the Company) or to the Control Documents between Shanghai Nextev and Shanghai NIO Technology Co., Ltd. solely resulted from the capital increase or equity transfer of Beijing Libite Auto Technology Co., Ltd. or Shanghai NIO Technology Co., Ltd. (or any other affiliate of the Company) (as the case may be) which has been approved in accordance with this Schedule A);

(x) any sale, transfer, assignment, license, mortgage or other disposition of, or the incurrence of any Lien on, a majority portion of the assets, properties, Intellectual Property, goodwill, Business of any Group Company in excess of US$30,000,000 (individually or in aggregate in a series of related transactions in any financial year) (except for the transfer or license among Group Companies for management purpose or in the ordinary course of business);

 

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(xi) any transfer of Prime Hubs Shares (as defined in the Purchase Agreement) by any Prime Hubs Grantee (as defined in the Purchase Agreement) to a Person other than Prime Hubs or a Key Employee (as defined in the Purchase Agreement), officer, management personnel or director of the Group Companies (including the vehicle 100% owned by such Key Employee, officer or director); or

(xii) any direct or indirect transfer by Mr. LI Bin of any equity securities in any Group Company or any of the Founder Vehicle, except for (1) the transfer to the Persons described in Section 2.6(i) to (iii) of the Right of First Refusal & Co-Sale Agreement, (2) the transfer of any equity securities of Beijing Libite for the purposes of individual foreign exchange registration of the Prime Hubs Grantees (or any amendments thereto), and (3) subject to Section 2.1(vi) in the Right of First Refusal & Co-Sale Agreement, up to a separate and additional 1,500,000 Series A-1 Preferred Shares beneficially held by the Founder (directly or indirectly through the Founder Vehicles), provided that the third party transferee shall have executed a Deed of Adherence in the form attached to the Series D Transaction Documents, as applicable.

(II)

(i) any declaration, setting aside and/or payment of any dividends or other distributions on any securities of any Group Company, or the adoption of or any change to the dividend policy;

(ii) any initial public offering (including Qualified IPO) of any Group Company, including choice of the underwriters, the listing venue, timing, valuation and the security exchange for the initial public offering;

(iii) approval of issuance of any indenture, bond or note of any Group Company; or

(iv) the appointment of, or entering into agreements or arrangements with, a company other than a wholly owned PRC Subsidiary of the Company to serve as a distributor of any products manufactured by PRC Group Companies and/or any partner of the Group, including but not limited to Anhui Jianghuai Automobile Co., Ltd.

(III)

Notwithstanding anything hereinabove, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series B Preferred Shares:

 

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(i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series B Preferred Shares;

(ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series B Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series B Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

(iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series B Preferred Shareholders relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series B Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series B Preferred Shareholders relative to the other classes of shares hereunder.

(IV)

Notwithstanding anything hereinabove, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series C Preferred Shares:

(i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series C Preferred Shares;

(ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series C Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series C Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

 

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(iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series C Preferred Shareholders relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series C Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series C Preferred Shareholders relative to the other classes of shares hereunder.

(V)

Notwithstanding anything hereinabove, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series D Preferred Shares:

(i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series D Preferred Shares;

(ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series D Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series D Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

(iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series D relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series D Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series D Preferred Shareholders relative to the other classes of shares hereunder.

 

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SCHEDULE B

Board

1. Quorum. The Board shall hold no less than one (1) board meeting during each fiscal quarter. A meeting of the Board shall only proceed where there are present (whether in person or by means of a conference telephone or any other equipment which allows all participants in the meeting to speak to and hear each other simultaneously) six (6) Directors of the Company then in office, and the foregoing number of Directors shall be the quorum requirements for meetings of the Board. Notwithstanding the foregoing, if notice of the Board meeting has been duly delivered to all Directors of the Board seven (7) days prior to the scheduled meeting in accordance with the notice procedures under these Articles, and the number of Directors required to be present under this Schedule B for such meeting to proceed is not present within one hour from the time appointed for the meeting because of the absence of any Director, the Directors present at the meeting shall adjourn the meeting to the third following Business Day at the same time and place (or to such other time or such other place as the Directors may determine) with notice delivered to all Directors one day prior to the adjourned meeting in accordance with the notice procedures under these Articles and, if at the adjourned meeting, the number of Directors required to be present under this Schedule B for such meeting to proceed is not present within one hour from the time appointed for the meeting because of the absence of any Director, then the presence of such Director(s), shall not be required at such adjourned meeting in order for the meeting to be quorate.

2. Expenses. The Company will promptly pay or reimburse each non-employee Board member and each non-employee Subsidiary Board (as defined in Shareholders Agreement) member for all reasonable out-of-pocket expenses incurred in connection with attending board or committee meetings and otherwise performing their duties as directors and committee members.

3. Acts of the Group Companies Requiring Approval of Investor Directors. In addition to such other limitations as may be provided in these Articles, the Company shall not take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, and the Company shall not permit any other Group Company to take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by a majority of the votes of the directors of the Company, including the affirmative vote of (i) at least two Investor Directors appointed by the holders of Series A-1 Preferred Shares and (ii) at least four Investor Directors appointed by the holders of Preferred Shares other than the holders of Series A-1 Preferred Shares:

(i) any related party transaction or a series of related party transactions involving any Group Company on one hand, and any Ordinary Holders, director, officer or employee of the Group Company on the other hand, for which the aggregate value exceeds US$3 million, except for the business cooperation with any of Tencent’s Affiliates (including but not limited to the business cooperation with any of Tencent’s Affiliates pursuant to Section 12.16 in Shareholders Agreement)

 

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(ii) the extension by any Group Company of any loan to any third party in excess of US$3 million (individually or in the aggregate in a series of related loans in a fiscal year), or any guarantee for the indebtedness of any third party, except for the loans or the trade credit incurred in the ordinary course of business;

(iii) the incurrence of any loan of any Group Company involving an amount in excess of US$5,000,000 from banks, financial institutions or any third party;

(iv) the commencement or carrying out of any business activities by Beijing Libite Auto Technology Co., Ltd. or Shanghai NIO Technology Co., Ltd. which will generate substantial revenues or cash flows; any material change to the business cope, or substance of the Business of any Group Company, the commencement or carrying out any new businesses of any Group Company other than the Business; or incurrence of any substantial expenses by Beijing Libite Auto Technology Co., Ltd. (except for the regular lease payment for its current leased office or regular office maintenance expenses) exceeding RMB1,000,000; any transfer of assets to Shanghai NIO Technology Co., Ltd. or Beijing Libite Auto Technology Co., Ltd.;

(v) approval or material amendment of the annual business plan or annual budget plan of any Group Company;

(vi) approval or amendment of Stock Incentive Plans of any Group Company, or any other incentive arrangements which may result in any employee, officer, director or advisor of the Group Companies directly hold any Equity Securities in the Company or other Group Company;

(vii) any material change in the accounting and financial policies of any Group Company unless such change is required by applicable Laws; or

(viii) engagement or change of the auditor of the Company.

 

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EX-4.4

Exhibit 4.4

Execution Version

NIO INC.

 

 

FIFTH AMENDED AND RESTATED

SHAREHOLDERS’ AGREEMENT

 

 


TABLE OF CONTENTS

 

         Page  

1.

  Definitions      5  

2.

  Demand Registration      18  

3.

  Piggyback Registrations      20  

4.

  Registration Procedures      22  

5.

  Registration-Related Indemnification      25  

6.

  Additional Registration-Related Undertakings      27  

7.

  Preemptive Right      31  

8.

  Information and Inspection Rights      34  

9.

  Corporate Governance      35  

10.

  Protective Provisions      39  

11.

  Drag-Along Rights      45  

12.

  Additional Covenants      47  

13.

  Miscellaneous      59  

SCHEDULES

Schedule 1: List of Investors

Schedule 2: Address for Notices

EXHIBIT

Exhibit A: Form of Deed of Adherence


FIFTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT

THIS FIFTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this “Agreement”) is entered into on November 10, 2017, by and among:

 

(1) NIO INC. (formerly known as NEXTEV INC.), an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (the “Company”);

 

(2) NIO NEXTEV LIMITED (formerly known as NEXTEV LIMITED), a limited company duly incorporated and validly existing under the Laws of Hong Kong (the “HK Company”);

 

(3) XPT LIMITED, a limited company duly incorporated and validly existing under the Laws of Hong Kong (the “XPT”);

 

(4) XPT TECHNOLOGY LIMITED, a limited company duly incorporated and validly existing under the Laws of Hong Kong (the “XPT Technology”);

 

(5) XPT, INC., a company duly incorporated and validly existing under the Laws of the State of Delaware, the United States of America (the “XPT US”)

 

(6) NIO CO., LTD. (formerly known as NEXTEV CO., LTD.) (上海蔚来汽车有限公司), a wholly foreign owned enterprise duly incorporated and validly existing under the Laws of the PRC (“Shanghai Nextev”);

 

(7) SHANGHAI XPT TECHNOLOGY CO., LTD. (上海蔚兰动力科技有限公司), a wholly foreign owned enterprise duly incorporated and validly existing under the Laws of the PRC (the “Shanghai Weilan”);

 

(8) XPT (JIANGSU) INVESTMENT CO., LTD. (formerly known as XPT INVESTMENT CO., LTD.) (蔚然(江苏)投资有限公司 ), a wholly foreign owned enterprise duly incorporated and validly existing under the Laws of the PRC (the “Jiangsu Weiran”);

 

(9) XPT (NANJING) E-POWERTRAIN TECHNOLOGY CO., LTD. (蔚然(南京)动力科技有限公司 ), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“XPT Nanjing Technology”);

 

(10) XPT (NANJING) ENERGY STORAGE SYSTEM CO., LTD. (蔚然(南京)储能技术有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“XPT Nanjing Energy”);

 

(11) NIO TECHNOLOGY CO., LTD. (上海蔚来科技有限公司, formerly known as 上海赛睿迪新能源汽车有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“NIO Technology”);

 

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(12) NEXTEV USER ENTERPRISE LIMITED, a limited company duly incorporated and validly existing under the Laws of Hong Kong (“Nextev User”);

 

(13) SHANGHAI NIO SALES AND SERVICE CO., LTD. (formerly known as SHANGHAI AUTO DISTRIBUTION SERVICE CO., LTD.) (上海蔚来汽车销售服务有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“Shanghai Auto Distribution”);

 

(14) NEXTEV POWER EXPRESS LIMITED, a limited company duly incorporated and validly existing under the Laws of Hong Kong (“Nextev Power”);

 

(15) NIO ENERGY INVESTMENT (HUBEI) CO., LTD. (formerly known as NEXTEV ENERGY INVESTMENT (HUBEI) CO., LTD.) (蔚来能源投资(湖北)有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“Hubei Investment”);

 

(16) SHANGHAI NIO ENERGY TECHNOLOGY CO., LTD. (formerly known as SHANGHAI NEXTEV ENERGY TECHNOLOGY CO., LTD.) (上海蔚来能源科技有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“Shanghai Energy”);

 

(17) WUHAN NIO ENERGY CO., LTD. (formerly known as WUHAN NEXTEV ENERGY CO., LTD.) (武汉蔚来能源有限公司), a limited liability company duly incorporated and validly existing under the Laws of the PRC (“Wuhan Energy”);

 

(18) BEIJING LIBITE AUTO TECHNOLOGY CO., LTD. (北京力比特汽车科技有限公司 ), a limited liability company incorporated under the Laws of the PRC (“Beijing Libite”);

 

(19) XTRONICS (NANJING) AUTOMATIVE INTELLIGENT TECHNOLOGY CO. LTD. (蔚隆 (南京 )汽车智能科技有限公司 ), a limited liability company incorporated under the Laws of the PRC (“Nanjing Weilong”);

 

(20) NIO USA, INC. (formerly known as NEXTEV USA, INC.), a company duly incorporated and validly existing under the Laws of the State of California, the United States of America (the “US Company”).

 

(21) NIO GMBH (formerly known as NEXTEV GMBH), a limited liability company duly incorporated and validly existing under the Laws of Germany (the “German Company”);

 

(22) NIO NEXTEV (UK) LTD (formerly known as NEXTEV (UK) LIMITED), a private company limited by shares duly incorporated and validly existing under the Laws of the United Kingdom (the “UK Company”);

 

(23) PRIME HUBS LIMITED, a business company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands (“Prime Hubs”);

 

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(24) MR. LI BIN, a citizen of the PRC whose identification number is 110108197406221836 (the “Founder”);

 

(25) Each of the Persons listed in Part A1 of Schedule 1 (List of Investors) hereto (collectively, the “Series A-1 Investors” and each a “Series A-1 Investor”);

 

(26) Each of the Persons listed in Part A2 of Schedule 1 (List of Investors) hereto (collectively, the “Series A-2 Investors” and each a “Series A-2 Investor”);

 

(27) Each of the Persons listed in Part A3 of Schedule 1 (List of Investors) hereto (collectively, the “Series A-3 Investors” and each a “Series A-3 Investor”);

 

(28) Each of the Persons listed in Part B of Schedule 1 (List of Investors) hereto (collectively, the “Series B Investors” and each a “Series B Investor”);

 

(29) Each of the Persons listed in Part C of Schedule 1 (List of Investors) hereto (collectively, the “Series C Investors” and each a “Series C Investor”); and

 

(30) Each of the Persons listed in Part D of Schedule 1 (List of Investors) hereto (together with any Additional Series D Investors participating in any applicable Additional Closings deemed as “Series D Investors” in accordance with Section 12.4, collectively, the “Series D Investors” and each a “Series D Investor”).

Each of the parties listed above shall be referred to herein individually as a “Party” and collectively as the “Parties.”

Capitalized terms used herein without definition shall have the meanings set forth in the Purchase Agreement (as defined below).

RECITALS

 

(A) WHEREAS, each of the Series D Investors has agreed to purchase from the Company, and the Company has agreed to sell to each Series D Investor, certain Series D Preferred Shares of the Company, on the term and conditions set forth in the Series D Preferred Share Purchase Agreement dated November 10, 2017 (as amended and restated and/or supplemented from time to time, the “Purchase Agreement”) by and among the Company, the HK Company, XPT, XPT Technology, Shanghai Nextev, XPT US, Shanghai Weilan, Jiangsu Weiran, XPT Nanjing Technology, XPT Nanjing Energy, Nanjing Weilong, NIO Technology, Nextev User, Shanghai Auto Distribution, Nextev Power, Hubei Investment, Shanghai Energy, Wuhan Energy, Beijing Libite, the US Company, the German Company, the UK Company, Prime Hubs, the Founder Vehicles and certain Series D Investors.

 

(B) WHEREAS, the Purchase Agreement provide that it shall be a condition precedent to the consummation of the transactions contemplated under the Purchase Agreement that the Parties have entered into this Agreement.

 

(C) WHEREAS, the Parties desire to enter into this Agreement and make the respective representations, warranties, covenants and agreements set forth herein on the terms and conditions set forth herein.

 

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(D) WHEREAS, a Fourth Amended and Restated Shareholders’ Agreement was entered into on March 21, 2017 by and among the Company, the HK Company, XPT, XPT Technology, Shanghai Nextev, Shanghai Weilan, Jiangsu Weiran, NIO Technology, Beijing Libite, the US Company, the German Company, the UK Company, Prime Hubs, the Founder, the Series A-1 Investors, the Series A-2 Investors, Series A-3 Investors, certain Series B Investors and certain Series C Investors (together with a Deed of Adherence dated May 31, 2017 by and between the Company and Blissful Days Holdings Limited, a Deed of Adherence dated May 31, 2017 by and between the Company and Bluefuture Fund L.P., a deed of adherence dated May 31, 2017 by and between the Company and Keen Eagle Capital Investment Limited, a Deed of Adherence dated April 24, 2017 by and between the Company and Champion Elite Global Limited, a Deed of Adherence dated July 6, 2017 by and between the Company and Tea Leaf Limited, a Deed of Adherence dated April 24, 2017 by and between the Company and China Investment Asset Management Limited, a Deed of Adherence dated May 31, 2017 by and between the Company and Guangfa Xinde Capital Management Limited, a Deed of Adherence dated April 24, 2017 by and between the Company and HF Holdings Limited, a Deed of Adherence dated April 24, 2017 by and between the Company and Ultimate Lenovo Limited, a Deed of Adherence dated May 31, 2017 by and between the Company and China Oceanwide International Asset Management Limited, a Deed of Adherence dated April 24, 2017 by and between the Company and Anderson Investments Pte. Ltd., a Deed of Adherence dated May 31, 2017 by and between the Company and UBS AG, London Branch, a Deed of Adherence dated April 24, 2017 by and between the Company and Cyber Tycoon Limited, and a Deed of Adherence dated April 24, 2017 by and between the Company and Honor Best International Limited, the “Prior Shareholders Agreement”). The Parties agree that as of the Initial Closing Date, this Agreement shall supersede the Prior Shareholders Agreement in its entirety, and the Prior Shareholders Agreement shall terminate and have no further force or effect.

WITNESSETH

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound hereto hereby agree as follows:

 

1. DEFINITIONS

 

1.1 The following terms shall have the meanings ascribed to them below:

Additional Closing” and “Additional Closing Date” shall have the meaning ascribed to them in the Purchase Agreement.

Additional Series D Investor” shall have the meaning ascribed to it in the Purchase Agreement.

 

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Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person (in the case of a Person being a natural person, the “Affiliate” shall include the immediate family members of such Person. For the purpose of this Agreement, “immediate family members” shall mean parents, mother-in-law or father-in-law, spouse, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, and children, and any other individual to whom the Person provides material support). In the case of an Investor, if applicable, the term “Affiliate” also includes (w) any shareholder of such Investor, (x) any of such shareholder’s or such Investor’s general partners, (y) the fund manager managing such shareholder or such Investor (and general partners and officers thereof) and other funds managed by such fund manager, and (z) trusts controlled by or for the benefit of any such Person referred to in (w), (x) or (y). Notwithstanding anything to the contrary in this Agreement and any other Series D Transaction Document, with respect to Sequoia or SCC, if applicable, the term “Affiliate” shall (x) only include a variety of entities within the Sequoia China Sector Group that are affiliated with Sequoia by ownership or operational relationship and engaged in a broad range of activities relating to investing and securities trading; and (y) shall not include any entity that is (i) outside of the Sequoia China Sector Group or (ii) primarily engaged in investment and trading in the secondary securities market; for purposes of the foregoing, the “Sequoia China Sector Group means all Sequoia Capital entities (whether currently existing or formed in the future) that are principally focused on companies located in, or with connections to, the PRC. Notwithstanding anything to the contrary in this Agreement and any other Series D Transaction Document, with respect to Temasek, if applicable, the term “Affiliate” shall only include (a) Temasek Holdings (Private) Limited (“Temasek Holdings”); and (b) Temasek Holdings’ direct and indirect wholly owned companies whose boards of directors or equivalent governing bodies comprise solely nominees or employees of (i) Temasek Holdings; (ii) Temasek Pte. Ltd. (being a wholly owned subsidiary of Temasek Holdings); and/or (iii) wholly owned direct and indirect subsidiaries of Temasek Pte. Ltd. Notwithstanding anything to the contrary in this Agreement and any other Series D Transaction Document, with respect to Tencent, if applicable, the term “Affiliate” shall only include (a) Tencent Holdings Limited (“Tencent Holdings”); and (b) any Person Controlled by Tencent Holdings. For the avoidance of doubt, any Investor and any holder of Preferred Shares shall not be deemed to be an Affiliate of any Group Company.

Applicable Securities Laws” means (i) with respect to any offering of securities in the United States, or any related act or omission within that jurisdiction, the securities laws of the United States, including the Exchange Act and the Securities Act, and any applicable Law of any state of the United States, and (ii) with respect to any offering of securities in any jurisdiction other than the United States, or any related act or omission in that jurisdiction, the applicable Laws of that jurisdiction.

Benchmark Shares” means, with respect to a holder of Preferred Shares, the number of Preferred Shares held by such holder of Preferred Shares as of the Initial Closing Date (as converted or reclassified from time to time in accordance with the Memorandum and Articles and this Agreement).

Board” or “Board of Directors” means the board of directors of the Company.

Business” means the business of the Group Companies, which is research and development, design, manufacturing, and sales of new energy automobiles (electric cars) and/or the components and accessory products related thereto, the provision of related services, the establishment and operation of charging networks, and other business as may be approved by the Board or the Shareholders of the Company in accordance with the Memorandum and Articles and this Agreement from time to time.

 

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Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks are required or authorized by law to be closed in the Cayman Islands, the PRC or Hong Kong.

Cause” means, with respect to the Founder or any of the Key Employees, (i) such person’s failure, in the reasonable judgment of the Board, to substantially perform his or her assigned duties or responsibilities (other than a failure resulting from his or her disability) after written notice thereof from the Board describing the person’s failure to perform such duties or responsibilities (provided that such person (if he serves as a Director) and any director appointed by the Founder or his Affiliate (if the person with alleged Cause is the Founder) shall abstain from all voting in the Board meetings or resolutions solely in relation to the judgment of his or her own failure to perform his or her assigned duties or responsibilities); (ii) engaging in knowing and intentional illegal conduct that is or was injurious to any Group Company; (iii) violation of a PRC law, or a law or regulation of any other jurisdiction, which violation was or is reasonably likely to be injurious to any Group Company; (iv) material breach of any confidentiality agreement, invention assignment agreement or any other service or employment agreements between the person and the Company or its Affiliates; (v) being convicted of, or entering a plea of nolo contendere to, a felony or committing any act of moral turpitude, dishonesty or fraud against, or the misappropriation of material property belonging to, any Group Company; (vi) material failure to comply with written policies or rules of the Company or its Affiliates; or (vii) gross negligence or wilful misconduct detrimental to any Group Company’s interests.

CFC” means a controlled foreign corporation as defined in the Code.

Charter Documents” means, with respect to a particular legal entity, the articles of incorporation, certificate of incorporation, formation or registration (including, if applicable, certificates of change of name), memorandum of association, articles of association, bylaws, articles of organization, certificate of formation, limited liability company agreement, trust deed, trust instrument, operating agreement, joint venture agreement, business license, or similar or other constitutive, governing, or charter documents, or equivalent documents, of such entity, as amended, supplemented or restated from time to time.

Closing” shall have the meaning ascribed to it in the Purchase Agreement.

Code” means the United States Internal Revenue Code of 1986, as amended.

Commission” means (i) with respect to any offering of securities in the United States, the Securities and Exchange Commission of the United States or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States, the regulatory body of the jurisdiction with authority to supervise and regulate the offering or sale of securities in that jurisdiction.

 

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Competing Business” means the business of design, manufacture and sale of electric automobiles (电动汽车).

Confidential Information” means the terms and conditions of the Series D Transaction Documents, all exhibits and schedules attached thereto, and information relating to the negotiations therefor.

Consent” means any consent, approval, authorization, release, waiver, permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to, any Person, including any Governmental Authority.

Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person. The terms “Controlled” and “Controlling” have meanings correlative to the foregoing.

Conversion Price” means the results by dividing the Initial Subscription Price Per Share by the then applicable conversion price per applicable Preferred Share.

Control Documents” shall have the meaning ascribed to it in the Purchase Agreement.

Director” means a director serving on the Board.

Director Indemnification Agreement” shall mean the director indemnification agreement, the form of which is approved by the Board from time to time, which is entered into by the Company and each of the Investor Directors.

Deed of Adherence” means the deed of adherence substantially in the form attached hereto as Exhibit A.

Equity Securities” means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests, profits interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option, call, commitment, note, conversion privilege, preemptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or exercisable for any of the foregoing, or any Contract providing for the acquisition of any of the foregoing.

Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

Form F-3” means Form F-3 promulgated by the Commission under the Securities Act or any successor form or substantially similar form then in effect.

 

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Form S-3” means Form S-3 promulgated by the Commission under the Securities Act or any successor form or substantially similar form then in effect.

Founder Vehicles” means, collectively, mobike Global (as defined in Schedule 1) and Originalwish (as defined in Schedule 1).

Governmental Authority” means any government of any nation or any federation, province or state or any other political subdivision thereof, any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any government authority, agency, department, board, commission or instrumentality of any country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory organization.

Governmental Order” means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, consent, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental Authority.

Group Company” means each of the Company and its Subsidiaries (including the HK Company, XPT, XPT Technology, XPT US, Shanghai Nextev, Shanghai Weilan, Jiangsu Weiran, XPT Nanjing Technology, XPT Nanjing Energy, Nanjing Weilong, NIO Technology, Nextev User, Shanghai Auto Distribution, Nextev Power, Hubei Investment, Shanghai Energy, Wuhan Energy Beijing Libite, US Company, German Company, UK Company, other Subsidiaries set out on Schedule III of the Purchase Agreement, and other Subsidiaries to be established from time to time), and “Group” or “Group Companies” refers to all of Group Companies collectively.

Holders” means the holders of Registrable Securities who are parties to this Agreement from time to time, and their permitted transferees that become parties to this Agreement from time to time.

Hong Kong” means the Hong Kong Special Administrative Region, the People’s Republic of China.

Initial Closing” and “Initial Closing Date” shall have the meaning ascribed to them in the Purchase Agreement.

Initiating Holders” means, with respect to a request duly made under Section 2.1 (Registration Other Than on Form F-3 or Form S-3) or Section 2.2 (Registration on Form F-3 or Form S-3) to Register any Registrable Securities, the Holders initiating such request.

Investors” means collectively the Series A-1 Investors, Series A-2 Investors, Series A-3 Investors, Series B Investors, Series C Investors and Series D Investors, and “Investor” means each or any of them.

Investor Restrictive Investment Cutoff Date” means (1) with respect to each of Hillhouse NEV Holdings Limited and Shunwei, March 18, 2017, (2) with respect to Tencent, May 6, 2017, (3) with respect to Smart Group, June 23, 2017, (4) with respect to each of Sequoia and Joy Capital, September 12, 2017, (5) with respect to Padmasree, March 10, 2018, (6) with respect to each Founder Vehicle, March 18, 2018, and (8) with respect to Energy, May 6, 2018.

 

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Investor Restrictive Investment Period” means, with respect to each Series A Investor, the period of time until the Investor Restrictive Investment Cutoff Date applicable to such Series A Investor. For the avoidance of doubt, the Investor Restrictive Investment Period shall also be applicable to the Affiliates of such Series A Investor (of Investment Affiliates of such Investor in case of Hillhouse NEV Holdings Limited or Shunwei).

IPO” means an initial public offering of Shares on an internationally recognized stock exchange.

Law” or “Laws” means any and all provisions of any applicable constitution, treaty, statute, law, regulation, ordinance, code, rule, or rule of common law, any governmental approval, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, in each case as amended, and any and all applicable Governmental Orders.

Lien” means any claim, charge, easement, encumbrance, lease, covenant, security interest, lien, option, pledge, mortgage, rights of others, or restriction (whether on voting, sale, transfer, disposition or otherwise), whether imposed by contract, understanding, law, equity or otherwise.

Loan and Security Agreement” means the Loan and Security Agreement dated March 10, 2016 by and between the Company and Padmasree, pursuant to which the Company provided a loan to Padmasree, and Padmasree pledged to the Company and granted to the Company a first-priority lien on 7,509,933 Series A-3 Preferred Shares held by Padmasree.

Majority Ordinary Holders” means the holders of at least 75% of the voting power of the then outstanding Ordinary Shares.

Majority Preferred Holders” means the holders of at least 75% of the voting power of the then outstanding Preferred Shares (voting together as a single class and calculated on an as-converted basis).

Material Group Subsidiaries” means collectively HK Company, XPT, Nextev User, Nextev Power, the US Company, the German Company, NIO Technology, Shanghai Auto Distribution, Hubei Investment, Shanghai Weilan, Jiangsu Weiran and Shanghai Nextev.

Memorandum and Articles” means the Tenth Amended and Restated Memorandum of Association of the Company and the Ninth Amended and Restated Articles of Association of the Company, adopted in accordance with applicable Law on or prior to the Initial Closing (as amended and restated from time to time in accordance with the articles thereto and the provisions of this Agreement), which shall be in the form and substance satisfactory to the Investors.

 

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Ordinary Holders” means Prime Hubs and any Person who will directly or indirectly hold any Ordinary Shares of the Company (other than the Investors), and each an “Ordinary Holder”.

Ordinary Share Equivalents” means any Equity Security which is by its terms convertible into or exchangeable or exercisable for Ordinary Shares or other share capital of the Company, including without limitation, the Preferred Shares.

Ordinary Shares” means the Company’s ordinary shares, par value US$0.00025 per share.

Person” means any individual, natural person, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or entity.

PFIC” means passive foreign investment company as defined in the Code.

PLN” means a note instrument issued by UBS or its Affiliates on or about the date of this Agreement that transfers, or has the effect of transferring, to any Person, in whole or in part, all or any of the economic benefits, interests, risks or other consequences of ownership of the Series C Preferred Shares (or Ordinary Shares into which the Series C Preferred Shares convert), including any agreements in respect thereof, the form of which has been previously provided to the Company for its review.

PLN Beneficiary” means an investor in or purchaser of (or bona fide prospective investor in or purchaser of) a PLN, including where such investor or purchaser invests in or purchases the PLN by way of PLN Transfer.

PLN Transfer means a transfer, assignment, novation, sale or other disposition (in all cases whether voluntary or involuntary, direct or indirect) of a PLN by a PLN Beneficiary to any other Person (whether in whole or in part).

PRC” means the People’s Republic of China, but solely for the purposes of this Agreement, excluding Hong Kong Special Administrative Region of the PRC, Macau Special Administrative Region of the PRC and Taiwan.

PRC Accounting Standards” means the China Accounting Standards (CAS 2006) issued by the PRC Ministry of Finance on February 15, 2006, as supplemented by relevant rules and guidelines issued from time to time, and other applicable PRC accounting regulations.

Preferred Shares” means, collectively, the Series A-1 Preferred Shares, the Series A-2 Preferred Shares, the Series A-3 Preferred Shares, the Series B Preferred Shares, the Series C Preferred shares and/or the Series D Preferred Shares.

Public Official” means any executive, official, or employee of a Governmental Authority, political party or member of a political party, political candidate; executive, employee or officer of a public international organization; or director, officer or employee or agent of a wholly owned or partially state-owned or controlled enterprise, including a PRC state-owned or controlled enterprise.

 

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Qualified IPO” means a firm commitment underwritten registered initial public offering by the Company of its Ordinary Shares (or securities of the Company representing the Ordinary Shares) on Hong Kong Stock Exchange, Nasdaq, New York Stock Exchange or other internationally recognized stock exchange, as approved by the Majority Preferred Holders, pursuant to a registration statement (or any analogous document, if applicable) that is filed with and declared effective in accordance with the securities laws of relevant jurisdiction, at a public offering price (prior to customary underwriters’ commissions and expenses) that values the Company at least US$6 billion on a fully diluted basis immediately prior to the completion of such offering, with gross proceeds to the Company in excess of US$1 billion, or otherwise approved by the Majority Preferred Holders.

Registrable Securities” means (i) the Ordinary Shares issued or issuable upon conversion of the Preferred Shares, (ii) any Ordinary Shares of the Company issued as a dividend or other distribution with respect to, in exchange for, or in replacement of, the shares referenced in (i) herein, and (iii) any Ordinary Shares owned or hereafter acquired by the Investors; excluding in all cases, however, any of the foregoing sold by a Person in a transaction other than an assignment pursuant to Section 13.4 (Assignments and Transfers; No Third Party Beneficiaries). For purposes of this Agreement, Registrable Securities shall cease to be Registrable Securities when such Registrable Securities have been disposed of pursuant to an effective Registration Statement.

Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of that Registration Statement; and the terms “Register” and “Registered” have meanings concomitant with the foregoing.

Registration Statement” means a registration statement prepared on Form F-1, F-3, S-1, or S-3 under the Securities Act (including, without limitation, Rule 415 under the Securities Act), or on any comparable form in connection with registration in a jurisdiction other than the United States.

Right of First Refusal & Co-Sale Agreement” means the Fifth Amended and Restated Right of First Refusal & Co-Sale Agreement entered into by and among the Company, Prime Hubs, Founder, the Series A-1 Investors, the Series A-2 Investors, the Series A-3 Investors, the Series B Investors, the Series C Investors and the Series D Investors on or prior to the Initial Closing, as amended and restated from time to time.

RMB” means the lawful currency of the PRC.

Securities Act” means the United States Securities Act of 1933, as amended.

Series A Investors” means collectively, the Series A-1 Investors, the Series A-2 Investors, and the Series A-3 Investors.

Series A-1 Preferred Shares” means the series A-1 preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

 

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Series A-2 Preferred Shares” means the series A-2 preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

Series A-3 Preferred Shares” means the series A-3 preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

Series A Preferred Shares” means collectively, the Series A-1 Preferred Shares, the Series A-2 Preferred Shares and/or the Series A-3 Preferred Shares.

Series B Preferred Shares” means the series B preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

Series C Preferred Shares” means the series C preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

Series D Preferred Shares” means the series D preferred shares of the Company, par value US$0.00025 per share, with the rights and privileges as set forth in this Agreement, the Memorandum and Articles, and the Right of First Refusal & Co-Sale Agreement.

Series D Transaction Documents” has the meaning set forth in the Purchase Agreement.

Shareholders” means the holders of the Ordinary Shares, the holders of the Series A Preferred Shares, the holders of the Series B Preferred Shares, the holders of the Series C Preferred Shares and the holders of the Series D Preferred Shares, and any Person who will hold any shares of the Company from time to time, and each a “Shareholder.”

Shares” means the Ordinary Shares, the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares, the Series D Preferred Shares and other outstanding shares in the capital of the Company.

Stock Incentive Plans” means (i) the 2015 Stock Incentive Plan and the 2016 Stock Incentive Plan of the Company, which set forth the rules for the grant of stock options, restricted shares and other awards to the employees, directors and consultants of the Group Companies (both U.S. citizens or non-U.S. citizens), (ii) the 2015 Stock Incentive Plan U.S. CEO Subplan, which sets forth the rules for the grant of stock options, restricted shares and other awards to the chief executive officer of the US Company, and (iii) any other stock option plans or equity incentive plans as may be adopted by the Company in accordance with the Memorandum and Articles and this Agreement.

 

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Subsidiary” means, with respect to any given Person, any other Person that is Controlled directly or indirectly by such given Person.

Tencent ” means, collectively, Image Frame, Mount Putuo, Morespark and any other Affiliate of Tencent, to the extent that it holds any Preferred Shares and/or Ordinary Shares.

Tencent Consortium” means, collectively, Tencent and Hammer Capital.

Trade Sale” means any the following events:

 

  (1) any consolidation, merger, amalgamation, or other business combination or corporate reorganization of the Company (and/or other Group Company(ies) collectively operating majority of the Business, collectively, the “Major Group Companies”) with or into any Person (collectively, the Restructuring Event”), resulting in a change in ownership or control of the Company and/or the Major Group Companies in which the Shareholders holding securities with voting power in the Company and/or the Major Group Companies (as the case may be) immediately before such Restructuring Event own and control shares and securities representing less than fifty percent (50%) of the total combined voting power of the outstanding share capital of the surviving business entity immediately after such Restructuring Event, except that the Company’s ultimate shareholding structure immediately after such Restructuring Event is the same as that immediately before such Restructuring Event; or

 

  (2) a sale, transfer, exclusive license, lease or other disposition of all or substantially all of the assets (including Intellectual Property) of the Group Companies (or any series of related transactions resulting in such sale, transfer, exclusive license, lease or other disposition of all or substantially all of the assets of the Group Companies) except that such transferee, licensee or lessee’s ultimate shareholding structure immediately after such event is the same as that of the Company immediately before such event; or

 

  (3) a sale, transfer or other disposition of a majority of the issued and outstanding share capital or securities possessing more than fifty percent (50%) of the total combined voting power of the Company and/or of the Major Group Companies, except that such transferee’s ultimate shareholding structure immediately after such event is the same as that of the Company immediately before such event.

U.S.” means the United States of America.

United States Person” means United States person as defined in Section 7701(a)(30) of the Code.

US GAAP” means U.S. generally accepted accounting principles.

 

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Warrantor” means Company, the HK Company, XPT, XPT Technology, XPT US, the US Company, the German Company, the UK Company, Shanghai Nextev, Shanghai Weilan, Jiangsu Weiran, XPT Nanjing Technology, XPT Nanjing Energy, Nanjing Weilong, NIO Technology, Nextev User, Shanghai Auto Distribution, Nextev Power, Hubei Investment, Shanghai Energy, Wuhan Energy, Beijing Libite, the Founder Vehicles and Prime Hubs, collectively, the “Warrantors.”

 

1.2 Other Defined Terms

The following terms shall have the meanings defined for such terms in the Sections set forth below:

 

Additional Number    Section 7.4 (ii)
Agreement    Preamble
Approved Sale    Section 11.1
Arbitration Notice    Section 13.6 (i)
Baidu Capital    Schedule I
Beijing Libite    Preamble
Bluestone    Schedule I
Bright Sky    Schedule I
ChinaEquity    Schedule I
Company    Preamble
Company Opportunity    Section 12.15 (iii)
Corporate Opportunity    Section 12.15 (iii)
Direct US Investor    Section 12.7 (iii)
Disclosing Party    Section 12.9 (iii)
Dispute    Section 13.6 (i)
Dissenting Member    Section 11.4
Energy    Schedule I
Exclusive Option Period    Section 7.6
Exempted Securities    Section 7.3
Exempt Registrations    Section 3.4
First Participation Notice    Section 7.4 (i)
Founder    Preamble
Four Vote    Section 9.1(i)
German Company    Preamble
Golden Brick    Schedule I
Grandfield    Schedule I
Haixia    Schedule I
Haitong    Schedule I
Hammer Capital    Schedule I
HK Company    Preamble
HKIAC    Section 13.6 (ii)
HKIAC Rules    Section 13.6 (ii)
Hillhouse    Schedule I
Honor Best    Schedule I
Hubei Investment    Preamble
IDG    Schedule I
Jiangsu Weiran    Preamble
Image Frame    Schedule I

 

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Indirect US Investor    Section 12.7 (iii)
Investor/ Investors    Preamble
Investor Directors    Section 9.1(i)
Investment Affiliates    Section 12.15
Joy Capital    Schedule I
Lenovo    Schedule I
Long Winner    Schedule I
Magic Stone    Schedule I
mobike Global    Schedule I
Mount Putuo    Schedule I
Morespark    Schedule I
Nanjing Weilong    Preamble
New Financing    Section 7.6
New Financing Notice    Section 7.6
New Margin Capital    Schedule I
New Securities    Section 7.3
Nextev User    Preamble
Nextev Power    Preamble
NIO Technology    Preamble
Ordinary Director    Section 9.1(i)
Orient Hontai    Schedule I
Offer Price    Section 11.1
Originalwish    Schedule I
Oversubscription Participants    Section 7.4 (ii)
Padmasree    Schedule I
Party/ Parties    Preamble
Palace    Schedule I
PFIC Annual Information Statement    Section 12.7(iii)
PFIC Shareholder    Section 12.7 (iii)
Preemptive Notice    Section 7.4 (i)
Preemptive Right    Section 7.1
Preemptive Rights Holder    Section 7.1
Prior Shareholders Agreement    Recitals
Pro Rata Share    Section 7.2
Proposed Cooperation    Section 12.16
Prime Hubs    Preamble
Purchase Agreement    Recitals
Remaining Members    Section 11.2
Second Participation Notice    Section 7.4 (ii)
Second Participation Period    Section 7.4 (ii)
Sequoia    Schedule I
SCC    Schedule I
Series A-1 Investor / Series A-1 Investors    Preamble
Series A-2 Investor / Series A-2 Investors    Preamble
Series A-3 Investor / Series A-3 Investors    Preamble
Series B Investor / Series B Investors    Preamble
Series C Investor / Series C Investors    Preamble
Series D Investor / Series D Investors    Preamble
Smart Group    Schedule I

 

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Shanghai Auto Distribution    Preamble
Shanghai Energy    Preamble
Shanghai Nextev    Preamble
Shanghai Weilan    Preamble
Shunwei    Schedule I
Special Cooperation Right    Section 12.16
Subsidiary Board    Section 9.1 (ii)
Temasek    Schedule I
Tencent Director    Section 9.1 (i)
Tencent Shareholding Threshold    Section 9.1 (i)
Total Prestige    Schedule I
TPG    Schedule I
Violation    Section 5.1 (i)
UBS    Section 13.1(i)(1)
UK Company    Preamble
US Company    Preamble
West City    Schedule I
WP    Schedule I
Wuhan Energy    Preamble
XPT    Preamble
XPT Nanjing Energy    Preamble
XPT Nanjing Technology    Preamble
XPT Technology    Preamble
Zhide    Schedule I

 

1.3 Interpretation

For all purposes of this Agreement, except as otherwise expressly herein provided, (i) the terms defined in this Section 1 shall have the meanings assigned to them in this Section 1 and include the plural as well as the singular, (ii) all accounting terms not otherwise defined herein have the meanings assigned under the US GAAP, (iii) all references in this Agreement to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement, (iv) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, (v) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision, (vi) all references in this Agreement to designated Schedules, Exhibits and Appendices are to the Schedules, Exhibits and Appendices attached to this Agreement, (vii) references to this Agreement, any other Series D Transaction Documents and any other document shall be construed as references to such document as the same may be amended, supplemented or novated from time to time, (viii) the term “or” is not exclusive, (ix) the term “including” will be deemed to be followed by “, but not limited to,” (x) the terms “shall”, “will”, and “agrees” are mandatory, and the term “may” is permissive, (xi) the phrase “directly or indirectly” means directly, or indirectly through one or more intermediate Persons or through contractual or other arrangements, and “direct or indirect” has the correlative meaning, (xii) the expression “Investor” and “Investors” shall, unless the context prohibits, include its respective successors, permitted transferees and assigns and any Persons deriving title under it, (xiii) the term “voting power” refers to the number of votes attributable to the Shares (on an as-converted basis) in accordance with the terms of the Memorandum and Articles, (xiv) the headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement, (xv) references to laws include any such law modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted, or extended by the same or pursuant to which the same is made, and (xvi) all references to dollars or to “US$” are to currency of the U.S. and all references to RMB are to currency of the PRC (and each shall be deemed to include reference to the equivalent amount in other currencies).

 

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2. DEMAND REGISTRATION

 

2.1 Registration Other Than on Form F-3 or Form S-3

Subject to the terms of this Agreement, at any time or from time to time after the earlier of (i) July 21, 2021, or (ii) expiry of one hundred eighty (180) days following the effective date of a registration statement for an IPO, Holders holding ten percent (10%) or more of the voting power of the then outstanding Registrable Securities held by all Holders are entitled to request in writing that the Company effect a Registration for any or all of Initiating Holder’s Registrable Securities. Upon receipt of such a request, the Company shall (x) promptly give written notice of the proposed Registration to all other Holders and (y) as soon as practicable, use its reasonable best efforts to cause the Registrable Securities specified in the request, together with any Registrable Securities of any Holder who requests in writing to join such Registration within fifteen (15) days after the Company’s delivery of written notice, to be Registered and/or qualified for sale and distribution in such jurisdiction as the Initiating Holders may request. The Company shall not be obligated to effect more than two (2) Registrations pursuant to this Section 2.1(Registration Other Than on Form F-3 or Form S-3) hereof that have been declared and ordered effective; provided that if the sale of all of the Registrable Securities sought to be included pursuant to this Section 2.1 (Registration Other Than on Form F-3 or Form S-3) hereof is not consummated for any reason other than due to the action or inaction of the Holders including Registrable Securities in such Registration, such Registration shall not be deemed to constitute one of the Registration rights granted pursuant to Section 2.1 hereof.

 

2.2 Registration on Form F-3 or Form S-3

The Company shall use its best efforts to qualify for registration on Form F-3 or Form S-3. Subject to the terms of this Agreement, if the Company qualifies for registration on Form F-3 or Form S-3 (or any comparable form for Registration in a jurisdiction other than the United States), any Holder is entitled to request the Company to file, in any jurisdiction in which the Company has had a registered underwritten public offering, unlimited number of Registration Statements on Form F-3 or Form S-3 (or any comparable form for Registration in a jurisdiction other than the United States), so long as such registration offerings are in excess of US$5,000,000, including without limitation any registration statements filed under the Securities Act providing for the registration of, and the sale on a continuous or a delayed basis by the Holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission. Upon receipt of such a request, the Company shall (i) promptly give written notice of the proposed Registration to all other Holders and (ii) as soon as practicable, cause the Registrable Securities specified in the request, together with any Registrable Securities of any Holder who requests in writing to join such Registration within fifteen (15) days after the Company’s delivery of written notice, to be Registered and qualified for sale and distribution in such jurisdiction.

 

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2.3 Right of Deferral

 

  (i) The Company shall not be obligated to Register or qualify Registrable Securities pursuant to this Section 2:

 

  (1) during the period starting with the date of filing by the Company of, and ending six (6) months following the effective date of any Registration Statement pertaining to Ordinary Shares of the Company other than an Exempt Registration; provided that the Holders are entitled to join such Registration in accordance with Section 3 (Piggyback Registrations);

 

  (2) in any jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such Registration or qualification, unless the Company is already subject to service of process in such jurisdiction; or

 

  (3) with respect to the registration on Form F-3 or Form S-3 (or any comparable form for Registration in a jurisdiction other than the United States), if Form F-3 is not available for such offering by the Holders.

 

  (ii) If, after receiving a request from Holders pursuant to Section 2.1(Registration Other Than on Form F-3 or Form S-3) or Section 2.2 (Registration on Form F-3 or Form S-3) hereof, the Company furnishes to the Holders a certificate signed by the chief executive officer of the Company stating that, in the good faith judgment of the Board, it would be materially detrimental to the Company or its members for a Registration Statement to be filed in the near future, then the Company shall have the right to defer such filing for a period during which such filing would be materially detrimental, provided that the Company may not utilize this right (x) for a Registration under Section 2.1 (Registration Other Than on Form F-3 or Form S-3) for more than ninety (90) days and (y) for a Registration under Section 2.2 (Registration on Form F-3 or Form S-3) for more than sixty (60) days, on any one occasion or more than once during any twelve (12) month period; provided further that the Company may not Register any other of its Equity Securities during such period (except for Exempt Registrations).

 

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2.4 Underwritten Offerings

If, in connection with a request to Register Registrable Securities under Section 2.1 (Registration Other Than on Form F-3 or Form S-3) or Section 2.2 (Registration on Form F-3 or Form S-3), the Initiating Holders seek to distribute such Registrable Securities in an underwritten offering, they shall so advise the Company as a part of the request, and the Company shall include such information in the written notice to the other Holders described in Section 2.1 (Registration Other Than on Form F-3 or Form S-3) and Section 2.2 (Registration on Form F-3 or Form S-3). In such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such underwritten offering and the inclusion of such Holder’s Registrable Securities in the underwritten offering (unless otherwise mutually agreed by the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwritten offering shall enter into an underwriting agreement in customary form with the underwriter or underwriters of internationally recognized standing selected for such underwritten offering by the Company and reasonably acceptable to the holders of a majority of the voting power of all Registrable Securities proposed to be included in such Registration. Notwithstanding any other provision of this Agreement, if the managing underwriter advises the Company that marketing factors (including without limitation the aggregate number of securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Registrable Securities to be underwritten in a Registration pursuant to Section 2.1 (Registration Other Than on Form F-3 or Form S-3) or Section 2.2 (Registration on Form F-3 or Form S-3), the underwriters may exclude up to seventy-five percent (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, as nearly as practicable, to the respective amounts of Registrable Securities requested by such Holders to be included. If any Holder disapproves the terms of any underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least ten (10) days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from such underwritten offering shall be withdrawn from the Registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to a Holder to the nearest one hundred (100) shares.

 

3. PIGGYBACK REGISTRATIONS

 

3.1 Registration of the Company’s Securities

Subject to the terms of this Agreement, if the Company proposes to Register for its own account any of its Equity Securities, or for the account of any holder (other than a Holder) of Equity Securities any of such holder’s Equity Securities, in connection with the public offering of such securities (except for Exempt Registrations), the Company shall promptly give each Holder written notice of such Registration and, upon the written request of any Holder given within fifteen (15) days after delivery of such notice, the Company shall include in such Registration any Registrable Securities thereby requested to be Registered by such Holder. If a Holder decides not to include all or any of its Registrable Securities in such Registration by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement or Registration Statements as may be filed by the Company, all upon the terms and conditions set forth herein.

 

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3.2 Right to Terminate Registration

The Company shall have the right to terminate or withdraw any Registration initiated by it under Section 3.1 prior to the effectiveness of such Registration, whether or not any Holder has elected to participate therein. The expenses of such withdrawn Registration shall be borne by the Company in accordance with Section 4.3.

 

3.3 Underwriting Requirements

 

  (i) In connection with any offering involving an underwriting of the Company’s Equity Securities, the Company shall not be required to Register the Registrable Securities of a Holder under this Section 3 (Piggyback Registrations) unless such Holder’s Registrable Securities are included in the underwritten offering and such Holder enters into an underwriting agreement in customary form with the underwriter or underwriters of internationally recognized standing selected by the Company and setting forth such terms for the underwritten offering as have been agreed upon between the Company and the underwriters. In the event the underwriters advise Holders seeking Registration of Registrable Securities pursuant to this Section 3 in writing that market factors (including the aggregate number of Registrable Securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Registrable Securities to be underwritten, the underwriters may exclude up to seventy-five percent (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 the 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, as nearly as practicable, to the respective amounts of Registrable Securities requested by such Holders to be included. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to a Holder to the nearest one hundred (100) shares.

 

  (ii) If any Holder disapproves the terms of any underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least ten (10) days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from the underwritten offering shall be withdrawn from the Registration.

 

3.4 Exempt Registrations

The Company shall have no obligation to Register any Registrable Securities under this Section 3 in connection with a Registration by the Company (i) relating solely to the sale of securities to participants in a share incentive plan of the Company, or (ii) relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act (or comparable provision under the Laws of another jurisdiction, as applicable) (collectively, “Exempt Registrations”).

 

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4. REGISTRATION PROCEDURES

 

4.1 Registration Procedures and Obligations

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

 

  (i) Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and use its reasonable best efforts to cause that Registration Statement to become effective, and, upon the request of the Holders holding a majority in voting power of the Registrable Securities Registered thereunder, keep the Registration Statement effective until the distribution thereunder has been completed;

 

  (ii) Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Laws with respect to the disposition of all securities covered by the Registration Statement;

 

  (iii) Furnish to the Holders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable Securities Laws, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

 

  (iv) Use its reasonable best efforts to Register and qualify the securities covered by the Registration Statement under the securities Laws of any jurisdiction, as reasonably requested by the Holders, provided, that the Company shall not be required to qualify to do business or file a general consent to service of process in any such jurisdictions;

 

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

 

  (vi) Promptly notify each Holder of Registrable Securities covered by the Registration Statement at any time when a prospectus relating thereto is required to be delivered under Applicable Securities Laws of (a) the issuance of any stop order by the Commission, or (b) the happening of any event or the existence of any condition as a result of which any prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, or if in the opinion of counsel for the Company it is necessary to supplement or amend such prospectus to comply with law, and at the request of any such Holder promptly prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made or such prospectus, as supplemented or amended, shall comply with law;

 

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  (vii) Furnish, at the request of any Holder requesting Registration of Registrable Securities pursuant to this Agreement, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this Agreement, (A) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and substance as is customarily given to underwriters in an underwritten public offering; and (B) comfort letters dated as of (x) the effective date of the registration statement covering such Registrable Securities, and (y) the closing date of the offering, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters;

 

  (viii) Otherwise comply with all applicable rules and regulations of the Commission to the extent applicable to the applicable registration statement and use its reasonable best efforts to make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than forty-five (45) days after the end of a twelve (12) month period (or ninety (90) days, if such period is a fiscal year) beginning with the first month of the Company’s first fiscal quarter commencing after the effective date of such registration statement, which statement shall cover such twelve (12) month period, subject to any proper and necessary extensions;

 

  (ix) Not, without the written consent of the holders of at least two thirds of voting power of the then outstanding Registrable Securities, make any offer relating to the Securities that would constitute a “free writing prospectus,” as defined in Rule 405 promulgated under the Securities Act;

 

  (x) Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a number assigned by the Committee on Uniform Securities Identification Procedures for all those Registrable Securities, in each case not later than the effective date of the Registration; and

 

  (xi) Take all reasonable action necessary to list the Registrable Securities on the primary exchange on which the Company’s securities are then traded or, in connection with a Qualified IPO, the primary exchange on which the Company’s securities will be traded.

 

  (xii) Permit any Holder which, in such Holder’s sole and exclusive judgment, might be deemed to be an underwriter or a “controlling person” (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) of the Company, to participate in the preparation of the Registration Statement, and to require the insertion therein of language, furnished to the Company in writing, which in the reasonable judgment of such Holder and its counsel should be included.

 

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4.2 Information from Holder

It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2 (Demand Registration) and Section 3 (Piggyback Registrations) hereof with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the Registration of such Holder’s Registrable Securities.

 

4.3 Expenses of Registration

All expenses, other than the underwriting discounts and selling commissions applicable to the sale of Registrable Securities pursuant to this Agreement (which shall be borne by the Holders requesting Registration on a pro rata basis in proportion to their respective numbers of Registrable Securities sold in such Registration), incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including (without limitation) all Registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company and fees and disbursement of counsels for the selling Holders, shall be borne by the Company. The Company shall not, however, be required to pay for any expenses of any Registration proceeding begun pursuant to Section 2.1 (Registration Other Than on Form F-3 or Form S-3) or Section 2.2 (Registration on Form F-3 or Form S-3) of this Agreement if the Registration request is subsequently withdrawn at the request of the Holders holding a majority of the voting power of the Registrable Securities requested to be Registered by all Holder in such Registration (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be thereby Registered in the withdrawn Registration) unless the Holders of at least two thirds ( 23) of the voting power of the Registrable Securities then outstanding agree that such registration constitutes the use by the Holders of one (1) demand registration pursuant to Section 2.1 (Registration Other Than on Form F-3 or Form S-3) (in which case such registration shall also constitute the use by all Holders of Registrable Securities of one (1) such demand registration); provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and the Company shall pay any and all such expenses.

