EXHIBIT 1.2
EXECUTION VERSION
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November 10,
2006, is by and between CDC Corporation, a corporation organized under the laws
of the Cayman Islands (the "COMPANY") and each investor listed on EXHIBIT A
hereto (individually, an "INVESTOR" and, collectively, the "INVESTORS").
A. The Company has authorized the issuance and sale of US$168,000,000
aggregate principal amount of its 3.75% Senior Exchangeable Convertible Notes
due 2011 in the form attached hereto as EXHIBIT B (the "NOTES"), and each
Investor wishes to purchase and the Company wishes to sell, upon the terms and
subject to the conditions stated in this Agreement, the Notes.
B. The sale of the Notes by the Company to the Investors will be effected
in reliance on the exemption from securities registration afforded by the
provisions of Regulation D ("REGULATION D"), as promulgated by the Securities
and Exchange Commission (the "COMMISSION") under the U.S. Securities Act of
1933, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect (the "SECURITIES ACT").
C. The Notes will be (i) convertible under certain conditions into Class A
common shares of the Company, (ii) exchangeable under certain conditions into
Class A common shares of CDC Software Corporation ("SOFTWARE"), a corporation
organized under the laws of the Cayman Islands, and/or (iii) exchangeable under
certain conditions into Class A common shares of CDC Games Corporation
("GAMES"), a corporation organized under the laws of the Cayman Islands. The
Company Common Shares into which the Notes may be converted are referred to
herein as the "CONVERSION SHARES" and the Software Common Shares and Games
Common Shares into which the Notes may be exchanged are referred to herein as
the "EXCHANGE SHARES". The Notes, Conversion Shares and Exchange Shares are
collectively referred to herein as the "SECURITIES".
D. The Company has agreed, under certain circumstances, to effect the
registration of the Conversion Shares and the Exchange Shares under the
Securities Act pursuant to a Registration Rights Agreement in the form attached
hereto as EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT").
In consideration of the mutual promises made herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Investor hereby agree as follows:
1. PURCHASE AND SALE OF NOTES; DEFINITIONS.
1.1 Purchase of Notes; Closing.
(a) Upon the terms and subject to the satisfaction or waiver of the
conditions set forth herein, the Company agrees to sell and each Investor agrees
to purchase a Note with a principal amount equal to the amount set forth
opposite such Investor's name on EXHIBIT A hereto. The purchase price for the
Note being purchased by an Investor (the "PURCHASE PRICE") shall be equal to the
principal amount of such Note. The date on which the closing of the purchase and
sale of the Notes occurs (the "CLOSING") is hereinafter referred to as the
"CLOSING DATE". The Closing will be deemed to occur at the offices of Xxxxxx
Song LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 when (i) this Agreement and
the other Transaction Documents (as defined below) have been fully executed and
delivered by and to the Company and each Investor, and (ii) each of the
conditions to the Closing described in this Agreement has been satisfied or
waived as specified therein.
(b) At the Closing, the Company will deliver to each Investor a Note
with a principal amount equal to the amount set forth opposite such Investor's
name on EXHIBIT A hereto against delivery by such Investor of immediately
available funds in the amount of its Purchase Price by wire transfer of United
States Dollars (as defined below) to the Company to such bank account as the
Company shall notify the Investors in writing not later than three (3) Business
Days prior to the Closing Date.
1.2 Certain Definitions. (a) When used herein, the following terms shall
have the respective meanings indicated:
"ACQUIRED DEBT" means Debt of a Person (a) existing at the time such
Person becomes a Subsidiary of the Company or is merged into or consolidated
with any Subsidiary of the Company or (b) assumed by the Company or any of its
Subsidiaries in connection with the acquisition of assets from such Person.
Acquired Debt of a Person shall be deemed to be incurred on the date the
acquired Person becomes a Subsidiary of the Company or the date of the related
acquisition of assets from such Person.
"ADDITIONAL PERMITTED DEBT" has the meaning specified in SECTION
4.6(b)(i) of this Agreement.
"AFFILIATE" means, as to any Person (the "SUBJECT PERSON"), any
other Person (a) that directly or indirectly through one or more intermediaries
controls or is controlled by, or is under direct or indirect common control
with, the subject Person, (b) that directly or indirectly beneficially owns or
holds ten percent (10%) or more of any class of voting equity of the subject
Person, or (c) ten percent (10%) or more of the voting equity of which is
directly or indirectly beneficially owned or held by the subject Person. For the
purposes of this definition, "CONTROL" when used with respect to any Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, through
representation on such Person's board of directors or other management committee
or group, by contract or otherwise.
"AFFILIATE TRANSACTION" means, with respect to any Person, any
transaction or arrangement between such Person, on the one hand, and any of such
Person's officers, directors, shareholders, employees,Subsidiaries or other
Affiliates, on the other hand.
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"ASSET ACQUISITION" means (i) an investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged with
the Company or any Subsidiary of the Company or (ii) the acquisition by the
Company or any Subsidiary of the Company of assets of any Person comprising a
division or line of business of such Person.
"ASSET SALE" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (excluding any sale and leaseback transaction
or any pledge of assets or stock by the Company or any of its Subsidiaries) to
any Person other than the Company or a Subsidiary of the Company of (i) any
Capital Stock of any Subsidiary of the Company or (ii) any other property or
asset of the Company or any Subsidiary of the Company other than in the ordinary
course of business.
"BOARD OF DIRECTORS" means the board of directors of the Company or
any Subsidiary of the Company, as applicable.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which any Principal Market is closed or on which banks in the City of New
York are required or authorized by law to be closed.
"CAPITAL EXPENDITURES" means, as to any period, the amount
identified as "Purchases of property and equipment" appearing on the Company's
Consolidated Cash Flow Statement for such period.
"CAPITALIZED LEASE OBLIGATIONS" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease to which
such Person is a party that is required to be classified and accounted for as a
capital lease obligation under GAAP, and for purposes of this definition, the
amount of such obligation at any date shall be the capitalized amount of such
obligation at such date, determined in accordance with GAAP.
"CLOSING" and "CLOSING DATE" have the respective meanings specified
in SECTION 1.1(a) of this Agreement.
"COMMISSION" means the United States Securities and Exchange
Commission, and any successor regulatory agency.
"COMMON SHARES" means the Company Common Shares, Games Common Shares
or Software Common Shares, as applicable.
"COMPANY COMMON SHARES" means the Class A common shares of the
Company, and any shares of capital stock issued or issuable by the Company from
time to time (with any adjustments) in replacement of, in exchange for or
otherwise in respect of its Class A common shares.
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"COMPANY INTELLECTUAL PROPERTY" has the meaning specified in SECTION
3.10 of this Agreement.
"COMPANY PARTY" has the meaning specified in SECTION 4.9(b) of this
Agreement.
"CONSOLIDATED CASH FLOW" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income, (ii) to
the extent Consolidated Net Income has been reduced thereby, (a) all income
taxes of such Person and its Subsidiaries paid, expensed or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary or nonrecurring gains or losses), (b) Consolidated Interest
Expense and (c) Consolidated Non-Cash Charges, all as determined on a
consolidated basis for such Person and its Subsidiaries in conformity with GAAP,
and (iii) the lesser of (x) dividends or distributions paid in cash to such
Person or its Subsidiary by another Person whose results are reflected as a
minority interest in the consolidated financial statements of such first Person
and (y) such Person's equity interest in the Consolidated Cash Flow of such
other Person (but in no event less than zero). For purposes of calculating a
Leverage Ratio with respect to any Four Quarter Period, "CONSOLIDATED CASH FLOW"
shall be calculated on a pro forma basis after giving effect to (A) any
Consolidated Interest Expense resulting from the incurrence of Debt of the
Company and its Subsidiaries (and the application of the proceeds therefrom)
giving rise to the need to make such calculation and any incurrence (and the
application of the proceeds therefrom) or repayment of other Debt, other than
the incurrence or repayment of Debt pursuant to working capital facilities, at
any time subsequent to the beginning of such Four Quarter Period and on or prior
to the date of determination, as if such occurrence (and the application of the
proceeds thereof), or the repayment, as the case may be, occurred on the first
day of such Four Quarter Period, (B) (x) any change in Consolidated Cash Flow
resulting from any Asset Sale to the extent that the assets that were the
subject of such Asset Sale contributed (positively or negatively) to such
Consolidated Cash Flow immediately prior to such sale or (y) any change in
Consolidated Cash Flow resulting from any Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or any of its Subsidiaries (including any
entity that becomes a Subsidiary as a result of such Asset Acquisition)
incurring, assuming or otherwise becoming liable for Debt) to the extent that
the assets that were the subject of such Asset Acquisition will, immediately
following such sale, contribute (positively or negatively) to such Consolidated
Cash Flow, in either case of (x) or (y), at any time on or subsequent to the
first day of such Four Quarter Period as if such Asset Sale or Asset Acquisition
occurred on the first day of such Four Quarter Period and (C) cost savings
resulting from employee terminations, facilities consolidations and closings,
standardization of employee benefits and compensation practices, consolidation
of property, casualty and other insurance coverage and policies, standardization
of sales representation commissions and other contract rates, and reductions in
taxes other than income taxes (collectively, "COST SAVINGS MEASURES"), which
Cost Savings Measures the Company reasonably believes in good faith could have
been achieved during such Four Quarter Period as a result of an Asset
Acquisition (regardless of whether such Cost Savings Measures could then be
reflected in pro forma financial statements under GAAP), less the amount of any
additional expenses that the Company reasonably estimates would result from
anticipated replacement of any items constituting Cost Savings Measures in
connection with such Asset Acquisition; provided, however, that both (A) such
Cost Savings Measures were identified and quantified in an officer's certificate
delivered to
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each holder of Notes at the time of the consummation of any such Asset
Acquisition and (B) with respect to each such Asset Acquisition completed prior
to the ninetieth (90th) day preceding such date of determination, actions were
commenced or initiated by the Company within ninety (90) days of such Asset
Acquisition to effect the Cost Savings Measures identified in such officer's
certificate (regardless, however, of whether the corresponding cost savings have
been achieved).
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person
for any period, without duplication, the sum of (i) the interest expense of such
Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of Debt discount (other than any discount attributable to Debt
represented by the Notes or any Permitted Software Debt), (b) the net cost under
interest rate swap agreements (including any amortization of discounts), but
only to the extent not already included in interest expense and specifically
identifiable in the applicable agreement, (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit, bankers' acceptance financing or
similar facilities, and (e) all accrued interest and (ii) the interest component
of Capitalized Lease Obligations paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP. In calculating "CONSOLIDATED INTEREST EXPENSE", (x)
interest on Debt determined on a fluctuating basis as of the date of
determination (including, in connection with the calculation of a Leverage
Ratio, Debt actually incurred on the date of the transaction giving rise to the
need to calculate such Leverage Ratio) and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Debt as in effect on the date of
determination and (y) notwithstanding (x) above, interest determined on a
fluctuating basis, to the extent such interest is covered by interest swap
agreements, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements as of the date of
determination.
"CONSOLIDATED NET INCOME" of any Person means, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided,
however, that there shall be excluded therefrom, without duplication, (a) gains
and losses from Asset Sales, (b) items classified as extraordinary or
nonrecurring gains and losses, and the related tax effects according to GAAP,
and (c) the net income or loss of any Person other than a Subsidiary.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries (excluding any such charges
constituting an extraordinary or nonrecurring item) that reduces Consolidated
Net Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"CONVERSION SHARES" has the meaning specified in the RECITALS of
this Agreement.
"CONVERTIBILITY DATE" means the first date on which a Holder may
effect a conversion of such Notes into Company Common Shares in accordance with
terms of the Notes.
