EXHIBIT 1.4
FINAL VERSION
EXHIBIT B TO THE
NOTE PURCHASE AGREEMENT
THIS SENIOR EXCHANGEABLE CONVERTIBLE NOTE (THIS "NOTE") AND THE SECURITIES
ISSUABLE UPON EXCHANGE OR CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE
WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER
OR SALE.
THIS NOTE AND THE SECURITIES ISSUABLE UPON EXCHANGE OR CONVERSION HEREOF ARE
SUBJECT TO THE TRANSFER AND RESALE RESTRICTIONS CONTAINED IN THE NOTE PURCHASE
AGREEMENT DATED AS OF NOVEMBER 10, 2006. THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, REPRESENTS AND AGREES THAT IT WILL NOTIFY ANY PURCHASER OF THIS
SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE.
THIS NOTE MAY BE DEEMED, UPON AN ADJUSTMENT OF THE APPLICABLE INTEREST RATE AS
PROVIDED HEREIN, TO BE ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE. THE ISSUER WILL
PROVIDE PROMPTLY TO THE HOLDER OF THIS NOTE, UPON ITS WRITTEN REQUEST, THE ISSUE
PRICE, ISSUE DATE, YIELD TO MATURITY AND AMOUNT OF ORIGINAL ISSUE DISCOUNT ON
THIS NOTE.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A
REDEMPTION, EXCHANGE OR CONVERSION HEREOF. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL OF THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.
CDC CORPORATION
3.75% SENIOR EXCHANGEABLE CONVERTIBLE NOTE DUE 2011
$[__________]
ISSUE DATE: NOVEMBER [___], 2006
1
FOR VALUE RECEIVED, CDC CORPORATION, a Cayman Islands corporation (the
"COMPANY"), hereby promises to pay to the order of [ ] or its permitted
successors or assigns (the "HOLDER") the amount set forth above as the principal
of this Note (this "NOTE") (as reduced pursuant to the terms hereof in
connection with a redemption, exchange or conversion) plus unpaid Interest
(subject to adjustment as described in SECTION 2(a) below) and Additional
Amounts (if any) accrued hereon in same day funds on or before November __, 2011
(the "MATURITY DATE"); provided that if the Maturity Date is not a Business Day,
this Note will be payable on the next succeeding Business Day (and no interest
shall accrue for the period from November __, 2011 to such Business Day). Except
as expressly provided herein, the Company may not redeem or prepay principal of
this Note prior to the Maturity Date.
This Note is one of an issue of 3.75% Senior Exchangeable Convertible
Notes issued pursuant to a Note Purchase Agreement, dated as of November 10,
2006 (the "NOTE PURCHASE AGREEMENT"). The Notes issued by the Company pursuant
to the Note Purchase Agreement, including this Note, are collectively referred
to herein as the "NOTES" and the holders of the Notes are collectively referred
to herein as the "HOLDERS".
1. DEFINITIONS.
(a) Certain Defined Terms. As used in this Note, the following terms shall
have the respective meanings indicated:
"CAP AMOUNT REDEMPTION AMOUNT" means the aggregate principal amount
of Excess Notes outstanding on the applicable Company Redemption Date.
"CAP AMOUNT REDEMPTION EVENT" means that (A) the sum of (x) the
number of CDC Common Shares into which the Notes have been converted at
such time plus (y) the number of CDC Common Shares issuable at such time
upon the Conversion of all of the outstanding Notes (without giving effect
to any limitations on such Conversion) exceeds the Cap Amount (the Notes
convertible into such excess Conversion Shares being referred to herein as
the "EXCESS NOTES"), and (B) Shareholder Approval with respect to such the
Company has not been obtained at or prior to such time.
"CAPITAL STOCK" means, with respect to any entity, any and all
shares, interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated) equity issued
by such entity.
"CDC ENTITY" means the Company, Games or Software, as the context
permits or requires.
"CHANGE OF CONTROL" means, with respect to any of the CDC Entities,
the existence or occurrence of any of the following events: (i) the
acquisition by any Person, directly or indirectly, through a purchase,
merger or other acquisition transaction, or series of purchases, mergers
or other acquisition transactions, of shares of the Capital Stock of such
CDC Entity entitling that Person to exercise 50% or more of the total
voting power of all shares of the Capital Stock of such CDC Entity
entitled to vote
2
generally in elections of directors, other than any acquisition by such
CDC Entity or one of its wholly-owned Subsidiaries; or (ii) a change in
the membership of the board of directors of a CDC Entity such that a
majority of the members of the board of directors of such CDC Entity
immediately following such change does not consist of Continuing Directors
of such CDC Entity; or (iii) a CDC Entity consolidates or merges with or
into any other Person, another Person merges with or into such CDC Entity,
or there occurs any conveyance, transfer, sale, lease or other disposition
of all or substantially all of such CDC Entity's properties and assets to
another Person, other than, in the case of this CLAUSE (iii) (A) any
transaction: (1) that does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Capital Stock of such
CDC Entity; and (2) pursuant to which the holders of 50% or more of the
total voting power of all shares of Capital Stock of such CDC Entity
entitled to vote generally in elections of directors immediately prior to
such transaction have the right to exercise, directly or indirectly, 50%
or more of the total voting power of all shares of Capital Stock of such
CDC Entity entitled to vote generally in elections of directors of the
continuing or surviving Person immediately after giving effect to such
transaction; (B) any merger primarily for the purpose of changing such CDC
Entity's jurisdiction of incorporation and resulting in a
reclassification, conversion or exchange of outstanding Common Shares of
such CDC Entity solely into shares of common stock of the surviving
entity; or (C) any transaction or series of transactions undertaken by the
Company prior to a Qualified IPO of Software or Games for the purpose of
consolidating its software segment operations under Software and its games
segment under Games in connection with effectuating a Qualified IPO of
Software or Games, as the case may be.
"COMMISSION" means the U.S. Securities and Exchange Commission, and
any successor agency thereof.
"COMPANY REDEMPTION" means a Cap Amount Redemption, Stock Price
Redemption or Tax Redemption, as the context permits or requires.
"COMPANY REDEMPTION DATE" means the date on which a Cap Amount
Redemption, Stock Price Redemption of Tax Redemption, as the case may be,
is effected.
"COMPANY REDEMPTION PRICE" means:
(i) with respect to a Stock Price Redemption, (x) the
principal amount of this Note being redeemed plus (y) all unpaid Interest
(subject to adjustment as described in SECTION 2(a) of this Note) and
Additional Amounts accrued on such principal amount to, but excluding, the
Company Redemption Date;
(i) with respect to a Tax Redemption, (x) the principal amount
of this Note being redeemed plus (y) all unpaid Interest (subject to
adjustment as described in SECTION 2(a) of this Note) and Additional
Amounts accrued on such principal amount to, but excluding, the Company
Redemption Date; plus (z) the applicable Premium; and
3
(iii) with respect to a Cap Amount Redemption, (x) the
principal amount of this Note being redeemed plus (y) all unpaid Interest
(subject to adjustment as described in SECTION 2(a) of this Note) and
Additional Amounts accrued on such principal amount to, but excluding, the
Company Redemption Date; plus (z) the applicable Premium.
"CONTINUING DIRECTOR" means, with respect to a CDC Entity, a member
of such entity's board of directors (i) who was a member of such board on
the Issue Date or (ii) who was nominated or elected by at least a majority
of the directors who were Continuing Directors at the time of such
nomination or election or whose election to such entity's board of
directors was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or such lesser number comprising a majority of a nominating
committee if authority for such nominations or elections has been
delegated to a nominating committee whose authority and composition have
been approved by at least a majority of the directors who were Continuing
Directors at the time such committee was formed.
"CONVERTIBILITY DATE" means the earliest to occur of (i) the second
(2nd) anniversary of the Issue Date if a Qualified IPO has not occurred on
or prior to such second anniversary, (ii) if a Qualified IPO has occurred,
the first date on which any Holder of a Note is unable to Exchange such
Note for either Games Common Shares or Software Common Shares as a result
of the application of the Games Share Limit and/or the Software Share
Limit (a "CONVERTIBILITY TRIGGERING EVENT") and (iii) the date on which a
Change of Control occurs.
"DEFAULT RATE" means the lower of eighteen percent (18%) and the
highest rate permitted by applicable law.
"ELIGIBLE MARKET" means each of the New York Stock Exchange, the
NASDAQ Global Market, the NASDAQ Global Select Market, the London Stock
Exchange and the Stock Exchange of Hong Kong.
"EVENT OF DEFAULT" means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(i) a default in the due and punctual payment of any
installment of Interest (and Additional Amounts, if any, on) accrued on
this Note as and when the same shall become due and payable, and the
continuance of such default for a period of five (5) Business Days,
provided, that such unpaid Interest and/or Additional Amounts shall accrue
interest at the Default Rate from the date on which such payment became
due until it is paid in full; or
(ii) a default in the due and punctual payment of the
principal (or any premium thereon) of this Note as and when the same shall
become due and payable whether at maturity or otherwise; or
4
(iii) a default or breach in (x) the observance or performance
of any material covenants or agreements of the Company in this Note or the
Note Purchase Agreement (other than a default or breach in the observance
or performance of any covenant or agreement set forth in SUBPARAGRAPH (i)
or (ii) above or as described in the following CLAUSE (y)) or (y) the
Company's performance of its obligations to timely file with the
Commission all reports required to be filed pursuant to the Exchange Act
or to refrain from terminating its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act would
permit such termination, and the continuance of such default for a period
of (in the case of CLAUSE (x) above) thirty (30) days and (in the case of
CLAUSE (y) above) seventy-five (75) days following the date on which
written notice of such failure has been given to the Company by the
Holder; or
(iv) a default or breach in (x) the observance or performance
of any material covenants or agreements of the Company in the Registration
Rights Agreement (other than as described in the following CLAUSE (y)) or
(y) the payment of any liquidated damages under the Registration Rights
Agreement as and when due, and the continuance of such default for a
period of (in the case of CLAUSE (x) above) seventy-five (75) days and (in
the case of CLAUSE (y) above) thirty (30) days following the date on which
written notice of such failure has been given to the Company by the
Holder; or
(v) the entry of a judgment, decree or order by a court of
competent jurisdiction for relief in respect of the Company or any of its
Material Subsidiaries (as defined in the Note Purchase Agreement) in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or the appointment of a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Company or any of its Material Subsidiaries or for any
substantial part of its property or ordering the winding up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(vi) the commencement by the Company or any of its Material
Subsidiaries of a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to
the entry of an order for relief in an involuntary case under any such
law, or consent to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or similar
official) of the Company or any of its Material Subsidiaries or for any
substantial part of its property, or the making by the Company or any of
its Material Subsidiaries of a general assignment for the benefit of
creditors, or the admission by the Company or any of its Material
Subsidiaries in writing of its inability to pay its debts as they become
due, or the taking of corporate action by the Company or any of its
Material Subsidiaries in furtherance of any such action; or
(vii) the Company, Games or Software becomes insolvent or
bankrupt or unable to pay its debts; stops, suspends or threatens to stop
or suspend payment of all or a material part of it debts; or proposes or
makes any agreement for the deferral, rescheduling or other readjustment
of its debts or any part thereof; or
5
(viii) a court of competent jurisdiction issues a judgment,
order or decree to the effect, or the Company (or, if applicable, Games or
Software) asserts in writing, that it is unlawful or illegal for the
Company or, if applicable, Games or Software, to perform or comply with
any of its material obligations under this Note, the Note Purchase
Agreement or the Registration Rights Agreement;
(ix) a default by the Company or any of its subsidiaries under
any indebtedness, liabilities and obligations (A) for borrowed money of
the Company or any of its subsidiaries; (B) for borrowed money of another
Person guaranteed by the Company or any of its subsidiaries; (C) secured
by a lien or other encumbrance existing on any property owned by the
Company or any of its subsidiaries, that individually or in the aggregate
exceeds five million dollars ($5,000,000), and such default results in the
redemption or acceleration of such indebtedness prior to its maturity
date, unless prior to such redemption or acceleration, such redemption or
acceleration is waived, cured, rescinded or annulled or unless such
indebtedness is discharged in full; or
(x) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against the Company or
any of its Material Subsidiaries and which judgments are not, within sixty
(60) days after the entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within sixty (60) days after the expiration
of such stay.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"EXCHANGE DATE" means the earlier to occur of (i)(x) with respect to
the Games Common Shares, the Games IPO Date and (y) with respect to the
Software Common Shares, the Software IPO Date and (ii) with respect to the
Games Common Shares and the Software Common Shares, the date on which a
Change of Control of Games or Software, as the case may be, occurs.
