CONSORTIUM AGREEMENT
Exhibit 2
Execution Copy
THIS CONSORTIUM AGREEMENT is made as of February 5, 2016 (the “Agreement”), by and among Xxxxxx Xxxx (the “Chairman”), Right Advance Management Ltd., a British Virgin Islands company (“Right Advance”), Chiming Bells International Limited, a British Virgin Islands company (“Chiming Bells”, and together with Right Advance, the “Chairman Holding Companies” and together with Chairman, the “Chairman Parties”), IDG-Accel China Growth Fund II L.P., a Cayman Islands limited partnership (“IDG Growth II”), and IDG-Accel China Investors II L.P., a Cayman Islands limited partnership (“IDG Investors II”, together with IDG Growth II, “IDG”, and together with all Additional Sponsors (as defined below), the “Sponsors”). The Chairman Parties and each Sponsor is referred to herein as a “Party”, and collectively, the “Parties”. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in Section 10.1 hereof.
1. | Proposal; Debt Financing; Holdco Ownership |
1 |
(a) The Parties shall use reasonable efforts and cooperate in good faith to arrange debt financing to support the Transaction (the “Debt Financing”), on terms satisfactory to the Parties. The definitive agreements in relation to the Debt Financing shall be to the reasonable satisfaction of each Party.
(b) To the extent practicable and permitted by the Target Board or the Special Committee, each of the Parties shall (i) furnish the financing banks with financial, know-your-client and other pertinent information relevant to the financial condition, business, operations and assets of the Target, as may be reasonably requested by the financing banks, and (ii) take all corporate or other actions reasonably requested by the financing banks to permit the consummation of the Debt Financing, including facilitating the pledging of collateral and, in connection therewith, executing and delivering any pledge and security documents, other definitive financing documents or certificates, or other documents as may be reasonably requested by the financing banks.
1.4. Holdco Ownership and Arrangements.
(a) Prior to the execution of the Definitive Agreements (as defined below), the Parties shall incorporate Holdco.
(b) Subsequent to the execution of the Merger Agreement, the Parties shall negotiate in good faith and use reasonable best efforts to enter into a shareholders agreement of Holdco that will take effect at the Closing.
(c) Each Party’s ownership percentage in Holdco shall be based on the amount of cash paid, and the agreed-upon value of any other consideration contributed (including rollover equity), by such Party to Holdco relative to the aggregate amount of cash paid, and the aggregate agreed-upon value of any other consideration contributed, by all of the Parties to Holdco in connection with the Transaction. For the avoidance of doubt, the Parties agree that the obligation of the Parties to purchase and pay for any Holdco shares shall be subject to the satisfaction or waiver of the various conditions to the obligations of Holdco to be set forth in the Definitive Agreements.
(d) Chairman and IDG may jointly agree to admit one or more additional investor(s) to the consortium as additional sponsor(s) to provide additional equity capital for the consummation of the Transaction. Any additional sponsor admitted to the Consortium pursuant to this Section 1.4(d) shall execute an adherence agreement to this Agreement in the form attached hereto as Schedule A (the “Adherence Agreement”) and upon its execution of the Adherence Agreement, such additional sponsor shall become an “Additional Sponsor” for purposes of this Agreement.
2. | Participation in Transaction; Advisors; Approvals |
(a) The Parties shall agree to the scope and engagement terms of all joint Advisors to Holdco and/or the Parties to be engaged after the date hereof in connection with the Transaction.
(b) If a Party requires separate representation in connection with specific issues arising out of the Proposal or the Transaction, such Party may retain other Advisors to advise it. Each Party that engages separate Advisors shall (i) provide prior notice to the other Parties of such engagement, and (ii) be solely responsible for the fees and expenses of such separate Advisors.
3. | Transaction Costs |
3.1. Expenses and Fee Sharing.
(a) Upon consummation of the Transaction, the Target shall reimburse the Parties for, or pay on behalf of the Parties, as the case may be, all of their out-of-pocket costs and expenses incurred in connection with the Transaction, including, without limitation, the reasonable fees, expenses and disbursements of Advisors retained by the Parties (other than fees and costs of any separate Advisors who were retained by the Parties in accordance with Section 2.2(b) unless and only to the extent such appointment and expenses are agreed to in advance by the Parties).