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"DEBT" means, as to any Person at any time (without duplication):
(a) all indebtedness, liabilities and obligations of such Person for borrowed
money; (b) all indebtedness, liabilities and obligations of such Person to pay
the deferred purchase price of Property or services, except trade accounts
payable of such Person arising in the ordinary course of business that are not
past due by more than 120 days; (c) all capital lease obligations of such
Person; (d) all Debt of others guaranteed by such Person; (e) all indebtedness,
liabilities and obligations secured by a Lien (other than a Permitted Lien)
existing on Property owned by such Person, whether or not the indebtedness,
liabilities or obligations secured thereby have been assumed by such Person or
are non-recourse to such Person; (f) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
bankers' acceptances, surety or other bonds and similar instruments; (g) all
liabilities and obligations of such Person to redeem or retire share capital of
such Person and (h) all Debt of such Person that is issued (or deemed issued)
with original issue discount, provided that, for purposes of this Agreement, the
amount of such Debt shall be the accreted value thereof.
"DISCLOSURE DOCUMENTS" means all SEC Documents filed with the
Commission at least three (3) Business Days prior to the Execution Date.
"EARN OUT AGREEMENTS" means those agreements listed on SCHEDULE 3.5
pursuant to which the Company may be required to issue Company Common Shares.
"EMBARGOED PERSON" has the meaning specified in SECTION 3.14(d) of
this Agreement.
"ENVIRONMENTAL LAW" means any Governmental Requirement relating to
pollution or the protection, cleanup or restoration of the environment or
natural resources, or to the public health or safety, or otherwise governing the
generation, use, handling, collection, treatment, storage, transportation,
recovery, recycling, discharge or disposal of hazardous materials.
"ERISA" means the U.S. Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder.
"EVENT OF DEFAULT" has the meaning specified in the Notes.
"EVOLUTION" means Evolution Capital Management LLC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
(or any successor act), and the rules and regulations thereunder (or respective
successors thereto).
"EXCHANGE SHARES" has the meaning specified in the RECITALS of this
Agreement.
"EXECUTION DATE" means the date of this Agreement.
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"EXISTING DEBT" means Debt outstanding on the Execution Date and
disclosed on SCHEDULE 3.5.
"EXISTING LIENS" means Liens on the Property of the Company or any
of its Subsidiaries that are in existence on the Execution Date and disclosed on
SCHEDULE 3.5.
"FCPA" has the meaning specified in SECTION 3.14(a) of this
Agreement.
"FOUR QUARTER PERIOD" means, with respect to any Person as of any
date, the four full fiscal quarters for such Person ending on or immediately
prior to such date.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as in effect from time to time as set forth in (i) opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants, (ii) statements of the Financial Accounting Standards Board and
(iii) interpretations of the Commission and the staff of the Commission.
"GAMES COMMON SHARES" means the Class A common shares of Games, and
any shares of capital stock issued or issuable by Games from time to time (with
any adjustments) in replacement of, in exchange for or otherwise in respect of
its Class A common shares.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to any government, including, without limitation, any stock exchange, securities
market or self-regulatory organization.
"GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance,
order, rule, regulation, writ, judgment, decree, injunction, franchise, license,
permit or other directive or requirement of any Governmental Authority.
"HOLDER" means, at any time, any Person that beneficially owns one
or more Notes.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" have the respective
meanings specified in SECTION 4.9(c) of this Agreement.
"INTELLECTUAL PROPERTY" means any and all patents, patent rights,
patent applications, trademarks, trade names, service marks, brand names, logos
and other trade designations (including unregistered names and marks), trademark
and service xxxx registrations and applications, copyrights and copyright
registrations and applications, inventions, invention disclosures, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.
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"INVESTMENT COMPANY ACT" has the meaning specified in SECTION 3.22
of this Agreement.
"INVESTOR PARTY" has the meaning specified in SECTION 4.9(a) of this
Agreement.
"ISSUER" has the meaning specified in SECTION 4.12(a) of this
Agreement.
"KEY EMPLOYEE" has the meaning specified in SECTION 3.15 of this
Agreement.
"LEVERAGE RATIO" means the ratio of (i) the aggregate outstanding
amount of Debt of the Company and its Subsidiaries as of the date of
determination on a consolidated basis in accordance with GAAP to (ii) the
Consolidated Cash Flow of the Company and its Subsidiaries for the Four Quarter
Period ending on or immediately prior to the date of determination. For purposes
of this definition, the aggregate outstanding principal amount of Debt of the
Company and its Subsidiaries shall be determined on a pro forma basis as if the
Debt giving rise to the need to perform such calculation had been incurred and
the proceeds therefrom had been applied, and all other transactions in respect
of which such Debt is being incurred has occurred, on the last day of such Four
Quarter Period.
"LIEN" means, with respect to any Property, any mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, tax lien,
financing statement, pledge, charge, or other lien, charge, easement,
encumbrance, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such Property
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"LISTING CURRENCY" means the currency in which Common Shares trade
on the Principal Market for such Common Shares.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the
business, properties, assets, operations, results of operations or financial
condition of the Company (individually) or of the Company and the Material
Subsidiaries (taken as a whole), except for (a) any such changes or effects
generally affecting the industries in which the Company, Games or Software
operate, (b) any change in economic (including financial, banking and/or
securities markets), regulatory or political conditions generally, and (c) any
such changes or effects resulting from (i) the announcement of the transactions
contemplated by this Agreement, the consummation of the transactions
contemplated hereby and the intended use of the proceeds to be delivered to the
Company pursuant to this Agreement, (ii) any litigation arising from allegations
of a breach of fiduciary duty or other violation of applicable law relating to
this Agreement or the transactions contemplated by this Agreement or (iii)
changes in applicable law, GAAP or accounting standards.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, assets, operations, results of operations or financial
condition of the Company (individually) or of the Company and the Material
Subsidiaries (taken as a whole) or (ii) the
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ability of the Company or any of the Material Subsidiaries to perform their
respective obligations under this Agreement or the other Transaction Documents.
"MATERIAL CONTRACTS" means, as to the Company and its Material
Subsidiaries, any agreement required to be filed under the Securities Act or the
Exchange Act as an exhibit to any report, schedule or registration statement
filed or required to be filed by the Company with the Commission, and any and
all amendments, modifications, supplements, renewals or restatements thereto.
"MATERIAL SUBSIDIARY" means (a) each of Software and Games, (b) any
"Significant Subsidiary" (as such term is defined in Rule 1-02 of Regulation S-X
of the Securities Act) of the Company, or (c) any other Subsidiary of the
Company, existing from time to time, with total assets exceeding 10% of the
total assets of the Company and its Subsidiaries on a consolidated basis as of
the end of the most recently completed fiscal year.
"MATURITY DATE" has the meaning specified in the Notes.
"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.
"MONEY LAUNDERING LAWS" has the meaning specified in SECTION 3.14(b)
of this Agreement.
"NEW SECURITIES" has the meaning specified in SECTION 4.12(a) of
this Agreement.
"OBLIGATIONS" means any and all indebtedness, liabilities and
obligations of the Company to any Investor evidenced by and/or arising pursuant
to this Agreement or any other Transaction Document, now existing or hereafter
arising, whether direct, indirect, related, fixed, contingent, liquidated,
unliquidated, joint, several or joint and several, including, without
limitation, the obligations of the Company to repay the principal of the Notes,
to pay interest on the Notes (including, without limitation, interest accruing
after any bankruptcy, insolvency, reorganization or other similar filing), and
to pay all fees, indemnities, costs and expenses (including attorneys' fees)
provided for in this Agreement or any other Transaction Document.
"OFAC" has the meaning specified in SECTION 2.7 of this Agreement.
"PERMITTED DEBT" means (i) the Notes; (ii) Existing Debt; (iii)
Refinanced Debt; (iv) Permitted Software Debt; (v) Subordinated Debt; (vi) the
Software Facility; (vii) Debt owed by the Company to any of its Subsidiaries or
by any Subsidiary of the Company to the Company or any Subsidiary of the
Company; (viii) guarantees by the Company or any of its Subsidiaries of any
Permitted Debt or Additional Permitted Debt incurred by the Company or any of
its Subsidiaries; (ix) Debt in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Company or any of its
Subsidiaries to its customers in the ordinary course of its business; (x) Debt
arising from agreements providing for indemnification,
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adjustment of purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing any obligations of
the Company or any of its Subsidiaries pursuant to such agreements, in each case
incurred in connection with the disposition of any Property of the Company or
any such Subsidiary; (xi) Debt represented by Capitalized Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the cost of acquisition, construction,
development or substantial repair, alteration or improvement of Property used in
a related business or incurred to refinance any such cost of acquisition,
construction, development or substantial repair, alteration or improvement, in
each case incurred no later than three hundred and sixty five (365) days after
the later of (x) the completion of such acquisition, construction, development,
substantial repair, alteration or improvement, and in an amount equal to,
individually or in the aggregate, together with any other Debt secured by such
Property, not more than eighty percent (80%) of the fair market value (as
reasonably determined in good faith by the Board of Directors of the Company) of
such Property or (y) the placing in operation of such Property as so
constructed, developed or substantially repaired, altered or improved; (xii)
Acquired Debt of a Person that becomes a Subsidiary of the Company or which is
assumed by a Subsidiary of the Company in connection with the acquisition of
assets of a Person, other than Debt incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or the acquisition of assets
of such Person, as the case may be; and (xiii) other Debt of the Company or any
Subsidiary not otherwise described above in an aggregate principal amount
(including any refinancings) not to exceed ten million dollars ($10,000,000) at
any one time outstanding.
"PERMITTED LIENS" means each of the following:
(a) Existing Liens;
(b) Liens on any assets of a corporation, shares of capital
stock or evidences of Debt of any corporation existing at the time such
corporation becomes a Subsidiary;
(c) Liens securing Debt of a Subsidiary of the Company that is
owed to the Company or to another Subsidiary of the Company;
(d) Liens on the assets of Software, Xxxx Systems, Inc., a
Delaware corporation, or Pivotal Corporation, a corporation organized under the
laws of British Columbia, securing the Software Facility;
(e) Liens securing Debt in an amount equal to, individually or
in the aggregate, not more than eighty percent (80%) of the fair market value
(as reasonably determined in good faith by the Board of Directors of the
Company) of Property acquired or constructed after the Closing to secure the
cost of acquisition, construction, development or substantial repair, alteration
or improvement of such Property; provided the Debt secured by any such Lien
shall have been incurred not later than three hundred sixty five (365) days
after the later of (i) the completion of the acquisition, construction,
development, substantial repair, alteration or improvement of such Property or
(ii) the placing in operation of such Property as so acquired, constructed,
developed or substantially repaired, altered or improved; and provided
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further, that such Liens are limited to the Property so acquired, constructed,
developed or repaired, altered or improved;
(f) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any Lien referred
to in the foregoing CLAUSES (a)-(e) inclusive, provided that the principal
amount of Debt secured thereby and not otherwise authorized by CLAUSES (a)-(e)
inclusive shall not exceed the principal amount of Debt, plus any premium or fee
payable in connection with any such extension, renewal or replacement, so
secured immediately prior to such extension, renewal or replacement;
(g) encumbrances consisting of easements, rights-of-way,
zoning restrictions or other restrictions on the use of real Property or
imperfections to title that do not (individually or in the aggregate) materially
impair the ability of the Company or any of its Subsidiaries to use such
Property in its businesses, and none of which is violated in any material
respect by existing or proposed structures or land use;
(h) Liens for taxes, assessments or other governmental charges
(including without limitation in connection with workers' compensation and
unemployment insurance) that are not delinquent or which are being contested in
good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such Liens, and for
which adequate reserves (as determined in accordance with GAAP) have been
established; and
(i) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business or which are being
contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject to such
Liens, for which adequate reserves (as determined in accordance with GAAP) have
been established.
"PERMITTED SOFTWARE DEBT" means Debt that may be incurred by
Software in an amount equal to or less than an aggregate of US$290 million, in
one transaction or a series of related transactions, from and after the
Execution Date, which Debt may be senior obligations of Software and convertible
into Software Common Shares, provided that (i) such lenders and/or investors in
such Debt transaction(s) shall be limited to one or more Strategic Investors,
(ii) such Debt transaction(s) shall be consummated on or prior to the one
hundred and eightieth (180th) day after the Closing Date (subject to an
automatic sixty (60) day extension if, at the expiration of such 180 day period,
Software is actively engaged in good faith negotiations with one or more
Strategic Investors to consummate such transaction), and (iii) such Debt shall
not be guaranteed by the Company or any of the Material Subsidiaries, except
that any Subsidiary of Software may guarantee such Debt.