 

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5. REGISTRATION-RELATED INDEMNIFICATION.

 

5.1 Company Indemnity

 

  (i) To the maximum extent permitted by Law, the Company will indemnify and hold harmless each Holder, such Holder’s partners, officers, directors, shareholders, members, and legal counsel, any underwriter (as defined in the Securities Act) and each Person, if any, who controls (as defined in the Securities Act) such Holder or underwriter, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under Laws which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration, qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (each a “Violation”): (a) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement (unless Holder is actually aware of and consent to the making of such untrue statement or alleged untrue statement), on the effective date thereof (including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto), (b) the omission or alleged omission to state in the Registration Statement, on the effective date thereof (including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto), a material fact required to be stated therein or necessary to make the statements therein not misleading, or (c) any violation or alleged violation by the Company of Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws. The Company will reimburse, as incurred, each such Holder, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action.

 

5.2 Holder Indemnity

 

  (i) To the maximum extent permitted by Law, each selling Holder that has included Registrable Securities in a Registration will, severally and not jointly, indemnify and hold harmless the Company, its directors and officers, any other Holder selling securities in connection with such Registration and each Person, if any, who controls (within the meaning of the Securities Act) the Company, such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs solely in reliance upon and in conformity with written information furnished by such Holder for use in connection with such Registration; and each such Holder will reimburse, as incurred, any Person intended to be indemnified pursuant to this Section 5.2 (Holder Indemnity), for any legal or other expenses reasonably incurred by such Person in connection with investigating or defending any such loss, claim, damage, liability or action. No Holder’s liability under this Section 5.2 (Holder Indemnity) (when combined with any amounts paid by such Holder pursuant to Section 5.4 (Contribution)) shall exceed the net proceeds actually received by such Holder from the offering of securities made in connection with that Registration.

 

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  (ii) The indemnity contained in this Section 5.2 (Holder Indemnity) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld or delayed).

 

  (iii) The indemnity contained in this Section 5.2 (Holder Indemnity) shall be in addition to any liability the selling Holder may otherwise have.

 

5.3 Notice of Indemnification Claim

Promptly after receipt by an indemnified party under Section 5.1 (Company Indemnity) or Section 5.2 (Holder Indemnity) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under Section 5.1 (Company Indemnity) or Section 5.2 (Holder Indemnity), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnifying parties. An indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonably incurred fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party, to the extent so prejudiced, of any liability to the indemnified party under this Section 5, but the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

 

5.4 Contribution

If any indemnification provided for in Section 5.1(Company Indemnity) or Section 5.2 (Holder Indemnity) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case: (A) no Holder will be required to contribute any amount (after combined with any amounts paid by such Holder pursuant to Section 5.2 (Holder Indemnity)) in excess of the net proceeds to such Holder from the sale of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

 

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5.5 Underwriting Agreement

To the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

5.6 Survival

The obligations of the Company and Holders under this Section 5 shall survive the completion of any offering of Registrable Securities in a Registration Statement under this Agreement, regardless of the expiration of any statutes of limitation or extensions of such statutes.

 

6. ADDITIONAL REGISTRATION-RELATED UNDERTAKINGS

 

6.1 Reports under the Exchange Act

With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of any Applicable Securities Laws that may at any time permit a Holder to sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 or Form S-3 (or any comparable form in a jurisdiction other than the United States), the Company agrees to:

 

  (i) make and keep public information available, as those terms are understood and defined in Rule 144 (or comparable provision, if any, under Applicable Securities Laws in any jurisdiction where the Company’s securities are listed), at all times following 90 days after the effective date of the first Registration under the Securities Act filed by the Company for an offering of its securities to the general public;

 

  (ii) file with the Commission in a timely manner all reports and other documents required of the Company under all Applicable Securities Laws; and

 

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  (iii) at any time following ninety (90) days after the effective date of the first Registration under the Securities Act filed by the Company for an offering of its securities to the general public by the Company, promptly furnish to any Holder holding Registrable Securities, upon request (a) a written statement by the Company that it has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 or Form S-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s securities are listed), (b) a copy of the most recent annual or quarterly report of the Company and such other reports and documents as filed by the Company with the Commission, and (c) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits the selling of any such securities without Registration or pursuant to Form F-3 or Form S-3 (or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s Securities are listed).

 

6.2 Limitations on Subsequent Registration Rights

From and after the date of this Agreement, the Company shall not, without the written consent of holders of at least at seventy-five percent (75%) of the voting power of the then outstanding Registrable Securities held by all Holders (calculated on an as-converted to Ordinary Share basis), enter into any agreement with any holder or prospective holder of any Equity Securities of the Company that would allow such holder or prospective holder (i) to include such Equity Securities in any Registration filed under Section 5.2 (Demand Registration) or Section 5.3 (Piggyback Registrations), (ii) to demand Registration of their Equity Securities, or (iii) cause the Company to include such Equity Securities in any Registration filed under Section 5.2 (Demand Registration) or Section 5.3 (Piggyback Registrations) hereof on a basis pari passu with or more favorable to such holder or prospective holder than is provided to the Holders of Registrable Securities.

 

6.3 “Market Stand-Off” Agreement

Each holder of Registrable Securities agrees, if so required by the managing underwriter(s) and to the extent necessary for a successful IPO, that it will not during the period commencing on the date of the final prospectus relating to the Company’s IPO and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days from the date of such final prospectus) (i) lend, offer, pledge, hypothecate, hedge, sell, make any short sale of, loan, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Equity Securities of the Company owned at the time of the Qualified IPO (other than those included in such offering), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such Equity Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Equity Securities of the Company or such other securities, in cash or otherwise; provided that (w) the forgoing provisions of this Section 6.3 shall be subject to any exceptions that any Holder and the applicable underwriter may agree on, (x) the foregoing provisions of this Section 6.3 shall not apply to the sale of any securities of the Company to an underwriter pursuant to any underwriting agreement, and to the extent permitted by the applicable Laws and the general requirements of the managing underwriter(s), shall not be applicable to any Holder unless all directors, officers and all other holders of at least one percent (1%) of the outstanding share capital of the Company (calculated on an as-converted to Ordinary Share basis) must be bound by restrictions at least as restrictive as those applicable to any such Holder pursuant to this Section 6.3, (y) to the extent permitted by the applicable Laws and the general requirements of the managing underwriter(s), this Section 6.3 shall not apply to a Holder to the extent that any other Person subject to substantially similar restrictions is released in whole or in part, and (z) the lockup agreements shall permit a Holder to transfer their Registrable Securities to their respective Affiliates so long as the transferees enter into the same lockup agreement. The underwriters in connection with the Company’s IPO are intended third party beneficiaries of this Section 6.3 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. In order to enforce the foregoing covenant, the Company may place restrictive legends on the certificates and impose stop-transfer instructions with respect to the Registrable Securities of each shareholder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

 

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6.4 IPO Participation Right

Subject to applicable law and regulations, each Investor shall have the right to purchase or direct any of its Affiliates to purchase, at its option, at the final price per share (net of underwriting discounts and commissions) set forth in the Company’s final prospectus with respect to an IPO, up to the number of the Ordinary Shares of the Company offered in the IPO that enables the Investor to maintain, in the aggregate, its percentage ownership interest in the Company immediately prior to the consummation of the IPO (calculated on a fully diluted and as converted basis).

 

6.5 IPO Sale Right

If any Equity Securities of the Company are offered in an underwritten public offering (whether or not a Qualified IPO) for the account of any shareholder of the Company, each Investor shall have the right to include a pro rata number of shares in the offering on terms and conditions no less favourable to such Investor than to any other selling shareholder(s), provided that the aggregate number of the Equity Securities of the Company to be offered by all the selling shareholders in an underwritten public offering shall not exceed 20% of the total number of the Equity Securities of the Company available for public subscription or placing under such underwritten public offering.

 

6.6 Termination of Registration Rights

The registration rights set forth in Section 2 (Demand Registration) or Section 3 (Piggyback Registrations) of this Agreement shall terminate on the earlier of (i) the date that is ten (10) years from the date of closing of a Qualified IPO (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 ninety (90)-day period.

 

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6.7 Exercise of Ordinary Share Equivalents

Notwithstanding anything to the contrary provided in this Agreement, the Company shall have no obligation to Register Registrable Securities which, if constituting Ordinary Share Equivalents, have not been exercised, converted or exchanged, as applicable, for Ordinary Shares as of the effective date of the applicable Registration Statement, but the Company shall cooperate and facilitate any such exercise, conversion or exchange as requested by the applicable Holder.

 

6.8 Intent

The terms of Section 2 through 6 are drafted primarily in contemplation of an offering of securities in the U.S. The parties recognize, however, the possibility that securities may be qualified or registered for offering to the public in a jurisdiction other than the U.S. where registration rights have significance or that the Company might effect an offering in the U.S. in the form of American Depositary Receipts or American Depositary Shares. Accordingly:

 

  (i) it is their intention that, whenever this Agreement refers to a Law, form, process or institution of the U.S. but the parties wish to effectuate qualification or registration in a different jurisdiction where registration rights have significance, reference in this Agreement to the Laws or institutions of the United States shall be read as referring, mutatis mutandis, to the comparable Laws or institutions of the jurisdiction in question; and

 

  (ii) it is agreed that the Company will not undertake any listing of American Depositary Receipts, American Depositary Shares or any other security derivative of the Ordinary Shares unless arrangements have been made reasonably satisfactory to the Majority Preferred Holders (voting together as one class on an as-converted basis) to ensure that the spirit and intent of this Agreement will be realized and that the Company is committed to take such actions as are necessary such that the Holders will enjoy rights corresponding to the rights hereunder to sell their Registrable Securities in a public offering in the U.S. as if the Company had listed Ordinary Shares in lieu of such derivative securities.

 

6.9 Assignment of Registration Rights

The registration rights of a Holder under Section 2 to 6 hereof may be assigned to any person acquiring Registrable Securities; provided that in either case no party may be assigned any of the foregoing rights unless the Company is given written notice by the assigning party stating the name and address of the assignee and identifying the securities of the Company as to which the rights in question are being assigned; and provided further, that any such assignee shall receive such assigned rights subject to all the terms and conditions of this Agreement, including without limitation the provisions of this Section 6.9.

 

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7. PREEMPTIVE RIGHT

 

7.1 General

The Company hereby grants to each holder of Preferred Shares (the “Preemptive Rights Holder”) the right of first refusal to purchase such Preemptive Rights Holder’s Pro Rata Share (as defined below) (and any oversubscription, as provided below), of all (or any part) of any New Securities (as defined below) that the Company may from time to time issue after the date of this Agreement (the “Preemptive Right”).

 

7.2 Pro Rata Share

A Preemptive Rights Holder’s “Pro Rata Share” for purposes of the Preemptive Rights is the ratio of (a) the number of Ordinary Shares (including Preferred Shares on an as-converted basis and any Ordinary Shares issued to or acquired by such Preemptive Rights Holder) held by such Preemptive Rights Holder, to (b) the total number of Ordinary Shares (including Preferred Shares on an as-converted basis and any Ordinary Shares issued to or acquired by all Preemptive Rights Holders) then held by all Preemptive Rights Holders immediately prior to the issuance of New Securities giving rise to the Preemptive Rights.

 

7.3 New Securities

For purposes hereof, “New Securities” shall mean any Equity Securities of the Company issued after the date hereof, except for the following Equity Securities (the “Exempted Securities”):

 

  (i) Ordinary Shares (and/or options or warrants therefore) (including any of such Shares which are repurchased) issued to officers, directors, employees and consultants of the Group Companies pursuant to the Stock Incentive Plans approved in accordance with the Memorandum and Articles and this Agreement;

 

  (ii) any Equity Securities issued pursuant to the Purchase Agreement and any Ordinary Shares issued upon the conversion of the Preferred Shares authorized under the Memorandum and Articles;

 

  (iii) any Equity Securities issued upon the exercise of any option of the Company issued prior to the Initial Closing;

 

  (iv) any Equity Securities issued pursuant to the transactions with strategic partners as approved by the Majority Preferred Holders and/or the Board in accordance with this Agreement and the Memorandum and Articles, and if such strategic partner is any of the Preferred Holders or any of their respective Affiliates, such Preferred Holder and the director(s) appointed by such Preferred Holder, as applicable, shall abstain from all voting in the general meetings, Board meetings or resolutions in relation to the transactions described under this Section 7.3(iv);

 

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  (v) any Equity Securities issued pursuant to transactions with financial institutions or lessors in connection with loans, credit arrangements, equipment financings or similar transactions, provided that such transactions have been approved by the Majority Preferred Holders and/or the Board (if applicable) in accordance with this Agreement and the Memorandum and Articles, and if such financial institution or lessor is any of the Preferred Holders or any of their respective Affiliates, such Preferred Holder and the director(s) appointed by such Preferred Holder, as applicable, shall abstain from all voting in the general meetings, Board meetings or resolutions in relation to the transactions described under this Section 7.3(v);

 

  (vi) any Equity Securities issued in connection with any share split, share dividend, reclassification or other similar events in which all Preemptive Rights Holders are entitled to participate on a pro rata basis;

 

  (vii) any Equity Securities issued pursuant to the acquisition of another corporation or entity by the Company by consolidation, merger, purchase of assets, or other reorganization in which the Company acquires, in a single transaction or a series of related transactions, all or substantially all assets of such other corporation or entity, or fifty percent (50%) or more of the equity ownership or voting power of such other corporation or entity, provided such acquisition has been approved by the Majority Preferred Holders and the Board in accordance with this Agreement and the Memorandum and Articles, and if such other corporation or entity is any of the Shareholders or its respective Affiliates, such Shareholder and the director(s) appointed by such Shareholder shall abstain from all voting in the general meetings, Board meetings or resolutions in relation to the issuance under this Section 7.3 (vii); and

 

  (viii) any Equity Securities issued pursuant to a Qualified IPO.

 

7.4 Procedures

 

  (i) First Participation Notice

Subject to the terms and provisions of Section 7.6 (Next Round Financing) hereof, in the event that the Company proposes to undertake an issuance of New Securities (in a single transaction or a series of related transactions), it shall give to each Preemptive Rights Holder written notice of its intention to issue New Securities (the “First Participation Notice”), describing the amount and type of New Securities, the price and the general terms upon which the Company proposes to issue such New Securities. Each Preemptive Rights Holder shall have thirty (30) Business Days from the date of receipt of any such First Participation Notice to agree in writing to purchase up to such Preemptive Rights Holder’s Pro Rata Share of such New Securities for the price and upon the terms and conditions specified in the First Participation Notice by giving written notice (the “Preemptive Notice”) to the Company and stating therein the quantity of New Securities to be purchased (not to exceed such Preemptive Rights Holder’s Pro Rata Share). If any Preemptive Rights Holder fails to so respond in writing within such thirty (30) Business Day period to purchase all or any part of such Preemptive Rights Holder’s Pro Rata Share of an offering of New Securities, then such Preemptive Rights Holder shall forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that it did not agree to purchase, but shall not be deemed to forfeit any right with respect to any other issuance of New Securities.

 

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  (ii) Second Participation Notice; Oversubscription

If any Preemptive Rights Holder fails or declines to exercise any portion of its Preemptive Rights in accordance with subsection (i) above, the Company shall promptly give notice (the “Second Participation Notice”) to other Preemptive Rights Holders who exercised in full their Preemptive Rights (the “Oversubscription Participants”) in accordance with subsection (i) above. Each Oversubscription Participant shall have ten (10) Business Days from the date of the Second Participation Notice (the “Second Participation Period”) to notify the Company of its desire to purchase more than its Pro Rata Share of the New Securities, stating the number of the additional New Securities it proposes to buy (the “Additional Number”). Such notice may be made by telephone if confirmed in writing within five (5) Business Days. If, as a result thereof, such oversubscription exceeds the total number of the remaining New Securities available for purchase, each Oversubscription Participant will be cut back by the Company with respect to its oversubscription to such number of remaining New Securities equal to the lesser of (x) the Additional Number and (y) the product obtained by multiplying (i) the number of the remaining New Securities available for subscription by (ii) a fraction, the numerator of which is the number of Ordinary Shares (including Preferred Shares on an as-converted basis and any Ordinary Shares issued to or acquired by such Oversubscription Participant) held by such Oversubscription Participant and the denominator of which is the total number of Ordinary Shares (including Preferred Shares on an as-converted basis and any Ordinary Shares issued to or acquired by all Oversubscription Participants) held by all the Oversubscription Participants.

 

7.5 Failure to Exercise

Upon the expiration of the Second Participation Period, or in the event no Preemptive Rights Holder exercises the Preemptive Rights within thirty (30) Business Days following the issuance of the First Participation Notice, the Company shall have ninety (90) days thereafter to complete the sale of the New Securities described in the First Participation Notice with respect to which the Preemptive Rights hereunder were not exercised at the same or higher price and upon non-price terms not more favorable to the purchasers thereof than specified in the First Participation Notice. In the event that the Company has not issued and sold such New Securities within such ninety (90) days period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to the Preemptive Rights Holders pursuant to this Section 7.

 

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7.6 Next Round Financing

Without prejudice to any other terms and provisions of this Section 7, in the event that the Company proposes to solicit or initiate for sale of any New Securities of the Company for the purpose of next round of financing (the “New Financing”) to any Person after the date of this Agreement, the Company shall give each Investor the written notice of its intention to undertake the New Financing (the “New Financing Notice”). Upon receiving the New Financing Notice, the Investors and the Company shall discuss and determine all factors of such New Financing, including but not limited to the types of financing, the amount of investment, the price and other general terms. The Investors shall have an exclusive option for a period of four (4) weeks following receipt of the New Financing Notice (the “Exclusive Option Period”) to elect to purchase, or appoint their Affiliate(s) to purchase, collectively up to all of the New Securities offered for sale in the New Financing. In case and to the extent the Investors do not collectively exercise their exclusive option hereunder within the Exclusive Option Period to purchase up to all of the New Securities, the Company may proceed to solicit, initiate or participate in any discussion or negotiation with any third parties for the sale of the remaining New Securities offered for sale in the New Financing, provided that each Investor shall be entitled to exercise its rights under the Section 7.1 to 7.5 hereunder, anti-dilution adjustment and other rights and privileges under this Agreement and the Memorandum and Articles exercisable in connection with the New Financing.

 

8. INFORMATION AND INSPECTION RIGHTS

8.1  Delivery of Financial Statements

Each Warrantor shall, and shall cause each Group Company to, deliver to each holder of Preferred Shares, the following documents or reports:

 

  (i) within ninety (90) days after the end of each fiscal year, a consolidated financial statements of the Group Companies for such fiscal year, prepared in accordance with the US GAAP, audited and certified by an internationally reputable firm of independent certified public accountants;

 

  (ii) within forty-five (45) days after the end of each quarter, a consolidated unaudited financial statements of the Group Companies for such quarter, prepared in accordance with the US GAAP;

 

  (iii) within thirty (30) days after the end of each month, a consolidated unaudited financial statements of the Group Companies for such month, prepared in accordance with the US GAAP;

 

  (iv) at least sixty (60) days before the beginning of each fiscal year, an annual business plan and an annual budget of the Group Companies approved by the Board, setting forth including without limitation, the projected balance sheets, income statements and statements of cash flows for each quarter during such fiscal year of each Group Company;

 

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  (v) copies of any documents and materials of the Group Companies submitted to any Shareholder by the Company whenever required by any holder of Preferred Shares; and

 

  (vi) as soon as practicable, any other information of the Group Companies reasonably requested by any such holder of Preferred Shares.

In the event that any Investor shall have any questions about the aforementioned financial information it received, such Investor shall be entitled to inspect the original financing documents, the financial system and operations of any Group Company.

 

8.2 Inspection Rights

Each Group Company covenants and agrees that each holder of Preferred Shares shall have the right to inspect the operation, facilities, properties, documents, records and books (including but not limited to the books of accounts) of each Group Company at any time during regular working hours with prior notice, the right to discuss the business, operation and conditions of a Group Company with any Group Company’s directors, officers, employees, independent accounts, legal counsels, advisers and investment bankers. The Warrantors shall procure the Group Companies to permit and facilitate the inspection right of each holder of Preferred Shares hereunder.

 

9. CORPORATE GOVERNANCE

 

9.1 Board of Directors

 

  (i) The Company shall have, and the Parties hereto agree to cause the Company to have, a Board consisting of not more than eleven (11) authorized Directors, with the composition of the Board determined as follows: (a) each of Hillhouse NEV Holdings Limited, Shunwei, and Energy (for as long as such Person continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) Director on the Board; (b) the Founder Vehicles (for as long as they continue to hold any Series A Preferred Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, three (3) Directors on the Board; (c) Temasek (for as long as it continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) Director on the Board; (d) Baidu Capital (for as long as it continues to hold at least 50% of its Benchmark Shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) Director on the Board; (e) Tencent (for so long as it continues to hold at least no less than 46,000,000 Preferred Shares (as converted or reclassified from time to time), which number shall be adjusted for any stock split, stock dividend, combination or other recapitalization or reclassification effected after the Initial Closing Date (the “Tencent Shareholding Threshold”)) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, two (2) Directors on the Board (each a “Tencent Director”) and, for the avoidance of doubt, for so long as Tencent holds any Preferred Shares (as converted or reclassified from time to time), Tencent shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) Tencent Director on the Board (the Directors referred to in (a), (b), (c), (d) and (e) above, each an “Investor Director,” and collectively, the “Investor Directors”), and (f) Prime Hubs (for as long as it continues to hold any shares) shall be entitled to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) Director (the “Ordinary Director”) on the Board. Smart Group (for as long as it continues to hold any Series A Preferred Shares in the Company) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to the Board. Sequoia (for as long as it continues to hold any Series A Preferred Shares in the Company) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to the Board. Bluestone (for as long as it continues to hold any Series B Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to the Board. IDG (for as long as it continues to hold any Series C Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to the Board. WP (for as long as it continues to hold any Series C Preferred Shares) shall have the right to appoint, remove and re-appoint at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to the Board. Each observer on the Board shall have the right to attend any Board meetings of the Company only on a non-voting capacity.

 

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Subject to the Series D Transaction Documents, the Investor Directors appointed by the Founder Vehicles shall collectively have four (4) votes on any matter submitted for approval of the Board (“Four Votes”), and among the Four Votes, Padmasree (as long as she holds any Series A-3 Preferred Shares and remains an Investor Director) (or any other Director appointed by the Founder Vehicles to replace Padmasree, in case Padmasree ceases to be an Investor Director) shall have one vote, and the Founder (as long as he remains an Investor Director) shall have the remaining of the Four Votes, provided that if the Investor Directors appointed by the Founder Vehicles shall only have one vote, the Founder shall have such one vote. Each of the other Directors of the Company shall have one (1) vote on any matter submitted for approval of the Board. The composition and voting arrangements of the board of directors of each of the Material Group Subsidiaries shall mirror the composition and the voting arrangements of the Board of the Company in accordance with Sections 5.6 and 8.17 of the Purchase Agreement.

 

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This Section 9.1(i) shall terminate immediately prior to the closing of an IPO of the Company. Immediately upon the IPO, the Board composition shall comply with the requirements of the applicable stock exchange, provided that the Founder Vehicles (acting as one Party) and Tencent (or their respective Affiliates) shall each be entitled to appoint at least one (1) director to the Board, and the management of the Company shall have an additional representative to serve on the Board.

 

  (ii) When and if requested by an Investor and subject to consent by the holders of at least 50% of the voting power of the then outstanding Preferred Shares (voting together as a single class and calculated on as-converted basis), the board of directors of each or any of the other Group Companies (the “Subsidiary Board” and collectively, the “Subsidiary Boards”) shall, and the Ordinary Holders and the Company agree to cause each or any such Subsidiary Board to, be re-constructed so as to include the same number of director(s) that such Investor is entitled to appoint to the Company as provided in Section 9.1 (i) above, with the same voting arrangements as those of the Company’s Board. For the avoidance of doubt, in the event that one (1) director cannot have more than one (1) vote under the Laws of any jurisdiction, the Founder Vehicles shall have the right to appoint a total of four (4) directors (as long as the Investor Directors appointed by the Founder Vehicles are collectively entitled to Four Votes in the Board) to the board of the directors of the Group Companies established in such jurisdiction. Notwithstanding the foregoing, any Investor which has right to appoint one (1) observer to the Board shall have the right to appoint, remove and re-appoint, at any time or from time to time and without the need for any consent or resolution of any other Shareholder, one (1) observer to each or any Subsidiary Board, who shall have the right to attend any meetings of such Subsidiary Board on a non-voting capacity.

 

9.2 Director Voting Agreements

 

  (i) With respect to each election of Directors of the Board, each holder of voting securities of the Company shall vote at each meeting of Shareholders of the Company, or in lieu of any such meeting shall give such holder’s written consent with respect to, as the case may be, all of such holder’s voting securities of the Company as may be necessary (x) to keep the authorized size of the Board at eleven (11) Directors, (y) to cause the election or re-election as members of the Board, and during such period to continue in office, each of the individuals appointed pursuant to Section 9.1 (Board of Directors), and (z) against any nominees not appointed pursuant to Section 9.1 (Board of Directors).

 

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  (ii) Any Director appointed pursuant to Section 9.1 (Board of Directors) may be removed from the Board only upon the vote or written consent of the Person or group of Persons entitled to appoint such Director pursuant to Section 9.1 (Board of Directors), and the Parties agree not to seek, vote for or otherwise effect the removal of any such Director without such vote or written consent. Any Person or group of Persons entitled to appoint any individual to be elected as a Director on the Board shall have the exclusive right at any time or from time to time to remove any such Director occupying such position and to fill any vacancy caused by the death, disability, retirement, resignation or removal of any Director occupying such position, and each other Party agrees to cooperate with such Person or group of Persons in connection with the exercise of such right. Each holder of voting securities of the Company agrees to always vote such holder’s respective voting securities of the Company (and given written consents in lieu thereof) in support of the foregoing.

 

  (iii) The Company agrees to take such action, and each other Party hereto agrees to take such action, as is necessary to cause the election or appointment to each Subsidiary Board of the Investor Directors pursuant to Section 9.1 (Board of Directors). Upon a removal or replacement of the Investor Directors from the Board in accordance with Section 9.2 (ii) above, the Company agrees to take such action, and each other Party hereto agrees to take such action, as is necessary to cause the removal of such director from each Subsidiary Board.

 

9.3 Quorum

The Board shall hold no less than one (1) board meeting during each fiscal quarter. A meeting of the Board shall only proceed where there are present (whether in person or by means of a conference telephone or any other equipment which allows all participants in the meeting to speak to and hear each other simultaneously) at least six (6) Directors of the Company then in office and the Parties shall cause the foregoing number of Directors to be the quorum requirements for meetings of the Board. The notice of the Board meeting shall be duly delivered to all Directors and observers seven (7) days prior to the scheduled meeting in accordance with the notice procedures under the Charter Documents of the Company. Notwithstanding the foregoing, if the aforementioned notice of the Board meeting has been duly delivered, and the number of Directors required to be present under this Section 9.3 for such meeting to proceed is not present within one hour from the time appointed for the meeting because of the absence of any Director, the Directors present at the meeting shall adjourn the meeting to the third following Business Day at the same time and place (or to such other time or such other place as the Directors may determine) with notice delivered to all Directors one day prior to the adjourned meeting in accordance with the notice procedures under the Charter Documents of the Company and, if at the adjourned meeting, the number of Directors required to be present under this Section 9.3 for such meeting to proceed is not present within one hour from the time appointed for the meeting because of the absence of any Director, then the presence of such number of Director(s), shall not be required at such adjourned meeting in order for the meeting to be quorate.

 

9.4 Expenses

The Company will promptly pay or reimburse each non-employee Board member and each non-employee Subsidiary Board member and each observer for all reasonable out-of-pocket expenses incurred in connection with attending board or committee meetings and otherwise performing their duties as directors and committee members.

 

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9.5 Alternates

Subject to applicable Law, each Director shall be entitled to appoint an alternate to serve at any Board meeting, and such alternate shall be permitted to attend all Board meetings and vote on behalf of the director for whom he is serving as an alternate.

 

9.6 Director Indemnification and Insurance

To the maximum extent permitted by the Laws of the Cayman Islands, the Company shall indemnify and hold harmless the Investor Directors and shall comply with the terms of the Director Indemnification Agreements, and at the request of the Investor Directors who are not a party to the Director Indemnification Agreement, shall enter into a director indemnification agreement with the Investor Directors in similar form to the Director Indemnification Agreement. From and after the Initial Closing, the Company shall purchase and at all times thereafter, maintain customary directors’ and officers’ liability insurance for the Investor Directors, provided however that such directors’ and officers’ liability insurance shall be in form and substance satisfactory to the Investor Directors.

 

10. PROTECTIVE PROVISIONS.

 

10.1 Acts of the Group Companies Requiring Approval of the Majority Preferred Holders

Notwithstanding anything in this Agreement or in the Charter Documents of any Group Company, the Warrantors shall ensure that no Group Company shall take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, and no Party shall permit any Group Company to take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by the Majority Preferred Holders, which shall include the approvals by Tencent for so long as the number of the Preferred Shares (as converted or reclassified from time to time) held by Tencent does not fall below the Tencent Shareholding Threshold and by the Founder Vehicles, provided that, where the applicable Law requires a special resolution to approve any of the acts specified below, in computing the majority when a poll is demanded for the purposes of passing such a special resolution at a meeting of Shareholders, the Majority Preferred Holders, which shall include the approvals by Tencent for so long as the number of the Preferred Shares (as converted or reclassified from time to time) held by Tencent does not fall below the Tencent Shareholding Threshold and by the Founder Vehicles, shall have the voting rights equal to all Shareholders who voted in favor of the special resolution plus one:

 

  (i) any amendment or change of the rights, preferences, privileges, or powers of or concerning, or the limitations or restrictions provided for the benefit of, any Preferred Shares, or any amendment of the Charter Documents of the Company or any Material Group Subsidiary;

 

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  (ii) any action that authorizes, creates or issues any Ordinary Shares or Preferred Shares after the Initial Closing (other than: (1) the issuance of Series D Preferred Shares pursuant to the Purchase Agreement, (2) the issuance of Ordinary Shares upon conversion of the Preferred Shares, and (3) the issuance of Ordinary Shares (or options or warrants therefor) pursuant to the Stock Incentive Plans); any action that authorizes, creates or issues any class or series of Equity Securities having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, superior to or on a parity with any Preferred Shares, or any Equity Securities convertible into, exchangeable for, or exercisable into any Equity Securities having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, superior to or on a parity with any series of Preferred Shares, and any action that reclassifies any outstanding shares into shares having rights, preferences, privileges, powers, or limitations or restrictions provided for the benefits of the holders thereof, senior to or on a parity with any series of Preferred Shares;

 

  (iii) any approval of the liquidation, winding up, bankruptcy, dissolution of any Group Company or the commitment to any of the foregoing; any filing by or against any Group Company for the appointment of a receiver, administrator or other form of external manager of any Group Company;

 

  (iv) any approval of the corporate reorganization, merger, consolidation, or split of any Group Company, any Trade Sale, or the commitment to any of the foregoing;

 

  (v) any acquisition of a majority of the shares, voting power, business or assets of any other corporation or entity, or any investment in any other corporation or entity in excess of US$30,000,000 (individually or in aggregate in a series of related transactions in any financial year);

 

  (vi) any repurchase or redemption or cancellation of any Equity Securities of any Group Company (other than pursuant to: (1) the Series D Transaction Documents, (2) any repurchase right of the Company under the Stock Incentive Plans approved in accordance with the Memorandum and Articles and this Agreement, (3) the Loan and Security Agreement, and (4) the offer letter dated November 23, 2015 for the engagement of Padmasree as chief development officer of the Company);

 

  (vii) any increase, decrease or alteration of the authorized or issued share capital or registered capital of any Group Company (other than (1) the increase of capital of any Group Company using the proceeds from the issuance and sale of the Series D Preferred Shares in accordance with Section 8.3 of the Purchase Agreement, and (2) the increase of capital of any Group Company by another Group Company which holds 100% equity in the first Group Company), or any transfer of the Equity Securities of any Group Company (other than (1) the transfer of Equity Securities of the Company which complies with the Right of First Refusal & Co-Sale Agreement or the Stock Incentive Plans, (2) the equity restructuring of Beijing Libite as described under the Purchase Agreement, and (3) the transfer or disposal of Padmasree’s shares pursuant to the Loan and Security Agreement);

 

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  (viii) any change of the size, composition or voting arrangement of the board of directors of any Group Company and the manner in which the directors of each Group Company are appointed, except in compliance with Section 9.1(i) above;

 

  (ix) (1) establishment of any Subsidiary other than a Subsidiary that is wholly owned, directly or indirectly, by NIO Inc., or divestiture or sale of an interest in a Subsidiary; or (2) restatement or amendment to, or termination of, the Control Documents between Shanghai Nextev and NIO Technology, or (3) execution of, restatement or amendment to, or termination of, any control documents between Shanghai Nextev and Beijing Libite (or any other affiliate of the Company) which provide contractual control to Shanghai Nextev over Beijing Libite (or such affiliate of the Company) and allow Shanghai Nextev to consolidate the financial statements of Beijing Libite (or such affiliate of the Company) (except for (A) the equity restructuring and the execution of control documents with respect to Beijing Libite pursuant to Section 8.13 of the Purchase Agreement, and (B) any amendment and restatement to the control documents between Shanghai Nextev and Beijing Libite (or any other affiliate of the Company) or to the Control Documents between Shanghai Nextev and NIO Technology solely resulted from the capital increase or equity transfer of Beijing Libite or NIO Technology (or any other affiliate of the Company) (as the case may be) which has been approved in accordance with this Section 10.1);;

 

  (x) any sale, transfer, assignment, license, mortgage or other disposition of, or the incurrence of any Lien on, a majority portion of the assets, properties, Intellectual Property, goodwill, Business of any Group Company in excess of US$30,000,000 (individually or in aggregate in a series of related transactions in any financial year) (except for the transfer or license among Group Companies for management purpose or in the ordinary course of business);

 

  (xi) any transfer of Prime Hubs Shares (as defined in the Purchase Agreement) by any Prime Hubs Grantee (as defined in the Purchase Agreement) to a Person other than Prime Hubs or a Key Employee, officer, management personnel or director of the Group Companies (including the vehicle 100% owned or controlled by such Key Employee, officer or director); or

 

  (xii) any direct or indirect transfer by the Founder of any Equity Securities in any Group Company or any of the Founder Vehicles, except for (1) the transfer to the Persons described in Section 2.6(i) to (iii) of the Right of First Refusal & Co-Sale Agreement, and (2) the transfer of any Equity Securities of Beijing Libite for the purposes of individual foreign exchange registration of the Prime Hubs Grantees (or any amendments thereto), and (3) subject to Section 2.1(vi) in the Right of First Refusal & Co-Sale Agreement, up to a separate and additional 1,500,000 Series A-1 Preferred Shares beneficially held by the Founder (directly or indirectly through the Founder Vehicles), provided that the third party transferee shall have executed a Deed of Adherence in the form attached hereto as Exhibit A.

 

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10.2 Notwithstanding anything in this Agreement or in the Charter Documents of any Group Company and without prejudicing the generality of the Section 10.1 above, the Warrantors shall ensure that no Group Company shall take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, and no Party shall permit any Group Company to take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by the Majority Preferred Holders, provided that, where the applicable Law requires a special resolution to approve any of the acts specified below, in computing the majority when a poll is demanded for the purposes of passing such a special resolution at a meeting of Shareholders, the Majority Preferred Holders shall have the voting rights equal to all Shareholders who voted in favour of the special resolution plus one

 

  (i) any declaration, setting aside and/or payment of any dividends or other distributions on any securities of any Group Company, or the adoption of or any change to the dividend policy;

 

  (ii) any initial public offering (including Qualified IPO) of any Group Company, including choice of the underwriters, the listing venue, timing, valuation and the security exchange for the initial public offering;

 

  (iii) approval of issuance of any indenture, bond or note of any Group Company; or

 

  (iv) the appointment of, or entering into agreements or arrangements with, a company other than a wholly owned PRC Subsidiary of the Company to serve as a distributor of any products manufactured by PRC Group Companies and/or any partner of the Group, including but not limited to Anhui Jianghuai Automobile Co., Ltd.

 

10.3 Notwithstanding anything in this Agreement, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series B Preferred Shares:

 

  (i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series B Preferred Shares;

 

  (ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series B Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series B Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

 

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  (iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series B Preferred Shareholders relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series B Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series B Preferred Shareholders relative to the other classes of shares hereunder.

 

10.4 Notwithstanding anything in this Agreement, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series C Preferred Shares:

 

  (i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series C Preferred Shares;

 

  (ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series C Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series C Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

 

  (iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series C Preferred Shareholders relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series C Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series C Preferred Shareholders relative to the other classes of shares hereunder.

 

10.5 Notwithstanding anything in this Agreement, the following actions shall require the consent of the holders of at least seventy-five percent (75%) of the outstanding Series D Preferred Shares:

 

  (i) any change in any of the rights, preferences, privileges, or powers of, or restrictions provided for the benefit of, the Series D Preferred Shares;

 

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  (ii) creating or authorizing the creation of or issue of any Ordinary Shares or any other security convertible into or exercisable for Ordinary Shares, or any security (or any other security convertible into or exercisable for such securities), having rights, preferences or privileges senior to or on parity with any Series D Preferred Shares, or without consideration or (in the case of Ordinary Shares or securities convertible into or exercisable for Ordinary Shares) for a consideration per share less than the Series D Conversion Price immediately prior to such creation or issue (except for the issuance of Exempted Securities); or

 

  (iii) any change to the capital structure of any Group Company which has the effect of diluting or reducing the effective shareholding of the Series D relative to the other classes of shares. For the avoidance of doubt, creation, authorization or issue of (x) any Exempted Securities or (y) any Equity Securities for an effective consideration per share more than the Series D Conversion Price immediately prior to such creation, authorization or issue shall not be considered having the effect of diluting or reducing the effective shareholding of the Series D Preferred Shareholders relative to the other classes of shares hereunder.

 

10.6 Acts of the Group Companies Requiring Approval of Investor Directors

In addition to such other limitations as may be provided in this Agreement, the Company shall not take, permit to occur, approve, authorize, or agree or commit to do any of the following, and the Company shall not permit any other Group Company to take, permit to occur, approve, authorize, or agree or commit to do any of the following acts, whether in a single transaction or a series of related transactions, whether directly or indirectly, and whether or not by amendment, merger, consolidation, scheme of arrangement, amalgamation, or otherwise, unless approved in advance in writing by a majority of the votes of the directors of the Company, including the affirmative vote of (a) at least two Investor Directors appointed by the Series A-1 Investors and (b) at least four Investor Directors appointed by the Investors other than the Series A-1 Investors:

 

  (i) any related party transaction or a series of related party transactions involving any Group Company on one hand, and any Ordinary Holders, director, officer or employee of the Group Company on the other hand, for which the aggregate value exceeds US$3 million, except for the business cooperation with any of Tencent’s Affiliates (including but not limited to the business cooperation with any of Tencent’s Affiliates pursuant to Section 12.16 hereto);

 

  (ii) the extension by any Group Company of any loan to any third party in excess of US$3 million (individually or in the aggregate in a series of related loans in a fiscal year), or any guarantee for the indebtedness of any third party, except for the loans or the trade credit incurred in the ordinary course of business;

 

  (iii) the incurrence of any loan of any Group Company involving an amount in excess of US$5,000,000 from banks, financial institutions or any third party;

 

  (iv) the commencement or carrying out of any business activities by Beijing Libite or NIO Technology which will generate substantial revenues or cash flows; any material change to the business scope, or substance of the Business of any Group Company, the commencement or carrying out any new businesses of any Group Company other than the Business; or incurrence of any substantial expenses by Beijing Libite (except for the regular lease payment for its current leased office or regular office maintenance expenses) exceeding RMB1,000,000; any transfer of assets to NIO Technology or Beijing Libite;

 

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  (v) approval or material amendment of the annual business plan or annual budget plan of any Group Company;

 

  (vi) approval or amendment of Stock Incentive Plans of any Group Company, or any other incentive arrangements which may result in any employee, officer, director or advisor of the Group Companies directly hold any Equity Securities in the Company or other Group Company;

 

  (vii) any material change in the accounting and financial policies of any Group Company unless such change is required by applicable Laws; or

 

  (viii) engagement or change of the auditor of the Company.

 

11. DRAG-ALONG RIGHTS.

 

11.1 Approved Sale

At any time after March 18, 2021, in the event that the holders of the Preferred Share receives a written bona fide offer for a Trade Sale from an unrelated person, which, for the purpose of this Section 11, means any third party which is not an Affiliate of any Group Company, or an Affiliate of the Founder or Mr. QIN Lihong, or an Affiliate of the Founder Vehicles, or any trust or other estate in which the Founder or Mr. QIN Lihong has a substantial beneficial interest, in which the implied valuation of the Company immediately prior to such offered Trade Sale is not less than US$6,000,000,000 (the “Offer Price”), and if such offered Trade Sale is approved and agreed by the Majority Preferred Holders (as so approved and agreed, the “Approved Sale”), then upon the receipt of written notice from the Majority Preferred Holders and within thirty (30) days thereafter, the Company and each Shareholder of the Company shall vote for, consent to and raise no objection against, enter into any agreement in connection with, participate in, and if applicable, shall cause all other Shareholders of the Company to promptly consent to, enter into any agreement in connection with, and participate in, such Trade Sale.

 

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11.2 In the event that there are any Shareholders that do not participate in the Approved Sale within the period as provided in Section 11.1, the Company shall promptly notify such Shareholder of the Company (the “Remaining Members”) in writing of the Approved Sale and the material terms and conditions of such Approved Sale, whereupon each Remaining Member shall, in accordance with instructions received from the Company and as pre-approved by the Majority Preferred Holders, vote all of its voting securities of the Company in favor of, otherwise consent in writing to, and/or otherwise sell or transfer all of its Shares in such Approved Sale (including without limitation tendering original share certificates for transfer, signing and delivering share transfer certificates, share sale or exchange agreements, and certificates of indemnity relating to any Shares in the capital of the Company in the event that such Remaining Member has lost or misplaced the relevant share certificate) on the same terms and conditions as were agreed by the Majority Preferred Holders; provided, however, that such terms and conditions, including with respect to price paid or received per share, may differ as among the Ordinary Shares, the Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares, the Series D Preferred Shares and different series of preferred shares, in order to reflect the liquidation preferences and participation rights of the preferred shares set forth in the Memorandum and Articles (it being understood that proceeds of the Approved Sale shall be distributed among the Shareholders in accordance with Article 8(b) of the Memorandum and Articles). In furtherance of the foregoing, the Company is expressly hereby authorized by each Remaining Member to take any and all of the following actions on such Remaining Member’s behalf (without receipt of any further consent by such Remaining Member): (i) vote all of the voting securities of such Remaining Member in favor of any such Approved Sale; (ii) otherwise consent on such Remaining Member’s behalf to such Approved Sale; (iii) sell all of such Remaining Member’s shares in such Approved Sale, in accordance with the terms and conditions of this Section 11.2; and (iv) act as such Remaining Member’s attorney-in-fact in relation to any such Approved Sale and have the full authority to sign and deliver, on behalf of such Remaining Member, share transfer certificates, share sale or exchange agreements and certificates of indemnity relating to any shares in the capital of the Company in the event that such Remaining Member has lost or misplaced the relevant share certificate.

 

11.3 In furtherance of the foregoing, in the event an Approved Sale is to be brought to a vote at a general meeting, each Shareholder of the Company entitled to vote at such meeting agrees:

 

  (i) to be present, in person or by proxy, at all such meetings and be counted for the purposes of determining the presence of a quorum at such meetings and the presence of the number of votes necessary for the effectiveness of any shareholder resolutions;

 

  (ii) to vote (in person, by proxy or by action by written consent, as applicable) all shares of the Company as to which it has record or beneficial ownership in favor of such Approved Sale and in opposition of any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Approved Sale;

 

  (iii) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable Laws at any time with respect to such Approved Sale; and

 

  (iv) to execute and deliver all related documentation and take such other action in support of the Approved Sale as shall reasonably be requested by the Majority Preferred Holders.

 

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11.4 Put Option

Without prejudice to the other provisions hereof, if any Shareholder of the Company (the “Dissenting Member”) refuses to vote in favor of the Approved Sale or participate in the Approved Sale in accordance with Section 11.1 (Approved Sale) through Section 11.3 (Drag-along Provisions to Control), then, so long as the Majority Preferred Holders give their written consent, each holder of the Preferred Shares voting in favor of the Approved Sale shall have the right to require the Dissenting Member to purchase in cash up to all of the Preferred Shares held by such holder at a price per Preferred Shares equal to the amount that a holder of a Preferred Shares would have received in respect of a Preferred Shares had the Company been sold for cash in the Approved Sale. The Dissenting Member shall also reimburse such holder of Preferred Shares for any and all reasonable fees and expense, including legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of rights of such holder of a Preferred Shares under this Section 11.4. Within fifteen (15) days after a holder of Preferred Shares delivers a notice to the Dissenting Member exercising the option created hereby, such holder of Preferred Shares shall deliver to the Dissenting Member the certificate or certificates representing Preferred Shares to be sold under this Section 11.4 by such holder of Preferred Shares properly endorsed for transfer, if certificated, and the Dissenting Member shall pay immediately the aggregate purchase price therefor and the amount of reimbursable fees and expenses, in each case, as provided for under this Section 11.4, in cash or by other means acceptable to such holder of Preferred Shares.

 

11.5 Drag-along Provisions to Control

For the avoidance of doubt, if and to the extent that there are inconsistencies between this Section 11 and any other provisions of this Agreement or the Right of First Refusal & Co-Sale Agreement, the terms of this Section 11 (Drag-Along Rights) shall prevail and control.

 

12. ADDITIONAL COVENANTS.

 

12.1 Control of Subsidiaries

The Company shall institute and keep in place such arrangements such that the Company (i) will at all times control the operations of and maintain relevant beneficial interests in each other Group Company, and (ii) will at all times be permitted to properly consolidate the financial results for each other Group Company in the consolidated financial statements for the Company prepared under the US GAAP.

 

12.2 Compliance with Laws

Each Warrantor shall cause the Group Companies to, conduct the Business in compliance in all material respects with all applicable Laws, and obtain, make and maintain in effect, all Consents from the relevant Governmental Authority or other Person required in respect of the due and proper establishment and operations of each Group Company in accordance with applicable Laws. Without limiting the generality of the foregoing, none of the Warrantors shall, and the Warrantors shall cause each Group Company not to, and the Parties shall ensure that its and their respective Subsidiaries and its respective officers, directors, and representatives shall not, directly or indirectly, (a) offer or give anything of value to any Public Official with the intent of obtaining any improper advantage, affecting or influencing any act or decision of any such Person, assisting any Group Company in obtaining or retaining business for, or with, or directing business to, any Person, or constituting a bribe, kickback or illegal or improper payment to assist any Group in obtaining or retaining business, (b) take any other action, in each case, in violation of the Foreign Corrupt Practices Act of the United States of America, as amended (as if it were a United States Person), or any other applicable similar anti-corruption, recordkeeping and internal controls Laws, or (c) establish or maintain any fund or assets in which any Group Company has proprietary rights that have not been recorded in its books and records of Group Company.

 

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12.3 Insurance

If requested by the Majority Preferred Holders, the Company shall promptly purchase and maintain, and shall cause its Subsidiaries to promptly purchase and maintain, in effect, insurance policies with respect to the Group Company’s properties, employees, products, operations, liabilities, and/or business, each in the amounts not less than that are customarily obtained by companies engaging in research and development, design, manufacture, promotion and distribution of new energy automobiles (electric cars) in the PRC.

 

12.4 Future Holders of Shares

Except with the written consent of the Majority Preferred Holders, the Company covenants that it will cause all future holders of at least 1% of the Company’s Shares, and all future holders of other Equity Securities convertible, exchangeable or exercisable into at least 1% of the Company’s Shares upon such conversion, exchange or exercise, to join this Agreement and the Right of First Refusal & Co-Sale Agreement as a “Party,” a “Shareholder” and, where applicable, as an “Ordinary Holder,” or an “Investor” and a “Preferred Holder,” either (i) by executing a Deed of Adherence in the form attached hereto as Exhibit A, without any amendment to this Agreement or the Right of First Refusal & Co-Sale Agreement, or (ii) by entering into an amended and restated Agreement in accordance with Section 13.12 and an amended and restated Right of First Refusal & Co-Sale Agreement in accordance with Section 4.10 thereof, as applicable, and each Shareholder shall cooperate with the Company in this regard. The Parties hereby agree that upon execution of a Deed of Adherence in the form attached hereto as Exhibit A by such holders with the Company, such holders may become parties to this Agreement and the Right of First Refusal & Co-Sale Agreement, and be entitled to all the applicable rights and privileges, and be bound by all the applicable duties and obligations, as provided under this Agreement and the Right of First Refusal & Co-Sale Agreement in relation to the Shares held by them. Further, immediately after each Additional Closing, Schedule 1 (List of Investors) to this Agreement will be amended to list the Additional Series D Investors participating in such Additional Closing, and subject to Section 13.2 (Effectiveness and Termination) hereof, each Additional Series D Investor participating in such Additional Closing shall be deemed as a “Series D Investor,” a “Party” and a “Shareholder” hereunder.

 

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12.5 Internal Control System

The Warrantors shall, and shall cause each Group Company to, maintain the books and records in accordance with sound business practices and implement and maintain an adequate system of procedures and controls with respect to finance, management, and accounting that meets international standards of good practice and is reasonably satisfactory to the Majority Preferred Holders to provide reasonable assurance that (i) transactions by it are executed in accordance with management’s general or specific authorization, (ii) transactions by it are recorded as necessary to permit preparation of financial statements in conformity with the respective PRC Accounting Standards or US GAAP and to maintain asset accountability, (iii) access to assets of it is permitted only in accordance with management’s general or specific authorization, (iv) the recorded accountability for assets of it is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any material differences, (v) segregating duties for cash deposits, cash reconciliation and cash payment, and establishing proper approval procedures relating to cash management, and (vi) any personal assets or bank accounts of the employees, directors, officers are not mingled with the corporate assets or corporate bank account of any Group Company, and no Group Company uses any personal bank accounts of any employees, directors, officers thereof during the operation of its business.

12.6 No Avoidance; Voting Trust

Each Warrantor will not, and shall procure the Group Companies not to, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be performed hereunder by the Group Companies, and each Warrantor will at all times in good faith assist and take action as appropriate in the carrying out of all of the provisions of this Agreement. Except for the transactions contemplated by the Series D Transaction Documents, each Ordinary Holder agrees that it shall not enter into any other agreements or arrangements of any kind with respect to the voting of any Shares or deposit any Shares in a voting trust or other similar arrangement.

12.7 United States Tax Matters

 

  (i) None of the Warrantors will, and will procure the Group Companies not to, take any action inconsistent with its treatment of the Company as a corporation for U.S. federal income tax purposes or elect to be treated as an entity other than a corporation for U.S. federal income tax purposes

 

  (ii) The Company shall use, and shall cause each of its Subsidiaries to use, its best efforts to arrange its management and business activities in such a way that the Company and each of its Subsidiaries are not treated as residents for tax purposes, or is otherwise subject to income tax in, a jurisdiction other than the jurisdiction in which they have been organized.

 

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  (iii) The Company shall use its best effort to avoid future status of the Company or any of its Subsidiaries as a PFIC. Within forty-five (45) days from the end of each taxable year of the Company, the Company shall determine, in consultation with a reputable accounting firm, whether the Company or any of its Subsidiaries was a PFIC in such taxable year (including whether any exception to PFIC status may apply). If the Company determines that the Company or any of its Subsidiaries was a PFIC in such taxable year (or if a Government Authority or an Investor informs the Company that it has so determined), it shall, within sixty (60) days from the end of such taxable year, provide the following information to each holder of Preferred Shares that is a United States Person (“Direct US Investor”) and each United States Person that holds either direct or indirect interest in such holder (“Indirect US Investor”) (hereinafter, collectively referred to as a PFIC Shareholder”): (i) all information reasonably available to the Company to permit such PFIC Shareholder to (a) accurately prepare its U.S. tax returns and comply with any other reporting requirements, if any, arising from its investment in the Company and relating to the Company or any of its Subsidiaries’ classification as a PFIC and (b) make any election (including, without limitation, a “qualified electing fund” election under Section 1295 of the Code), with respect to the Company (or any of its Subsidiaries); and (ii) a completed “PFIC Annual Information Statement” as described under Treasury Regulation Section 1.1295-1(g). The Company shall be required to provide the information described above to an Indirect US Investor only if the relevant holder of Preferred Share requests in writing that the Company provide such information to such Indirect US Investor and furnish the Company with written identifying information (such as name, address, and other identifying information) about the Indirect US Investor.

 

  (iv) Each of the Ordinary Holders represents that such Person is not a United States Person and such Person is not owned, wholly or in part, directly or indirectly, by any United States Person. Each of the Ordinary Holders shall provide prompt written notice to the Company of any subsequent change in its United States Person status. The Company shall use its best efforts to avoid future status of the Company or any of its Subsidiaries as a CFC. Upon written request of a holder of Preferred Shares from time to time, the Company will promptly provide in writing such information concerning its shareholders and the direct and indirect interest holders in each shareholder sufficient for such holder of Preferred Shares to determine whether the Company is a CFC. In the event that the Company does not have in its possession all the information necessary for the holder of Preferred Shares to make such determination, the Company shall promptly procure such information from its shareholders. The Company shall, (i) upon written request of a holder of Preferred Shares, furnish on a timely basis all information requested by such holder to satisfy its (or any Indirect US Investor’s) U.S. federal income tax return filing requirements, if any, arising from its investment in the Company and relating to the Company or any of its Subsidiaries’ classification as a CFC. The Company and each of its Subsidiaries shall use their commercially reasonable best efforts to avoid generating for any taxable year in which the Company or any of its Subsidiaries is a CFC, income that would be includible in the income of such holder of Preferred Shares (or any Indirect US Investor) pursuant to Section 951 of the Code.

