Canaan(CAN)2024-12-09 21:00Series A Preferred Shares Designation and Conversion - 125,000 Class A Ordinary Shares re-designated into Series A Convertible Preferred Shares with a par value of US$0.00000005 each[3] - Series A Preferred Shares convertible into Class A Ordinary Shares after 6 months from the Issuance Date[10] - Conversion Rate for Series A Preferred Shares determined by dividing the Conversion Amount by the Conversion Price less the Issuance Fee[13] - Conversion Price set at the lower of $4.00 (Fixed Conversion Price) or the Market Price on the date of determination[15] - Holders can convert Series A Preferred Shares into ADSs by delivering a Conversion Notice and surrendering Series A Preferred Share Certificates[17] - Company to credit ADSs to the Holder's DTC account within 6 Business Days following the delivery of a Conversion Notice[18] - If the company fails to deliver ADSs within 5 consecutive Trading Days after a Conversion Failure, it must pay damages of 1.5% of the product of the number of ADSs not issued and the trading price selected by the Holder[20] - The company has up to 2 additional 10 Trading Day grace periods to deliver ADSs without incurring failure to deliver fees[20] - The company must convert Series A Preferred Shares on a pro rata basis if it receives multiple Conversion Notices for the same Conversion Date[25] - The company cannot issue Series A Convertible Preferred Shares if it would cause a Holder to exceed a 4.99% or 9.99% beneficial ownership limit of Class A Ordinary Shares[27] - The Fixed Conversion Price will be adjusted if the company issues ADSs or Class A Ordinary Shares at a price lower than the Applicable Price[30] - The company must notify Holders of the number of outstanding Class A Ordinary Shares within 1 Trading Day upon request[27] - The Company may issue Convertible Securities, and the lowest price per share for ADS or Class A Ordinary Shares issuable upon conversion, exercise, or exchange will be adjusted based on the consideration received or receivable by the Company[32] - If the purchase or exercise price of Options or Convertible Securities changes, the Fixed Conversion Price will be adjusted to reflect the new price or rate[33] - In integrated transactions involving Options and other securities, the consideration received will be calculated by deducting the Option Value from the aggregate consideration[35] - If the Company subdivides or combines its ADSs or Class A Ordinary Shares, the Fixed Conversion Price will be proportionally adjusted[39] - The Company can voluntarily reduce the Fixed Conversion Price with the prior written consent of the Required Holders[40] - If the ratio of ADSs to Class A Ordinary Shares changes, the number of ADSs to be delivered upon conversion and the Conversion Price will be adjusted accordingly[41] - Holders may elect to receive Class A Ordinary Shares instead of ADSs upon conversion of Series A Preferred Shares, with proportional adjustments to the Conversion Price[42] - In the event of a Triggering Event, Holders may convert Series A Preferred Shares into ADSs at the Alternate Conversion Price[44] - A Triggering Event includes the suspension of ADS trading for 5 consecutive Trading Days or more than 10 Trading Days in a 365-day period[48] - A Triggering Event also includes the Company's failure to pay Stated Value, dividends, or other amounts due under the Certificate of Designations for at least 10 Business Days[48] - The company must reserve at least 175% of the maximum number of Class A Ordinary Shares necessary for the conversion of Series A Preferred Shares at the Alternate Conversion Rate[68] - If the company fails to maintain sufficient authorized Class A Ordinary Shares (an "Authorized Share Failure"), it must take immediate action to increase authorized shares, including holding a shareholder meeting within 60 days[70] - In the event of an Authorized Share Failure, if the company cannot deliver sufficient shares upon conversion, it must pay cash equal to the number of undelivered ADSs multiplied by the highest Closing Sale Price of the ADSs during the relevant period[70] - Any Class A Ordinary Shares reserved for a Holder who ceases to hold Series A Preferred Shares will be reallocated pro rata to the remaining Holders[68] - The company must deliver the applicable Triggering Event Redemption Price to each Holder within three (3) Business Days after receipt of the Holder's Triggering Event Redemption Notice[72] - In the event of insufficient assets on a Redemption Date, the Company will redeem the maximum possible number of Series A Preferred Shares pro rata among Holders[75] - The company must provide written notice to Holders immediately upon any adjustment of the Fixed Conversion Price, detailing the calculation of such adjustment[96] - The company must maintain a register for Series A Preferred Shares, recording the names and