"PERSON" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.
11
"PLACEMENT AGENT" has the meaning specified in SECTION 2.11 of this
Agreement.
"PRINCIPAL MARKET" means the Nasdaq Global Market or such other
principal exchange, market or quotation system on which the Company Common
Shares, Software Common Shares or Games Common Shares, as applicable, are
listed, traded or quoted.
"PROPERTY" means property and/or assets of all kinds, whether real,
personal or mixed, tangible or intangible (including, without limitation, all
rights relating thereto).
"PRO RATA SHARE" means, with respect to an Investor, the ratio
determined by dividing (i) the principal amount of the Note or Notes purchased
hereunder by such Investor at the Closing by (ii) the aggregate principal amount
of the Notes purchased hereunder by all of the Investors at the Closing.
"PURCHASE PRICE" has the meaning specified in SECTION 1.1(a).
"QUALIFIED IPO" (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 thirty percent (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.
"REFINANCED DEBT" means any refinancing, replacement, renewal or
extension of Existing Debt, provided that such refinancing, replacement, renewal
or extension does not have the effect of increasing the amount of Existing Debt
outstanding immediately prior to such refinancing, renewal or extension
(including for the purpose of calculating such amount any premium or fee payable
in connection with any such refinancing, renewal or extension).
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in the
RECITALS of this Agreement.
"REGISTRATION STATEMENT" has the meaning specified in the
Registration Rights Agreement.
"REGISTRABLE SECURITIES" has the meaning specified in the
Registration Rights Agreement.
"RESERVED AMOUNT" has the meaning specified in SECTION 4.7 of this
Agreement.
"RESTRICTED PAYMENT" means (A) the repurchase, whether by the
payment of cash, property or otherwise, (i) by the Company or any of its
Subsidiaries of any shares of capital stock of the Company or any of its
Subsidiaries (other than (x) repurchases by either Games or Software of its
Common Shares from and after a Qualified IPO of such entity or (y) purchases by
12
the Company or any of its wholly-owned Subsidiaries of the voting equity of any
Subsidiary of the Company that is not wholly-owned, directly or indirectly, by
the Company) or (ii) from and after a Qualified IPO of Games or Software, as the
case may be, by such entity of its Common Shares, provided, that repurchases
pursuant to a Stock Repurchase Program shall not constitute a Restricted Payment
and (B) the payment of any dividend or distribution of any cash or other
property (other than CDC Common Shares) by the Company to holders of its Common
Shares.
"RULE 144" means Rule 144 under the Securities Act or any successor
provision.
"SEC DOCUMENTS" means all reports, schedules and registration
statements filed by the Company with the Commission since January 1, 2005,
excluding the exhibits and schedules thereto.
"SECURITIES" has the meaning specified in the RECITALS of this
Agreement.
"SECURITIES ACT" has the meaning specified in the RECITALS of this
Agreement.
"SOFTWARE COMMON SHARES" means the Class A common shares of
Software, and any shares of capital stock issued or issuable by Software from
time to time (with any adjustments) in replacement of, in exchange for or
otherwise in respect of its Class A common shares.
"SOFTWARE FACILITY" means the credit facility to be made available
to Software by Silicon Valley Bank or a comparable financial institution, the
aggregate principal amount of which shall not exceed thirty million dollars
(US$30,000,000) and shall not be guaranteed by the Company.
"STOCK REPURCHASE PROGRAM" means (i) as to any repurchases of CDC
Common Shares, the Company's existing stock repurchase program and any
replacement or supplemental stock repurchase program of the Company as approved
by the independent members of the Board of Directors of the Company that allows
repurchases consistent with the past practice of the Company and (ii) as to any
repurchases of Common Shares of a CDC Entity after a Qualified IPO, any stock
repurchase program of such CDC Entity and any replacement or supplemental stock
repurchase program of such CDC Entity as approved by the independent members of
the Board of Directors of such CDC Entity.
"STRATEGIC INVESTOR" means a Person that makes a strategic equity or
equity-linked investment in Software to finance Software's growth and
consolidation strategy in the enterprise software industry.
"SUBORDINATED DEBT" means Debt incurred by the Company that is
expressly subordinated in right of payment to the Debt and Obligations evidenced
by the Notes, and which Debt does not provide at any time for the payment,
prepayment, repayment, repurchase or defeasance, directly or indirectly, of any
principal or premium, if any, thereon until at least 91 days after the Maturity
Date.
13
"SUBSEQUENT PLACEMENT," "SUBSEQUENT PLACEMENT CLOSING DATE,"
"SUBSEQUENT PLACEMENT NOTICE," "SUBSEQUENT PLACEMENT NOTICE DATE," "SUBSEQUENT
PLACEMENT PURCHASE" and "SUBSEQUENT PLACEMENT TERMS" have the respective
meanings specified in SECTION 4.12(a) of this Agreement.
"SUBSEQUENT PLACEMENT ELECTION NOTICE" has the meaning specified in
SECTION 4.12(b) of this Agreement.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which at least a majority of the outstanding share capital or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors (or Persons performing similar
functions) of such corporation or entity (regardless of whether or not at the
time, in the case of a corporation, share capital of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more of its Subsidiaries or by such Person
and one or more of its Subsidiaries.
"TERMINATION DATE" means the earlier to occur of (i) the first date
on which the aggregate principal amount of all Notes then outstanding is less
than twenty five percent (25%) of the aggregate principal amount of the Notes
issued on the Closing Date and (ii) in the event that a Qualified IPO has
occurred at least thirty (30) days prior to the three-year anniversary of the
Closing Date, such three-year anniversary.
"TOTAL CAPITALIZATION" of a Person, as of any measurement date,
means the total long-term debt and shareholder's equity of such Person as
calculated in accordance with GAAP consistently applied.
"TRANSACTION" means the issuance of the Notes upon the terms and
conditions of this Agreement and the other Transaction Documents.
"TRANSACTION DOCUMENTS" means (i) this Agreement, (ii) the Notes,
(iii) the Registration Rights Agreement, and (iv) all other agreements,
documents and other instruments executed and delivered by or on behalf of the
Company or any of its officers at the Closing.
"TRANSFER AGENT" has the meaning specified in SECTION 2.6 of this
Agreement.
"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.
(b) Terms Defined in the Notes. All capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Notes.
14
1.3 Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "HEREOF", "HEREIN" and "HEREUNDER" and words of similar
import contained in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR. Each Investor (with respect
to itself only) hereby represents and warrants to the Company and agrees with
the Company that, as of the Execution Date and as of the Closing Date:
2.1. Authorization; Enforceability. Such Investor is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization as set forth below such
Investor's name on the signature page hereof with the requisite corporate power
and authority to purchase the Securities to be purchased by it hereunder and to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party. All corporate action on the part of each Investor necessary for
the authorization, execution and delivery of this Agreement and the other
Transaction Documents to which it is a party and the performance of the
obligations of such Investor at the Closing and the consummation of all the
transactions contemplated hereby and thereby, prior to, at or after the Closing
has been taken. This Agreement constitutes, and upon execution and delivery
thereof, each other Transaction Document to which such Investor is a party will
constitute, such Investor's valid and legally binding obligation, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity. None of the Investors is
required to give any notice to, make any filing or registration with, or obtain
any authorization, consent or approval of any Governmental Authority in
connection with the execution, delivery and performance by such Investor of this
Agreement and the other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby.
2.2 No Public Sale. Such Investor is acquiring the Securities solely for
its own account and not with a present view to the public resale or distribution
of all or any part thereof, except pursuant to sales, swap transactions or other
similar transactions that are registered under, or exempt from the registration
requirements of, the Securities Act and/or sales registered under the Securities
Act; provided, however, that in making such representation, such Investor does
not agree to hold the Securities for any minimum or specific term and reserves
the right to sell, transfer or otherwise dispose of the Securities at any time
in accordance with the provisions of this Agreement and with Federal and state
securities laws applicable to such sale, transfer or disposition.
Notwithstanding the provisions of the Transaction Documents and related
documents, the Company acknowledges that Investors may enter into swap
transactions or other similar transactions on the Securities ("SWAP
TRANSACTIONS").
2.3 Character of Investor/Financial Suitability. Such Investor is an
institutional accredited investor within the meaning of Rule 501(a)(1), (2), (3)
and (7) of Regulation D or a "qualified institutional buyer" as such term is
defined under Rule 144A of the Securities Act, and was not organized for the
specific purpose of acquiring the Securities. Such Investor can bear the
economic risk of a total loss of its investment in the Securities and has such
knowledge and
15
experience in business and financial matters so as to enable it to understand
the risks of and form an investment decision with respect to its investment in
the Securities.
2.4 Information. The Company has, prior to the Execution Date, provided
such Investor with information regarding the business, operations and financial
condition of the Company and has, prior to the Execution Date, granted to such
Investor the opportunity to ask questions of and receive answers from
representatives of the Company, its officers, directors, employees and agents
concerning the Company in order for such Investor to make an informed decision
with respect to its investment in the Securities. Such Investor has requested,
received, reviewed and considered all information it deems relevant in making an
informed investment decision with respect to the Securities and such Investor
has been furnished with, or had access to, all materials relating to the
business, finances and operations of the Company and materials relating to the
transactions contemplated hereby which have been requested by such Investor,
including without limitation copies of the Company's Annual Report on Form 20-F
for the year ended December 31, 2005 (and any amendments thereto) and each of
the Company's Current Reports on Form 6-K filed since January 1, 2006 (and any
amendments thereto). Neither such information nor any other investigation
conducted by such Investor or any of its representatives shall modify, amend or
otherwise affect such Investor's right to rely on the Company's representations
and warranties contained in this Agreement.
2.5 Limitations on Disposition. Such Investor acknowledges that, except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act and may not be transferred or
resold without registration under the Securities Act or unless such Investor
shall have delivered to the Company an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such Securities may be transferred
or sold pursuant to an exemption from such registration. The Securities may be
pledged or hypothecated in connection with a bona fide margin account or other
loan or financing arrangement secured by the Securities and such pledge of
Securities shall not be deemed to be a transfer or sale of the Securities
hereunder, and no holder of such Securities effecting a pledge thereof shall be
required as a condition thereto to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document.
2.6 Legend. Such Investor understands that the certificates representing
the Securities may bear at issuance one or more restrictive legends in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
INTO WHICH SUCH SECURITIES MAY BE CONVERTED OR EXCHANGED HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE OFFERED OR SOLD UNLESS A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR AN EXEMPTION FROM
16
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. 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."
Notwithstanding the foregoing, it is agreed that, as long as (A) the
resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement under
the Securities Act and the holder of such securities represents in writing to
the Company that such Securities have been or will be sold pursuant to such
registration statement, (B) such Securities have been sold pursuant to Rule 144,
subject to receipt by the Company of customary documentation reasonably
acceptable to the Company in connection therewith, or (C) such Securities are
eligible for resale under Rule 144(k) or any successor provision, such
Securities shall be issued without any legend or other restrictive language and,
with respect to Securities upon which such legend is stamped, the Company shall
issue new certificates without such legend to the holder upon request. The
Company shall execute and deliver written instructions to the transfer agent for
the Company Common Shares (the "TRANSFER AGENT") as may be necessary to satisfy
any request by an Investor for removal of such legends no later than the close
of business on the third (3rd) Business Day following the receipt of a request
from an Investor to the extent the removal of such legends is permitted by this
SECTION 2.6.
2.7 OFAC. Such Investor or, to the knowledge of such Investor, any
director, officer, agent, employee, Affiliate or Person acting on behalf of such
Investor, is not currently subject to any sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department ("OFAC").
2.8 No Brokers. No agent, broker, investment banker, Person or firm is or
shall be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly in connection with the transactions
contemplated by this Agreement and the other Transaction Documents based in any
way on any arrangements, agreements or understandings made by or on behalf of
such Investor or an Affiliate thereof.