 

  (v) The Company shall comply, and shall cause each of its Subsidiaries to comply, with all record-keeping, reporting, and other requests necessary for the Company and each of its Subsidiaries to comply with any applicable U.S. tax law or to allow each holder of Preferred Shares to avail itself of any provision of U.S. tax laws. The Company shall also provide each holder of Preferred Shares with any information requested by such holder of Preferred Shares to allow such holder of Preferred Shares to comply with U.S. tax laws or to avail itself of any provision of U.S. tax laws.

 

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  (vi) The cost incurred by the Company in providing the information that it is required to provide, or is required to cause to be provided, and the cost incurred by the Company in taking the action, or causing the action to be taken, as described in this Section shall be borne by the Company.

 

12.8 Other Tax Matters

Each of the Warrantors agrees to jointly and severally indemnify each Investor from and against (i) any Taxes imposed on such Investor by any PRC Government Authority in connection with its investment in the Company, and (ii) any loss, claim, liability, expense, or other damage (including diminution in the value of the Company business or such Investor’s investment in the Company) attributable to (a) any Taxes (or the non-payment thereof) of any Group Company for all taxable periods ending on or before the Initial Closing and the portion through the end of the Initial Closing for any taxable period that includes (but does not end on) the Initial Closing, (b) any Taxes of any other Person imposed by any Governmental Authority on any Group Company as a transferee, successor, withholding agent, accomplice, or party providing conveniences in connection with an event or transaction occurring before the Initial Closing, and (c) any breach of any representations, warranties or covenants contained in Section 12.7 (United States Tax Matters).

 

12.9 Confidentiality

 

  (i) Non-Disclosure of Confidential Information. Except as set forth in Section 12.9(iii), each of the Parties shall (i) not use or disclose to any person that is not a Party any Confidential Information it has or acquires; (ii) make every effort to prevent the unauthorized use or disclosure of Confidential Information; and (iii) cause each of its Affiliates to comply with (i) and (ii) in this Section 12.9(i).

 

  (ii) Press Releases. No announcement regarding any of the Confidential Information (including the Investor’s subscription of share interest of the Company) in a press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to the general public may be made without the prior written consent of the Majority Preferred Holders. Any press release issued by the Company shall not disclose any of the Confidential Information and the final form of such press release shall be approved in advance in writing by the Majority Preferred Holders (except for any press release made by Tencent in connection with the transaction as contemplated under the Series D Transaction Documents upon the Initial Closing).

 

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  (iii) Permitted Disclosures. Notwithstanding the foregoing, Section 12.9 (i) above shall not apply to (a) Confidential Information which a restricted party learns from a third party which such third party reasonably believes to have the right to make the disclosure, provided that the restricted party complies with any restrictions imposed by such third party; (b) Confidential Information which is rightfully in the restricted party’s possession prior to the time of disclosure by the protected party and not acquired by the restricted party under a confidentiality obligation; (c) Confidential Information which enters the public domain without breach of confidentiality by the restricted party, (d) disclosures of Confidential Information by a Party to its current or bona fide prospective investors, Affiliates and their respective employees, directors, bankers, lenders, accountants, legal counsels, business partners or representatives or advisors who need to know such information, in each case only where such persons or entities are informed of the confidential nature of the Confidential Information and are under appropriate nondisclosure obligations substantially similar to those set forth in Section 12.9, (e) disclosures of Confidential Information to a bona fide purchaser or transferee of the Shares held by the Investors where such purchaser or transferee is informed of the confidential nature of the Confidential Information and are under appropriate nondisclosure obligations substantially similar to those set forth in Section 12.9, (f) disclosures of Confidential Information if such disclosure is approved in writing by the Company, the Majority Ordinary Holders and the Majority Preferred Holders, and (g) disclosures of Confidential Information to the extent required pursuant to applicable Law (including the applicable rules of any stock exchange), in which case the party required to make such disclosure (the “Disclosing Party”) shall provide the other Parties hereto with prompt written notice of that fact, shall consult with the other Parties hereto regarding such disclosure, and shall, to the extent reasonably possible and with the cooperation and reasonable efforts of the other Parties, seek a protective order, confidential treatment or other appropriate remedy. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required to be disclosed.

 

  (iv) The provisions of Section 12.9 shall terminate and supersede the provisions of any separate nondisclosure agreement executed by any of the Parties hereto with respect to the transactions contemplated hereby, including without limitation, any term sheet, letter of intent, memorandum of understanding or other similar agreement entered into by any Group Company, the Ordinary Holders and the Investors in respect of the transactions contemplated hereby.

 

12.10    No use of Series D Investors’ Name or Logo

Without the prior written consent of a Series D Investor, and whether or not such Series D Investor is then a shareholder of the Company, none of the Parties shall use, publish or reproduce the name, brand and/or logo of such Series D Investor, or any names, brands, trademarks or logos similar to those of such Series D Investor, or claim itself a partner of such Series D Investor or its Affiliates, or make any similar representations, in any discussion, documents or materials or otherwise, including without limitation for marketing, advertising, promotional or other purposes, where the names, brands and/or logos of each Series D Investor are as follows (unless stated elsewhere in Sections 12.11 (No Use of Series C Investors’ Name or Logo), 12.12 (No Use of Series B Investors’ Name or Logo), 12.13 (No Use of Series A-3 Investors’ Name or Logo) or 12.14 (No Use of Series A-2 Investors’ Name or Logo)): (1) with respect to Image Frame and Morespark, “Tencent” or “腾讯,” (2) with respect to Hammer Capital, “Hammer” or “黑马资本,” (3) with respect to Hubei Science & Technology Investment Group (Hong Kong) Co Ltd, “Hubei Science & Technology” or “湖北科投,” (4) with respect to PV Vision Limited, “Primavera” or “春华,” (5) with respect to Temasek, “Temasek, ” (6) with respect to Hillhouse, “Hillhouse,” “Gaoling”, “Lei Zhang”, “张磊” or “高瓴” and (7) with respect to SCC “Sequoia,” “Sequoia Capital” or “红杉.”

 

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12.11   No use of Series C Investors’ Name or Logo

Without the prior written consent of a Series C Investor, and whether or not such Series C Investor is then a shareholder of the Company, none of the Parties shall use, publish or reproduce the name, brand and/or logo of such Series C Investor, or any names, brands, trademarks or logos similar to those of such Series C Investor, or claim itself a partner of such Series C Investor or its Affiliates, or make any similar representations, in any discussion, documents or materials or otherwise, including without limitation for marketing, advertising, promotional or other purposes, where the names, brands and/or logos of each Series C Investor are as follows (unless stated elsewhere in Sections 12.10 (No use of Series D Investors’ Name or Logo), 12.12 (No Use of Series B Investors’ Name or Logo), 12.13 (No Use of Series A-3 Investors’ Name or Logo) or 12.14 (No Use of Series A-2 Investors’ Name or Logo)): (1) with respect to Baidu Capital, “Baidu” or “ ,” and “Baidu Capital” or “百度资本,” (2) with respect to West City, “Capital Today” or “今日资本,” (3) with respect to WP, “Warburg Pincus” or “华平,” (4) with respect to New Margin Capital, “聯創資本” or “New Margin Capital,” (5) with respect to Image Frame, “Tencent” or “腾讯,” (6) with respect to Total Prestige, “新天域资本” or “New Horizon Capital,” (7) with respect to Zhide, “中金,” “CICC,” “中金公司,” “中金资本” or “中金智德,” (8) with respect to ChinaEquity, “信中利,” and (9) with respect to UBS, “UBS” or “瑞银.”

 

12.12   No use of Series B Investors’ Name or Logo

Without the prior written consent of a Series B Investor, and whether or not such Series B Investor is then a shareholder of the Company, none of the Parties shall use, publish or reproduce the name, brand and/or logo of such Series B Investor, or any names, brands, trademarks or logos similar to those of such Series B Investor, or claim itself a partner of such Series B Investor or its Affiliates, or make any similar representations, in any discussion, documents or materials or otherwise, including without limitation for marketing, advertising, promotional or other purposes, where the names, brands and/or logos of each Series B Investor are as follows (unless stated elsewhere in Sections 12.10 (No use of Series D Investors’ Name or Logo), 12.11 (No Use of Series C Investors’ Name or Logo), 12.12 (No Use of Series B Investors’ Name or Logo), 12.13 (No Use of Series A-3 Investors’ Name or Logo) or 12.14 (No Use of Series A-2 Investors’ Name or Logo)): (1) with respect to Temasek, “Temasek,” (2) with respect to Bluestone, “Bluestone” or “厚朴,” (3) with respect to TPG, “TPG,” (4) with respect to Magic Stone, “Magic Stone,” (5) with respect to Orient Hontai, “Orient Hontai,” (6) with respect to Golden Brick, “Golden Brick,” (7) with respect to Lenovo, “Lenovo,” (8) with respect to SCC, “Sequoia,” “Sequoia Capital” or “红杉,” (9) with respect to Grandfield, “Redview” and “鸿为,” (10) with respect to Palace, “蘭亭投资 ,” (11) with respect to Bright Sky, “GIC,” (12) with respect to Long Winner, “China Renaissance,” and (13) with respect to Hillhouse, “Hillhouse,” “Gaoling”, “Lei Zhang”, “张磊” or “高瓴.”

 

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12.13   No use of Series A-3 Investors’ Name or Logo

Without the prior written consent of Sequoia, and whether or not Sequoia is then a shareholder of the Company, none of the Parties shall use, publish or reproduce the name, brand and/or logo of “Sequoia,” “Sequoia Capital” or “红杉,” or any similar names, brands, trademarks or logos, or claim itself a partner of Sequoia or its Affiliates, or make any similar representations, in any discussion, documents or materials or otherwise, including without limitation for marketing, advertising, promotional or other purposes. Without the prior written consent of Joy Capital, and whether or not Joy Capital is then a shareholder of the Company, none of the Parties shall use, publish or reproduce the name, brand and/or logo of “Joy Capital,” or any similar names, brands, trademarks or logos, or claim itself a partner of Joy Capital or its Affiliates, or make any similar representations, in any discussion, documents or materials or otherwise, including without limitation for marketing, advertising, promotional or other purposes.

 

12.14   No use of Series A-2 Investors’ Name or Logo

Except for the permitted disclosures under Section 12.9 (Confidentiality) hereof, (1) without the prior written consent of Hillhouse, none of the Parties shall use, publish, reproduce, or refer to the name “Hillhouse,” “Gaoling” “Lei Zhang”, “张磊 ” or any similar name, trademark or logo in any discussion, documents or materials, including without limitation for marketing or other purposes; (2) without the prior written consent of Shunwei, none of the Parties shall use, publish, reproduce, or refer to the name “Shunwei,” “顺为,” “Xiaomi,” “小米,” or the name of the general partner of Shunwei or Xiaomi, or any similar name, trademark or logo in any discussion, documents or materials, including without limitation for marketing or other purposes; (3) without the prior written consent of Mount Putuo, none of the Parties shall use, publish, reproduce, or refer to the name “Tencent,” “腾讯,” or any similar name, trademark or logo in any discussion, documents or materials, including without limitation for marketing or other purposes; (4) without the prior written consent of Smart Group, none of the Parties shall use, publish, reproduce, or refer to the name “Smart Group”, “Jingdong,” “JD,” “京东,” or any similar name, trademark or logo in any discussion, documents or materials, including without limitation for marketing or other purposes.

 

12.15   Corporate Opportunity

It is acknowledged and agreed by each of the Parties (for itself and on behalf of its Subsidiaries and Affiliates) that, notwithstanding the appointment of an Investor Director or observer by each of the Series A Investors, subject to all applicable Laws and securities regulations, each of the Series A Investors and its respective Affiliates (or in case of Hillhouse NEV Holdings Limited or Shunwei, its respective Investment Affiliates, where “Investment Affiliates” for the purpose of this Section 12.15 shall mean if applicable, any shareholder of Hillhouse NEV Holdings Limited or Shunwei (as the case may be), any fund managing company managing such shareholder or Hillhouse NEV Holdings Limited or Shunwei (as the case may be), and other funds managed by such fund managing company) shall forever be entitled to, directly or indirectly:

 

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  (i) acquire, transfer, enter into any derivative or similar transaction, or otherwise enter into a contract in respect of the Equity Securities of the Group Companies or any other Person;

 

  (ii) enter into any agreement, arrangement or understanding with, or otherwise acquire, hold or dispose of Equity Securities in, (1) any publically listed, traded or quoted company, regardless of whether such company carries out the Competing Business, and/or (2) with respect to a Series A Investor (regardless whether such Series A Investor concurrently holds any Series B Preferred Shares, any Series C Preferred Shares or any Series D Preferred Shares), only after the applicable Investor Restrictive Investment Cutoff Date of such Series A Investor, any private company which carries out the Competing Business. For the avoidance of doubt, regardless whether such Series A Investor concurrently holds any Series B Preferred Shares, any Series C Preferred Shares or any Series D Preferred Shares, (a) within the applicable Investor Restrictive Investment Period for each Series A Investor, such Series A Investor and its respective Affiliates (or in case of Hillhouse NEV Holdings Limited or Shunwei, its respective Investment Affiliates) shall not enter into any agreement, arrangement or understanding with, or otherwise acquire or hold Equity Securities in, any private company which carries out the Competing Business, (b) notwithstanding anything provided to the contrary herein, for purposes of this subsection (ii), Competing Business shall not include the business of (A) the design, manufacture or sale of any vehicles other than electric automobiles (电动汽车), (B) the design, manufacture or sale of the parts, components and accessory products for any vehicles (including new energy automobiles (electric cars)), (C) the provision of automobile-related services, (D) low-speed electric cars, and (E) charging networks, (c) upon prior written consent of the Founder Vehicles with respect to a particular private company which carries out the Competing Business, each of the Series A Investors and its respective Affiliates (or in case of Hillhouse NEV Holdings Limited or Shunwei, its respective Investment Affiliates) may enter into any agreement, arrangement or understanding with, or otherwise acquire or hold Equity Securities in, such private company which carries out the Competing Business within the applicable Investor Restrictive Investment Period, and (d) the restrictions under this Section 12.15 (ii) shall exclude any agreement, arrangement or understanding with, or any acquisition of or investment in any private company which carries out the Competing Business, (A) by any Series A Investor which has occurred prior to the closing of the purchase and sale of its respective Preferred Shares, and (B) by Tencent though the fund currently being formed by an Affiliate of Tencent and certain third parties, the name and basic information of which fund shall be disclosed to the Company upon its establishment.

 

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  (iii) refer a business or investment opportunity of any nature (the “Corporate Opportunity”) to any Person whatsoever (whether or not having any affiliation to the Group Companies), except for a Corporate Opportunity that is expressly directed to the Investor Director in his capacity as a Director of the Company (the “Company Opportunity”), provided that a Company Opportunity is referred to the Company on a first refusal basis, the Company acknowledges and agrees that such Investor Director shall not be in breach of any fiduciary duty or duty of confidentiality for referring a Corporate Opportunity to any person. Any Company Opportunity not pursued by the Company may be referred to any other Person by such Investor and such Investor Director.

 

12.16   Business Cooperation with Tencent

Each of the Warrantors jointly and severally undertakes to Tencent that, as long as Tencent holds any Preferred Shares in the Company, in the event any Group Company proposes to cooperate with any internet company (the “Proposed Cooperation”), such Group Company shall first notify Tencent of the scope and terms of the Proposed Cooperation in reasonable detail. Tencent shall have the right to request such Group Company to grant a cooperation opportunity covering substantially similar scope and terms to Tencent or an appropriate Affiliate of Tencent, and such Group Company shall grant such cooperation opportunity to Tencent or an appropriate Affiliate of Tencent, or cause any existing cooperation between any Group Company and Tencent (or an Affiliate of Tencent) to cover substantially similar scope and terms of the Proposed Cooperation, in each case on the terms and conditions no less favorable than those of the Proposed Cooperation (the “Special Cooperation Right”). The Warrantors further agree that in case Xiaomi Corporation or any of its Affiliates (other than Shunwei) becomes a holder of Preferred Shares of the Company, as long as Xiaomi Corporation or such Affiliate holds any Preferred Shares in the Company, the Warrantors shall, and shall cause the Group Companies to, grant Xiaomi Corporation or such Affiliate the Special Cooperation Right identical to the Special Cooperation Right granted to Tencent hereunder.

 

12.17   Sole Distributor

Wholly-owned PRC subsidiaries of the Company shall be the only distributors of any products manufactured by any PRC Group Company and/or any partner of the Group, including but not limited to Anhui Jianghuai Automobile Co., Ltd.

12.18   Intellectual Property

All Company Owned IP and Company Registered IP shall be owned by, licensed to, registered for and/or applied for in the name of any Group Company.

 

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12.19   Non-Compete

 

  (i) The Founder hereby undertakes and the Warrantors shall cause the Founder to undertake to the Company and the Investors that for a period as long as the Founder holds any position of chairman, director or management personnel in any Group Company, and at any time prior to the third anniversary from the date he ceases to hold such position in any Group Company (whichever is later), he will not, without the prior written consent of the holders of at least 75% of the voting power of the then outstanding Series A-2 Preferred Shares, Series A-3 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares (voting together as a single class and calculated on as-converted basis) either on his own account or through any of his Affiliates or in conjunction with or on behalf of any other Person:

 

  (1) Unless the employment of the Founder is terminated by any Group Company without Cause, carry on or be engaged, concerned or interested directly or indirectly whether as shareholder, director, employee, partner, agent, advisor or otherwise carry on any business in direct competition with the primary business then operated by the Group Companies in the PRC and any other geographic territory in which the Group Companies then actively operate (except for the Founder’s interest in 湖北蔚来长江新能源产业发展基金合伙企业(有限合伙));

 

  (2) Solicit or entice away or attempt to solicit or entice away from any Group Company, any Person who is or shall at any time within twelve (12)    months prior to such solicitation have been a customer, client, representative or agent of such Group Company or in the habit of dealing with such Group Company; or

 

  (3) Employ, solicit or entice away or attempt to employ, solicit or entice away from any Group Company, any person who is or shall have been at the date of or within twelve (12) months prior to such cessation an officer, manager, consultant or employee of any such Group Company whether or not such person would commit a breach of contract by reason of leaving such employment (other than pursuant to advertisements of general circulation).

 

  (ii) Each and every obligation under this Section 12.19 shall be treated as a separate obligation and shall be severally enforceable as such and in the event of any obligation or obligations being or becoming unenforceable in whole or in part, such part or parts which are unenforceable shall be deleted from such section and any such deletion shall not affect the enforceability of the remainder parts of such section.

 

  (iii) If any restrictions in this Section 12.19 shall be adjudged to be invalid or unenforceable as being in excess of what is reasonably required for the protection of the Group or the Investors, but would be valid if parts of this Section were deleted or the scope herein reduced, all restrictions in this Section shall apply with such modifications as may be necessary to make them legally valid and effective.

 

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The Warrantors shall cause each Key Employee of the Group Companies to comply with the non-compete agreement executed between such Key Employee and the relevant Group Company.

12.20 Triple-Class Structure and Super Voting Rights

The Company shall procure, and each Shareholder shall procure that, immediately prior to the closing of a Qualified IPO of the Company:

 

  (i) except for the Ordinary Shares and Preferred Shares beneficially owned by Tencent and the Founder Vehicles, each fully paid Preferred Share shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class A Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by the other Shareholders shall be designated as class A Ordinary Share, as the case may be. Each class A Ordinary Share shall be entitled to one (1) vote on all matters subject to the vote at general meetings of the Company;

 

  (ii) each fully paid Preferred Share held by Tencent shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class B Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by Tencent shall be designated as Class B Ordinary Share, as the case may be. Each class B Ordinary Share shall be entitled to four (4) votes on all matters subject to the vote at general meetings of the Company; and

 

  (iii) each fully paid Preferred Share held by the Founder Vehicles shall be converted into the number of fully paid and non-assessable Ordinary Share(s) to be designated as class C Ordinary Share(s) based on the applicable Preferred Share Conversion Price then in effect, and each fully paid and non-assessable Ordinary Share held by Founder Vehicles shall be designated as Class C Ordinary Share, as the case may be. Each class C Ordinary Share shall be entitled to eight (8) votes on all matters subject to the vote at general meetings of the Company.

 

12.21 Stock Incentive Plan Arrangements

Subject to Section 10 in this Agreement, the Company shall procure, and each Shareholder shall procure that:

 

  (i) immediately after the Initial Closing, the aggregate number of Ordinary Shares (and/or options or warrants therefore) reserved for issuance to officers, directors, employees and consultants of the Group Companies pursuant to the Stock Incentive Plans shall be increased by 23,000,000 Ordinary Shares; and

 

  (ii) as soon as practicable after the Initial Closing, a new Stock Incentive Plan shall be adopted, which shall be effective for a period of five (5) years starting from January 1 of the year following the completion of a Qualified IPO and shall include appropriate provisions to the effect that the maximum number of shares which may be issued pursuant to such Stock Incentive Plan shall be automatically increased each year by the number of shares representing 1.5% of the then total issued and outstanding share capital of the Company as of the end of each preceding year.

 

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13. MISCELLANEOUS

 

13.1 UBS PLNs

 

  (i) Notwithstanding any provision of any Series D Transaction Document, each Party hereby acknowledges and agrees as follows:

(1) UBS AG, London Branch (the “UBS”) or its Affiliates intends, and UBS or its Affiliates is permitted, to enter into PLNs;

(2) UBS shall procure that a PLN Beneficiary shall not enter into a PLN Transfer unless the prior written consent of the Company is obtained; provided that such prior written consent from the Company shall no longer be required after the end of the “market stand-off” period under Section 6.3 in this Agreement (such period not to exceed one hundred and eighty (180) days from the date of the final prospectus relating to the Company’s IPO);

(3) UBS undertakes to include in the documentation that it or its Affiliate enters into with a PLN Beneficiary, a restriction on PLN Beneficiaries transferring or having the effect of transferring, to any Person, in whole or in part, all or any of the economic benefits, interests, risks or other consequences of the relevant PLN without first obtaining the prior consent of UBS, and UBS undertakes not to provide such consent unless it receives the prior written consent of the Company; and

(4) UBS may disclose the Confidential Information (including for the avoidance of doubt, the documents, reports and information referred to in Section 8.1 in this Agreement) that UBS has obtained in its capacity as a Shareholder to a PLN Beneficiary, provided that (a) UBS shall have included in the documentation that it or its Affiliate enters into with a PLN Beneficiary the confidential nature of the Confidential Information and shall also have provided in such documentation that a PLN Beneficiary shall be bound by the nondisclosure obligations under the Series D Transaction Documents to the same extent as though the PLN Beneficiary were a party thereto and (b) UBS and/or the relevant PLN Beneficiary grants third party rights to the Company under the Contracts (Rights of Third Parties) Ordinance (Chapter 623 of the Laws of Hong Kong and all applicable laws and regulations) to enforce against such PLN Beneficiary any breach of such nondisclosure obligations by such PLN Beneficiary.

 

  (ii) Without prejudice to the generality of Section 13.1(i) in this Agreement, notwithstanding any provision of any Series D Transaction Document, each Party hereby specifically acknowledges and agrees that the “market stand-off” restrictions under Section 6.3(ii) in this Agreement shall not apply to a PLN, provided, however, that for the avoidance of doubt, UBS, as a Shareholder of the Company, shall in all other respects be subject to the “market stand-off” restrictions under Section 6.3(ii) in this Agreement.

 

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  (iii) Without prejudice to the generality of Section 13.1(i) in this Agreement, notwithstanding any provision of any Series D Transaction Document, each Party hereby specifically acknowledges and agrees that, in respect of a PLN or proposed PLN (or a PLN Transfer or proposed PLN Transfer), (i) no PLN Beneficiary shall be required to execute a Deed of Adherence as result of Section 2.1(v) of the Right of First Refusal & Co-Sale Agreement and (ii) the rights of first refusal under Section 2.2 of the Right of First Refusal & Co-Sale Agreement and the right of co-sale under Section 2.3 of the Right of First Refusal & Co-Sale Agreement shall not apply, provided, however, that for the avoidance of doubt, UBS, as a Shareholder of the Company, shall in all other respects be subject to the rights of first refusal under Section 2.2 of the Right of First Refusal & Co-Sale Agreement and the right of co-sale under Section 2.3 of the Right of First Refusal & Co-Sale Agreement.

 

13.2 Effectiveness and Termination

 

  (i) This Agreement shall take effect as of the Initial Closing Date with respect to all the Parties which have duly executed this Agreement as of the Initial Closing, and shall take effect as of the applicable Additional Closing Date with respect to any Additional Series D Investor which has duly executed the Deed of Adherence with the Company as of an Additional Closings, provided however that (1) in the event that any Series D Investor (including any Additional Series D Investor) fails to pay any portion of its Series D Investment Amount (as defined in the Purchase Agreement or as specified in the applicable Deed of Adherence, as the case may be) in full upon the applicable Closing and the Company has amended the register of members in accordance with Sections 2.4(i)(d) or 2.4(ii)(e) of the Purchase Agreement and/or the Memorandum and Articles to reflect the forfeiture of the Series D Preferred Shares of such Series D Investor corresponding to the unpaid Series D Investment Amount, then this Agreement shall have effect with respect to such Series D Investor only to the extent of its unforfeited Series D Preferred Shares, and (2) in the event that any Shareholder ceases to be a Shareholder of the Company, it shall no longer be bound by the provisions of this Agreement and such Shareholder’s name shall be removed from any list or register of members of the Company, provided that Sections 12.9 (Confidentiality), 12.10 (No use of Series D Investors’ Name or Logo), 12.11 (No Use of Series C Investors’ Name or Logo), 12.12 (No Use of Series B Investors’ Name or Logo), 12.13 (No Use of Series A-3 Investors’ Name or Logo), 12.14 (No Use of Series A-2 Investors’ Name or Logo), 13.5 (Governing Law) and 13.6 (Dispute Resolution) shall survive.

 

  (ii) This Agreement shall terminate upon mutual consent of all the Parties hereto. The provisions of Sections 7 (Preemptive Right), 8 (Information and Inspection Rights), 9 (Corporate Governance), 10 (Protective Provisions) and 11 (Drag-Along Rights) shall terminate on the consummation of a Qualified IPO. If this Agreement terminates, the Parties shall be released from their obligations under this Agreement, except in respect of any obligation stated, explicitly or otherwise, to continue to exist after the termination of this Agreement (including without limitation those under Section 2 through 6, Section 12 (Additional Covenants) and this Section 13). If any Party breaches this Agreement before the termination of this Agreement, it shall not be released from its obligations arising from such breach on termination.

 

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13.3 Further Assurances

Upon the terms and subject to the conditions herein, each of the Parties hereto agrees to use its reasonable best efforts to take or cause to be taken all action, to do or cause to be done, to execute such further instruments, and to assist and cooperate with the other Parties hereto in doing, all things necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement and, to the extent reasonably requested by another Party, to enforce rights and obligations pursuant hereto.

 

13.4 Assignments and Transfers; No Third Party Beneficiaries

Except as otherwise provided herein, this Agreement and the rights and obligations of the Parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal representatives, but shall not otherwise be for the benefit of any third party. Subject as otherwise provided herein, the rights of any Investor hereunder are assignable to any Person in connection with the transfer (which transfer does not breach any provision of the Series D Transaction Documents and any applicable Laws) of Equity Securities held by such Investor but only to the extent of such transfer, and any such transferee shall execute and deliver to the Company a Deed of Adherence in the form attached hereto as Exhibit A becoming a party hereto as a “Party,” a “Shareholder,” and an “Investor” hereunder and under the applicable Series D Transaction Documents, subject to the terms and conditions hereof and thereof. Subject to the foregoing, this Agreement and the rights and obligations of any Party hereunder shall not otherwise be assigned without the mutual written consent of the other Parties.

Notwithstanding any provision to the contrary in this Agreement, the Parties hereby acknowledge and agree that Padmasree shall be able to tender of any of her Series A-3 Preferred Shares from time to time for all or a portion of any amounts due to the Company pursuant to the Loan and Security Agreement.

 

13.5 Governing Law

This Agreement shall be governed by and construed under the Laws of Hong Kong, without regard to principles of conflict of laws thereunder.

 

13.6 Dispute Resolution.

 

  (i) Any dispute, controversy or claim (each, a “Dispute”) arising out of or relating to this Agreement, or the interpretation, breach, termination, validity or invalidity thereof, shall be referred to arbitration upon the demand of either party to the dispute with notice (the “Arbitration Notice”) to the other.

 

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  (ii) The Dispute shall be settled by arbitration in Hong Kong by the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules (the “HKIAC Rules”) in force when the Arbitration Notice is submitted in accordance with the HKIAC Rules. The arbitration tribunal shall consist of three (3) arbitrators to be appointed according to the HKIAC Rules.

 

  (iii) To the extent that the HKIAC Rules are in conflict with the provisions of this Section 13.6, the provisions of this Section 13.6 shall prevail.

 

  (iv) The arbitration shall be conducted in English. Each party to the arbitration shall cooperate with each other party to the arbitration in making full disclosure of and providing complete access to all information and documents requested by such other party in connection with such arbitral proceedings, subject only to any confidentiality obligations binding on such party.

 

  (v) The award of the arbitral tribunal shall be final and binding upon the parties thereto, and the prevailing party may apply to a court of competent jurisdiction for enforcement of such award.

 

  (vi) The arbitral tribunal shall decide any Dispute submitted by the parties to the arbitration strictly in accordance with the substantive Law of Hong Kong (without regard to principles of conflict of Laws thereunder) and shall not apply any other substantive Law.

 

  (vii) Any party to the Dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

 

  (viii) During the course of the arbitral tribunal’s adjudication of the Dispute, this Agreement shall continue to be performed except with respect to the part in dispute and under adjudication.

 

13.7 Notices

Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address of the relevant Party as shown on Schedule 2 (Address for Notices) (or at such other address as such Party may designate by fifteen (15) days’ advance written notice to the other Parties to this Agreement given in accordance with this Section 13.7). Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a written confirmation of delivery, and to have been effected at the earlier of (i) delivery (or when delivery is refused) and (ii) expiration of two (2) Business Days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid, if such day is a Business Day and if sent during normal business hours of the recipient, otherwise the next Business Day. Notwithstanding the foregoing, to the extent a “with a copy to” address is designated, notice must also be given to such address in the manner above for such notice, request, consent or other communication hereunder to be effective.

 

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13.8     Expenses

If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.

 

13.9     Rights Cumulative; Specific Performance

Each and all of the various rights, powers and remedies of a Party hereto will be considered to be cumulative with and in addition to any other rights, powers and remedies which such Party may have at Law or in equity in the event of the breach of any of the terms of this Agreement. The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof nor the waiver of any other right, power or remedy available to such Party. Without limiting the foregoing, the Parties hereto acknowledge and agree irreparable harm may occur for which money damages would not be an adequate remedy in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to apply for injunction to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement.

 

13.10   Successor Indemnification

If any Warrantor or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of such Warrantor assume the obligations of such Warrantor with respect to indemnification of the Investor Director as in effect immediately before such transaction, whether such obligations are contained in the Charter Documents, or elsewhere, as the case may be.

 

13.11   Severability

In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. If, however, any provision of this Agreement shall be invalid, illegal, or unenforceable under any such applicable Law in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform to the minimum requirements of such Law, or, if for any reason it is not deemed so modified, it shall be invalid, illegal, or unenforceable only to the extent of such invalidity, illegality, or limitation on enforceability without affecting the remaining provisions of this Agreement, or the validity, legality, or enforceability of such provision in any other jurisdiction.

 

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13.12   Amendments and Waivers

Any provision in this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only by the written consent of (i) the Company; (ii) the holders of at least a majority of the then issued and outstanding Series A-1 Preferred Shares; (iii) the holders of at least seventy-five percent (75%) of the then issued and outstanding Series A-2 Preferred Shares; (iv) the holders of at least a majority of the then issued and outstanding Series A-3 Preferred Shares; (v) the holders of at least seventy-five percent (75%) of the then issued and outstanding Series B Preferred Shares, (vi) the holders of at least seventy-five percent (75%) of the then issued and outstanding Series C Preferred Shares, , (vii) the holders of at least seventy-five percent (75%) of the then issued and outstanding Series D Preferred Shares, and (viii) Prime Hubs; provided, however, that no amendment or waiver shall be effective or enforceable in respect of any Ordinary Holder or a holder of Preferred Shares if such amendment or waiver affects such Ordinary Holder or such holder of Preferred Shares, respectively, materially and adversely differently from the other Ordinary Holders or the other holders of the Preferred Shares of the same class or series, respectively, unless such Ordinary Holder or such holder of Preferred Shares consents in writing to such amendment or waiver. Notwithstanding the foregoing, any Party may waive any of its/his rights hereunder by an instrument in writing signed by such Party without obtaining the consent of any other Parties. Any amendment or waiver effected in accordance with this Section 13.12 shall be binding upon all the Parties hereto.

 

13.13   No Waiver

Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a waiver of such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times.

 

13.14   Delays or Omissions

No delay or omission to exercise any right, power or remedy accruing to any Party under this Agreement, upon any breach or default of any other Party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Party of any breach or default under this Agreement, or any waiver on the part of any Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.

 

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13.15   No Presumption

The Parties acknowledge that any applicable Law that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived. If any claim is made by a Party relating to any conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because this Agreement was prepared by or at the request of any Party or its counsel.

 

13.16   Counterparts

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes of the effectiveness of this Agreement.

 

13.17   Entire Agreement

This Agreement (including the Exhibits hereto) constitutes the full and entire understanding and agreement among the Parties with regard to the subjects hereof, and supersedes all other agreements between or among any of the Parties with respect to the subject matter hereof. Without limiting the generality of the foregoing, this Agreement supersedes, in its entirety, the Prior Shareholders Agreement, which shall terminate and have no further force or effect whatsoever as of the date of effectiveness of this Agreement, and the Parties hereby irrevocably waive any and all rights that they may have against any other party under the Prior Shareholders Agreement in exchange for their rights hereunder.

 

13.18   Control

In the event of any conflict or inconsistency between any of the terms of this Agreement and any of the terms of any of the Charter Documents of any of the Group Companies and Prime Hubs, or in the event of any dispute related to any such Charter Document, the terms of this Agreement shall prevail in all respects as among all the Parties other than the Company, the Parties shall give full effect to and act in accordance with the provisions of this Agreement over the provisions of the Charter Documents, and the Parties hereto shall exercise all voting and other rights and powers (including to procure any required alteration to such Charter Documents to resolve such conflict or inconsistency) to make the provisions of this Agreement effective, and not to take any actions that impair any provisions in this Agreement.

 

13.19   Performance

The Ordinary Holders irrevocably agree to cause and guarantee the performance by each Warrantor of all of its respective covenants and obligations under this Agreement.

 

13.20   Aggregation of Shares

All Shares held or acquired by any Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

 

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13.21   Adjustments for Share Splits, Etc

Wherever in this Agreement there is a reference to a specific number of Shares of the Company, then, upon the occurrence of any subdivision, combination or share dividend of the relevant class or series of the Shares, the specific number of shares so referenced in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of Shares by such subdivision, combination or share dividend.

 

13.22   Grant of Proxy

Upon the failure of any Ordinary Holder to vote the Equity Securities of the Company held thereby, to implement the provisions of and to achieve the purposes of this Agreement, such Ordinary Holder hereby grants to a Person designated by the Company a proxy in all Equity Securities of the Company held by it/him to vote all such Equity Securities to implement the provisions of and to achieve the purposes of this Agreement.

 

13.23   Rights and Obligations of Holders of Preferred Shares

Under the Series D Transaction Documents, (i) the obligations of the holders of the Preferred Shares shall be several and not joint, (ii) the Series A-1 Preferred Shares, the Series A-2 Preferred Shares, and the Series A-3 Preferred Shares shall rank pari passu with each other, except as otherwise provided in the Series D Transaction Documents, (iii) the Series B Preferred Shares shall rank prior and in preference to the Series A Preferred Shares, except as otherwise provided in the Series D Transaction Documents, (iv) the Series C Preferred Shares shall rank prior and in preference to the Series B Preferred Shares and the Series A Preferred Shares, except as otherwise provided in the Series D Transaction Documents, and (v) the Series D Preferred Shares shall rank prior and in preference to the Series C Preferred Shares, the Series B Preferred Shares and the Series A Preferred Shares, except as otherwise provided in the Series D Transaction Documents.

 

13.24   Use of English Language

This Agreement has been executed and delivered in the English language. Any translation of this Agreement into another language shall have no interpretive effect. All documents or notices to be delivered pursuant to or in connection with this Agreement shall be in the English language or, if any such document or notice is not in the English language, accompanied by an English translation thereof, and the English language version of any such document or notice shall control for purposes thereof.

 

13.25   Replacement

The Parties agree that upon the Initial Closing, this Agreement shall supersede and replace the Prior Shareholders Agreement in its entirety, and the Prior Shareholders Agreement shall terminate and have no further force or effect as of the Initial Closing Date.

 

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13.26 Representations and Warranties

 

  (i) Each Party hereby represents and warrants to each other Party, as of the date hereof, and as of the effective date of this Agreement (with respect to an Additional Series D Investor, as of the Additional Closing Date), as follows:

 

  (1) such Party, if not a natural person, is duly organized, validly existing and in good standing under the applicable Law of its jurisdiction of organization/incorporation;

 

  (2) such Party is a natural person, or is a corporate body with the legal capacity, power, authority and right to execute, deliver and perform its obligations under this Agreement, and all actions on its part necessary for the authorization, execution, delivery of and the performance of all of its obligations under this Agreement have been taken;

 

  (3) this Agreement will when executed be a legal, valid and binding obligation, enforceable against it in accordance with its terms, except where such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally; and

 

  (4) the execution and delivery by such Party of this Agreement and the consummation by it of all the transactions contemplated hereunder do not (i) breach or constitute (or with notice or lapse of time or both constitute) a default under its constitutional documents, the Prior Shareholders Agreement or any material contract or agreement to which such Party is bound; and (iii) result in a violation or breach of or constitute (or with notice or lapse of time or both constitute) a default under any applicable Law by which such Party or any of its assets is bound.

 

13.27 Exclusion of Contracts (Rights of Third Parties) Ordinance

Save as otherwise expressly provided hereunder, a Person who is not a Party to this Agreement has no right under the Contracts (Rights of Third Parties) Ordinance (Chapter 623 of the Laws of Hong Kong ) to enforce this Agreement.

[The remainder of this page has been intentionally left blank.]

 

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IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

COMPANY:     NIO INC.
    By:  

/s/ QIN Lihong

    Name:   QIN Lihong LOGO
    Title:   Director

 

HK COMPANY:     NIO NEXTEV LIMITED
    By:  

/s/ QIN Lihong

    Name:   QIN Lihong LOGO
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

XPT:     XPT LIMITED  
    By:  

/s/ QIN Lihong

  LOGO
    Name:   QIN Lihong LOGO  
    Title:   Director  
XPT TECHNOLOGY:     XPT TECHNOLOGY LIMITED  
    By:  

/s/ QIN Lihong

  LOGO
    Name:   QIN Lihong LOGO  
    Title:   Director  
XPT US:     XPT INC.  
    By:   LOGO  
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

SHANGHAI NEXTEV:     NIO CO., LTD.  
    By:  

/s/ QIN Lihong

  LOGO
    Name:   QIN Lihong LOGO  
    Title:   Legal Representative  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

JIANGSU WEIRAN:     XPT (JIANGSU) INVESTMENT CO., LTD.  
    By:  

/s/ LI Bin

  LOGO
    Name:   LI Bin LOGO  
    Title:   Legal Representative  
SHANGHAI WEILAN:     SHANGHAI XPT TECHNOLOGY CO., LTD.  
    By:  

/s/ LI Bin

  LOGO
    Name:   LI Bin LOGO  
    Title:   Legal Representative  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

XPT NANJING TECHNOLOGY    

XPT (NANJING) E-POWERTRAIN TECHNOLOGY CO., LTD.

 
    By:   /s/ LI Bin   LOGO
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

XPT NANJING ENERGY    

XPT (NANJING) ENERGY STORAGE SYSTEM CO., LTD.

    By:   LOGO   LOGO
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

NIO TECHNOLOGY     NIO TECHNOLOGY CO., LTD.  
    By:  

/s/ QIN Lihong

  LOGO
    Name:   QIN Lihong LOGO  
    Title:   Legal Representative  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

NEXTEV USER    

NEXTEV USER ENTERPRISE LIMITED

 
    By:  

/s/ QIN Lihong

 
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

SHANGHAI AUTO DISTRIBUTION SHANGHAI NIO SALES AND SERVICE CO., LTD.

 

By:  

/s/ QIN Lihong                         

  LOGO
Name:  
Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

NEXTEV POWER     NEXTEV POWER EXPRESS LIMITED  
    By:  

/s/ QIN Lihong

 
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

HUBEI INVESTMENT     NIO ENERGY INVESTMENT (HUBEI) CO., LTD.
    By:   LOGO   LOGO
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

SHANGHAI ENERGY     SHANGHAI NIO ENERGY TECHNOLOGY CO., LTD.
    By:   LOGO   LOGO
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

WUHAN ENERGY     WUHAN NIO ENERGY CO., LTD.  
    By:  

/s/ QIN Lihong

  LOGO
    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

BEIJING LIBITE     BEIJING LIBITE AUTO TECHNOLOGY CO., LTD.
    By:  

/s/ QIN Lihong

  LOGO
    Name:   QIN Lihong LOGO  
    Title:   Legal Representative  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

NANJING WEILONG:     XTRONICS (Nanjing) Automotive Intelligent Technology Co., Ltd.
    By:   LOGO   LOGO
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

US COMPANY     NIO USA, INC.
    By:  

/s/ Padmasree Warrior

 
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

GERMAN COMPANY     NIO GMBH
    By:  

/s/ ZHANG Hui

    Name:   ZHANG Hui LOGO
    Title:   Managing Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

UK COMPANY     NIO NEXTEV (UK) LTD
    By:  

/s/ Hui Zhang

    Name:   Hui Zhang
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

PRIME HUBS    

PRIME HUBS LIMITED

 

    By:  

/s/ QIN Lihong

    Name:   QIN Lihong LOGO
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

FOUNDER    

LI BIN LOGO

 

    By:  

/s/ LI Bin

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR    

ORIGINAL WISH LIMITED

 

    By:  

/s/ LI Bin

    Name:   LI Bin LOGO
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR    

MOBIKE GLOBAL LTD.

 

    By:  

/s/ LI Bin

    Name:   LI Bin LOGO
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     ENERGY LEE LIMITED
    By:   LOGO
    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

HILLHOUSE NEV HOLDINGS LIMITED

 

    By:  

/s/ Meng Shan

    Name:   Meng Shan
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     SHUNWEI TMT II LIMITED
    By:  

/s/ Koh Tuck Lye

    Name:   Koh Tuck Lye
    Title:   Director
    SHUNWEI GROWTH II LIMITED
    By:  

/s/ Koh Tuck Lye

    Name:   Koh Tuck Lye
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

SMART GROUP GLOBAL LIMITED

 

    By:  

/s/ Lin Qiang Dong

    Name:   Lin Qiang Dong
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:         MOUNT PUTUO INVESTMENT LIMITED
    By:   LOGO
    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

SEQUOIA CAPITAL CHINA GF HOLDCO III-A, LTD.

 

    By:  

/s/ Ip Siu Wai Eva

    Name:   Ip Siu Wai Eva
    Title:   Authorized Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

JOY CAPITAL I, L.P.

 

    By:   Joy Capital I GP, L.P.
      its general partner
    By:   Joy Capital GP, Ltd.
      its general partner
    By:  

/s/ LIU ERHAI

    Name:   LIU ERHAI
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:      

PADMASREE WARRIOR

 

     

/s/ Padmasree Warrior

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

ANDERSON INVESTMENTS PTE. LTD.

 

    By:  

/s/ Rohit Sobti

    Name:   Rohit Sobti
    Title:   Authorized Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

TPG GROWTH III SF PTE. LTD.

 

    By:  

/s/ Hua Fung Teh

   

Name:

Title:

 

Hua Fung Teh

Authorised Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

BLUESTONE COMPANY LIMITED

 

    By:  

/s/ Tay Chee Keong Jeremiah Jeremy

    Name:   Tay Chee Keong Jeremiah Jeremy
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR  

MAGIC STONE ALTERNATIVE PRIVATE EQUITY FUND, L.P.

  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

ORIENT HONTAI LIMITED

 

    By:  

/s/ Tony Ma

    Name:   Tony Ma LOGO
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

GOLDEN BRICK CAPITAL PRIVATE EQUITY FUND II L.P.

 

    By:  

LOGO

 

   

Name:

Title:

 

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:         ULTIMATE LENOVO LIMITED
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

HH RSV-X HOLDINGS LIMITED

 

    By:  

/s/ Jennifer Neo

    Name:   Jennifer Neo
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

SCC GROWTH IV HOLDCO A, LTD.

 

    By:  

/s/ Ip Siu Wai Eva

    Name:   Ip Siu Wai Eva
    Title:   Authorized Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

PALACE INVESTMENTS PTE. LTD.

 

    By:  

/s/ Choun Chee Kong

    Name:   Choun Chee Kong
    Title:   Authorised signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     GRANDFIELD INVESTMENT LTD.
    By:  

/s/ Wong Kok Wai         06 NOV 2017

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:      
   

IDG CHINA VENTURE CAPITAL FUND IV L.P.

 

    By:   IDG China Venture Capital Fund IV Associates L.P.,
      its General Partner
    By:   IDG China Venture Capital Fund GP IV Associates Ltd.,
      its General Partner
    By:  

/s/ Chi Sing HO

    Name:   Chi Sing HO
    Title:   Authorized Signatory
    IDG CHINA IV INVESTORS L.P.
    By:   IDG China Venture Capital Fund GP IV Associates Ltd.,
      its General Partner
    By:  

/s/ Chi Sing HO

    Name:   Chi Sing HO
    Title:   Authorized Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     BRIGHT SKY II, L.P.
    By Bright Sky Partners Limited,
    its General Partner
    By:  

/s/ Wong Kok Wai         06 NOV 2017

    Name:   Wong Kok Wai
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:         LONG WINNER INVESTMENT LIMITED
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     BAIDU CAPITAL L.P.
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     WEST CITY ASIA LIMITED
    By:   LOGO
    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

TANZANITE GEM HOLDINGS LIMITED

 

    By:  

/s/ Steven Glenn

    Name:   Steven Glenn
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

HAIXIA NEV INTERNATIONAL LIMITED PARTNERSHIP (formerly known as HAIXIA NIO INTERNATIONAL LIMITED PARTNERSHIP)

 

     

For and on behalf of

Haixia NEV International Limited Partnership

    By:   LOGO
    Name:   Haixia Capital Management Ltd,
    Title:   Authorised Signatory of its General Partner Haixia NEV International Limited Partnership

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

HAITONG INTERNATIONAL INVESTMENT HOLDINGS LIMITED

 

    By:  

/s/ Xi DENG

    Name:   Xi DENG
    Title:   Managing Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   NEW MARGIN CAPITAL HONG KONG CO.,
  LIMITED  LOGO
  By:  

LOGO

 

  Name:  
  Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:      IMAGE FRAME INVESTMENT (HK) LIMITED
  By:   LOGO
  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:  

ZHIDE EV INVESTMENT LIMITED

  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:        CHINAEQUITY SMART TRAVEL CO., LTD.
  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:      TOTAL PRESTIGE INVESTMENT LIMITED
  By:  

/s/ Wong Kok Wai         06 NOV 2017

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   CYBER TYCOON LIMITED
  By:  

/s/ Chi Sing HO

  Name:   Chi Sing HO
  Title:   Authorized Signatory

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:      HONOR BEST INTERNATIONAL LIMITED
  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:  

CHAMPION ELITE GLOBAL LIMITED

LOGO LOGO

  By:  

/s/ Jenny Wenjie WU

  Name:   Jenny Wenjie WU
  Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:  

CHINA INDUSTRIAL INTERNATIONAL TRUST ASSET MANAGEMENT COMPANY LIMITED, (formerly known as CHINA INVESTMENT ASSET MANAGEMENT LIMITED)

LOGO

  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   HF HOLDINGS LIMITED
   

For and on behalf of

HF Holdings Limited

  By:  

LOGO Authorized Signature(s)

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   TEA LEAF LIMITED
  By:  

/s/ Karen Ellerbe

  Name:   Karen Ellerbe
  Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:  

BLISSFUL DAYS HOLDINGS LIMITED

LOGO

  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     GUANGFAXINDE CAPITAL MANAGEMENT LIMITED  LOGO
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     BLUEFUTURE FUND L.P.
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     UBS AG, LONDON BRANCH
    By:  

/s/ Saad Slaoui

    Name:   Saad Slaoui
    Title:   Managing Director
    By:  

/s/ David Innerdale

    Name:   David Innerdale
    Title:   Managing Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     KEEN EAGLE CAPITAL INVESTMENT LIMITED  LOGO
    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    

CHINA OCEANWIDE INTERNATIONAL ASSET MANAGEMENT LIMITED

LOGO

    By:  

LOGO

 

    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     CHINA MERCHANTS FORTUNE 100 ALTERNATIVE INVESTMENT SP  
    By:  

/s/ Bai Haifeng

  LOGO
    Name:   Bai Haifeng  
    Title:   CEO  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     MORESPARK LIMITED
    By:   LOGO
    Name:  
    Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     LEAP PROSPECT LIMITED
    By:  

/s/ Ling Kay Rodney Tsang

    Name:   Ling Kay Rodney Tsang
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     PV VISION LIMITED
    By:  

/s/ Ena Leung

    Name:   Ena Leung
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     SERENITY WL HOLDINGS LTD.
    By:  

/s/ Wang Chen

    Name:   Wang Chen
    Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

INVESTOR:

 

    SCOTTISH MORTGAGE INVESTMENT TRUST PLC.  
    By:  

/s/ Graham Laybourn

 
    Name:   Graham Laybourn  
    Title:   Partner of Baillie Gifford & Co, as agent for and on behalf of Scottish Mortgage Investment Trust plc  
    PACIFIC HORIZON INVESTMENT TRUST PLC.  
    By:  

/s/ Graham Laybourn

 
    Name:   Graham Laybourn  
    Title:   Partner of Baillie Gifford & Co, as agent for and on behalf of Pacific Horizon Investment Trust plc  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     MARIAD OPPORTUNITIES MASTER FUND LIMITED
    By:  

/s/ Scott A. Gaynor

 
    Name:   Scott A. Gaynor  
    Title:   Authorized Signatory  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     LONE CYPRESS LTD.
    By:  

/s/ Kerry A. Tyler

 
    Name:   Kerry A. Tyler  
    Title:   Authorized Signatory  
    LONE SPRUCE L.P.
    By:  

/s/ Kerry A. Tyler

 
    Name:   Kerry A. Tyler  
    Title:   Authorized Signatory  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     ULTRA RESULT HOLDINGS LIMITED
    By:  

LOGO

 

 
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     AL NAHDHA INVESTMENT LLC
    By:  

/s/ H.E. Saeed Eid Al Ghafli

 
    Name:   H.E. Saeed Eid Al Ghafli  
    Title:   Authorized Signatory  
    AL BEED GROUP  
    By:  

/s/ H.E. Saeed Eid Al Ghafli

 
    Name:   H.E. Saeed Eid Al Ghafli  
    Title:   Authorized Signatory  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     OLDBRIDGE INVEST LLC
    By:  

/s/ Galal Kulaib

 
    Name:   Galal Kulaib  
    Title:   Authorized Signatory  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     AC LIMITED
    By:  

/s/ Ossama Khoreibi

 
    Name:   Ossama Khoreibi  
    Title:   Director  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     BEST CASTLE LIMITED
    By:  

LOGO

 

 
    Name:    
    Title:    

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     HUBEI SCIENCE & TECHNOLOGY INVESTMENT GROUP (HONG KONG) COMPANY LIMITED  
    By:  

LOGO

 

 
    Name:   LOGO  
    Title:   Director of Company  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     WP NIO INVESTMENT PARTNERSHIP L.P.  
    By:  

/s/ Steven Glenn

 
    Name:   Steven Glenn  
    Title:   Authorized Signatory  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:     LEZMENIA ASSETS LIMITED
  By:  

LOGO

 

  Name:  
  Title:  
    LAPATHIA HOLDINGS LIMITED
  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   SILVER RIDGE FUND I LIMITED PARTNERSHIP
    For and on behalf of
    Silver Ridge Ventures Limited
  By:  

LOGO Authorized Signature(s)

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   THE MABEL CHAN 2012 FAMILY TRUST
  By:  

/s/ Ed Yiu-Cheong Chan

  Name:   Ed Yiu-Cheong Chan
  Title:   Trustee

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:       MAGIC STONE SPECIAL OPPORTUNITY FUND IV, L.P.
  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   MEGA TREASURE INVESTMENT LIMITED
  By:  

/s/ Wong Kok Wai         06 NOV 2017

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   JOY NEXT INVESTMENT MANAGEMENT LIMITED
  By:  

/s/ LIU ERHAI

  Name:   LIU ERHAI
  Title:   Director

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:    DIAMOND DIVISION LIMITED
  By:  

LOGO

 

  Name:  
  Title:  

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the date and year first above written.

 

INVESTOR:   HH DYU HOLDINGS LIMITED
  By:   

/s/ Meng Shan

  Name:    Meng Shan
  Title:    Director

 

 

Signature Page to Fifth Amended and Restated Shareholders’ Agreement - NIO INC.