addresses of holders and transferees[103] - The company is obligated to re-issue Series A Preferred Share Certificates in cases of loss, theft, or mutilation, provided the Holder provides satisfactory evidence and indemnification[100] - The company must publicly disclose material, nonpublic information upon receipt or delivery of any notice under the Certificate of Designations, unless it determines such information is not material[101] - The company must pay any stamp, court, or documentary taxes arising from payments or execution of the Certificate of Designations and deliver official receipts to Holders[109] - The company has provided a Conversion Notice template for converting Series A Convertible Preferred Shares into ADSs, with details such as the number of shares to be converted and the conversion price[186][187] - The company has specified the process for issuing ADSs upon conversion, including options for delivery as a certificate or via DTC[188] - The company acknowledges the Conversion Notice and directs the Depositary to issue the indicated number of ADSs in accordance with the Irrevocable Depositary Instructions[190] Dividends and Redemption - Series A Preferred Shares rank prior to all Ordinary Shares and Junior Shares in terms of dividends, distributions, and payments upon a Liquidation Event[3] - Series A Preferred Shares to be redeemed at 105% of the Conversion Amount if outstanding on the Maturity Date, which is 12 months post-Issuance Date[4] - Holders of Series A Preferred Shares entitled to receive dividends when declared by the Board, starting from the applicable Issuance Date[8] - Series A Preferred Shares redemption price is set at 115% of the greater of the Conversion Amount or the product of the Conversion Amount and the quotient of the highest Closing Sale Price of ADSs divided by the lowest Alternate Conversion Price during the specified period[52] - In the event of a Bankruptcy Triggering Event, the company must immediately redeem all outstanding Series A Preferred Shares at the Triggering Event Redemption Price without requiring any notice or demand from the Holders[53] - In a Change of Control, Holders can require the company to redeem their Series A Preferred Shares at a price equal to 115% of the greater of the Conversion Amount or the product of the Conversion Amount and the quotient of the highest Closing Sale Price of ADSs divided by the lowest Conversion Price during the specified period[60] - The company must offer to repurchase Series A Preferred Shares in cash if an Offer to Repurchase Event occurs, at a price based on the Offer to Repurchase Event Redemption Premium and the greater of the Conversion Amount or a formula based on the ADS Closing Sale Price[65] - The company must ensure that in a Fundamental Transaction, the Successor Entity assumes all obligations and delivers securities to Holders that are substantially similar to the Series A Preferred Shares, with a stated value equal to the Stated Value and similar conversion rights[55] - Holders have the right to receive securities, cash, assets, or other property in a Corporate Event, equivalent to what they would have received if their Series A Preferred Shares had been converted immediately prior to the event[58] - The company must pay any stamp, court, or documentary taxes arising from payments or execution of the Certificate of Designations and deliver official receipts to Holders[109] - The company must maintain a Minimum Cash Reserve Requirement equal to its quarterly cash operating expenses[82] - The company must pay all costs incurred by a Holder for collection, enforcement, or action related to this Certificate of Designations, including attorneys' fees[87] - Any Series A Preferred Shares that are converted, repurchased, or redeemed shall be automatically cancelled and cannot be reissued, sold, or transferred[90] - The company acknowledges that a breach of its obligations will cause irreparable harm to the Holders, and in the event of such a breach, Holders are entitled to an injunction without showing economic loss or requiring a bond[91] - In case of disputes over calculations such as the Conversion Rate or Redemption Price, the company must submit the disputed determination to an independent investment bank or accountant within one business day, with results binding absent demonstrable error[94] - Payments to Holders must be made in U.S. dollars via wire transfer, and any late payments incur a Late Charge of 15% per annum until paid in full[97] - The company irrevocably waives the right to a jury trial for any disputes arising under the Certificate of Designations[99] - All payments under the Certificate of Designations must be made free of taxes unless required by law, and the company must indemnify Holders for any taxes or related penalties[108] Corporate Governance and Restrictions - The company covenants not to circumvent