"GAMES IPO DATE" means the date on which the Qualified IPO Price for
a Qualified IPO with respect to the Games Common Shares is fixed by the
Company and the managing underwriter(s) therefor.
"LISTING CURRENCY" means the currency in which Common Shares trade
on the Principal Market for such Common Shares.
"LISTING CURRENCY CONVERSION RATE" means, as of any date, the
closing rate at which U.S. Dollars may be purchased with the relevant
Listing Currency (if other than U.S. Dollars) on the Business Day
immediately preceding such date as published by The Wall Street Journal.
"MAJORITY IN INTEREST" means, at any time, the Holders of at least a
majority in aggregate principal amount of the Notes at such time
outstanding.
6
"MINIMUM IPO AMOUNT" means US$100,000,000 or the equivalent thereof
in the Listing Currency or such lesser amount consented to by Holders of
at least 33.33% in outstanding aggregate principal amount of the Notes as
of the date such consent is given by the Holders thereof.
"PREMIUM" means, with respect to any redemption of this Note for
which Premium is payable, the product of (i) 0.05 and (ii) the principal
amount of this Note being redeemed.
"PRINCIPAL MARKET" means, with respect to the CDC Common Shares, the
Games Common Shares or the Software Common Shares, as the case may be, the
principal securities exchange or market on which such Common Shares are
listed or quoted.
"PRO RATA SHARE" means, with respect to a Holder, the quotient
obtained by dividing the aggregate principal amount of the Note purchased
by such Holder on the Issue Date by the aggregate principal amount of all
of the Notes issued to the Holders on the Issue Date.
"QUALIFIED IPO" means (i) the sale by Games or Software of its
Common Shares in a firm commitment, fully underwritten public offering
through a globally recognized investment banking firm, the gross proceeds
of which to the Company and any selling shareholders (before underwriting
discounts, commissions and fees) equal or exceed the Minimum IPO Amount;
provided that the aggregate gross proceeds payable to all selling
shareholders in such public offering does not exceed 30% of the total
gross proceeds of such public offering, and (ii) following such offering,
such Common Shares are listed or quoted on an Eligible Market.
"QUALIFIED IPO DATE" means the date on which Software or Games, as
the case may be, (i) has consummated a Qualified IPO and, together with
any selling shareholders, has received the Minimum IPO Amount (less any
underwriting discounts, commissions and fees) in connection with a
Qualified IPO and (ii) has obtained the listing or quotation of its Common
Shares sold in such Qualified IPO on an Eligible Market.
"QUALIFIED IPO PRICE" means the price per share at which the Games
Common Shares or the Software Common Shares, as the case may be, are sold
to the public in a Qualified IPO, as adjusted thereafter for stock splits,
stock dividends and similar events.
"SOFTWARE IPO DATE" means the date on which the Qualified IPO Price
for a Qualified IPO with respect to the Software Common Shares is fixed by
the Company and the managing underwriter(s) therefor.
"STOCK PRICE REDEMPTION AMOUNT" means an aggregate principal amount
of this Note that (A) if the Stock Price Redemption Conditions described
in CLAUSE (i)(B) of the definition of such term as described herein are
satisfied, would equal, upon Conversion of such principal amount into CDC
Common Shares at the Conversion Price in effect immediately prior to such
Conversion, the sum of the daily trading volumes of the CDC
7
Common Shares for the thirty (30) consecutive Trading Days occurring
immediately prior to the date on which the Company Redemption Notice is
delivered to each Holder, or (B) if the Stock Price Redemption Conditions
described in CLAUSE (i)(A) of the definition of such term as described
herein are satisfied, would equal, upon an Exchange of such principal
amount for Games Common Shares or Software Common Shares at the Exchange
Price in effect immediately prior to such Exchange, the sum of the daily
trading volumes of the Games Common Shares or the Software Common Shares,
as the case may be, for the thirty (30) consecutive Trading Days occurring
immediately prior to the date on which the Company Redemption Notice is
delivered to each Holder (or, if the Stock Price Redemption Conditions
described in CLAUSE (i)(A) of the definition of such term as described
herein are satisfied with respect to both Games and Software, the sum of
the daily trading volumes for each of the Games Common Shares and the
Software Common Shares for the thirty (30) consecutive Trading Days
occurring immediately prior to the date on which the Company Redemption
Notice is delivered to each Holder). The daily trading volume for the
relevant Common Shares shall be as reported by the Principal Market on
which such Common Shares then trade or are quoted, and shall be expressed
as a U.S. Dollar amount. If the Principal Market with respect to such
Common Shares is not located in the United States, and the applicable
Listing Currency is other than U.S. Dollars, such Listing Currency shall
be converted into U.S. Dollars using the Listing Currency Conversion Rate
as of the date of determination. Payment of the Stock Price Redemption
Amount shall be made to the Holders pro rata based on the principal amount
of the Notes then outstanding in relation to the principal amount of the
Note then held by each Holder.
"STOCK PRICE REDEMPTION CONDITIONS" means each of the following
conditions:
(i) (A) if a Qualified IPO has occurred prior to the delivery
of a Company Redemption Notice, both (x) one year has elapsed since the
applicable Qualified IPO Date and (y) beginning on such one-year
anniversary of the Qualified IPO Date, the daily VWAP for the Common
Shares of the CDC Entity that has consummated such Qualified IPO exceeds
one hundred and thirty percent (130%) of the Qualified IPO Price on each
of at least twenty (20) Trading Days out of any thirty (30) consecutive
Trading Days; or
(B) if a Qualified IPO has not occurred prior to the
delivery of a Company Redemption Notice, both (x) one year has elapsed
since the Convertibility Date and (y) beginning on such one-year
anniversary of the Qualified IPO Date, the daily VWAP for the CDC Common
Shares exceeds one hundred and thirty percent (130%) of the Conversion
Price on each of at least twenty (20) Trading Days out of any thirty (30)
consecutive Trading Days;
(ii) with respect to the Common Shares described in CLAUSES
(i)(A) or (i)(B) above, as applicable, and on each of the twenty Trading
Days described therein, (A) the authorized but unissued and otherwise
unreserved number of such Common Shares is sufficient for the issuance or
delivery thereof, as the case may be, upon a Conversion or Exchange in
full of the Notes for such Common Shares in accordance with
8
the terms thereof; (B) if the Principal Market for such Common Shares is
located in the United States, (I) such Common Shares may be sold by each
Holder pursuant to an effective and available Registration Statement under
the Securities Act or (II) such Common Shares may be sold without
restriction pursuant to Rule 144(k) under the Securities Act;
(iii) with respect to the Common Shares described in CLAUSES
(i)(A) or (i)(B) above, as applicable, and on each of the twenty Trading
Days described therein, such Common Shares are listed or quoted (and have
not suspended from trading) on an Eligible Market and are approved for
listing upon issuance;
(iv) the issuance of such Common Shares upon a Conversion or
Exchange of the Notes in full in accordance with their terms (without
giving effect to any limitation on such Conversion or Exchange contained
herein) would not violate any rules or regulation of any market or
exchange on which such Common Shares are listed or eligible for quotation;
(v) no Event of Default, and no event that with the passage of
time or the giving of notice or both would constitute an Event of Default,
has occurred and is continuing; and
(vi) neither a Change of Control, nor a public announcement of
a pending or proposed Change of Control, has occurred.
"TAX LAW REDEMPTION CONDITION" means, with respect to this Note, (A)
the Company is required by the terms of this Note to pay Additional
Amounts on this Note pursuant to SECTION 2(b), and (B) the Holder of this
Note has not waived the Company's obligations under SECTION 2(b) within
ten (10) days following receipt of written notice of such requirement from
the Company.
"TRADING DAY" means, with respect to CDC Common Shares, Games Common
Shares or Software Common Shares, as the case may be, a Business Day on
which such Common Shares are purchased and sold on the Principal Market
for such Common Shares.
"UNITED STATES" and "U.S." means the United States of America
(including the States thereof and the District of Columbia) and its
possessions (including Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa, Wake Island and the Northern Mariana Islands).
"U.S. DOLLARS", "US$" and "DOLLARS" refer to the lawful currency of
the United States.