SCHEDULE 1

LIST OF INVESTORS1

Part A1

 

1. ORIGINALWISH LIMITED, a business company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands (“Originalwish”);

 

2. MOBIKE GLOBAL LTD., a business company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands (“mobike Global”); and

 

3. ENERGY LEE LIMITED, a business company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands (“Energy”).

Part A2

 

4. HILLHOUSE NEV HOLDINGS LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

5. SHUNWEI TMT II LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Shunwei TMT”), and SHUNWEI GROWTH II LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Shunwei Growth”, together with Shunwei TMT, “Shunwei”);

 

6. SMART GROUP GLOBAL LIMITED, a business company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Smart Group”); and

 

7. MOUNT PUTUO INVESTMENT LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Mount Putuo”).

Part A3

 

8. SEQUOIA CAPITAL CHINA GF HOLDCO III-A, LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (“Sequoia”);

 

9. JOY CAPITAL I, L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands (“Joy Capital”); and

 

10. PADMASREE WARRIOR, a U.S. citizen whose passport number is 488781280 (“Padmasree”).

 

1 NTD: Pending company confirmation.

 

- 41 -


Part B

 

11. ANDERSON INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore (“Temasek”);

 

12. TPG GROWTH III SF PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore (“TPG”);

 

13. BLUESTONE COMPANY LIMITED, a company limited by shares duly incorporated and validly existing under the Laws of the Cayman Islands (“Bluestone”);

 

14. MAGIC STONE ALTERNATIVE PRIVATE EQUITY FUND, L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands(“Magic Stone”);

 

15. ORIENT HONTAI LIMITED, a business company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Orient Hontai”);

 

16. GOLDEN BRICK CAPITAL PRIVATE EQUITY FUND II L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands (“Golden Brick”);

 

17. ULTIMATE LENOVO LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Lenovo”);

 

18. HILLHOUSE NEV HOLDINGS LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

19. HH RSV-X HOLDINGS LIMITED, an exempted company with limited liability duly incorporated and validly existing under the Laws of the Cayman Islands;

 

20. SHUNWEI TMT II LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands, and SHUNWEI GROWTH II LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

21. MOUNT PUTUO INVESTMENT LIMITED, an exempted company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

22. SCC GROWTH IV HOLDCO A, LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (“SCC”);

 

23. JOY CAPITAL I, L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands;

 

24. PALACE INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore (“Palace”);

 

- 42 -


25. GRANDFIELD INVESTMENT LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (“Grandfield”);

 

26. IDG CHINA VENTURE CAPITAL FUND IV L.P. and IDG CHINA IV INVESTORS L.P., each an exempted limited partnership registered and validly existing under the Laws of the Cayman Islands;

 

27. BRIGHT SKY II, L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands (“Bright Sky”); and

 

28. LONG WINNER INVESTMENT LIMITED (遠宏投資有限公司 ), a limited company duly incorporated and validly existing under the Laws of Hong Kong.

Part C

 

29. BAIDU CAPITAL L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands (“Baidu Capital”);

 

30. WEST CITY ASIA LIMITED, a company limited by shares duly incorporated and validly existing under the Laws of the British Virgin Islands (“West City”);

 

31. TANZANITE GEM HOLDINGS LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“WP”);

 

32. HAIXIA NEV INTERNATIONAL LIMITED PARTNERSHIP (formerly known as HAIXIA NIO INTERNATIONAL LIMITED PARTNERSHIP), a limited partnership company duly incorporated and validly existing under the Laws of the Cayman Islands (“Haixia”);

 

33. HAITONG INTERNATIONAL INVESTMENT HOLDINGS LIMITED (formerly known as HAITONG INTERNATIONAL ALTERNATIVE INVESTMENT LIMITED), a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Haitong”);

 

34. NEW MARGIN CAPITAL HONG KONG CO., LIMITED (聯創資本(香港)有限公司), a limited liability company duly incorporated and validly existing under the Laws of Hong Kong (“New Margin Capital”);

 

35. IMAGE FRAME INVESTMENT (HK) LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong (“Image Frame”, with Mount Putuo, individually or collectively Tencent”);

 

36. ZHIDE EV INVESTMENT LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the Cayman Islands (“Zhide”);

 

37. CHINAEQUITY SMART TRAVEL CO., LTD., a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“ChinaEquity”);

 

- 43 -


38. PALACE INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore;

 

39. TOTAL PRESTIGE INVESTMENT LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the Cayman Islands (“Total Prestige”);

 

40. BRIGHT SKY II, L.P., an exempted limited partnership duly registered and validly existing under the Laws of the Cayman Islands;

 

41. TPG GROWTH III SF PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore;

 

42. BLUESTONE COMPANY LIMITED, a company limited by shares duly incorporated and validly existing under the Laws of the Cayman Islands;

 

43. IDG CHINA VENTURE CAPITAL FUND IV L.P. and IDG CHINA IV INVESTORS L.P., each an exempted limited partnership registered and validly existing under the Laws of the Cayman Islands, and CYBER TYCOON LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“IDG”);

 

44. HONOR BEST INTERNATIONAL LIMITED, a company with limited liability duly incorporated and validly existing under the Laws of the British Virgin Islands (“Honor Best”);

 

45. ANDERSON INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore;

 

46. ULTIMATE LENOVO LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

47. CHAMPION ELITE GLOBAL LIMITED (冠傑環球有限公司 ), a business company duly registered and validly existing under the Laws of the British Virgin Islands;

 

48. CHINA INDUSTRIAL INTERNATIONAL TRUST ASSET MANAGEMENT COMPANY LIMITED (formerly known as CHINA INVESTMENT ASSET MANAGEMENT LIMITED (兴业国信资产管理有限公司)) , a limited liability company duly registered and validly existing under the Laws of the PRC;

 

49. HF HOLDINGS LIMITED, a limited liability company under the laws of the British Virgin Islands;

 

50. TEA LEAF LIMITED, an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands;

 

- 44 -


51. BLISSFUL DAYS HOLDINGS LIMITED (福日控股有限公司 ), a business company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

52. GUANGFA XINDE CAPITAL MANAGEMENT LIMITED (广发信德资本管理有限公司), a corporation duly incorporated under and validly existing under the Laws of the British Virgin Islands;

 

53. BLUEFUTURE FUND L.P., an exempted limited partnership duly incorporated and validly existing under the Laws of the Cayman Islands;

 

54. UBS AG, LONDON BRANCH, a company duly incorporated and validly existing under the Laws of the Switzerland and registered as a branch in England and Wales Branch No. BR004507 at 5 Broadgate, London EC2M 2QS;

 

55. KEEN EAGLE CAPITAL INVESTMENT LIMITED (銳鷹創富有限公司), a limited liability company duly incorporated and validly existing under the Laws of Hong Kong;

 

56. CHINA OCEANWIDE INTERNATIONAL ASSET MANAGEMENT LIMITED (中泛國際資產管理有限公司 ), a BVI business company duly incorporated and validly existing under the Laws of the British Virgin Islands; and

 

57. CHINA MERCHANTS FORTUNE 100 ALTERNATIVE INVESTMENT SP, an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands.

Part D

 

58. IMAGE FRAME INVESTMENT (HK) LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong;

 

59. MORESPARK LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong (“Morespark”);

 

60. LEAP PROSPECT LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands (“Hammer Capital”);

 

60. PV VISION LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

61. SERENITY WL HOLDINGS LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands;

 

62. SCOTTISH MORTGAGE INVESTMENT TRUST PLC, a public limited company duly incorporated and validly existing under the Laws of the United Kingdom;

 

63. PACIFIC HORIZON INVESTMENT TRUST PLC, a public limited company duly incorporated and validly existing under the Laws of the United Kingdom;

 

- 45 -


64. MYRIAD OPPORTUNITIES MASTER FUND LIMITED, an exempted company duly incorporated and validly exiting under the Laws of the Cayman Islands;

 

65. LONE CYPRESS, LTD., an exempted limited liability company duly incorporated and validly existing under the Laws of the Cayman Islands;

 

66. LONE SPRUCE, L.P., a limited partnership duly incorporated and validly existing under the Laws of the State of Delaware, USA;

 

67. ULTRA RESULT HOLDINGS LIMITED; a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

68. AL NAHDHA INVESTMENT LLC, a limited liability company duly incorporated and validly existing under the Laws of United Arab Emirates;

 

69. AL BEED GROUP, an establishment duly incorporated and validly existing under the Laws of United Arab Emirates;

 

70. OLDBRIDGE INVEST L.L.C., a limited liability company duly incorporated and validly existing under the Laws of United Arab Emirates;

 

71. AC LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Dubai International Financial Centre;

 

72. BEST CASTLE LIMITED, an exempted Company duly incorporated and validly exiting under the Laws of the Cayman Islands;

 

73. HUBEI SCIENCE & TECHNOLOGY INVESTMENT GROUP (HONG KONG) COMPANY LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong;

 

74. WP NIO INVESTMENT PARTNERSHIP L.P., a limited partnership duly incorporated and validly existing under the Laws of the Cayman Islands;

 

75. LEZMENIA ASSETS LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

76. LAPATHIA HOLDINGS LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Cyprus;

 

77. SILVER RIDGE FUND I LIMITED PARTNERSHIP, a limited partnership duly incorporated and validly existing under the Laws of the Cayman Islands;

 

78. THE MABEL CHAN 2012 FAMILY TRUST, a trust duly governed by the laws of the State of New York, USA;

 

79. MAGIC STONE SPECIAL OPPORTUNITY FUND IV L.P., an exempted limited partnership duly incorporated and validly existing under the Laws of the Cayman Islands;

 

- 46 -


80. MEGA TREASURE INVESTMENT LIMITED, an exempted company duly incorporated and validly exiting under the Laws of the Cayman Islands;

 

81. TANZANITE GEM HOLDINGS LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

82. SCC GROWTH IV HOLDCO A, LTD., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (“SCC”);

 

83. JOY NEXT INVESTMENT MANAGEMENT LIMITED, a limited liability company duly registered and validly existing under the Laws of Hong Kong;

 

84. ANDERSON INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore;

 

85. TPG GROWTH III SF PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore;

 

86. BLUESTONE COMPANY LIMITED, a company limited by shares duly incorporated and validly existing under the Laws of the Cayman Islands;

 

87. BRIGHT SKY II, L.P., an exempted company duly incorporated and validly exiting under the Laws of the Cayman Islands;

 

88. DIAMOND DIVISION LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

89. WEST CITY ASIA LIMITED, a limited liability company duly incorporated and validly existing under the Laws of the British Virgin Islands;

 

90. HAIXIA NEV INTERNATIONAL LIMITED PARTNERSHIP, a limited partnership company duly incorporated and validly existing under the Laws of the Cayman Islands;

 

92. KEEN EAGLE CAPITAL INVESTMENT LIMITED, a limited liability company duly incorporated and validly existing under the Laws of Hong Kong;

 

93. PALACE INVESTMENTS PTE. LTD., a private company limited by shares duly incorporated and validly existing under the Laws of Republic of Singapore; and

 

94. HH DYU Holdings Limited, an exempted company with limited liability duly incorporated and validly existing under the Laws of the Cayman Islands (collectively with Hillhouse NEV Holdings Limited and HH RSV-X Holdings Limited, “Hillhouse”).

 

- 47 -


SCHEDULE 2

ADDRESS FOR NOTICES

 

If to the Group Companies:
Address:    20th Building, 56 An Tuo Road, AnTing Town, JiaDing, Shanghai, PRC
Attn:    Mr. WANG Dongning (汪冬宁)
Fax:   
Email:    nick.wang@nio.com
If to Founder Vehicles:
Address:   

Floor 13-14, Building No.1, Cheng Ying Center, 5 Laiguangying West Road, Chaoyang District, Beijing, PRC

(中国北京市朝阳区来广营西路 5 号院诚 盈中心 1 号楼 13-14 )

Attn:    Mr. LI Bin
Fax:   
Email:    william.li@nextev.com
If to Founder:   
Address:   

Floor 13-14, Building No.1, Cheng Ying Center, 5 Laiguangying West Road, Chaoyang District, Beijing, PRC

(中国北京市朝阳区来广营西路 5 号院诚 盈中心 1 号楼 13-14 )

Attn:    Mr. LI Bin
Fax:   
Email:    william.li@nextev.com
If to Prime Hubs:
Address:   

Floor 13-14, Building No.1, Cheng Ying Center, 5 Laiguangying West Road, Chaoyang District, Beijing, PRC

(中国北京市朝阳区来广营西路 5 号院诚 盈中心 1 号楼 13-14 )

Attn:    Heather DIWU (第五蕙)
Fax:   
Email:    heather.diwu@nio.com
If to Energy:   
Address:   

Floor 13-14, Building No.1, Cheng Ying Center, 5 Laiguangying West Road, Chaoyang District, Beijing, PRC

(中国北京市朝阳区来广营西路 5 号院诚 盈中心 1 号楼 13-14 )

Attn:    Mr. LI Xiang
Fax:   
Email:    lixiang@autohome.com.cn

 

- 48 -


If to Hillhouse:
Address:    Floor 28, Building B, PingAn International Financial Center, 3 Xinyuannan Road, Chaoyang District, Beijing 100027, PRC
Fax:    +86 (10) 5952-0882
Attention:    Luke LI
Email:    lli@hillhousecap.com
With a copy to:
Address:    Suite 1608, One Exchange Square, 8 Connaught Place, Central, Hong Kong
Tel:    +852 2179-1927
Fax:    +852 2179-1900
Attention:    Mr. Adam HORNUNG
Email:    legal@hillhousecap.com
If to Shunwei:   
Address:    P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Attention:    Mr. Tuck Lye Koh (许达来)
Email:    tlkoh@shunwei.com
With a copy to:
Address:    Unit 1309A, 13/F, Cable TV Tower, No. 9 Hoi Shing Road, Tsuen Wan, N.T., Hong Kong
Tel:    +852 24050088
Fax:    +852 24050003
Email:    tlkoh@shunwei.com
Attention:    Mr. Tuck Lye Koh (许达来)
If to Tencent:   
Address:    Tencent Building, Keji Zhongyi Avenue, Hi-tech Park, Nanshan District Shenzhen 518057, PRC
Attention:    Compliance and Transactions Department
Email:    legalnotice@tencent.com
with a copy to:   
Address:    Tencent Building, Keji Zhongyi Avenue, Hi-tech Park, Nanshan District, Shenzhen 518057, PRC
Attention:    Mergers and Acquisitions Department
Email:    PD_Support@tencent.com
If to Smart Group:
Address:    Building 18, Kechuang No.11 Street, Yizhuang Economic Development Zone, Daxing District, Beijing, PRC
Tel:    (86 10) 58955998
Fax:   
Attention:    Nancy
Email:    nancy@jd.com

 

- 49 -


with a copy to:   
Attention:    Xiaohong Miao
Email:    mxh@jd.com
Tel:    (86 10) 58955998
If to Sequoia or SCC:
Address:    Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands, c/o Suite 3613, 36/F, Two Pacific Place, 88 Queensway, Hong Kong
Tel:    +852 2501 8989
Fax:    +852 2501 5249
Attention:    Ip Siu Wai Eva / Ian Qian
Email:    eip@sequoiacap.com, iqian@sequoiacap.com
If to Joy Capital:
Address:    1501 Tower B, Greenland Center, No.4 Wangjing Dongyuan, Chaoyang District, Beijing
Tel:    (86 10) 52388085
Fax:    (86 10) 52388090
Attention:    Angela Lin
Email:    linlin@joycapital.com.cn
If to Padmasree Warrior:
Address:    2950 Alexis Drive Palo Alto, CA 94304
Tel:    +1(408) 386 7960 (Cell)
   +1(650) 209 5705 (Home)
Email:    padmasree.warrior@gmail.com
If to Temasek:
Address:    60B Orchard Road, #06-18 Tower 2, The Atrium@Orchard, Singapore 238891
Tel:   
Fax:   
Attention:    Wu Hai
Email:    wuhai@temasek
If to TPG:   
Address:    TPG Growth III SF Pte. Ltd., 80 Raffles Place, #15-01 UOB Plaza 1, Singapore 048624
Tel:    +65 6390 5000
Fax:    +65 6390 5001
Attention:    Hua Fung Teh
Email:    HTeh@tpg.com

 

- 50 -


With a copy to:
TPG Global, LLC
Address:    301 Commerce Street, Suite 3300 Fort Worth, TX 76102, U.S.A.
Tel:    +1 415 743 1532
Fax:    +1 415 438 1349
Attention:    Legal Department
Email:    tpglegaldepartment@tpg.com
If to Bluestone:
Address:    Suites 203-205, Winland International Finance Center, No. 7 Financial Street, Beijing, China
Tel:   
Fax:   
Attention:    Yi CHEN
Email:    simon.chen@hopucap.com
If to Magic Stone:
Address:    D36, King’s Garden, No.18 Xiaoyun Road, Chaoyang District, Beijing, P.R. China
Tel:   
Fax:    +86 (10) 85187755
Attention:    Zeng Yu
Email:    jennyzeng@msainvest.com
If to Orient Hontai:
Address:    701, 7/F, North Block C, Raycom Infotech Park, No. 2 Science Institution South Road, Haidian District, Beijing, China
Tel:    +86 150 1138 5037
Fax:    +86 (10) 8286 2988-927
Attention:    Eric Zhao/Han Zhang
Email:    eric.zhao@hontaicapital.com/Han.zhang@hontaicapital.com
If to Golden Brick:
Address:    c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands
Tel:   
Fax:    (86 10) 5735 1999
Attention:    Malcolm Ko
Email:    malcolmko@ceeholdings.com

 

- 51 -


If to Lenovo:   
Address:    6th Floor, Tower A, #6, Shangdi Road West, Haidian District, Beijing Tel:
Fax:   
Attention:    Ricky Chen
Email:    chenbo10@lenovo.com
If to Palace:   
Address:    60B Orchard Road, #06-18 Tower 2, The Atrium@Orchard, Singapore 238891
Tel:   
Fax:   
Attention:    Song Junhe, Pavcap Ops, Pavcap Legal
Email:    junhe@pavcap.com.sg, ops@pavcap.com.sg, legal@pavcap.com.sg
If to Grandfield or Bright Sky or Total Prestige:
Address:    190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands
Tel:   
Fax:   
Attention:   
With a copy to:
Redview Advisors (HK) Limited
Address:    Suite 1702-03, One Exchange Square, 8 Connaught Place, Central, Hong Kong
Tel:    +852 2801 6988
Fax:    +852 28014882
Attention:    Director
If to IDG:   
Address:    c/o IDG Capital Management (HK) Ltd., Unit 5505, 55/F., The Center 99 Queen’s Road, Central, Hong Kong
Tel:   
Fax:    +852 2529 1619
Attention:    Chi Sing HO
Email:   
With a copy to:
Address:    Floor 6, Tower A, COFCO Plaza, 8 Jianguomennei Dajie, Beijing, 100005, P.R. China
Fax:    +86 (10) 8512 0225
Attention:    Mr. Rui Guo
If to Long Winner:
Address:    2508, Hongkou SOHO, 575 Wusong Road, Hongkou Area, Shanghai, China, 200080 / 上海市虹口区吴淞路 575 号虹口 SOHO 2508,邮编 200080
Fax:    +86 (21) 6127 9989
Attention:    John Y Hsin
Email:    jhsin@huaxing.com

 

- 52 -


If to Baidu Capital:
Address:    上海市黄浦区马当路 388 SOHO 复兴广场 A 2705
Tel:   
Fax:   
Attention:    Jenny Wenjie WU
Email:    jennywu@baidu-cap.com
If to West City:
Address:    Unit 908. Level 9, Cyberport 2, 100 Cyberport Road, Hong Kong (香港数码 港道 100 号数码港 2 9 908 )
Tel:    +852 2866 3088
Fax:    +852 2866 2966
Attention:    Xin Xu / Rong Zhu
Email:    kathyxu@capitaltoday.com / jasonzhu@capitaltoday.com
If to WP:   
Address:    c/o Warburg Pincus LLC, 450 Lexington Avenue, New York, NY 10017, USA
Tel:   
Fax:   
Attention:    Steven G. Glenn/David J. Sreter/Tara E. O’Neill
Email:   
With a copy to:
Warburg Pincus Asia LLC
Address:    Suite 6703, Two International Finance Centre, 8 Finance Street, Hong Kong
Tel:   
Fax:    +852 2521 3869
Attention:    Julian Cheng and Andrew Chan
Email:    julian.cheng@warburgpincus.com/andrew.chan@warburgpincus.com
If to Haixia:   
Address:    Floor 22, East Wing, D Building, Qinghuatongfang Technology Plaza,No.1 Wangzhuang Road, Haidian District, Beijing (北京市海淀区王庄路一号,清 华同方科技广场 D 座东楼 22 )
Tel:    +86 (10) 82366710
Fax:    +86 (10) 62366718
Attention:    张明义
Email:    zhangmingyi@haixiaasset.com

 

- 53 -


If to Haitong:   
Address:    18/F, Li Po Chun Chambers, 189 Des Voeux Road Central, Hong Kong
Tel:    +852 2801 2687
Fax:    +852 3926 8907
Attention:    Luxi Wei
Email:    l.wei@htisec.com
If to New Margin Capital:
Address:    北京市朝阳区望京东 4 区绿地中心 D 座绿地中国锦大厦 16 1601(Unit 1601-1, Greenland China Jin Building, Hongtai East Street, Wangjing East Garden 4th District, Chaoyang District, Beijing 100102)
Tel:   
Fax:    +86 (10) 65280062
Attention:    Mr. Tian
Email:    zhangyu@newmargin.cn, richardtian@newmargin.cn
If to Zhide:   
Address:    32nd Floor, Azia Center,1233 Lujiazui Ring Road, Shanghai, P.R. China
Tel:   
Fax:    +86 (21) 5888 0598
Attention:    Yuan Shitao
Email:    Shitao.yuan@cicc.com.cn
If to ChinaEquity:
Address:    3rd Floor, Tower C, Shoukai Xingfu Square, Xindong Road, Chaoyang District, Beijing 100027, China
Tel:    +86 (10) 8555 0508
Fax:    +86 (10) 8555 0509
Attention:   

John Liu ( )

Email:    johnliu@chinaequity.net
If to Honor Best:
Address:    Room 904, Tower E1, Oriental Plaza, No.1 East Chang’an Avenue, Dongcheng District, Beijing, PRC
Tel:   
Fax:    +86 10 85188718
Attention:    CHAI Hua
Email:    hua.chai@everbright-idg.com
If to Champion Elite:
Address:    Room 2705, 17F, 388 Madang Rd, Shanghai
Tel:    +86 21 8036 1199
Fax:    +86 21 8036 1199
Attention:    Jenny Wenjie Wu
Email:    jennywu@baiducapital.com

 

- 54 -


If to China Industrial International Trust Asset Management (China Investment Asset Management):
Address:    35/F, One Business Center, 68 Yin Cheng Zhong Road, Pudong District, Shanghai
Tel:    +86 (021) 3829 6250
Fax:    +86 (021) 3860 1997
Attention:    Zou Likun
Email:    zoulk@ciit.com.cn
If to HF:   
Address:   
Tel:   
Fax:   
Attention:    Xia Wang/Pu Wang
Email:    wangxia@hanfor.cn/wangpu@hanfor.cn
If to Tea Leaf:
Address:    c/o Walkers Fiduciary Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands
Tel:    +1 345 814 7600
Fax:   
Attention:    Directors
Email:    fiduciary@walkersglobal.com
If to Blissful Days:
Address:   
Tel:   
Fax:   
Attention:    Mr. Zhao
Email:    366128798@qq.com
If to Guangfa Xinde:
Address:    16/F Metro Plaza.183 North Tianhe Rd, Guangzhou, P.R. China
Tel:    +86 20 8755 5888-6362
Fax:    +86 20 8755 3363-6362
Attention:    Liang Chen
Email:    xdchenl@gf.com.cn
If to Bluefuture:
Address:   
Tel:   
Fax:   
Attention:    Rong Xiao
Email:    xiaor@bothwealth.com

 

- 55 -


If to UBS:   
Address:    UBS AG, 5 Broadgate, London EC2M 2QS
Tel:    +852 2971 8888
Fax:    +852 2868 1510
Attention:    Adrian Ding/John Zhai/Simon Lam
Email:    ol-ccs+-project-newton@ubs.com
If to Keen Eagle:
Address:   
Tel:   
Fax:    +86 (021) 6226 2075
Attention:    Yuan Yao
Email:    yaoyuan@cdb-pe.cn
If to China Oceanwide:
Address:   
Tel:   
Fax:   
Attention:    Yue Yuanyuan
Email:    yueyuanyuan@fhkg.com
If to China Merchants:
Address:    Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands
Tel:    +852 3628 2302
Fax:    +852 3582 3371
Attention:    Gao Ting
Email:    gaot@cmfchina.com
If to Hammer Capital:
Address:    Room 1803, Zhongshen International Building, Songyuan Road, Luohu District, Shenzhen 518001
Tel:    +86 158 1870 6677
Fax:   
Attention:    Yu Bai/Amanda Chau
Email: Amanda.chau@hammercaptial.co
If to PV Vision Limited:
Address:    48/F, China World Tower 3, No. 1 Jian Guo Men Wai Avenue, Beijing, China
Tel:    +86 (10) 8559 8918
Fax:   
Attention:    Michael Wang
Email:    Michael.Wang@primavera-capital.com

 

- 56 -


With a copy to:
Attention:    Jimmy Guo/Edward Han
Email:    Jimmy.Guo@primavera-capital.com/Edward.Han@primavera-capital.com
If to Serenity WL Holdings Ltd.:
Address:    c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, Cayman Islands, KY1-1104
Tel:    +86-21-6288-1001
Fax:   
Attention:    Wang Chen
Email:    wchen@serenitycap.com
If to Scottish Mortgage Investment Trust PLC:
Address:    Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Tel:   
Fax:   
Attention:    Peter Singlehurst, Linda Lin, Ewan Markson-Brown, Keith Borrows and Christopher Smith
Email:    peter.singlehurst@bailliegifford.com, linda.lin@bailliegifford.com, ewan.markson-brown@bailliegifford.com, keith.borrows@bailliegifford.com, christopher.smith@bailliegifford.com
If to Pacific Horizon Investment Trust PLC:
Address:    Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN
Tel:   
Fax:   
Attention:    Peter Singlehurst, Linda Lin, Ewan Markson-Brown, Keith Borrows and Christopher Smith
Email:    peter.singlehurst@bailliegifford.com, linda.lin@bailliegifford.com, ewan.markson-brown@bailliegifford.com, keith.borrows@bailliegifford.com, christopher.smith@bailliegifford.com
If to Myriad Opportunities Master Fund Limited:
Address:    15/F, Agricultural Bank of China Tower, 50 Connaught Road Central, Central, Hong Kong
Tel:    +852 3664 7889
Fax:    +852 9387 5420
Attention:    Scott Gaynor
Email:    Scott@myriadasset.com
If to Lone Cypress, Ltd./Lone Spruce, L.P.:
Address:    Two Greenwich Plaza, Greenwich, CT 06830
Tel:   
Fax:   
Attention:    COO/CFO
Email:    kt@lpcap.com/mm@lpcap.com

 

- 57 -


If to Ultra Result Holdings Limited:
Address:    37/F, Bank of China Tower, 1 Garden Road, Hong Kong
Tel:    +852 3406 8682
Fax:   
Attention:    Eric Dong
Email:    eric.dong@chinaamc.com
If to Al Nahdha Invetment LLC:
Address:   
Tel:   
Fax:   
Attention:    Amer Khan/Junaid Sukhera
Email:    amer@alnahdhainv.ae/junaid@alnahdhainv.ae
If to Al Beed Group:
Address:   
Tel:   
Fax:   
Attention:    Amer Khan/Al Hadi
Email:    amer@alnahdhainv.ae/junaid@alnahdhainv.ae
If to Oldbridge Invest LLC
Address:   
Tel:   
Fax:   
Attention:    Galal Kulaib
Email:    galal@oldbridge.ae
If to AC Limited:
Address:    Gate Precinct Building 5, Level 6, Suite 607B, DIFC, P.O. Box 116020, Dubai, U.A.E.
Tel:    +971 4 455 9500
Fax:    +971 4 455 9501
Attention:    Michael
Email:    notices@aclimited.com
If to Best Castle Limited:
Address:    28/F, CITIC Tower, 1 Tim Mei Avenue, Central, Hong Kong
Tel:    +852 3710 6888 / +86 21 6170-5542
Fax:    +852 2104 6977
Attention:    Vicki Hui / Liyang Zhang / Dixon Ng
Email:    vickihui@citicicapital.com/liyangzhang@citiccapital.com /dixonng@citiccapital.com

 

- 58 -


If to Hube Science & Technology Investment Group (Hong Kong) Company Limited:
Address:    Room 1802, Dominton Centre, 43-59 Queen’s Road East, HK
Tel:    +86 (027) 8770 5403
Fax:   
Attention:    Qing Shao
Email:    sq@whovii.com
If to WP NIO Investment Partnership L.P.:
Address:    450 Lexington Avenue, New York, NY 10017
Tel:   
Fax:   
Attention:    Steven Glenn
Email:   
If to Lezmenia Assets/Lapathia Holdings:
Address:    Russia-China Investment Fund, 819-821 Winland International Finance Center, 7 Financial St., Xicheng District, Beijing 100033, China
Tel:   
Fax:    +86 10 57629111
Attention:    Legal Department
Email:    xiaoming.lai@rcif.com, shengwei.xu@rcif.com, zhen.lin@rcif.com
And   
Address:    Russia-China Investment Fund Naberezhnaya Tower, Presnenskaya nab. 10, Block B, floor 6 Moscow, Russia 123317
Tel:   
Fax:    +7 (495) 230-05-56
Attention:    Legal Department
Email:    stanislav.song@rcif.com, vladislav.sidorov@rcif.com, nina.bystrova@rcif.com
With a copy to:
Address:    ThemisServ Ltd, 16, Kyriakos Matsis Avenue, Eagle House, 5thFloor, Ayioi Omoloyites, 1082 Nicosia, Cyprus
Tel:   
Fax:   
Attention:    Despo Efstathiou, Phivos Pelides
Email:    defstathiou@themisserv.com, ppelides@cypruslaw.com.cy

 

- 59 -


If to Silver Ridge Fund I limited Partnership:
Address:    Unit 511, Section B, Building No. 4, Software Industry Base, Nanshan District, Shenzhen, China
Tel:    +86 (755) 82575570
Fax:   
Attention:    Tingting Xiong
Email:    Xiongtingting@silver-ridgecapital.com
If to the Mabel Chan 2012 Family Trust:
Address:    4/F, Catalina Mansions, 98 MacDonnell Road, Mid-Levels, Hong Kong
Tel:    +852 9152 8339, +852 9540 2077; +852 2849 6188
Fax:   
Attention:    Ed Yiu-Cheong Chan
Email:    edchan2011@gmail.com, mabeled1987@gmail.com
If to Magic Stone Special Opportunity Fund IV L.P.:
Address:   
Tel:   
Fax:   
Attention:    Ben Harburg
Email:    Ben.harburg@msainvest.com
If to Mega Treasure Investment Limited:
Address:    190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands
Tel:   
Fax:   
Attention:    Xiaohuan Liu
Email:    liuxh@nhfund.com
If to Joy Next Investment Management Limited:
Address:    1501 Tower B, Greenland Center, No.4 Wangjing Dongyuan, Chaoyang District, Beijing
Tel:    (86 10) 52388085
Fax:    (86 10) 52388090
Attention:    Angela Lin
Email:    linlin@joycapital.com.cn
If to Diamond Division:
Address:    2508, Hongkou SOHO, 575 Wusong Road, Hongkou Area, Shanghai, China, 200080 / 上海市虹口区吴淞路 575 号虹口 SOHO 2508,邮编 200080
Tel:   
Fax:   
Attention:    Lu ZHAO
Email:    luzhao@huaxing.com

 

- 60 -


EXHIBIT A

FORM OF DEED OF ADHERENCE

This Deed of Adherence (this “Deed”) is entered into on [•], by and between the following parties:

 

1. NIO INC., an exempted company duly incorporated and validly existing under the Laws of the Cayman Islands (the “Company”); and

 

2. [New Shareholder], [a [ ] company duly incorporated] / [a [ ] limited partnership duly registered] and validly existing under the Laws of [ ] / [ ] citizen whose passport number is [    ] (the “New Shareholder”).

RECITALS

 

(A) [On [•], the Company, certain Series [A-1/A-2/A-3/B/C/D] Investors, and certain subsidiaries and affiliates of the Company entered into a Series [A-1/A-2/A-3/B/C/D] Preferred Share Purchase Agreement (the “Purchase Agreement”) in connection with the issue and sales of the Series [A-1/A-2/A-3/B/C/D] Preferred Shares of the Company.] On [•], 2017, the Company, the shareholders of the Company and certain subsidiaries and affiliates of the Company entered into the Fifth Amended and Restated Shareholders Agreement and the Fifth Amended and Restated Right of First Refusal & Co-Sale Agreement (collectively, and together with any amendments and supplements thereto from time to time, the “Shareholder Documents”), which set forth the rights and obligations regarding the corporate governance of the Company, the transfer of the shares of the Company and certain other rights and obligations of the parties as set forth herein. On [•], the Company adopted the Tenth Amended and Restated Memorandum of Association and the Ninth Amended and Restated Articles of Association (together with any amendments and supplements thereto from time to time, the “M&A”);

 

(B) [The New Shareholder agrees to participate in the Additional Closing permitted under [Section 2.4(ii)] of the Purchase Agreement.] [Subject to the terms and conditions of the Purchase Agreement,] The New Shareholder agrees to [subscribe for / be allotted / have transferred to him/her/it] a total of [ ] [Series A-1/Series A-2/Series A-3 Preferred Shares / Series B Preferred Shares / Series C Preferred Shares / Series D Preferred Shares Ordinary Shares] (the “Shares”) of the Company for an aggregate Series A/B/C/D Investment Amount of US$[ ] [at the Additional Closing] / on [•];

 

(C) [Pursuant to [Section 2.4(ii)] of the Purchase Agreement,] The New Shareholder agrees to become a party to and be bound by the terms of [the Purchase Agreement,] the Shareholder Documents (as a party thereto) and the M&A by executing and delivering this Deed; and

 

(D) The Company enters into this Deed on behalf of itself and as agent for all other persons who are at present or who may hereafter become bound by [the Purchase Agreement,] the Shareholder Documents and the M&A (including the existing Shareholders).

 

- 61 -


THIS DEED WITNESSES as follows:

 

1. DEFINED TERMS AND CONSTRUCTION

 

1.1 In this Deed, except as the context may otherwise require, all words and expressions defined in [the Purchase Agreement,] the Shareholder Documents and the M&A shall have the same meanings when used herein.

 

1.2 The rules of construction of [the Purchase Agreement,] the Shareholder Documents and the M&A will apply as if incorporated in this Deed.

 

1.3 This Deed shall be incorporated into [the Purchase Agreement and] the Shareholder Documents as if expressly incorporated into [the Purchase Agreement and] the Shareholder Documents.

 

1.4 [Immediately after the Additional Closing and subject to the terms and conditions of the Purchase Agreement, (1) Schedule I to the Purchase Agreement will be amended to list the New Shareholder, (2) the capitalization table listed in Schedule III to the Purchase Agreement shall be amended to reflect the change of shareholding structure of the Company upon the Additional Closing, and (3) the Company shall update its register of members to reflect the issuance of the Shares to the New Shareholders.]

 

2. UNDERTAKINGS

The New Shareholder confirms that [he/she/it] has received copies of [the Purchase Agreement,] the Shareholder Documents and the M&A, and fully understands and accepts the terms thereof. The New Shareholder hereby covenants and undertakes to the Company who is as trustee for all other persons who are at present or who may hereafter become bound by [the Purchase Agreement,] the Shareholder Documents and the M&A, and to the Company itself, that, upon completion of the [allotment/transfer] of the Shares and subject to [the Purchase Agreement and] the Shareholder Documents, the New Shareholder shall adhere to, observe, perform and be bound by all the duties, burdens and obligations, as provided under [the Purchase Agreement and] the Shareholder Documents to which [he/she/it] shall be a party and all documents expressed in writing to be supplemental or ancillary thereto, in relation to the Shares, and shall be deemed as a “Shareholder”, a “Party”, [an “Investor”], [a “Holder”], [a “Preferred Holder”], [a “Series A/Series B/Series C/Series D Holder”], and [a “Series A-1/Series A-2/Series A-3/Series B/Series C/Series D Investor]”, each as defined thereunder, in relation to the Shares, as if [he/she/it] had been an original party to [the Purchase Agreement and] the Shareholder Documents since the date thereof, and be bound by the M&A.

[If the New Shareholder is a natural person and is married on the date of this Deed, such New Shareholder’s spouse shall, concurrently with the execution of this Agreement by the parties hereto, execute and deliver to the Company a spousal consent in substantially the form of Annex A attached hereto (“Spousal Consent”). Notwithstanding the execution and delivery thereof, such Spousal Consent shall not be deemed to confer or convey to such New Shareholder’s spouse any rights in such New Shareholder’s Shares or other securities of the Company to be held by the New Shareholder from time to time that do not otherwise exist by operation of law or the agreement of the parties. If any New Shareholder marries (or remarries) after the date of this Deed, such New Shareholder shall, within 30 days thereafter, obtain his or her new spouse’s acknowledgement of, and consent to, the existence and binding effect of all restrictions contained in this Deed, [the Purchase Agreement and] the Shareholder Documents by causing such spouse to execute and deliver a Spousal Consent.]

 

- 62 -


For the purpose of the notices and communications required or permitted under [the Purchase Agreement and] the Shareholder Documents, the address of the New Shareholder is as follows, which shall be incorporated in Schedule 2 (Address for Notices) of each of the Shareholder Documents:

Address:

Tel:

Fax:

Attention:

Email:

 

3. ENFORCEABILITY AND GOVERNING LAW

Each existing Shareholder and the Company shall be entitled to enforce [the Purchase Agreement,] the Shareholder Documents and the M&A against the New Shareholder, and the New Shareholder shall be entitled to all rights and benefits pertaining to the Shares held by it (other than those that are non-assignable) as set forth in [the Purchase Agreement,] the Shareholder Documents and the M&A, in each case as if the New Shareholder had been an original party to [the Purchase Agreement and] the Shareholder Documents since the date thereof.

This Deed shall be governed by and construed in accordance with the laws of Hong Kong, except to the extent that the Companies Law of the Cayman Islands by its terms is applicable.

[Signature page follows]

 

- 63 -


IN WITNESS WHEREOF, this Deed of Adherence has been executed as a deed on the date first above written.

 

NIO INC.
By:  

                 

Name:
Title:  
Director
[NAME OF NEW SHAREHOLDER]
By:  

 

Name:
Title:

 

- 64 -


ANNEX A

FORM OF SPOUSAL CONSENT

I, [•], spouse of [•], have read and approve of [the Purchase Agreement] and the Shareholder Documents by and among the Company and the parties, including my spouse, listed therein. Capitalized terms used herein without definition shall have the meanings set forth in [the Purchase Agreement] and the Shareholder Documents.

I am aware that [the Purchase Agreement] and the Shareholder Documents contain provisions regarding (i) voting and transfer of shares, and (ii) certain rights of certain other holders of capital stock of the Company upon a sale, transfer, assignment, pledge, encumbrance or other disposition of capital stock which my spouse may own, including any interest I might have therein.

I hereby agree that my interest, if any, in any Shares, securities or other property subject to [the Purchase Agreement] and the Shareholder Documents shall be irrevocably bound by [the Purchase Agreement] and the Shareholder Documents. I further understand and agree that any community property interest I may have in such Shares, securities or other property shall be similarly bound by [the Purchase Agreement] and the Shareholder Documents.

I am aware that the legal, financial and related matters contained in [the Purchase Agreement] and the Shareholder Documents are complex and that I am free to seek independent professional guidance or counsel with respect to this Spousal Consent. I have either sought such guidance or counsel or determined, after reviewing [the Purchase Agreement] and the Shareholder Documents carefully, that I will waive such right.

Dated: [            ]

 

[Name of Spouse]
By:  

                     

 

- 1 -

EX-10.1

Exhibit 10.1

NEXTEV INC.

2015 STOCK INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

2. Definitions. The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

(a) “Administrator” means the Board or any of the Committees appointed by the Board to administer the Plan.

(b) “Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person, where “Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person.

(c) “Applicable Laws” means legal requirements relating to the Plan and the Awards under applicable laws, regulations, rules, federal securities laws, state corporate and securities laws, the rules of any applicable stock exchange or national market system, and the laws, regulations, orders or rules of any jurisdiction applicable to the Awards granted to residents therein or the Grantees receiving such Awards.

(d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

(e) “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Share, Restricted Share Unit or other right or benefit under the Plan.

(f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

(g) “Board” means the Board of Directors of the Company.


(h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and/or to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity (including without limitation of any non-competition obligations of Grantee); or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person, or any crime involving fraud, or misrepresentation or violation of applicable securities laws.

(i) “Change in Control” means (as determined by the Administrator acting reasonably) a change in ownership or control of the Company after the Registration Date effected through the direct or indirect acquisition by any Person or related group of Persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by an Affiliate of the Company) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Directors who are not Affiliates or associates of the offeror do not recommend such shareholders accept.

(j) “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

(k) “Company” means NEXTEV INC., an exempted company incorporated with limited liability under the laws of the Cayman Islands or any successor corporation that adopts the Plan in connection with a Corporate Transaction.

(l) “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as an Employee or Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(m) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.


(n) “Corporate Transaction” means (as determined by the Administrator acting reasonably) any of the following transactions:

(i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

(ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company and its Subsidiaries and Affiliates;

(iii) the complete liquidation or dissolution of the Company;

(iv) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the Ordinary Shares outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a Person or Persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

(v) acquisition in a single or series of related transactions by any Person or related group of Persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

(o) “Director” means a member of the Board or the board of directors of any Related Entity.

(p) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

(q) “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Ordinary Shares.


(r) “Drag-Along Event” means a Trade Sale of the Company (as defined in the M&A of the Company) at any time after March 18, 2021 (or other date as otherwise determined by the Company and the relevant shareholders and investors of the Company from time to time), as approved by the holders of at least 75% of the voting power of the then outstanding series A preferred shares of the Company (voting together as a single class and calculated on as-converted basis), which Trade Sale implies the valuation of the Company immediately prior to such offered Trade Sale of not less than US$3,000,000,000 (or other amount as otherwise determined by the Company and the relevant shareholders and investors of the Company from time to time).

(s) “Employee” means any person, including a Director, who is in the employment of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(u) “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows:

(i) If the Ordinary Shares are traded on a securities exchange, the value shall be deemed to be the security’s closing price on such exchange on the applicable valuation date, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Ordinary Shares are traded over-the-counter, the value shall be deemed to be the closing bid price on the applicable valuation date as reported in The Wall Street Journal or such other source as the Administrator deems reliable; and

(iii) In the absence of an established market for the Ordinary Shares of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith and, to the extent applicable, in compliance with Section 409A of the U.S. Code.

(v) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

(w) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities (or the securities of a successor corporation) to the general public pursuant to (a) a registration statement filed under the Securities Act of 1933, as amended, or (b) the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally recognized securities exchange.

(x) “Incentive Stock Option” shall mean a stock option granted pursuant to the Plan that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the U.S. Code.


(y) “M&A” means the currently effective memorandum and articles of association of the Company.

(z) “Ordinary Share” means the Company’s ordinary shares, par value US$0.00025 per share.

(aa) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan. Options granted to employees who are U.S. taxpayers may either qualify as Incentive Stock Options or as options that do not qualify as Incentive Stock Options.

(bb) “Parent” means any company (other than the Company) in an unbroken chain of companies ending with the Company, if each of the companies other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain. A company that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

(cc) “Person” means any individual, corporation, partnership, limited partnership, association, limited liability company, firm, trust, estate or other enterprise or entity

(dd) “Plan” means this 2015 Stock Incentive Plan.

(ee) “Registration Date” means the first to occur of (i) the closing of the IPO; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

(ff) “Related Entity” means any Parent or Subsidiary or Affiliate of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary or an Affiliate of the Company holds a substantial ownership interest, directly or indirectly.

(gg) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable share or stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

(hh) “Restricted Share” means a Share issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.


(ii) “Restricted Share Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

(jj) “SAR” means a share appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Ordinary Shares.

(kk) “Share” means an Ordinary Share of the Company.

(ll) “Spin-off Transaction” means a distribution by the Company to its shareholders of all or any portion of the securities of any Subsidiary of the Company.

(mm) “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company, if each of the companies other than the last company in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain, by equity ownership or by contract. A company that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

(nn) “U.S. Code” means the U.S. Internal Revenue Code of 1986, as amended.

3. Shares Subject to the Plan.

(a) Subject to the provisions of Section 11 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is 46,264,378 Shares . The Shares to be issued pursuant to Awards shall be authorized, but unissued, or reacquired Ordinary Shares. Subject to the provisions of Section 11 below, the maximum number of Shares which may be subject to Options granted as Incentive Stock Options is 46,264,378 Shares.

(b) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. To the extent not prohibited by the Applicable Law and the listing requirements of the applicable stock exchange or national market system on which the Ordinary Shares are traded, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.


4. Administration of the Plan.

(a) Plan Administrator.

(i) Administration. The Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in accordance with the Applicable Laws and the M&A. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more officers to grant such Awards and may limit such authority as the Board determines from time to time.

(ii) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

(b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

(i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

(ii) to determine whether and to what extent Awards are granted hereunder;

(iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions of any Award granted hereunder (including the vesting schedule set forth in the Notice of Stock Option Award);

(vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent;

(vii) to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan; and

(viii) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.


(c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or Employees of the Company or a Related Entity, members of the Board and any Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such Person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such Person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

5. Eligibility. Awards may be granted to Employees, Directors and Consultants.    An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.

6. Terms and Conditions of Awards.

(a) Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Shares, Restricted Share Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

(b) Designation of Award. Each Award shall be designated in the Award Agreement.

(c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. Each Award shall be subject to the terms of an Award Agreement approved by the Administrator and, if applicable, a subplan established pursuant to Section 25, which may provide that certain provisions of the Plan referenced in such Award Agreement or subplan shall not apply to such Award. The performance criteria established by the Administrator may include, without limitation, any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. Notwithstanding anything to the contrary provided hereof, to the extent permitted under Applicable Laws, the Administrator shall be entitled to require each Grantee to, as one precondition to being granted each Award, enter into a non-competition agreement with the Company or Related Entity, under which the Grantee shall be obligated to undertake certain non-competition obligations during the term of the employment with the Company or Related Entity and a certain reasonable period after the employment with the Company, and the Company shall have the right to waive Grantee’s such non-compete obligation upon its own discretion and decision, subject to the non-competition agreement.


(d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction.

(e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award (other than an Option held by a U.S. taxpayer), satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

(f) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

(g) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award, subject to compliance with the Applicable Laws. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

(h) Term of Award. The term of each Award shall be the term stated in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award. In the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock 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 the Company or any Subsidiary or Affiliate, the term of the Incentive Stock Option will not be longer than five years from the date of grant.


(i) Transferability of Awards. Subject to the Applicable Laws, Awards shall be transferable (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 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 Administrator.

(j) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator.

7. Award Exercise or Purchase Price, Consideration and Taxes.

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be determined by the Administrator, and in the case of Options or SARs granted to U.S. taxpayers, shall not be less than 100% of the Fair Market Value of a Share as of the date of grant. In addition, in the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock Option is granted, owns (or, pursuant to Section 424(d) of the U.S. Code, is deemed to own) Shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any Subsidiary or Affiliate, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(c), above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

(b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

(i) cash;

(ii) check;

(iii) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;


(iv) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, withholding of Shares subject to the Award having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

(v) with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

(vi) any combination of the foregoing methods of payment.

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other Person until such Grantee or other Person has made arrangements acceptable to the Administrator for the satisfaction of any income and employment tax withholding obligations under any Applicable Laws. The Grantee shall be responsible for all taxes associated with the receipt, vest, exercise, transfer and disposal of the Awards and the Shares. Upon exercise of an Award, the Company and/or the Related Entity which is an employer of the Grantee shall have the right to withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

8. Exercise of Award.

(a) Procedure for Exercise; Rights as a Shareholder.

(i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

(ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the Person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).

(b) Exercise of Award Following Termination of Continuous Service.

(i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.


(ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

(c) No Exercise in Violation of Applicable Law.

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award shall not be exercised if the Administrator (in its sole discretion) determines that an exercise would violate any Applicable Laws.

(d) Restrictions on Exercise.

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award may not be exercised before the consummation of (i) an IPO of the Company, (ii) a Corporate Transaction, or (iii) the Change in Control, except as permitted by the applicable Award Agreement or otherwise as determined by the Administrator.

9. Conditions Upon Issuance of Shares.

(a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) As a condition to the exercise of an Award, the Company may require the Person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

(c) As a condition to the exercise of an Award, the applicable Award Agreement may provide for Grantee to grant a power of attorney to the Board or any Person designated by the Board to exercise the voting rights with respect to the Shares and the Company may require the Person exercising such Award to acknowledge and agree to be bound by the provisions of the currently effective M&A, shareholders agreement, right of first refusal and co-sale agreement and other documents of the Company in relation to the Shares (if any), as if the Grantee is a holder of Ordinary Shares thereunder.

10. Repurchase Rights. Except as provided in the applicable Award Agreement or subplan, the Company shall be entitled to repurchase from Grantee all vested options and Shares upon termination of the Grantee’s Continuous Service with Cause. The Award Agreement shall (or may, with respect to Awards granted or issued to Officers, Directors or Consultants) provide that:

(a) the consideration payable for the vested Options or Shares upon exercise of such repurchase right shall be made in cash or by cancellation of purchase money indebtedness; and


(b) the amount of the consideration payable for the Shares or vested Options shall be at their original purchase price paid by the Grantee.

11. Adjustments Upon Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be equitably adjusted for (i) any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, share dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Ordinary Shares including a corporate merger, consolidation, acquisition of property or equity, separation (including a spin-off or other distribution of shares or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. In the event of a Spin-off Transaction, the Administrator may in its discretion make such adjustments and take such other action as it deems appropriate with respect to outstanding Awards under the Plan, including but not limited to: (i) adjustments to the number and kind of Shares, the exercise or purchase price per Share and the vesting periods of outstanding Awards, (ii) prohibit the exercise of Awards during certain periods of time prior to the consummation of the Spin-off Transaction, or (iii) the substitution, exchange or grant of Awards to purchase securities of the Subsidiary; provided that the Administrator shall not be obligated to make any such adjustments or take any such action hereunder.

12. Corporate Transactions and Changes in Control.

(a) Termination of Award to the Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

(b) Acceleration of Award Upon Corporate Transaction or Change in Control.

(i) Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date. The portion of the Award that is not Assumed shall terminate under subsection (a) of this Section 11 to the extent not exercised prior to the consummation of such Corporate Transaction.


(ii) Change in Control. Except as provided otherwise in an individual Award Agreement, in the event of a Change in Control (other than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that the Grantee’s Continuous Service has not terminated prior to such date.

13. Effective Date and Term of Plan. The Plan shall become effective upon the later to occur of its adoption by the Board or its approval by the shareholders of the Company. The Plan shall continue in effect for a term of ten (10) years after the date of adoption, unless sooner terminated. Subject to Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

14. Amendment, Suspension or Termination of the Plan.

(a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 14(a).

(b) No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c) No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.

15. Reservation of Shares.

(a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

16. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.


17. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

18. Vesting Schedule. Except as unanimously approved by the Board, Options to be issued to the Grantees under the Plan shall be subject to a minimum four (4) year vesting schedule calling for vesting no faster than the following, counting from the applicable grant date or vesting commencement date (as determined by the Administer) with respect to the total issued Options: the Option representing 25% of the Shares 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.

19. Drag-Along Events. Except as provided in the applicable Award Agreement or subplan, in the event of a Drag-Along Event, the Grantees who hold any 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 or a Person authorized by the Board, a power of attorney to transfer, sell, convey and assign his/her 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.

20. IPO. In the case of a IPO, the Grantees shall enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company for the purpose of the IPO, and each of such Grantees shall grant to the Board or a Person authorized by the Board, a power of attorney to enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company and to do and carry out all the acts and to execute all the documents that are necessary or advisable to complete the IPO.

21. Service with Competitor. Notwithstanding Section 8(b), and except as provided in the applicable Award Agreement or subplan or as otherwise determined by the Administrator, in the event a Grantee serves as the director, officer, employee (whether full time or part time), shareholder, representative or agent of a competitor of the Company and the Related Entities (the “Service with Competitor”) after termination of the Grantee’s Continuous Service, with or without Cause, excluding any passive investment by way of shares or other securities of not more than 5% of the total issued share capital of any company, the Grantee’s right to exercise the Option shall terminate immediately upon the date of the Service with Competitor, except as otherwise determined by the Administrator, and the Company shall have rights to repurchase all vested Awards and exercised Shares held by the Grantee at a discount price determined by the Administrator.


22. Unfunded Obligation. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

23. Entire Plan. This Plan, the individual Award Agreements and any other document, together with all the exhibits hereto and thereto, constitutes and contains the entire stock incentive plan and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof (including any and all of the stock incentive plans of the Company before the date of this Plan).

24. Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

25. Modifications and Subplans. Without amending this Plan, the Administrator may grant awards to eligible persons on such terms and conditions different from those specified in this Plan as may in the judgment of the Administrator be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Administration may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with the Applicable Laws or market practices of the countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.

EX-10.2

Exhibit 10.2

NEXTEV INC.

2016 STOCK INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

2. Definitions. The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

(a) “Administrator” means the Board or any of the Committees appointed by the Board to administer the Plan.

(b) “Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person, where “Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person.

(c) “Applicable Laws” means legal requirements relating to the Plan and the Awards under applicable laws, regulations, rules, federal securities laws, state corporate and securities laws, the rules of any applicable stock exchange or national market system, and the laws, regulations, orders or rules of any jurisdiction applicable to the Awards granted to residents therein or the Grantees receiving such Awards.

(d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

(e) “Award” means an Option, SAR, Dividend Equivalent Right, Restricted Share, Restricted Share Unit or other right or benefit under the Plan.

(f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

(g) “Board” means the Board of Directors of the Company.


(h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and/or to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity (including without limitation of any non-competition obligations of Grantee); or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person, or any crime involving fraud, or misrepresentation or violation of applicable securities laws.