the terms of the Series A Preferred Shares through any corporate actions, including amendments to its Memorandum and Articles of Association or reorganizations[67] - The Company is prohibited from incurring any Indebtedness other than Permitted Indebtedness without prior written consent of the Required Holders[77] - The company's Permitted Secured Indebtedness is capped at an aggregate principal amount not exceeding US$50,000,000 at any time[160] - The company's Permitted Indebtedness includes 5-year unsecured convertible bonds issued pursuant to Rule 144A, provided the fixed conversion price is not subject to being reset[157] - The company's Total Indebtedness includes all Indebtedness, the Conversion Amount of all Series A Preferred Shares, and all trade payables and cash-based obligations, excluding customer pre-payments[176] - If the company's Total Indebtedness to Market Capitalization ratio exceeds 25%, holders can require the company to redeem their Series A Preferred Shares to bring the ratio down to 15%[63] - The company's Market Capitalization is calculated by multiplying the total number of issued and outstanding ADSs by the arithmetic average of the Closing Sale Prices of the ADSs for the ten consecutive Trading Days immediately preceding the applicable date of determination[150] - The company's Principal Market is The Nasdaq Global Market[162] - The company's Subscription Date for the Securities Purchase Agreement is November 27, 2023[173] - The company has defined "Trading Day" as any day on which the ADSs are traded on the Principal Market or the principal securities exchange if the Principal Market is not the main trading market[177] - The company has outlined the conditions under which a "Variable Rate Transaction" occurs, including the issuance or sale of securities with conversion, exercise, or exchange rates that vary with trading prices[180] - The "Weighted Average Price" of the ADSs on the Principal Market is determined based on the volume-weighted average price reported by Bloomberg for a specific Trading Day[181] - The company has executed a Certificate of Designations signed by Nangeng Zhang, Chairman and CEO, on September 26, 2024[183] - The company's securities may be issued to employees, officers, directors, or consultants under an Approved Share Plan[121] - The Company may conduct at-the-market offerings of ADSs under its currently effective Form F-3 Registration Statement or any future registration statement[122] - The Maximum Percentage applies collectively to a Holder and all Attribution Parties[123] - Excluded Securities include ADSs or Class A Ordinary Shares issued under an Approved Share Plan, ATM Offering, or upon conversion of outstanding Options or Convertible Securities[141] - A Fundamental Transaction includes scenarios where the Company consolidates, merges, or sells substantially all of its assets, or where Subject Entities acquire at least 50% of the issued and outstanding Class A Ordinary Shares[143] - GAAP refers to United States generally accepted accounting principles, consistently applied[145] - The Stated Value of each Series A Preferred Share is US$1,072.80[172] - The Market Price is defined as 92.50% of the lowest daily Weighted Average Price of the ADSs during the five consecutive Trading Days immediately preceding the applicable Conversion Date[151] - The Offer to Repurchase Event Redemption Premium is 115% for events described in clause (i) and 100% for events described in clause (ii)[153] - The company's SOFR Factor calculation includes the 90-day average SOFR published on the Trading Day immediately preceding the date of conversion and the number of days from the issuance of the Preferred Shares being converted until the applicable Conversion Date[172] - Each ADS represents 15 Class A Ordinary Shares[117] - The Alternate Conversion Price is determined as the lowest of several factors, including 80% of the Weighted Average Price of the ADSs on the applicable Alternate Conversion Date[119] - Available Cash is defined as 30% of the gross cash proceeds generated by an Offer to Repurchase Event described in clause (i) of the definition[124] - The Exchange Rate for currency conversion is based on the U.S. dollar exchange rate published in the Wall Street Journal[140] - No consideration shall be offered or paid to any Holder to amend or waive any provision of the Series A Preferred Shares unless the same consideration is offered to all Holders[86] - Holders have the right to transfer Series A Preferred Shares and any ADSs issued upon conversion without the Company's consent[85] - Holders cannot transfer Series A Preferred Shares certificates without physically surrendering them to the company first[22] - Holders of Series A Preferred Shares have the right to participate in any Purchase Rights granted to Class A Ordinary Shareholders, subject to the Maximum Percentage limitation[62]