2.9 Certain Trading Limitations. Such Investor (i) represents that on and
from the date such Investor first became aware of the Transaction until the date
hereof it has not and (ii) covenants that for the period commencing on the date
hereof and ending on the public announcement by the Company of the Transaction
it will not, engage in any sale, offer to sell, solicitation of offers to buy,
disposition of, loan, pledge or grant of any right with respect to the Company
Common Shares in violation of the Securities Act.
17
2.10 No Advice. Such Investor understands that nothing in this Agreement
or any other materials presented to the Investor in connection with the purchase
and sale of the Notes constitutes legal, tax or investment advice. Such Investor
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Notes.
2.11 Placement Agent Fees. Such Investor acknowledges that (i) the Company
has engaged and authorized Xxxxx and Company, LLC (the "PLACEMENT AGENT") in
connection with the Transaction, (ii) the Company shall pay the Placement Agent
a commission and indemnify it in respect of certain losses and (iii) registered
representatives of the Placement Agent and/or their designees (including,
without limitation, registered representatives of the Placement Agent and/or
their designees who may participate in the offer and sale of the Notes sold in
the Transaction) may be paid a portion of the commissions paid to the Placement
Agents.
2.12 Treatment of Non-Public Information. Such Investor agrees to hold the
existence, terms and conditions of the Transaction in confidence and not to
disclose the same to any other person, other than its representatives, agents
and employees who are made aware of such agreement, until such time as the
Company files with the Commission a Current Report on Form 6-K disclosing the
Transaction or publicly announces the Transaction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to each Investor and agrees with each Investor that, as of the
Execution Date and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. Each of the Company and
its Material Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite power and authority to carry on its business as now
conducted. Each of the Company and its Material Subsidiaries is duly qualified
to transact business and is in good standing in each jurisdiction in which it
conducts business except where the failure so to qualify has not had or would
not reasonably be expected to have a Material Adverse Effect.
3.2 Authorization; Consents. The Company has the requisite corporate power
and authority to enter into and perform its obligations under the Transaction
Documents, to issue and sell the Notes to the Investors in accordance with the
terms hereof and thereof, and to issue and deliver the Conversion Shares upon
conversion of the Notes and to deliver, transfer and assign the Games Common
Shares or the Software Common Shares, or both, as applicable, upon the exchange
of the Notes following a Qualified IPO relating to Games or Software, or both,
as the case may be. All corporate action on the part of the Company by its
officers, directors and shareholders necessary for the authorization, execution
and delivery of, and the performance by the Company of its obligations under,
the Transaction Documents has been taken, and no further consent or
authorization of the Company, its directors, shareholders or any Governmental
Authority is required (other than such Governmental Requirements as may be
required as contemplated under the Registration Rights Agreement).
3.3 Enforcement. This Agreement has been and, at or prior to the Closing,
each other Transaction Document required to be delivered by the terms hereof at
the Closing will be, duly
18
executed and delivered by the Company. This Agreement constitutes and, upon the
execution and delivery thereof by the Company, each other Transaction Document
will constitute, the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to (i) applicable bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company is subject to the reporting requirements of the
Exchange Act and, except as described on SCHEDULE 3.4, has filed with the
Commission all SEC Documents that the Company was required to file with the
Commission on or after December 31, 2005. The Company is not aware of any event
occurring or expected to occur on or prior to the Closing Date (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 6-K after the Closing (other than
the items set forth in its press releases which have not been filed since its
most recent Form 6-K). Each SEC Document, as of the date of the filing thereof
with the Commission (or if amended or superseded by a filing prior to the
Execution Date, then on the date of such amending or superseding filing),
complied in all material respects with the requirements of the Securities Act
and Exchange Act, as applicable, and the rules and regulations promulgated
thereunder and, as of the date of such filing (or if amended or superseded by a
filing prior to the Execution Date, then on the date of such filing), such SEC
Document did not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents required to be filed as exhibits to the SEC Documents
have been filed as required. Except as set forth in the Disclosure Documents,
the Company has no liabilities, contingent or otherwise, other than liabilities
incurred in the ordinary course of business that, under GAAP, are not required
to be reflected in the financial statements included in the Disclosure Documents
and which, individually or in the aggregate, are not material to the
consolidated business or financial condition of the Company and its Material
Subsidiaries, taken as a whole. As of their respective dates, the financial
statements of the Company included in the Company's Annual Report on Form 20-F
for the year ended December 31, 2005 (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto and (ii) have been prepared
in accordance with GAAP consistently applied at the times and during the periods
involved (except as may be otherwise indicated in such financial statements or
the notes thereto) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended.
3.5 Capitalization; Debt Schedule. The capitalization of the Company,
Software and Games, including their respective authorized share capital, the
number of shares issued and outstanding, the number of shares issuable and
reserved for issuance pursuant to their respective stock option plans and
agreements, the number of shares issuable and reserved for issuance pursuant to
securities (other than the Notes) exercisable for, or convertible into or
exchangeable for any of their respective shares and the number of Company Common
Shares initially to be reserved for issuance upon conversion of the Notes, is
set forth on SCHEDULE 3.5. All outstanding share capital of the Company has
been, or upon issuance will be, validly issued, fully paid and
19
non-assessable. All Material Subsidiaries of the Company are disclosed on
SCHEDULE 3.5. Except as disclosed on SCHEDULE 3.5, the Company or a wholly-owned
Subsidiary of the Company owns all of the share capital of each Material
Subsidiary of the Company, which share capital is validly issued, fully paid and
non-assessable, and the share capital of the Company or any of its Material
Subsidiaries is not subject to preemptive rights or any other similar rights of
the shareholders of the Company or any such Material Subsidiary or any Liens
created by or through the Company or any such Material Subsidiary. Except as
disclosed on SCHEDULE 3.5 or as contemplated herein, there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any share capital of the Company or any of its
Material Subsidiaries, or arrangements by which the Company or any of its
Material Subsidiaries is or may become bound to issue additional share capital
of the Company or any of its Material Subsidiaries (whether pursuant to
anti-dilution, "reset" or other similar provisions). SCHEDULE 3.5 identifies all
Debt of the Company and/or its Material Subsidiaries currently outstanding in
excess of $500,000 as of the date hereof, and identifies all Liens on any of the
Property of the Company or any of its Material Subsidiaries, except for such
Liens that do not individually or in the aggregate materially affect the value
of such property or materially interfere with the use made of such Property by
the Company and the Material Subsidiaries.
3.6 Due Authorization; Valid Issuance. The Notes are duly authorized and,
when issued, sold and delivered in accordance with the terms of this Agreement,
will constitute legal, valid and binding obligations of the Company, enforceable
in accordance with their terms, subject to (i) applicable bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization or other similar
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity whether in a
proceeding in equity or at law. The Company Common Shares issuable under the
Notes are duly authorized and reserved for issuance, and the Conversion Shares
or the Exchange Shares, as the case may be, when issued or exchanged and
delivered in accordance with the terms of the Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of any
Liens imposed by or through the Company or any of its Subsidiaries. Assuming the
accuracy of each Investor's representations contained herein, the issuance and
sale of the Notes under this Agreement will be effected in compliance with all
applicable Governmental Requirements.
3.7 No Conflict. Neither the Company nor any of its Material Subsidiaries
is in violation of any provisions of its memorandum and articles of association,
charter, bylaws or any other governing document. Except as set forth on SCHEDULE
3.7, neither the Company nor any of its Subsidiaries is in violation of or in
default (and no event has occurred which, with notice or lapse of time or both,
would constitute a default) under any provision of any instrument or contract to
which it is a party or by which it or any of its Property is bound, or in
violation of any provision of any Governmental Requirement applicable to the
Company or any Subsidiary of the Company, except for any violation or default
that has not had or would not reasonably be expected to have a Material Adverse
Effect. The (i) execution, delivery and performance of this Agreement and the
other Transaction Documents and (ii) consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Notes, the reservation for issuance of the Conversion Shares, the issuance
and delivery of the Conversion Shares and the exchange and delivery of the
Exchange Shares, as the case may be) will not (a)
20
result in any violation of any provisions of the memorandum and articles of
association, charter, bylaws or any other governing document of the Company,
Games or Software, (b) conflict with, violate or result in a breach of or
default (with or without notice or lapse of time or both) under any provision of
any instrument or contract to which the Company or any Subsidiary of the Company
is a party or by which it or any of its Property is bound or be in conflict with
or constitute, with or without the passage of time and giving of notice or both,
a default under any such provision, instrument or contract, (c) result in the
violation of any provision of any Governmental Requirement applicable to the
Company or a Subsidiary of the Company, (d) result in the creation of any Lien
upon any Property of the Company or of any of its Material Subsidiaries other
than Permitted Liens or (e) trigger any preemptive or anti-dilution rights
(including without limitation pursuant to any "reset" or similar provisions) or
rights of first refusal or first offer, or any other rights that would allow or
permit the holders of the Company's securities or any other Person to purchase
securities of the Company or any Subsidiary of the Company (whether pursuant to
a shareholder rights plan provision or otherwise), except, with respect to
clause (b), such violations or defaults, as the case may be, that would not have
or reasonably be expected to have a Material Adverse Effect or an effect that is
material and adverse to any Investor.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The financial condition of the Company and its consolidated
entities is, in all material respects, as described in the Disclosure Documents,
except for changes in the ordinary course of business and normal year-end
adjustments that are not, in the aggregate, materially adverse to the
consolidated business or financial condition of the Company or its Subsidiaries,
taken as a whole. Other than as set forth in the Disclosure Documents, there has
been no (i) Material Adverse Change since the date of the Company's most recent
financial statements contained in the Disclosure Documents or (ii) change by the
Company in its accounting principles, policies and methods except as required by
changes in GAAP.
3.8.2 Each of the Company and its Material Subsidiaries has (i)
prepared in good faith and duly and timely filed all tax returns required to be
filed by it and such returns are complete and accurate in all material respects
and (ii) paid all taxes required to have been paid by it, except for taxes which
it reasonably disputes in good faith or the failure to pay which has not had or
would not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any Material Subsidiary of the Company has any liability with
respect to taxes that accrued on or before the date of the most recent balance
sheet of the Company included in the Disclosure Documents in excess of the
amounts accrued with respect thereto that are reflected on such balance sheet.
3.8.3 Except for sales tax audits undertaken by state taxing
authorities in the ordinary course of business and as set forth in SCHEDULE
3.8.3, neither the Company nor any of its Material Subsidiaries is the subject
of any pending or, to the Company's knowledge, threatened inquiry, investigation
or administrative or legal proceeding by any Governmental Authority.
3.8.4 Except as set forth on SCHEDULE 3.8.4, there is no material
claim, litigation or administrative proceeding pending, or, to the Company's
knowledge, threatened or
21
contemplated, against the Company or any of its Material Subsidiaries wherein an
unfavorable decision, ruling or finding would reasonably be expected to have a
Material Adverse Effect.
3.9 Acknowledgement of Dilution. The Company acknowledges that the
issuance of Company Common Shares upon conversion of the Notes may result in
dilution of the outstanding Company Common Shares, which dilution may be
substantial under certain market conditions.
3.10 Intellectual Property. Except as set forth in SCHEDULE 3.10, the
Company and its Material Subsidiaries own or possess sufficient rights to use
all patents, patent rights, trademarks, copyrights, licenses, inventions, trade
secrets, trade names and know-how that are currently necessary for the conduct
of their respective businesses as now conducted (the "COMPANY INTELLECTUAL
PROPERTY"), except where the failure to own or possess such Company Intellectual
Property would not have or reasonably be expected to have a Material Adverse
Effect. Except as set forth in SCHEDULE 3.10, (i) neither the Company nor any of
its Subsidiaries has received any written notice of, or has any actual knowledge
of, any infringement by the Company or its Subsidiaries of intellectual property
rights of any third party that, individually or in the aggregate, would have or
reasonably be expected to have a Material Adverse Effect and (ii) neither the
Company nor any of its Subsidiaries has received any written notice of any
infringement by a third party of any Company Intellectual Property that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
3.11 Registration Rights; Rights of Participation. Except as disclosed in
SCHEDULE 3.11, the Company has not granted or agreed to grant to any Person any
rights (including "piggy-back" registration rights) to have any securities of
the Company or any Material Subsidiary registered with the Commission or any
other Governmental Authority which has not been satisfied in full or waived on
or prior to the date hereof. No Person, including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties, has any right of first refusal, preemptive right, right of
participation, anti-dilutive right or any similar right to participate in, or to
receive securities or other assets of the Company solely as a result of the
transactions contemplated by this Agreement or the other Transaction Documents,
other than the fees payable to the Placement Agent in connection with such
transactions.