"VWAP" on a Trading Day means, with respect to the CDC Common
Shares, the Games Common Shares or the Software Common Shares, as the case
may be, the volume weighted average price of such Common Shares for such
Trading Day on the Principal
9
Market therefor as reported by Bloomberg Financial Markets or, if
Bloomberg Financial Markets is not then reporting such prices, by a
comparable reporting service selected by the Company and reasonably
acceptable to the Holders of a Majority in Interest, or if no such
reporting service is reporting such prices, by the Principal Market on
which such Common Share is then listed or quoted. If VWAP cannot be
calculated for such Common Shares on such Trading Day on any of the
foregoing bases, then the Company shall submit such calculation to an
independent investment banking firm of international reputation and
reasonably acceptable to the Holders of a Majority in Interest, and shall
cause such investment banking firm to perform such determination and
notify the Company and each Holder of the results of determination no
later than two (2) Business Days from the time such calculation was
submitted to it by the Company. All such determinations shall be
appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
(b) Other Terms. The following additional terms have the respective
meanings specified in the Sections of this Note indicated below:
"ACCELERATED AMOUNT" SECTION 6(b)
"ACCELERATION" SECTION 6(a)
"ACCELERATION DATE" SECTION 6(a)
"ACCELERATION NOTICE" SECTION 6(a)
"ADDITIONAL AMOUNTS" SECTION 2(b)
"ALLOCATION AMOUNT" SECTION 9(e)(ii)
"APPLICABLE INTEREST RATE" SECTION 2(a)
"CAP AMOUNT" SECTION 9(e)(ii)
"CHANGE OF CONTROL ELECTION NOTICE" SECTION 5(c)
"CAP AMOUNT REDEMPTION" SECTION 3(a)
"CHANGE OF CONTROL REDEMPTION" SECTION 5(a)
"CHANGE OF CONTROL REDEMPTION DATE" SECTION 5(a)
"CHANGE OF CONTROL REDEMPTION NOTICE" SECTION 5(a)
"CHANGE OF CONTROL REDEMPTION PRICE" SECTION 5(a)
"COMPANY" PREAMBLE
"COMPANY REDEMPTION" SECTION 3(a)
"COMPANY REDEMPTION DATE" SECTION 3(b)
"COMPANY REDEMPTION NOTICE" SECTION 3(b)
"CONVERSION" SECTION 8(a)
"CONVERSION DATE" SECTION 9(a)
"CONVERSION DEFAULT" SECTION 9(d)
10
"CONVERSION NOTICE" SECTION 9(a)
"CONVERSION PRICE" SECTION 8(b)
"CONVERSION SHARES" SECTION 8(a)
"CONVERTIBLE SECURITIES" SECTION 10(d)
"DTC" SECTION 9(c)
"DELIVERY DATE" SECTION 9(c)
"DETERMINATION DATE" SECTION 10(c)
"DILUTIVE ISSUANCE" SECTION 10(e)(i)
"DISPUTE PROCEDURE" SECTION 9(b)
"DISTRIBUTION" SECTION 10(c)
"DISTRIBUTION DATE" SECTION 10(c)
"DISTRIBUTION NOTICE" SECTION 10(c)
"EXCHANGE" SECTION 7(a)
"EXCHANGE DATE" SECTION 9(a)
"EXCHANGE DEFAULT" SECTION 9(d)
"EXCHANGE NOTICE" SECTION 9(a)
"EXCHANGE SHARES" SECTION 7(a)
"EXCLUDED SECURITIES" SECTION 10(f)
"FAST" SECTION 9(c)
"GAMES ALLOCATION AMOUNT" SECTION 9(e)(iv)
"GAMES EXCHANGE PRICE" SECTION 7(b)(ii)
"GAMES SHARE LIMIT" SECTION 9(e)(iv)
"HOLDER" PREAMBLE
"HOLDER REDEMPTION" SECTION 4(a)
"HOLDER REDEMPTION DATE" SECTION 4(a)
"HOLDER REDEMPTION NOTICE" SECTION 4(b)
"HOLDER REDEMPTION PRICE" SECTION 4(a)
"IPO DISCOUNT" SECTION 7(c)
"INTEREST" SECTION 2(a)
"INTEREST PAYMENT DATE" SECTION 3
"MATURITY DATE" PREAMBLE
"NEW ISSUANCE PRICE" SECTION 10(e)(i)
"NOTE PURCHASE AGREEMENT" PREAMBLE
11
"RECORD DATE" SECTION 10(c)
"SHAREHOLDER APPROVAL" SECTION 9(e)(ii)
"SOFTWARE ALLOCATION AMOUNT" SECTION 9(e)(iii)
"SOFTWARE EXCHANGE PRICE" SECTION 7(b)(i)
"SOFTWARE SHARE LIMIT" SECTION 9(e)(iii)
"STOCK PRICE REDEMPTION" SECTION 3(a)
"TAX REDEMPTION" SECTION 3(a)
"TAXING JURISDICTION" SECTION 2(b)
"TRANSFER AGENT" SECTION 9(c)
(c) Terms Defined in the Note Purchase Agreement. All capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Note Purchase Agreement.
2. PAYMENT OF INTEREST.
(a) Interest Accrual. The principal of this Note will bear interest
("INTEREST") from and including the Issue Date until such principal is paid in
full (whether at maturity, by redemption, Conversion or Exchange) at an annual
rate equal to the Applicable Interest Rate, payable (i) quarterly in arrears on
January 1, April 1, July 1 and October 1 of each year, commencing January 1,
2007, and (ii) on the date on which such principal is paid (whether at maturity,
by redemption, Conversion or Exchange) (each payment date described in the
foregoing CLAUSES (i) and (ii) being referred to herein as an "INTEREST PAYMENT
DATE"). If any Interest Payment Date would otherwise be a day which is not a
Business Day, such Interest Payment Date shall be deemed to occur on the next
day which is a Business Day and no additional interest shall be payable on
account of such delayed payment. Interest on this Note will be calculated on the
basis of a 360-day year consisting of twelve (12) months of thirty (30) days
each and, in the case of an incomplete month, the actual number of days elapsed
during that month.
For purposes hereof, "APPLICABLE INTEREST RATE" means 3.75% per annum,
provided that,
(i) upon the occurrence of a Holder Redemption, the Applicable Interest
Rate shall increase automatically to 12.5% per annum and shall apply
retroactively from the Issue Date to, but not including, the Holder
Redemption Date;
(ii) upon the occurrence of a Change of Control Redemption, the
Applicable Interest Rate shall increase automatically to 12.5% per
annum and shall apply retroactively from the Issue Date to, but not
including, the Change of Control Redemption Date;
12
(iii) if a Qualified IPO has not occurred as of the Maturity Date, the
Applicable Interest Rate shall increase automatically to 12.5% per
annum and shall apply retroactively from the Issue Date to, but not
including, the Maturity Date;
(iv) if a Qualified IPO has occurred as of the Maturity Date, the
Applicable Interest Rate shall increase automatically to 7.5% per
annum and shall apply retroactively from the Issue Date to, but not
including, the Maturity Date;
(v) upon the occurrence of a Tax Law Redemption Condition or a Cap
Amount Redemption, the Applicable Interest Rate shall increase
automatically to 12.5% per annum and shall apply retroactively from
the Issue Date to, but not including, the applicable Company
Redemption Date; and
(vi) upon the occurrence of an Event of Default, and the continuance of
such Event of Default for a period of at least forty-five (45) days
from the date on which such Event of Default first occurs (or, if
more than one Event of Default occurs within a period of forty-five
days, from the date on which the first such Event of Default
occurs), the Applicable Interest Rate shall increase automatically
to the Default Rate and shall apply from the date such Event of
Default first occurs to, but not including, the earlier of (i) the
date on which such Event of Default (and any other Event of Default
that may have occurred) is cured to the satisfaction of the Holder
and (ii) the date on which the Accelerated Amount is paid in full.
For the avoidance of doubt, it is understood that, if an increase in the
Applicable Interest Rate occurs with respect to this Note as described in
PARAGRAPHS (i) through (v) above, Interest shall be deemed to have accrued on
all principal of this Note at such increased Applicable Interest Rate
retroactively from the Issue Date through the date on which such principal is
paid (whether at maturity, by redemption, Conversion or Exchange), and the
payment of Interest to the Holder of this Note that is required to be made on
the first Interest Payment Date following such increase shall be adjusted upward
by the aggregate dollar amount of such retroactive increase from the Issue Date
through such Interest Payment Date.
(b) Additional Amounts. All payments under this Note will be made by the
Company in U.S. Dollars free and clear of, and without liability or withholding
or deduction for or on account of, any present or future taxes of whatever
nature (collectively, "TAX") imposed or levied by or on behalf of the United
States, the Cayman Islands or the People's Republic of China (each, a "TAXING
JURISDICTION"), unless the withholding or deduction of such Tax is compelled by
applicable Governmental Requirements. If any deduction or withholding for any
Tax of a Taxing Jurisdiction shall at any time be required in respect of any
amount to be paid by the Company under this Note, the Company will pay to the
relevant Taxing Jurisdiction the full amount required to be withheld, deducted
or otherwise paid before penalties attach thereto or interest accrues thereon
and pay to the Holder, on the same day that it is required to pay such amount
under this Note, such additional amount (the "ADDITIONAL AMOUNT") as may be
necessary in order that the net amount paid to the Holder under this Note after
such deduction, withholding or payment (including, without limitation, any
required deduction or withholding of Tax on or
13
with respect to such Additional Amount), shall be not less than the amount then
due and payable to the Holder under the terms of this Note before the assessment
of such Tax.
(c) Payments. Payments of principal of, Interest, Premium (if any) and
Additional Amounts (if any) on this Note shall be made in U.S. Dollars by wire
transfer of immediately available funds to the Holder in accordance with the
wire instructions of the Holder set forth on Exhibit A to the Note Purchase
Agreement, and such amounts not paid when due shall bear interest until paid at
the Default Rate, unless such funds were not received by the Holder as a result
of the failure of the Holder to provide accurate wiring instructions or to
notify the Company of a change in such wire instructions.
3. COMPANY REDEMPTION.
(a) Company Redemptions. In the event that (i) all of the Stock Price
Redemption Conditions are satisfied contemporaneously, the Company may, at its
option, redeem up to the Stock Price Redemption Amount applicable to all of the
Notes (a "STOCK PRICE REDEMPTION"), (ii) the Tax Law Redemption Condition is
satisfied, the Company may, at its option, redeem all but not less than all of
the Notes (a "TAX REDEMPTION"); or (iii) a Cap Amount Redemption Event occurs,
the Company shall be obligated to redeem all but not less all of the Cap Amount
Redemption Amount of all of the Notes (each, a "CAP AMOUNT REDEMPTION"), in each
such case, at the applicable Company Redemption Price. Each Company Redemption,
to the extent it applies to less than the entire principal amount of the Notes
then outstanding (including, without limitation, as a result of the failure by
the Company to have sufficient funds available to effect such redemption in
full, in which case the Holder shall have all other rights hereunder with
respect to any such failure), shall be made pro rata among the Holders based on
the principal amount of each Note then outstanding in relation to the aggregate
principal amount of all of the Notes then outstanding.
(b) Redemption Notice. In order to effect a Stock Price Redemption or a
Tax Redemption, or if the Company is required to effect a Cap Amount Redemption,
the Company shall send an irrevocable redemption notice (a "COMPANY REDEMPTION
NOTICE") to each affected Holder. If a Cap Amount Redemption Event occurs, the
Company shall deliver a Company Redemption Notice no later than the fifth (5th)
day after the occurrence of such event; provided, however, that if the Company
fails to deliver such notice on or before such fifth day, the Company shall be
deemed for purposes hereof to have delivered such notice on such fifth day. Each
Company Redemption Notice shall specify the nature of the Company Redemption to
which it relates, a statement of facts showing that the applicable redemption
conditions have been satisfied (or, in the case of a Cap Amount Redemption, that
a Cap Amount Redemption Event has occurred), the principal amount of Notes of
each holder that will be redeemed, and the date on which such redemption is to
be effected (the "COMPANY REDEMPTION DATE"). A Company Redemption Date shall
occur not more than sixty (60) days nor less than thirty (30) days following the
date on which the related Company Redemption Notice is delivered to each holder.