(i) “Change in Control” means (as determined by the Administrator acting reasonably) a change in ownership or control of the Company after the Registration Date effected through the direct or indirect acquisition by any Person or related group of Persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by an Affiliate of the Company) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Directors who are not Affiliates or associates of the offeror do not recommend such shareholders accept.

(j) “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

(k) “Company” means NEXTEV INC., an exempted company incorporated with limited liability under the laws of the Cayman Islands or any successor corporation that adopts the Plan in connection with a Corporate Transaction.

(l) “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as an Employee or Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

(m) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.


(n) “Corporate Transaction” means (as determined by the Administrator acting reasonably) any of the following transactions:

(i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

(ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company and its Subsidiaries and Affiliates;

(iii) the complete liquidation or dissolution of the Company;

(iv) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the Ordinary Shares outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a Person or Persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

(v) acquisition in a single or series of related transactions by any Person or related group of Persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

(o) “Director” means a member of the Board or the board of directors of any Related Entity.

(p) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

(q) “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Ordinary Shares.


(r) “Drag-Along Event” means an Approved Sale of the Company, as defined in the M&A of the Company.

(s) “Employee” means any person, including a Director, who is in the employment of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(u) “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows:

(i) If the Ordinary Shares are traded on a securities exchange, the value shall be deemed to be the security’s closing price on such exchange on the applicable valuation date, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

(ii) If the Ordinary Shares are traded over-the-counter, the value shall be deemed to be the closing bid price on the applicable valuation date as reported in The Wall Street Journal or such other source as the Administrator deems reliable; and

(iii) In the absence of an established market for the Ordinary Shares of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith and, to the extent applicable, in compliance with Section 409A of the U.S. Code.

(v) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

(w) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities (or the securities of a successor corporation) to the general public pursuant to (a) a registration statement filed under the Securities Act of 1933, as amended, or (b) the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally recognized securities exchange.

(x) “Incentive Stock Option” shall mean a stock option granted pursuant to the Plan that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the U.S. Code.

(y) “M&A” means the currently effective memorandum and articles of association of the Company.

(z) “Ordinary Share” means the Company’s ordinary shares, par value US$0.00025 per share.


(aa) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan. Options granted to employees who are U.S. taxpayers may either qualify as Incentive Stock Options or as options that do not qualify as Incentive Stock Options.

(bb) “Parent” means any company (other than the Company) in an unbroken chain of companies ending with the Company, if each of the companies other than the Company owns or Controls stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain. A company that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

(cc) “Person” means any individual, corporation, partnership, limited partnership, association, limited liability company, firm, trust, estate or other enterprise or entity

(dd) “Plan” means this 2016 Stock Incentive Plan.

(ee) “Registration Date” means the first to occur of (i) the closing of the IPO; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

(ff) “Related Entity” means any Parent or Subsidiary or Affiliate of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary or an Affiliate of the Company holds a substantial ownership interest, directly or indirectly.

(gg) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable share or stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

(hh) “Restricted Share” means a Share issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

(ii) “Restricted Share Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.


(jj) “SAR” means a share appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Ordinary Shares.

(kk) “Share” means an Ordinary Share of the Company.

(ll) “Spin-off Transaction” means a distribution by the Company to its shareholders of all or any portion of the securities of any Subsidiary of the Company.

(mm) “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company, if each of the companies other than the last company in the unbroken chain owns or Controls stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain, by equity ownership or by contract. A company that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

(nn) “U.S. Code” means the U.S. Internal Revenue Code of 1986, as amended.

3. Shares Subject to the Plan.

(a) The Shares to be issued pursuant to the Awards under this Plan shall be authorized, but unissued, or reacquired Ordinary Shares. Subject to the provisions of Section 11 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is 18,000,000 Shares (proportionally adjusted to reflect any share dividends, share splits, or similar transactions).

(b) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. To the extent not prohibited by the Applicable Law and the listing requirements of the applicable stock exchange or national market system on which the Ordinary Shares are traded, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

4. Administration of the Plan.

(a) Plan Administrator.

(i) Administration. The Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in accordance with the Applicable Laws and the M&A. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more officers or directors to grant such Awards and may limit such authority as the Board determines from time to time.


(ii) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws and approved by the Administrator.

(b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

(i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

(ii) to determine whether and to what extent Awards are granted hereunder;

(iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions of any Award granted hereunder (including the vesting schedule set forth in the Notice of Stock Option Award);

(vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent;

(vii) to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan; and

(viii) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

(c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or Employees of the Company or a Related Entity, members of the Board and any Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such Person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such Person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.


5. Eligibility. Awards may be granted to Employees, Directors and Consultants. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.

6. Terms and Conditions of Awards.

(a) Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Shares, Restricted Share Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

(b) Designation of Award.    Each Award shall be designated in the Award Agreement.

(c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. Each Award shall be subject to the terms of an Award Agreement approved by the Administrator and, if applicable, a subplan established pursuant to Section 25, which may provide that certain provisions of the Plan referenced in such Award Agreement or subplan shall not apply to such Award. The performance criteria established by the Administrator may include, without limitation, any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. Notwithstanding anything to the contrary provided hereof, to the extent permitted under Applicable Laws, the Administrator shall be entitled to require each Grantee to, as one precondition to being granted each Award, enter into a non-competition agreement with the Company or Related Entity, under which the Grantee shall be obligated to undertake certain non-competition obligations during the term of the employment with the Company or Related Entity and a certain reasonable period after the employment with the Company, and the Company shall have the right to waive Grantee’s such non-compete obligation upon its own discretion and decision, subject to the non-competition agreement.


(d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction.

(e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award (other than an Award held by a U.S. taxpayer), satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

(f) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

(g) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award, subject to compliance with the Applicable Laws. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

(h) Term of Award. The term of each Award shall be the term stated in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award. In the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock 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 the Company or any Subsidiary or Affiliate, the term of the Incentive Stock Option will not be longer than five years from the date of grant.

(i) Transferability of Awards. Subject to the Applicable Laws, Awards shall be transferable (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 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 Administrator.


(j) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator.

7. Award Exercise or Purchase Price, Consideration and Taxes.

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be determined by the Administrator, and in the case of Options or SARs granted to U.S. taxpayers, shall not be less than 100% of the Fair Market Value of a Share as of the date of grant. In addition, in the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock Option is granted, owns (or, pursuant to Section 424(d) of the U.S. Code, is deemed to own) Shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any Subsidiary or Affiliate, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6 above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

(b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

(i) cash;

(ii) check;

(iii) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

(iv) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, withholding of Shares subject to the Award having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

(v) with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or


(vi) any combination of the foregoing methods of payment.

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other Person until such Grantee or other Person has made arrangements acceptable to the Administrator for the satisfaction of any income and employment tax withholding obligations under any Applicable Laws. The Grantee shall be responsible for all taxes associated with the receipt, vest, exercise, transfer and disposal of the Awards and the Shares. Upon exercise of an Award, the Company and/or the Related Entity which is an employer of the Grantee shall have the right to withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

8. Exercise of Award.

(a) Procedure for Exercise; Rights as a Shareholder.

(i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

(ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the Person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(v).

(b) Exercise of Award Following Termination of Continuous Service.

(i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

(ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.


(c) No Exercise in Violation of Applicable Law.

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award shall not be exercised if the Administrator (in its sole discretion) determines that an exercise would violate any Applicable Laws.

(d) Restrictions on Exercise.

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award may not be exercised before the consummation of (i) an IPO of the Company, (ii) a Corporate Transaction, or (iii) the Change in Control, except as permitted by the applicable Award Agreement or otherwise as determined by the Administrator.

9. Conditions Upon Issuance of Shares.

(a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws and the relevant Award Agreement, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b) As a condition to the exercise of an Award, the Company may require the Person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

(c) As a condition to the exercise of an Award, the applicable Award Agreement may provide for Grantee to grant a power of attorney to the Board or any Person designated by the Board to exercise the voting rights with respect to the Shares and the Company may require the Person exercising such Award to acknowledge and agree to be bound by the provisions of the currently effective M&A, shareholders agreement, right of first refusal and co-sale agreement and other documents of the Company in relation to the Shares (if any), as if the Grantee is a holder of Ordinary Shares thereunder.

10. Repurchase Rights. Except as provided in the applicable Award Agreement or the subplan, upon termination of a Grantee’s Continuous Service for any reason, the Company shall be entitled to repurchase from the Grantee all or any portion of any vested Awards and the Shares obtained by the Grantee upon exercise of any Awards. The Award Agreement shall (or may, with respect to Awards granted or issued to Officers, Directors or Consultants) provide that:

(a) the consideration payable for such vested Awards or such Shares upon exercise of such repurchase right shall be made in cash or by cancellation of purchase money indebtedness; and

(b) the amount of the consideration payable for such Shares or such vested Awards shall be as determined by the Administrator. The Grantee shall cooperate with the Company to complete and give effect to such repurchase.


11. Adjustments Upon Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be equitably adjusted for (i) any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, share dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Ordinary Shares including a corporate merger, consolidation, acquisition of property or equity, separation (including a spin-off or other distribution of shares or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. In the event of a Spin-off Transaction, the Administrator may in its discretion make such adjustments and take such other action as it deems appropriate with respect to outstanding Awards under the Plan, including but not limited to: (i) adjustments to the number and kind of Shares, the exercise or purchase price per Share and the vesting periods of outstanding Awards, (ii) prohibit the exercise of Awards during certain periods of time prior to the consummation of the Spin-off Transaction, or (iii) the substitution, exchange or grant of Awards to purchase securities of the Subsidiary; provided that the Administrator shall not be obligated to make any such adjustments or take any such action hereunder.

12. Corporate Transactions and Changes in Control.

(a) Termination of Award to the Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed or Replaced in connection with the Corporate Transaction.

(b) Acceleration of Award Upon Corporate Transaction or Change in Control.

(i) Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date. The portion of the Award that is not Assumed or Replaced shall terminate under subsection (a) of this Section to the extent not exercised prior to the consummation of such Corporate Transaction.


(ii) Change in Control. Except as provided otherwise in an individual Award Agreement, in the event of a Change in Control (other than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that the Grantee’s Continuous Service has not terminated prior to such date.

13. Effective Date and Term of Plan. The Plan shall become effective upon the later to occur of its adoption by the Board or its approval by the shareholders of the Company. The Plan shall continue in effect for a term of ten (10) years after the date of adoption, unless sooner terminated or extended before expiration. Subject to Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

14. Amendment, Suspension or Termination of the Plan.

(a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 14(a).

(b) No Award may be granted during any suspension of the Plan or after termination of the Plan.

(c) No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.

15. Reservation of Shares.

(a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

(b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

16. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.


17. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

18. Vesting Schedule. Except as approved by the Administrator, Options to be issued to the Grantees under the Plan shall be subject to a minimum four (4) year vesting schedule calling for vesting no faster than the following, counting from the applicable grant date or vesting commencement date (as determined by the Administrator) with respect to the total issued Options: the Option representing 25% of the Shares 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.

19. Drag-Along Events. Except as provided in the applicable Award Agreement or subplan, in the event of a Drag-Along Event, the Grantees who hold any 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 or a Person authorized by the Board, a power of attorney to transfer, sell, convey and assign his/her 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.

20. IPO. In the case of a IPO, the Grantees shall enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company for the purpose of the IPO, and each of such Grantees shall grant to the Board or a Person authorized by the Board, a power of attorney to enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company and to do and carry out all the acts and to execute all the documents that are necessary or advisable to complete the IPO.

21. Service with Competitor. Notwithstanding Section 8(b), and except as provided in the applicable Award Agreement or subplan or as otherwise determined by the Administrator, in the event a Grantee serves as the director, officer, employee (whether full time or part time), shareholder, representative or agent of a competitor of the Company and the Related Entities (the “Service with Competitor”) after termination of the Grantee’s Continuous Service, with or without Cause, excluding any passive investment by way of shares or other securities of not more than 5% of the total issued share capital of any company, the Grantee’s right to exercise the Awards shall terminate immediately upon the date of the Service with Competitor, except as otherwise determined by the Administrator, and the Company shall have rights to repurchase all vested Awards and exercised Shares held by the Grantee at a discount price determined by the Administrator.

22. Unfunded Obligation. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.


23. Entire Plan. This Plan, the individual Award Agreements and any other document, together with all the exhibits hereto and thereto, constitute and contain the entire stock incentive plan and understanding of the parties with respect to the subject matter hereof and supersede any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof.

24. Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

25. Modifications and Subplans. Without amending this Plan, the Administrator may grant awards to eligible persons on such terms and conditions different from those specified in this Plan as may in the judgment of the Administrator be necessary to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Administrator may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with the Applicable Laws or market practices of the countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.

EX-10.3

Exhibit 10.3

NIO Inc.

2017 STOCK INCENTIVE PLAN

2017年股权激励计划

1. Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

计划宗旨。本2017年股权激励计划旨在吸引、留住市场最优人才,为公司雇员、董事和顾问提供进一步的激励,促进公司业务发展。

2. Definitions. The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

定义。除非授予协议另作定义,否则本计划及授予协议中的术语将使用下列定义。如果授予协议另外定义了某术语,则该等定义将取代本第二条之规定。

(a) “Administrator” means the Board or any of the Committees appointed by the Board to administer the Plan.

管理人指董事会或董事会指定的管理本计划的任何委员会。

(b) “Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person, where “Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, that such power or authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person.

关联方指针对任何特定人士,直接或间接控制该等特定人士,被该等特定人士控制或与该等特定人士处于共同控制之下的任何人士。 控制特定人士,指通过持有有表决权的股份、合同约定或其他方式,直接或间接控制该等人士业务、管理和政策的权力或权限。无论是否被行使,一旦拥有控制该等人士股东大会或股东会超过百分之五十( 50%)有表决权的受益所有权或权力,或拥有任命该等人士董事会中多数成员的权力,该等的权力或职权应明确视为控制。

(c) “Applicable Laws” means legal requirements relating to the Plan and the Awards under applicable laws, regulations, rules, federal securities laws, state corporate and securities laws, the rules of any applicable stock exchange or national market system, and the laws, regulations, orders or rules of any jurisdiction applicable to the Awards granted to residents therein or the Grantees receiving such Awards.

适用法律指与本计划和授予协议相关的法律要求,包括:适用的法律、法规、规章、联邦证券法、州立公司法和州立证券法,任何证券交易所或全国性交易体系的规则,和其他任何司法管辖区内适用于被授予的授权或被授权人的法律、法规、法 令或规定。


(d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

承担指当公司整体出售发生时,以下其一: (i)公司明确表示承担授权的义务,或 (ii)公司整体出售涉及的继受方或其母公司明确表示承担授权对应的合同义务(而不仅是迫于法律的强制实施),该承担可以在适当调整继受方或其母公司有关授权的股份的数量和类型以及相关行权或者购买价格的基础上,但该调整至少应保持根据相关授权文书公司整体出售发生时的授权的补偿要件。

(e) “Award” means an Option, SAR, Dividend Equivalent Right, Restricted Share, Restricted Share Unit or other right or benefit under the Plan.

授权指在本计划项下对期权、股份增值权、股息对等权利、受限股份、受限股份单位或其它权利或利益的授予。

(f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

授予协议指公司和被授权人签署的、约定授权事项的书面协议及其后续修订版本。

(g) “Board” means the Board of Directors of the Company.

董事会指本公司的董事会。

(h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and/or to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity (including without limitation of any non-competition obligations of Grantee); or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person, or any crime involving fraud, or misrepresentation or violation of applicable securities laws.

事由指公司或关联实体终止被授权人的持续任职的原因。事由可以是被授权人与公司或者关联实体签署的届时有效的书面协议所明确定义的事由,或者,如果没有此类届时有效的书面协议与定义,根据管理人的决定,可以是被授权人引起的下列原因: (i)恶意作为或不作为,和/或其作为或不作为导致公司或关联实体的损失; (ii)对公 司或关联实体不忠,或作出故意不当行为,或实质性违反与公司或关联实体签定的协议(包括但不限于被授权人的竞业禁止义务);或 (iii)犯有涉及不忠、背信或对任何人士有生理伤害或精神伤害的犯罪行为,或涉及欺诈或虚假陈述或违反适用证券法的犯罪行为。

 

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(i) “Change in Control” means (as determined by the Administrator acting reasonably) a change in ownership or control of the Company after the Registration Date effected through the direct or indirect acquisition by any Person or related group of Persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by an Affiliate of the Company) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Directors who are not Affiliates or associates of the offeror do not recommend such shareholders accept.

控制权变更指(由管理人经合理行为决定的)因下列交易而导致在公司登记日后发生的所有权或控制权变更:任何人士或该等人士的相关集团(由公司、或公司发起的员工福利计划、或公司关联方进行的收购除外)通过直接向公司股东提出收购要约或换股要约,要求直接或间接收购公司百分之五十( 50%)以上的有表决权的已发行股份,而多数非要约方关联方或合作方的董事均不建议公司股东接受该等收购要约或换股要约。

(j) “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.

委员会指任何由董事会指定的董事会成员组成的管理本计划的委员会。

(k) “Company” means NIO Inc., an exempted company incorporated with limited liability under the laws of the Cayman Islands or any successor corporation that adopts the Plan in connection with a Corporate Transaction.

公司NIO Inc.,一家根据开曼法律成立的有限责任豁免公司,或者适用本计划的公司整体出售的继受方。

(l) “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as an Employee or Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

顾问指由公司或关联实体聘用的,向公司或关联实体提供顾问或咨询服务的任何人士(雇员或董事除外,该等除外仅针对该等人士以雇员或董事身份提供服务的情况)。

 

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(m) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

持续任职指以雇员、董事或顾问身份向公司或关联实体提供的服务未中断或未终止。如果根据其所在管辖地法律,非经事先通知不得有效终止任职的,雇员、董事或顾问的持续任职仍应当自其实际终止向公司或关联实体提供服务之日止,而不考虑其适用法律下终止任职所需满足的通知期限。如果持续任职实际终止,或被授权人供职的对象不再为关联实体,那么被授权人的持续任职应被视为终止。在下列情况下,持续任职不得被视为中断: (i)经批准的请假;(ii)雇员、董事或顾问,在公司、任一关联实体或任一继受者间的调任;或 (iii)职务变化,但仍以雇员、董事或顾问的身份继续供职于公司或关联实体(但授予协议另有规定的除外)。经批准的请假包括病假、服兵役假或任何其它经批准的事假。

(n) “Corporate Transaction” means (as determined by the Administrator acting reasonably) any of the following transactions:

公司整体出售指(由管理人经合理行为决定的)任何下述交易:

(i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

非以公司作为继存方的并购或合并,但以改变公司注册地为主要目的的交易除外;

(ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company and its Subsidiaries and Affiliates;

出售、转让和以其它方式处分公司全部或实质性的全部资产;

(iii) the complete liquidation or dissolution of the Company;

公司完全清算或解散;

(iv) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the Ordinary Shares outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a Person or Persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

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以公司为继存方的任何反向收购或一系列以反向收购告终的相关交易(包括但不限于后附反向收购的要约收购),但是 (A) 在该等收购之前已发行的普通股,凭借该等收购转换或交换为其他财产的(无论证券、现金或其他形式),或 (B) 该等收购前公司百分之五十(50%)以上的有表决权的已发行股份转让给在收购交易前的原持有人以外的一人或数人,但管理人不认为其构成公司整体出售的除外;或

(v) acquisition in a single or series of related transactions by any Person or related group of Persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

任何人士或该等人士的相关集团(公司或公司发起的员工福利计划除外)通过单独或系列的相关交易,购买公司百分之五十( 50%)以上的有表决权的已发行股份,但管理人不认为其构成公司整体出售的相关交易除外。

(o) “Director” means a member of the Board or the board of directors of any Related Entity.

董事指董事会成员或任何关联实体的董事会董事。

(p) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

残障应当具有公司或被授权人供职的关联实体的长期残障政策中的定义,而不论该政策是否覆盖被授权人。如果公司或被授权人供职的关联实体尚未制定的长期残障政策, 残障指经医学鉴定被授权人生理或心理损害而无法履行被授权人职务职责且持续九十( 90)天及以上。除非被授权人向管理人出示充分的损害证明,且满足管理人的自由裁量,否则被授权人不应被视为残障。

(q) “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Ordinary Shares.

股息对等权利指被授权人有权以获得普通股股息的形式要求支付补偿金的权利。

(r) “Drag-Along Event” means an Approved Sale of the Company, as defined in the M&A of the Company.

 

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领售权交易指如公司章程中定义的公司被批准的出售交易。

(s) “Employee” means any person, including a Director, who is in the employment of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

雇员指受雇于公司或关联实体的任何人士(包括董事),且该等人士应当受制于公司或关联实体对工作内容和工作方式的指示和控制。公司或关联实体向董事支付费用,不应被视为足以证明公司对其存在雇佣关系。

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

交易法指《1934美国证券交易法》及其后续修订。

(u) “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows:

公平市场价值指在任何日期根据以下方式确定的普通股的价值:

(i) If the Ordinary Shares are traded on a securities exchange, the value shall be deemed to be the security’s closing price on such exchange on the applicable valuation date, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

如果普通股在证券交易所进行交易,则公平市场价值应为该股份在该等证券交易所可适用的估值日的收盘价,收盘价以《华尔街日报》或管理人认为可以信赖的其它来源的报道为准;或

(ii) If the Ordinary Shares are traded over-the-counter, the value shall be deemed to be the closing bid price on the applicable valuation date as reported in The Wall Street Journal or such other source as the Administrator deems reliable; and

如果普通股在场外交易市场进行交易,则公平市场价值应为可适用的估值日的收盘价,收盘价以《华尔街日报》或管理人认为可以信赖的其它来源的报道为准;或

(iii) In the absence of an established market for the Ordinary Shares of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith and, to the extent applicable, in compliance with Section 409A of the U.S. Code.

如果普通股尚不存在(i)(ii)款的交易形式,股份的公平市场价值由管理人根据善意确定,且(如适用)符合美国法令 409A节。

(v) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.

被授权人指按本计划获得授权的雇员、董事或顾问。

 

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(w) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities (or the securities of a successor corporation) to the general public pursuant to (a) a registration statement filed under the Securities Act of 1933, as amended, or (b) the securities laws applicable to an offering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally recognized securities exchange.

首次公开发行指公司(a)根据1933年证券法案及其后续修订进行股份注册上市申请书备案,或 (b) 如果股份将在其他国际认可的证券交易所上市,根据拟挂牌的证券交易所所在管辖地对拟发行股份适用的证券法律,向公众首次承诺公开发行承销其任何股份(或继受公司的股份)。

(x) “Incentive Stock Option” shall mean a stock option granted pursuant to the Plan that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the U.S. Code.

股权激励期权指按照本计划授予的股权期权,该期权的条款内容可以被认定或者有意被认定为美国法令 S422所指的股权激励期权。

(y) “M&A” means the currently effective memorandum and articles of association of the Company.

章程指届时有效的公司章程。

(z) “Ordinary Share” means the Company’s ordinary shares, par value US$0.00025 per share.

普通股指每股面值为0.00025美元的公司的普通股。

(aa) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan. Options granted to employees who are U.S. taxpayers may either qualify as Incentive Stock Options or as options that do not qualify as Incentive Stock Options.

期权指在本计划项下,根据授予协议授予的购买股份的选择权。向作为美国纳税居民的雇员授予的期权可能被认定为股权激励期权,也可能无法被认定为股权激励期权。

(bb) “Parent” means any company (other than the Company) in an unbroken chain of companies ending with the Company, if each of the companies other than the Company owns or Controls stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain. A company that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

母公司指在以本公司为最末端的连续公司链中的任何公司(本公司除外),且该公司(本公司除外)拥有该公司链中某一家公司百分之五十( 50%)以上的有表决权的股份。任何公司在本计划正式通过后达到母公司的标准的,应当自达到标准之日起被视为母公司。

(cc) “Person” means any individual, corporation, partnership, limited partnership, association, limited liability company, firm, trust, estate or other enterprise or entity.

 

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人士指任何个人、公司、合伙企业、有限合伙企业、独资企业、联合企业、有限责任公司、公司、信托、不动产或任何其他企业或实体。

(dd) “Plan” means this 2017 Stock Incentive Plan.

计划指本2017年股权激励计划。

(ee) “Registration Date” means the first to occur of (i) the closing of the IPO; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.

登记日指下列事件较早发生的日期:(i)首次公开发行的交割日;和(ii)公司整体出售完成之日,如果根据1933年证券法案及其后续修订备案和宣布生效的股份注册上市申请书要求,在公司整体出售之日或之前,公司整体出售的继受方(或其母公司)应当向公众出售其可以发行的同一类别股份的话。

(ff) “Related Entity” means any Parent or Subsidiary or Affiliate of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary or an Affiliate of the Company holds a substantial ownership interest, directly or indirectly.

关联实体指本公司的任何母公司、或子公司、或关联方、以及任何本公司、母公司、子公司或关联方直接或间接持有实质性所有权利益的任何企业、公司、合伙、有限责任公司或其他实体。

(gg) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable share or stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

替代指根据公司整体出售,授权被公司、继受方(如适用)或其母公司的有可以比性的股份、股权授权或现金激励方案替代,并且该等股份、股份奖励或现金激励方案保留了公司整体出售时授权中存在的补偿要件,以及提供了和该授权具有相同(或更有利的)兑现时间表的后续支出。是否有可以比性由管理人决定,该决定应为最终的、有约束力的和终局的。

(hh) “Restricted Share” means a Share issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

受限股份指在本计划项下以一定对价向被授权人发行的,在转让、 优先购买权、回购条款、没收条款和管理人制定的其他条件方面受限制的股份。

 

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(ii) “Restricted Share Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

受限股份单位指可以基于时间推移或管理人制定的业绩标准完成,全部或者部分获得的,以现金、股票或其他证券或者管理人决定的上述组合进行支付的一项授权。

(jj) “SAR” means a share appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Ordinary Shares.

股份增值权指赋予被授权人股份或现金补偿的股份增值权利,由管理人制定,并以普通股的增值作为衡量。

(kk) “Share” means an Ordinary Share of the Company.

股份指公司的普通股。

(ll) “Spin-off Transaction” means a distribution by the Company to its shareholders of all or any portion of the securities of any Subsidiary of the Company.

分拆交易指公司向其股东分配子公司的全部或部分股份的交易。

(mm) “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company, if each of the companies other than the last company in the unbroken chain owns or Controls stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain, by equity ownership or by contract. A company that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

子公司指在以本公司为最顶端的连续公司链中的任何公司(本公司除外),且该公司(公司链最末端公司除外)基于持股或协议而拥有该公司链中某一家公司百分之五十( 50%)以上的有表决权的股份。任何公司在本计划正式通过后达到子公司的标准的,应当自达到标准之日起被视为子公司。

(nn) “U.S. Code” means the U.S. Internal Revenue Code of 1986, as amended.

美国法令1986年美国国内税收法及其修正案。

3. Shares Subject to the Plan.

本计划项下的股份

(a) The Shares to be issued pursuant to the Awards under this Plan shall be authorized, but unissued, or reacquired Ordinary Shares. Subject to the provisions of Section 11 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards is [10,000,000] Shares (proportionally adjusted to reflect any share dividends, share splits, or similar transactions).

 

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基于授权而发行的股份应为经授权但未发行或重新购回的普通股。根据下述第 11节之规定,基于全部授权而发行的股份不得超过 [10,000,000]股(可根据分红、拆股或类似交易按比例调整)。

(b) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. To the extent not prohibited by the Applicable Law and the listing requirements of the applicable stock exchange or national market system on which the Ordinary Shares are traded, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

任何被没收的、被取消的、或到期失效的(无论自愿或非自愿)授权(或其部分)所代表的股份,在计算本计划项下可发行股份的最大数量时,不应被视为已发行的股份。本计划项下基于授权已实际发行的股份不得再被用作本计划项下的股份,且不得被用于本计划项下将来的股份发行,但如果尚未兑现的股份被公司没收或被公司以初始购股价格或回购时的公平市场价值中较低的价格回购,则该股份可以被用于本计划项下未来的授权。在适用法律和普通股挂牌的证券交易所或全国性市场系统的上市规则允许的情况下,授权所对应的股份如满足如下条件: (i)支付授权的行权价或购买价格;或 (ii)履行因行权而产生的税收代缴义务,在计算本计划项下可发行股份的最大数量时,不应被视为已发行的股份,管理人另有决定的除外。

4. Administration of the Plan.

计划的管理

(a) Plan Administrator.

计划管理人

(i) Administration. The Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in accordance with the Applicable Laws and the M&A. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more officers or directors to grant such Awards and may limit such authority as the Board determines from time to time.

管理。本计划应由 (A)董事会或(B)董事会指定的根据适用法律及章程组成的委员会管理。一经委任,除非董事会另有指示,该等委员会应持续履行其被指定职能。董事会可以授权一位或多位管理人员授予期权并且董事会可以不时限制该等授权。

 

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(ii) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws and approved by the Administrator.

管理过失。如果授权的授予与本第4(a)款中的规定不一致,则该项授权应当在适用法律允许且管理人同意的范围内,自授予日起被推定为有效。

(b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

管理人的权力。受限于适用法律以及本计划条款(包括本计划赋予管理人的其他权利),除非董事会另有决定,否则管理人拥有下列自由裁量权:

(i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

不时确定本计划项下可以获得授权的雇员、董事、顾问;

(ii) to determine whether and to what extent Awards are granted hereunder;

确定是否按本计划给予授权以及授权范围;

(iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

确定本计划项下的每项授权对应的股份数量或其他应付对价;

(iv) to approve forms of Award Agreements for use under the Plan;

批准用于本计划的授予协议的形式;

(v) to determine the terms and conditions of any Award granted hereunder (including the vesting schedule set forth in the Notice of Stock Option Award);

确定本计划项下任何授权的条款和条件(包括股权期权授予通知项下的兑现时间表);

(vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent;

修订依本计划授予的任何已发行授权的条款,但未经被授权人书面同意,不得作出对被授权人已发行授权产生不利影响的修订;

(vii) to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan; and

解释计划和授权的条款,包括但不限于依计划制定的授予通知 或授予协议;

 

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(viii) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

采取管理人认为合适的,不违反本计划条款的其他行动。

(c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or Employees of the Company or a Related Entity, members of the Board and any Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such Person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such Person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

赔偿。除了作为公司或关联实体的董事会成员或雇员可以能享有的其他赔偿权利外,公司应当保护或赔偿被授权代表董事会、管理人或公司行事的公司或关联实体的董事会成员或雇员,使其在适用法律允许的范围内、按税后标准,免于支付所有包括律师费在内的实际必要开支(由于任何因按照本计划或者本计划下授权履行或未履行事务而引发的该等人士作为当事人的主张、调查、行动或其他法律程序的应诉,或者上诉),以及该等人士在和解(假如公司同意和解)或诉讼、调查、行动、诉讼或其他法律程序结果中支付的全部金额,除非在该等主张、调查、行动、诉讼或其他法律程序中判定该等主体因其重大过失、恶意或故意不当行为承担责任。上述赔偿的前提是,在任何该等主张、调查、行动、诉讼或其他法律程序发生后三十( 30)日内,该等主体应书面通知公司,向公司提供在该等主张、调查、行动、诉讼或其他法律程序以自费应诉的机会。

5. Eligibility. Awards may be granted to Employees, Directors and Consultants.An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.

资格条件。授权可以被授予雇员、董事及顾问。已被给予授权的雇员、董事及顾问,如符合条件,可以被授予其他额外的授权

6. Terms and Conditions of Awards.

授权条件

(a) Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Shares, Restricted Share Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.

 

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授权类别。本计划项下,管理人有权授予雇员、董事或顾问与本计划条款不相抵触的任何类别的安排,其条款涉及或可以能涉及: (i)股份、(ii)现金奖励或者(iii)期权、股份增值权或其他类似权利;可以按照固定价格或与股份公平市场价值相关的浮动价格发行;触发行使权利和转换权利的可以是一定时间期限、一起或数期事件、业绩标准或者其他条件。授权类型包括但不限于期权、股份增值权和受限股份的买卖收益和红利、受限股份单位或股息对等权利;并且授权可以由一种前述证券或利益或由两( 2)种以上证券或利益的任何组合、选择构成。

(b) Designation of Award. Each Award shall be designated in the Award Agreement.

授权之指定。每项授权应在授予协议中指明。

(c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. Each Award shall be subject to the terms of an Award Agreement approved by the Administrator and, if applicable, a subplan established pursuant to Section 25, which may provide that certain provisions of the Plan referenced in such Award Agreement or subplan shall not apply to such Award. The performance criteria established by the Administrator may include, without limitation, any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total shareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. Notwithstanding anything to the contrary provided hereof, to the extent permitted under Applicable Laws, the Administrator shall be entitled to require each Grantee to, as one precondition to being granted each Award, enter into a non-competition agreement with the Company or Related Entity, under which the Grantee shall be obligated to undertake certain non-competition obligations during the term of the employment with the Company or Related Entity and a certain reasonable period after the employment with the Company, and the Company shall have the right to waive Grantee’s such non-compete obligation upon its own discretion and decision, subject to the non-competition agreement.

 

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授权条件。根据本计划的条款,管理人有权决定每项授权的条款、条 件,包括但不限于授权兑现时间表、回购条款、优先购买权、没收条款、授权结算时的支付方式(现金、股份或其它对价)、或有支付与业绩标准的完成。每项授权应根据管理人同意的授予协议的条款,以及根据第 25条制定的子计划(如适用),该等授予协议或子计划可能约定计划中的某些条款不适用于该授权。管理人制定的业绩标准可以根据以下一项或多项的组合: (i)股份价格上涨、(ii)每股收益、(iii)股东收益总值、(iv)营业利润、 (v)毛利润、(vi)股权收益、(vii)资产收益、 (viii)投资收益、(ix) 营业收入、(x)营业净收入、 (xi)税前利润、(xii) 现金流、(xiii)总收入、 (xiv)支出、(xv)扣除利息、税收和折旧后的收入,(xvi)附加经济价值和(xvii)市场份额。业绩标准可以适用于公司、关联实体和 /或公司或任何关联实体的独立业务部门。部分完成业绩标准,可以依据授予协议的规定,依业绩完成程度相应地支付或兑现权利。尽管本计划有相反的规定,作为授予每项授权的前提条件,管理人应有权要求每位被授权人与公司或关联实体签署竞业禁止协议,在该协议项下,被授权人应有义务在公司或关联实体雇用期间或离职后的特定合理期间承担相应的竞业禁止义务 ,且公司有权依照其自由裁量权和决定根据竞业禁止协议放弃被授权人的竞业禁止义务。

(d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction.

收购及其它交易。公司或关联实体通过并购、购股、资产收购或其它方式收购另一实体、或购买在另一实体中的利益、或购买在关联实体中的额外利益时,管理人可以发行本计划项下的授权,以结算、承担或替代已发行授权或未来授权义务。

(e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award (other than an Award held by a U.S. taxpayer), satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

授权的延迟支付。管理人可以在本计划项下制定一个或多个方案,以使选定的被授权人有机会在行使授权(除美国纳税人持有的授权外)、完成业绩标准、或发生其它事件时选择延迟接受对价,如无此选择,则被授权人将有权获得授权项下的支付、股份或其它对价。管理人可以制定选择的程序、选择时间、被延迟的支付、股份或其它对价及其利息或其它收益的支付机制、以及其他管理人认为适当的管理延迟方案的条款、条件、规则和程序。

(f) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

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独立方案。管理人可以在本计划项下制定一个或多个独立方案,以按照其不时决定的条款和条件将特定形式的授权给予一类或多类被授权人。

(g) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award, subject to compliance with the Applicable Laws. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

提前行权。授予协议可以(但并非必须)包含一个条款,规定被授权人,在其为雇员、董事或顾问的任何时间,有权在遵守适用法律的前提下在授权完全兑现前的任何时候行使部分或全部授权。由此获得的任何未兑现股份可受限于回购条款且回购受益人为公司或关联实体,或者可受限于受管理人认为适当的任何其他条款。

(h) Term of Award. The term of each Award shall be the term stated in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award. In the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock 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 the Company or any Subsidiary or Affiliate, the term of the Incentive Stock Option will not be longer than ten years from the date of grant.

授权有效期。每项授权的有效期为授予协议中指定的期限。尽管有上述规定,任何授权的具体有效期不应包括被授权人选择延迟接受授权项下可发行股份或现金的期间。对于授权给雇员的股权激励期权,如果该雇员在该股权激励期权授予时,拥有(或根据美国法令第 424(d)节可被视为拥有)超过公司、子公司和关联方所有类型的享有投票权的 10%的股份,则该股权激励期权的有效期不超过自授予日起十年。

(i) Transferability of Awards. Subject to the Applicable Laws, Awards shall be transferable (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 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 Administrator.

授权的可转让性。根据适用法律,授权应基于如下事由转让:(i)根据遗嘱、继承与分配法转让;(ii)在被授权人有生之年,在管理人的授权范围内以管理人授权的方式转让。尽管有前述规定,被授权人可以用管理人提供的指定受益人的格式文件,指定其死亡后授权的一个或多个受益人。

(j) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other date as is determined by the Administrator.

授予日期。任何情形下,给予授权的日期应为管理人决定给予授权 期或管理人指定的其他日期。

 

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7. Award Exercise or Purchase Price, Consideration and Taxes.

授权行权价或购买价格、对价与税收

(a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be determined by the Administrator, and in the case of Options or SARs granted to U.S. taxpayers, shall not be less than 100% of the Fair Market Value of a Share as of the date of grant. In addition, in the case of an Incentive Stock Option granted to an employee who, at the time the Incentive Stock Option is granted, owns (or, pursuant to Section 424(d) of the U.S. Code, is deemed to own) Shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any Subsidiary or Affiliate, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

行权价或购买价格。授权的行权价或购买价格(如有)应当由管理人确定:在授予雇员期权或股份增值权的情形下,该价格不应低于截至授予日期每股的公平市场价值的 100%。除此之外,在授予雇员的股权激励期权的情形下,如果该雇员在该股权激励期权授予时,拥有(或根据美国法令第 424(d)节可被视为拥有)超过公司、子公司和关联方所有类型股份总合并投票权 10%的股份,则每股的行权价格不少于截至授予日期每股的公平市场价值的 110%

Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6 above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

尽管有本第7(a)款的前述规定,对于按第6节给予的授权,则该授权的行权价或购买价格应当根据证明同意授予授权的相关法律文书的条款确定。

(b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:

对价。对基于行使授权或购买授权而发行的股份应支付的对价,包括其支付方式,应由管理人决定,但应遵守适用法律之规定。管理人除了可以决定任何其他种类的对价,管理人有权接受以下作为按计划发行的股份的对价:

(i) cash;

现金;

(ii) check;

支票;

(iii) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

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如果行使或购买股份发生在登记日当天或之后,或经管理人所允许,则对价可以是交付股份或出具管理人可能要求的经适当签署的股份权利证明(该等股份于交付之日或出具证明之日的公平市场价值应等于正在被行使期权的股份的行权价之总额);

(iv) if the exercise or purchase occurs on or after the Registration Date, or as otherwise permitted by the Administrator, withholding of Shares subject to the Award having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

如果行使授权或购买授权发生在登记日当天或之后,或经管理人所允许,在行权日根据授权,则对价可以是收回授权下的股份(该等股份的公平市场价值应等值于正在被行使的授权的行权价之总额);

(v) with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or

就期权而言,如果行权发生在登记日或登记之后,则款项可通过经销商出售与汇款程序支付。按照此程序被授权人 (A)应书面指示公司指定的经销商,以立即开始销售部分或全部已购买股份,同时还应将足够涵盖所购买股份的全部行权价的金额汇至公司; (B)应书面指示公司将购买的股份直接交付这些经销商从而完成销售;或

(vi) any combination of the foregoing methods of payment.

前述支付方式的任意组合。

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.

对于不接受上述所有对价支付形式的授权、或者限制一种或多种对价支付形式的授权,管理人可以通过不时采纳或者修改第四节 (b)(iv)款所述的授予协议的标准格式的方式或其他任何方式,在任何时候进行授权。

(c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other Person until such Grantee or other Person has made arrangements acceptable to the Administrator for the satisfaction of any income and employment tax withholding obligations under any Applicable Laws. The Grantee shall be responsible for all taxes associated with the receipt, vest, exercise, transfer and disposal of the Awards and the Shares. Upon exercise of an Award, the Company and/or the Related Entity which is an employer of the Grantee shall have the right to withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.

 

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税收。在被授权人或其他人士按照适用法律就所得税支付和雇佣税扣缴义务的履行作出令管理人认为可接受的安排之前,不得将本计划下的股份交付给被授权人或其他人士。被授权人应当承担与授权和股份的接受、兑现、行权、转让和处分相关的全部税负。授权一经行使,公司和 /或被授权人供职的关联实体应当有权从被授权人处代扣、抵扣或收取一定金额以履行前述税收义务。

8. Exercise of Award.

行使授权

(a) Procedure for Exercise; Rights as a Shareholder.

行使程序;股东权利

(i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

本计划项下授予的任何授权应按照管理人依据本计划和授予协议载明的条款确定的时间和条件行使。

(ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the Person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).

如果有权行使授权的任何人士按照授予协议的条款向公司递交行权的书面通知并全额支付被行使授权对应的股票,包括,在选定的范围内,按照第 7(b)(iv)款规定使用经销商出售与汇款程序支付购买价格,则授权应被视为已行使。

(b) Exercise of Award Following Termination of Continuous Service.

持续任职终止后行使授权

(i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.

授予协议规定的到期日之后,授权不可再被行使,唯可根据授予协议的规定在被授权人持续任职终止后被行使。

(ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.

如果授予协议允许被授权人在持续任职终止后的一定期限内行使授权,在该期限届满或原授权有效期届满时(取两者中较早发生的时间),没有行使的授权部分应该到期终止。

 

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(c) No Exercise in Violation of Applicable Law.

行权不得违反适用法律

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award shall not be exercised if the Administrator (in its sole discretion) determines that an exercise would violate any Applicable Laws.

尽管有前述规定,不论授权是否已经可以行权,如果管理人(根据其完全自由裁量)认为行权将违反任何适用法律的,该等授权不得被行使。

(d) Restrictions on Exercise.

行权限制

Notwithstanding the foregoing, regardless of whether an Award has otherwise become exercisable, the Award may not be exercised before the consummation of (i) an IPO of the Company, (ii) a Corporate Transaction, or (iii) the Change in Control, except as permitted by the applicable Award Agreement or otherwise as determined by the Administrator.

尽管有前述规定,不论授权是否已经可以行权,除非管理人另有决定,在下述交易交割前,授权不得被行使: (i)公司首次公开发行,(ii)公司整体出售,(iii) 控制权变更。

9. Conditions Upon Issuance of Shares.

股份发行条件

(a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws and the relevant Award Agreement, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

除非行权及相关股份的发行或交付符合所有适用法律,且公司律师进一步就该合规性作出确认,否则不得基于行权发行任何股份。

(b) As a condition to the exercise of an Award, the Company may require the Person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

如果公司律师认为任何适用法律有陈述保证的要求,作为行使授权的条件,公司可以要求行使授权的人士在行使授权时陈述并保证,其购买该股份仅为投资目的,并无出售、分销该股份之意图。

(c) As a condition to the exercise of an Award, the applicable Award Agreement may provide for Grantee to grant a power of attorney to the Board or any Person designated by the Board to exercise the voting rights with respect to the Shares and the Company may require the Person exercising such Award to acknowledge and agree to be bound by the provisions of the currently effective M&A, shareholders agreement, right of first refusal and co-sale agreement and other documents of the Company in relation to the Shares (if any), as if the Grantee is a holder of Ordinary Shares thereunder.

 

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作为行使授权的条件,被授权人应授权董事会或董事会指定的人士作为其代表行使投票权,且公司可以要求该等行使授权的人士承认并同意遵守届时有效的公司章程、股东协议、优先购买权和跟售权协议以及其他与股份有关的公司法律文件(若有),如同被授权人是普通股的持有人一样。

10. Repurchase Rights. Except as provided in the applicable Award Agreement or the subplan, upon termination of a Grantee’s Continuous Service for any reason, the Company shall be entitled to repurchase from the Grantee all or any portion of any vested Awards and the Shares obtained by the Grantee upon exercise of any Awards. The Award Agreement shall (or may, with respect to Awards granted or issued to Officers, Directors or Consultants) provide that:

回购权。除非在可适用的授权协议或自计划中另有约定,当被授权人出于任何原因而终止持续任职时,公司有权从被授权人处回购被授权人的全部兑现期权和通过行使授权而获得的股份。授予协议应当约定(或者如授权是向管理人员、董事或顾问授予或发行的,则授予协议可以约定):

(a) the consideration payable for such vested Awards or such Shares upon exercise of such repurchase right shall be made in cash or by cancellation of purchase money indebtedness; and

行使回购权时所需就兑现授权或股份支付的对价,应当以现金形式或取消买价负债的形式支付;且

(b) the amount of the consideration payable for such vested Awards or such Shares shall be as determined by the Administrator. The Grantee shall cooperate with the Company to complete and give effect to such repurchase.

回购兑现授权或股份的对价应当被管理人决定。被授权人应与公司合作以完成并使该回购生效。

11. Adjustments Upon Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, as well as any other terms that the Administrator determines require adjustment shall be equitably adjusted for (i) any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, share dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Ordinary Shares including a corporate merger, consolidation, acquisition of property or equity, separation (including a spin-off or other distribution of shares or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. In the event of a Spin-off Transaction, the Administrator may in its discretion make such adjustments and take such other action as it deems appropriate with respect to outstanding Awards under the Plan, including but not limited to: (i) adjustments to the number and kind of Shares, the exercise or purchase price per Share and the vesting periods of outstanding Awards, (ii) prohibit the exercise of Awards during certain periods of time prior to the consummation of the Spin-off Transaction, or (iii) the substitution, exchange or grant of Awards to purchase securities of the Subsidiary; provided that the Administrator shall not be obligated to make any such adjustments or take any such action hereunder.

 

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市值变化后的调整。受限于公司股东的要求,对于已发行的授权所指向的股份数量,以及本计划项下已被允许发行的股份数量但该股份对应的授权还未被授予或已经被收回至本计划,该已发行授权的行权价或购买价格、该授权对应的在一个会计年度可发放给被授权人的最大数量的股份,以及管理人认为需要调整的任何其他条件,将根据以下情况按比例调整: (i)因拆股、反向拆股、股份分红、并股或股份重新分类,或类似影响股份的交易而引起的已发行股份的数量的增减; (ii)公司未收到对价而进行的已发行股份数量的增减;或 (iii)管理人有权自行决定的有关普通股的其他交易,包括公司新设合并、吸收合并、购买财产或股权、分立(包括分拆或其他股份或财产的分配)、重组、全部或部分清算或其他类似交易;然而公司可转换证券的转换不得被视为 未收到对价而进行的交易。上述调整需由管理人进行且其决定是终局的、有约束力的和决定性的。除非管理人另有决定,否则公司发行任何级别的股份,或者可以转换为任何级别的股份的证券,不得影响授权项下股份的数量或价格,不得对授权项下股份的数量或价格因上述原因做调整。分拆交易发生时,管理人有权自行决定对本计划项下已发行的授权进行如下调整或作出其认为适当的行动,包括但不限于: (i)调整股份数量、类型、每股行权价或购买价格以及已发行授权的兑现时间, (ii)在分拆交易交割前的一定期限内禁止行使授权,或 (iii)替换、交换或授予授权以购买子公司的证券。

12. Corporate Transactions and Changes in Control.

公司整体出售和控制权变更

(a) Termination of Award to the Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed or Replaced in connection with the Corporate Transaction.

公司整体出售中授权未被承担则告终止 。自公司整体出售交割时起,本计划项下的全部已发行授权应当终止且该等终止于交割时即生效。但是,在公司整体出售中被承担的授权不应终止。

(b) Acceleration of Award Upon Corporate Transaction or Change in Control.

公司整体出售或控制权变更后授权加速

 

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(i) Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date. The portion of the Award that is not Assumed or Replaced shall terminate under subsection (a) of this Section to the extent not exercised prior to the consummation of such Corporate Transaction.

公司整体出售。除非单独授予协议另有规定,否则在公司整体出售的情况下,未被承担或替代的授权应在公司整体出售的特定生效日前且被授权人仍在公司持续任职的前提下自动全部兑现生效、可诸行使、并且解除任何回购权或没收全对其的限制(除非回购权以公平市场价格行使)。根据本节 (a)款,未被承担的授权如在公司整体出售交割前仍未被行使则应当终止。

(ii) Change in Control. Except as provided otherwise in an individual Award Agreement, in the event of a Change in Control (other than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that the Grantee’s Continuous Service has not terminated prior to such date.

控制权变更。除非单独授予协议另有规定,在控制权变更的情况下(不包括同时也是公司整体出售的控制权变更),如果被授权人在公司控制权变更的特定生效日前在公司的持续任职未终止,每一项在计划项下已发行的授权应在该生效日前自动全部变为兑现和可行使的,且解除任何回购权或没收权对该授权部分相应股票的限制(以公平市场价格行使的回购权除外)。

13. Effective Date and Term of Plan. The Plan shall become effective upon the later to occur of its adoption by the Board or its approval by the shareholders of the Company. The Plan shall continue in effect for a term of ten (10) years after the date of adoption, unless sooner terminated or extended before expiration. Subject to Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

计划生效日和期限。本计划在董事会通过或股东批准两者较晚日后生效。除非提前终止,本计划自批准之日起有效期为十( 10)年。受限于适用法律,授权可予本计划生效后予以授出。

14. Amendment, Suspension or Termination of the Plan.

计划的修订、中止与终止

(a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 14(a).

 

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董事会可以随时修订、中止和终止计划。但是,当适用法律要求该等修订须得到公司股东批准时,或者修订涉及本计划第 4(b)(vi)款或第14(a)款时,非经公司股东批准,不得进行相应的修订。

(b) No Award may be granted during any suspension of the Plan or after termination of the Plan.

本计划中止期间或终止之后不得授予任何授权。

(c) No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.

对本计划的任何中止或终止(包括本计划第12节项下的计划终止)不得影响任何已经被授予的授权。

15. Reservation of Shares.

股份保留

(a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

公司在本计划有效期内须一直预留和保留足额的股份,以保证满足本计划的需要。

(b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

如果公司律师认为依法发行、出售本计划项下股份需要从有管辖权的监管机构获得必要批准而公司未能从有管辖权的任何监管机构获得该批准,则公司对未能获得必要批准而不能进行发行或出售不负任何责任。

16. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan. For the avoidance of doubt, to the extent that the Grantee is an Employee of the Company or any Related Entity, the terms and conditions of the Plan, the Award Agreement, the Notice of Stock Option Award and any exhibit, schedule or ancillary documents of the foregoing shall in no event form or be deemed as part of his/her employment contract with the Company or Related Entity.

对雇佣期限或顾问关系没有影响 。本计划并不赋予被授权人任何与持续任职有关的权利,也不影响被授权人或公司或被授权人供职的关联实体在任何时候终止被授权人 持续任职的权利,无论此等终止是否是因事由或者是否基于通知。公司或任何关联实体关于被授权人持续任职因本计划下的事由而被终止的决定,不影响公司或任何关联实体任意终止与所雇佣的被授权人的雇佣关系的能力。为免疑义,就作为公司或任何关联实体雇员的被授予人而言,本计划、授予协议、股票期权授予通知以及前述文件的任何附件、附表或附属文件项下的条款和条件在任何情况下均不应构成或被视为该被授予人与公司或关联实体之间雇佣合同的一部分。

 

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17. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

对退休与其他福利计划没有影响 。除非公司或关联实体的退休计划或其他福利计划另有具体约定,否则授权不得被视为对公司或关联实体任何退休计划的收益或出资之计算的补偿,并且不得影响任何其他类型的福利计划,或此后设立的任何可得收益和收益金额与薪酬水平相关的福利计划。本计划不构成 1974年《雇员退休收入保障法》及其后续修订项下的 退休计划福利计划

18. Vesting Schedule. Except as approved by the Administrator, Options to be issued to the Grantees under the Plan shall be subject to a minimum four (4) year vesting schedule calling for vesting no faster than the following, counting from the applicable grant date or vesting commencement date (as determined by the Administrator) with respect to the total issued Options: the Option representing 25% of the Shares 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.

兑现时间表。除非管理人另作决定,根据本计划向被授权人发行的期权应当受限于一个不短于四( 4)年的兑现时间表,自授予日或相关兑现开始日(由管理人确定)起全部发行期权按以下兑现时间表行使:期权对应的 25%的股份应在第一年届满时兑现,剩余的部分于接下来的三十六( 36)个月中按月平均兑现。

19. Drag-Along Events. Except as provided in the applicable Award Agreement or subplan, in the event of a Drag-Along Event, the Grantees who hold any 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 or a Person authorized by the Board, a power of attorney to transfer, sell, convey and assign his/her 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.

领售权交易。除非在相关授予协议中另有规定,在发生领售权交易的情况下,基于行使授权而持有任何股份的被授权人,应当根据领售权交易出售、转让、让渡或让与其全部股份,并使领售权交易得以有效实现。被授权人应当授权公司的董事会或董事会不时指定的其他人士为完成领售权交易而对他 /她的股份进行转让、出售、让与和让渡,并采取一切必要且适当的行为和签署一切必要且适当的文件。

 

24


20. IPO. In the case of a IPO, the Grantees shall enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company for the purpose of the IPO, and each of such Grantees shall grant to the Board or a Person authorized by the Board, a power of attorney to enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company and to do and carry out all the acts and to execute all the documents that are necessary or advisable to complete the IPO.

