EXHIBIT 4.57
EXECUTION VERSION
================================================================================
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
Dated as of February 18, 2008
between
YUCAIPA GLOBAL PARTNERSHIP FUND L.P.
and
XINHUA FINANCE MEDIA LTD.
================================================================================
i
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION 3
Section 1.1 Definitions...............................................4
Section 1.2 Interpretation............................................4
ARTICLE II PURCHASE AND SALE OF SHARES 4
Section 2.1 Purchase and Sale of Shares...............................4
Section 2.2 The Closing...............................................4
Section 2.3 Investor Deliveries at the Closing........................4
Section 2.4 Company Deliveries at the Closing.........................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 5
Section 3.1 Organization..............................................5
Section 3.2 Capitalization............................................5
Section 3.3 Authorization; Execution and Enforceability...............7
Section 3.4 Subsidiaries and Joint Ventures...........................7
Section 3.5 No Conflicts; Consents and Approvals......................7
Section 3.6 SEC Reports; Financial Statements.........................8
Section 3.7 Absence of Certain Changes................................9
Section 3.8 No Undisclosed Liabilities................................9
Section 3.9 Litigation................................................9
Section 3.10 Licenses.................................................10
Section 3.11 Intellectual Property Rights.............................10
Section 3.12 Exchange Listing.........................................10
Section 3.13 Tax Matters..............................................11
Section 3.14 Tangible Assets..........................................11
Section 3.15 Leases and Contracts.....................................11
Section 3.16 Employees................................................12
Section 3.17 Compliance with Law......................................12
Section 3.18 Related Party Transactions...............................12
Section 3.19 Investment Company.......................................12
Section 3.20 Corrupt Practices; USA Patriot Act, OFAC.................12
Section 3.21 Validity of the Shares...................................13
Section 3.22 Registration, Information and Special Voting Rights......13
Section 3.23 Securities Law Compliance................................13
Section 3.24 Brokers..................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 14
Section 4.1 Organization, Standing and Power.........................14
Section 4.2 Authorization; Execution and Investor....................14
Section 4.3 No Conflict; Consents and Approvals......................14
Section 4.4 Purchase Entirely for Own Account........................14
Section 4.5 Investment Experience....................................15
Section 4.6 Restricted Securities....................................15
Section 4.7 Legends..................................................15
Section 4.8 Accredited Investor......................................15
Section 4.9 No General Solicitation..................................16
Section 4.10 Brokers..................................................16
ARTICLE V COVENANTS 16
Section 5.1 Access to Information....................................16
Section 5.2 Pre-Closing Actions Affecting the Common Shares..........17
Section 5.3 Listing..................................................17
Section 5.4 Preserve Accuracy of Representations and Warranties;
Fulfillment of Conditions; Notification of Certain
Matters..................................................18
Section 5.5 Contractual Consents and Governmental Approvals..........18
Section 5.6 Issuance of ADS Shares...................................19
Section 5.7 Investor Pre-Emptive Rights..............................19
Section 5.8 Filing of Resale Shelf Registration Statement............21
ARTICLE VI CONDITIONS 28
Section 6.1 Conditions to the Company's Obligations..................28
Section 6.2 Conditions to the Investor's Obligations.................29
ARTICLE VII INDEMNIFICATION 31
Section 7.1 Survival.................................................31
Section 7.2 Indemnification..........................................31
Section 7.3 Damages Threshold and Cap................................32
Section 7.4 Indemnification Procedures...............................32
Section 7.5 Third-Party Claims.......................................32
Section 7.6 Tax Treatment of Indemnity Payments......................33
Section 7.7 Exclusivity..............................................33
Section 7.8 Certain Damages..........................................33
ARTICLE VIII FURTHER AGREEMENTS; TRANSFER RESTRICTIONS 33
Section 8.1 Public Announcements.....................................33
Section 8.2 Fees and Expenses........................................33
Section 8.3 Limitation on Short Sales................................34
Section 8.4 Restrictions on Transfers of Series B Preferred Shares...34
ARTICLE IX GENERAL 34
Section 9.1 Termination..............................................34
Section 9.2 Notices..................................................35
Section 9.3 Complete Agreement; No Third-Party Beneficiaries.........36
2
Section 9.4 GOVERNING LAW............................................37
Section 9.5 No Assignment............................................37
Section 9.6 Counterparts.............................................37
Section 9.7 Remedies; Waiver.........................................37
Section 9.8 Severability.............................................38
Section 9.9 Amendment; Waiver........................................38
Section 9.10 Arbitration..............................................38
Exhibit A Definitions
Exhibit B Form of Authorizing Resolution
Exhibit C-1 Form of Legal Opinion of Xxxxxxx Xxxx Xxxxxxx
Exhibit C-2 Form of Legal Opinion of Xxxxxx & Xxxxxxx LLP
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Shareholders' Agreement
Exhibit F Form of Consent to Issuance of Series C Preferred Shares
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
THIS SERIES B CONVERTIBLE PREFERRED SHARES PURCHASE AGREEMENT, dated as of
February 18, 2008, is by and between YUCAIPA GLOBAL PARTNERSHIP FUND L.P., an
exempted limited partnership organized under the laws of the Cayman Islands (the
"Investor"), and XINHUA FINANCE MEDIA LIMITED, a company organized under the
laws of the Cayman Islands (the "Company" and together with the Investor, the
"Parties").
W I T N E S S E T H:
WHEREAS, the Company intends to create a new class of convertible preferred
shares designated as Series B Convertible Preferred Shares (the "Series B
Preferred Shares") through the adoption by the Board of Directors of the Company
of an authorizing resolution in the form attached as Exhibit B hereto (the
"Authorizing Resolution"); and
WHEREAS, the Company wishes to issue and sell to the Investor, and the
Investor wishes to purchase from the Company, 300,000 Series B Preferred Shares
(the "Shares") upon the terms and subject to the conditions set forth herein and
in the Transaction Documents;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
3
Section 1.1 Definitions. The capitalized terms that are defined in Exhibit
A are used herein with the meanings set forth therein.
Section 1.2 Interpretation.
(a) Headings. The headings to the Articles, Sections and Subsections of
this Agreement or any Exhibit to this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.
(b) Usage. In this Agreement, unless the context requires otherwise: (i)
the singular number includes the plural number and vice versa; (ii) reference to
any gender includes each other gender; (iii) Exhibit A to this Agreement is
hereby incorporated into, and shall be deemed to be a part of, this Agreement;
(iv) the terms "hereunder", "hereof", "hereto" and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular
section or other provision hereof; (v) the words "include", "includes" and
"including" shall be deemed to be followed by the words "without limitation";
and (vi) a reference to any Article, Section, Subsection or Exhibit shall be
deemed to refer to the corresponding Article, Section, Subsection, or Exhibit of
this Agreement.
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1 Purchase and Sale of Shares. At the Closing, the Company shall
issue and sell to the Investor, and the Investor shall purchase from the
Company, the Shares on the terms and subject to the conditions set forth herein,
free and clear of any Liens. At the Closing, the Investor shall pay the Company,
as consideration for the Shares, an aggregate purchase price of US$30,000,000
(the "Purchase Price") less the Expense Reimbursement referred to in Section 8.2
below (the amount of the Purchase Price remaining after the deduction of such
Expense Reimbursement being sometimes hereinafter referred to as the "Net
Purchase Price").