3.12 Integration with Other Issuances of Securities. Neither the Company
nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their
behalf, has issued or sold any securities which would be integrated with the
sale of the Securities hereby to the Investors or the issuance or exchange of
the Conversion Shares or Exchange Shares, as the case may be, for purposes of
the Securities Act or of any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any Principal
Market, nor will the Company or any of its Subsidiaries take any action or steps
that would require registration of any of the Securities under the Securities
Act or cause the offering of the Securities to be so integrated with other
offerings.
3.13 No General Solicitation; Placement Agent's Fees. Neither the Company,
nor any of its Subsidiaries, nor any Person acting on its or their behalf, has
engaged in any form of
22
general solicitation or general advertising (within the meaning of Regulation D
under the Securities Act). The Company shall be responsible for the payment of
the Placement Agent's fees, financial advisory fees, or brokers' commissions
(other than for Persons engaged by any Investor or its investment advisor)
relating to or arising out of the issuance of the Notes pursuant to this
Agreement. Other than the Placement Agent, the Company has not engaged any
placement agent or other agent in connection with the sale of the Securities.
3.14 Foreign Corrupt Practices; Anti-Money Laundering; OFAC; Embargoed
Persons.
(a) None of the Company, its Subsidiaries or, to the knowledge of
the Company, any director, officer, agent, employee, Affiliate or other Person
acting on behalf of the Company or its Subsidiaries, is aware of or has taken
any action, directly or indirectly, that would result in a violation by such
Persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder (the "FCPA"). The Company and its Material
Subsidiaries have instituted and maintain policies and procedures designed to
ensure, and which are reasonably expected to continue to ensure, continued
compliance with the FCPA. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the FCPA.
(b) The operations of the Company and its Subsidiaries are and have
been conducted at all times in compliance with the money laundering statutes of
applicable jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered or enforced by
any applicable Governmental Authority (collectively, the "MONEY LAUNDERING
LAWS") and no action, suit or proceeding by or before any court or Governmental
Authority or any arbitrator involving the Company or its Subsidiaries with
respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
(c) None of the Company, its Subsidiaries or, to the knowledge of
the Company, any director, officer, agent, employee, Affiliate or Person acting
on behalf of the Company or its Subsidiaries, is currently subject to any U.S.
sanctions administered by OFAC; and the Company will not directly or indirectly
use the proceeds from the sale of the Notes, or lend, contribute or otherwise
make available such proceeds to any Subsidiary, joint venture partner or other
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.
(d) None of the funds or other assets of the Company or its
Subsidiaries shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any Person subject to trade restrictions under United
States law, including, but not limited to, the International Emergency Economic
Powers Act, 50 U.S.C. Section 1701 et seq., the Trading with the Enemy Act, 50
U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated under
any such United States laws (each, an "EMBARGOED PERSON"), with the result that
the investments evidenced by the Securities are or would be in violation of any
applicable Governmental Requirements. None of the funds or other assets of the
Company or its
23
Subsidiaries shall be derived from any unlawful activity with the result that
the investments evidenced by the Securities are or would be in violation of any
Governmental Requirements.
3.15 Key Employees. Except as set forth in SCHEDULE 3.15, each executive
officer (as defined in Rule 501(f) of the Securities Act) of the Company and its
Material Subsidiaries, respectively (each, a "KEY EMPLOYEE"), is currently
serving in the capacity described in the Disclosure Documents. Except as set
forth on SCHEDULE 3.15, the Company has no knowledge of any fact or circumstance
(including without limitation (i) the terms of any agreement to which such
person is a party or any litigation in which such person is or may become
involved and (ii) any illness or medical condition that could reasonably be
expected to result in the disability or incapacity of such person) that would
limit or prevent any such person from serving in such capacity on a full-time
basis in the foreseeable future, or of any intention on the part of any such
person to limit or terminate his or her employment with the Company or any of
its Material Subsidiaries. To the knowledge of the Company, no Key Employee has
borrowed money pursuant to a currently outstanding loan.
3.16 [intentionally omitted]
3.17 [intentionally omitted]
3.18 Insurance. The Company and its Material Subsidiaries maintain
insurance in such amounts and covering such losses and risks as the Company
believes to be prudent and customary, consistent with industry practice for the
conduct of its and its Material Subsidiaries' respective businesses and the
value of their respective properties. As of the date hereof and as of the
Closing Date, no notice of cancellation has been received for any of such
policies, and the Company and its Material Subsidiaries are in compliance in all
material respects with all of the terms and conditions thereof. Without limiting
the generality of the foregoing, the Company maintains Director's and Officer's
insurance in an amount not less than $10 million for each covered occurrence.
3.19 Property. The Company and its Material Subsidiaries have good and
marketable title to all real and personal Property owned by them, in each case
free and clear of all Liens, except for Permitted Liens. Any Property held under
lease by the Company or its Material Subsidiaries is held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made or proposed to be made of such Property by
the Company or any of its Material Subsidiaries.
3.20 Regulatory Permits. The Company and its Material Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
Governmental Authorities necessary to conduct their respective businesses,
except where the failure to have any such certificate, authorization or permit
would not have or reasonably be expected to have a Material Adverse Effect, and
neither the Company nor any such Material Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
3.21 Exchange Act Registration; Listing. The Company Common Shares are
registered pursuant to Section 12(g) of the Exchange Act and are eligible for
quotation on a
24
Principal Market, and the Company agrees that it shall, upon the occurrence of
the Software IPO Date or the Games IPO Date, as the case may be, cause any
Software Common Shares and Games Common Shares for which the Notes are
exchangeable to become registered pursuant to Section 12(g) of the Exchange Act
and eligible for quotation on a Principal Market. The Company currently meets
the continuing eligibility requirements for listing on such Principal Market and
has not received any notice from such Principal Market that it may not currently
satisfy such requirements or that such continued listing is in any way
threatened. The Company has taken no action designed to, or which, to the
knowledge of the Company, may have the effect of, terminating the registration
of the Company Common Shares under the Exchange Act or delisting the Company
Common Shares from such Principal Market.
3.22 Investment Company Status. The Company is not, and immediately after
any Closing will not be, an "INVESTMENT COMPANY" or an entity "CONTROLLED" by an
"INVESTMENT COMPANY" within the meaning of the Investment Company Act of 1940,
as amended (the "INVESTMENT COMPANY ACT"), and shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
3.23 Transfer Taxes. No stock transfer or other taxes (other than income
taxes) are required to be paid in connection with the issuance and sale of any
of the Securities, other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the Closing.
3.24 Transactions with Interested Persons. Other than as set forth on
SCHEDULE 3.24, no officer, director or employee of the Company or any of its
Subsidiaries is making or has made any arrangements with the Company or any of
its Subsidiaries to become a party to any transaction with the Company or any
Subsidiary of the Company (other than for services as employees, officers and
directors and reimbursement for expenses incurred on behalf of the Company or
its Subsidiaries) in which the aggregate consideration involved in any such
transaction or series of transactions exceeds $60,000, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee holds a ten percent (10%) or greater equity interest or is an officer,
director, or trustee.
3.25 Accountants. Deloitte & Touche LLP, who the Company expects will
render an opinion with respect to the financial statements to be included in the
Company's Annual Report on Form 20-F for the year ended December 31, 2006, are,
to the Company's knowledge, independent accountants as required by the
Securities Act.
3.26 No Other Agreements. The Company has not, directly or indirectly,
entered into any agreement with or granted any right to any Investor relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents, except as expressly set forth in the Transaction Documents.
25
3.27 Foreign Issuer. The Company is a "foreign private issuer" (as such
term is defined in Rule 405 under the Securities Act).
3.28 PFIC. The Company shall provide all information requested by each
Investor that is necessary for such Investor to make a "qualified electing fund"
(QEF) election.
3.29 Xxxxxxxx-Xxxxx Act; Internal Controls and Procedures. The Company is
in material compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002, as amended, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof. The Company maintains accounting controls, policies and
procedures, and such books and records as are reasonably designed to provide
reasonable assurance that (i) all transactions to which the Company or any
Subsidiary of the Company is a party or by which its properties are bound are
effected by a duly authorized employee or agent of the Company, supervised by
and acting within the scope of the authority granted by the Company's senior
management; (ii) the recorded accounting of the Company's consolidated assets is
compared with existing assets at regular intervals; and (iii) all transactions
to which the Company or any Subsidiary of the Company is a party, or by which
its properties are bound, are recorded (and such records maintained) in
accordance with all Government Requirements and as may be necessary or
appropriate to ensure that the financial statements of the Company are prepared
in accordance with GAAP.
3.30 Disclosure. Except with respect to information provided to Polygon
Investment Partners LP, the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Investors or their agents or
counsel with any information that constitutes our could reasonably be expected
to constitute material non-public information, other than the existence of the
transactions contemplated hereby. The representations, warranties and written
statements contained in this Agreement and the other Transaction Documents and
in the certificates, exhibits and schedules delivered to the Investors by the
Company pursuant to this Agreement and the other Transaction Documents, do not
contain any untrue statement of a material fact, and do not omit to state a
material fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made, except that with respect to
assumptions, projections and opinions contained in such materials, the Company
represents only that such assumptions, projections and opinions were made in
good faith and that the Company believes there is a reasonable basis therefor.
The Company acknowledges that the Investors are relying on the representations,
acknowledgments and agreements made by the Company in this Section 3.30 and
elsewhere in this Agreement in making trading and other decisions concerning the
Securities purchased hereunder.
3.31 Absence of Certain Changes. Neither the Company nor any of its
Material Subsidiaries has taken any steps to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact that would reasonably lead a creditor to do so. The
Company and its Material Subsidiaries, individually and on a consolidated basis,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this
26
Section 3.31, "INSOLVENT" means, with respect to any Person, (i) the present
fair saleable value of such Person's assets is less than the amount required to
pay such Person's total Debt, (ii) such Person is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) such Person has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.
3.32 Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Securities, (ii) other than the Company's agreement to pay a fee to the
Placement Agent or in connection with its Stock Repurchase Program, sold, bid
for, purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
3.33 Acknowledgement Regarding Investors' Trading Activity. Anything in
this Agreement or elsewhere herein to the contrary notwithstanding, it is
understood and acknowledged by the Company that, to the extent not otherwise
prohibited by Section 2.9 of this Agreement or by Governmental Requirement, (i)
none of the Investors have been asked to agree, nor has any Investor agreed, to
desist from purchasing or selling, long and/or short, securities of the Company,
or "derivative" securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) that past or future open market or
other transactions by any Investor, including, without limitation, short sales
or "derivative" transactions, before or after the closing of this or future
private placement transactions, may negatively impact the market price of the
Company's publicly-traded securities; (iii) that any Investor, and counter
parties in "derivative" transactions to which any such Investor is a party,
directly or indirectly, presently may have a "short" position in the Common
Stock, and (iv) that each Investor shall not be deemed to have any affiliation
with or control over any arm's length counter-party in any "derivative"
transaction. The Company further understands and acknowledges, that to the
extent not otherwise prohibited by Section 2.9 of this Agreement or by
Governmental Requirement, (a) one or more Investors may engage in hedging
activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Conversion Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted.
3.34 Application of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's memorandum and articles of
association, charter, bylaws or any other governing document or the laws of the
state of its incorporation which is or could become applicable to any Investor
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and any Investor's
ownership of the Securities. The Company has not
27
adopted a stockholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control of
the Company.
3.35 Employee Relations. Neither the Company nor any of its Material
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union.
3.36 Form F-3 Eligibility of the Company. The Company meets the
requirements for use of Form F-3 under the Securities Act.