(b) If the Transaction is not consummated (and Section 3.1(c) below does not apply), the Parties agree to share ratably based on such Party’s planned equity participation (which for the avoidance of doubt shall include any rollover equity of such Parties) or as may otherwise be agreed among the Parties the out-of-pocket costs and expenses payable by them in connection with the Transaction incurred prior to the termination of the Transaction, including any fees and expenses payable to Advisors retained by the Parties (other than fees and costs of any separate Advisors who were retained by the Parties in accordance with Section 2.2(b) unless and only to the extent such appointment and expenses are agreed to in advance by the Parties).
(c) If the Transaction is not consummated due to the unilateral breach of this Agreement by one or more Parties, then such breaching Parties shall reimburse any non-breaching Party for all out-of-pocket costs and expenses, including any fees and expenses of (i) Advisors retained by the Parties (including the fees and costs of any separate Advisors who were retained by the Parties in accordance with Section 2.2(b)) and (ii) financing banks in connection with the Debt Financing, incurred by such non-breaching Party in connection with the Transaction, without prejudice to any rights and remedies otherwise available to such non-breaching Party.
4. | Exclusivity |
(a) work exclusively with the other Parties to implement the Transaction, including to (i) evaluate the Target and its business, (ii) prepare, negotiate and finalize the definitive documentation in connection with the Transaction, including for the Debt Financing (collectively, the “Definitive Agreements”), and (iii) vote, or cause to be voted, at every shareholder or stakeholder meeting (whether by written consent or otherwise) all Securities against any Competing Proposal or matter that would facilitate a Competing Proposal and in favor of the Transaction;
(b) not, directly or indirectly, either alone or with or through any Representatives authorized to act on such Party’s behalf (i) make a Competing Proposal, or solicit, encourage, facilitate or join with any other person in the making of, any Competing Proposal, (ii) provide any information to any third party with a view to the third party or any other person pursuing or considering to pursue a Competing Proposal, (iii) finance or offer to finance any Competing Proposal, including by offering any equity or debt finance, or contribution of Securities or provision of a voting agreement, in support of any Competing Proposal, (iv) enter into any written or oral agreement, arrangement or understanding (whether legally binding or not) regarding, or do, anything that is directly inconsistent with the provisions of this Agreement or the Transaction as contemplated under this Agreement, (v) acquire or dispose of any Securities (other than acquiring Securities pursuant to the share incentive plans of the Target), and, directly or indirectly (A) sell, offer to sell, give, pledge, encumber, assign, grant any option for the sale of or otherwise transfer or dispose of, or enter into any agreement, arrangement or understanding to sell or otherwise transfer or dispose of, an interest in any Securities (“Transfer”) or permit the Transfer by any of its Affiliates of an interest in any Securities, in each case, except as expressly contemplated under this Agreement and the definitive documentation, (B) enter into any contract, option or other arrangement or understanding with respect to a Transfer or limitation on voting rights of any of the Securities, or any right, title or interest thereto or therein, or (C) deposit any Securities into a voting trust or grant any proxies or enter into a voting agreement, power of attorney or voting trust with respect to any Securities, (vi) take any action that would reasonably be expected to have the effect of preventing, disabling or delaying such Party from performing its obligations under this Agreement, or (vii) solicit, encourage, facilitate, induce or enter into any negotiation, discussion, agreement or understanding (whether or not in writing and whether or not legally binding) with any other person regarding the matters described in Sections 4.1(b)(i) to 4.1(b)(vi);
(c) immediately cease and terminate, and cause to be ceased and terminated, all existing activities, discussions, conversations, negotiations and other communications with all persons conducted heretofore with respect to a Competing Proposal; and
(d) promptly notify the other Parties if it or, to its knowledge, any of its Representatives receives any approach or communication with respect to any Competing Proposal, including in such notice the identity of the other persons involved and the nature and content of the approach or communication, and provide the other Parties with copies of any written communication.