Section 2.2 The Closing. Subject to the fulfillment of the conditions set
forth in Article VI, the issuance, purchase and sale of the Shares and the
consummation of the other Transactions (the "Closing") shall take place in the
offices of Xxxxxx & Xxxxxxx LLP, 41st Floor, One Exchange Square, 0 Xxxxxxxxx
Xxxxx, Xxxxxxx, Xxxx Xxxx on February 27, 2008, or at such other time and place
as the Company and the Investor may agree (the date on which the Closing
actually takes place being sometimes referred to herein as the "Closing Date").
At the Closing, the Investor and the Company shall make certain deliveries, as
specified in Sections 2.3 and 2.4, respectively, and all such deliveries,
regardless of chronological sequence, shall be deemed to occur contemporaneously
and simultaneously on the occurrence of the last delivery and none of such
deliveries shall be effective until the last of the same has occurred.
Section 2.3 Investor Deliveries at the Closing. At the Closing, the
Investor shall deliver to the Company:
(a) the Net Purchase Price by wire transfer of same-day funds to a
bank account designated in writing by the Company at least two Business
Days prior to the Closing;
4
(b) a counterpart of the Registration Rights Agreement, duly executed
by the Investor;
(c) a counterpart of the Shareholders Agreement, duly executed by the
Investor; and
(d) each of the opinions, certificates and documents required to be
delivered by the Investor at the Closing pursuant to Section 6.1.
Section 2.4 Company Deliveries at the Closing. At the Closing, the Company
shall deliver to the Investor:
(a) a certificate representing the Shares registered in the name of
the Investor;
(b) a counterpart of the Registration Rights Agreement, duly executed
by the Company;
(c) a counterpart of the Shareholders Agreement, duly executed by the
Company and XFL; and
(d) each of the opinions, certificates and documents required to be
delivered by the Company at the Closing pursuant to Section 6.2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as of the date
of this Agreement and as of the Closing Date, as follows:
Section 3.1 Organization. The Company: (a) is an exempted company limited
by shares duly organized, validly existing and in good standing under the laws
of the Cayman Islands; (b) has all requisite corporate power and authority to
carry on its business as now conducted; (c) is duly qualified, licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to do so would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
and (d) has the corporate power and authority to execute, deliver and perform
its obligations under each of the Transaction Documents to which it is a party.
The Company is not in default under or in violation of any provision of its
Memorandum of Association or Articles of Association, and no such defaults or
violations have occurred in the past which would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
Section 3.2 Capitalization.
(a) As of the date hereof, the authorized capital of the Company consists
of 143,822,874 Class A Common Shares, 50,054,619 Class B Common Shares and
806,122,507 shares not yet designated as to class or series (the "Undesignated
Shares"). As of the date
5
hereof, of the Class A Common Shares currently authorized: 90,061,269 shares are
currently outstanding, 19,530,205 shares are reserved for issuance under the
Share Option and Share Grant Plan and the remainder are unissued and not
reserved for issuance for any purpose. Of the Class B Common Shares, 50,054,618
are currently outstanding and the remainder are unissued and not reserved for
issuance for any purpose. None of the Series B Preferred Shares have been issued
or have been reserved for any purpose other than for issuance pursuant to this
Agreement.
(b) Section 3.2(b) of the Disclosure Schedule sets forth a list of all
Employee Share Options currently outstanding as of the date hereof. Except for
such Employee Share Options or as otherwise set forth in Section 3.2(b) of the
Disclosure Schedule: (i) there are no outstanding Convertible Securities or
Share Purchase Rights or any share appreciation rights, performance share awards
or other employee incentive awards the value of which is determined by reference
to the value of the Class A Common Shares, Class B Common Shares or ADS Shares,
(ii) the Company is not a party to any other agreements or commitments
obligating the Company to issue, sell, repurchase, redeem or otherwise acquire
any Capital Shares, Convertible Securities or Share Purchase Rights; and (iii)
to the knowledge of the Company, no other Person is a party to or otherwise
bound by any agreements, trusts, proxies, instruments or other commitments
relating to the voting, purchase, sale or other disposition of any Capital
Shares, Convertible Securities or Share Purchase Rights held by such Person.
Neither the issuance of the Shares as contemplated herein, the issuance of any
PIK Dividend Shares nor the issuance of any Conversion Shares will cause the
number of Common Shares issuable pursuant to the Employee Share Options or any
other outstanding Convertible Securities or Share Purchase Rights to increase as
a result of any antidilution provisions relating thereto.
(c) There are no authorized or outstanding bonds, debentures, notes or
other obligations of the Company, the holders of which have the right to vote
with the holders of Common Shares on any matter.
(d) Except as disclosed in the SEC Reports or Section 3.2(d) of the
Disclosure Schedule, the Company does not have in effect any dividend
reinvestment plans or employee share purchase plans.
(e) All outstanding Capital Shares have been duly authorized and validly
issued and are fully-paid and nonassessable and have been issued without
violation of any preemptive rights of any Person. All outstanding Employee Share
Options have been issued without violation of any preemptive rights of any
Person, and all Class A Common Shares issued upon exercise thereof will have
been, upon such issuance, duly authorized and validly issued without violation
of any preemptive rights of any Person and will be fully-paid and nonassessable.
(f) Upon the due issuance by the Depositary to the Investor of ADRs
evidencing the ADS Shares against the deposit of Class A Common Shares in
accordance with the provisions of the Deposit Agreement, such ADRs will be duly
and validly issued under the Deposit Agreement and the Investor will be entitled
to the rights of a registered holder of ADRs evidencing the ADS Shares specified
therein and in the Deposit Agreement. The Deposit Agreement is in full force and
effect, has been duly authorized, executed and delivered by the Company and, to
the knowledge of the Company, the Depositary, and constitutes a valid and
6
legally binding obligation of the Company and, to the knowledge of the Company,
the Depositary, enforceable against the Company and (to the knowledge of the
Company) the Depositary in accordance with its terms. The Company has not
breached any of its material obligations under the Deposit Agreement, and, to
the knowledge of the Company, the Depositary has not breached any of its
material obligations under the Deposit Agreement. The Company has not received
any notice of resignation or termination from the Depositary.
Section 3.3 Authorization; Execution and Enforceability.
(a) The Company has all requisite corporate power and authority to execute,
deliver and perform each Transaction Document to which it is a party and to
consummate each of the Transactions. Other than the Authorizing Resolution, the
execution, delivery and performance of each Transaction Document to which the
Company is a party and the consummation of each of the Transactions has been
duly authorized by the Board and no further corporate action on the part of the
Company (including any action by the shareholders of the Company) is required in
connection therewith.
(b) This Agreement has been duly executed and delivered by the Company and
constitutes, and, upon execution and delivery thereof as contemplated herein,
each other Transaction Document to which the Company is a party will have been
duly executed and delivered by the Company and will constitute, a legal, valid
and binding obligation of the Company enforceable against it in accordance with
its terms, subject to the effect of any applicable bankruptcy, reorganization,
insolvency, moratorium, restructuring or similar laws affecting creditors'
rights and remedies generally and general equitable principles (regardless of
whether enforceability is considered a proceeding in equity or at law)
("Enforceability Exceptions").
Section 3.4 Subsidiaries and Joint Ventures.