(c) Redemption Obligations. The Company may effect one or more Stock Price
Redemptions; provided, however, that (i) the Company may not effect more than
one Stock Price
14
Redemption during any thirty (30) day period, and (ii) the Stock
Price Redemption Conditions must be satisfied separately for each Stock Price
Redemption. The Company shall be required to effect a Cap Amount Redemption each
time a Cap Amount Redemption Event occurs.
(d) Failure to Pay Company Redemption Price. If the Company fails to pay
the Company Redemption Price to the Holder on or before Company Redemption Date,
in addition to all rights and remedies otherwise available to the Holder, the
Holder shall be entitled to receive interest at the Default Rate on such unpaid
amount from and after the Company Redemption Date until such Company Redemption
Price has been paid in full.
(e) Right to Exercise or Convert. Nothing in this SECTION 3 shall be
deemed to preclude the Holder from effecting any of its Conversion, Exchange or
redemption rights in accordance with the terms of this Note prior to the
applicable Company Redemption Date.
(f) Surrender of this Note. If this Note is redeemed in full pursuant to
this SECTION 3, the Holder shall deliver this Note (or comply with the SECTION
12(e) if this Note has been lost, stolen or mutilated) promptly following its
receipt of the Company Redemption Price in connection with such redemption.
4. HOLDER REDEMPTION.
(a) Holder Redemption. In the event that a Qualified IPO has not occurred
on or before the three-year anniversary of the Issue Date (a "HOLDER REDEMPTION
TRIGGERING DATE"), the Holder shall have the right to require the Company to
redeem all or any portion of this Note (a "HOLDER REDEMPTION") at the Holder
Redemption Price on the date that is twenty (20) Business Days after such third
anniversary date (the "HOLDER REDEMPTION DATE"). For purposes hereof, "HOLDER
REDEMPTION PRICE" means (A) the principal amount of this Note being redeemed
plus (B) all unpaid Interest (subject to adjustment as described in SECTION 2(a)
of this Note) and Additional Amounts (if any) accrued on the principal of this
Note to, but excluding, the Holder Redemption Date.
(b) Holder Redemption Exercise. In order to exercise its right to effect a
Holder Redemption on the Holder Redemption Date, the Holder shall deliver a
written notice (a "HOLDER REDEMPTION NOTICE") to the Company on a date not later
than the fifth (5th) Business Day immediately preceding the Holder Redemption
Date stating the portion of the principal amount of this Note which the Holder
is electing to have redeemed, which portion must be a principal amount of
$25,000 or an integral multiple thereof, if less than the entire outstanding
principal amount of this Note is to be redeemed. Upon receipt by the Company of
a Holder Redemption Notice, the Holder shall (unless such Holder Redemption
Notice is validly withdrawn, as provided in SECTION 4(c) below) be entitled to
receive the Holder Redemption Price with respect to the principal amount of this
Note to be redeemed. Such Holder Redemption Price shall be paid to the Holder
promptly but no later than two (2) Business Days following the Holder Redemption
Date. The portion of this Note in respect of which a Holder Redemption Notice
has been given by the Holder may not be exchanged or converted pursuant to
SECTIONS 7 or 8, respectively, hereof on or after the date of the delivery of
such Holder Redemption Notice unless such Holder Redemption Notice has first
been withdrawn as provided in SECTION 4(c).
15
(c) Withdrawal. The Holder may withdraw a Holder Redemption Notice by
delivering a written notice of withdrawal to the Company at any time prior to
the close of business on the Business Day immediately prior to the Holder
Redemption Date (or, if payment is not made on or before the due date therefor,
at any time thereafter until such payment is made in full), specifying the
principal amount of this Note with respect to which such notice of withdrawal is
being submitted, and the principal amount, if any, of this Note which remains
subject to the original Holder Redemption Notice and which has been or will be
delivered for redemption by the Company.
(d) Failure to Pay Holder Redemption Price. If the Company fails to pay
the Holder Redemption Price to the Holder by the second (2nd) Business Day
following the Holder Redemption Date, in addition to all rights and remedies
otherwise available to the Holder, the Holder shall be entitled to receive
Interest at the Default Rate on such unpaid amount, from and after the Holder
Redemption Date until the Holder Redemption Price has been paid in full.
(e) Surrender of this Note. If this Note is redeemed in full pursuant to
this SECTION 4, the Holder shall deliver this Note (or comply with the SECTION
12(e) if this Note has been lost, stolen or mutilated) to the Company promptly
following its receipt of the Holder Redemption Price.
5. REDEMPTION UPON A CHANGE OF CONTROL.
(a) Change of Control Redemption. In the event that a Change of Control
occurs with respect to the Company, Games or Software at any time prior to the
Maturity Date, the Holder shall have the right to require the Company to redeem
for cash all or any portion of this Note not previously converted, exchanged or
redeemed (a "CHANGE OF CONTROL REDEMPTION") at the Change of Control Redemption
Price as of the date (the "CHANGE OF CONTROL REDEMPTION DATE") that is the
twentieth (20th) Business Day following such Change of Control. For purposes
hereof, "CHANGE OF CONTROL REDEMPTION PRICE" means (A) the principal amount of
the Note being redeemed plus (B) all unpaid Interest (subject to adjustment as
described in SECTION 2(a) of this Note) and Additional Amounts (if any) accrued
on such principal amount to, but excluding, the Change of Control Redemption
Date plus (C) the applicable Premium.
(b) Change of Control Notice. The Holder may exercise its rights specified
in SECTION 5(a) by delivering a written notice (a "CHANGE OF CONTROL NOTICE") to
the Company at any time on or prior to the fifth (5th) Business Day immediately
preceding the applicable Change of Control Redemption Date, specifying the
portion of the principal amount of this Note to be redeemed, which portion must
be $25,000 or an integral multiple thereof, if less than the full outstanding
amount of this Note is to be redeemed.
Upon receipt by the Company of the Change of Control Notice, the Holder
shall (unless such Change of Control Notice is withdrawn as specified in SECTION
5(c)) thereafter be entitled to receive the Change of Control Redemption Price
with respect to the portion of this Note being redeemed. The Change of Control
Redemption Price shall be paid to the Holder on the Change of Control Redemption
Date. The Note in respect of which a Change of Control Notice has been given by
the Holder thereof may not be exchanged or converted pursuant to SECTIONS 7 or
8,
16
respectively, hereof on or after the date of the delivery of such Change of
Control Notice unless such Change of Control Notice has first been withdrawn as
specified in SECTION 5(c).
(c) Withdrawal of Election. Notwithstanding anything herein to the
contrary, the Holder, after delivering to the Company a Change of Control
Notice, shall have the right to withdraw such Change of Control Notice, in whole
or in part, at any time prior to the close of business on the Business Day
immediately prior to the Change of Control Redemption Date (or, if payment is
not made on or before the due date therefor, at any time thereafter until such
payment is made in full) by delivery of a written notice of withdrawal to the
Company, specifying the principal amount of this Note with respect to which such
notice of withdrawal is being submitted, and the principal amount, if any, of
this Note which remains subject to the original Change of Control Notice, and
which has been or will be delivered for redemption by the Company.
(d) Failure to Pay Change of Control Redemption Price. If the Company
fails to pay the Change of Control Redemption Price to the Holder by the second
Business Day following the Change of Control Redemption Date, in addition to all
rights and remedies otherwise available to the Holder, the Holder shall be
entitled to receive interest at the Default Rate on such unpaid amount, from and
after the Change of Control Redemption Date until the Change of Control
Redemption Price has been paid in full.
(e) Surrender of this Note. If this Note is redeemed in full pursuant to
this SECTION 5, the Holder shall deliver this Note (or comply with the SECTION
12(e) if this Note has been lost, stolen or mutilated) to the Company promptly
following its receipt of the Change of Control Redemption Price.
6. EVENTS OF DEFAULT; ACCELERATION.
(a) Acceleration. In the event that an Event of Default occurs, the Holder
may declare all or a portion of this Note then outstanding (and Interest and
Additional Amounts, if any, accrued thereon) to be due and payable immediately
(an "ACCELERATION") by delivering a written notice to the Company (an
"ACCELERATION NOTICE") and, unless such Event of Default shall have been cured
by the Company prior to the delivery of such written notice, such principal and
Interest (and Additional Amounts, if any) shall become immediately due and
payable on the date on which the Acceleration Notice is delivered to the Company
(the "ACCELERATION DATE"). The Holder may, at any time, rescind an Acceleration
Notice and/or waive an Event of Default by sending written notice thereof to the
Company.
(b) Acceleration of Payment. Upon an Acceleration, the Company shall pay
the amount of outstanding principal and accrued but unpaid Interest (subject to
adjustment as described in SECTION 2(a) of this Note) and Additional Amounts, if
any, due to the Holder (the "ACCELERATED AMOUNT") no later than two (2) Business
Days following the Acceleration Date. In the event that the Company pays to the
Holder in cash the entire remaining unpaid principal amount of this Note, all
accrued and unpaid Interest and any other amounts due hereunder, the Holder
shall return this Note to the Company for cancellation promptly following its
receipt such payment.
17
7. EXCHANGE.
(a) Right to Exchange. The Holder shall have the right, at any time and
from time to time after an Exchange Date, to exchange all or any part of this
Note (as long as the portion of this Note to be exchanged is $25,000 or an
integral multiple thereof if less than the full outstanding amount of this Note
is to be exchanged) plus (at the option of the Holder) all or any unpaid
Interest and Additional Amounts (if any) accrued thereon into such number of
fully paid and non-assessable Common Shares of the entity or entities to which
such Exchange Date relates (such Common Shares, the "EXCHANGE SHARES") as is
determined in accordance with the terms of this SECTION 7 (an "EXCHANGE"). For
the avoidance of doubt, if an Exchange Date relates to either the Software
Common Shares or the Games Common Shares, but not both, the Company shall be
obligated under this SECTION 7 to effect an Exchange of this Note only into the
Common Shares of the entity to which such Exchange Date relates, and the Holder
shall have no right to require the Company to effect any Exchange into the other
such entity until and unless an Exchange Date with respect to such entity
occurs.
(b) Exchange Price.
(i) The exchange price at which this Note may be exchanged for
Software Common Shares (the "SOFTWARE EXCHANGE PRICE") shall be equal to (i)
prior to the Software IPO Date, $13.3333, and (ii) on or after the Software IPO
Date, the lower of (x) the Software Exchange Price in effect immediately prior
to the Software IPO Date and (y) the product of (1) the Qualified IPO Price for
Software Common Shares times (2) the IPO Discount. The Software Exchange Price
shall be subject to adjustment pursuant to SECTION 10 below.