3.37 U.S. Real Property Holding Corporation. The Company is not, nor has
it ever been, a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon any Investor's request.
3.38 Ranking of Notes. The Notes will constitute general unsecured Debt of
the Company ranking pari passu in right of payment with any unsecured,
unsubordinated Debt of the Company and senior in right of payment to any
subordinated Debt of the Company. The Notes will be effectively subordinated to
any secured Debt of the Company to the extent of the assets of the Company
securing such Debt and structurally subordinated to the Debt of any Subsidiary
of the Company.
4. COVENANTS AND AGREEMENTS.
4.1 Press Release; Filings. The Company shall, (i) on or prior to 8:30
a.m. (eastern time) on the Business Day immediately following the Execution
Date, issue a press release disclosing the material terms of this Agreement and
the other Transaction Documents and the transactions contemplated hereby and
thereby, and (ii) on or prior to 5:00 p.m. (eastern time) on the Business Day
immediately following the Execution Date, file with the Commission a Current
Report on Form 6-K disclosing the material terms of and including as exhibits
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby; provided, however, that each Investor shall
have a reasonable opportunity to review and comment on any such press release or
Form 6-K prior to the issuance or filing thereof. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law
with respect to the transactions contemplated hereby.
4.2 Use of Proceeds. The Company shall use the proceeds from the sale of
the Notes as set forth on SCHEDULE 4.2.
4.3 Use of Investor Name. Except as may be required by applicable
Governmental Requirements, the Company shall not use, directly or indirectly,
any Investor's name or the name of any of its Affiliates in any advertisement,
announcement, press release or other similar communication unless it has
received the prior written consent of such Investor for the specific use
contemplated or as otherwise required by applicable Governmental Requirements.
4.4 Disclosure of Non-Public Information. The Company agrees that it will
not at any time following the Execution Date disclose material non-public
information to any Investor
28
(other than Evolution in the circumstances contemplated by SECTIONS 4.10 and
4.11 hereof) without first obtaining such Investor's prior written consent to
such disclosure.
4.5 Additional Affirmative Covenants of the Company. During the period
beginning on the Execution Date and ending on the Termination Date, the Company
shall, and shall cause each of its Material Subsidiaries to:
(a) maintain its corporate existence in good standing;
(b) provide each Investor with copies of all materials sent to
its shareholders at the same time as such materials are delivered to such
shareholders; and
(c) if such entity was required by the Exchange Act to file
reports with the Commission at any time while Notes are outstanding, timely file
all reports required to be filed pursuant to the Exchange Act and refrain from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit such termination.
4.6 Negative Covenants of the Company. During the period beginning on the
Execution Date and ending on the Termination Date, the Company shall not, and
shall not permit any of its Subsidiaries to:
(a) engage or enter into any Affiliate Transactions unless such
transaction is (1) effected on terms that are not materially less favorable
to the Company or such Subsidiary, as the case may be, than those that could
reasonably have been obtained at such time from an unaffiliated third-party and
(2) approved by the Company's or such Subsidiary's independent directors, as
applicable; provided, however, that this covenant will not restrict:
(i) the payment of reasonable and customary compensation and
fees to directors of the Company or any Subsidiary of the Company who are not
employees of the Company or any of its Subsidiaries;
(ii) any payments not expressly prohibited by SECTION 4.6(c)
of this Agreement;
(iii) customary compensation or employee benefit arrangements
or incentive or indemnification arrangements with any officer, director or
employee of the Company or any Subsidiary of the Company entered into or
arranged in the ordinary course of the Company's business consistent with past
practice; and
(iv) loans and advances to officers, directors and employees
of the Company or any Subsidiary of the Company for reasonable travel,
entertainment and relocation expenses, in each case made in the ordinary course
of the Company's business consistent with past practice;
(b) (i) incur any Debt other than Permitted Debt; provided that the
Company and its Subsidiaries (I) may not incur any Permitted Debt set forth in
clauses (v), (vi) (the
29
incurrence of Debt under such clause (vi) to be deemed to occur only on the date
that the Software Facility is entered into as though the entire amount available
to be borrowed thereunder were borrowed on such date and not at the time of any
subsequent draw-down), (vii) (the incurrence of Debt under such clause (vii) to
be deemed to occur only to the extent such Debt is owed to or by a Subsidiary of
the Company that is not wholly-owned by the Company, in which case the amount of
such Debt to which this provision will give effect shall be equal to the product
of (1) 1.00 minus the percentage equity interest that the Company directly or
indirectly owns in such Subsidiary times (2) the aggregate amount of such Debt),
(xi), (xii) or (xiii) of the definition thereof unless, and (II) may incur Debt
in addition to Permitted Debt ("ADDITIONAL PERMITTED DEBT") as long as, after
giving effect to the incurrence of any (I) such Permitted Debt or (II)
Additional Permitted Debt, as applicable:
(A) (1) the Leverage Ratio is less than or equal to 6.0
to 1, and (2) the aggregate amount of Debt of the Company and its
Subsidiaries does not exceed fifty percent (50%) of the Total
Capitalization of the Company and its Subsidiaries on a consolidated
basis, in each case as reflected in the Company's consolidated
financial statements for the immediately preceding Four Quarter
Period;
(B) the Consolidated Cash Flow of the Company and its
Subsidiaries, as reflected in the Company's consolidated financial
statements for the immediately preceding Four Quarter Period,
exceeds two (2) times the sum of Consolidated Interest Expense and
Capital Expenditures during the immediately preceding Four Quarter
Period; and
(C) in the case of Additional Permitted Debt, such
Additional Permitted Debt is not senior to the Notes, and if such
Additional Permitted Debt is pari passu with the Notes, such
Additional Permitted Debt does not have a scheduled maturity, and is
not otherwise subject to prepayment or redemption, prior to the 91st
day following the three-year anniversary of the Closing Date; or
(ii) grant, establish or maintain any Lien on any of its
Property other than Permitted Liens; provided, however, that, notwithstanding
the foregoing limitation, a Subsidiary of the Company (but not the Company) may
grant, establish or maintain Liens in addition to Permitted Liens to the extent
that such additional Liens are granted, established or maintained in connection
with Additional Permitted Debt incurred by such Subsidiary;
(c) make any Restricted Payments; or
(d) amend any voting powers, designations, preferences, rights or
qualifications, limitations or restrictions of the capital stock of the Company,
Games or Software; provided, however, that the Company, Games or Software, as
the case may be, may amend its articles of association, memorandum of
association, bylaws or other governing documents (i) with respect to Games or
Software, to implement a dual class capital stock structure in connection with a
Qualified IPO or (ii) to effect a stock split or reverse stock split.
30
On or before the Business Day following the date on which the Company
announces its financial results for the preceding fiscal quarter, the Company
shall deliver to each Investor a certificate signed by a duly authorized officer
of the Company, certifying that the Company has complied in all material
respects with the covenants set forth in Section 4.6(b) as of the last day of
such fiscal quarter and, if the Company did not so comply, describing in
reasonable detail the circumstances of its failure to comply.
4.7 Reservation of Company Common Shares. The Company shall, on the
Convertibility Date, have authorized and reserved for issuance to the Investors
free from any preemptive rights, and shall keep available at all times
thereafter during which any Notes are outstanding, a number of Company Common
Shares (the "RESERVED AMOUNT") that, on such Convertibility Date, is not less
than one hundred ten percent (110%) of the number of Company Common Shares
issuable upon conversion of all of the Notes outstanding on the Convertibility
Date, without regard to any limitation or restriction on such conversion that
may be set forth in the Notes. The Reserved Amount shall be allocated among the
Investors in accordance with each Investor's Pro Rata Share. In the event that
an Investor shall sell or otherwise transfer any of such Investor's Notes, each
transferee shall be allocated a pro rata portion of such transferor's Reserved
Amount. Any portion of the Reserved Amount allocated to any Investor or other
Person which no longer holds any Notes shall be reallocated to the remaining
Investors pro rata based on the number of the Registrable Securities held by
such Investors at such time. In the event that the Reserved Amount is
insufficient at any time to cover one hundred percent (100%) of the Registrable
Securities issuable upon the conversion of the Notes (without regard to any
restriction on such conversion), the Company shall take such action (including
without limitation holding a meeting of its shareholders) to increase the
Reserved Amount to cover one hundred ten percent (110%) of such Registrable
Securities, such increase to be effective not later than the sixtieth (60th) day
(or ninetieth (90th) day, in the event shareholder approval is required for such
increase) following the Company's receipt of written notice of such deficiency
from any Investor. The Company shall own, beneficially and of record, and shall
set aside for delivery to the Investors upon the exchange of the Notes, free and
clear of all Liens, at all times from the date on which a Qualified IPO occurs
through the earlier of (i) the Maturity Date and (ii) the date on which no Notes
remain outstanding, a sufficient number of Games Common Shares and Software
Common Shares, as the case may be, in order to satisfy the exchange of the Notes
in full for such Common Shares (without regard to any restrictions that may
apply to such exchange) (the "EXCHANGE SHARE RESERVED AMOUNT"). The Exchange
Share Reserved Amount shall be allocated among the Investors in accordance with
each Investor's Pro Rata Share, and otherwise in accordance with the allocation
of the Reserved Amount among the Investors as described in this SECTION 4.7.
4.8 Certain Taxes. The Company agrees to pay all stamp, documentary or
similar taxes or fees which may be payable in respect of the execution and
delivery or the enforcement of this Agreement or the execution and delivery (but
not the transfer) or the enforcement of any of the Notes or of any amendment of,
or waiver or consent under or with respect to, this Agreement or of any of the
Notes, and to pay any value added tax due and payable in respect of
reimbursement of costs and expenses by the Company pursuant to this SECTION 4.8,
and will hold harmless each Holder to the extent permitted by applicable
Governmental Requirements against
31
any loss or liability resulting from nonpayment or delay in payment of any such
tax or fee required to be paid by the Company hereunder.
4.9 Indemnification.
(a) The Company will indemnify and hold each Investor and its
directors, managers, officers, shareholders, members, partners, employees and
agents (each, an "INVESTOR PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Investor Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents.
(b) Each Investor will severally (and not jointly) indemnify and
hold the Company and its directors, managers, officers, shareholders, members,
partners, employees and agents and each Subsidiary and its directors, managers,
officers, shareholders, members, partners, employees and agents (each, a
"COMPANY PARTY") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Company Party may suffer or incur as a
result of or relating to any breach of any of the representations, warranties,
covenants or agreements made by such Investor in this Agreement or in the other
Transaction Documents. In any such event, the aggregate indemnification
obligation of an Investor shall not exceed the Purchase Price delivered by such
Investor in connection with its purchase of Securities hereunder.
(c) For purposes of this SECTION 4.9(c), a party seeking
indemnification pursuant to CLAUSE (a) or (b) above is referred to as an
"INDEMNIFIED PARTY" and the party from whom indemnification is sought is
referred to as an "INDEMNIFYING PARTY." If any action shall be brought against
any Indemnified Party in respect of which indemnity may be sought pursuant to
this Agreement, such Indemnified Party shall promptly notify the Indemnifying
Party in writing, and the Indemnifying Party shall have the right to assume the
defense thereof with counsel of its own choosing. Any Indemnified Party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party except to the extent that (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing,
(ii) the Indemnifying Party has failed after a reasonable period of time
following such Indemnified Party's written request that it do so, to assume such
defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Indemnifying Party and the position of such
Indemnified Party. An Indemnifying Party will not be liable to any Indemnified
Party under this Agreement (i) for any settlement by an Indemnified Party
effected without the Indemnifying Party's prior written consent (which consent
shall not be unreasonably withheld) or (ii) to the extent, but only to the
extent that a loss, claim, damage or liability is the result of such Indemnified
Party's wrongful actions or omissions or gross negligence or such Indemnified
Party's breach of any of the representations, warranties, covenants or
agreements made by such Indemnified Party in this Agreement or in the other
Transaction Documents.