(a) All material Subsidiaries of the Company are described in the SEC
Reports or in Section 3.4(a) of the Disclosure Schedule. Except as disclosed in
the SEC Reports or in such Section 3.4(a) of the Disclosure Schedule: (i) all of
the outstanding shares or registered capital or other equity capital in each of
such Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable; (ii) all of the outstanding shares or registered capital of, or
other ownership interest in each of such Subsidiaries are owned by the Company
or a wholly-owned Subsidiary of the Company, free and clear of any Liens; and
(iii) there are no outstanding subscriptions, rights, convertible securities or
other agreements or commitments obligating the Company or any such Subsidiary to
issue, transfer or sell any securities of any such Subsidiary.
(b) Except as described in the SEC Reports or in Section 3.4(b) of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns, of
record or beneficially, any material direct or indirect equity or other interest
in any other Entity.
Section 3.5 No Conflicts; Consents and Approvals.
(a) The execution, delivery or performance by the Company of the
Transaction Documents to which it is a party and the consummation of the
Transactions will not (a) conflict with or violate any provision of the
Memorandum of Association or Articles of
7
Association of the Company or any Organizational Document of any of its
Subsidiaries; (b) result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of, create
in any Person any right to accelerate, terminate, modify or cancel, or require
any notice, consent or waiver under, any Contractual Obligation or any Law
applicable to the Company or any of its Subsidiaries or any of their respective
properties and assets; (c) result in the imposition of any Lien upon any
properties or assets of the Company or any of its Subsidiaries, (d) result in
the Company being required to redeem, repurchase or otherwise acquire any
outstanding equity or debt interests, securities or obligations of the Company
or any of its Subsidiaries or any options or other rights exercisable for any of
same or (e) cause the accelerated vesting of any Employee Share Options or other
employee benefits or result in any obligations on the part of the Company or any
of its Subsidiaries to pay any additional severance benefits upon the
termination of the employment of any employee thereof, except in the case of (b)
or (c), to the extent it does not or would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as set forth in Section 3.5(b) of the Disclosure Schedule, the
Company is not required to obtain any consent, authorization or approval of, or
make any filing, notification or registration with, any Governmental Authority
or any self regulatory organization in order for the Company to execute, deliver
and perform any Transaction Document to which it is a party or to consummate any
of the Transactions ("Company Approvals").
(c) Except as set forth in Section 3.5(c) of the Disclosure Schedule, no
Contractual Consents are required to be obtained under any Contractual
Obligation applicable to the Company or any of its Subsidiaries in connection
with the execution, delivery or performance by the Company of any Transaction
Document to which it is a party or the consummation of any of the Transactions
("Company Contractual Consents").
Section 3.6 SEC Reports; Financial Statements.
(a) From January 1, 2007, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act (all the
foregoing filed prior to the date hereof and all exhibits included or
incorporated by reference therein and financial statements and schedules thereto
and documents included or incorporated by reference therein being sometimes
hereinafter collectively referred to as the "SEC Reports"). As of their
respective filing dates, the SEC Reports complied in all material respects with
the requirements of the Exchange Act applicable to the SEC Reports (as amended
or supplemented), and none of the SEC Reports, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) As of their respective dates, except as set forth therein or in the
notes thereto, the financial statements contained in the SEC Reports and the
related notes (the "Financial Statements") complied as to form in all material
respects with all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. The Financial Statements: (i) were
prepared in accordance with accounting principles generally
8
accepted in the United States ("GAAP"), consistently applied during the periods
involved (except (x) as may be otherwise indicated in the notes thereto or (y)
in the case of unaudited interim statements, to the extent that they may not
include footnotes or may be condensed or summary statements), (ii) fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments) and (iii) are in all material respects in accordance with the books
of account and records of the Company and its consolidated subsidiaries (except
as may be otherwise noted therein).
Section 3.7 Absence of Certain Changes.
Except as disclosed in the SEC Reports or in Section 3.7 of the Disclosure
Schedule, since September 30, 2007, (a) there has not been any Material Adverse
Effect or any changes, events or developments that would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and (b) the
Company and its Subsidiaries, taken as a whole, have conducted their respective
businesses only in the ordinary course and in conformity with past practice.
Section 3.8 No Undisclosed Liabilities.
Except as disclosed in the SEC Reports or in Section 3.8 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any material
liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated, whether due or to become due), except for the
following: (a) liabilities reflected in or reserved for in the Recent Balance
Sheet, (b) liabilities that have arisen since the date of the Recent Balance
Sheet in the ordinary course of the businesses of the Company and its
Subsidiaries consistent with past practice that would have been required under
GAAP to be reflected in the Recent Balance Sheet had such liabilities existed as
of the date of the Recent Balance Sheet, (c) liabilities that would not be
required under GAAP to be reflected in an audited consolidated balance sheet of
the Company and its consolidated subsidiaries and that are not in the aggregate
material and (d) liabilities incurred in connection with the Transactions.
Section 3.9 Litigation.
Except as disclosed in the SEC Reports or in Section 3.9 of the Disclosure
Schedule, there is no Action or Proceeding to which the Company or any of its
Subsidiaries or any of their respective officers, directors or employees is a
party (either as a plaintiff or defendant) pending or, to the knowledge of the
Company, threatened before any Governmental Authority (i) that challenges the
validity or propriety of any of the Transactions or (ii) if determined adversely
to the Company or any of its Subsidiaries or any such officer, director or
employee would reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect. Except as disclosed in the SEC Reports or as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, there has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by any Governmental Authority
involving the Company or any of its Subsidiaries or any officer, director,
employee thereof. Except as disclosed in the SEC Reports, no order, judgment or
9
decree of any Governmental Authority has been issued in any Action or Proceeding
to which the Company or any of its Subsidiaries is or was a party or, to the
knowledge of the Company, in any other Action or Proceeding except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 3.10 Licenses.
Except as disclosed in the SEC Reports or in Section 3.10 of the Disclosure
Schedule and except as would not be reasonably expected to have a Material
Adverse Effect, all material Licenses required to be obtained by the Company or
any of its Subsidiaries in all relevant jurisdictions in order to own their
respective assets and to operate their respective businesses have been duly
obtained in accordance with all applicable Laws. None of such Licenses has been
terminated and, in respect of any such Licenses that is subject to renewal, the
Company has not received any notice that such renewal will not be timely granted
by the relevant Government Authorities. The Company and each of its Subsidiaries
are in compliance with the terms of such Licenses, except where the failure to
so comply does not or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Neither the execution, delivery or
performance by the Company of any Transaction Document to which it is a party
nor the consummation of any of the Transactions will result in a breach of, or
constitute a default under, any such License. Except as disclosed in Section
3.10 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries
is, or has received any notice that it is, or has at any time been, in default
(or with the giving of notice or lapse of time or both, would be in default)
under any such License.
Section 3.11 Intellectual Property Rights.
Except as would not reasonably be expected to have a Material Adverse
Effect, the Company and the Subsidiaries own or possess, or will be able to
obtain on reasonable terms, licenses or sufficient rights to use all patents,
patent applications, patent rights, inventions, know-how, trade secrets,
trademarks, trademark applications, service marks, service names, trade names
and copyrights necessary to enable them to conduct their businesses as currently
conducted ("Intellectual Property"). Neither the Company nor any of the
Subsidiaries has infringed the intellectual property rights of third parties,
and no third party, to the knowledge of the Company, is infringing the
Intellectual Property of the Company, in each case, where such infringement
would reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect. There is no material claim or proceeding pending or, to
the knowledge of the Company, threatened that challenges the right of the
Company or any of the Subsidiaries with respect to any of the Intellectual
Property.