Notwithstanding the foregoing provisions of this Section 4.1, to the extent the Target specifically requests that the Chairman cooperate in respect of a bona fide written Competing Proposal that was not initiated, solicited, or encouraged by the Chairman, and the Chairman determines (solely in his capacity as Chief Executive Officer, Chairman or a member of the Target Board, and not in his capacity as a shareholder) that, based on the written advice of Cayman Islands counsel to the Consortium or a counsel of applicable jurisdiction, that he is obligated in such capacity to cooperate with the Company in order to comply with his fiduciary duties under Cayman Islands law or other applicable jurisdiction, the Chairman may provide such cooperation but only to the extent required to comply with such fiduciary duties in such capacity and in no event shall this clause be used as a means intended primarily to circumvent the exclusivity provisions thereof.
5. | Termination |
(a) Upon termination of this Agreement with respect to a Party pursuant to Section 5.1, Article 3 (Transaction Costs), Article 4 (Exclusivity), Article 5 (Termination), Section 6.2 (Confidentiality), Article 7 (Notices) and Article 9 (Miscellaneous) shall continue to bind such Party and such Party shall be liable under Article 3 for its pro rata portion of any costs and expenses incurred by the Parties prior to the termination of this Agreement with respect to such Party, unless there was a breach of this Agreement by such Party prior to the termination, in which case Section 3.1(c) shall apply.
(b) Upon termination of this Agreement pursuant to Section 5.2, Article 3 (Transaction Costs), Article 5 (Termination), Section 6.2 (Confidentiality), Article 7 (Notices) and Article 9 (Miscellaneous) shall continue to bind the Parties and each of the Parties shall be liable under Article 3 for its pro rata portion of any costs and expenses incurred by the Parties prior to the termination of this Agreement, unless there was a breach of this Agreement by such Party prior to the termination, in which case Section 3.1(c) shall apply.
(c) Other than as set forth in Sections 5.3(a) and (b) or in respect of a breach of this Agreement by any Party prior to the termination of this Agreement with respect to such Party, the Parties shall not otherwise be liable to each other in relation to this Agreement.
6. | Announcements and Confidentiality |
(a) Except as permitted under Section 6.3, each Party shall not, and shall direct its Affiliates and Representatives not to, without the prior written consent of the other Parties, disclose any Confidential Information received by it (the “Recipient”) from any other Party (the “Discloser”). Each Party shall not and shall direct its Affiliates and Representatives not to, use any Confidential Information for any purpose other than for the purposes of this Agreement or the Transaction.
(b) Subject to Section 6.2(c), the Recipient shall safeguard and return to the Discloser, on demand, any Confidential Information which falls within clause (a) of the definition of Confidential Information, and in the case of electronic data that constitutes Confidential Information, to return or destroy such Confidential Information (other than any electronic data stored on the back-up tapes of the Recipient’s hardware) at the option of the Recipient.
(c) Each Sponsor may retain in a secure archive a copy of the Confidential Information referred to in Section 6.2(b) if the Confidential Information is required to be retained by the Sponsor for regulatory purposes or in connection with a bona fide document retention policy.
(d) Each Party acknowledges that, in relation to Confidential Information received from the other Parties, the obligations contained in this Section 6.2 shall continue to apply for a period of 12 months following termination of this Agreement pursuant to Section 5.1 or 5.2, unless otherwise agreed in writing.
7. | Notices |
7.1 Any notice, request, instruction or other document to be provided hereunder by any Party to another Party shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by facsimile, overnight courier or electronic mail, to the address provided under such other Party’s signature page hereto, or to such other address or facsimile number or electronic mail address as such Party may hereafter specify for the purpose by notice to the other Parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
8. | Representations and Warranties |
9. | Miscellaneous |
9.8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction other than the State of New York.
10. | Definitions and Interpretations |
10.1. Definitions. In this Agreement, unless the context requires otherwise:
“Advisors” means the advisors and/or consultants of Holdco, and the Parties, in each case appointed in connection with the Transaction.
“Affiliate” means, with respect to any person, any other person that, directly or indirectly, Controls, is Controlled by or is under common Control with such specified person and “Affiliates” shall be construed accordingly.
“Business Day” means any day (other than a Saturday or a Sunday) on which banks generally are open in the People’s Republic of China, Hong Kong and in New York, New York, for the transaction of normal banking business.
“Competing Proposal” means a proposal, offer or invitation to the Target, a Sponsor, any of the Chairman Parties or any of their respective Affiliates (other than the Proposal), that involves the direct or indirect acquisition of 10% or more of the Target Ordinary Shares, a sale of all or any significant amount of the assets of the Target, a restructuring or recapitalization of the Target, or some other transaction that could adversely affect, prevent or materially reduce the likelihood of the consummation of the Transaction with the Parties.