(ii) The exchange price at which this Note may be exchanged for
Games Common Shares (the "GAMES EXCHANGE PRICE") shall be equal to (i) prior to
the Games IPO Date, $8.3333, and (ii) on or after the Games IPO Date, the lower
of (x) the Games Exchange Price in effect immediately prior to the Games IPO
Date and (y) the product of (1) the Qualified IPO Price for Games Common Shares
times (2) the IPO Discount. The Games Exchange Price shall be subject to
adjustment pursuant to SECTION 10 below.
(c) IPO Discount. The term "IPO DISCOUNT" means, with respect to the
applicable Qualified IPO Price:
(i) 0.85 if such Qualified IPO occurs prior to the 12th month after
the Issue Date;
(ii) 0.80 if such Qualified IPO occurs on or after the 12th month
after the Issue Date but prior to the 24th month after the Issue Date;
(iii) 0.75 if such Qualified IPO occurs on or after the 24th month
after the Issue Date but prior to the 36th month after the Issue Date;
(iv) 0.70 if such Qualified IPO occurs on or after the 36th month
after the Issue Date but prior to the 48th month after the Issue Date; and
18
(v) 0.65 if such Qualified IPO occurs on or after the 48th month
after the Issue Date.
(d) Surrender of this Note. If this Note is Exchanged in full pursuant to
this SECTION 7, the Holder shall deliver this Note (or comply with the SECTION
12(e) if this Note has been lost, stolen or mutilated) to the Company promptly
following such Exchange.
8. CONVERSION.
(a) Right to Convert. The Holder shall have the right, at any time and
from time to time following the Convertibility Date, to convert all or any part
of this Note (as long as the portion of this Note to be converted is $25,000 or
an integral multiple thereof if less than the full outstanding amount of this
Note is to be converted) plus (at the option of the Holder) all or any unpaid
Interest and Additional Amounts (if any) accrued thereon into such number of
fully paid and non-assessable CDC Common Shares (the "CONVERSION SHARES") as is
determined in accordance with the terms of this SECTION 8 (a "CONVERSION").
(b) Conversion Price. The price per CDC Common Share at which this Note
may be converted (the "CONVERSION PRICE") shall initially be equal to $10.37;
provided, however, in the event of a Convertibility Triggering Event, the
Conversion Price shall be the lesser of (x) such amount and (y) $8.42, subject
to adjustment as provided in SECTION 10 below.
(c) Surrender of this Note. If this Note is Converted in full pursuant to
this SECTION 8, the Holder shall deliver this Note (or comply with the SECTION
12(e) if this Note has been lost, stolen or mutilated) to the Company promptly
following such Conversion.
9. EXCHANGE/CONVERSION MECHANICS AND LIMITATIONS.
(a) Notice. In order to exercise its right pursuant to the terms of this
Note to exchange or convert all or any portion of this Note for Common Shares,
the Holder shall deliver to the Company, by facsimile transmission, at any time
prior to 5:00 p.m., New York City time, on the Business Day on which the Holder
wishes to effect such Exchange (the "EXCHANGE DATE") or Conversion (the
"CONVERSION DATE"), a written notice in the form attached hereto as ANNEX I (an
"EXCHANGE NOTICE") or ANNEX II (a "CONVERSION Notice"), as applicable, stating
the aggregate principal amount of this Note (plus, if so elected by the Holder,
all or any unpaid Interest and Additional Amounts (if any) accrued hereon) to be
exchanged or converted, as the case may be, the number of Common Shares into
which the Holder wishes to exchange or convert this Note, and the name or names
(with addresses or, if delivery of such Common Shares is to be made by book
entry, any relevant account information) in which the Holder wishes such Common
Shares to be issued. The Holder shall not be required to physically surrender
this Note to the Company in order to effect an Exchange or Conversion. The
Company shall notify the Holder if an Exchange Notice or Conversion Notice is
incomplete or incorrect, and the Holder shall promptly provide such missing or
corrected information; provided, however, that if the Company believes the
Holder's determination of the number of Common Shares to be delivered as set
forth in such notice is incorrect, such dispute shall be resolved in accordance
with SECTION 9(b). The Company shall maintain a record showing, at any given
time, the unpaid principal amount of this Note and the date of each Exchange
and/or Conversion or other payment of principal hereof.
19
(b) Number of Exchange Shares/Conversion Shares. The number of Exchange
Shares or Conversion Shares, as applicable, to be delivered by the Company
pursuant to an Exchange or Conversion, as applicable, shall be equal to the
principal amount of this Note being exchanged or converted, as applicable, plus
(if the Holder so elects) all or any unpaid Interest and Additional Amounts (if
any) accrued thereon, divided by the Exchange Price in effect on the Exchange
Date or the Conversion Price in effect on the Conversion Date, as the case may
be. In the case of a dispute as to the number of Exchange Shares or Conversion
Shares deliverable upon an Exchange or Conversion (including without limitation
as a result of adjustments to the Exchange Price or Conversion Price made in
accordance with SECTION 10 below), the Company shall promptly deliver to the
exchanging or converting Holder the number of Exchange Shares or Conversion
Shares, as applicable, that are not disputed and shall submit the disputed
calculations to a certified public accounting firm of international recognition
(other than the Company's independent accountants) within two (2) Business Days
of receipt of the Holder's Exchange Notice or Conversion Notice, as applicable.
The Company shall use its commercially reasonable efforts to cause such
accountants to calculate the disputed Exchange Price or Conversion Price, as the
case may be, as provided herein and to notify the Company and the Holder of the
results in writing no later than two (2) Business Days following the day on
which such accountant received the disputed calculation (the "DISPUTE
PROCEDURE"). Such accountant's calculation shall be deemed conclusive absent
manifest error. The fees of any such accountant shall be borne by the party
whose calculations are most at variance with those of such accountant. The
Company shall not issue any fraction of a Common Share in connection with any
Exchange or Conversion, but instead shall make a cash payment (calculated to the
nearest cent) equal to such fraction multiplied by the daily VWAP of such Common
Share on the last Trading Day prior to the date of Exchange or Conversion.
(c) Delivery of Exchange Shares/Conversion Shares. Upon receipt of an
Exchange Notice or Conversion Notice from the Holder, the Company shall, no
later than the close of business on the third (3rd) Business Day following the
Exchange Date or Conversion Date set forth in such notice (the "DELIVERY DATE"),
issue or otherwise transfer and cause to be delivered to the Holder the number
of Exchange Shares or Conversion Shares, as applicable, determined pursuant to
SECTION 9(b) above; provided, however, that any Exchange Shares or Conversion
Shares that are the subject of a Dispute Procedure shall be delivered no later
than the close of business on the third (3rd) Business Day following the
determination made pursuant thereto. To the extent practicable, the Company
shall effect delivery of Conversion Shares and Exchange Shares to the Holder, as
long as the designated transfer agent or co-transfer agent in the United States
for such shares (the "TRANSFER AGENT") participates in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program ("FAST"), or if such
shares are then settled and cleared through a comparable alternative electronic
share delivery mechanism and clearing system outside the United States, by
crediting the account of the Holder or its nominee at DTC or such other clearing
system (as specified in the applicable Exchange Notice or Conversion Notice)
with the number of Exchange Shares or Conversion Shares, as applicable, required
to be delivered, no later than the close of business on such Delivery Date. In
the event that (i) the Transfer Agent is not a participant in FAST (or delivery
of Conversion Shares or Exchange Shares through DTC is otherwise impracticable),
and trading in the applicable CDC Entity's Common Shares is not then settled and
cleared through a comparable alternative electronic share delivery mechanism and
clearing system, or (ii) if the Holder so specifies in an Exchange Notice or
Conversion Notice, as applicable, or otherwise in writing on or
20
before the applicable Exchange Date or Conversion Date, the Company shall effect
delivery of the Exchange Shares or Conversion Shares, as the case may be, by
delivering to the Holder or its nominee physical certificates representing such
Exchange Shares or Conversion Shares, no later than the close of business on
such Delivery Date. Neither Exchange Shares nor Conversion Shares delivered to a
Holder shall contain any restrictive legend unless such legend is required
pursuant to the terms of the Note Purchase Agreement. Notwithstanding the
foregoing, if the Holder has delivered (i) a Change of Control Notice or (ii) a
Holder Redemption Notice, this Note may not be exchanged or converted unless
such notice is withdrawn in accordance with SECTION 4(c) or 5(d) hereof,
respectively.
(d) Failure to Deliver Conversion Shares. In the event that the Company
fails for any reason to deliver to the Holder the number of Exchange Shares or
Conversion Shares required to be delivered upon the Exchange or Conversion of
this Note, as the case may be, on or before the second (2nd) Business Day
following the Delivery Date therefor (an "EXCHANGE DEFAULT" or "CONVERSION
Default", as applicable), the Holder shall have the right to receive from the
Company an amount equal to (i) (N/365) multiplied by (ii) the aggregate
principal amount of this Note as to which the Company has failed to deliver such
Exchange Shares or Conversion Shares multiplied by (iii) the Default Rate, where
"N" equals the number of days elapsed between the original Delivery Date of such
shares and the date on which such Exchange Default or Conversion Default has
been cured. In the event that Common Shares are purchased by or on behalf of the
Holder in order to make delivery on a sale effected in anticipation of receiving
Exchange Shares or Conversion Shares, as applicable, the Holder shall have the
right to receive from the Company, in addition to the amounts described in the
immediately preceding sentence, (i) the aggregate amount paid by or on behalf of
the Holder for such purchased shares minus (ii) the aggregate amount of net
proceeds, if any, received by the Holder from the sale of the Exchange Shares or
Conversion Shares, as applicable, subsequently delivered to the Holder pursuant
to such Exchange or Conversion. Amounts payable under this SECTION 9(d) shall be
paid to the Holder by wire transfer of immediately available funds on or before
the fifth (5th) Business Day following written notice from the Holder to the
Company specifying the amount owed to it by the Company pursuant to this SECTION
9(d). In addition to the rights of the Holder under this SECTION 9(d), the
Holder shall have the right to pursue all other remedies available to it at law
or in equity (including, without limitation, a decree of specific performance
and/or injunctive relief).
(e) Limitations on Right to Exchange/Convert.