Section 3.12 Exchange Listing.
The ADS Shares are listed on the NASDAQ Global Market and, to the knowledge
of the Company, there are no proceedings to revoke or suspend such listing. The
Company is in compliance with the requirements of the NASDAQ Global Market for
continued listing of the ADS Shares thereon and any other applicable NASDAQ
Global Market listing and maintenance requirements. Trading in the ADS Shares
has not been suspended by the SEC or the NASDAQ Global Market.
10
Section 3.13 Tax Matters.
Except as disclosed in the SEC Reports or in Section 3.13 of the Disclosure
Schedule or except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect: (i) the Company and each of its
Subsidiaries have filed all material Tax Returns required to be filed by them;
(ii) all such material Tax Returns are true, correct and complete in all
material respects; (iii) all material Taxes due and owed by the Company and its
Subsidiaries (whether or not shown on any Tax Return) have been paid; (iv)
neither the Company nor any of its Subsidiaries currently is the beneficiary of
any extension of time within which to file any material Tax Return; (v) no claim
has ever been made by a Governmental Authority in a jurisdiction where the
Company or any of its Subsidiaries does not file Tax Returns that the Company or
any such Subsidy is or may be subject to taxation by that jurisdiction; (vi)
there are no Liens on any of the assets or properties of the Company or any of
its Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax; and (vii) neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
Section 3.14 Tangible Assets.
Except as disclosed in the SEC Reports or in Section 3.14 of the Disclosure
Schedule or except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, the Company and each of its
Subsidiaries have good and marketable title to, or have valid rights to lease or
otherwise use, all items of real and tangible personal property that are
material to their respective businesses, free and clear of all Liens other than
Liens (i) that do not materially interfere with the use of such property or (ii)
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
Section 3.15 Leases and Contracts.
Except as disclosed in the SEC Reports or in Section 3.15 of the Disclosure
Schedule, neither the Company nor any or its Subsidiaries is a party to or bound
by any material Company Contract. Except as disclosed in the SEC Reports or in
such Section 3.15 or except as would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect: (i) each Company Contract
is in full force and effect; (ii) the Company and its Subsidiaries have
satisfied in full or provided for all of their liabilities and obligations under
each such Company Contract requiring performance prior to the date hereof in all
material respects, and are not in default under any of them, nor, to the
knowledge of the Company, does any condition exist that with notice or lapse of
time or both would constitute such a default; (iii) to the knowledge of the
Company, no other party to any such Company Contract is in default thereunder,
nor does any condition exist that with notice or lapse of time or both would
constitute such a default; and (iv) no approval or consent of any Person is
needed for each such Company Contract to continue to be in full force and effect
following the consummation of the Transactions.
11
Section 3.16 Employees.
Except as disclosed in the SEC Reports or in Section 3.16 of the Disclosure
Schedule or except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect: to the knowledge of the Company,
no officer or key employee of the Company or any of its Subsidiaries, or any
group of employees whose continued employment is material to the operations of
the Company or any of its Subsidiaries, intends to terminate their employment
with the Company and there are no material controversies between the Company and
any of its officers or key employees.
Section 3.17 Compliance with Law.
Except as disclosed in the SEC Reports or in Section 3.17 of the Disclosure
Schedule or except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, the Company and each of its
Subsidiaries and the conduct and operation of their respective businesses are
and have been, since January 1, 2007, in material compliance with (a) each Law
that affects or relates to this Agreement or the Transaction Documents or any of
the Transactions or (b) each Law that is applicable to the Company or its
Subsidiaries or their respective businesses, including any environmental and
securities Laws and Laws relating to employment practices.
Section 3.18 Related Party Transactions.
Except as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, all Company Contracts, and any other
material relationships, between the Company or any Subsidiary (each, a "Company
Party"), on the one hand, and any Related Person of a Company Party, on the
other hand, and all obligations owed by a Company Party to any Related Person of
the Company Party (other than obligations owed by one Company Party to another),
are disclosed in the SEC Reports or in Section 3.18 of the Disclosure Schedule.
Section 3.19 Investment Company
The Company is not, and after giving effect to the Transactions will not
be, an "investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
Section 3.20 Corrupt Practices; USA Patriot Act, OFAC.
Neither the Company nor any Subsidiary, nor to the knowledge of the Company
any director, officer, employee, agent or other Person acting on behalf of the
Company or any Subsidiary has, in the course of his or its actions for, or on
behalf of the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employees from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee. The Company
12
and each of its Subsidiaries is in compliance in all material respects with the
USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)).
None of the Company or its Subsidiaries (i) is a Sanctioned Person, (ii) has
more than 10% of its assets in Sanctioned Entities, or (iii) derives more than
10% of its operating income from investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. The proceeds hereunder will not be used and have
not been used to fund any operations in, finance any investments or activities
in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.
Section 3.21 Validity of the Shares.
(a) Upon the issuance to the Investor in accordance with the Transaction
Documents, the Shares, and any PIK Dividend Shares, will have been duly
authorized and validly issued without violation of the preemptive rights of any
Person and will be fully-paid and nonassessable, free and clear of any Liens.
(b) Any Conversion Shares issued upon conversion of any of the Shares or
PIK Dividend Shares, upon the issuance thereof, will have been duly authorized
and validly issued without violation of the preemptive rights of any Person and
will be fully-paid and nonassessable, free and clear of any Liens.
Section 3.22 Registration, Information and Special Voting Rights.
Except as disclosed in the SEC Reports or in Section 3.22 of the Disclosure
Schedule and except as provided in the Shareholders Agreement and the
Registration Rights Agreement, the Company has not granted or agreed to grant
any registration rights, information rights or special voting rights to any
Person.
Section 3.23 Securities Law Compliance.
Assuming the accuracy of the Investor's representations and warranties
contained in Article IV, the offer, sale and issuance of the Shares hereunder,
the issuance of any PIK Dividend Shares and the issuance of any Conversion
Shares upon the conversion thereof is and will be in compliance with Section
4(2) of the Securities Act and is exempt from the registration and prospectus
delivery requirements of the Securities Act and all applicable state and foreign
securities laws. Neither the Company nor any agent of the Company has offered
the Shares by any form of general solicitation or general advertising, including
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
Section 3.24 Brokers.
No broker, investment banker or other Person is entitled to any broker's,
finder's or other similar fee or commission in connection with the execution and
delivery of this Agreement or any of the other Transaction Documents or the
consummation of any of the Transactions based upon arrangements made by or on
behalf of the Company.
13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as of the date
of this Agreement and as of the Closing Date as follows:
Section 4.1 Organization, Standing and Power.
The Investor is an exempted limited partnership duly organized, validly
existing and in good standing under the laws of the Cayman Islands. The Investor
has the necessary power and authority to execute, deliver and perform each
Transaction Document to which it is a party.
Section 4.2 Authorization; Execution and Investor.
The execution, delivery and performance by the Investor of each Transaction
Document to which it is a party have been duly and validly authorized by all
necessary limited liability company action on the part of the Investor and do
not require any further authorization or consent of the members of the Investor.
This Agreement has been duly executed and delivered by the Investor, and each
other Transaction Document to which the Investor is a party, when executed and
delivered as contemplated herein, will have been duly executed and delivered by
the Investor, and this Agreement constitutes, and each of such other Transaction
Documents upon execution and delivery thereof by the Investor will constitute,
the legal, valid and binding obligations of the Investor, enforceable against
the Investor in accordance with their respective terms, subject to the
Enforceability Exceptions.