“Confidential Information” includes (a) all written, oral or other information obtained in confidence by one Party from any other Party in connection with this Agreement or the Transaction, unless such information (x) is already known to such Party or to others not known by such Party to be bound by a duty of confidentiality, or (y) is or becomes publicly available other than through a breach of this Agreement by such Party, and (b) the existence or terms of, and any negotiations or discussions relating to, this Agreement, the Proposal and any definitive documentation, including the Definitive Agreements.
“Consortium” means the consortium formed by the Parties and any Additional Sponsor to undertake the Transaction.
“Control” means the possession, directly or indirectly, of the power to direct the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise.
“Representative” of a Party means such Party’s employees, directors, officers, partners, members, nominees, agents, advisors (including, but not limited to legal counsel, accountants, consultants and financial advisors), potential sources of equity or debt financing, and any representatives of the foregoing. The Representatives shall include the Advisors.
“Securities” means shares, warrants, options and any other securities which are convertible into or exercisable for shares in the Target.
“Target Ordinary Shares” means the issued and outstanding ordinary shares, par value US$0.0000005 per share, of the Target.
CHAIRMAN PARTIES: | ||
XXXXXX XXXX | ||
/s/ Xxxxxx XXXX | ||
ADDRESS: | 00xx Xxxxx, Xxxxxx Xxxxx Xx. 000 Xxxxxxxxxxx Xxxxxx Xxxxxxx, 000000, Xxxxx | |
RIGHT ADVANCE MANAGEMENT LTD. | ||
By: | /s/ Xxxxxx XXXX | |
Name: Xxxxxx XXXX | ||
Title: Authorized Signatory | ||
ADDRESS: | 00xx Xxxxx, Xxxxxx Xxxxx Xx. 000 Xxxxxxxxxxx Xxxxxx Xxxxxxx, 000000, Xxxxx | |
CHIMING BELLS INTERNATIONAL LIMITED | ||
By: | /s/ Xxxxxx XXXX | |
Name: Xxxxxx XXXX | ||
Title: Authorized Signatory | ||
ADDRESS: | 00xx Xxxxx, Xxxxxx Xxxxx Xx. 000 Xxxxxxxxxxx Xxxxxx Xxxxxxx, 000000, Xxxxx |
THE SPONSORS: | ||
IDG-ACCEL CHINA GROWTH FUND II L.P. | ||
By: IDG-Accel China Growth Fund II Associates L.P., its General Partner | ||
By: IDG-Accel China Growth Fund XX XX Associates Ltd., its General Partner | ||
By: | /s/ Chi Sing Ho | |
Name: Chi Sing Ho | ||
Title: Authorised Signatory | ||
ADDRESS: Xxxx 0000, 00/X., Xxx Xxxxxx 00 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx | ||
IDG-ACCEL CHINA INVESTORS II L.P. | ||
By: IDG-Accel China Growth Fund XX XX Associates Ltd., its General Partner | ||
By: | /s/ Chi Sing Ho | |
Name: Chi Sing Ho | ||
Title: Authorised Signatory | ||
ADDRESS: | Xxxx 0000, 00/X., Xxx Xxxxxx 00 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx |
SCHEDULE A
FORM OF ADHERENCE AGREEMENT
THIS ADHERENCE AGREEMENT (this “Agreement”) is entered into on ____, 201_
BY:
[New Sponsor], a [limited liability company] organized and existing under the laws of [●] with its registered address at [●] (the “New Sponsor”).
(A) On [DATE], the parties listed at Annex A (the “Existing Parties”) entered into a consortium agreement (the “Consortium Agreement”) and proposed to undertake an acquisition transaction (the “Transaction”) with respect to KongZhong Corporation (the “Target”), a company incorporated under the laws of the Cayman Islands and listed on the Nasdaq Stock Market (“NASDAQ”), pursuant to which the Target would be delisted from NASDAQ and deregistered under the United States Securities Exchange Act of 1934, as amended.
(B) Additional sponsors may be admitted to the Consortium pursuant to Section 1.4(d) of the Consortium Agreement.