(i) In no event shall the Holder be permitted to exchange or convert
principal of this Note if, upon such Exchange or Conversion, (x) the number of
Common Shares of the CDC Entity to be delivered plus (y) the number of Common
Shares of such CDC Entity beneficially owned by the Holder would exceed 9.9% of
the number of such Common Shares then issued and outstanding, it being the
intent of this SECTION 9(e) that the Holder not be deemed at any time to have
the power to vote or dispose of greater than 9.9% of the number of Common Shares
of the Company, Software or Games, respectively, issued and outstanding at any
time. Nothing contained herein shall be deemed to restrict the right of the
Holder to exchange or convert any such excess principal amount of this Note at
such time as such Exchange or Conversion would not violate the provisions of
this SECTION 9(e). As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act. The submission of an Exchange
Notice or
21
Conversion Notice by the Holder shall be deemed to be the Holder's
representation that the portion of this Note submitted for Exchange or
Conversion is exchangeable or convertible, as the case may be, pursuant to the
terms hereof and without any limitation under this SECTION 9(e). The Company may
conclusively rely on such representation and shall have no obligation whatsoever
to verify or confirm the accuracy thereof. The Company shall have no liability
to any Person if a Holder's determination of whether this Note is exchangeable
or convertible pursuant to the terms hereof is incorrect. The Holder shall have
the right, upon sixty (60) days' prior written notice to the Company, to waive
the provisions of this SECTION 9(e)(i).
(ii) The Company may call a shareholder meeting to obtain from its
shareholders their approval of the terms of the transactions contemplated by
this Note, the Purchase Agreement and the other transaction documents
contemplated hereby and thereby ("SHAREHOLDER APPROVAL"). Until the Shareholder
Approval has been obtained, the aggregate number of Conversion Shares that may
be issued by the Company pursuant to the Notes may not at any time exceed the
Cap Amount. In furtherance of the foregoing limitation, until Shareholder
Approval has been obtained (or a Holder obtains an opinion of counsel reasonably
satisfactory to the Company and its counsel that such approval is not required
under the applicable rules of the Principal Market for the CDC Common Shares),
the number of Conversion Shares that a Holder may receive upon conversion of
this Note, when added to the number of Conversion Shares previously received by
the Holder upon conversion of such Holder's Notes, may not exceed the product of
(A) the Cap Amount and (B) the Holder's Pro Rata Share (such product, the
"ALLOCATION AMOUNT"). In the event that a Holder shall sell or otherwise
transfer any portion of such Holder's Notes, the Holder's Allocation Amount then
remaining shall be allocated between such Holder and its transferee pro rata in
proportion to the aggregate number of Conversion Shares issuable under the Notes
so transferred and the aggregate number of Conversion Shares issuable under the
Notes retained by such Holder. Notwithstanding the foregoing, the Company shall
have no obligation whatsoever to ensure compliance with the provisions of the
preceding two sentences. For purposes hereof, "CAP AMOUNT" means 19.99% of the
number of CDC Common Shares outstanding as of the Issue Date.
(iii) The aggregate number of Software Common Shares that may be
delivered by the Company to the Holders pursuant to Exchanges of the Notes may
not at any time exceed the Software Share Limit (as defined below). In
furtherance of the foregoing limitation, the number of Software Common Shares
that the Holder may receive upon Exchange of this Note, when added to the number
of Software Common Shares previously received by the Holder upon Exchange of
this Note, may not exceed the product of (A) the Software Share Limit and (B)
the Holder's Pro Rata Share (such product, the "SOFTWARE ALLOCATION AMOUNT"). In
the event that the Holder shall sell or otherwise transfer any portion of this
Note, the Holder's Software Allocation Amount shall be allocated between the
Holder and its transferee pro rata in proportion to the aggregate number of
Software Common Shares exchangeable for the portion of this Note so transferred
and the aggregate number of Software Common Shares exchangeable for the portion
of this Note retained by the Holder. Notwithstanding the foregoing, the Company
shall have no obligation whatsoever to ensure compliance with the provisions of
the preceding two sentences. For purposes hereof, "SOFTWARE SHARE LIMIT" means,
with respect to an Exchange Date, 33.33% of the number of Software Common Shares
outstanding as of such Exchange Date.
22
(iv) The aggregate number of Games Common Shares that may be
delivered by the Company pursuant to the Notes may not at any time exceed the
Games Share Limit (as defined below). In furtherance of the foregoing
limitation, the number of Games Common Shares that the Holder may receive upon
Exchange of this Note, when added to the number of Games Common Shares
previously received by the Holder upon Exchange of this Note, may not exceed the
product of (A) the Games Share Limit and (B) the Holder's Pro Rata Share (such
product, the "GAMES ALLOCATION AMOUNT"). In the event that the Holder shall sell
or otherwise transfer any portion of this Note, the Holder's Games Allocation
Amount shall be allocated between the Holder and its transferee pro rata in
proportion to the aggregate number of Games Common Shares exchangeable for the
portion of this Note so transferred and the aggregate number of Games Common
Shares exchangeable for the portion of this Note retained by the Holder.
Notwithstanding the foregoing, the Company shall have no obligation whatsoever
to ensure compliance with the provisions of the preceding two sentences. For
purposes hereof, "GAMES SHARE LIMIT" means, with respect to an Exchange Date,
33.33% of the number of Games Common Shares outstanding as of such Exchange
Date.
(f) Effect of Exchange or Conversion. Upon the Exchange or Conversion of
this Note, the Holder shall be entitled to receive unpaid Interest and
Additional Amounts (if any) accrued hereon from the immediately preceding
Interest Payment Date up to, but excluding, the Exchange Date or Conversion
Date, as the case may be, in cash by wire transfer of immediately available
funds. If the Holder elects to include such Interest and Additional Amounts in a
Exchange or Conversion, the delivery to the Holder of the number of Common
Shares or other consideration representing such accrued Interest and Additional
Amounts (if any) upon such Exchange or Conversion, shall be deemed payment in
full of such Interest and Additional Amounts.
(g) Taxes on Exchange or Conversion. The issuance or delivery of Common
Shares upon an Exchange or Conversion shall be made without charge to the Holder
for any documentary, stamp or similar issue or transfer taxes in respect of the
issue thereof, and the Company shall pay any and all documentary, stamp or
similar issue or transfer taxes that may be payable in respect of such issuance
or delivery. The Company shall not, however, be required to pay any such tax
which may be payable in respect of any issuance or delivery of Common Shares
which are delivered pursuant to an Exchange or Conversion in a name other than
that of the Holder of this Note, and no such issue or delivery shall be made
unless and until the Holder has paid to the Company the amount of such tax or
has provided the Company with evidence reasonably satisfactory to the Company
that such tax has been paid.
10. ADJUSTMENTS TO EXCHANGE PRICE AND CONVERSION PRICE.
The Exchange Price and the Conversion Price, as applicable, shall be
adjusted from time to time as follows:
(a) Stock Splits, Stock Interests, Etc. If, at any time on or after the
Issue Date, the number of outstanding Common Shares is increased by a stock
split, stock dividend, combination, reclassification or other similar event, the
Exchange Price or Conversion Price, as the case may be, shall be proportionately
reduced or, if the number of outstanding Common Shares is decreased by a
23
reverse stock split, combination, reclassification or other similar event, the
Exchange Price or Conversion Price, as the case may be, shall be proportionately
increased. In such event, the Company shall notify the applicable transfer agent
(if any) of such change on or before the effective date thereof.
(b) Distributions. If, at any time after the Issue Date, any of the
Company, Software or Games declares or makes any distribution of cash or any
other assets (or rights to acquire such assets) to holders of its Common Shares,
including without limitation any dividend or distribution to holders of its
Common Shares of shares (or rights to acquire shares) of a subsidiary (a
"DISTRIBUTION"), the Company shall deliver written notice of such Distribution
(a "DISTRIBUTION NOTICE") to the Holder at least fifteen (15) days prior to the
earlier to occur of (i) the record date for determining the shareholders of such
CDC Entity entitled to such Distribution (the "RECORD DATE") and (ii) the date
on which such Distribution is made (the "DISTRIBUTION DATE") (the earlier of
such dates being referred to as the "DETERMINATION DATE"); provided, however
that if the Company does not deliver a Distribution Notice as required hereby,
the date on which the Holder receives such notice shall be deemed to be the
earlier to occur of (i) the date on which the Company publicly announces such
Distribution and (ii) the date on which the Holder otherwise is informed of such
Distribution. Upon the receipt (or deemed receipt) by the Holder of a
Distribution Notice, the Holder shall promptly (but in no event later than three
(3) Business Days) notify the Company whether it has elected (A) to receive the
same amount and type of assets (including, without limitation, cash) being
distributed, and at the same time, as though the Holder were, on the
Determination Date, a holder of a number of CDC Common Shares (in the case of a
Distribution by the Company) or Software Common Shares or Games Common Shares
(in the case of a Distribution by Software or Games, as applicable) into which
this Note is exchangeable or convertible at the Exchange Price or Conversion
Price, as the case may be, in effect as of such Determination Date (without
giving effect to any limitations on such Exchange or Conversion contained in
SECTION 9(e)) or (B) upon any Exchange or Conversion of this Note on or after
the Distribution Date into the Common Shares of the CDC Entity that made the
Distribution, to reduce the Exchange Price or Conversion Price, as the case may
be, in effect on the Business Day immediately preceding the Record Date by an
amount equal to the fair market value of the assets to be distributed divided by
the number of Common Shares of the CDC Entity making such Distribution, such
fair market value to be reasonably determined in good faith by the independent
members of the board of directors of the distributing CDC Entity. Upon receipt
of such election notice from the Holder, the Company shall timely effectuate the
transaction or adjustment contemplated in the foregoing CLAUSE (A) or (B), as
applicable. If the Holder does not notify the Company of its election pursuant
to the preceding sentence on or prior to the Determination Date, the Holder
shall be deemed to have elected CLAUSE (A) of the preceding sentence. For the
avoidance of doubt, if the Holder makes an election pursuant to CLAUSE (A) of
this PARAGRAPH (b) with respect to a Distribution by the Company or either
Software or Games, the Holder will not be entitled to any adjustment under
CLAUSE (B) of this PARAGRAPH (b) upon (i) in the case of a CLAUSE (A) election
in respect of a Distribution by Software, an Exchange of this Note for Games
Common Shares or (ii) in the case of a CLAUSE (A) election in respect of a
Distribution by Games, an Exchange of this Note for Software Common Shares.
(c) Convertible Securities. If, at any time after the Issue Date, any of
the Company, Software or Games pays a dividend consisting of Convertible
Securities to holders of its Common
24
Shares, whether or not such Convertible Securities are immediately convertible,
exercisable or exchangeable, then the Holder shall be entitled, upon any
Exchange or Conversion of this Note (after the record date for determining
shareholders entitled to receive such Convertible Securities or, if no such
record is taken, the date on which such Convertible Securities are issued) into
Common Shares of the CDC Entity that paid such dividend, to receive the
aggregate number of Convertible Securities which the Holder would have received
with respect to the Common Shares of such CDC Entity issuable upon such Exchange
or Conversion (without giving effect to any limitations on such Exchange or
Conversion contained herein) had the Holder been the holder of such Common
Shares on the record date for the determination of shareholders entitled to
receive such Convertible Securities (or if no such record is taken, the date on
which such Convertible Securities were issued). For purposes hereof,
"CONVERTIBLE SECURITIES", as to a CDC Entity, means securities or other
instruments that are convertible into or exercisable or exchangeable for any
Common Shares of such CDC Entity.