Section 4.3 No Conflict; Consents and Approvals.
(a) Neither the execution, delivery or performance by the Investor of any
Transaction Document to which it is a party, nor the consummation by the
Investor of any of the Transactions will (i) conflict with or violate any
provision of any Organizational Document of the Investor or (ii) result in a
breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, create in any Person any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any Contractual Obligation or any Law applicable to the Investor
or any of its properties or assets other than a breach, default, acceleration,
right, notice, consent or waiver that is not material.
(b) The Investor is not required to obtain any consent, authorization or
approval of, or make any filing or registration with, any Governmental Authority
in order for the Investor to execute, deliver and perform each Transaction
Document to which it is a party and to consummate the Transactions.
Section 4.4 Purchase Entirely for Own Account.
The Shares and any PIK Dividend Shares and Conversion Shares to be acquired
by the Investor hereunder will be acquired for investment for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and the
Investor has no present intention of selling, granting any
14
participation in, or otherwise distributing the same in violation of the
Securities Act. The Investor does not have any agreement or understanding,
whether or not legally binding, direct or indirect, with any other Person to
sell or otherwise distribute the Shares.
Section 4.5 Investment Experience.
The Investor acknowledges that it can bear the economic risk and complete
loss of its investment in the Shares and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby. The Investor understands that the
purchase of the Shares involves substantial risk.
Section 4.6 Restricted Securities.
The Investor understands that the Shares and any PIK Dividend Shares or
Conversion Shares issued to the Investor will be characterized as "restricted
securities" under the United States federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. The Investor understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Shares or the fairness or suitability of
the investment in the Shares.
Section 4.7 Legends.
The Investor understands that, except as provided below and until such time
as the resale thereof has been registered under the Securities Act, certificates
evidencing the Shares and any PIK Dividend Shares and Conversion Shares issued
to the Investor shall bear the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OFFERED FOR
SALE, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION FROM
COUNSEL IN A FORM ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL STATING THAT
SUCH REGISTRATION IS NOT REQUIRED."
(b) If required under the securities laws of any U.S. state or foreign
country in connection with the issuance or sale of the Shares and any PIK
Dividend Shares and Conversion Shares issued to the Investor, any legends
required in order to comply with such laws.
Section 4.8 Accredited Investor.
The Investor is an "accredited investor" as defined in Rule 501(a) of
Regulation D, as amended, under the Securities Act. The Investor's principal
place of business is in California.
15
Section 4.9 No General Solicitation.
The Investor did not learn of the opportunity to purchase the Shares by
means of any form of general or public solicitation or general advertising, or
publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which the Investor was invited by any of the
foregoing means of communications.
Section 4.10 Brokers.
Except as heretofore been disclosed to the Company by the Investor, no
broker, investment banker or other Person is entitled to any broker's, finder's
or other similar fee or commission in connection with the execution an delivery
of this Agreement or the Registration Rights Agreement or the consummation of
any of the Transactions based upon arrangements made by or on behalf of the
Investor, and the Investor shall indemnify and hold the Company harmless against
any claim for any such fee or commission based on any such arrangements.
ARTICLE V
COVENANTS
Section 5.1 Access to Information.
(a) In General. From the date hereof until the Closing Date, the Company
shall at all times afford the officers, employees and authorized representatives
of the Investor (including independent public accountants and attorneys)
reasonable access during normal business hours to the offices, properties,
employees and business and financial records (including computer files,
retrieval programs and similar documentation) of the Company and its
Subsidiaries, all to the extent reasonably requested by the Investor. The
Investor agrees that any such investigation shall be conducted in such a manner
as not to interfere unreasonably with the operations of the Company and its
Subsidiaries.
(b) Financial Reports Where Public Filings not Available. If the Company at
any time ceases to timely file periodic reports pursuant to Section 13 of the
Exchange Act, so long as the Investor and its Affiliates and Affiliated Funds
continue to hold at least 5% of the Adjusted Outstanding Common Shares, the
Company shall deliver to the Investor each of the following:
(i) As soon as available, and in any event within sixty (60) days after
the end of each of the first three quarters of each fiscal year,
unaudited interim consolidated balance sheets of the Company and its
Subsidiaries as at the end of such quarter and the related
consolidated statements of income, cash flow, shareholders equity and
changes in financial position of the Company and its Subsidiaries as
at the end of and for such quarter, setting forth in each case in
comparative form the corresponding figures for and as at the end of
the corresponding quarter of the preceding fiscal year, all in
reasonable detail and prepared in accordance with GAAP consistently
applied (subject to year end adjustments and the absence of
footnotes);
16
(ii) Within one hundred and twenty (120) days after the end of each fiscal
year of the Company, consolidated balance sheets of the Company and
its Subsidiaries as at the end of such year and the related
consolidated statements of income, shareholders' equity and changes
in financial position of the Company and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the
consolidated figures for the previous fiscal year, all in reasonable
detail and accompanied by a report thereon of independent public
accountants of recognized national standing selected by the Company;
and
(iii) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made
available by the Company to the holders of any class of its
securities generally or by any Subsidiary of the Company to the
holders of any class of its securities generally.
(c) Other Information. So long as the Investor and its Affiliates and
Affiliated Funds continue to hold at least 5% of the Adjusted Outstanding Common
Shares, the Company shall furnish to the Investor with reasonable promptness
such other information relating to the Company and its Subsidiaries as the
Investor may from time to time reasonably request; provided that the Company
shall not be obligated to furnish any information which (i) the Board of
Directors of the Company believes could compromise any attorney-client privilege
or (ii) may cause the Company to breach a confidentiality obligation by which it
is bound.
(d) Confidentiality Obligations. The Investor hereby acknowledges that any
confidential information of the Company made available to the Investor pursuant
to this Section 5.1 will be subject to the Confidentiality Agreement.
Section 5.2 Pre-Closing Actions Affecting the Common Shares.
Between the date of this Agreement and the Closing Date, the Company shall
not: (i) pay any dividends or make any distributions on its Common Shares other
than (A) regular cash dividends or distributions paid out of retained earnings
and (B) distributions permitted pursuant to clause (v) or below, (ii) subdivide
or reclassify its outstanding Common Shares into a greater number of shares,
(iii) consolidate or reclassify its outstanding Common Shares into a smaller
number of shares; (iv) other than in an "Exempt Issuance", issue any "New
Securities" for a consideration per share less than the initial "Conversion
Price" (with the terms in quotations having the meanings specified in the
Authorizing Resolution), (v) other than in such an "Exempt Issuance", distribute
to all holders of its Common Shares any share capital of the Company or
evidences of Indebtedness or rights, options or warrants to subscribe for or
purchase any of its securities or (vi) effect any transaction referred to in
Section 4.8 of the Authorizing Resolution.
Section 5.3 Listing.
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 ADS
Shares on the NASDAQ Global Market and shall use commercially reasonable efforts
to maintain the listing of
17
the ADS Shares on the NASDAQ Global Market, including without limitation,
exhausting all available remedies, appeal reviews and other similar mechanisms
and procedures provided for under the rules and regulations of the NASDAQ Global
Market to permit such continued listing of the ADS Shares.
