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LDK SOLAR CO., LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005
AND THE YEAR ENDED DECEMBER 31, 2006
(Amounts in US$ thousands, except share and per share data)
issuance because the Series A Shares were convertible at issuance date. In addition, under the provisions of
EITF Issue No. 00-27 ""Application of Issue No. 98-5 to Certain Convertible Instrument'', the Company
determined that the contingent beneficial conversion feature relating to the Conversion ratio adjustment will
be recognized only when the 2006 and 2007 audit reports are delivered and the contingency is resolved, and
with respect to the Series A Dilution Adjustment, upon the issuance of additional ordinary shares. To the
extent that the audited net earnings, as defined, of the Group for 2006 and for 2007 is below US$28,500 or
US$95,000 respectively, or the Company issues additional ordinary shares at a price less than the then
prevailing Series A Shares' conversion price, the intrinsic value that results from such contingent beneficial
conversion feature would be recognized as an addition to paid-in capital with a corresponding charge to net
income available to ordinary shareholders at the earliest conversion date, which is the later of the issuance
date or the date the contingency is resolved. With reference to the definition of 2006 audited net earnings as
set out in the Series A Agreement, management has determined that its 2006 audited net earnings, as defined,
exceeds US$28,500 and accordingly the conversion ratio adjustment based on the 2006 audited net earnings
was not triggered. As the contingency relating to the 2007 audited net earnings was not resolved as of
December 31, 2006, management has not considered the 2007 conversion ratio adjustment when preparing the
consolidated financial statements for the year ended December 31, 2006.
Voting rights
Each Series A Share has voting rights equivalent to the number of ordinary shares into which such
Series A Share is then convertible.
Registration rights
The Series A Shares holders have registration rights similar to the ordinary shareholders. These
registration rights include demand, F-3 or equivalent, and piggyback rights. The specific terms of registration
rights would include at least the following: (i) starting three years after the Closing Date, the holders of
majority of the outstanding Series A Shares may request a Form F-1 registration statement to be filed;
(ii) starting one year after the Qualified IPO, two (2) demand registrations upon request of holders of
majority of the outstanding Series A Shares on Form F-3 or equivalent if listed on a non-US stock exchange;
(iii) unlimited piggyback registrations in connection with registrations of shares for the account of the
Company (other than the Qualified IPO) or selling shareholders exercising demand rights; and (iv) cut-back
provisions providing that registrations (other than the Qualified IPO) must include at least 25% of the shares
requested to be included by the holders of registrable securities, and the ordinary shareholders, management,
employees, directors and consultants of the Company must be cut back before the holders of registrable
securities would be cut back. The registration rights agreement does not provide for liquidated damages in the
event that the Company fails to have the registration statement declared effective or if the effectiveness is not
maintained.
Dividends
The Series A Shares holders shall be entitled to receive dividends out of any funds legally available for
this purpose, when and if declared by the Board of Directors of the Company. No dividends shall be declared
or paid on any of the ordinary shares unless they shall also be declared or paid on all the outstanding preferred
share pro rata treating the preferred shares as the greatest whole number of shares of ordinary shares then
issuable upon conversion of such preferred shares.
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