(d) Dilutive Issuances.
(i) Adjustment Upon Dilutive Issuances. If, at any time on or after
the Issue Date, any CDC Entity issues or sells any of its Common Shares for a
consideration per share less than the Conversion Price or Exchange Price for its
Common Shares in effect immediately prior to such issuance or sale (or deemed
issuance or sale) (a "DILUTIVE ISSUANCE"), then immediately after such Dilutive
Issuance, the Conversion Price or the Exchange Price for such CDC Entity's
Common Shares then in effect shall be reduced to an amount equal to the lower
of:
(1) the product of (A) the Conversion Price or Exchange Price,
as the case may be, in effect immediately prior to such issuance or sale,
and (B) the following fraction:
N(0) + N(1)
----------
N(0) + N(2)
where:
N(0) = the number of Common Shares of such CDC Entity
outstanding immediately prior to such Dilutive
Issuance (without taking into account the conversion,
exercise or exchange of any Convertible Securities,
including the Notes);
N(1) = the number of Common Shares of such CDC Entity for
which the aggregate consideration, if any, received or
receivable by such CDC Entity for the total number of
such additional Common Shares so issued, sold or
deemed issued or sold in such dilutive issuance would
be convertible or exchangeable at the Conversion Price
or Exchange Price for such Common Shares, as the case
may be, in effect immediately prior to such Dilutive
Issuance; and
N(2) = the number of such additional Common Shares of such
CDC Entity so issued, sold or deemed issued or sold in
such Dilutive Issuance;
25
and
(2) the product of (A) 1.30 and (B) the price per share at
which such additional Common Shares were issued, sold or deemed issued or
sold in such dilutive issuance.
(ii) Effect on Conversion Price and Exchange Price upon Certain
Events. For purposes of determining the adjusted Conversion Price or Exchange
Price under SECTION 10(d)(i), the following will be applicable:
(A) Issuance of Convertible Securities. If after the Issue
Date any CDC Entity issues or sells any Convertible Securities, whether or not
immediately convertible, exercisable or exchangeable into the Common Shares of
such entity, and the price per share for which one such Common Share is issuable
upon such conversion, exercise or exchange is less than the Conversion Price or
Exchange Price for such Common Shares in effect on the date of issuance or sale
of such Convertible Securities, then the maximum total number of Common Shares
issuable upon the conversion, exercise or exchange of all such Convertible
Securities shall, as of the date of the issuance or sale of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by such
CDC Entity for such price per share. For purposes of this SECTION 10(d)(ii)(A),
the "price per share for which one Common Share is issuable upon such
conversion, exercise or exchange" shall be equal to the sum of the lowest
amounts of consideration, if any, received or receivable by such CDC Entity as
consideration for the issuance or sale of such Convertible Security, plus the
minimum aggregate amount of additional consideration, if any, payable to such
issuing entity upon the conversion, exercise or exchange thereof. No further
adjustment to the Exchange Price or Conversion Price shall be made upon the
actual issuance of Common Shares pursuant to a conversion, exercise or exchange
of such Convertible Securities.
(B) Change In Option Price Or Conversion Rate. If there is a
change at any time in (x) the amount of additional consideration, if any,
payable to a CDC Entity upon the conversion, exercise or exchange of any
Convertible Securities; or (y) the rate at which any Convertible Securities
issued by a CDC Entity are convertible into or exercisable or exchangeable for
Common Shares of such CDC Entity (in each such case, other than under or by
reason of provisions designed to protect against dilution), the Exchange Price
or Conversion Price, as applicable, in effect at the time of such change shall
be readjusted to the Exchange Price or Conversion Price which would have been in
effect at such time had such Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion, exercise or
exchange rate, as the case may be, at the time initially issued or sold.
(C) Calculation Of Consideration Received. If any Common
Shares or Convertible Securities are issued or sold for cash by a CDC Entity,
the consideration received therefor will be the amount of such cash received by
such CDC Entity. In case any Common Shares or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than cash,
including in the case of a strategic or similar arrangement in which the other
entity will provide services to the issuing entity, purchase services from the
issuing entity or otherwise provide intangible consideration to the issuing
entity, the amount of the consideration other than cash received by the issuing
entity (including the net present value of the
26
consideration expected by the issuing entity for the provided or purchased
services) shall be the fair market value of such consideration. In case any
Convertible Securities are sold by a CDC Entity in connection with the issue or
sale of other securities of such CDC Entity, together comprising one integrated
transaction, such Convertible Securities will be deemed to have been issued for
the difference of (x) the aggregate fair market value of such Convertible
Securities and other securities issued or sold in such integrated transaction,
less (y) the fair market value of the securities other than such Convertible
Securities, issued or sold in such transaction, and the other securities issued
or sold in such integrated transaction will be deemed to have been issued or
sold for the balance of the consideration received by the CDC Entity. In case
any Common Shares or Convertible Securities of a CDC Entity are issued in
connection with any merger or consolidation in which the issuing entity is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation that is attributable to such Common Shares or
Convertible Securities, as the case may be. The independent members of the
issuing entity's board of directors shall calculate reasonably and in good
faith, using standard commercial valuation methods appropriate for valuing such
assets, the fair market value of any consideration.
(e) Exceptions To Adjustment Of Exchange Price or Conversion Price.
Notwithstanding the foregoing, no adjustment to the Exchange Price or Conversion
Price shall be made pursuant to this SECTION 10 upon the issuance of any
Excluded Securities. For purposes hereof, "EXCLUDED SECURITIES" means (A) the
Notes; (B) Common Shares or other securities issued or issuable upon Conversion
or Exchange of the Notes; (C) Common Shares issued or issuable to employees,
directors, consultants or suppliers from time to time upon the exercise of
options, in such case granted or to be granted in the discretion of the board of
directors of the issuing CDC Entity pursuant to one or more stock option plans
or restricted stock plans in effect as of the Issue Date or adopted thereafter
following the approval of the board of directors and/or shareholders of such CDC
Entity; (D) Common Shares issued or issuable in connection with any stock split,
stock dividend, reclassification of the issuing CDC Entity's share capital or
recapitalization of such CDC Entity, (E) Common Shares issued or issuable
pursuant to Earn Out Agreements (as defined in the Note Purchase Agreement); and
(F) Common Shares issued or issuable as consideration in connection with any
acquisition or transaction by the Company, whether through an acquisition of
stock or a merger of any business, assets or technologies the primary purpose of
which is not to raise equity capital.
(f) Notice Of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exchange Price or Conversion Price pursuant to this SECTION
10 resulting in a change in the Exchange Price or Conversion Price by more than
one percent (1%), or any change in the number or type of share capital,
securities and/or other property issuable upon an Exchange or Conversion, the
Company, at its expense, shall promptly compute such adjustment, readjustment or
change and prepare and furnish to the Holder a certificate setting forth such
adjustment, readjustment or change and showing in detail the facts upon which
such adjustment, readjustment or change is based, provided, the failure of the
Company to deliver any such certificate shall not affect the application of such
adjustment, readjustment or change.
(g) Adjustments; Additional Shares, Securities or Assets. In the event
that at any time, as a result of an adjustment made pursuant to this SECTION 10,
the Holder shall, upon an Exchange or
27
Conversion, become entitled to receive securities or assets (other than Common
Shares) then, wherever appropriate, all references herein to shares of Common
Shares shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions of
this SECTION 10.
11. ADDITIONAL RIGHTS UPON A CHANGE OF CONTROL.
(a) Change of Control. If, at any time after the Issue Date, a Change of
Control of the Company, Software or Games shall occur, and in addition to all
other rights of the Holder resulting from such Change of Control, the Holder
shall have the right to receive upon an Exchange or Conversion of this Note, at
any time and from time to time thereafter, in lieu of the Common Shares
otherwise deliverable, such shares of stock, securities and/or other property as
would have been issued or payable to the Holder upon such Change of Control had
the Holder exchanged or converted this Note in full into Common Shares of such
entity immediately prior to the consummation of such Change of Control at the
Exchange Price or Conversion Price, as applicable, then in effect (without
giving effect to any limitations on such Exchange or Conversion contained in
SECTION 9(e)). The Company shall not effect any Change of Control or, to the
extent within its reasonable control, permit a Change of Control to occur unless
(i) the Holder has received written notice of such Change of Control at least
five (5) Business Days prior to the effective date of such Change of Control and
(ii) the Company has, at or before the time it delivers such written notice to
the Holder, publicly announced the material terms of such Change of Control .
The above provisions shall apply regardless of whether or not there would have
been a sufficient number of Common Shares authorized and/or available for
delivery upon Exchange or Conversion of this Note as of the date of such
transaction, and shall similarly apply to successive Changes of Control.
(b) Assumption of Note by Successor. If at any time there shall occur a
Change of Control in which the Company is not the surviving entity, then in any
such event the surviving entity, as a condition precedent to any such Change of
Control, shall expressly assume, by a written instrument in form reasonably
satisfactory to the Holders of a Majority in Interest, all of the obligations of
the Company under the Notes then outstanding, and the successor or assuming
entity shall succeed to and be substituted for the Company with the same effect
as if it had been named herein as the Company. In such event, the Company shall
thereupon be relieved of any further obligation or liability hereunder as the
predecessor corporation may, but shall not be required to, thereupon or at any
time thereafter be dissolved, wound up or liquidated.
12. MISCELLANEOUS.
(a) Failure to Exercise Rights not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude any other or further exercise thereof.
All rights and remedies of the Holder hereunder are cumulative and not exclusive
of any rights or remedies otherwise available.
(b) Notices. Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Note shall be
in writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such
28
delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day, (ii) on
the next Business Day after timely delivery to an overnight courier and (iii) on
the Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed as
follows:
If to the Company:
CDC Corporation
33/F Citicorp Centre
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxx
Xxxx Xxxx
Tel: (000) 0000-0000
Fax: (000) 0000-0000
with a copy (which shall not constitute notice) to:
King & Spalding LLP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address for the Holder as shall appear on the
signature page of the Note Purchase Agreement executed by the Holder, or as
shall be designated by the Holder in writing to the Company in accordance this
SECTION 12(b).