Section 5.4 Preserve Accuracy of Representations and Warranties;
Fulfillment of Conditions; Notification of Certain Matters.
(a) The Company and the Investor shall each refrain from taking any action
which would render any representation or warranty contained in Article III or IV
inaccurate in any material respect as of the Closing Date. Each Party shall
promptly notify the other of (i) any event or matter that would reasonably be
expected to cause any of its representations or warranties to be untrue in any
material respect or (ii) any Action or Proceeding that shall be instituted or
threatened against such Party to restrain, prohibit or otherwise challenge the
legality of any of the Transactions.
(b) The Company and the Investor shall each use their respective reasonable
best efforts to cause each of the conditions precedent set forth in Article VI
to be satisfied as soon as practicable after the date hereof. Without limiting
the generality of the foregoing, the Company shall cause the Authorizing
Resolution to be duly adopted by the Board prior to the Upset Date.
(c) Between the date hereof and the Closing Date, the Company shall notify
the Investor of (i) the occurrence of any Material Adverse Effect, (ii) any
Action or Proceeding that is threatened, brought, asserted or commenced against
the Company or any of its Subsidiaries or any of their respective officers,
directors or employees which would have been required to be disclosed in the
Disclosure Schedule with respect to the representations and warranties of the
Company set forth in Section 3.9 if such Action or Proceeding had arisen prior
to the date hereof, (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the Transactions, (iv) any material default of which the Company
becomes aware under any material Company Contract or any event which, with
notice or lapse of time or both, would become such a default on or prior to the
Closing Date; and (v) any notice from any Governmental Authority in connection
with or relating to any of the Transactions.
(d) The Company and the Investor shall cooperate fully with each other and
assist each other in defending any Action or Proceeding brought against either
Party challenging this Agreement or any of the other Transaction Documents or
the consummation of any of the Transactions, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed.
Section 5.5 Contractual Consents and Governmental Approvals.
(a) The Company will use commercially reasonable efforts to obtain before
the Closing Date, and the Investor shall reasonably cooperate with the Company
in such efforts, the Company Contractual Consents set forth in Section 3.5(c) of
the Disclosure Schedule,
18
provided that neither the Company nor the Investor shall have any obligation to
offer or pay any consideration in order to obtain any such Company Contractual
Consents.
(b) Between the date hereof and the Closing Date, the Company and the
Investor shall use commercially reasonable efforts, and shall cooperate with
each other, in making any required filing, registration or notification with,
and in attempting to obtain the Company Approvals set forth in Section 3.5(b) of
the Disclosure Schedule in connection with the Transactions and to otherwise
satisfy the conditions set forth in Article VI.
Section 5.6 Issuance of ADS Shares. Upon the request of the Investor at any
time, and subject to applicable securities Laws and the provisions of the
Deposit Agreement, the Company shall arrange for any Conversion Shares issued or
issuable to the Investor to be deposited with the Depositary and for
corresponding ADRs to be issued in the name of the Investor, and the Company
shall pay any fees or expense reimbursements required to be paid to the
Depositary in connection therewith.
Section 5.7 Investor Pre-Emptive Rights.
(a) If at any time the Company wishes to issue any Common Shares, other
Capital Shares, Convertible Securities or Share Purchase rights (collectively,
"New Securities") to any Person or Persons, the Investor shall have a preemptive
right to purchase its Pro Rata Share (as defined below), of any such New
Securities. "Pro Rata Share" for purposes of this preemptive right means that
number of the New Securities equal to the product of (i) a fraction, the
numerator of which is the Investor's aggregate ownership of Common Shares
(calculated on an as converted and fully-diluted basis) and the denominator of
which is the number of the Company's total issued and outstanding Common Shares
(calculated on an as converted and fully-diluted basis), multiplied by (ii) the
number of New Securities to be issued. The Company will not issue any New
Securities without first offering the Investor its preemptive right described in
this Section 5.7.
(b) In the event that the Company proposes to issue New Securities, it may
give the Investor a written notice of its intention to issue New Securities (the
"Issuance Notice"), describing the approximate number and type of New
Securities, the terms of such New Securities, the estimated pricing date, the
estimated price range (as may be modified in accordance with the provisions
hereof, the "Estimated Price Range") and the other terms upon which the Company
proposes to issue and sell such New Securities. Any such Issuance Notice shall
be delivered to the Investor not less than ten (10) Business Days prior to the
pricing (the "Pricing") of such New Securities. If the estimated pricing date or
the Estimated Price Range shall change, the Company shall promptly notify the
Investor prior to the Pricing, provided that in the event of any change in the
Estimated Price Range, Investor shall be entitled to revoke any agreement to
purchase that it may have delivered as set forth in the following sentence.
Following receipt of an Issuance Notice as set forth in the first two sentences
of this paragraph, the Investor shall have the right, by giving written notice
to the Company at least three (3) days prior to the Pricing, to either (y) agree
to purchase up to its Pro Rata Share of such New Securities within the Estimated
Price Range and upon the general terms specified in the Issuance Notice (which
shall not exceed the Investor's Pro Rata Share) or (z) waive its right to so
purchase up to its Pro Rata Share of such New Securities. If, following receipt
of an Issuance
19
Notice as set forth in the first two sentences of this paragraph, the Investor
fails to agree in writing at least three days prior to the Pricing to purchase
the Investor's full Pro Rata Share of such offering of New Securities, then (A)
except as set forth in Section 5.7(c), the Investor shall forfeit the right
hereunder to purchase that part of its Pro Rata Share of such New Securities
that it did not so agree to purchase, and (B) the Company shall have sixty (60)
calendar days thereafter to sell the New Securities with respect to which the
Investor's preemptive right hereunder was not exercised, at a price within or
above the Estimated Price Range and upon general terms no more favorable to the
purchasers thereof than specified in the Company's Issuance Notice to the
Investor. In the event that the Company has not issued and sold the New
Securities within such sixty (60) calendar day period, then the Company shall
not thereafter issue or sell any New Securities without again first offering
such New Securities to the Investor pursuant to this Section 5.7.
(c) In the event that the Company proposes to issue New Securities in a
transaction in which (i) it does not provide the Investor with the Issuance
Notice and an opportunity for the Investor to elect to purchase up to its Pro
Rata Share of such New Securities during the period described above, or (ii) it
shall have notified (or been required to notify) the Investor, less than five
days prior to the Pricing, of any acceleration in the estimated pricing date, or
a delay in the estimated pricing date of more than ten (10) days, or a reduction
of more than 10% in the Estimated Price Range (and the Investor shall not have
purchased New Securities in connection with such transaction), then no later
than five (5) days after the issuance of such New Securities, the Company shall
provide the Investor with a written notice of the issuance of such New
Securities, setting forth the price and other terms on which such New Securities
were sold, and the Investor shall have thirty (30) days from the date such
notice is effective hereof based upon the manner or method of notice, to deliver
to the Company a written notice indicating its agreement to purchase up to its
Pro Rata Share of such New Securities at the same price and on the same terms
and conditions under which such New Securities were sold in such transaction, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed the Investor's Pro Rata Share), and
upon receipt of such written notice from the Investor, the Company shall be
required to sell such quantity of the New Securities to the Investor.
