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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)
The Conversion price shall initially be equal to the applicable Series C issue price for each of the
outstanding preferred shares, subject to adjustments for dilutions (""Series C Dilution Adjustment'') as follows
if any of the events listed below occur prior to the conversion of the preferred shares:
a) The Company shall pay a dividend or make a distribution on its ordinary shares in ordinary
shares, subdivide or reclassify its outstanding ordinary shares into a greater number of shares or combine
or reclassify its outstanding ordinary shares into a smaller number of shares;
b) The Company shall issue additional ordinary shares, rights, options or warrants to subscribe for
or purchase ordinary shares without consideration or for a consideration per share less than the then
effective conversion price on the date the Company issues or sells such new securities; and
c) The Company shall distribute to all holders of its ordinary shares any share capital 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 Company and dividends or
distributions referred to in previous paragraph a)).
Management has determined that there was no embedded beneficial conversion feature attributable to
the Series C Shares, since the initial conversion price of the Series C Shares is equal to the Series C issue
price, which was higher than the fair value of the Company's ordinary shares at the commitment date
determined by management based on the valuation performed by Sallmanns. In addition, under the provisions
of EITF Issue No. 00-27 ""Application of Issue No. 98-5 to Certain Convertible Instrument'', management
determined that the contingent beneficial conversion feature relating to the Conversion ratio adjustment will
be recognized only when the related audit report is delivered and the contingency is resolved, and with respect
of the Series C Dilution Adjustment, upon the issuance of additional ordinary shares. To the extent that the
2007 audited net earnings, as defined, is below US$110,000 or the Company issued additional ordinary shares
at a price less than the then prevailing Series C 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. 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 C Share has voting rights equivalent to the number of ordinary shares into which such
Series C Share is then convertible.
Registration rights
Holders of Series C Shares have registration rights similar to the holders of Series A and B Shares and
the ordinary shareholders. These registration rights include demand registration, Form F-3 registration and
piggyback registration. 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.
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