32
4.10 Board Observation. During the period beginning on the Closing Date
and ending on the earlier of (i) the Termination Date and (ii) the consummation
of a Qualified IPO by either Software or Games, Evolution shall have the right
to appoint a designee to attend and observe (in person or via teleconference)
any and all meetings and other similar proceedings of the Board Of Directors (or
any committee thereof) of Software and/or Games. During such period, each of
Software and Games shall provide Evolution reasonable advance notice of each
such meeting and/or proceeding, which notice shall not contain any material
non-public information, it being acknowledged and agreed that notice provided to
Evolution concurrently with notice to members of the Board of Directors (or any
committee thereof) of Software or Games, as the case may be, shall constitute
reasonable advance notice. Evolution shall be presumed not to have exercised its
board observation rights with respect to any such meeting or proceeding unless
it notifies the Company of its affirmative exercise of such rights as to such
meeting or proceeding. Evolution's determination not to exercise its board
observation rights in respect of any meeting or proceeding of the Board of
Directors (or any committee thereof) of Software or Games shall not impair its
rights to attend any such meeting or proceeding thereafter. Upon Evolution's
request, the Company shall notify Evolution prior to any such board meeting or
proceeding whether any information to be discussed at such meeting or proceeding
will constitute material non-public information; upon the receipt of material
non-public information as a result of the exercise of its board observation
rights, Evolution shall comply with all applicable Governmental Requirements
regarding the use of such information.
4.11 Information Rights. Prior to a Qualified IPO of Software or Games,
the Company shall promptly deliver upon written request, to each Investor
holding at least $10 million in aggregate principal amount of Notes at the time
of such request annual and quarterly financial statements, quarterly budgets and
other information reasonably requested by such Investor with respect to Software
and Games, as applicable; provided, however, that if the Company determines that
any such information constitutes material non-public information, it will so
notify the Investor and will not deliver such information to the Investor unless
it receives the Investor's prior written consent to such delivery. To the extent
the Company delivers any material non-public information to any Investor
following receipt of the requesting Investor's written consent to such delivery,
such Investor shall comply with all applicable Governmental Requirements
regarding the use of such information.
4.12 Participation Right.
(a) If any of the Company, Software or Games (the "ISSUER") intends,
directly or indirectly, to offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its equity or equity equivalent
securities, including without limitation any debt, preferred stock or other
instrument or security that is, at any time during its life and under any
circumstances, convertible into or exchangeable or exercisable for its Common
Shares or securities convertible or exchangeable into its Common Shares (any
such offer, sale, grant, disposition or announcement being referred to as a
"SUBSEQUENT PLACEMENT") at any time prior to a Qualified IPO, the Issuer shall
have first complied with this SECTION 4.12, provided that no Issuer shall be
required to comply with this Section 4.12 in connection with the Permitted
Software Debt and the Investors shall have no rights under this SECTION 4.12
with respect to such Permitted Software Debt.
33
(b) The Company shall deliver to each Investor a written notice (the
"OFFER NOTICE") of any proposed or intended issuance or sale (the "OFFER") of
the securities being offered (the "OFFERED SECURITIES") in a Subsequent
Placement, which Offer Notice shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to be
issued or sold, and the number or amount of the Offered Securities to be issued
or sold, (y) identify the persons or entities (if known) to which or with which
the Offered Securities are to be offered, issued or sold and (z) offer to issue
and sell to such Investors an aggregate amount representing thirty five percent
(35%) of the aggregate principal amount of the Notes purchased by all of the
Investors at the Closing, to be allocated among such Investors (a) based on such
Investor's Pro Rata Share (the "BASIC AMOUNT"), and (b) with respect to each
Investor that elects to purchase its Basic Amount, any additional portion of the
Offered Securities attributable to the Basic Amounts of other Investors as such
Investor shall indicate it will purchase or acquire should the other Investors
subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION AMOUNT").
(c) To accept an Offer, in whole or in part, such Investor must
deliver a written notice to the Company prior to the end of the second (2nd)
Business Day by 5:00 p.m New York City time after such Investor's receipt of the
Offer Notice containing the final definitive terms of the Subsequent Placement
(the "OFFER PERIOD"), setting forth the portion of such Investor's Basic Amount
that such Investor elects to purchase and, if such Investor shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Investor elects to purchase (in either case, the "NOTICE OF ACCEPTANCE").
If the Basic Amounts subscribed for by all Investors are less than the total of
all of the Basic Amounts, then each Investor who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "AVAILABLE UNDERSUBSCRIPTION
AMOUNT"), each Investor who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such Investor bears to the total
Basic Amounts of all Investors that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent its deems reasonably
necessary.
(d) If the aggregate dollar amount of the Subsequent Placement
exceeds the amount purchasable by the Investors hereunder or the Investors,
collectively, do not elect to purchase the entire amount of the Subsequent
Placement which may be purchased by such Investors pursuant to this SECTION
4.12, the Issuer may offer and sell the securities to which the Investors were
entitled to purchase hereunder, or the securities not purchasable by the
Investors hereunder, as the case may be, to a third party (which may include any
Investor), provided that such sale must occur within thirty (30) days of the
Subsequent Placement Closing Date and on the same terms and conditions set forth
in the Offer Notice. Any such sale made after such thirty-day period, or on
terms or conditions different than the terms set forth in the Offer Note, must
again be offered to the Investors in accordance with SECTION 4.12 above.
Notwithstanding anything herein to the contrary, in the event that aggregate
purchase price for all securities proposed to be issued in a Subsequent
Placement by an Issuer is less than 35% of the aggregate principal amount of the
Notes issued to all of the Investors at the Closing, the dollar amount of such
securities to which each Investor is entitled to purchase hereunder shall be
proportionately
34
reduced. Each purchase of securities by Investors pursuant to this SECTION 4.12
shall take place on the Subsequent Placement Closing Date.
Section 4.13. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities to be included on the Company Registration
Statement (each as defined in the Registration Rights Agreement) upon each
national securities exchange and automated quotation system, if any, upon which
the Company Common Shares are then listed (subject to official notice of
issuance) and shall maintain, in accordance with the Notes, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Company Common Stock's
authorization for quotation on the Principal Market or on any Eligible Market
(as defined in the Notes). Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Company Common Stock on the Principal Market or on any
Eligible Market, as applicable. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4.13. After each
of a Games Exchange Date and a Software Exchange Date (each as defined in the
Registration Rights Agreement) Games and Software, as applicable, shall promptly
secure the listing of all of the Registrable Securities to be included upon each
of the Games Registration Statement and the Software Registration Statement, as
applicable, upon each national securities exchange and automated quotation
system, if any, upon which the Games Common Shares or Software Common Shares, as
applicable, are then listed (subject to official notice of issuance) and shall
maintain, in accordance with the Notes, such listing of all such applicable
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. Games and Software, as applicable, shall maintain the
Games Common Shares' or Software Common Shares', as applicable, authorization
for quotation on such Eligible Market through and including the expiration of
the applicable Registration Period (as defined in the Registration Rights
Agreement). Neither Games nor Software, as applicable, nor any of their
respective Subsidiaries shall take any action which would be reasonably expected
to result in the delisting or suspension of the Games Common Shares or Software
Common Shares, as applicable, on the such Eligible Market prior to the
expiration of the applicable Registration Period. Games and Software shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4.13.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors' Obligations at the Closing. Each Investor's
obligations to effect the Closing, including without limitation its obligation
to purchase any Notes at the Closing, are conditioned upon the fulfillment (or
waiver by such Investor in its sole and absolute discretion) of each of the
following events as of the Closing Date, and the Company shall use commercially
reasonable efforts to cause each of such conditions to be satisfied:
5.1.1 the representations and warranties of the Company set forth in
this Agreement and in the other Transaction Documents shall be
true and correct in all material respects as of such date as
if made on such date (except that, to the extent that any such
representation or warranty relates to a particular date, such
representation or
35
warranty shall be true and correct in all material respects as
of that particular date);
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and
conditions set forth in this Agreement and in the other
Transaction Documents that are required to be complied with or
performed by the Company on or before the Closing;
5.1.3 the Company shall have delivered to such Investor a
certificate, signed by a duly authorized officer of the
Company, certifying that the conditions specified in SECTIONS
5.1.1 and 5.1.2 have been fulfilled as of the Closing, it
being understood that such Investor may rely on such
certificate as though it were a representation and warranty of
the Company made herein;
5.1.4 the Company shall have delivered to such Investor a
certificate, signed by the Secretary or an Assistant Secretary
of the Company, attaching (i) the memorandum and articles of
association of the Company and (ii) resolutions passed by its
Board of Directors to authorize the transactions contemplated
hereby and by the other Transaction Documents, and certifying
that such documents are true and complete copies of the
originals and have not been amended or superseded, it being
understood that such Investor may rely on such certificate as
a representation and warranty of the Company made herein;
5.1.5 the Company shall have delivered to such Investor the
opinions, dated as of the Closing Date, of (i) as to matters
under Cayman Islands law, Cayman Islands counsel for the
Company in the form attached hereto as EXHIBIT C-1 hereto,
(ii) as to certain matters under New York law and U.S. federal
securities law, King & Spalding LLP in the form attached
hereto as EXHIBIT C-2 hereto, and (iii) as to certain other
matters, the Company's General Counsel, in the form attached
hereto as EXHIBIT C-3;
5.1.6 the Company and, to the extent applicable, Games and Software,
shall have executed and delivered to such Investor the
Registration Rights Agreement and each other Transaction
Document; and
5.1.7 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby and by
the other Transaction Documents.
36
5.2 Conditions to Company's Obligations at the Closing. The Company's
obligations to effect the Closing with an Investor are conditioned upon the
fulfillment (or waiver by the Company in its sole and absolute discretion) of
each of the following events as of the Closing Date:
5.2.1 the representations and warranties of such Investor set forth
in this Agreement and in the other Transaction Documents to
which it is a party shall be true and correct in all material
respects as of such date as if made on such date (except that,
to the extent that any such representation or warranty relates
to a particular date, such representation or warranty shall be
true and correct in all material respects as of that
particular date);
5.2.2 such Investor shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement and in the other Transaction Documents that are
required to be complied with or performed by such Investor on
or before the Closing;
5.2.3 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby and by
the other Transaction Documents;
5.2.4 such Investor shall have executed each Transaction Document to
which it is a party and shall have delivered the same to the
Company; and
5.2.5 such Investor shall have provided the Company with any forms
reasonably requested by the Company prior to the Closing to
establish that no payments to such Investor under the Notes
will be subject to withholding tax in any taxing
jurisdictions.
6. MISCELLANEOUS.
6.1 Survival; Severability. The representations, warranties, covenants and
indemnities made by the parties herein and in the other Transaction Documents
shall survive the Closing notwithstanding any due diligence investigation made
by or on behalf of the party seeking to rely thereon. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that in such case the
parties shall negotiate in good faith to replace such provision with a new
provision which is not illegal, unenforceable or void, as long as such new
provision does not materially change the economic benefits of this Agreement to
the parties.
6.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure
37
to the benefit of and be binding upon the respective successors and permitted
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Following the Closing Date, an Investor may assign its rights
and obligations hereunder in connection with any private sale or transfer of the
Securities in accordance with the terms hereof, as long as, as a condition
precedent to such transfer, the transferee executes an acknowledgment agreeing
to be bound by the applicable provisions of this Agreement, in which case the
term "INVESTOR" shall be deemed to refer to such transferee as though such
transferee were an original signatory hereto. The Company may not assign its
rights or obligations under this Agreement.
6.3 No Reliance. Each party acknowledges that (i) it has such knowledge in
business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
any other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from any other party to this Agreement or any other Transaction Document any
assurance or guarantee as to the merits (whether legal, regulatory, tax,
financial or otherwise) of entering into this Agreement or the other Transaction
Documents or the performance of its obligations hereunder and thereunder, and
(iv) it has consulted with its own legal, regulatory, tax, business, investment,
financial and accounting advisors to the extent that it has deemed necessary,
and has entered into this Agreement and the other Transaction Documents based on
its own independent judgment and, if applicable, on the advice of such advisors,
and not on any view (whether written or oral) expressed by any other party.