(d) If the Investor gives the Company notice pursuant to Section 5.7(b) or
Section 5.7(c) that the Investor desires to purchase all or any of the New
Securities it is entitled to purchase (the "Elected New Securities"), payment
therefor shall be made by wire transfer, against issuance of such New Securities
at the executive offices of the Company, on the date such securities are issued
to the Investor. In the event that the Issuance Notice specifies that
consideration other than cash is to be paid in connection with any issuance of
New Securities, in lieu of such other consideration, the Investor will be
entitled to pay the cash equivalent of such other consideration, as determined
by an independent third-party appraiser jointly appointed by the Company and the
Investor.
(e) The preemptive rights contained in this Section 5.7 shall not apply to
any of the following: (a) any PIK Dividend Shares, (b) any Permitted Parity
Preferred Shares or (c) any New Securities issued (i) as a share dividend to
holders of Common Shares, Series B Preferred Shares or Permitted Parity
Preferred Shares or upon any subdivision or combination of such Common Shares,
Series B Preferred Shares or Permitted Parity Preferred Shares, (ii) upon
20
the conversion of any Series B Preferred Shares or Permitted Parity Preferred
Shares or upon the conversion or exchange of any other Convertible Securities of
the Company duly issued on or prior to the date hereof that are convertible into
or exchangeable for Common Shares, (iii) upon the exercise of any Share Purchase
Rights issued prior to the date hereof, (iv) to employees, officers or directors
of the Company or any Subsidiary pursuant to incentive agreements, share
purchase or share option plans, share bonuses or awards, or employment or
advisory related warrants, contracts or other arrangements approved by the Board
prior to or following the date hereof or (v) in connection with any direct or
indirect acquisition by the Company of, or a merger with and into the Company
of, another Person or business approved by the Board prior to or following the
date hereof.
(f) The Investor's preemptive rights set forth in this Section 5.7 shall
automatically terminate if the aggregate of (x) the number of Investor Common
Shares (as defined in the Shareholders Agreement) held by the Investor and its
Affiliates and Affiliated Funds as a group and (y) any Investor Common Shares
issuable upon conversion of any Investor Preferred Shares (as defined in the
Shareholders Agreement) held by the Investor and its Affiliates and Affiliated
Funds as a group represents less than five percent (5%) of the Adjusted
Outstanding Common Shares.
Section 5.8 Filing of Resale Shelf Registration Statement.
(a) Filing. The Company shall file with the SEC, at least sixty (60) days
prior to the first anniversary of the Closing Date, a Shelf Registration
Statement covering the resale from time to time of Registrable Securities by
Registrable Securities Holders (such Shelf Registration Statement may also from
time to time cover the resale of any Parity Registrable Securities held by
Parity Registrable Securities Holders) in accordance with the methods or
distribution selected by such holders and shall use its reasonable best efforts
to cause such Shelf Registration Statement to be declared effective under the
Securities Act as soon as practicable after such filing.
(b) Continued Effectiveness. Subject to Section 5.8(c), the Company shall
use its reasonable best efforts to have the Shelf Registration Statement
declared effective on or prior to the first anniversary of the Closing Date. The
Company shall thereafter use its reasonable best efforts to prepare and file
with the SEC such amendments and supplements to the Shelf Registration Statement
and the Prospectus as may be necessary to keep the Shelf Registration Statement
current and continuously effective in order to permit the Prospectus forming a
part thereof to be usable by the Registrable Securities Holders for the offer
and sale of Registrable Securities until the earlier of (x) the fifth
anniversary of the date hereof and (y) the date as of which such Registrable
Securities Holders no longer hold any Registrable Securities.
(c) Suspension of Use of Shelf Registration Statement. The Company may
suspend the use of the Shelf Registration Statement by the Registrable
Securities Holders (and any Parity Registrable Securities Holders) if the
Company furnishes to such holders a certificate signed by the Chief Executive
Officer, Chief Financial Officer or General Counsel of the Company (x) stating
that a Potential Material Event exists (and enclosing a copy of the written
determination of the Board referred to in the definition of Potential Material
Event) or (y) stating that a Company-initiated registration statement for an
underwritten offering of Equity Securities
21
has become effective, in which event the Company shall have the right to suspend
such use for a period of not more than 90 calendar days after the date of such
certificate (a "Shelf Suspension"), provided that the Company shall not exercise
a Shelf Suspension more than twice in any 12-month period with at least a 60
calendar day interval between each Shelf Suspension. In the event of any Shelf
Suspension, no Registrable Securities Holder (or Parity Registrable Securities
Holder) may offer or sell any Registrable Securities (or Parity Registrable
Securities) pursuant to the Shelf Registration Statement during the period of
the applicable Shelf Suspension.
(d) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, filing, qualification or compliance pursuant
to this Section 5.8 shall be borne by the Company. Unless otherwise stated, all
Selling Expenses relating to any Registrable Securities and/or Parity
Registrable Securities offered pursuant to the Shelf Registration Statement
filed pursuant to this Section 5.8 shall be borne by the applicable Selling
Holders pro rata based on the respective numbers of Registrable Securities
and/or Parity Registrable Securities registered by them.
(e) Further Obligations of the Company. Whenever the Company effects the
registration of any Registrable Securities pursuant to this Section 5.8, the
Company shall:
(i) Registration of ADS. If the Selling Holders propose to sell
Registrable Securities and/or Parity Registrable Securities in the
form of ADS Shares, the Company shall, if and to the extent
necessary, register additional ADS Shares on Form F-6, to permit the
sale of such Registrable Securities and/or Parity Registrable
Securities as ADS Shares.
(ii) Copies of Documents. Furnish to each Selling Holder, without charge,
such number of conformed copies of the Shelf Registration Statement
and of any amendments and supplements thereto (in each case
including all exhibits), such number of copies of the Prospectus
included in such Shelf Registration Statement (including each
preliminary prospectus and any summary prospectus), in conformity
with the requirements of the Securities Act, such documents
incorporated by reference in such Shelf Registration Statement or
Prospectus, and such other documents, as such Selling Holders may
reasonably request.
(iii) Opinion and Comfort Letter. Furnish to such Selling Holders (i) an
opinion of the counsel representing the Company for purposes of such
registration, dated the effective date of such Shelf Registration
Statement (or, in the case of any underwritten public offering
pursuant to the Shelf Registration Statement, dated the date of the
closing under the underwriting agreement with respect to both the
effective date of the Shelf Registration Statement and the date of
the closing under the underwriting agreement), in form and substance
as is customarily given by counsel for the issuer to underwriters in
an underwritten public offering, addressed to the underwriters, if
any, and to such Selling Holders, and (ii) a "cold comfort" letter,
dated the effective date of the Shelf Registration Statement (and,
in the case of any underwritten public offering pursuant to
22
the Shelf Registration Statement, dated the date of the closing
under the underwriting agreement) signed by the independent
certified public accountants who have certified the Company's
financial statements included in such Shelf Registration Statement,
in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to such
Selling Holders.
(iv) "Blue Sky" Qualification. Register or qualify all Registrable
Securities and Parity Registrable Securities to be offered under
such Shelf Registration Statement under the securities or blue sky
laws of such jurisdictions as the applicable Selling Holders (or in
an underwritten offering, the managing underwriter) shall reasonably
request, and do any and all other acts and things which may be
necessary or advisable to enable such Selling Holders to consummate
the disposition in such jurisdictions of the Registrable Securities
and/or Parity Registrable Securities offered pursuant to such Shelf
Registration Statement, except that the Company shall not for any
such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any
such jurisdiction.