首次公开发行。首次公开发行时,被授权人将与公司为首次公开发行而委任的任何承销商、协调者、银行业者或保荐人签署一切协议。为此目的,被授权人特此不可撤销地授权公司董事会或董事会不时指定的其他人士与公司委任的任何承销商、协调者、银行业者或保荐人签署一切协议,并为完成首次公开发行采取一切必要且适当的行为和签署一切必要且适当的文件。

21. Service with Competitor. Notwithstanding Section 8(b), and except as provided in the applicable Award Agreement or subplan or as otherwise determined by the Administrator, in the event a Grantee serves as the director, officer, employee (whether full time or part time), shareholder, representative or agent of a competitor of the Company and the Related Entities (the “Service with Competitor”) after termination of the Grantee’s Continuous Service, with or without Cause, excluding any passive investment by way of shares or other securities of not more than 5% of the total issued share capital of any company, the Grantee’s right to exercise the Awards shall terminate immediately upon the date of the Service with Competitor, except as otherwise determined by the Administrator, and the Company shall have rights to repurchase all vested Awards and exercised Shares held by the Grantee at a discount price determined by the Administrator.

竞争任职。尽管有第8(b)款之规定,,除非规定在可适用的授予协议或子计划或除非管理人另有决定,如果被授权人在持续任职终止(无论是否因事由)之后,担任公司竞争者或其关联实体的董事、管理人员、雇员(无论全职或兼职)、股东、代表或代理( 竞争任职),不包括对不超过任何公司发行股份总数的 5% 的股份或其他证券进行的任何被动投资,除非管理人另有决定,否则被授权人行权的权利应当从开始竞争任职之日终止,并且公司应当有权以管理人确定的折价回购被授权人的所有兑现期权和已行权的股份。

22. Unfunded Obligation. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

25


无基金义务。无论出于任何目的,本计划项下对被授权人的应付款项都没有义 务被用于设立基金或作为抵押。公司和关联实体都不得被要求从其普通基金中隔离任何款项、或设立任何信托、或为类似目的设立任何特殊账户。公司应保留其在任何投资(包括信托投资)中的实益所有权,以用于履行其在本计划项下的付款义务。任何投资、或任何对信托或被授权人账户的设立或维护,都不得设立或构成信托或者管理人、公司、关联实体和被授权人之间的信托关系,都不得设立任何被授权人或被授权人的债权人在公司或任何关联实体资产上的既得利益或受益权利。无论公司基于本计划投资或再投资的任何资产发生任何价值变化,被授权人都无权向公司或关联实体提出任何主张。

23. Entire Plan. This Plan, the individual Award Agreements and any other document, together with all the exhibits hereto and thereto, constitute and contain the entire stock incentive plan and understanding of the parties with respect to the subject matter hereof and supersede any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties respecting the subject matter hereof.

完整计划。本计划、单独的授予协议和其他任何文件、连同本计划的全部附件,构成了完整的股权激励计划和各方对相关事项的完整谅解,并完整代替各方此前就相关事项的任何或全部谈判、通信、协议、谅解、责任或义务(包括公司在此前制定的任何或全部股权激励计划)。

24. Construction; Language. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. This Plan is stipulated in both English and Chinese. In case of any discrepancy between the Chinese and English version, the English version shall prevail in any case.

解释;语言。本计划中的标题只是出于方便而设,并不影响本计划的任何意思和解释。除非上下文中另有明确表示,否则本计划中仅表示单数形式的用语也应包括其复数形式,反之亦然。除非上下文中另有明确表示, 的使用并不意味着排他。本计划以中文及英文制定。若中文版本与英文版本之间存在任何不一致之处,在任何情况下应以英文版为准。

25. Modifications and Subplans. Without amending this Plan, the Administrator may grant awards to eligible persons on such terms and conditions different from those specified in this Plan as may in the judgment of the Administrator be necessary to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Administrator may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with the Applicable Laws or market practices of the countries or jurisdictions in which the Company or its Subsidiaries operates or has employees.

修订与子计划。在不修订本计划的情况下,管理人为促进实现本计划可根据管理人自身判断就与本计划不同的条款及条件向具有的资格人士授权,以及为促进上述目的管理人可作出相应的修订、修改、程序、子计划,以符合该公司或其子公司经营或拥有雇员的有关国家或司法管辖区的适用法律或市场惯例。

 

26

EX-10.7

Exhibit 10.7

Power of Attorney

Date: April 19, 2018

I, Bin LI , a citizen of the People’s Republic of China (“China” or the “PRC”) whose Identification Card No. is ********, and a holder of 80% of the registered capital of Shanghai Anbin Technology Co., Ltd. (the “Anbin Technology”) as of the date of this Power of Attorney, hereby irrevocably authorize and entrust NIO Co., Ltd. (the “WFOE”) to exercise the following rights and handle the following matters on my behalf relating to all equity interests held by me now and in the future in Anbin Technology (the “My Shareholding”), during the term of this Power of Attorney:

The WFOE is hereby authorized, as my sole and exclusive agent and attorney, to act on behalf of myself with respect to all rights and matters concerning My Shareholding, including without limitation to: 1) convening and attending shareholders’ meetings of Anbin Technology; 2) exercising all of the shareholder’s rights and shareholder’s voting rights that I am entitled to under the laws of China and the articles of association of Anbin Technology; 3) handling the sale, transfer, pledge or disposition of My Shareholding (in part or in whole), including without limitation executing all necessary equity transfer documents and other documents for disposal of My Shareholding and fulfilling all necessary procedures; 4) representing myself in executing any resolutions and minutes as a shareholder of Anbin Technology on my behalf; 5) nominating, electing, designating, appointing or removing on behalf of myself the legal representative, directors, supervisors, general managers, chief executive officer and other senior management members of Anbin Technology; and 6) approving the amendments to the company’s articles of association. Without written consent by WFOE, I have no right to increase, decrease, transfer, pledge, or by any other manner to dispose or change My Shareholding.

Without limiting the generality of the powers granted hereunder, the WFOE shall have the power and authority to, on behalf of myself, execute all and any supplementary agreements, ancillary documents, modifications, and/or amended and restated versions in relation to the Exclusive Option Agreement, Equity Interest Pledge Agreement, Exclusive Business Cooperation Agreement and Loan Agreement dated April 19, 2018, by and among WFOE, Anbin Technology and/or myself, and any documents and agreements I shall sign as required in the aforesaid agreements (including without limitation the “Transfer Contract” for the transfer of the “Optioned Interests” as described under the Exclusive Option Agreement), and perform the obligations under the aforesaid documents and agreements.

All the actions associated with My Shareholding conducted by the WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by the WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify the actions taken by the WFOE and the documents executed by the WFOE in relation to My Shareholding.


I hereby agree that the WFOE has the right to re-authorize or assign one or multiple matters and its rights related to such matters under this Power of Attorney to any other person or entity at its own discretion and without obtaining my prior consent. If required by PRC laws, the WFOE shall designate a qualified PRC citizen to handle such matters and exercise such rights as set forth in this Power of Attorney.

This Power of Attorney takes effect as of the date hereof. During the period that I am a shareholder of Anbin Technology, this Power of Attorney shall be irrevocable and continuously effective and valid from the date of execution of this Power of Attorney.

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the WFOE through this Power of Attorney, and shall not exercise such rights by myself.

 

By:  

/s/ Bin Li

Name:   Bin LI

 

Witness:  

/s/ Shuye Wu

Name:   Shuye WU
Accepted by:
NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Acknowledged by:
Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Power of Attorney

Date: April 19, 2018

I, Lihong QIN, a citizen of the People’s Republic of China (“China” or the “PRC”) whose Identification Card No. is ********, and a holder of 20% of the registered capital of Shanghai Anbin Technology Co., Ltd. (the “Anbin Technology”) as of the date of this Power of Attorney, hereby irrevocably authorize and entrust NIO Co., Ltd. (the “WFOE”) to exercise the following rights and handle the following matters on my behalf relating to all equity interests held by me now and in the future in Anbin Technology (the “My Shareholding”), during the term of this Power of Attorney:

The WFOE is hereby authorized, as my sole and exclusive agent and attorney, to act on behalf of myself with respect to all rights and matters concerning My Shareholding, including without limitation to: 1) convening and attending shareholders’ meetings of Anbin Technology; 2) exercising all of the shareholder’s rights and shareholder’s voting rights that I am entitled to under the laws of China and the articles of association of Anbin Technology; 3) handling the sale, transfer, pledge or disposition of My Shareholding (in part or in whole), including without limitation executing all necessary equity transfer documents and other documents for disposal of My Shareholding and fulfilling all necessary procedures; 4) representing myself in executing any resolutions and minutes as a shareholder and a director of Anbin Technology on my behalf; 5) nominating, electing, designating, appointing or removing on behalf of myself the legal representative, directors, supervisors, general managers, chief executive officer and other senior management members of Anbin Technology; and 6) approving the amendments to the company’s articles of association. Without written consent by WFOE, I have no right to increase, decrease, transfer, pledge, or by any other manner to dispose or change My Shareholding.

Without limiting the generality of the powers granted hereunder, the WFOE shall have the power and authority to, on behalf of myself, execute all and any supplementary agreements, ancillary documents, modifications, and/or amended and restated versions in relation to the Exclusive Option Agreement, Equity Interest Pledge Agreement, Exclusive Business Cooperation Agreement and Loan Agreement dated April 19, 2018, by and among WFOE, Anbin Technology and/or myself, and any documents and agreements I shall sign as required in the aforesaid agreements (including without limitation the “Transfer Contract” for the transfer of the “Optioned Interests” as described under the Exclusive Option Agreement), and perform the obligations under the aforesaid documents and agreements.

All the actions associated with My Shareholding conducted by the WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by the WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify the actions taken by the WFOE and the documents executed by the WFOE in relation to My Shareholding.


I hereby agree that the WFOE has the right to re-authorize or assign one or multiple matters and its rights related to such matters under this Power of Attorney to any other person or entity at its own discretion and without obtaining my prior consent. If required by PRC laws, the WFOE shall designate a qualified PRC citizen to handle such matters and exercise such rights as set forth in this Power of Attorney.

This Power of Attorney takes effect as of the date hereof. During the period that I am a shareholder of Anbin Technology, this Power of Attorney shall be irrevocable and continuously effective and valid from the date of execution of this Power of Attorney.

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the WFOE through this Power of Attorney, and shall not exercise such rights by myself.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN

 

Witness:  

/s/ Shuye Wu

Name:   Shuye WU
Accepted by:
NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Acknowledged by:
Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
EX-10.8

Exhibit 10.8

Loan Agreement

This Loan Agreement (the “Agreement”) is made and entered into by and between the Parties below as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

  (1) NIO Co., Ltd. (the “Lender”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

  (2) Bin LI (the “Borrower”), a citizen of China with Identification No.: ********.

In this Agreement, each of the Lender and the Borrower shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. As of the date hereof, the Borrower holds 80% of equity interests in Shanghai Anbin Technology Co., Ltd. (the “Borrower Company”). All of the equity interest now held and hereafter acquired by the Borrower in the Borrower Company shall be referred to as the “Borrower Equity Interest;”

 

2. The Lender agrees to provide the Borrower with a loan in the aggregate amount of RMB 24,000,000 to be used for the purposes set forth in this Agreement.

After friendly consultation, the Parties agree as follows:

 

1 Loan

 

  1.1 In accordance with the terms and conditions of this Agreement, the Lender agrees to provide to the Borrower a loan in the aggregate amount of RMB 24,000,000 (the “Loan”). Once the Lender receives a notice from the Borrower requesting the provision of all or any part of the Loan during the term of this Agreement, the Lender shall within one (1) month after receiving such notice provide that portion of Loan to the Borrower. The term of the Loan shall be the term of this Agreement. During the term of the Loan, upon occurrence of any of the following circumstances, the term of the Loan shall accelerate and the Borrower shall immediately repay the full amount of the Loan (and any interest thereon):

 

  1.1.1 Thirty (30) days elapsed after the Borrower receives a written notice from the Lender requesting repayment of the Loan (and all interest thereon);

 

  1.1.2 The Borrower’s death, lack, or limitation of civil capacity;

 

1

Strictly Confidential


  1.1.3 The Borrower ceases (for any reason) to be a shareholder of the Borrower Company or its affiliates, and the Borrower is not an employee of the Lender, the Borrower Company or their affiliates;

 

  1.1.4 The Borrower engages in criminal act or is involved in criminal activities;

 

  1.1.5 According to the applicable laws of China, foreign investors are permitted to invest in the principal business that is currently conducted by the Borrower Company in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, the competent government authorities of China begin to approve such investments, and the Lender elects to exercise the exclusive option under the Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement; or the Lender or the Borrower Company has violated or committed a breach of its representations, warranties, covenants or other obligations under the Exclusive Option Agreement;

 

  1.1.6 The Borrower Company failed to obtain or renew any governmental approval or license necessary for the operation of its core business.

 

  1.2 The Borrower agrees to accept the aforementioned Loan provided by the Lender, and hereby agrees and undertakes to use the Loan solely for the contribution of the registered capital of the Borrower Company, or for the working capital of the Borrower Company. Without the Lender’s prior written consent, the Borrower shall not use the Loan for any purpose other than as set forth herein.

 

  1.3 The Lender and the Borrower hereby agree and confirm that the Borrower shall repay the Loan only through the following means (or other means approved by the Lender): by transferring the Borrower Equity Interest in whole to the Lender or the Lender’s designated persons (legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement, and any proceeds from the transfer of the Borrower Equity Interest (to the extent permissible) shall be used by the Borrower to repay the Loan (principal and any interest thereon) to the Lender or the Lender’s designated persons, in accordance with this Agreement and in the manner designated by the Lender.

 

  1.4 The Lender and the Borrower hereby agree and confirm that to the extent permitted by the applicable laws, the Lender shall have the right (but not the obligation) to purchase or designate other persons (legal or natural persons) to purchase the Borrower Equity Interest in part or in whole at any time, at the price stipulated in the Exclusive Option Agreement.

 

  1.5 The Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes the Lender or a legal or natural person designated by the Lender to exercise all of the Borrower’s rights as a shareholder of the Borrower Company.

 

2

Strictly Confidential


  1.6 When the Borrower transfers the Borrower Equity Interest to the Lender or the Lender’s designated person(s) in accordance with the Exclusive Option Agreement, (1) in the event that the transfer price of such Borrower Equity Interest equals to or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be an interest-free loan, (2) in the event that the transfer price of such Borrower Equity Interest exceeds the actual principal amount of the Loan under this Agreement, the excess over the actual principal amount shall be the interest of the Loan under this Agreement to the extent not prohibited by the PRC laws, and all of such interest shall be repaid by the Borrower to the Lender or otherwise paid by the Borrower to the Lender’s designated person(s) through legal means within ten (10) days after receiving the transfer price.

 

2 Representations and Warranties

 

  2.1 Between the date of this Agreement and the date of termination of this Agreement, the Lender hereby makes the following representations and warranties to the Borrower:

 

  2.1.1 The Lender is a corporation duly organized and legally existing in accordance with the laws of China;

 

  2.1.2 The Lender has the legal capacity to execute and perform this Agreement. The execution and performance by the Lender of this Agreement do not violate the Lender’s articles of association or other organizational documents, and the Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and

 

  2.1.3 This Agreement constitutes the Lender’s legal, valid, and binding obligations enforceable in accordance with its terms.

 

  2.2 Between the date of this Agreement and the date of termination of this Agreement, the Borrower hereby makes the following representations and warranties:

 

  2.2.1 The Borrower has the legal capacity to execute and perform this Agreement. The Borrower has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement;

 

  2.2.2 This Agreement constitutes the Borrower’s legal, valid, and binding obligations enforceable in accordance with its terms; and

 

  2.2.3 There are no disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower, nor are there any potential disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower.

 

3

Strictly Confidential


3 Borrower’s Covenants

 

  3.1 As and when he/she becomes, and for so long as he/she remains a shareholder of the Borrower Company, the Borrower irrevocably covenants that during the term of this Agreement, the Borrower shall ensure the Borrower Company:

 

  3.1.1 to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement (the “Exclusive Business Cooperation Agreement”) to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement.

 

  3.1.2 at the request of the Lender (or a party designated by the Lender), to execute the contracts/agreements on business cooperation with the Lender (or a party designated by the Lender), and to strictly abide by such contracts/agreements;

 

  3.1.3 to provide the Lender with all of the information on the Borrower Company’s business operations and financial condition at the Lender’s request;

 

  3.1.4 to immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to the Borrower Company’s assets, business, or income;

 

  3.1.5 at the request of the Lender, to appoint any persons designated by the Lender as the director or the executive director of the Borrower Company;

 

  3.2 :the Borrower covenants that during the term of this Agreement, he/she shall:

 

  3.2.1 endeavor to keep the Borrower Company to be engaged in its principle business and to keep the specific business scope of its business license;

 

  3.2.2 abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement (the “Equity Interest Pledge Agreement”) and the Exclusive Option Agreement to which the Borrower is a party, perform his/her obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;

 

4

Strictly Confidential


  3.2.3 without the prior written consent of the Lender, not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except in accordance with the Equity Interest Pledge Agreement, the Exclusive Option Agreement and the Power of Attorney;

 

  3.2.4 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except to the Lender or the Lender’s designated person;

 

  3.2.5 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of the Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of the Lender;

 

  3.2.6 immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the Borrower Company’s assets, business or revenue or relating to the Borrower Equity Interest;

 

  3.2.7 to the extent necessary to maintain his/her ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all claims;

 

  3.2.8 without the prior written consent of the Lender, not cause the Borrower Company to sell, transfer, mortgage or dispose of in any manner any material assets of the Borrower Company or legal or beneficial interest in the material business or revenues of the Borrower Company, or allow the encumbrance thereon of any security interest, and refrain from any action/omission that may have a material impact on the assets, business and liabilities of the Borrower Company;

 

  3.2.9 appoint any designee of the Lender as the director or the executive director of the Borrower Company, at the request of the Lender;

 

  3.2.10 to the extent permitted by the laws of China, at the request of the Lender at any time, promptly and unconditionally transfer all of the Borrower Equity Interest to the Lender or the Lender’s designated representative(s) at any time, and ensure the other shareholders of the Borrower Company to waive their right of first refusal with respect to the share transfer described in this Section;

 

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  3.2.11 to the extent permitted by the laws of China, at the request of the Lender at any time, ensure that the other shareholders of the Borrower Company shall promptly and unconditionally transfer all of their equity interests in the Borrower Company to the Lender or the Lender’s designated representative(s) at any time, and the Borrower hereby waives his/her right of first refusal (if any) with respect to the equity transfer by such other shareholders described in this Section;

 

  3.2.12 in the event that the Lender purchases the Borrower Equity Interest from the Borrower in accordance with the provisions of the Exclusive Option Agreement, use such purchase price obtained thereby to repay the Loan (and any interest thereon) to the Lender; and

 

  3.2.13 without the prior written consent of the Lender, not cause the Borrower Company to supplement, change, or amend its articles of association in any manner, increase or decrease its registered capital or change its share capital structure in any manner.

 

4 Liability for Default

 

  4.1 If the Borrower materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Borrower. The Lender is entitled to require the Borrower to rectify or take remedial measures. If the Borrower fails to rectify or take remedial measures within ten (10) days after the Lender delivers a written notice to the Borrower and requires for rectification (or within any other reasonable period required by the Lender), the Lender is entitled to, at its sole discretion, (1) terminate this Agreement and require the Borrower to compensate all the losses; or (2) require specific performance of the obligations of the Borrower under this Agreement and require the Borrower to compensate all the losses. This Section shall not prejudice any other rights of the Lender under this Agreement

 

  4.2 Unless otherwise required by the applicable laws, the Borrower shall not terminate this Agreement unilaterally in any event. Unless otherwise expressly set forth in this Agreement or requested by the Lender in writing, the Borrower shall not, in any event, repay the principal of the Loan or any interest thereon before the termination of the term of the Loan.

 

  4.3 In the event that the Borrower fails to perform the repayment obligations set forth in this Agreement, the Borrower shall pay an overdue interest of 0.01% per day for the outstanding payment, until the day the Borrower repays the full principal of the Loan (and any interest thereon), overdue interests and other payable amounts.

 

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5 Notices

 

  5.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  5.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below

 

  5.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  5.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  5.2 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms of this Section.

 

6 Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

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7 Governing Law and Resolution of Disputes

 

  7.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes shall be governed by the laws of China.

 

  7.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

  7.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

8 Miscellaneous

 

  8.1 This Agreement shall become effective upon execution by the Parties, and shall expire upon the date of full performance by the Parties of their respective obligations under this Agreement.

 

  8.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  8.3 In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  8.4 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

 

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  8.5 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.5 shall survive the termination of this Agreement.

 

  8.6 This Agreement shall be written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.

 

Lender:   NIO Co., Ltd.
By:  

    /s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative

 

Borrower:   Bin LI
By:  

    /s/ Bin Li


Loan Agreement

This Loan Agreement (the “Agreement”) is made and entered into by and between the Parties below as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

  (1) NIO Co., Ltd. (the “Lender”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

  (2) Lihong QIN (the “Borrower”), a citizen of China with Identification No.: ********.

In this Agreement, each of the Lender and the Borrower shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. As of the date hereof, the Borrower holds 20% of equity interests in Shanghai Anbin Technology Co., Ltd. (the “Borrower Company”). All of the equity interest now held and hereafter acquired by the Borrower in the Borrower Company shall be referred to as the “Borrower Equity Interest;”

 

2. The Lender agrees to provide the Borrower with a loan in the aggregate amount of RMB 6,000,000 to be used for the purposes set forth in this Agreement.

 

  After friendly consultation, the Parties agree as follows:

 

1 Loan

 

  1.1 In accordance with the terms and conditions of this Agreement, the Lender agrees to provide to the Borrower a loan in the aggregate amount of RMB 6,000,000 (the “Loan”). Once the Lender receives a notice from the Borrower requesting the provision of all or any part of the Loan during the term of this Agreement, the Lender shall within one (1) month after receiving such notice provide that portion of Loan to the Borrower. The term of the Loan shall be the term of this Agreement. During the term of the Loan, upon occurrence of any of the following circumstances, the term of the Loan shall accelerate and the Borrower shall immediately repay the full amount of the Loan (and any interest thereon):

 

  1.1.1 Thirty (30) days elapsed after the Borrower receives a written notice from the Lender requesting repayment of the Loan (and all interest thereon);

 

  1.1.2 The Borrower’s death, lack, or limitation of civil capacity;

 

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  1.1.3 The Borrower ceases (for any reason) to be a shareholder of the Borrower Company or its affiliates, and the Borrower is not an employee of the Lender, the Borrower Company or their affiliates;

 

  1.1.4 The Borrower engages in criminal act or is involved in criminal activities;

 

  1.1.5 According to the applicable laws of China, foreign investors are permitted to invest in the principal business that is currently conducted by the Borrower Company in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, the competent government authorities of China begin to approve such investments, and the Lender elects to exercise the exclusive option under the Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement; or the Lender or the Borrower Company has violated or committed a breach of its representations, warranties, covenants or other obligations under the Exclusive Option Agreement;

 

  1.1.6 The Borrower Company failed to obtain or renew any governmental approval or license necessary for the operation of its core business.

 

  1.2 The Borrower agrees to accept the aforementioned Loan provided by the Lender, and hereby agrees and undertakes to use the Loan solely for the contribution of the registered capital of the Borrower Company, or for the working capital of the Borrower Company. Without the Lender’s prior written consent, the Borrower shall not use the Loan for any purpose other than as set forth herein.

 

  1.3 The Lender and the Borrower hereby agree and confirm that the Borrower shall repay the Loan only through the following means (or other means approved by the Lender): by transferring the Borrower Equity Interest in whole to the Lender or the Lender’s designated persons (legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement, and any proceeds from the transfer of the Borrower Equity Interest (to the extent permissible) shall be used by the Borrower to repay the Loan (principal and any interest thereon) to the Lender or the Lender’s designated persons, in accordance with this Agreement and in the manner designated by the Lender.

 

  1.4 The Lender and the Borrower hereby agree and confirm that to the extent permitted by the applicable laws, the Lender shall have the right (but not the obligation) to purchase or designate other persons (legal or natural persons) to purchase the Borrower Equity Interest in part or in whole at any time, at the price stipulated in the Exclusive Option Agreement.

 

  1.5 The Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes the Lender or a legal or natural person designated by the Lender to exercise all of the Borrower’s rights as a shareholder of the Borrower Company.

 

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  1.6 When the Borrower transfers the Borrower Equity Interest to the Lender or the Lender’s designated person(s) in accordance with the Exclusive Option Agreement, (1) in the event that the transfer price of such Borrower Equity Interest equals to or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be an interest-free loan, (2) in the event that the transfer price of such Borrower Equity Interest exceeds the actual principal amount of the Loan under this Agreement, the excess over the actual principal amount shall be the interest of the Loan under this Agreement to the extent not prohibited by the PRC laws, and all of such interest shall be repaid by the Borrower to the Lender or otherwise paid by the Borrower to the Lender’s designated person(s) through legal means within ten (10) days after receiving the transfer price.

 

2 Representations and Warranties

 

  2.1 Between the date of this Agreement and the date of termination of this Agreement, the Lender hereby makes the following representations and warranties to the Borrower:

 

  2.1.1 The Lender is a corporation duly organized and legally existing in accordance with the laws of China;

 

  2.1.2 The Lender has the legal capacity to execute and perform this Agreement. The execution and performance by the Lender of this Agreement do not violate the Lender’s articles of association or other organizational documents, and the Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and

 

  2.1.3 This Agreement constitutes the Lender’s legal, valid, and binding obligations enforceable in accordance with its terms.

 

  2.2 Between the date of this Agreement and the date of termination of this Agreement, the Borrower hereby makes the following representations and warranties:

 

  2.2.1 The Borrower has the legal capacity to execute and perform this Agreement. The Borrower has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement;

 

  2.2.2 This Agreement constitutes the Borrower’s legal, valid, and binding obligations enforceable in accordance with its terms; and

 

  2.2.3 There are no disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower, nor are there any potential disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower.

 

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3 Borrower’s Covenants

 

  3.1 As and when he/she becomes, and for so long as he/she remains a shareholder of the Borrower Company, the Borrower irrevocably covenants that during the term of this Agreement, the Borrower shall ensure the Borrower Company:

 

  3.1.1 to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement (the “Exclusive Business Cooperation Agreement”) to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement.

 

  3.1.2 at the request of the Lender (or a party designated by the Lender), to execute the contracts/agreements on business cooperation with the Lender (or a party designated by the Lender), and to strictly abide by such contracts/agreements;

 

  3.1.3 to provide the Lender with all of the information on the Borrower Company’s business operations and financial condition at the Lender’s request;

 

  3.1.4 to immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to the Borrower Company’s assets, business, or income;

 

  3.1.5 at the request of the Lender, to appoint any persons designated by the Lender as the director or the executive director of the Borrower Company;

 

  3.2 the Borrower covenants that during the term of this Agreement, he/she shall:

 

  3.2.1 endeavor to keep the Borrower Company to be engaged in its principle business and to keep the specific business scope of its business license;

 

  3.2.2 abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement (the “Equity Interest Pledge Agreement”) and the Exclusive Option Agreement to which the Borrower is a party, perform his/her obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;

 

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  3.2.3 without the prior written consent of the Lender, not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except in accordance with the Equity Interest Pledge Agreement, the Exclusive Option Agreement and the Power of Attorney;

 

  3.2.4 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except to the Lender or the Lender’s designated person;

 

  3.2.5 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of the Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of the Lender;

 

  3.2.6 immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the Borrower Company’s assets, business or revenue or relating to the Borrower Equity Interest;

 

  3.2.7 to the extent necessary to maintain his/her ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all claims;

 

  3.2.8 without the prior written consent of the Lender, not cause the Borrower Company to sell, transfer, mortgage or dispose of in any manner any material assets of the Borrower Company or legal or beneficial interest in the material business or revenues of the Borrower Company, or allow the encumbrance thereon of any security interest, and refrain from any action/omission that may have a material impact on the assets, business and liabilities of the Borrower Company;

 

  3.2.9 appoint any designee of the Lender as the director or the executive director of the Borrower Company, at the request of the Lender;

 

  3.2.10 to the extent permitted by the laws of China, at the request of the Lender at any time, promptly and unconditionally transfer all of the Borrower Equity Interest to the Lender or the Lender’s designated representative(s) at any time, and ensure the other shareholders of the Borrower Company to waive their right of first refusal with respect to the share transfer described in this Section;

 

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  3.2.11 to the extent permitted by the laws of China, at the request of the Lender at any time, ensure that the other shareholders of the Borrower Company shall promptly and unconditionally transfer all of their equity interests in the Borrower Company to the Lender or the Lender’s designated representative(s) at any time, and the Borrower hereby waives his/her right of first refusal (if any) with respect to the equity transfer by such other shareholders described in this Section;

 

  3.2.12 in the event that the Lender purchases the Borrower Equity Interest from the Borrower in accordance with the provisions of the Exclusive Option Agreement, use such purchase price obtained thereby to repay the Loan (and any interest thereon) to the Lender; and

 

  3.2.13 without the prior written consent of the Lender, not cause the Borrower Company to supplement, change, or amend its articles of association in any manner, increase or decrease its registered capital or change its share capital structure in any manner.

 

4 Liability for Default

 

  4.1 If the Borrower materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Borrower. The Lender is entitled to require the Borrower to rectify or take remedial measures. If the Borrower fails to rectify or take remedial measures within ten (10) days after the Lender delivers a written notice to the Borrower and requires for rectification (or within any other reasonable period required by the Lender), the Lender is entitled to, at its sole discretion, (1) terminate this Agreement and require the Borrower to compensate all the losses; or (2) require specific performance of the obligations of the Borrower under this Agreement and require the Borrower to compensate all the losses. This Section shall not prejudice any other rights of the Lender under this Agreement

 

  4.2 Unless otherwise required by the applicable laws, the Borrower shall not terminate this Agreement unilaterally in any event. Unless otherwise expressly set forth in this Agreement or requested by the Lender in writing, the Borrower shall not, in any event, repay the principal of the Loan or any interest thereon before the termination of the term of the Loan.

 

  4.3 In the event that the Borrower fails to perform the repayment obligations set forth in this Agreement, the Borrower shall pay an overdue interest of 0.01% per day for the outstanding payment, until the day the Borrower repays the full principal of the Loan (and any interest thereon), overdue interests and other payable amounts.

 

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5 Notices

 

  5.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  5.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below

 

  5.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  5.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  5.2 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms of this Section.

 

6 Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

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7 Governing Law and Resolution of Disputes

 

  7.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes shall be governed by the laws of China.

 

  7.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

  7.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

8 Miscellaneous

 

  8.1 This Agreement shall become effective upon execution by the Parties, and shall expire upon the date of full performance by the Parties of their respective obligations under this Agreement.

 

  8.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  8.3 In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  8.4 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

 

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  8.5 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.5 shall survive the termination of this Agreement.

 

  8.6 This Agreement shall be written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.

 

Lender: NIO Co., Ltd.
By:  

    /s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Borrower: Lihong QIN
By:  

    /s/ Lihong Qin

EX-10.9

Exhibit 10.9

Equity Interest Pledge Agreement

This Exclusive Interest Pledge Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party A: NIO Co., Ltd. (hereinafter the “Pledgee”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

Party B: Bin LI (hereinafter the “Pledgor”), a Chinese citizen with Identification No.: ********;

 

Party C: Shanghai Anbin Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its registered address at Room J1289, Floor 4, No.5358, Huyi Road, Jiading District, Shanghai.

In this Agreement, each of the Pledgee, the Pledgor and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. The Pledgor is a citizen of China who as of the date hereof holds 80% of the equity interests of Party C, representing RMB 24,000,000 in the registered capital of Party C. Party C is a limited liability company registered in Shanghai, China. Party C acknowledges the respective rights and obligations of the Pledgor and the Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

 

2. The Pledgee is a wholly foreign-owned enterprise registered in China. The Pledgee and Party C have executed an Exclusive Business Cooperation Agreement (as defined below); Party C, the Pledgee and the Pledgor have executed an Exclusive Option Agreement (as defined below); the Pledgor has executed a Power of Attorney (as defined below) in favor of the Pledgee; and the Pledgee and the Pledgor have executed a Loan Agreement (as defined below) as defined below);

 

3. To ensure that Party C and the Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Load Agreement and the Power of Attorney, the Pledgor hereby pledges to the Pledgee all of the equity interest that the Pledgor holds in Party C as security for Party C’s and the Pledgor’s obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Loan Agreement and the Power of Attorney.

To perform the provisions of the Transaction Documents (as defined below), the Parties have mutually agreed to execute this Agreement upon the following terms.

 

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1. Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

 

  1.1 Pledge: shall refer to the security interest granted by the Pledgor to the Pledgee pursuant to Section 2 of this Agreement, i.e., the right of the Pledgee to be paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest.

 

  1.2 Equity Interest: shall refer to 80% equity interests in Party C currently held by the Pledgor, representing RMB24,000,000 in the registered capital of Party C, and all of the equity interest hereafter legally acquired by the Pledgor in Party C.

 

  1.3 Term of the Pledge: shall refer to the term set forth in Section 3 of this Agreement.

 

  1.4 Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and the Pledgee on April 19, 2018, (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, the Pledgee and the Pledgor on April 19, 2018, (the “Exclusive Option Agreement”), the Loan Agreement executed by and between the Pledgee and the Pledgor on April 19, 2018, (the “Loan Agreement”), Power of Attorney executed on April 19, 2018, by the Pledgor (the “Power of Attorney”) and any modification, amendment and restatement to the aforementioned documents.

 

  1.5 Contract Obligations: shall refer to all the obligations of the Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan Agreement and this Agreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and this Agreement.

 

  1.6 Secured Indebtedness: shall refer to all the direct, indirect and derivative losses and losses of anticipated profits, suffered by the Pledgee, incurred as a result of any Event of Default on the part of the Pledgor and/or Party C under the Transaction Documents. The amount of such losses shall be calculated based on such factors as the reasonable business plan and profit forecast of the Pledgee, the consulting and service fees payable to the Pledgee under the Exclusive Business Cooperation Agreement, damages and relevant fees under the Transaction Documents, all expenses occurred by the Pledgee in connection with enforcement of the Pledgor’s and/or Party C’s Contract Obligations and etc.

 

  1.7 Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.

 

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  1.8 Notice of Default: shall refer to the notice issued by the Pledgee in accordance with this Agreement declaring an Event of Default.

 

2. Pledge

 

  2.1 The Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligations and payment of the Secured Indebtedness under this Agreement. Party C hereby assents that the Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.

 

  2.2 During the term of the Pledge, unless prohibited by the applicable laws and regulations, the Pledgee is entitled to receive dividends distributed on the Equity Interest. Without the prior written consent of the Pledgee, the Pledgor shall not receive dividends distributed on the Equity Interest. Dividends received by the Pledgor on Equity Interest after the deduction of individual income tax paid by the Pledgor shall be, as required by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to making any other payment; or (2) to the extent not prohibited by the applicable PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  2.3 The Pledgor may subscribe for a capital increase in Party C only with prior written consent of the Pledgee. Any additional equity interest obtained by the Pledgor as a result of the Pledgor’s subscription of the increased registered capital of the Company shall also be deemed as Equity Interest, and the Parties shall enter into further equity pledge agreement for this purpose and complete registration of the pledge of such additional equity interest.

 

  2.4 In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to the Pledgor upon Party C’s dissolution or liquidation shall, upon the request of the Pledgee, be (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) to the extent not prohibited by PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the applicable PRC laws.

 

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3. Term of the Pledge

 

  3.1 The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein is registered with the relevant administration for industry and commerce (the “AIC”). The Pledge shall remain effective until all Contract Obligations have been fully performed and all Secured Indebtedness has been fully paid. The Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the Parties shall be bound by the provisions of this Agreement. The Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the relevant PRC laws and regulations and the competent AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after submission for filing.

 

  3.2 During the Term of the Pledge, in the event the Pledgor and/or Party C fails to perform the Contract Obligations or pay Secured Indebtedness, the Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.

 

4. Custody of Records for Equity Interest subject to the Pledge

 

  4.1 During the Term of the Pledge set forth in this Agreement, the Pledgor shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. The Pledgee shall have custody of such documents during the entire Term of the Pledge set forth in this Agreement.

 

5. Representations and Warranties of the Pledgor and Party C

As of the execution date of this Agreement, the Pledgor and Party C hereby jointly and severally represent and warrant to the Pledgee that:

 

  5.1 The Pledgor is the sole legal and beneficial owner of the Equity Interest. The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 

  5.2 Each of the Pledgor and Party C has the power, capacity and authority to execute and deliver this Agreement, and to perform it/his obligations under this Agreement. This Agreement constitutes the Pledgor’s and Party C’s legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof.

 

  5.3 Except for the Pledge, the Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

 

  5.4 The Pledgor and Party C have obtained any and all approvals and consents from the applicable government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

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  5.5 The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or document to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.

 

6. Covenants of the Pledgor and Party C

 

  6.1 During the term of this Agreement, the Pledgor and Party C hereby jointly and severally covenant to the Pledgee:

 

  6.1.1 The Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of the Pledgee, except for the performance of the Transaction Documents; Party C shall not assent to or assist in the aforesaid behaviors;

 

  6.1.2 The Pledgor and Party C shall comply with and carry out all requirements under applicable laws and regulations relating to pledge, and within five (5) days of receipt of any notice, order or recommendation issued or made by the competent authorities regarding the Pledge (if any), shall present the aforementioned notice, order or recommendation to the Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon the Pledgee’s reasonable request or upon consent of the Pledgee;

 

  6.1.3 Each of the Pledgor and Party C shall promptly notify the Pledgee of any event or notice received by it that may have an impact on the Equity Interest (or any portion thereof,) as well as any event or notice received by it that may have an impact on any guarantees and obligations of the Pledgor under this Agreement or the performance of obligations of the Pledgor under this Agreement;

 

  6.1.4 Party C shall complete the registration procedures for the extension of the operation term within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.

 

  6.2 The Pledgor agrees that the rights acquired by the Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by the Pledgor or any, successors, heirs or representatives of the Pledgor or any other persons through any legal proceedings.

 

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  6.3 To protect or perfect the security interest granted by this Agreement for the Contract Obligations and Secured Indebtedness, the Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by the Pledgee. The Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with the Pledgee or designee(s) of the Pledgee (natural persons/legal persons). The Pledgor undertakes to provide the Pledgee within a reasonable time with all notices, the orders and decisions regarding the Pledge that are required by the Pledgee.

 

  6.4 The Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, the Pledgor shall indemnify the Pledgee for all losses resulting therefrom.

 

7. Event of Breach

 

  7.1 The following circumstances shall be deemed an Event of Default:

 

  7.1.1 The Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.1.2 Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, the Pledgor and Party C shall immediately notify the Pledgee in writing accordingly.

 

  7.3 Unless an Event of Default set forth in Section 7.1 has been successfully resolved to the Pledgee’s satisfaction within twenty (20) days after the Pledgee and/or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, the Pledgee may issue a Notice of Default to the Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of Section 8 of this Agreement.

 

8. Exercise of the Pledge

 

  8.1 The Pledgee shall issue a written Notice of Default to the Pledgor when it exercises the Pledge.

 

  8.2 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1.

 

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  8.3 After the Pledgee issues a Notice of Default to the Pledgor in accordance with Section 8.1, the Pledgee may exercise any remedy measure under the applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to being paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest. The Pledgee shall not be liable for any loss incurred by its duly exercise of such rights and powers.

 

  8.4 The proceeds from the exercise of the Pledge by the Pledgee shall be used to pay for the taxes and expenses incurred as a result of disposing the Equity Interest and to perform the Contract Obligations and pay the Secured Indebtedness to the Pledgee prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to the Pledgor or any other person who have rights to such balance under applicable laws or be deposited to the local notary public office where the Pledgor resides, with all expenses incurred being borne by the Pledgor. To the extent not prohibited by the applicable PRC laws, the Pledgor shall unconditionally donate the aforementioned proceeds to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  8.5 The Pledgee may exercise any remedy measure available to it simultaneously or in any order. The Pledgee may exercise the priority right in compensation based on the monetary valuation that such Equity Interest is converted into or with the proceeds from the auction or sale of the Equity Interest under this Agreement, without being required to exercise any other remedy measure first.

 

  8.6 The Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and the Pledgor or Party C shall not raise any objection to such exercise.

 

  8.7 When the Pledgee disposes of the Pledge in accordance with this Agreement, the Pledgor and Party C shall provide the necessary assistance to enable the Pledgee to enforce the Pledge in accordance with this Agreement.

 

9. Breach of Agreement

 

  9.1 If the Pledgor or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Pledgor or Party C (as the case may be). The Pledgee is entitled to require the Pledgor or Party C to rectify or take remedial measures. If within ten (10) days after the Pledgee delivers a written notice to the Pledgor or Party C and requires for rectification (or within any other reasonable period required by the Pledgee), the Pledgor or Party C (as the case may be) fails to rectify or take remedial measures, the Pledgee is entitled to, at its sole discretion, (1) terminate this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of the Pledgor or Party C (as the case may be) under this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of the Pledgee under this Agreement.

 

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  9.2 The Pledgor or Party C shall not have any right to terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

10. Assignment

 

  10.1 Without the Pledgee’s prior written consent, neither the Pledgor nor Party C shall assign or delegate its/his rights and obligations under this Agreement.

 

  10.2 This Agreement shall be binding on the Pledgor and his/her successors, heirs (including who inherited the Equity Interest) and permitted assigns, and shall be valid with respect to the Pledgee and each of his/her successors, heirs and permitted assigns.

 

  10.3 At any time, the Pledgee may assign any and all of its rights and obligations under the Transaction Documents and this Agreement to its designee(s), in which case the assignees shall have the rights and obligations of the Pledgee under the Transaction Documents and this Agreement, as if it were the original party to the Transaction Documents and this Agreement.

 

  10.4 In the event of change of the Pledgee due to assignment, the Pledgor and/or Party C shall, at the request of the Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the competent AIC.

 

  10.5 The Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of the Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by the Pledgor except in accordance with the written instructions of the Pledgee.

 

11. Termination

 

  11.1 Upon the fulfillment of all Contract Obligations and the full payment of all Secured Indebtedness by the Pledgor and Party C, the Pledgee shall release the Pledge under this Agreement upon the Pledgor’s request as soon as reasonably practicable and shall assist the Pledgor in de-registering the Pledge from the shareholders’ register of Party C and with the competent PRC local administration for industry and commerce.

 

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  11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.

 

12. Handling Fees and Other Expenses

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

 

13. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

14. Governing Law and Resolution of Disputes

 

  14.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  14.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  14.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

15. Severability

In the event that one or several of the provisions of this Contract are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

16. Attachments

The attachments set forth herein shall be an integral part of this Agreement.

 

17. Effectiveness and Amendments

 

  17.1 This Agreement shall become effective upon execution by the Parties, until the Contract Obligations have been fully performed and the Secured Indebtedness have been fully paid.

 

  17.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

18. Language and Counterparts

This Agreement is written in English in four copies. The Pledgor, the Pledgee and Party C shall hold one copy respectively and the other copy shall be used for registration.

The Remainder of this page is intentionally left blank

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.

 

Pledgee:   NIO Co., Ltd.
签字:  
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Pledgor:   Bin LI
签字:  
By:  

/s/ Bin Li

Party C:   Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Attachments:

 

1. Shareholders’ Register of Party C;

 

2. The Capital Contribution Certificate for Party C;

 

3. Exclusive Business Cooperation Agreement;

 

4. Exclusive Option Agreement;

 

5. Loan Agreement

 

6. Power of Attorney.


Equity Interest Pledge Agreement

This Exclusive Interest Pledge Agreement (this “Agreement”) is executed by and among the following Parties as of April 2018 Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party A: NIO Co., Ltd. (hereinafter the “Pledgee”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

Party B: Lihong QIN (hereinafter the “Pledgor”), a Chinese citizen with Identification No.: ********;

 

Party C: Shanghai Anbin Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its registered address at Room J1289, Floor 4, No.5358, Huyi Road, Jiading District, Shanghai.

In this Agreement, each of the Pledgee, the Pledgor and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. The Pledgor is a citizen of China who as of the date hereof holds 20% of the equity interests of Party C, representing RMB 6,000,000 in the registered capital of Party C. Party C is a limited liability company registered in Shanghai, China. Party C acknowledges the respective rights and obligations of the Pledgor and the Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

 

2. The Pledgee is a wholly foreign-owned enterprise registered in China. The Pledgee and Party C have executed an Exclusive Business Cooperation Agreement (as defined below); Party C, the Pledgee and the Pledgor have executed an Exclusive Option Agreement (as defined below); the Pledgor has executed a Power of Attorney (as defined below) in favor of the Pledgee; and the Pledgee and the Pledgor have executed a Loan Agreement (as defined below) as defined below);

 

3. To ensure that Party C and the Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Load Agreement and the Power of Attorney, the Pledgor hereby pledges to the Pledgee all of the equity interest that the Pledgor holds in Party C as security for Party C’s and the Pledgor’s obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Loan Agreement and the Power of Attorney.

To perform the provisions of the Transaction Documents (as defined below), the Parties have mutually agreed to execute this Agreement upon the following terms.

 

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1. Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

 

  1.1 Pledge: shall refer to the security interest granted by the Pledgor to the Pledgee pursuant to Section 2 of this Agreement, i.e., the right of the Pledgee to be paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest.

 

  1.2 Equity Interest: shall refer to 20% equity interests in Party C currently held by the Pledgor, representing RMB 6,000,000 in the registered capital of Party C, and all of the equity interest hereafter legally acquired by the Pledgor in Party C.

 

  1.3 Term of the Pledge: shall refer to the term set forth in Section 3 of this Agreement.

 

  1.4 Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and the Pledgee on April 19, 2018, (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, the Pledgee and the Pledgor on April 19, 2018, (the “Exclusive Option Agreement”), the Loan Agreement executed by and between the Pledgee and the Pledgor on April 19, 2018, (the “Loan Agreement”), Power of Attorney executed on April 19, 2018, by the Pledgor (the “Power of Attorney”) and any modification, amendment and restatement to the aforementioned documents.

 

  1.5 Contract Obligations: shall refer to all the obligations of the Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan Agreement and this Agreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and this Agreement.

 

  1.6 Secured Indebtedness: shall refer to all the direct, indirect and derivative losses and losses of anticipated profits, suffered by the Pledgee, incurred as a result of any Event of Default on the part of the Pledgor and/or Party C under the Transaction Documents. The amount of such losses shall be calculated based on such factors as the reasonable business plan and profit forecast of the Pledgee, the consulting and service fees payable to the Pledgee under the Exclusive Business Cooperation Agreement, damages and relevant fees under the Transaction Documents, all expenses occurred by the Pledgee in connection with enforcement of the Pledgor’s and/or Party C’s Contract Obligations and etc.

 

  1.7 Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.

 

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  1.8 Notice of Default: shall refer to the notice issued by the Pledgee in accordance with this Agreement declaring an Event of Default.

 

2. Pledge

 

  2.1 The Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligations and payment of the Secured Indebtedness under this Agreement. Party C hereby assents that the Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.

 

  2.2 During the term of the Pledge, unless prohibited by the applicable laws and regulations, the Pledgee is entitled to receive dividends distributed on the Equity Interest. Without the prior written consent of the Pledgee, the Pledgor shall not receive dividends distributed on the Equity Interest. Dividends received by the Pledgor on Equity Interest after the deduction of individual income tax paid by the Pledgor shall be, as required by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to making any other payment; or (2) to the extent not prohibited by the applicable PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  2.3 The Pledgor may subscribe for a capital increase in Party C only with prior written consent of the Pledgee. Any additional equity interest obtained by the Pledgor as a result of the Pledgor’s subscription of the increased registered capital of the Company shall also be deemed as Equity Interest, and the Parties shall enter into further equity pledge agreement for this purpose and complete registration of the pledge of such additional equity interest.

 

  2.4 In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to the Pledgor upon Party C’s dissolution or liquidation shall, upon the request of the Pledgee, be (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) to the extent not prohibited by PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the applicable PRC laws.

 

3. Term of the Pledge

 

  3.1 The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein is registered with the relevant administration for industry and commerce (the “AIC”). The Pledge shall remain effective until all Contract Obligations have been fully performed and all Secured Indebtedness has been fully paid. The Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the Parties shall be bound by the provisions of this Agreement. The Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the relevant PRC laws and regulations and the competent AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after submission for filing.

 

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  3.2 During the Term of the Pledge, in the event the Pledgor and/or Party C fails to perform the Contract Obligations or pay Secured Indebtedness, the Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.

 

4. Custody of Records for Equity Interest subject to the Pledge

 

  4.1 During the Term of the Pledge set forth in this Agreement, the Pledgor shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. The Pledgee shall have custody of such documents during the entire Term of the Pledge set forth in this Agreement.

 

5. Representations and Warranties of the Pledgor and Party C

As of the execution date of this Agreement, the Pledgor and Party C hereby jointly and severally represent and warrant to the Pledgee that:

 

  5.1 The Pledgor is the sole legal and beneficial owner of the Equity Interest. The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 

  5.2 Each of the Pledgor and Party C has the power, capacity and authority to execute and deliver this Agreement, and to perform it/his obligations under this Agreement. This Agreement constitutes the Pledgor’s and Party C’s legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof.

 

  5.3 Except for the Pledge, the Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

 

  5.4 The Pledgor and Party C have obtained any and all approvals and consents from the applicable government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

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  5.5 The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or document to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.

 

6. Covenants of the Pledgor and Party C

 

  6.1 During the term of this Agreement, the Pledgor and Party C hereby jointly and severally covenant to the Pledgee:

 

  6.1.1 The Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of the Pledgee, except for the performance of the Transaction Documents; Party C shall not assent to or assist in the aforesaid behaviors;

 

  6.1.2 The Pledgor and Party C shall comply with and carry out all requirements under applicable laws and regulations relating to pledge, and within five (5) days of receipt of any notice, order or recommendation issued or made by the competent authorities regarding the Pledge (if any), shall present the aforementioned notice, order or recommendation to the Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon the Pledgee’s reasonable request or upon consent of the Pledgee;

 

  6.1.3 Each of the Pledgor and Party C shall promptly notify the Pledgee of any event or notice received by it that may have an impact on the Equity Interest (or any portion thereof,) as well as any event or notice received by it that may have an impact on any guarantees and obligations of the Pledgor under this Agreement or the performance of obligations of the Pledgor under this Agreement;

 

  6.1.4 Party C shall complete the registration procedures for the extension of the operation term within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.

 

  6.2 The Pledgor agrees that the rights acquired by the Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by the Pledgor or any, successors, heirs or representatives of the Pledgor or any other persons through any legal proceedings.

 

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  6.3 To protect or perfect the security interest granted by this Agreement for the Contract Obligations and Secured Indebtedness, the Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by the Pledgee. The Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with the Pledgee or designee(s) of the Pledgee (natural persons/legal persons). The Pledgor undertakes to provide the Pledgee within a reasonable time with all notices, the orders and decisions regarding the Pledge that are required by the Pledgee.

 

  6.4 The Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, the Pledgor shall indemnify the Pledgee for all losses resulting therefrom.

 

7. Event of Breach

 

  7.1 The following circumstances shall be deemed an Event of Default:

 

  7.1.1 The Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.1.2 Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, the Pledgor and Party C shall immediately notify the Pledgee in writing accordingly.

 

  7.3 Unless an Event of Default set forth in Section 7.1 has been successfully resolved to the Pledgee’s satisfaction within twenty (20) days after the Pledgee and/or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, the Pledgee may issue a Notice of Default to the Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of Section 8 of this Agreement.

 

8. Exercise of the Pledge

 

  8.1 The Pledgee shall issue a written Notice of Default to the Pledgor when it exercises the Pledge.

 

  8.2 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1.

 

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  8.3 After the Pledgee issues a Notice of Default to the Pledgor in accordance with Section 8.1, the Pledgee may exercise any remedy measure under the applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to being paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest. The Pledgee shall not be liable for any loss incurred by its duly exercise of such rights and powers.

 

  8.4 The proceeds from the exercise of the Pledge by the Pledgee shall be used to pay for the taxes and expenses incurred as a result of disposing the Equity Interest and to perform the Contract Obligations and pay the Secured Indebtedness to the Pledgee prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to the Pledgor or any other person who have rights to such balance under applicable laws or be deposited to the local notary public office where the Pledgor resides, with all expenses incurred being borne by the Pledgor. To the extent not prohibited by the applicable PRC laws, the Pledgor shall unconditionally donate the aforementioned proceeds to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  8.5 The Pledgee may exercise any remedy measure available to it simultaneously or in any order. The Pledgee may exercise the priority right in compensation based on the monetary valuation that such Equity Interest is converted into or with the proceeds from the auction or sale of the Equity Interest under this Agreement, without being required to exercise any other remedy measure first.

 

  8.6 The Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and the Pledgor or Party C shall not raise any objection to such exercise.

 

  8.7 When the Pledgee disposes of the Pledge in accordance with this Agreement, the Pledgor and Party C shall provide the necessary assistance to enable the Pledgee to enforce the Pledge in accordance with this Agreement.

 

9. Breach of Agreement

 

  9.1 If the Pledgor or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Pledgor or Party C (as the case may be). The Pledgee is entitled to require the Pledgor or Party C to rectify or take remedial measures. If within ten (10) days after the Pledgee delivers a written notice to the Pledgor or Party C and requires for rectification (or within any other reasonable period required by the Pledgee), the Pledgor or Party C (as the case may be) fails to rectify or take remedial measures, the Pledgee is entitled to, at its sole discretion, (1) terminate this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of the Pledgor or Party C (as the case may be) under this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of the Pledgee under this Agreement.

 

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  9.2 The Pledgor or Party C shall not have any right to terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

10. Assignment

 

  10.1 Without the Pledgee’s prior written consent, neither the Pledgor nor Party C shall assign or delegate its/his rights and obligations under this Agreement.

 

  10.2 This Agreement shall be binding on the Pledgor and his/her successors, heirs (including who inherited the Equity Interest) and permitted assigns, and shall be valid with respect to the Pledgee and each of his/her successors, heirs and permitted assigns.

 

  10.3 At any time, the Pledgee may assign any and all of its rights and obligations under the Transaction Documents and this Agreement to its designee(s), in which case the assignees shall have the rights and obligations of the Pledgee under the Transaction Documents and this Agreement, as if it were the original party to the Transaction Documents and this Agreement.