(C) The New Sponsor now wishes to participate in the Transaction contemplated under the Consortium Agreement, to sign this Agreement, and to be bound by the terms of the Consortium Agreement as a Sponsor and a Party thereto.
THIS AGREEMENT WITNESSES as follows:
1. DEFINED TERMS AND CONSTRUCTION
1.1 Capitalized terms used but not defined herein shall have the meaning set forth in the Consortium Agreement.
1.2 This Agreement shall be incorporated into the Consortium Agreement as if expressly incorporated into the Consortium Agreement.
2. UNDERTAKINGS
2.1 Assumption of obligations
The New Sponsor undertakes, to each other party to this Agreement that it will, with effect from the date hereof, perform and comply with each of the obligations of a Sponsor as if it had been a Party to the Consortium Agreement at the date of execution thereof and the Existing Parties agree that where there is a reference to a “Sponsor” or “Party” there it shall be deemed to include a reference to the New Sponsor and with effect from the date hereof, all the rights of a Sponsor provided under the Consortium Agreement will be accorded to the New Sponsor as if the New Sponsor had been a Sponsor and a Party under the Consortium Agreement at the date of execution thereof .
3. REPRESENTATIONS AND WARRANTIES
3.1 The New Sponsor represents and warrants to each of the other Parties as follows:
3.1.1 Status
It is a company duly organized, established and validly existing under the laws of the jurisdiction stated in preamble 1 of this Agreement and has all requisite power and authority to own, lease and operate its assets and to conduct the business which it conducts.
3.1.2 Due Authorization
It has full power and authority to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by the New Sponsor has been duly authorized by all necessary action on behalf of the New Sponsor.
3.1.3 Legal, Valid and Binding Obligation
This Agreement has been duly executed and delivered by the New Sponsor and constitutes the legal, valid and binding obligation of the New Sponsor, enforceable against it in accordance with the terms hereof.
3.1.4 [Ownership
As of the date of this Agreement, (i) the New Sponsor holds (A) of record the number and class of outstanding Target Ordinary Shares set forth under the heading “Shares Held of Record” next to its name on Schedule A hereto (specifying the number held as common shares and in the form of ADSs), free and clear of any encumbrances or restrictions, and (B) the other Securities set forth under the heading “Other Securities” next to its name on Schedule A hereto, in each case free and clear of any encumbrances or restrictions; (ii) the New Sponsor has the sole right to control the voting and disposition of such Target Ordinary Shares (if any) and any other Securities (if any) held by it; and (iii) none of the New Sponsor and its Affiliates owns, directly or indirectly, any Target Ordinary Shares or other Securities, other than as set forth on Schedule A hereto.] [if applicable]
3.1.5 Reliance
Each Party acknowledges that the other Parties have entered into this Agreement on the basis of and reliance upon (among other things) the representations and warranties in Sections 3.1.1 to 3.1.4 and have been induced by them to enter into this Agreement.
4. NOTICE
Any notice, request, instruction or other document to be provided hereunder by any Party to another Party shall be in writing and delivered personally or sent by facsimile, overnight courier or electronic mail, to the address, facsimile number or electronic mail address provided under the other Party’s signature page to the Consortium Agreement, or to any other address, facsimile number or electronic mail address as a Party may hereafter specify for the purpose by notice to the other Parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 6:00 p.m. on a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day in the place of receipt.
5. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions that would cause the application of the laws of any jurisdiction other than the State of New York.
6. DISPUTE RESOLUTION.
Section 9.9 of the Consortium Agreement shall be incorporated by reference herein and deemed to be a part hereof.
7. SPECIFIC PERFORMANCE.
Each Party acknowledges and agrees that the other Parties would be irreparably injured by a breach of this Agreement by it and that money damages alone are an inadequate remedy for actual or threatened breach of this Agreement. Accordingly, each Party shall be entitled to specific performance or injunctive or other equitable relief (without posting a bond or other security) to enforce or prevent any violations of any provision of this Agreement, in addition to all other rights and remedies available at law or in equity to such Party, including the right to claim money damages for breach of any provision of this Agreement.
[Signature page follows.]
[New Sponsor’s Name] | ||
By: | ||
Name: | ||
Position: |
Notice details | ||
Address: | ||
Email: | ||
Facsimile: |