(c) Amendments. No amendment, modification or other change to, or (except
as explicitly set forth herein) waiver of any provision of, this Note may be
made unless such amendment, modification or change is (A) set forth in writing
and is signed by the Company and (B) consented to in writing by the holders of
at least a Majority in Interest of the unpaid principal amount of the Notes, it
being understood that upon the satisfaction of the conditions described in (A)
and (B) above, each Note (including any Note held by a Holder who did not
consent to such amendment specified in (B) above) shall be deemed to incorporate
any amendment, modification, change or waiver effected thereby as of the
effective date thereof; provided, however, that the Company may amend this Note
or any term without the consent of any Holder if such amendment is for the sole
purpose of: (i) adding to the covenants of the Company for the benefit of the
Holders; (ii) surrendering any right or power conferred upon the Company; (iii)
evidencing the succession of a corporation or other Person to the Company and
the assumption by such successor of the covenants and obligations of the Company
in this Note or (iv) correcting a manifest error or supplementing any provision
contained herein or therein, as long as such correction or supplement does not
adversely affect the rights of any Holder. Notwithstanding the foregoing,
without the written consent or the affirmative vote of each Holder of Notes
affected thereby, an amendment or waiver under this Section 12(c) may not:
29
(i) change the maturity of the principal or the date any installment
of interest, including amounts due under SECTION 2(d) of the Registration Rights
Agreement, is due on any Note;
(ii) reduce the principal amount, Company Redemption Price, Holder
Redemption Price or Change of Control Redemption Price of, or interest,
including amounts due under SECTION 2(d) of the Registration Rights Agreement,
payable on, any Note;
(iii) change the currency of any amount owed or owing under this
Note or any interest thereon from U.S. Dollars;
(iv) impair the right of the Holder to institute suit for the
enforcement of any payment or with respect to this Note;
(v) except as otherwise permitted or contemplated by the provisions
of this Note, adversely affect the repurchase right of the Holder of this Note
or the redemption provisions as provided in Sections 3, 4 or 5 hereof or the
right of the Holder of this Note to exchange it as provided in Section 7 hereof
or convert it as provided in Section 8 hereof;
(vi) modify any of the provisions of this Section 13(c), or reduce
the principal amount of outstanding Notes required to waive a default under the
Notes, except to provide that certain other provisions of the Notes cannot be
modified or waived without the consent of the Holder of each outstanding Note
affected thereby; or
(vii) reduce the percentage of the principal amount of the
outstanding Notes the consent of whose Holders is required for any amendment to
the Notes or the Note Purchase Agreement or the consent of whose Holders is
required for any waiver provided for under the Notes or Note Purchase Agreement.
(d) Transfer of Note. The Holder may sell, transfer or otherwise dispose
of all or any part of this Note (including without limitation pursuant to a
pledge) to any person or entity as long as such sale, transfer or disposition is
the subject of an effective registration statement under the Securities Act of
1933, as amended, and applicable state securities laws, or is exempt from
registration thereunder, is accompanied by a transfer notice in the form
attached hereto as ANNEX III and is otherwise made in accordance with the
applicable provisions of the Note Purchase Agreement. The Holder hereof by
purchasing this Note, represents and agrees that it will notify any purchaser of
this Note from it of such transfer and resale restrictions. From and after the
date of any such sale, transfer or disposition, the transferee hereof shall be
deemed to be the holder of a Note in the principal amount acquired by such
transferee, and the Company shall, as promptly as practicable, issue and deliver
to such transferee a new Note identical in all respects to this Note, in the
name of such transferee. The Company shall be entitled to treat the original
Holder as the holder of this entire Note unless and until it receives written
notice of the sale, transfer or disposition hereof.
(e) Lost or Stolen Note. Upon receipt by the Company of evidence of the
loss, theft, destruction or mutilation of this Note, and (in the case of loss,
theft or destruction) of indemnity
30
or security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Note, if mutilated, the Company shall execute and deliver
to the Holder a new Note identical in all respects to this Note.
(f) Governing Law. This Note shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York other
than such laws that would permit or require the application of the laws of
another jurisdiction.
(g) Submission to Jurisdiction. The Company hereby irrevocably submits to
the exclusive jurisdiction of any New York State or United States Federal court
sitting in the City and County of New York over any suit, action or proceeding
arising out of or related to the Notes. The Company irrevocably waives, to the
fullest extent permitted by law, any objection which it may have to the venue of
any such suit, action or proceeding brought in such a court and any claim that
any such suit, action or proceeding brought in such a court has been brought in
an inconvenient forum. The Company agrees that final judgment in any such suit,
action or proceeding brought in such a court shall be conclusive and binding
upon the Company and may be enforced in any court to the jurisdiction of which
the Company is subject by a suit upon such judgment; provided that service of
process is effected upon the Company in the manner specified in SECTION 12(b) or
as otherwise permitted by law.
(h) Agent for Service of Process. As long as any of the Notes remain
outstanding, the Company will at all times maintain an authorized agent in the
City of New York, upon whom process may be served in any legal action or
proceeding arising out of or relating to this Note. Service of process upon such
agent and written notice of such service mailed or delivered to the Company
shall to the extent permitted by law be deemed in every respect effective
service of process upon the Company in any such legal action or proceeding. The
Company has appointed Xxxxx Xxxxx as its agent for such purpose, and covenants
and agrees that service of process in any legal action or proceeding may be made
at the office of such agent at CDC Corporation, Chrysler Building, 000 Xxxxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (or at such other address or, at
the office of such other authorized agent as the Company may designate by
written notice to the Holder).
(i) Successors and Assigns. The terms and conditions of this Note shall
inure to the benefit of and be binding upon the respective successors (whether
by merger or otherwise) and permitted assigns of the Company and the Holder. The
Company may not assign its rights or obligations under this Note except as
specifically required or permitted pursuant to the terms hereof.
(j) Usury. This Note is subject to the express condition that at no time
shall the Company be obligated or required to pay interest hereunder at a rate
which could subject the Holder to either civil or criminal liability as a result
of being in excess of the maximum interest rate which the Company is permitted
by applicable law to contract or agree to pay. If by the terms of this Note, the
Company is at any time required or obligated to pay interest hereunder at a rate
in excess of such maximum rate, the rate of interest under this Note shall be
deemed to be immediately reduced to such maximum rate and the interest payable
shall be computed at such maximum rate and all prior interest payments in excess
of such maximum rate shall be applied and shall be deemed to have been payments
in reduction of the principal balance of this Note.
31
(k) Exchange, Conversion and Paying Agent. The Company may, upon thirty
(30) days' written notice to the Holder, appoint one or more agents to perform
the Company's administrative duties in connection with redemptions, Exchanges,
Conversions and/or payment of Interest or Accrued Amounts with respect to this
Note. Such notice shall specify (i) whether such agent shall be responsible for
administering redemptions, Exchanges, Conversions and/or payment of Interest or
Accrued Amounts, (ii) the date on which such agent will assume such duties, and
(iii) the address and contact information of such agent. From and after the date
on which the agent is to assume such duties as specified in such notice, the
Holder shall submit all notices requesting redemptions, Exchanges, Conversions
and or payment of Interest or Accrued Amounts, as the case may be, to such agent
with a copy to the Company.
(l) Injunctive Relief. The Company acknowledges and agrees that a breach
by it of its obligations hereunder will cause irreparable harm to each Investor
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, such Investor shall be entitled to an injunction restraining any
breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss or the posting of any bond.
[Remainder of Page Left Intentionally Blank]
32
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by its duly authorized officer on the date first above written.
CDC CORPORATION
By:____________________________
Name:
Title:
ANNEX I
NOTICE OF EXCHANGE
The undersigned hereby elects to exchange principal of, and/or Interest and
Additional Amounts (if any) accrued on, the 3.75% Senior Exchangeable
Convertible Note (the "Note") issued by CDC CORPORATION into common shares
("Common Shares") of [Software/Games] according to the terms and conditions of
the Note. Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Note.
Notwithstanding anything to the contrary contained herein, this Exchange Notice
shall constitute a representation by the holder of the Note submitting this
Exchange Notice that, after giving effect to the exchange provided for in this
Exchange Notice, such holder (together with its affiliates) will not have
beneficial ownership (together with the beneficial ownership of such Person's
affiliates) of a number of Common Shares which exceeds 9.9% of the total
outstanding shares of Common shares as determined pursuant to the provisions of
Section 9(e) of the Note.
Date of Exchange:_____________________________
Principal Amount of
Note to be Exchanged:_________________________
Amount of Interest
to be Exchanged:______________________________
Additional Amounts
to be Exchanged: _____________________________
Common Shares to be Delivered:________________
Name of Holder:_______________________________
Address: __________________________________
__________________________________
__________________________________
Signature: __________________________________
NOTICE: The name of the Holder must correspond
with the name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Holder Requests Delivery to be made: (check one)
- By Delivery of Physical Certificates to the Above Address
- Through Depository Trust Corporation
(Account _____________________________)
ANNEX II
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal of, and/or Interest and
Additional Amounts (if any) accrued on, the 3.75% Senior Exchangeable
Convertible Note (the "Note") issued by CDC CORPORATION (the "Company") into
common shares ("Common Shares") of the Company according to the terms and
conditions of the Note. Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Note.
Notwithstanding anything to the contrary contained herein, this Conversion
Notice shall constitute a representation by the holder of the Note submitting
this Conversion Notice that, after giving effect to the conversion provided for
in this Conversion Notice, such holder (together with its affiliates) will not
have beneficial ownership (together with the beneficial ownership of such
Person's affiliates) of a number of Common Shares which exceeds 9.9% of the
total outstanding shares of Common Shares as determined pursuant to the
provisions of Section 9(e) of the Note.
Date of Conversion:___________________________
Principal Amount of
Note to be Converted:_________________________
Amount of Interest
to be Converted:______________________________
Additional Amounts
to be Converted: _____________________________
Common Shares to be Issued:___________________
Name of Holder:_______________________________
Address: __________________________________
__________________________________
__________________________________
Signature: __________________________________
NOTICE: The name of the Holder must correspond
with the name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Holder Requests Delivery to be made: (check one)
- By Delivery of Physical Certificates to the Above Address
- Through Depository Trust Corporation
(Account______________________________)
Annex III
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Indemnification No.
_____________________________________________
Please print or typewrite name and address including zip code of assignee
_____________________________________________
the within Note (or if less than the entire principal amount of the Note, a
portion thereof equal to $____________) and all rights thereunder, hereby
irrevocably constituting and appointing
_____________________________________________
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date of an effective registration statement
under the U.S. Securities Act of 1933, as amended (the "Securities Act") or (ii)
two years after the date of the original issuance of this Note or the last date
on which the Note was held by an Affiliate of the Company, the undersigned
confirms, that without utilizing any general solicitation or general
advertising:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A thereunder.
or
[ ](a) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the conditions
of transfer set forth in this Note.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register this Note in the name of any person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
and in Section 12(d) of the Note shall have been satisfied.
Date: _____________________________ ____________________________________
Signature
NOTICE: The name of the Holder of
this assignment must correspond with
the name as written upon the face of
the within-mentioned instrument in
every particular, without alteration
or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuer as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representation in order to claim the exemption from
registration provided by Rule 144A
Date: _____________________________ ____________________________________
Signature
ANNEX IV
Schedule of
Decreases
of Principal Amount
Principal Amount of
Balance Decrease Date
_____________________ ___________________ _________________
$[ ],000,000 ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
_____________________ ___________________ _________________