 

  10.4 In the event of change of the Pledgee due to assignment, the Pledgor and/or Party C shall, at the request of the Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the competent AIC.

 

  10.5 The Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of the Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by the Pledgor except in accordance with the written instructions of the Pledgee.

 

11. Termination

 

  11.1 Upon the fulfillment of all Contract Obligations and the full payment of all Secured Indebtedness by the Pledgor and Party C, the Pledgee shall release the Pledge under this Agreement upon the Pledgor’s request as soon as reasonably practicable and shall assist the Pledgor in de-registering the Pledge from the shareholders’ register of Party C and with the competent PRC local administration for industry and commerce.

 

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  11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.

 

12. Handling Fees and Other Expenses

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

 

13. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

14. Governing Law and Resolution of Disputes

 

  14.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  14.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  14.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

15. Severability

In the event that one or several of the provisions of this Contract are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

16. Attachments

The attachments set forth herein shall be an integral part of this Agreement.

 

17. Effectiveness and Amendments

 

  17.1 This Agreement shall become effective upon execution by the Parties, until the Contract Obligations have been fully performed and the Secured Indebtedness have been fully paid.

 

  17.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

18. Language and Counterparts

This Agreement is written in English in four copies. The Pledgor, the Pledgee and Party C shall hold one copy respectively and the other copy shall be used for registration.

The Remainder of this page is intentionally left blank

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.

 

Pledgee:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Pledgor:   Lihong QIN
By:  

/s/ Lihong Qin

Party C:   Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Attachments:

 

1. Shareholders’ Register of Party C;

 

2. The Capital Contribution Certificate for Party C;

 

3. Exclusive Business Cooperation Agreement;

 

4. Exclusive Option Agreement;

 

5. Loan Agreement

 

6. Power of Attorney.
EX-10.10

Exhibit 10.10

Exclusive Business Cooperation Agreement

This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”).

 

Party  A: NIO Co., Ltd.
Address: Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party  B: Shanghai Anbin Technology Co., Ltd.
Address: Room J1289, Floor 4, No.5358, Huyi Road, Jiading District, Shanghai

In this Agreement, each of Party A and Party B shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas,

 

1. Party A is a wholly foreign-owned enterprise established in China, and has sufficient capacity, experience and resources for the R&D of new energy automobiles and related components and for providing technical development, technical services and consultation in relation to new energy automobile and related components ;

 

2. Party B is a company established in China with exclusive domestic capital and as registered with the relevant PRC government authorities, is permitted to engage in technical seivices and consultation in respect of automobiles and related components. The businesses conducted by Party B currently and at any time during the term of this Agreement are collectively referred to as the “Principal Business”;

 

3. Party A is willing to provide Party B with technical development, technical support, management consultation and other related services on an exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in technology, team, and resources, and Party B is willing to accept such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.

Now, therefore, through mutual discussion, the Parties have reached the following agreements:

 

1. Services Provided by Party A

 

  1.1 Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party B with comprehensive technical support, consulting services and other related services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, including but not limited to the following:

 

  (1) Licensing Party B to use the technology and software legally owned by Party A in relation to the Principal Business;

 

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  (2) Design, development, maintenance and updating of technologies necessary for Party B’s Principal Business, and provision of related technical consultation and technical services;

 

  (3) Design, installation, daily management, maintenance and updating of related database;

 

  (4) Technical support and training for employees of Party B;

 

  (5) Assisting Party B in collection and research of technology and market information (excluding market research business that wholly foreign-owned enterprises are restricted from conducting under PRC law);

 

  (6) Providing business and management consultation for Party B;

 

  (7) Providing marketing and promotional services for Party B;

 

  (8) Development and testing of new products;

 

  (9) Leasing of equipments or properties; and

 

  (10) Other related services requested by Party B from time to time to the extent permitted under PRC law.

 

  1.2 Party B agrees to accept all the services provided by Party A. The Parties agree that Party A may appoint or designate its affiliates or other qualified parties to provide Party B with the services under this Agreement (the parties designated by Party A may enter into certain agreements described in Section 1.3 with Party B). Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third party and shall not establish same or similar corporation relationships with any third party regarding the matters contemplated by this Agreement.

 

  1.3 Service Providing Methodology

 

  1.3.1 Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, methods, personnel, and fees for the specific services.

 

  1.3.2 To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into equipment or property lease agreements with Party A or any other party designated by Party A which shall permit Party B to use Party A’s relevant equipment or property based on the business needs of Party B.

 

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  1.3.3 Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all of the assets and business of Party B, to the extent permitted under PRC law, and at the lowest purchase price permitted by PRC law. The Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions of the transfer of the assets.

 

2. The Calculation and Payment of the Service Fees

2.1 The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:

 

  2.1.1 In consideration for the services provided by Party A hereunder, Party B shall pay a service fee to Party A on annual basis (or at any time agreed by the Parties). The service fees for each year (or for any other period agreed by the Parties) shall consist of a management fee and a fee for services provided, which shall be reasonably determined by Party A based on the following factors. Party A may provide separate confirmation letter and/or invoice to Party B to indicate the amount of service fees due for each service period; or the amount of services fees may be as set forth in the relevant contracts separately executed by the Parties.

 

  (1) Complexity and difficulty of the services provided by Party A;

 

  (2) Seniority of and time consumed by the employees of Party A providing the services;

 

  (3) Specific contents, scope and value of the services provided by Party A;

 

  (4) Market price of the same type of services;

 

  (5) Operation conditions of Party B.

 

  2.1.2 If Party A transfers or licenses technology to Party B, develops software or other technology as entrusted by Party B, or leases equipments or properties to Party B, the technology transfer price, license price, development fees or rent shall be determined by the Parties separately based on the actual situations and/or set forth in the relevant contracts separately executed by the Parties.

 

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3. Intellectual Property Rights and Confidentiality Clauses

 

  3.1 Party A shall have sole, exclusive and complete ownership, rights and interests in any and all intellectual properties or intangible assets arising out of or created or developed during the performance of this Agreement by both Parties, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others (to the extent not prohibited by the PRC laws). Unless expressly authorized by Party A, Party B is not entitled to any rights or interests in any intellectual property rights of Party A which are used by Party A in providing the services pursuant to this Agreement. To ensure Party A’s rights under this Section, where necessary, Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion, for the purposes of vesting the ownership, right or interest of any such intellectual property rights and intangible assets in Party A, and/or perfecting the protections of any such intellectual property rights and intangible assets for Party A (including registering such intellectual property rights and intangible assets under Party A’s name).

 

  3.2 The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

4. Representations and Warranties

4.1 Party A hereby represents, warrants and covenants as follows:

 

  4.1.1 Party A is a wholly foreign-owned enterprise legally established and validly existing in accordance with the laws of China; Party A or the service providers designated by Party A will obtain all government permits and licenses necessary for providing the service under this Agreement (if required) before providing such services.

 

  4.1.2 Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

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  4.1.3 This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.

4.2 Party B hereby represents, warrants and covenants as follows:

 

  4.2.1. Party B is a company legally established and validly existing in accordance with the laws of China and has obtained and will maintain all permits and licenses for engaging in the Principal Business in a timely manner.

 

  4.2.2. Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

  4.2.3. This Agreement constitutes Party B’s legal, valid and binding obligations, and shall be enforceable against it in accordance with its terms.

 

5. Term of Agreement

 

  5.1 This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this Agreement or terminated in writing by Party A, this Agreement shall remain effective.

 

  5.2 During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof and endeavor to obtain the approval of, and complete registration with, the competent authorities for such renewal, so as to enable this Agreement to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for the renewal of its operation term is not approved by the competent government authorities.

 

  5.3 The rights and obligations of the Parties under Sections 3, 6, 7 and this Section 5.3 shall survive the termination of this Agreement.

 

6. Governing Law and Resolution of Disputes

 

  6.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  6.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  6.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

7. Breach of Agreement and Indemnification

 

  7.1 If Party B materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B. Party A is entitled to require Party B to rectify or take remedial measures. If Party B fails to rectify or take remedial measures within ten (10) days after Party A delivers a written notice to Party B and requires for rectification (or within any other reasonable period required by Party A), Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B to compensate all the losses; or (2) require specific performance of the obligations of Party B under this Agreement and require Party B to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  7.2 Unless otherwise required by the applicable laws, Party B shall not unilaterally terminate this Agreement in any event.

 

  7.3 Party B shall indemnify Party A and hold Party A harmless from any losses, damages, obligations or expenses caused by any lawsuit, claims or other demands raised by any third party against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except where such losses, damages, obligations or expenses arise from the gross negligence or willful misconduct of Party A.

 

8. Force Majeure

 

  8.1 In the case of any force majeure events (“Force Majeure”) such as earthquakes, typhoons, floods, fires, flu, wars, riots, strikes or any other events that cannot be predicted and are unpreventable and unavoidable by the affected Party, which causes the failure of either Party to perform or completely perform this Agreement or perform this Agreement on time, the Party affected by such Force Majeure shall not be liable for this. However, the Party affected by such Force Majeure shall give the other Party written notices without any delay, and shall provide details and related documents evidencing such event within 15 days after sending out such notice, explaining the reasons for such failure of, partial or delay of performance.

 

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  8.2 If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from the non-performance, incomplete performance or delay of performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party.

 

  8.3 In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure.

 

9. Assignment

 

  9.1 Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.

 

  9.2 Party B agrees that unless expressly required by the applicable laws otherwise, Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment, Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.

 

10. Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

11. Amendments and Supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

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12. Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors and permitted assigns, and shall be valid with respect to the Parties and each of their successors and permitted assigns.

 

13. Language and Counterparts

This Agreement is written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   QIN Lihong
Title:   Legal Representative
Party B:   Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   QIN Lihong
Title:   Legal Representative
EX-10.11

Exhibit 10.11

Exclusive Option Agreement

This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018, in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party  A: NIO Co., Ltd.
Address: Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party  B: Bin LI (a Chinese citizen with Identification No.: ********)

 

Party  C: Shanghai Anbin Technology Co., Ltd.
Address: Room J1289, Floor 4, No.5358, Huyi Road, Jiading District, Shanghai

In this Agreement, each of Party A, Party B and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. Party B is the shareholder of Party C and as of the date hereof hold 80% of the equity interests of Party C, representing RMB 24,000,000 in the registered capital of Party C.

 

2. Party A and Party B executed a Loan Agreement (“Loan Agreement”) on April 19, 2018, according to which Party A agreed to provide to Party B a loan in the amount of RMB 24,000,000 for the purpose as designated in the Loan Agreement.

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 

1. Sale and Purchase of Equity Interest

 

  1.1 Option Granted

Party B hereby irrevocably and unconditionally grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

 

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  1.2 Steps for Exercise of the Equity Interest Purchase Option

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying:(a) Party A’s decision to exercise the Equity Interest Purchase Option, and the name of the Designee(s) if any; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests or the date for the transfer of the Optioned Interests.

 

  1.3 Equity Interest Purchase Price

Optioned Interests

The total price for the purchase by Party A of all Optioned Interests held by Party B upon exercise of the Equity Interest Purchase Option by Party A shall equal to the amount of registered capital contributed by Party B in Party C for such Optioned Interests (or such price may be as set forth in the equity transfer agreement to be executed between Party A (or the Designee) and Party B separately, provided that such price does not violate PRC laws and regulations and is acceptable to Party A); if Party A exercises the Equity Interest Purchase Option to purchase part of the Optioned Interests held by Party B in Party C, then the purchase price shall be calculated on a pro rata basis. If at the time when Party A exercises the Equity Interest Purchase Option, the PRC laws impose mandatory requirements on the purchase price of such Optioned Interests, such that the minimum price permitted under PRC law is higher than the aforementioned price, then the purchase price shall be such minimum price permitted by PRC law (collectively, the “Equity Interest Purchase Price”).

 

  1.4 Transfer of Optioned Interests

For each exercise of the Equity Interest Purchase Option:

 

  1.4.1 Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s);

 

  1.4.2 Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the Optioned Interests by Party B to Party A and/or the Designee(s) and waiving any right of first refusal with respect thereto;

 

  1.4.3 Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 

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  1.4.4 Party B shall, within thirty (30) days after receipt of the Equity Interest Purchase Option Notice, execute all necessary contracts, agreements or documents with relevant parties, obtain all necessary government approvals and permits, and complete all necessary registrations and filings, so as to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to the Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement thereto.; “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with a power of attorney and any modification, amendment and restatement thereto.

 

  1.5 Payment

The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall be used for repayment of the loan provided by Party A (and any interest thereon) in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity Interest Purchase Option, Party A may make the payment of the Equity Interest Purchase Price by way of offset of the outstanding debts owed by Party B to Party A (including without limitation the outstanding amount of the loan owed by Party B to Party A and any interest thereon) (such debts, the “Offset Debts”), in which case Party A shall not be required to pay any additional purchase price to Party B, unless the Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with the PRC laws. If the PRC laws impose mandatory requirements on the Equity Interest Purchase Price agreed under this Agreement, such that the minimum Equity Interest Purchase Price permitted under PRC laws exceeds the price already offset with the Offset Debts, Party B hereby waives its right to receive the amount of price that exceeds the amount offset with the Offset Debts.

 

2. Covenants

 

  2.1 Covenants regarding Party C

Party B (as a shareholder of Party C) and Party C hereby covenant as follows:

 

  2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 

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  2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain and maintain all necessary government licenses and permits by prudently and effectively operating its business and handling its affairs;

 

  2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any material assets of Party C or legal or beneficial interest in the material business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 

  2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for payables incurred in the ordinary course of business other than through loans;

 

  2.1.5 They shall always operate all of Party C’s businesses within the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may adversely affect Party C’s operating status and asset value;

 

  2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business;

 

  2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 

  2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;

 

  2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 

  2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 

  2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C’s assets, business, revenue or equity interest;

 

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  2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders;

 

  2.1.14 At the request of Party A, they shall appoint any person designated by Party A as the director or executive director of Party C.

 

  2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates; and

 

  2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A;

 

  2.1.17 Once PRC laws permits foreign investors to invest in the principal business of Party C in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, and the competent government authorities of China begin to approve such investments, upon Party’s exercise of the Equity Interest Purchase Option, Party B shall immediately transfer to Party A or the Designee(s) the equity interest in Party C held by Party B.

 

  2.2 Covenants of Party B

Party B hereby covenants as follows:

 

  2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

  2.2.2 Without the prior written consent of Party A, Party B shall ensure the shareholders’ meeting and/or the directors (or the executive director) of Party C not to approve any sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

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  2.2.3 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting or the directors (or the executive director) of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person;

 

  2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 

  2.2.5 Party B shall ensure the shareholders’ meeting or the directors (or the executive director) of Party C to vote in favor of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 

  2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.2.7 Party B shall appoint any designee of Party A as the director or the executive director of Party C, at the request of Party A;

 

  2.2.8 Party B gives consent to the execution by each of the other shareholders of Party C with Party A and Party C of the exclusive option agreement, the equity interest pledge agreement and the power of attorney similar to this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, and undertakes not to take any action in conflict with such documents executed by such other shareholders; with respect to the transfer of equity interest of Party C by any of the other shareholders of Party C to Party A and/or the Designee(s) pursuant to such shareholder’s exclusive option agreement, Party B hereby waives all of its right of first refusal (if any).

 

  2.2.9 If Party received any profit distribution, interest, dividend or proceeds of liquidation from Party C, Party B shall promptly donate all such profit distribution, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A in the manner permitted by the applicable PRC laws; and

 

  2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Party B’s Equity Interest Pledge Agreement or under the Party B’s Power of Attorney, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

 

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3. Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of the transfer of the Optioned Interests, that:

 

  3.1 They have the power, capacity and authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning each transfer of the Optioned Interests as described thereunder (each, a “Transfer Contract”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts substantially consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 

  3.2 Party B and Party C have obtained any and all approvals and consents from the competent government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

  3.3 The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 

  3.4 Party B has the legal and complete title to the equity interests held by it in Party C. Except for Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, Party B has not placed any security interest or encumbrances on such equity interests;

 

  3.5 Party C is a limited liability company duly organized and validly existing under the laws of the PRC. Party C has the legal and complete title to all of the assets used in connection with its business operation, and has not placed any security interest on the aforementioned assets;

 

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  3.6 Party C does not have any outstanding debts, except for (i) debt incurred during the ordinary course of business; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained.

 

  3.7 Party C has complied with all PRC laws and regulations in material aspects; and

There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

 

4. Effective Date and Term

This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.

 

5. Governing Law and Resolution of Disputes

 

  5.1 Governing Law

The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of the PRC.

 

  5.2 Methods of Resolution of Disputes

In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

6. Taxes and Fees

Each Party shall pay any and all transfer and registration taxes, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

 

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7. Notices

 

  7.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  7.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below;

 

  7.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  7.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  7.2 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms of this Section.

 

8. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement, and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of other Parties, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels, or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of, or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

9. Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

 

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10. Breach of Agreement

 

  10.1 If Party B or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B or Party C (as the case may be). Party A is entitled to require Party B or Party C to rectify or take remedial measures. If within ten (10) days after Party A delivers a written notice to Party B or Party C and requires for rectification (or within any other reasonable period required by Party A), Party B or Party C (as the case may be) fails to rectify or take remedial measures, Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of Party B or Party C (as the case may be) under this Agreement and require Party B or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  10.2 Party B or Party C shall not terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

11. Miscellaneous

 

  11.1 Amendments, changes and supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  11.2 Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 

  11.3 Headings

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

 

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  11.4 Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  11.5 Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors, heirs (including who inherited the Optioned Interests) and permitted assigns, and shall be valid with respect to the Parties and each of their successors, heirs and permitted assigns.

 

  11.6 Survival

 

  11.6.1 Any obligations that occurred or that are due in connection with this Agreement before the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

 

  11.6.2 The provisions of Sections 5, 8, 10 and this Section 11.6 shall survive the termination of this Agreement.

 

  11.7 Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 

  11.8 Language

This Agreement is written in English language in three copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Party B:   LI Bin
By:  

/s/ Li Bin

Party C:   Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Exclusive Option Agreement

This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party  A: NIO Co., Ltd.
Address: Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party  B: Lihong QIN (a Chinese citizen with Identification No.: ********)

 

Party  C: Shanghai Anbin Technology Co., Ltd.
Address: Room J1289, Floor 4, No.5358, Huyi Road, Jiading District, Shanghai

In this Agreement, each of Party A, Party B and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. Party B is the shareholder of Party C and as of the date hereof hold 20% of the equity interests of Party C, representing RMB 6,000,000 in the registered capital of Party C.

 

2. Party A and Party B executed a Loan Agreement (“Loan Agreement”) on April 19, 2018, according to which Party A agreed to provide to Party B a loan in the amount of RMB 6,000,000 for the purpose as designated in the Loan Agreement.

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 

1. Sale and Purchase of Equity Interest

 

  1.1 Option Granted

Party B hereby irrevocably and unconditionally grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

 

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  1.2 Steps for Exercise of the Equity Interest Purchase Option

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying:(a) Party A’s decision to exercise the Equity Interest Purchase Option, and the name of the Designee(s) if any; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests or the date for the transfer of the Optioned Interests.

 

  1.3 Equity Interest Purchase Price

Optioned Interests

The total price for the purchase by Party A of all Optioned Interests held by Party B upon exercise of the Equity Interest Purchase Option by Party A shall equal to the amount of registered capital contributed by Party B in Party C for such Optioned Interests (or such price may be as set forth in the equity transfer agreement to be executed between Party A (or the Designee) and Party B separately, provided that such price does not violate PRC laws and regulations and is acceptable to Party A); if Party A exercises the Equity Interest Purchase Option to purchase part of the Optioned Interests held by Party B in Party C, then the purchase price shall be calculated on a pro rata basis. If at the time when Party A exercises the Equity Interest Purchase Option, the PRC laws impose mandatory requirements on the purchase price of such Optioned Interests, such that the minimum price permitted under PRC law is higher than the aforementioned price, then the purchase price shall be such minimum price permitted by PRC law (collectively, the “Equity Interest Purchase Price”).

 

  1.4 Transfer of Optioned Interests

For each exercise of the Equity Interest Purchase Option:

 

  1.4.1 Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s);

 

  1.4.2 Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the Optioned Interests by Party B to Party A and/or the Designee(s) and waiving any right of first refusal with respect thereto;

 

  1.4.3 Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 

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  1.4.4 Party B shall, within thirty (30) days after receipt of the Equity Interest Purchase Option Notice, execute all necessary contracts, agreements or documents with relevant parties, obtain all necessary government approvals and permits, and complete all necessary registrations and filings, so as to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to the Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement thereto.; “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with a power of attorney and any modification, amendment and restatement thereto.

 

  1.5 Payment

The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall be used for repayment of the loan provided by Party A (and any interest thereon) in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity Interest Purchase Option, Party A may make the payment of the Equity Interest Purchase Price by way of offset of the outstanding debts owed by Party B to Party A (including without limitation the outstanding amount of the loan owed by Party B to Party A and any interest thereon) (such debts, the “Offset Debts”), in which case Party A shall not be required to pay any additional purchase price to Party B, unless the Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with the PRC laws. If the PRC laws impose mandatory requirements on the Equity Interest Purchase Price agreed under this Agreement, such that the minimum Equity Interest Purchase Price permitted under PRC laws exceeds the price already offset with the Offset Debts, Party B hereby waives its right to receive the amount of price that exceeds the amount offset with the Offset Debts.

 

2. Covenants

 

  2.1 Covenants regarding Party C

Party B (as a shareholder of Party C) and Party C hereby covenant as follows:

 

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  2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 

  2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain and maintain all necessary government licenses and permits by prudently and effectively operating its business and handling its affairs;

 

  2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any material assets of Party C or legal or beneficial interest in the material business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 

  2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for payables incurred in the ordinary course of business other than through loans;

 

  2.1.5 They shall always operate all of Party C’s businesses within the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may adversely affect Party C’s operating status and asset value;

 

  2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business;

 

  2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 

  2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;

 

  2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 

  2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 

  2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C’s assets, business, revenue or equity interest;

 

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  2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders;

 

  2.1.14 At the request of Party A, they shall appoint any person designated by Party A as the director or executive director of Party C.

 

  2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates; and

 

  2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A;

 

  2.1.17 Once PRC laws permits foreign investors to invest in the principal business of Party C in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, and the competent government authorities of China begin to approve such investments, upon Party’s exercise of the Equity Interest Purchase Option, Party B shall immediately transfer to Party A or the Designee(s) the equity interest in Party C held by Party B.

 

  2.2 Covenants of Party B

Party B hereby covenants as follows:

 

  2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

  2.2.2 Without the prior written consent of Party A, Party B shall ensure the shareholders’ meeting and/or the directors (or the executive director) of Party C not to approve any sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

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  2.2.3 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting or the directors (or the executive director) of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person;

 

  2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 

  2.2.5 Party B shall ensure the shareholders’ meeting or the directors (or the executive director) of Party C to vote in favor of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 

  2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.2.7 Party B shall appoint any designee of Party A as the director or the executive director of Party C, at the request of Party A;

 

  2.2.8 Party B gives consent to the execution by each of the other shareholders of Party C with Party A and Party C of the exclusive option agreement, the equity interest pledge agreement and the power of attorney similar to this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, and undertakes not to take any action in conflict with such documents executed by such other shareholders; with respect to the transfer of equity interest of Party C by any of the other shareholders of Party C to Party A and/or the Designee(s) pursuant to such shareholder’s exclusive option agreement, Party B hereby waives all of its right of first refusal (if any).

 

  2.2.9 If Party received any profit distribution, interest, dividend or proceeds of liquidation from Party C, Party B shall promptly donate all such profit distribution, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A in the manner permitted by the applicable PRC laws; and

 

  2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Party B’s Equity Interest Pledge Agreement or under the Party B’s Power of Attorney, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

 

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3. Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of the transfer of the Optioned Interests, that:

 

  3.1 They have the power, capacity and authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning each transfer of the Optioned Interests as described thereunder (each, a “Transfer Contract”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts substantially consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 

  3.2 Party B and Party C have obtained any and all approvals and consents from the competent government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

  3.3 The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 

  3.4 Party B has the legal and complete title to the equity interests held by it in Party C. Except for Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, Party B has not placed any security interest or encumbrances on such equity interests;

 

  3.5 Party C is a limited liability company duly organized and validly existing under the laws of the PRC. Party C has the legal and complete title to all of the assets used in connection with its business operation, and has not placed any security interest on the aforementioned assets;

 

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  3.6 Party C does not have any outstanding debts, except for (i) debt incurred during the ordinary course of business; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained.

 

  3.7 Party C has complied with all PRC laws and regulations in material aspects; and

 

  3.8 There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

 

4. Effective Date and Term

This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.

 

5. Governing Law and Resolution of Disputes

 

  5.1 Governing Law

The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of the PRC.

 

  5.2 Methods of Resolution of Disputes

In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

6. Taxes and Fees

Each Party shall pay any and all transfer and registration taxes, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

 

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7. Notices

 

  7.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  7.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below;

 

  7.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  7.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  7.2 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms of this Section.

 

8. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement, and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of other Parties, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels, or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of, or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

9. Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

 

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10. Breach of Agreement

 

  10.1 If Party B or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B or Party C (as the case may be). Party A is entitled to require Party B or Party C to rectify or take remedial measures. If within ten (10) days after Party A delivers a written notice to Party B or Party C and requires for rectification (or within any other reasonable period required by Party A), Party B or Party C (as the case may be) fails to rectify or take remedial measures, Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of Party B or Party C (as the case may be) under this Agreement and require Party B or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  10.2 Party B or Party C shall not terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

11. Miscellaneous

 

  11.1 Amendments, changes and supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  11.2 Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 

  11.3 Headings

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

 

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  11.4 Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  11.5 Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors, heirs (including who inherited the Optioned Interests) and permitted assigns, and shall be valid with respect to the Parties and each of their successors, heirs and permitted assigns.

 

  11.6 Survival

 

  11.6.1 Any obligations that occurred or that are due in connection with this Agreement before the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

 

  11.6.2 The provisions of Sections 5, 8, 10 and this Section 11.6 shall survive the termination of this Agreement.

 

  11.7 Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 

  11.8 Language

This Agreement is written in English language in three copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Party B:   Lihong QIN
签字:  
By:  

/s/ Lihong Qin

Party C:   Shanghai Anbin Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
EX-10.12

Exhibit 10.12

Power of Attorney

Date: April 19, 2018

I, Bin LI , a citizen of the People’s Republic of China (“China” or the “PRC”) whose Identification Card No. is ********, and a holder of 80% of the registered capital of Beijing NIO Network Technology Co., Ltd. (the “Beijing NIO Network”) as of the date of this Power of Attorney, hereby irrevocably authorize and entrust NIO Co., Ltd. (the “WFOE”) to exercise the following rights and handle the following matters on my behalf relating to all equity interests held by me now and in the future in Beijing NIO Network (the “My Shareholding”), during the term of this Power of Attorney:

The WFOE is hereby authorized, as my sole and exclusive agent and attorney, to act on behalf of myself with respect to all rights and matters concerning My Shareholding, including without limitation to: 1) convening and attending shareholders’ meetings of Beijing NIO Network; 2) exercising all of the shareholder’s rights and shareholder’s voting rights that I am entitled to under the laws of China and the articles of association of Beijing NIO Network; 3) handling the sale, transfer, pledge or disposition of My Shareholding (in part or in whole), including without limitation executing all necessary equity transfer documents and other documents for disposal of My Shareholding and fulfilling all necessary procedures; 4) representing myself in executing any resolutions and minutes as a shareholder of Beijing NIO Network on my behalf; 5) nominating, electing, designating, appointing or removing on behalf of myself the legal representative, directors, supervisors, general managers, chief executive officer and other senior management members of Beijing NIO Network; and 6) approving the amendments to the company’s articles of association. Without written consent by WFOE, I have no right to increase, decrease, transfer, pledge, or by any other manner to dispose or change My Shareholding.

Without limiting the generality of the powers granted hereunder, the WFOE shall have the power and authority to, on behalf of myself, execute all and any supplementary agreements, ancillary documents, modifications, and/or amended and restated versions in relation to the Exclusive Option Agreement, Equity Interest Pledge Agreement, Exclusive Business Cooperation Agreement and Loan Agreement dated April 19, 2018, by and among WFOE, Beijing NIO Network and/or myself, and any documents and agreements I shall sign as required in the aforesaid agreements (including without limitation the “Transfer Contract” for the transfer of the “Optioned Interests” as described under the Exclusive Option Agreement), and perform the obligations under the aforesaid documents and agreements.

All the actions associated with My Shareholding conducted by the WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by the WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify the actions taken by the WFOE and the documents executed by the WFOE in relation to My Shareholding.


I hereby agree that the WFOE has the right to re-authorize or assign one or multiple matters and its rights related to such matters under this Power of Attorney to any other person or entity at its own discretion and without obtaining my prior consent. If required by PRC laws, the WFOE shall designate a qualified PRC citizen to handle such matters and exercise such rights as set forth in this Power of Attorney.

This Power of Attorney takes effect as of the date hereof. During the period that I am a shareholder of Beijing NIO Network, this Power of Attorney shall be irrevocable and continuously effective and valid from the date of execution of this Power of Attorney.

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the WFOE through this Power of Attorney, and shall not exercise such rights by myself.

 

By:  

/s/ Bin Li

Name:   Bin LI

 

Witness:  

/s/ Shuye Wu

Name:   Shuye WU

Accepted by:

 

NIO Co., Ltd.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative

Acknowledged by:

 

Beijing NIO Network Technology Co., Ltd.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Power of Attorney

Date: April 19, 2018

I, Lihong QIN, a citizen of the People’s Republic of China (“China” or the “PRC”) whose Identification Card No. is ********, and a holder of 20% of the registered capital of Beijing NIO Network Technology Co., Ltd (the “Beijing NIO Network”) as of the date of this Power of Attorney, hereby irrevocably authorize and entrust NIO Co., Ltd. (the “WFOE”) to exercise the following rights and handle the following matters on my behalf relating to all equity interests held by me now and in the future in Beijing NIO Network (the “My Shareholding”), during the term of this Power of Attorney:

The WFOE is hereby authorized, as my sole and exclusive agent and attorney, to act on behalf of myself with respect to all rights and matters concerning My Shareholding, including without limitation to: 1) convening and attending shareholders’ meetings of Beijing NIO Network; 2) exercising all of the shareholder’s rights and shareholder’s voting rights that I am entitled to under the laws of China and the articles of association of Beijing NIO Network; 3) handling the sale, transfer, pledge or disposition of My Shareholding (in part or in whole), including without limitation executing all necessary equity transfer documents and other documents for disposal of My Shareholding and fulfilling all necessary procedures; 4) representing myself in executing any resolutions and minutes as a shareholder and a director of Beijing NIO Network on my behalf; 5) nominating, electing, designating, appointing or removing on behalf of myself the legal representative, directors, supervisors, general managers, chief executive officer and other senior management members of Beijing NIO Network; and 6) approving the amendments to the company’s articles of association. Without written consent by WFOE, I have no right to increase, decrease, transfer, pledge, or by any other manner to dispose or change My Shareholding.

Without limiting the generality of the powers granted hereunder, the WFOE shall have the power and authority to, on behalf of myself, execute all and any supplementary agreements, ancillary documents, modifications, and/or amended and restated versions in relation to the Exclusive Option Agreement, Equity Interest Pledge Agreement, Exclusive Business Cooperation Agreement and Loan Agreement dated April 19, 2018, by and among WFOE, Beijing NIO Network and/or myself, and any documents and agreements I shall sign as required in the aforesaid agreements (including without limitation the “Transfer Contract” for the transfer of the “Optioned Interests” as described under the Exclusive Option Agreement), and perform the obligations under the aforesaid documents and agreements.

All the actions associated with My Shareholding conducted by the WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by the WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify the actions taken by the WFOE and the documents executed by the WFOE in relation to My Shareholding.


I hereby agree that the WFOE has the right to re-authorize or assign one or multiple matters and its rights related to such matters under this Power of Attorney to any other person or entity at its own discretion and without obtaining my prior consent. If required by PRC laws, the WFOE shall designate a qualified PRC citizen to handle such matters and exercise such rights as set forth in this Power of Attorney.

This Power of Attorney takes effect as of the date hereof. During the period that I am a shareholder of Beijing NIO Network, this Power of Attorney shall be irrevocable and continuously effective and valid from the date of execution of this Power of Attorney.

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the WFOE through this Power of Attorney, and shall not exercise such rights by myself.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN

 

Witness:  

/s/ Shuye Wu

Name:   Shuye WU

Accepted by:

 

NIO Co., Ltd.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative

Acknowledged by:

 

Beijing NIO Network Technology Co., Ltd.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
EX-10.13

Exhibit 10.13

Loan Agreement

This Loan Agreement (the “Agreement”) is made and entered into by and between the Parties below as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

  (1) NIO Co., Ltd. (the “Lender”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

  (2) Bin LI (the “Borrower”), a citizen of China with Identification No.: ********.

In this Agreement, each of the Lender and the Borrower shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

  1. As of the date hereof, the Borrower holds 80% of equity interests in Beijing NIO Network Technology Co., Ltd. (the “Borrower Company”). All of the equity interest now held and hereafter acquired by the Borrower in the Borrower Company shall be referred to as the “Borrower Equity Interest;”

 

  2. The Lender agrees to provide the Borrower with a loan in the aggregate amount of RMB 8,000,000 to be used for the purposes set forth in this Agreement.

After friendly consultation, the Parties agree as follows:

 

1 Loan

 

  1.1 In accordance with the terms and conditions of this Agreement, the Lender agrees to provide to the Borrower a loan in the aggregate amount of RMB 8,000,000 (the “Loan”). Once the Lender receives a notice from the Borrower requesting the provision of all or any part of the Loan during the term of this Agreement, the Lender shall within one (1) month after receiving such notice provide that portion of Loan to the Borrower. The term of the Loan shall be the term of this Agreement. During the term of the Loan, upon occurrence of any of the following circumstances, the term of the Loan shall accelerate and the Borrower shall immediately repay the full amount of the Loan (and any interest thereon):

 

  1.1.1 Thirty (30) days elapsed after the Borrower receives a written notice from the Lender requesting repayment of the Loan (and all interest thereon);

 

  1.1.2 The Borrower’s death, lack, or limitation of civil capacity;

 

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  1.1.3 The Borrower ceases (for any reason) to be a shareholder of the Borrower Company or its affiliates, and the Borrower is not an employee of the Lender, the Borrower Company or their affiliates;

 

  1.1.4 The Borrower engages in criminal act or is involved in criminal activities;

 

  1.1.5 According to the applicable laws of China, foreign investors are permitted to invest in the principal business that is currently conducted by the Borrower Company in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, the competent government authorities of China begin to approve such investments, and the Lender elects to exercise the exclusive option under the Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement; or the Lender or the Borrower Company has violated or committed a breach of its representations, warranties, covenants or other obligations under the Exclusive Option Agreement;

 

  1.1.6 The Borrower Company failed to obtain or renew any governmental approval or license necessary for the operation of its core business.

 

  1.2 The Borrower agrees to accept the aforementioned Loan provided by the Lender, and hereby agrees and undertakes to use the Loan solely for the contribution of the registered capital of the Borrower Company, or for the working capital of the Borrower Company. Without the Lender’s prior written consent, the Borrower shall not use the Loan for any purpose other than as set forth herein.

 

  1.3 The Lender and the Borrower hereby agree and confirm that the Borrower shall repay the Loan only through the following means (or other means approved by the Lender): by transferring the Borrower Equity Interest in whole to the Lender or the Lender’s designated persons (legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement, and any proceeds from the transfer of the Borrower Equity Interest (to the extent permissible) shall be used by the Borrower to repay the Loan (principal and any interest thereon) to the Lender or the Lender’s designated persons, in accordance with this Agreement and in the manner designated by the Lender.

 

  1.4 The Lender and the Borrower hereby agree and confirm that to the extent permitted by the applicable laws, the Lender shall have the right (but not the obligation) to purchase or designate other persons (legal or natural persons) to purchase the Borrower Equity Interest in part or in whole at any time, at the price stipulated in the Exclusive Option Agreement.

 

  1.5 The Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes the Lender or a legal or natural person designated by the Lender to exercise all of the Borrower’s rights as a shareholder of the Borrower Company.

 

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  1.6 When the Borrower transfers the Borrower Equity Interest to the Lender or the Lender’s designated person(s) in accordance with the Exclusive Option Agreement, (1) in the event that the transfer price of such Borrower Equity Interest equals to or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be an interest-free loan, (2) in the event that the transfer price of such Borrower Equity Interest exceeds the actual principal amount of the Loan under this Agreement, the excess over the actual principal amount shall be the interest of the Loan under this Agreement to the extent not prohibited by the PRC laws, and all of such interest shall be repaid by the Borrower to the Lender or otherwise paid by the Borrower to the Lender’s designated person(s) through legal means within ten (10) days after receiving the transfer price.

 

2 Representations and Warranties

 

  2.1 Between the date of this Agreement and the date of termination of this Agreement, the Lender hereby makes the following representations and warranties to the Borrower:

 

  2.1.1 The Lender is a corporation duly organized and legally existing in accordance with the laws of China;

 

  2.1.2 The Lender has the legal capacity to execute and perform this Agreement. The execution and performance by the Lender of this Agreement do not violate the Lender’s articles of association or other organizational documents, and the Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and

 

  2.1.3 This Agreement constitutes the Lender’s legal, valid, and binding obligations enforceable in accordance with its terms.

 

  2.2 Between the date of this Agreement and the date of termination of this Agreement, the Borrower hereby makes the following representations and warranties:

 

  2.2.1 The Borrower has the legal capacity to execute and perform this Agreement. The Borrower has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement;

 

  2.2.2 This Agreement constitutes the Borrower’s legal, valid, and binding obligations enforceable in accordance with its terms; and

 

  2.2.3 There are no disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower, nor are there any potential disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower.

 

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3 Borrower’s Covenants

 

  3.1 As and when he/she becomes, and for so long as he/she remains a shareholder of the Borrower Company, the Borrower irrevocably covenants that during the term of this Agreement, the Borrower shall ensure the Borrower Company:

 

  3.1.1 to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement (the “Exclusive Business Cooperation Agreement”) to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement.

 

  3.1.2 at the request of the Lender (or a party designated by the Lender), to execute the contracts/agreements on business cooperation with the Lender (or a party designated by the Lender), and to strictly abide by such contracts/agreements;

 

  3.1.3 to provide the Lender with all of the information on the Borrower Company’s business operations and financial condition at the Lender’s request;

 

  3.1.4 to immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to the Borrower Company’s assets, business, or income;

 

  3.1.5 at the request of the Lender, to appoint any persons designated by the Lender as the director or the executive director of the Borrower Company;

 

  3.2 the Borrower covenants that during the term of this Agreement, he/she shall:

 

  3.2.1 endeavor to keep the Borrower Company to be engaged in its principle business and to keep the specific business scope of its business license;

 

  3.2.2 abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement (the “Equity Interest Pledge Agreement”) and the Exclusive Option Agreement to which the Borrower is a party, perform his/her obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;

 

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  3.2.3 without the prior written consent of the Lender, not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except in accordance with the Equity Interest Pledge Agreement, the Exclusive Option Agreement and the Power of Attorney;

 

  3.2.4 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except to the Lender or the Lender’s designated person;

 

  3.2.5 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of the Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of the Lender;

 

  3.2.6 immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the Borrower Company’s assets, business or revenue or relating to the Borrower Equity Interest;

 

  3.2.7 to the extent necessary to maintain his/her ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all claims;

 

  3.2.8 without the prior written consent of the Lender, not cause the Borrower Company to sell, transfer, mortgage or dispose of in any manner any material assets of the Borrower Company or legal or beneficial interest in the material business or revenues of the Borrower Company, or allow the encumbrance thereon of any security interest, and refrain from any action/omission that may have a material impact on the assets, business and liabilities of the Borrower Company;

 

  3.2.9 appoint any designee of the Lender as the director or the executive director of the Borrower Company, at the request of the Lender;

 

  3.2.10 to the extent permitted by the laws of China, at the request of the Lender at any time, promptly and unconditionally transfer all of the Borrower Equity Interest to the Lender or the Lender’s designated representative(s) at any time, and ensure the other shareholders of the Borrower Company to waive their right of first refusal with respect to the share transfer described in this Section;

 

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  3.2.11 to the extent permitted by the laws of China, at the request of the Lender at any time, ensure that the other shareholders of the Borrower Company shall promptly and unconditionally transfer all of their equity interests in the Borrower Company to the Lender or the Lender’s designated representative(s) at any time, and the Borrower hereby waives his/her right of first refusal (if any) with respect to the equity transfer by such other shareholders described in this Section;

 

  3.2.12 in the event that the Lender purchases the Borrower Equity Interest from the Borrower in accordance with the provisions of the Exclusive Option Agreement, use such purchase price obtained thereby to repay the Loan (and any interest thereon) to the Lender; and

 

  3.2.13 without the prior written consent of the Lender, not cause the Borrower Company to supplement, change, or amend its articles of association in any manner, increase or decrease its registered capital or change its share capital structure in any manner.

 

4 Liability for Default

 

  4.1 If the Borrower materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Borrower. The Lender is entitled to require the Borrower to rectify or take remedial measures. If the Borrower fails to rectify or take remedial measures within ten (10) days after the Lender delivers a written notice to the Borrower and requires for rectification (or within any other reasonable period required by the Lender), the Lender is entitled to, at its sole discretion, (1) terminate this Agreement and require the Borrower to compensate all the losses; or (2) require specific performance of the obligations of the Borrower under this Agreement and require the Borrower to compensate all the losses. This Section shall not prejudice any other rights of the Lender under this Agreement

 

  4.2 In the event that the Borrower fails to perform the repayment obligations set forth in this Agreement, the Borrower shall pay an overdue interest of 0.01% per day for the outstanding payment, until the day the Borrower repays the full principal of the Loan (and any interest thereon), overdue interests and other payable amounts.

 

5 Notices

 

  5.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

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  5.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below

 

  5.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  5.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  5.2 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms of this Section.

 

6 Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

7 Governing Law and Resolution of Disputes

 

  7.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes shall be governed by the laws of China.

 

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  7.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

  7.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

8 Miscellaneous

 

  8.1 This Agreement shall become effective upon execution by the Parties, and shall expire upon the date of full performance by the Parties of their respective obligations under this Agreement.

 

  8.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  8.3 In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  8.4 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

 

  8.5 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.5 shall survive the termination of this Agreement.

 

  8.6 This Agreement shall be written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.

 

Lender:   NIO Co., Ltd.
By:  

    /s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Borrower:   Bin LI
By:  

    /s/ Bin Li


Loan Agreement

This Loan Agreement (the “Agreement”) is made and entered into by and between the Parties below as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

  (1) NIO Co., Ltd. (the “Lender”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

  (2) Lihong QIN (the “Borrower”), a citizen of China with Identification No.: ********.

In this Agreement, each of the Lender and the Borrower shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

  1. As of the date hereof, the Borrower holds 20% of equity interests in Beijing NIO Network Technology Co., Ltd. (the “Borrower Company”). All of the equity interest now held and hereafter acquired by the Borrower in the Borrower Company shall be referred to as the “Borrower Equity Interest;”

 

  2. The Lender agrees to provide the Borrower with a loan in the aggregate amount of RMB 2,000,000 to be used for the purposes set forth in this Agreement.

After friendly consultation, the Parties agree as follows:

 

1 Loan

 

  1.1 In accordance with the terms and conditions of this Agreement, the Lender agrees to provide to the Borrower a loan in the aggregate amount of RMB 2,000,000 (the “Loan”). Once the Lender receives a notice from the Borrower requesting the provision of all or any part of the Loan during the term of this Agreement, the Lender shall within one (1) month after receiving such notice provide that portion of Loan to the Borrower. The term of the Loan shall be the term of this Agreement. During the term of the Loan, upon occurrence of any of the following circumstances, the term of the Loan shall accelerate and the Borrower shall immediately repay the full amount of the Loan (and any interest thereon):

 

  1.1.1 Thirty (30) days elapsed after the Borrower receives a written notice from the Lender requesting repayment of the Loan (and all interest thereon);

 

  1.1.2 The Borrower’s death, lack, or limitation of civil capacity;

 

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  1.1.3 The Borrower ceases (for any reason) to be a shareholder of the Borrower Company or its affiliates, and the Borrower is not an employee of the Lender, the Borrower Company or their affiliates;

 

  1.1.4 The Borrower engages in criminal act or is involved in criminal activities;

 

  1.1.5 According to the applicable laws of China, foreign investors are permitted to invest in the principal business that is currently conducted by the Borrower Company in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, the competent government authorities of China begin to approve such investments, and the Lender elects to exercise the exclusive option under the Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement; or the Lender or the Borrower Company has violated or committed a breach of its representations, warranties, covenants or other obligations under the Exclusive Option Agreement;

 

  1.1.6 The Borrower Company failed to obtain or renew any governmental approval or license necessary for the operation of its core business.

 

  1.2 The Borrower agrees to accept the aforementioned Loan provided by the Lender, and hereby agrees and undertakes to use the Loan solely for the contribution of the registered capital of the Borrower Company, or for the working capital of the Borrower Company. Without the Lender’s prior written consent, the Borrower shall not use the Loan for any purpose other than as set forth herein.

 

  1.3 The Lender and the Borrower hereby agree and confirm that the Borrower shall repay the Loan only through the following means (or other means approved by the Lender): by transferring the Borrower Equity Interest in whole to the Lender or the Lender’s designated persons (legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement, and any proceeds from the transfer of the Borrower Equity Interest (to the extent permissible) shall be used by the Borrower to repay the Loan (principal and any interest thereon) to the Lender or the Lender’s designated persons, in accordance with this Agreement and in the manner designated by the Lender.

 

  1.4 The Lender and the Borrower hereby agree and confirm that to the extent permitted by the applicable laws, the Lender shall have the right (but not the obligation) to purchase or designate other persons (legal or natural persons) to purchase the Borrower Equity Interest in part or in whole at any time, at the price stipulated in the Exclusive Option Agreement.

 

  1.5 The Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes the Lender or a legal or natural person designated by the Lender to exercise all of the Borrower’s rights as a shareholder of the Borrower Company.

 

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  1.6 When the Borrower transfers the Borrower Equity Interest to the Lender or the Lender’s designated person(s) in accordance with the Exclusive Option Agreement, (1) in the event that the transfer price of such Borrower Equity Interest equals to or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be an interest-free loan, (2) in the event that the transfer price of such Borrower Equity Interest exceeds the actual principal amount of the Loan under this Agreement, the excess over the actual principal amount shall be the interest of the Loan under this Agreement to the extent not prohibited by the PRC laws, and all of such interest shall be repaid by the Borrower to the Lender or otherwise paid by the Borrower to the Lender’s designated person(s) through legal means within ten (10) days after receiving the transfer price.

 

2 Representations and Warranties

 

  2.1 Between the date of this Agreement and the date of termination of this Agreement, the Lender hereby makes the following representations and warranties to the Borrower:

 

  2.1.1 The Lender is a corporation duly organized and legally existing in accordance with the laws of China;

 

  2.1.2 The Lender has the legal capacity to execute and perform this Agreement. The execution and performance by the Lender of this Agreement do not violate the Lender’s articles of association or other organizational documents, and the Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and

 

  2.1.3 This Agreement constitutes the Lender’s legal, valid, and binding obligations enforceable in accordance with its terms.

 

  2.2 Between the date of this Agreement and the date of termination of this Agreement, the Borrower hereby makes the following representations and warranties:

 

  2.2.1 The Borrower has the legal capacity to execute and perform this Agreement. The Borrower has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement;

 

  2.2.2 This Agreement constitutes the Borrower’s legal, valid, and binding obligations enforceable in accordance with its terms; and

 

  2.2.3 There are no disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower, nor are there any potential disputes, litigations, arbitrations, administrative proceedings, or any other legal proceedings relating to the Borrower.

 

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3 Borrower’s Covenants

 

  3.1 As and when he/she becomes, and for so long as he/she remains a shareholder of the Borrower Company, the Borrower irrevocably covenants that during the term of this Agreement, the Borrower shall ensure the Borrower Company:

 

  3.1.1 to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement (the “Exclusive Business Cooperation Agreement”) to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement.

 

  3.1.2 at the request of the Lender (or a party designated by the Lender), to execute the contracts/agreements on business cooperation with the Lender (or a party designated by the Lender), and to strictly abide by such contracts/agreements;

 

  3.1.3 to provide the Lender with all of the information on the Borrower Company’s business operations and financial condition at the Lender’s request;

 

  3.1.4 to immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to the Borrower Company’s assets, business, or income;

 

  3.1.5 at the request of the Lender, to appoint any persons designated by the Lender as the director or the executive director of the Borrower Company;

 

  3.2 the Borrower covenants that during the term of this Agreement, he/she shall:

 

  3.2.1 endeavor to keep the Borrower Company to be engaged in its principle business and to keep the specific business scope of its business license;

 

  3.2.2 abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement (the “Equity Interest Pledge Agreement”) and the Exclusive Option Agreement to which the Borrower is a party, perform his/her obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;

 

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  3.2.3 without the prior written consent of the Lender, not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except in accordance with the Equity Interest Pledge Agreement, the Exclusive Option Agreement and the Power of Attorney;

 

  3.2.4 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the Borrower Equity Interest, or allow the encumbrance thereon of any security interest, except to the Lender or the Lender’s designated person;

 

  3.2.5 ensure any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of the Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of the Lender;

 

  3.2.6 immediately notify the Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the Borrower Company’s assets, business or revenue or relating to the Borrower Equity Interest;

 

  3.2.7 to the extent necessary to maintain his/her ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all claims;

 

  3.2.8 without the prior written consent of the Lender, not cause the Borrower Company to sell, transfer, mortgage or dispose of in any manner any material assets of the Borrower Company or legal or beneficial interest in the material business or revenues of the Borrower Company, or allow the encumbrance thereon of any security interest, and refrain from any action/omission that may have a material impact on the assets, business and liabilities of the Borrower Company;

 

  3.2.9 appoint any designee of the Lender as the director or the executive director of the Borrower Company, at the request of the Lender;

 

  3.2.10 to the extent permitted by the laws of China, at the request of the Lender at any time, promptly and unconditionally transfer all of the Borrower Equity Interest to the Lender or the Lender’s designated representative(s) at any time, and ensure the other shareholders of the Borrower Company to waive their right of first refusal with respect to the share transfer described in this Section;

 

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  3.2.11 to the extent permitted by the laws of China, at the request of the Lender at any time, ensure that the other shareholders of the Borrower Company shall promptly and unconditionally transfer all of their equity interests in the Borrower Company to the Lender or the Lender’s designated representative(s) at any time, and the Borrower hereby waives his/her right of first refusal (if any) with respect to the equity transfer by such other shareholders described in this Section;

 

  3.2.12 in the event that the Lender purchases the Borrower Equity Interest from the Borrower in accordance with the provisions of the Exclusive Option Agreement, use such purchase price obtained thereby to repay the Loan (and any interest thereon) to the Lender; and

 

  3.2.13 without the prior written consent of the Lender, not cause the Borrower Company to supplement, change, or amend its articles of association in any manner, increase or decrease its registered capital or change its share capital structure in any manner.

 

4 Liability for Default

 

  4.1 If the Borrower materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Borrower. The Lender is entitled to require the Borrower to rectify or take remedial measures. If the Borrower fails to rectify or take remedial measures within ten (10) days after the Lender delivers a written notice to the Borrower and requires for rectification (or within any other reasonable period required by the Lender), the Lender is entitled to, at its sole discretion, (1) terminate this Agreement and require the Borrower to compensate all the losses; or (2) require specific performance of the obligations of the Borrower under this Agreement and require the Borrower to compensate all the losses. This Section shall not prejudice any other rights of the Lender under this Agreement

 

  4.2 In the event that the Borrower fails to perform the repayment obligations set forth in this Agreement, the Borrower shall pay an overdue interest of 0.01% per day for the outstanding payment, until the day the Borrower repays the full principal of the Loan (and any interest thereon), overdue interests and other payable amounts.

 

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5 Notices

 

  5.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  5.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below

 

  5.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  5.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  5.2 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms of this Section.

 

6 Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

7 Governing Law and Resolution of Disputes

 

  7.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes shall be governed by the laws of China.

 

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  7.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

  7.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

8 Miscellaneous

 

  8.1 This Agreement shall become effective upon execution by the Parties, and shall expire upon the date of full performance by the Parties of their respective obligations under this Agreement.

 

  8.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  8.3 In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  8.4 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

 

  8.5 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.5 shall survive the termination of this Agreement.

 

  8.6 This Agreement shall be written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.

 

Lender:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Borrower:   Lihong QIN
By:  

    /s/ Lihong Qin

EX-10.14

Exhibit 10.14

Equity Interest Pledge Agreement

This Exclusive Interest Pledge Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party  A: NIO Co., Ltd. (hereinafter the “Pledgee”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

Party  B: Lihong QIN (hereinafter the “Pledgor”), a Chinese citizen with Identification No.: ********;

 

Party  C: Beijing NIO Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its registered address at Room 112, Beijing Yuxiangqing Hotel, No. 23 Courtyard, Babaozhuang, Haidian District, Beijing.

In this Agreement, each of the Pledgee, the Pledgor and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. The Pledgor is a citizen of China who as of the date hereof holds 80% of the equity interests of Party C, representing RMB 8,000,000 in the registered capital of Party C. Party C is a limited liability company registered in Beijing, China. Party C acknowledges the respective rights and obligations of the Pledgor and the Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

 

2. The Pledgee is a wholly foreign-owned enterprise registered in China. The Pledgee and Party C have executed an Exclusive Business Cooperation Agreement (as defined below); Party C, the Pledgee and the Pledgor have executed an Exclusive Option Agreement (as defined below); the Pledgor has executed a Power of Attorney (as defined below) in favor of the Pledgee; and the Pledgee and the Pledgor have executed a Loan Agreement (as defined below) as defined below);

 

3. To ensure that Party C and the Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Load Agreement and the Power of Attorney, the Pledgor hereby pledges to the Pledgee all of the equity interest that the Pledgor holds in Party C as security for Party C’s and the Pledgor’s obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Loan Agreement and the Power of Attorney.