6.4 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor hereunder are several and not joint with the
obligations of the other Investors hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. The Company acknowledges and agrees that nothing contained
herein or in any other Transaction Document, and no action taken by any Investor
pursuant hereto or thereto, shall be deemed to constitute the Investors as a
partnership, an association, a joint venture or any other kind of entity, or a
"group" as described in Section 13(d) of the Exchange Act, or create a
presumption that the Investors are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Investor has been represented by its own separate counsel in connection with the
transactions contemplated hereby, shall be entitled to protect and enforce its
rights, including without limitation rights arising out of this Agreement or the
other Transaction Documents, individually, and shall not be required to join any
other Investor as an additional party in any proceeding for such purpose.
6.5 Governing Law; Jurisdiction; Waiver of Jury Trial. (a) This Agreement
shall be governed by and construed under the internal laws of the State of New
York applicable to contracts made and to be performed entirely within the State
of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City and County of New York for
the adjudication of any dispute hereunder or any other Transaction
38
Document or in connection herewith or therewith or with any transaction
contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.
(b) EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY
DISPUTE OR CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT OR THE OTHER
TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH,
TERMINATION OR VALIDITY OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 6.5(b).
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered by facsimile transmission.
6.7 Headings. The headings used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
6.8 Notices. Any notice, demand or request required or permitted to be
given by the Company or an Investor pursuant to the terms of this Agreement
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such 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 second Business Day after
timely delivery to an internationally recognized overnight courier and (iii) on
the Business Day actually received if sent by certified or registered mail
(return receipt requested, postage prepaid), addressed as follows:
If to the Company:
39
CDC Corporation
00/X Xxxxxxxx Xxxxxx
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.
Phone: (000) 000-0000
Fax: (000) 000-0000
and if to any Investor, to such address for such Investor as shall appear on
EXHIBIT A hereto with a copy to such Investor's counsel (if any) as listed
therein, or as shall be designated by such Investor in writing to the Company in
accordance with this SECTION 6.8.
6.9 Expenses. The Company and each Investor shall pay all costs and
expenses that it incurs in connection with the negotiation, execution, delivery
and performance of this Agreement or the other Transaction Documents, provided,
however, that that the Company shall, at the Closing, pay to Evolution the
amount of $100,000 in immediately available funds as reimbursement for its
out-of-pocket expenses (including without limitation reasonable legal fees and
expenses) incurred or to be incurred by it in connection with its due diligence
investigation of the Company and the negotiation, preparation, execution,
delivery and performance of this Agreement and the other Transaction Documents.
At the Closing, the amount due for such fees and expenses may be netted out of
the Purchase Price payable by Evolution or its Affiliates.
6.10 Entire Agreement. This Agreement and the other Transaction Documents
constitute the entire agreement between or among the parties with regard to the
subject matter hereof and thereof, superseding all prior agreements or
understandings, whether written or oral, between or among the parties.
6.11 Amendments. Neither this Agreement nor any term hereof may be amended
or waived except pursuant to a written instrument executed by the Company and
the holders of at least a majority in aggregate principal amount of Notes then
outstanding; provided, however, that the Company may amend this Agreement or any
term without the consent of any Investor if such amendment is for the sole
purpose of: (i) adding to the covenants of the Company for the benefit of the
Investors; (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 Agreement and the Notes or (iv) correcting a manifest error or
supplementing any provision contained herein or
40
therein, as long as such correction or supplement does not adversely affect the
rights of any Investor and, provided, further, that no condition set forth in
SECTION 5 hereof may be waived with respect to an Investor other than by a
written instrument signed by the Investor against whom enforcement of any such
waiver is sought. Any waiver shall be effective only in the specific instance
and for the specific purpose for which given. 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 6.11 may not reduce
the percentage of the principal amount of the outstanding Notes the consent of
whose Holders is required for any amendment to this Agreement or the consent of
whose Holders is required for any waiver provided for under this Agreement. No
consideration shall be offered or paid to any Investor to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the Investors.
[Signature Pages to Follow]
41
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first-above written.
CDC CORPORATION
By: ___________________________
Name:
Title:
EVOLUTION MASTER FUND LTD. SPC,
SEGREGATED PORTFOLIO M
By: __________________________
Name:
Title:
ALEXANDRA GLOBAL MASTER FUND LTD.
BY: ALEXANDRA INVESTMENT MANAGEMENT, LLC
By: __________________________
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman & Chief Executive Officer
CAPITAL VENTURES INTERNATIONAL
BY: HEIGHTS CAPITAL MANAGEMENT, INC.
By: __________________________
Name: Xxxxxx Xxxxxxxx
Title: Investment Manager
DEUTSCHE BANK AG, LONDON BRANCH
By: __________________________
Name:
Title:
JAYHAWK XX XXXXXXX CORP.
By: __________________________
Name: Xxxxxxx X. Xxxxxxx
Title: CFO of GP
JAYHAWK PE CO-INVEST BLOCKER CORP.
By: __________________________
Name: Xxxxxxx X. Xxxxxxx
Title: CFO of GP
JGB CAPITAL OFFSHORE, LTD.
By: __________________________
Name: Xxxxx Xxxxx
Title: President
KINGS ROAD INVESTMENTS LTD.
BY: POLYGON INVESTMENT PARTNERS LP
By: __________________________
Name: Xxxxxxx Xxxxx
Title: Authorized Signatory
M KINGDON OFFSHORE LTD
By: __________________________
Name: Xxxx Xxxxxxx
Title:
PORTSIDE GROWTH AND OPPORTUNITY FUND
BY: RAMIUS CAPITAL GROUP, LLC
By: __________________________
Name: Xxxxxxx Xxxxx
Title:
RADCLIFFE SPC, LTD. FOR AND ON BEHALF OF
THE CLASS A CONVERTIBLE CROSSOVER
SEGREGATED PORTFOLIO
BY: RG CAPITAL MANAGEMENT, L.P.
BY: RGC MANAGEMENT COMPANY, LLC
By: __________________________
Name: Xxxxxx X. Xxxxxxxxxx
Title: Managing Director
XXXXXXX INTERNATIONAL FUND, LTD.
By: __________________________
Name: Xxxxx Xxxxxx
Title: Managing Member
UBS X'XXXXXX LLC FBO X'XXXXXX PIPES
CORPORATE STRATEGIES MASTER LIMITED
BY: UBS X'XXXXXX LLC
By: __________________________
Name: Xxxx Xxxxxx
Title: Executive Director
EXHIBIT A
SCHEDULE OF INVESTORS
LEGAL
JURISDICTION PRINCIPAL PURCHASE WIRE REPRESENTATIVE'S
PURCHASER ADDRESS OF RESIDENCE AMOUNT OF NOTE PRICE INSTRUCTIONS ADDRESS
----------------- ------------------------------ ------------- -------------- ------------- ------------- -------------------
Alexandra Global c/o Alexandra Investment British $ 6,000,000 $ 6,000,000
Master Fund Ltd. Management, LLC Virgin
000 Xxxxx Xxxxxx, 00xx Xxxxx Xxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Capital Ventures Capital Ventures International Cayman $15,000,000 $15,000,000
International c/o Heights Capital Management Islands
000 Xxxxxxxxxx Xxxxxx, Xxxxx
0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Tel: (000) 000-0000
Evolution Master Xxxxxx House Cayman $68,000,000 $68,000,000 Xxxxxx Song LLP
Fund Ltd. SPC, 00 Xxxx Xxxxxx Xxxxxxx 000 Xxxxx Xxxxxx
Segregated Xxxxxx Town 19th Floor
Portfolio M Grand Cayman NY, NY 10017
KY1-9002 Xxxxxx X. Xxxxxx
Cayman Islands Tel: 000-000-0000
Fax: 000-000-0000
Additional copy to:
Evolution Capital Management,
LLC
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Xxxxxxx Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Deutsche Bank Deutsche Bank AG, London Deutsche $13,000,000 $13,000,000
AG, London Branch Branch Bank AG,
c/o Deutsche Bank Securities London
Inc. Branch is a
00 Xxxx Xxxxxx, 00xx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 banking
Attn: Xxxxxx X. Xxxxxxxxx corporation,
Tel: organized
and existing
Additional Notices to: under the
laws of the
Deutsche Bank AG, London Federal
Branch Republic of
c/o Deutsche Bank Securities Germany and
Inc. registered
00 Xxxx Xxxxxx, 00xx Xxxxx under
Xxx Xxxx, XX 00000 Schedule 21A
Attn: Xxxxx Xxxxxxx and Xxxx to the
Kourtesiadou Companies
Tel: Act of 1985
Fax: (000) 000-0000 / as having
(000) 000-0000 established
a branch in
England
and Wales.
Jayhawk PE Jayhawk XX Xxxxxxx Corp. Cayman $25,000,000 $25,000,000
Blocker Corp. c/o Walkers SPV Limited at Islands
Xxxxxx House, 00 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxx Xxxxxx
XX0-0000, Cayman Islands
Attn: Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Jayhawk PE Jayhawk PE Co-Invest Blocker Cayman $ 0.00 $ 0.00
Co-Invest Corp. Islands
Blocker Corp. c/o Walkers SPV Limited at
Xxxxxx House, 00 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxx Xxxxxx
XX0-0000, Cayman Islands
Attn: Xxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
JGB Capital JGB Capital Offshore Ltd. Cayman $ 500,000 $ 500,000
Offshore, Ltd. c/x Xxxxxxx Corporate Islands
Services (Cayman) Limited
Xxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxx Town, Grand Cayman
Additional copy to:
JGB Capital Offshore, Ltd.
c/o JGB Management Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
Tel: (000) 000-0000
Kings Road c/o Polygon Investment Cayman $10,000,000 $10,000,000 Xxxxxxx Xxxx & Xxxxx LLP
Investments Ltd. Partners LP Islands 000 Xxxxx Xxxxxx
000 Xxxxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
14th Floor Attention: Xxxxxxx Xxxxx,
Xxx Xxxx, XX 00000 Esq.
Attention: Xxxx X.X. Facsimile: (000) 000-0000
Xxxxxxxxx and Xxxxxxx X. Xxxxx Telephone: (000) 000-0000
Fax: (000) 000-0000
Tel: (000) 000-0000
M Xxxxxxx X Xxxxxxx Offshore Ltd Cayman $10,000,000 $10,000,000
Offshore Ltd Xxxxxxx Xxxxx Cayman Trust Islands
Harbour Centre
Grand Cayman, Cayman Islands
BWI
C/O Kingdon Capital
Management LLC
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn:
Tel:
Portside Growth Portside Growth and Cayman $10,000,000 $10,000,000
and Opportunity Opportunity Fund Islands
Fund c/o Ramius Capital Group, LLC (00-0000000)
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Tel: (000) 000-0000 /
(000) 000-0000
Fax: (000) 000-0000
Radcliffe SPC, Radcliffe SPC, Ltd. for and on Cayman $ 5,000,000 $ 5,000,000
Ltd. for and behalf of the Class A Islands
on behalf of the Convertible Crossove
Class A Segregated Portfolio
Convertible c/o RG Capital Management, LP
Crossover 3 Bala Plaza-East, Xxxxx 000
Xxxxxxxxxx Xxxx Xxxxxx, XX 00000
Portfolio Attn: Xxxxxx X. Xxxxxxxxxx
Tel: (000) 000-0000
Xxxxxxx Xxxxxxx International Fund, Ltd. $ 3,500,000 $ 3,500,000
International c/o Swiss Financial Services,
Fund, Ltd. Ltd
One Montague
0xx Xxxxx, Xxxx Xxx Xxxxxx\
X.X. Xxx XX-00000
Nassau, Bahamas
Additional copy to:
Xxxxxxx International Fund,
Ltd.
c/x Xxxxxxx, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000 Xxxx
Xxxxxx or Xxxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Xxx Xxxxxx
Swiss Financial Services
000 Xxxxxx Xxxx.
Xxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
UBS X'Xxxxxx LLC c/o UBS X'Xxxxxx LLC fbo Cayman $2,000,000 $2,000,000
fbo X'Xxxxxx PIPES Corporate Islands
X'Xxxxxx Strategies Master Limited
PIPES Corporate One North Xxxxxx Dr.
Strategies 32nd Floor
Master Limited Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