To perform the provisions of the Transaction Documents (as defined below), the Parties have mutually agreed to execute this Agreement upon the following terms.

 

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1. Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

 

  1.1 Pledge: shall refer to the security interest granted by the Pledgor to the Pledgee pursuant to Section 2 of this Agreement, i.e., the right of the Pledgee to be paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest.

 

  1.2 Equity Interest: shall refer to 80% equity interests in Party C currently held by the Pledgor, representing RMB 8,000,000 in the registered capital of Party C, and all of the equity interest hereafter legally acquired by the Pledgor in Party C.

 

  1.3 Term of the Pledge: shall refer to the term set forth in Section 3 of this Agreement.

 

  1.4 Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and the Pledgee on April 19, 2018, (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, the Pledgee and the Pledgor on April 19, 2018, (the “Exclusive Option Agreement”), the Loan Agreement executed by and between the Pledgee and the Pledgor on April 19, 2018, (the “Loan Agreement”), Power of Attorney executed on April 19, 2018, by the Pledgor (the “Power of Attorney”) and any modification, amendment and restatement to the aforementioned documents.

 

  1.5 Contract Obligations: shall refer to all the obligations of the Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan Agreement and this Agreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and this Agreement.

 

  1.6 Secured Indebtedness: shall refer to all the direct, indirect and derivative losses and losses of anticipated profits, suffered by the Pledgee, incurred as a result of any Event of Default on the part of the Pledgor and/or Party C under the Transaction Documents. The amount of such losses shall be calculated based on such factors as the reasonable business plan and profit forecast of the Pledgee, the consulting and service fees payable to the Pledgee under the Exclusive Business Cooperation Agreement, damages and relevant fees under the Transaction Documents, all expenses occurred by the Pledgee in connection with enforcement of the Pledgor’s and/or Party C’s Contract Obligations and etc.

 

  1.7 Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.

 

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  1.8 Notice of Default: shall refer to the notice issued by the Pledgee in accordance with this Agreement declaring an Event of Default.

 

2. Pledge

 

  2.1 The Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligations and payment of the Secured Indebtedness under this Agreement. Party C hereby assents that the Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.

 

  2.2 During the term of the Pledge, unless prohibited by the applicable laws and regulations, the Pledgee is entitled to receive dividends distributed on the Equity Interest. Without the prior written consent of the Pledgee, the Pledgor shall not receive dividends distributed on the Equity Interest. Dividends received by the Pledgor on Equity Interest after the deduction of individual income tax paid by the Pledgor shall be, as required by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to making any other payment; or (2) to the extent not prohibited by the applicable PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  2.3 The Pledgor may subscribe for a capital increase in Party C only with prior written consent of the Pledgee. Any additional equity interest obtained by the Pledgor as a result of the Pledgor’s subscription of the increased registered capital of the Company shall also be deemed as Equity Interest, and the Parties shall enter into further equity pledge agreement for this purpose and complete registration of the pledge of such additional equity interest.

 

  2.4 In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to the Pledgor upon Party C’s dissolution or liquidation shall, upon the request of the Pledgee, be (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) to the extent not prohibited by PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the applicable PRC laws.

 

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3. Term of the Pledge

 

  3.1 The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein is registered with the relevant administration for industry and commerce (the “AIC”). The Pledge shall remain effective until all Contract Obligations have been fully performed and all Secured Indebtedness has been fully paid. The Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the Parties shall be bound by the provisions of this Agreement. The Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the relevant PRC laws and regulations and the competent AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after submission for filing.

 

  3.2 During the Term of the Pledge, in the event the Pledgor and/or Party C fails to perform the Contract Obligations or pay Secured Indebtedness, the Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.

 

4. Custody of Records for Equity Interest subject to the Pledge

 

  4.1 During the Term of the Pledge set forth in this Agreement, the Pledgor shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. The Pledgee shall have custody of such documents during the entire Term of the Pledge set forth in this Agreement.

 

5. Representations and Warranties of the Pledgor and Party C

As of the execution date of this Agreement, the Pledgor and Party C hereby jointly and severally represent and warrant to the Pledgee that:

 

  5.1 The Pledgor is the sole legal and beneficial owner of the Equity Interest. The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 

  5.2 Each of the Pledgor and Party C has the power, capacity and authority to execute and deliver this Agreement, and to perform it/his obligations under this Agreement. This Agreement constitutes the Pledgor’s and Party C’s legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof.

 

  5.3 Except for the Pledge, the Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

 

  5.4 The Pledgor and Party C have obtained any and all approvals and consents from the applicable government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

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  5.5 The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or document to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.

 

6. Covenants of the Pledgor and Party C

 

  6.1 During the term of this Agreement, the Pledgor and Party C hereby jointly and severally covenant to the Pledgee:

 

  6.1.1 The Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of the Pledgee, except for the performance of the Transaction Documents; Party C shall not assent to or assist in the aforesaid behaviors;

 

  6.1.2 The Pledgor and Party C shall comply with and carry out all requirements under applicable laws and regulations relating to pledge, and within five (5) days of receipt of any notice, order or recommendation issued or made by the competent authorities regarding the Pledge (if any), shall present the aforementioned notice, order or recommendation to the Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon the Pledgee’s reasonable request or upon consent of the Pledgee;

 

  6.1.3 Each of the Pledgor and Party C shall promptly notify the Pledgee of any event or notice received by it that may have an impact on the Equity Interest (or any portion thereof,) as well as any event or notice received by it that may have an impact on any guarantees and obligations of the Pledgor under this Agreement or the performance of obligations of the Pledgor under this Agreement;

 

  6.1.4 Party C shall complete the registration procedures for the extension of the operation term within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.

 

  6.2 The Pledgor agrees that the rights acquired by the Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by the Pledgor or any, successors, heirs or representatives of the Pledgor or any other persons through any legal proceedings.

 

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  6.3 To protect or perfect the security interest granted by this Agreement for the Contract Obligations and Secured Indebtedness, the Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by the Pledgee. The Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with the Pledgee or designee(s) of the Pledgee (natural persons/legal persons). The Pledgor undertakes to provide the Pledgee within a reasonable time with all notices, the orders and decisions regarding the Pledge that are required by the Pledgee.

 

  6.4 The Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, the Pledgor shall indemnify the Pledgee for all losses resulting therefrom.

 

7. Event of Breach

 

  7.1 The following circumstances shall be deemed an Event of Default:

 

  7.1.1 The Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.1.2 Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, the Pledgor and Party C shall immediately notify the Pledgee in writing accordingly.

 

  7.3 Unless an Event of Default set forth in Section 7.1 has been successfully resolved to the Pledgee’s satisfaction within twenty (20) days after the Pledgee and/or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, the Pledgee may issue a Notice of Default to the Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of Section 8 of this Agreement.

 

8. Exercise of the Pledge

 

  8.1 The Pledgee shall issue a written Notice of Default to the Pledgor when it exercises the Pledge.

 

  8.2 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1.

 

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  8.3 After the Pledgee issues a Notice of Default to the Pledgor in accordance with Section 8.1, the Pledgee may exercise any remedy measure under the applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to being paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest. The Pledgee shall not be liable for any loss incurred by its duly exercise of such rights and powers.

 

  8.4 The proceeds from the exercise of the Pledge by the Pledgee shall be used to pay for the taxes and expenses incurred as a result of disposing the Equity Interest and to perform the Contract Obligations and pay the Secured Indebtedness to the Pledgee prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to the Pledgor or any other person who have rights to such balance under applicable laws or be deposited to the local notary public office where the Pledgor resides, with all expenses incurred being borne by the Pledgor. To the extent not prohibited by the applicable PRC laws, the Pledgor shall unconditionally donate the aforementioned proceeds to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  8.5 The Pledgee may exercise any remedy measure available to it simultaneously or in any order. The Pledgee may exercise the priority right in compensation based on the monetary valuation that such Equity Interest is converted into or with the proceeds from the auction or sale of the Equity Interest under this Agreement, without being required to exercise any other remedy measure first.

 

  8.6 The Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and the Pledgor or Party C shall not raise any objection to such exercise.

 

  8.7 When the Pledgee disposes of the Pledge in accordance with this Agreement, the Pledgor and Party C shall provide the necessary assistance to enable the Pledgee to enforce the Pledge in accordance with this Agreement.

 

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9. Breach of Agreement

 

  9.1 If the Pledgor or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Pledgor or Party C (as the case may be). The Pledgee is entitled to require the Pledgor or Party C to rectify or take remedial measures. If within ten (10) days after the Pledgee delivers a written notice to the Pledgor or Party C and requires for rectification (or within any other reasonable period required by the Pledgee), the Pledgor or Party C (as the case may be) fails to rectify or take remedial measures, the Pledgee is entitled to, at its sole discretion, (1) terminate this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of the Pledgor or Party C (as the case may be) under this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of the Pledgee under this Agreement.

 

  9.2 The Pledgor or Party C shall not have any right to terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

10. Assignment

 

  10.1 Without the Pledgee’s prior written consent, neither the Pledgor nor Party C shall assign or delegate its/his rights and obligations under this Agreement.

 

  10.2 This Agreement shall be binding on the Pledgor and his/her successors, heirs (including who inherited the Equity Interest) and permitted assigns, and shall be valid with respect to the Pledgee and each of his/her successors, heirs and permitted assigns.

 

  10.3 At any time, the Pledgee may assign any and all of its rights and obligations under the Transaction Documents and this Agreement to its designee(s), in which case the assignees shall have the rights and obligations of the Pledgee under the Transaction Documents and this Agreement, as if it were the original party to the Transaction Documents and this Agreement.

 

  10.4 In the event of change of the Pledgee due to assignment, the Pledgor and/or Party C shall, at the request of the Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the competent AIC.

 

  10.5 The Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of the Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by the Pledgor except in accordance with the written instructions of the Pledgee.

 

11. Termination

 

  11.1 Upon the fulfillment of all Contract Obligations and the full payment of all Secured Indebtedness by the Pledgor and Party C, the Pledgee shall release the Pledge under this Agreement upon the Pledgor’s request as soon as reasonably practicable and shall assist the Pledgor in de-registering the Pledge from the shareholders’ register of Party C and with the competent PRC local administration for industry and commerce.

 

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  11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.

 

12. Handling Fees and Other Expenses

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

 

13. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

14. Governing Law and Resolution of Disputes

 

  14.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  14.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  14.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

15. Severability

In the event that one or several of the provisions of this Contract are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

16. Attachments

The attachments set forth herein shall be an integral part of this Agreement.

 

17. Effectiveness and Amendments

 

  17.1 This Agreement shall become effective upon execution by the Parties, until the Contract Obligations have been fully performed and the Secured Indebtedness have been fully paid.

 

  17.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

18. Language and Counterparts

This Agreement is written in English in four copies. The Pledgor, the Pledgee and Party C shall hold one copy respectively and the other copy shall be used for registration.

The Remainder of this page is intentionally left blank

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.

 

Pledgee: NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Pledgor: Bin LI
By:  

/s/ Bin Li

Party  C: Beijing NIO Network Technology Co., Ltd.

 

By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Attachments:

 

1. Shareholders’ Register of Party C;

 

2. The Capital Contribution Certificate for Party C;

 

3. Exclusive Business Cooperation Agreement;

 

4. Exclusive Option Agreement;

 

5. Loan Agreement

 

6. Power of Attorney.


Equity Interest Pledge Agreement

This Exclusive Interest Pledge Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party  A: NIO Co., Ltd. (hereinafter the “Pledgee”), a wholly foreign-owned enterprise, organized and existing under the laws of the PRC, with its registered address at Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai;

 

Party  B: Lihong QIN (hereinafter the “Pledgor”), a Chinese citizen with Identification No.: ********;

 

Party  C: Beijing NIO Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its registered address at Room 112, Beijing Yuxiangqing Hotel, No. 23 Courtyard, Babaozhuang, Haidian District, Beijing.

In this Agreement, each of the Pledgee, the Pledgor and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. The Pledgor is a citizen of China who as of the date hereof holds 20% of the equity interests of Party C, representing RMB 2,000,000 in the registered capital of Party C. Party C is a limited liability company registered in Beijing, China. Party C acknowledges the respective rights and obligations of the Pledgor and the Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

 

2. The Pledgee is a wholly foreign-owned enterprise registered in China. The Pledgee and Party C have executed an Exclusive Business Cooperation Agreement (as defined below); Party C, the Pledgee and the Pledgor have executed an Exclusive Option Agreement (as defined below); the Pledgor has executed a Power of Attorney (as defined below) in favor of the Pledgee; and the Pledgee and the Pledgor have executed a Loan Agreement (as defined below) as defined below);

 

3. To ensure that Party C and the Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Load Agreement and the Power of Attorney, the Pledgor hereby pledges to the Pledgee all of the equity interest that the Pledgor holds in Party C as security for Party C’s and the Pledgor’s obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Loan Agreement and the Power of Attorney.

To perform the provisions of the Transaction Documents (as defined below), the Parties have mutually agreed to execute this Agreement upon the following terms.

 

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1. Definitions

Unless otherwise provided herein, the terms below shall have the following meanings:

 

  1.1 Pledge: shall refer to the security interest granted by the Pledgor to the Pledgee pursuant to Section 2 of this Agreement, i.e., the right of the Pledgee to be paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest.

 

  1.2 Equity Interest: shall refer to 20% equity interests in Party C currently held by the Pledgor, representing RMB 2,000,000 in the registered capital of Party C, and all of the equity interest hereafter legally acquired by the Pledgor in Party C.

 

  1.3 Term of the Pledge: shall refer to the term set forth in Section 3 of this Agreement.

 

  1.4 Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and the Pledgee on April 19, 2018, (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, the Pledgee and the Pledgor on April 19, 2018, (the “Exclusive Option Agreement”), the Loan Agreement executed by and between the Pledgee and the Pledgor on April 19, 2018, (the “Loan Agreement”), Power of Attorney executed on April 19, 2018, by the Pledgor (the “Power of Attorney”) and any modification, amendment and restatement to the aforementioned documents.

 

  1.5 Contract Obligations: shall refer to all the obligations of the Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan Agreement and this Agreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and this Agreement.

 

  1.6 Secured Indebtedness: shall refer to all the direct, indirect and derivative losses and losses of anticipated profits, suffered by the Pledgee, incurred as a result of any Event of Default on the part of the Pledgor and/or Party C under the Transaction Documents. The amount of such losses shall be calculated based on such factors as the reasonable business plan and profit forecast of the Pledgee, the consulting and service fees payable to the Pledgee under the Exclusive Business Cooperation Agreement, damages and relevant fees under the Transaction Documents, all expenses occurred by the Pledgee in connection with enforcement of the Pledgor’s and/or Party C’s Contract Obligations and etc.

 

  1.7 Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.

 

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  1.8 Notice of Default: shall refer to the notice issued by the Pledgee in accordance with this Agreement declaring an Event of Default.

 

2. Pledge

 

  2.1 The Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligations and payment of the Secured Indebtedness under this Agreement. Party C hereby assents that the Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.

 

  2.2 During the term of the Pledge, unless prohibited by the applicable laws and regulations, the Pledgee is entitled to receive dividends distributed on the Equity Interest. Without the prior written consent of the Pledgee, the Pledgor shall not receive dividends distributed on the Equity Interest. Dividends received by the Pledgor on Equity Interest after the deduction of individual income tax paid by the Pledgor shall be, as required by the Pledgee, (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to making any other payment; or (2) to the extent not prohibited by the applicable PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  2.3 The Pledgor may subscribe for a capital increase in Party C only with prior written consent of the Pledgee. Any additional equity interest obtained by the Pledgor as a result of the Pledgor’s subscription of the increased registered capital of the Company shall also be deemed as Equity Interest, and the Parties shall enter into further equity pledge agreement for this purpose and complete registration of the pledge of such additional equity interest.

 

  2.4 In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to the Pledgor upon Party C’s dissolution or liquidation shall, upon the request of the Pledgee, be (1) deposited into an account designated and supervised by the Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) to the extent not prohibited by PRC laws, unconditionally donated to the Pledgee or any other person designated by the Pledgee in the manner permitted by the applicable PRC laws.

 

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3. Term of the Pledge

 

  3.1 The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein is registered with the relevant administration for industry and commerce (the “AIC”). The Pledge shall remain effective until all Contract Obligations have been fully performed and all Secured Indebtedness has been fully paid. The Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the Parties shall be bound by the provisions of this Agreement. The Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the relevant PRC laws and regulations and the competent AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after submission for filing.

 

  3.2 During the Term of the Pledge, in the event the Pledgor and/or Party C fails to perform the Contract Obligations or pay Secured Indebtedness, the Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.

 

4. Custody of Records for Equity Interest subject to the Pledge

 

  4.1 During the Term of the Pledge set forth in this Agreement, the Pledgor shall deliver to the Pledgee’s custody the capital contribution certificate for the Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. The Pledgee shall have custody of such documents during the entire Term of the Pledge set forth in this Agreement.

 

5. Representations and Warranties of the Pledgor and Party C

As of the execution date of this Agreement, the Pledgor and Party C hereby jointly and severally represent and warrant to the Pledgee that:

 

  5.1 The Pledgor is the sole legal and beneficial owner of the Equity Interest. The Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 

  5.2 Each of the Pledgor and Party C has the power, capacity and authority to execute and deliver this Agreement, and to perform it/his obligations under this Agreement. This Agreement constitutes the Pledgor’s and Party C’s legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof.

 

  5.3 Except for the Pledge, the Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

 

  5.4 The Pledgor and Party C have obtained any and all approvals and consents from the applicable government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

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  5.5 The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or document to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.

 

6. Covenants of the Pledgor and Party C

 

  6.1 During the term of this Agreement, the Pledgor and Party C hereby jointly and severally covenant to the Pledgee:

 

  6.1.1 The Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of the Pledgee, except for the performance of the Transaction Documents; Party C shall not assent to or assist in the aforesaid behaviors;

 

  6.1.2 The Pledgor and Party C shall comply with and carry out all requirements under applicable laws and regulations relating to pledge, and within five (5) days of receipt of any notice, order or recommendation issued or made by the competent authorities regarding the Pledge (if any), shall present the aforementioned notice, order or recommendation to the Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon the Pledgee’s reasonable request or upon consent of the Pledgee;

 

  6.1.3 Each of the Pledgor and Party C shall promptly notify the Pledgee of any event or notice received by it that may have an impact on the Equity Interest (or any portion thereof,) as well as any event or notice received by it that may have an impact on any guarantees and obligations of the Pledgor under this Agreement or the performance of obligations of the Pledgor under this Agreement;

 

  6.1.4 Party C shall complete the registration procedures for the extension of the operation term within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.

 

  6.2 The Pledgor agrees that the rights acquired by the Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by the Pledgor or any, successors, heirs or representatives of the Pledgor or any other persons through any legal proceedings.

 

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  6.3 To protect or perfect the security interest granted by this Agreement for the Contract Obligations and Secured Indebtedness, the Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by the Pledgee. The Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by the Pledgee, to facilitate the exercise by the Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with the Pledgee or designee(s) of the Pledgee (natural persons/legal persons). The Pledgor undertakes to provide the Pledgee within a reasonable time with all notices, the orders and decisions regarding the Pledge that are required by the Pledgee.

 

  6.4 The Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, the Pledgor shall indemnify the Pledgee for all losses resulting therefrom.

 

7. Event of Breach

 

  7.1 The following circumstances shall be deemed an Event of Default:

 

  7.1.1 The Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.1.2 Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

  7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, the Pledgor and Party C shall immediately notify the Pledgee in writing accordingly.

 

  7.3 Unless an Event of Default set forth in Section 7.1 has been successfully resolved to the Pledgee’s satisfaction within twenty (20) days after the Pledgee and/or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, the Pledgee may issue a Notice of Default to the Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of Section 8 of this Agreement.

 

8. Exercise of the Pledge

 

  8.1 The Pledgee shall issue a written Notice of Default to the Pledgor when it exercises the Pledge.

 

  8.2 Subject to the provisions of Section 7.3, the Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1.

 

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  8.3 After the Pledgee issues a Notice of Default to the Pledgor in accordance with Section 8.1, the Pledgee may exercise any remedy measure under the applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to being paid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from the auction or sale of the Equity Interest. The Pledgee shall not be liable for any loss incurred by its duly exercise of such rights and powers.

 

  8.4 The proceeds from the exercise of the Pledge by the Pledgee shall be used to pay for the taxes and expenses incurred as a result of disposing the Equity Interest and to perform the Contract Obligations and pay the Secured Indebtedness to the Pledgee prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to the Pledgor or any other person who have rights to such balance under applicable laws or be deposited to the local notary public office where the Pledgor resides, with all expenses incurred being borne by the Pledgor. To the extent not prohibited by the applicable PRC laws, the Pledgor shall unconditionally donate the aforementioned proceeds to the Pledgee or any other person designated by the Pledgee in the manner permitted by the PRC laws.

 

  8.5 The Pledgee may exercise any remedy measure available to it simultaneously or in any order. The Pledgee may exercise the priority right in compensation based on the monetary valuation that such Equity Interest is converted into or with the proceeds from the auction or sale of the Equity Interest under this Agreement, without being required to exercise any other remedy measure first.

 

  8.6 The Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and the Pledgor or Party C shall not raise any objection to such exercise.

 

  8.7 When the Pledgee disposes of the Pledge in accordance with this Agreement, the Pledgor and Party C shall provide the necessary assistance to enable the Pledgee to enforce the Pledge in accordance with this Agreement.

 

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9. Breach of Agreement

 

  9.1 If the Pledgor or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of the Pledgor or Party C (as the case may be). The Pledgee is entitled to require the Pledgor or Party C to rectify or take remedial measures. If within ten (10) days after the Pledgee delivers a written notice to the Pledgor or Party C and requires for rectification (or within any other reasonable period required by the Pledgee), the Pledgor or Party C (as the case may be) fails to rectify or take remedial measures, the Pledgee is entitled to, at its sole discretion, (1) terminate this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of the Pledgor or Party C (as the case may be) under this Agreement and require the Pledgor or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of the Pledgee under this Agreement.

 

  9.2 The Pledgor or Party C shall not have any right to terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

10. Assignment

 

  10.1 Without the Pledgee’s prior written consent, neither the Pledgor nor Party C shall assign or delegate its/his rights and obligations under this Agreement.

 

  10.2 This Agreement shall be binding on the Pledgor and his/her successors, heirs (including who inherited the Equity Interest) and permitted assigns, and shall be valid with respect to the Pledgee and each of his/her successors, heirs and permitted assigns.

 

  10.3 At any time, the Pledgee may assign any and all of its rights and obligations under the Transaction Documents and this Agreement to its designee(s), in which case the assignees shall have the rights and obligations of the Pledgee under the Transaction Documents and this Agreement, as if it were the original party to the Transaction Documents and this Agreement.

 

  10.4 In the event of change of the Pledgee due to assignment, the Pledgor and/or Party C shall, at the request of the Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the competent AIC.

 

  10.5 The Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of the Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by the Pledgor except in accordance with the written instructions of the Pledgee.

 

11. Termination

 

  11.1 Upon the fulfillment of all Contract Obligations and the full payment of all Secured Indebtedness by the Pledgor and Party C, the Pledgee shall release the Pledge under this Agreement upon the Pledgor’s request as soon as reasonably practicable and shall assist the Pledgor in de-registering the Pledge from the shareholders’ register of Party C and with the competent PRC local administration for industry and commerce.

 

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  11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.

 

12. Handling Fees and Other Expenses

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.

 

13. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

14. Governing Law and Resolution of Disputes

 

  14.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  14.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  14.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

15. Severability

In the event that one or several of the provisions of this Contract are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

16. Attachments

The attachments set forth herein shall be an integral part of this Agreement.

 

17. Effectiveness and Amendments

 

  17.1 This Agreement shall become effective upon execution by the Parties, until the Contract Obligations have been fully performed and the Secured Indebtedness have been fully paid.

 

  17.2 Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

18. Language and Counterparts

This Agreement is written in English in four copies. The Pledgor, the Pledgee and Party C shall hold one copy respectively and the other copy shall be used for registration.

The Remainder of this page is intentionally left blank

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.

 

Pledgee: NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Pledgor: Lihong QIN
By:  

/s/ Lihong Qin

Party C: Beijing NIO Network Technology Co., Ltd.

By:  

/s/ Lihong Qin_

Name:   Lihong QIN
Title:   Legal Representative

 


Attachments:

 

1. Shareholders’ Register of Party C;

 

2. The Capital Contribution Certificate for Party C;

 

3. Exclusive Business Cooperation Agreement;

 

4. Exclusive Option Agreement;

 

5. Loan Agreement

 

6. Power of Attorney.
EX-10.15

Exhibit 10.15

Exclusive Business Cooperation Agreement

This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”).

 

Party A:    NIO Co., Ltd.

 

Address:       Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party B:    Beijing NIO Network Technology Co., Ltd.

 

Address:     Room 112, Beijing Yuxiangqing Hotel, No. 23 Courtyard, Babaozhuang, Haidian District, Beijing

In this Agreement, each of Party A and Party B shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas,

 

1. Party A is a wholly foreign-owned enterprise established in China, and has sufficient capacity, experience and resources for the R&D of new energy automobiles and related components and for providing technical development, technical services and consultation in relation to new energy automobile and related components;

 

2. Party B is a company established in China with exclusive domestic capital and as registered with the relevant PRC government authorities, is permitted to engage in internet culture activities The businesses conducted by Party B currently and at any time during the term of this Agreement are collectively referred to as the “Principal Business”;

 

3. Party A is willing to provide Party B with technical development, technical support, management consultation and other related services on an exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in technology, team, and resources, and Party B is willing to accept such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.

Now, therefore, through mutual discussion, the Parties have reached the following agreements:

 

1. Services Provided by Party A

 

  1.1 Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party B with comprehensive technical support, consulting services and other related services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, including but not limited to the following:

 

  (1) Licensing Party B to use the technology and software legally owned by Party A in relation to the Principal Business;

 

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  (2) Design, development, maintenance and updating of technologies necessary for Party B’s Principal Business, and provision of related technical consultation and technical services;

 

  (3) Design, installation, daily management, maintenance and updating of related database;

 

  (4) Technical support and training for employees of Party B;

 

  (5) Assisting Party B in collection and research of technology and market information (excluding market research business that wholly foreign-owned enterprises are restricted from conducting under PRC law);

 

  (6) Providing business and management consultation for Party B;

 

  (7) Providing marketing and promotional services for Party B;

 

  (8) Development and testing of new products;

 

  (9) Leasing of equipments or properties; and

 

  (10) Other related services requested by Party B from time to time to the extent permitted under PRC law.

 

  1.2 Party B agrees to accept all the services provided by Party A. The Parties agree that Party A may appoint or designate its affiliates or other qualified parties to provide Party B with the services under this Agreement (the parties designated by Party A may enter into certain agreements described in Section 1.3 with Party B). Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third party and shall not establish same or similar corporation relationships with any third party regarding the matters contemplated by this Agreement.

 

  1.3 Service Providing Methodology

 

  1.3.1 Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, methods, personnel, and fees for the specific services.

 

  1.3.2 To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into equipment or property lease agreements with Party A or any other party designated by Party A which shall permit Party B to use Party A’s relevant equipment or property based on the business needs of Party B.

 

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  1.3.3 Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all of the assets and business of Party B, to the extent permitted under PRC law, and at the lowest purchase price permitted by PRC law. The Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions of the transfer of the assets.

 

2. The Calculation and Payment of the Service Fees

 

  2.1 The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:

 

  2.1.1 In consideration for the services provided by Party A hereunder, Party B shall pay a service fee to Party A on annual basis (or at any time agreed by the Parties). The service fees for each year (or for any other period agreed by the Parties) shall consist of a management fee and a fee for services provided, which shall be reasonably determined by Party A based on the following factors. Party A may provide separate confirmation letter and/or invoice to Party B to indicate the amount of service fees due for each service period; or the amount of services fees may be as set forth in the relevant contracts separately executed by the Parties.

 

  (1) Complexity and difficulty of the services provided by Party A;

 

  (2) Seniority of and time consumed by the employees of Party A providing the services;

 

  (3) Specific contents, scope and value of the services provided by Party A;

 

  (4) Market price of the same type of services;

 

  (5) Operation conditions of Party B.

 

  2.1.2 If Party A transfers or licenses technology to Party B, develops software or other technology as entrusted by Party B, or leases equipments or properties to Party B, the technology transfer price, license price, development fees or rent shall be determined by the Parties separately based on the actual situations and/or set forth in the relevant contracts separately executed by the Parties.

 

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3. Intellectual Property Rights and Confidentiality Clauses

 

  3.1 Party A shall have sole, exclusive and complete ownership, rights and interests in any and all intellectual properties or intangible assets arising out of or created or developed during the performance of this Agreement by both Parties, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others (to the extent not prohibited by the PRC laws). Unless expressly authorized by Party A, Party B is not entitled to any rights or interests in any intellectual property rights of Party A which are used by Party A in providing the services pursuant to this Agreement. To ensure Party A’s rights under this Section, where necessary, Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion, for the purposes of vesting the ownership, right or interest of any such intellectual property rights and intangible assets in Party A, and/or perfecting the protections of any such intellectual property rights and intangible assets for Party A (including registering such intellectual property rights and intangible assets under Party A’s name).

 

  3.2 The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

4. Representations and Warranties

 

  4.1 Party A hereby represents, warrants and covenants as follows:

 

  4.1.1 Party A is a wholly foreign-owned enterprise legally established and validly existing in accordance with the laws of China; Party A or the service providers designated by Party A will obtain all government permits and licenses necessary for providing the service under this Agreement (if required) before providing such services.

 

  4.1.2 Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

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  4.1.3 This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.

 

  4.2 Party B hereby represents, warrants and covenants as follows:

 

  4.2.1. Party B is a company legally established and validly existing in accordance with the laws of China and has obtained and will maintain all permits and licenses for engaging in the Principal Business in a timely manner.

 

  4.2.2. Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

  4.2.3. This Agreement constitutes Party B’s legal, valid and binding obligations, and shall be enforceable against it in accordance with its terms.

 

5. Term of Agreement

 

  5.1 This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this Agreement or terminated in writing by Party A, this Agreement shall remain effective.

 

  5.2 During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof and endeavor to obtain the approval of, and complete registration with, the competent authorities for such renewal, so as to enable this Agreement to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for the renewal of its operation term is not approved by the competent government authorities.

 

  5.3 The rights and obligations of the Parties under Sections 3, 6, 7 and this Section 5.3 shall survive the termination of this Agreement.

 

6. Governing Law and Resolution of Disputes

 

  6.1 The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

  6.2 In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

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  6.3 Upon the occurrence of any disputes arising from the interpretation and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

7. Breach of Agreement and Indemnification

 

  7.1 If Party B materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B. Party A is entitled to require Party B to rectify or take remedial measures. If Party B fails to rectify or take remedial measures within ten (10) days after Party A delivers a written notice to Party B and requires for rectification (or within any other reasonable period required by Party A), Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B to compensate all the losses; or (2) require specific performance of the obligations of Party B under this Agreement and require Party B to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  7.2 Unless otherwise required by the applicable laws, Party B shall not unilaterally terminate this Agreement in any event.

 

  7.3 Party B shall indemnify Party A and hold Party A harmless from any losses, damages, obligations or expenses caused by any lawsuit, claims or other demands raised by any third party against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except where such losses, damages, obligations or expenses arise from the gross negligence or willful misconduct of Party A.

 

8. Force Majeure

 

  8.1 In the case of any force majeure events (“Force Majeure”) such as earthquakes, typhoons, floods, fires, flu, wars, riots, strikes or any other events that cannot be predicted and are unpreventable and unavoidable by the affected Party, which causes the failure of either Party to perform or completely perform this Agreement or perform this Agreement on time, the Party affected by such Force Majeure shall not be liable for this. However, the Party affected by such Force Majeure shall give the other Party written notices without any delay, and shall provide details and related documents evidencing such event within 15 days after sending out such notice, explaining the reasons for such failure of, partial or delay of performance.

 

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  8.2 If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from the non-performance, incomplete performance or delay of performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party.

 

  8.3 In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure.

 

9. Assignment

 

  9.1 Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.

 

  9.2 Party B agrees that unless expressly required by the applicable laws otherwise, Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment, Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.

 

10. Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

11. Amendments and Supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

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12. Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors and permitted assigns, and shall be valid with respect to the Parties and each of their successors and permitted assigns.

 

13. Language and Counterparts

This Agreement is written in English language in two copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Party B:   Beijing NIO Network Technology Co., Ltd
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
EX-10.16

Exhibit 10.16

Exclusive Option Agreement

This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party A:    NIO Co., Ltd.

 

Address:       Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party B:      Bin LI (a Chinese citizen with Identification No.: ********)

 

Party C:    Beijing NIO Network Technology Co., Ltd.

 

Address:       Room 112, Beijing Yuxiangqing Hotel, No. 23 Courtyard, Babaozhuang, Haidian District, Beijing

In this Agreement, each of Party A, Party B and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. Party B is the shareholder of Party C and as of the date hereof hold 80% of the equity interests of Party C, representing RMB 8,000,000in the registered capital of Party C.

 

2. Party A and Party B executed a Loan Agreement (“Loan Agreement”) on April 19, 2018, according to which Party A agreed to provide to Party B a loan in the amount of RMB 8,000,000 for the purpose as designated in the Loan Agreement.

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 

1. Sale and Purchase of Equity Interest

 

  1.1 Option Granted

Party B hereby irrevocably and unconditionally grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

 

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  1.2 Steps for Exercise of the Equity Interest Purchase Option

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying:(a) Party A’s decision to exercise the Equity Interest Purchase Option, and the name of the Designee(s) if any; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests or the date for the transfer of the Optioned Interests.

 

  1.3 Equity Interest Purchase Price

Optioned Interests

The total price for the purchase by Party A of all Optioned Interests held by Party B upon exercise of the Equity Interest Purchase Option by Party A shall equal to the amount of registered capital contributed by Party B in Party C for such Optioned Interests (or such price may be as set forth in the equity transfer agreement to be executed between Party A (or the Designee) and Party B separately, provided that such price does not violate PRC laws and regulations and is acceptable to Party A); if Party A exercises the Equity Interest Purchase Option to purchase part of the Optioned Interests held by Party B in Party C, then the purchase price shall be calculated on a pro rata basis. If at the time when Party A exercises the Equity Interest Purchase Option, the PRC laws impose mandatory requirements on the purchase price of such Optioned Interests, such that the minimum price permitted under PRC law is higher than the aforementioned price, then the purchase price shall be such minimum price permitted by PRC law (collectively, the “Equity Interest Purchase Price”).

 

  1.4 Transfer of Optioned Interests

For each exercise of the Equity Interest Purchase Option:

 

  1.4.1 Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s);

 

  1.4.2 Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the Optioned Interests by Party B to Party A and/or the Designee(s) and waiving any right of first refusal with respect thereto;

 

  1.4.3 Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 

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  1.4.4 Party B shall, within thirty (30) days after receipt of the Equity Interest Purchase Option Notice, execute all necessary contracts, agreements or documents with relevant parties, obtain all necessary government approvals and permits, and complete all necessary registrations and filings, so as to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to the Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement thereto.; “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with a power of attorney and any modification, amendment and restatement thereto.

 

  1.5 Payment

The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall be used for repayment of the loan provided by Party A (and any interest thereon) in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity Interest Purchase Option, Party A may make the payment of the Equity Interest Purchase Price by way of offset of the outstanding debts owed by Party B to Party A (including without limitation the outstanding amount of the loan owed by Party B to Party A and any interest thereon) (such debts, the “Offset Debts”), in which case Party A shall not be required to pay any additional purchase price to Party B, unless the Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with the PRC laws. If the PRC laws impose mandatory requirements on the Equity Interest Purchase Price agreed under this Agreement, such that the minimum Equity Interest Purchase Price permitted under PRC laws exceeds the price already offset with the Offset Debts, Party B hereby waives its right to receive the amount of price that exceeds the amount offset with the Offset Debts.

 

2. Covenants

 

  2.1 Covenants regarding Party C

Party B (as a shareholder of Party C) and Party C hereby covenant as follows:

 

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  2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 

  2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain and maintain all necessary government licenses and permits by prudently and effectively operating its business and handling its affairs;

 

  2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any material assets of Party C or legal or beneficial interest in the material business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 

  2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for payables incurred in the ordinary course of business other than through loans;

 

  2.1.5 They shall always operate all of Party C’s businesses within the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may adversely affect Party C’s operating status and asset value;

 

  2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business;

 

  2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 

  2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;

 

  2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 

  2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 

  2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C’s assets, business, revenue or equity interest;

 

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  2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders;

 

  2.1.14 At the request of Party A, they shall appoint any person designated by Party A as the director or executive director of Party C.

 

  2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates; and

 

  2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A;

 

  2.1.17 Once PRC laws permits foreign investors to invest in the principal business of Party C in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, and the competent government authorities of China begin to approve such investments, upon Party’s exercise of the Equity Interest Purchase Option, Party B shall immediately transfer to Party A or the Designee(s) the equity interest in Party C held by Party B.

 

  2.2 Covenants of Party B

Party B hereby covenants as follows:

 

  2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

  2.2.2 Without the prior written consent of Party A, Party B shall ensure the shareholders’ meeting and/or the directors (or the executive director) of Party C not to approve any sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

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  2.2.3 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting or the directors (or the executive director) of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person;

 

  2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 

  2.2.5 Party B shall ensure the shareholders’ meeting or the directors (or the executive director) of Party C to vote in favor of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 

  2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.2.7 Party B shall appoint any designee of Party A as the director or the executive director of Party C, at the request of Party A;

 

  2.2.8 Party B gives consent to the execution by each of the other shareholders of Party C with Party A and Party C of the exclusive option agreement, the equity interest pledge agreement and the power of attorney similar to this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, and undertakes not to take any action in conflict with such documents executed by such other shareholders; with respect to the transfer of equity interest of Party C by any of the other shareholders of Party C to Party A and/or the Designee(s) pursuant to such shareholder’s exclusive option agreement, Party B hereby waives all of its right of first refusal (if any).

 

  2.2.9 If Party received any profit distribution, interest, dividend or proceeds of liquidation from Party C, Party B shall promptly donate all such profit distribution, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A in the manner permitted by the applicable PRC laws; and

 

  2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Party B’s Equity Interest Pledge Agreement or under the Party B’s Power of Attorney, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

 

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3. Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of the transfer of the Optioned Interests, that:

 

  3.1 They have the power, capacity and authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning each transfer of the Optioned Interests as described thereunder (each, a “Transfer Contract”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts substantially consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 

  3.2 Party B and Party C have obtained any and all approvals and consents from the competent government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

  3.3 The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 

  3.4 Party B has the legal and complete title to the equity interests held by it in Party C. Except for Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, Party B has not placed any security interest or encumbrances on such equity interests;

 

  3.5 Party C is a limited liability company duly organized and validly existing under the laws of the PRC. Party C has the legal and complete title to all of the assets used in connection with its business operation, and has not placed any security interest on the aforementioned assets;

 

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  3.6 Party C does not have any outstanding debts, except for (i) debt incurred during the ordinary course of business; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained.

 

  3.7 Party C has complied with all PRC laws and regulations in material aspects; and

 

  3.8 There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

 

4. Effective Date and Term

This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.

 

5. Governing Law and Resolution of Disputes

 

  5.1 Governing Law

The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of the PRC.

 

  5.2 Methods of Resolution of Disputes

In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

6. Taxes and Fees

Each Party shall pay any and all transfer and registration taxes, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

 

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7. Notices

 

  7.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  7.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below;

 

  7.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  7.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  7.2 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms of this Section.

 

8. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement, and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of other Parties, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels, or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of, or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

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9. Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

 

10. Breach of Agreement

 

  10.1 If Party B or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B or Party C (as the case may be). Party A is entitled to require Party B or Party C to rectify or take remedial measures. If within ten (10) days after Party A delivers a written notice to Party B or Party C and requires for rectification (or within any other reasonable period required by Party A), Party B or Party C (as the case may be) fails to rectify or take remedial measures, Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of Party B or Party C (as the case may be) under this Agreement and require Party B or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  10.2 Party B or Party C shall not terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

11. Miscellaneous

 

  11.1 Amendments, changes and supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  11.2 Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 

  11.3 Headings

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

 

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  11.4 Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  11.5 Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors, heirs (including who inherited the Optioned Interests) and permitted assigns, and shall be valid with respect to the Parties and each of their successors, heirs and permitted assigns.

 

  11.6 Survival

 

  11.6.1 Any obligations that occurred or that are due in connection with this Agreement before the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

 

  11.6.2 The provisions of Sections 5, 8, 10 and this Section 11.6 shall survive the termination of this Agreement.

 

  11.7 Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 

  11.8 Language

This Agreement is written in English language in three copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Party B:   Bin LI
By:  

/s/ Bin Li

Party C:   Beijing NIO Network Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative


Exclusive Option Agreement

This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of April 19, 2018 in Shanghai, the People’s Republic of China (“China” or the “PRC”):

 

Party A:    NIO Co., Ltd.

 

Address:       Room 115, No. 569 Anchi Road, Anting Town, Jiading District, Shanghai

 

Party B:      Lihong QIN (a Chinese citizen with Identification No.: ********)

 

Party C:    Beijing NIO Network Technology Co., Ltd.

 

Address:       Room 112, Beijing Yuxiangqing Hotel, No. 23 Courtyard, Babaozhuang, Haidian District, Beijing

In this Agreement, each of Party A, Party B and Party C shall be hereinafter referred to as a “Party” individually, and as the “Parties” collectively.

Whereas:

 

1. Party B is the shareholder of Party C and as of the date hereof hold 20% of the equity interests of Party C, representing RMB 2,000,000in the registered capital of Party C.

 

2. Party A and Party B executed a Loan Agreement (“Loan Agreement”) on April 19, 2018, according to which Party A agreed to provide to Party B a loan in the amount of RMB 2,000,000 for the purpose as designated in the Loan Agreement.

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 

1. Sale and Purchase of Equity Interest

 

  1.1 Option Granted

Party B hereby irrevocably and unconditionally grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

 

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  1.2 Steps for Exercise of the Equity Interest Purchase Option

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying:(a) Party A’s decision to exercise the Equity Interest Purchase Option, and the name of the Designee(s) if any; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”); and (c) the date for purchasing the Optioned Interests or the date for the transfer of the Optioned Interests.

 

  1.3 Equity Interest Purchase Price

Optioned Interests

The total price for the purchase by Party A of all Optioned Interests held by Party B upon exercise of the Equity Interest Purchase Option by Party A shall equal to the amount of registered capital contributed by Party B in Party C for such Optioned Interests (or such price may be as set forth in the equity transfer agreement to be executed between Party A (or the Designee) and Party B separately, provided that such price does not violate PRC laws and regulations and is acceptable to Party A); if Party A exercises the Equity Interest Purchase Option to purchase part of the Optioned Interests held by Party B in Party C, then the purchase price shall be calculated on a pro rata basis. If at the time when Party A exercises the Equity Interest Purchase Option, the PRC laws impose mandatory requirements on the purchase price of such Optioned Interests, such that the minimum price permitted under PRC law is higher than the aforementioned price, then the purchase price shall be such minimum price permitted by PRC law (collectively, the “Equity Interest Purchase Price”).

 

  1.4 Transfer of Optioned Interests

For each exercise of the Equity Interest Purchase Option:

 

  1.4.1 Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the Optioned Interests to Party A and/or the Designee(s);

 

  1.4.2 Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the Optioned Interests by Party B to Party A and/or the Designee(s) and waiving any right of first refusal with respect thereto;

 

  1.4.3 Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 

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  1.4.4 Party B shall, within thirty (30) days after receipt of the Equity Interest Purchase Option Notice, execute all necessary contracts, agreements or documents with relevant parties, obtain all necessary government approvals and permits, and complete all necessary registrations and filings, so as to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to the Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement thereto.; “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with a power of attorney and any modification, amendment and restatement thereto.

 

  1.5 Payment

The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall be used for repayment of the loan provided by Party A (and any interest thereon) in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity Interest Purchase Option, Party A may make the payment of the Equity Interest Purchase Price by way of offset of the outstanding debts owed by Party B to Party A (including without limitation the outstanding amount of the loan owed by Party B to Party A and any interest thereon) (such debts, the “Offset Debts”), in which case Party A shall not be required to pay any additional purchase price to Party B, unless the Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with the PRC laws. If the PRC laws impose mandatory requirements on the Equity Interest Purchase Price agreed under this Agreement, such that the minimum Equity Interest Purchase Price permitted under PRC laws exceeds the price already offset with the Offset Debts, Party B hereby waives its right to receive the amount of price that exceeds the amount offset with the Offset Debts.

 

2. Covenants

 

  2.1 Covenants regarding Party C

Party B (as a shareholder of Party C) and Party C hereby covenant as follows:

 

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  2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 

  2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain and maintain all necessary government licenses and permits by prudently and effectively operating its business and handling its affairs;

 

  2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any material assets of Party C or legal or beneficial interest in the material business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 

  2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for payables incurred in the ordinary course of business other than through loans;

 

  2.1.5 They shall always operate all of Party C’s businesses within the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may adversely affect Party C’s operating status and asset value;

 

  2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the ordinary course of business;

 

  2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 

  2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;

 

  2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 

  2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 

  2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C’s assets, business, revenue or equity interest;

 

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  2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders;

 

  2.1.14 At the request of Party A, they shall appoint any person designated by Party A as the director or executive director of Party C.

 

  2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates; and

 

  2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A;

 

  2.1.17 Once PRC laws permits foreign investors to invest in the principal business of Party C in China, with a controlling stake and/or in the form of wholly foreign-owned enterprises, and the competent government authorities of China begin to approve such investments, upon Party’s exercise of the Equity Interest Purchase Option, Party B shall immediately transfer to Party A or the Designee(s) the equity interest in Party C held by Party B.

 

  2.2 Covenants of Party B

Party B hereby covenants as follows:

 

  2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

  2.2.2 Without the prior written consent of Party A, Party B shall ensure the shareholders’ meeting and/or the directors (or the executive director) of Party C not to approve any sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the interest placed in accordance with Party B’s Equity Interest Pledge Agreement, Party B’s Power of Attorney and this Agreement;

 

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  2.2.3 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting or the directors (or the executive director) of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person;

 

  2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 

  2.2.5 Party B shall ensure the shareholders’ meeting or the directors (or the executive director) of Party C to vote in favor of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 

  2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims;

 

  2.2.7 Party B shall appoint any designee of Party A as the director or the executive director of Party C, at the request of Party A;

 

  2.2.8 Party B gives consent to the execution by each of the other shareholders of Party C with Party A and Party C of the exclusive option agreement, the equity interest pledge agreement and the power of attorney similar to this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, and undertakes not to take any action in conflict with such documents executed by such other shareholders; with respect to the transfer of equity interest of Party C by any of the other shareholders of Party C to Party A and/or the Designee(s) pursuant to such shareholder’s exclusive option agreement, Party B hereby waives all of its right of first refusal (if any).

 

  2.2.9 If Party received any profit distribution, interest, dividend or proceeds of liquidation from Party C, Party B shall promptly donate all such profit distribution, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A in the manner permitted by the applicable PRC laws; and

 

  2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Party B’s Equity Interest Pledge Agreement or under the Party B’s Power of Attorney, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

 

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3. Representations and Warranties

Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of the transfer of the Optioned Interests, that:

 

  3.1 They have the power, capacity and authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning each transfer of the Optioned Interests as described thereunder (each, a “Transfer Contract”), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts substantially consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 

  3.2 Party B and Party C have obtained any and all approvals and consents from the competent government authorities and third parties (if required) for the execution, delivery and performance of this Agreement.

 

  3.3 The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 

  3.4 Party B has the legal and complete title to the equity interests held by it in Party C. Except for Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney, Party B has not placed any security interest or encumbrances on such equity interests;

 

  3.5 Party C is a limited liability company duly organized and validly existing under the laws of the PRC. Party C has the legal and complete title to all of the assets used in connection with its business operation, and has not placed any security interest on the aforementioned assets;

 

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  3.6 Party C does not have any outstanding debts, except for (i) debt incurred during the ordinary course of business; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained.

 

  3.7 Party C has complied with all PRC laws and regulations in material aspects; and

 

  3.8 There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

 

4. Effective Date and Term

This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.

 

5. Governing Law and Resolution of Disputes

 

  5.1 Governing Law

The execution, effectiveness, interpretation, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of the PRC.

 

  5.2 Methods of Resolution of Disputes

In the event of any dispute with respect to the interpretation and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute, either Party may submit the relevant dispute to the Shanghai International Economic and Trade Arbitration Commission for arbitration, in accordance with the arbitration rules of such arbitration commission effective at that time. The place of the hearing of the arbitration shall be Shanghai. The arbitration award shall be final and binding on both Parties.

 

6. Taxes and Fees

Each Party shall pay any and all transfer and registration taxes, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

 

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7. Notices

 

  7.1 All notices and other communications required to be given pursuant to this Agreement or otherwise given in connection with this Agreement shall be delivered personally, or sent by registered mail, prepaid postage, a commercial courier service, facsimile transmission or email to the address of such Party set forth below. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

  7.1.1 Notices given by personal delivery shall be deemed effectively given on the date of receipt at the address set forth below, or the date on which such notices are placed at the address set forth below;

 

  7.1.2 Notices given by courier service, registered mail or prepaid postage shall be deemed effectively given on the date of receipt, refusal or return for any reason at the address set forth below;

 

  7.1.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission to the Fax no. set forth below (as evidenced by an automatically generated confirmation of transmission). Notices given by email shall be deemed effectively given on the date of successful transmission, provided that the sending Party has received a system message indicating successful transmission or has not received a system message within 24 hours indicating failure of delivery or return of email.

 

  7.2 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms of this Section.

 

8. Confidentiality

The Parties acknowledge that the existence and the terms of this Agreement, and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of other Parties, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels, or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of, or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

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9. Further Warranties

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

 

10. Breach of Agreement

 

  10.1 If Party B or Party C materially breaches any provision under this Agreement, or fails to perform, performs incompletely or delays to perform any obligation under this Agreement, it shall constitute a breach under this Agreement on the part of Party B or Party C (as the case may be). Party A is entitled to require Party B or Party C to rectify or take remedial measures. If within ten (10) days after Party A delivers a written notice to Party B or Party C and requires for rectification (or within any other reasonable period required by Party A), Party B or Party C (as the case may be) fails to rectify or take remedial measures, Party A is entitled to, at its sole discretion, (1) terminate this Agreement and require Party B or Party C (as the case may be) to compensate all the losses; or (2) require specific performance of the obligations of Party B or Party C (as the case may be) under this Agreement and require Party B or Party C (as the case may be) to compensate all the losses. This Section shall not prejudice any other rights of Party A under this Agreement.

 

  10.2 Party B or Party C shall not terminate this Agreement unilaterally in any event unless otherwise required by the applicable laws.

 

11. Miscellaneous

 

  11.1 Amendments, changes and supplements

Any amendment, change and supplement to this Agreement shall be made in writing by all of the Parties. Any amendment agreement and supplementary agreement duly executed by the Parties hereto with regard to this Agreement shall constitute an integral part of this Agreement, and shall have equal legal validity as this Agreement.

 

  11.2 Entire agreement

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 

  11.3 Headings

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

 

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  11.4 Severability

In the event that one or several of the provisions of this Agreement are held to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

  11.5 Successors

The terms of this Agreement shall be binding on the Parties hereto and their respective successors, heirs (including who inherited the Optioned Interests) and permitted assigns, and shall be valid with respect to the Parties and each of their successors, heirs and permitted assigns.

 

  11.6 Survival

 

  11.6.1 Any obligations that occurred or that are due in connection with this Agreement before the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

 

  11.6.2 The provisions of Sections 5, 8, 10 and this Section 11.6 shall survive the termination of this Agreement.

 

  11.7 Waivers

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 

  11.8 Language

This Agreement is written in English language in three copies, each Party having one copy.

 

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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 

Party A:   NIO Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
Party B:   Lihong QIN
By:  

/s/ Lihong Qin

Party C:   Beijing NIO Network Technology Co., Ltd.
By:  

/s/ Lihong Qin

Name:   Lihong QIN
Title:   Legal Representative
EX-21.1

Exhibit 21.1

List of Significant Subsidiaries and Variable Interest Entities

 

Subsidiaries

  

Place of Incorporation

NIO USA, Inc.

   United States

XPT Inc.

   United States

NIO NEXTEV (UK) LTD

   United Kingdom

NIO GmbH

   Germany

NIO Nextev Limited

   Hong Kong

XPT Limited

   Hong Kong

NIO User Enterprise Limited

   Hong Kong

NIO Power Express Limited

   Hong Kong

XPT Technology Limited

   Hong Kong

NIO SPORT LIMITED

   Hong Kong

NIO Co., Ltd.

   People’s Republic of China

Shanghai NIO New Energy Automobile Co., Ltd.

   People’s Republic of China

Shanghai NIO Sales and Services Co., Ltd.

   People’s Republic of China

Jiangsu Weiran Investment Co., Ltd.

   People’s Republic of China

Shanghai XPT Technology Limited

   People’s Republic of China

NIO Energy Investment (Hubei) Co., Ltd.

   People’s Republic of China

Shanghai NIO Energy Technology Co., Ltd.

   People’s Republic of China

Wuhan NIO Energy Co., Ltd.

   People’s Republic of China

XPT (Nanjing) E-Powertrain Technology Co., Ltd.

   People’s Republic of China

XPT (Nanjing) Energy Storage System Co., Ltd.

   People’s Republic of China

XTRONICS (Nanjing) Automotive Intelligent Technologies Co., Ltd.

   People’s Republic of China

NIO Technology Co., Ltd.

   People’s Republic of China

Variable Interest Entity

  

Place of Incorporation

Beijing NIO Network Technology Co., Ltd.

   People’s Republic of China

Shanghai Anbin Technology Co., Ltd.

   People’s Republic of China