(v) Notification of Certain Events. As promptly as practicable after
becoming aware thereof, notify the applicable Selling Holders of the
happening of any event of which the Company has knowledge, as a
result of which the prospectus included in the Shelf Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits 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, and
promptly prepare and file with the SEC a supplement or amendment to
the Shelf Registration Statement or other appropriate filing with
the SEC to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to such Selling
Holders as such Selling Holders may reasonably request.
(vi) SEC Stop Orders. As promptly as practicable after becoming aware
thereof, notify the applicable Selling Holders (and, in the event of
an underwritten offering, the managing underwriters) of the issuance
by the SEC of any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Shelf Registration Statement
at the earliest possible time.
(vii) Listing Requirements. Use its reasonable best efforts to list such
Registrable Securities and/or Parity Registrable Securities on each
securities exchange on which the Equity Securities of the Company
(including the ADS Shares) are then listed. If the Selling Holders
propose
23
to sell Registrable Securities and/or Parity Registrable Securities
in the form of ADS Shares, the Company shall (subject to the Deposit
Agreement) procure delivery of ADS Shares listed on such securities
exchange to the Selling Holders and, to the extent additional ADS
Shares are required to be registered on Form F-6 in order to carry
out such delivery, register such additional ADS Shares.
(viii) Certificate Preparation. Cooperate with the applicable Selling
Holders to facilitate the timely preparation and delivery of
certificates for the Registrable Securities and/or Parity
Registrable Securities to be offered pursuant to the Shelf
Registration Statement and enable such certificates for the
Registrable Securities and/or Parity Registrable Securities to be in
such denominations or amounts as the case may be, as such Selling
Holders may reasonably request, and deliver, or shall cause legal
counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to such Selling Holders)
an appropriate instruction and opinion of such counsel. If the
Selling Holders propose to sell Registrable Securities and/or Parity
Registrable Securities in the form of ADS Shares, the Company shall
cooperate with such Selling Holders to facilitate the timely
delivery of the certificates referred to above to the Depositary and
shall (subject to the Deposit Agreement) cause the Depositary to
cooperate with such Selling Holders to facilitate the timely
preparation and delivery of the depositary receipts evidencing such
ADS Shares in such denominations or amounts as the case may be, as
such Selling Holders may reasonably request.
(ix) Underwriting Agreement. In the event of any underwritten public
offering pursuant to the Shelf Registration Statement, enter into
and perform its obligations under an underwriting agreement, in
usual and customary form and complying with the provisions of
Section 5.8(h), with the managing underwriter of such offering.
(x) Other Actions. Take all other reasonable actions necessary to
expedite and facilitate disposition by the applicable Selling
Holders of the Registrable Securities and/or Parity Registrable
Securities pursuant to the Shelf Registration Statement.
(f) Information from Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 5.8 with
respect to the Registrable Securities or Parity Registrable Securities of any
Selling Holder that such Selling Holder shall furnish to the Company such
information regarding itself, the Registrable Securities or Parity Selling
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such securities.
(g) Preparation; Reasonable Investigation; Review by Counsel. In connection
with any offering of Registrable Securities under the Shelf Registration
Statement, each
24
Registrable Securities Holder, its underwriters, if any, and counsel for such
Registrable Securities Holder shall:
(i) be permitted to review such Shelf Registration Statement, each
prospectus included therein or filed with the SEC, and each amendment
thereof or supplement thereto a reasonable period of time (but not
less than 3 Business Days) prior to their filing with the SEC; and
(ii) be given reasonable access to the Company's books and records and such
opportunities to discuss the business of the Company with its
officers, counsel and the independent public accountants who have
certified its financial statements as shall be necessary, in the
reasonable opinion of such Registrable Securities Holders, such
underwriters, if any, or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
(h) Indemnification. In the event any Registrable Securities and/or Parity
Registrable Securities are included in the Shelf Registration Statement filed
pursuant to this Section 5.8, the following indemnification provisions shall
apply.
(i) Indemnification by the Company.
(1) Indemnification. To the extent permitted by law, the
Company shall indemnify and hold harmless the Selling Holders,
each of the employees, officers, directors, partners, members,
managers, legal counsel and agents of such Selling Holders,
any underwriter (as defined in the Securities Act) for such
Selling Holders and each Person, if any, who controls any of
such Selling Holders or underwriter within the meaning of the
Securities Act or Exchange Act (collectively, the "Holder
Indemnified Persons") against and hold each Holder Indemnified
Person harmless from any and all liabilities, obligations,
losses, damages, (excluding consequential, special, indirect
or punitive damages), lawsuits, investigations, arbitrations,
actions, judgments, costs, expenses or claims, including,
without limitation, reasonable attorneys' fees and expenses
incurred in investigation or defending any of the foregoing
(collectively, "Losses"), that the Holder Indemnified Persons
may suffer or sustain arising out of or due to any of the
following (any of the following being a "Violation"):
(a) any untrue statement or alleged untrue statement of
a material fact contained in such Registration
Statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or
supplements thereto;
25
(b) the omission or alleged omission to state therein a
material fact required to be stated therein, or
necessary to make the statements therein not misleading;
or
(c) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state
securities law, or any applicable securities laws or
Laws of a jurisdiction outside the United States.
(2) Limitations on Indemnification. Notwithstanding the
foregoing, the Company shall not be liable for:
(a) any amounts paid in settlement of any such Losses if
such settlement is effected without the consent of the
Company (which consent shall not be unreasonably
withheld or delayed); or
(b) any Losses to the extent that such Losses arise out
of or are based upon a Violation which occurs in
reliance upon and in strict conformity with written
information furnished by such Selling Holders expressly
for use in connection with such registration.
(ii) Indemnification by the Registrable Securities Holders.
(1) Indemnification. To the extent permitted by law, each
Selling Holder participating in any registration pursuant to
this Agreement shall indemnify and hold harmless the Company,
each of the Company's employees, officers, directors, legal
counsel and other agents, any underwriter (as defined in the
Securities Act) for the Company and each Person, if any, who
controls the Company or underwriter within the meaning of the
Securities Act or Exchange Act (collectively, the "Company
Indemnified Persons"), against and hold each Company
Indemnified Person harmless from any and all Losses that the
Company Indemnified Persons may suffer or sustain arising out
of or due to any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance
upon and in strict conformity with written information
furnished by such Selling Holder expressly for use in
connection with such registration.
(2) Limitations on Indemnification. Notwithstanding the
foregoing, no Selling Holder shall not be liable for:
(a) indemnification pursuant to this Agreement in excess
of the aggregate net cash proceeds received by such
Selling
26
Holder from the offering of Registrable Securities in
such registration;
(b) any amounts paid in settlement of any such Losses if
such settlement is effected without the consent of such
Selling Holder; (which consent shall not be unreasonably
withheld or delayed); or
(c) any Losses to the extent that such Losses do not
arise out of or are not based upon a Violation which
occurs in reliance upon and in strict conformity with
written information furnished by such Selling Holder
expressly for use in connection with such registration.
(iii) Indemnification Mechanics. If there occurs an event which a Company
Indemnified Person or a Holder Indemnified Person (any such Person
being the "Indemnitee") hereto asserts is an indemnifiable event
pursuant to this Section, the Indemnitee shall promptly notify the
party obligated to provide indemnification hereunder (the
"Indemnitor") in writing of such event. Delay or failure to so notify
the Indemnitor shall only relieve the Indemnitor of its obligations
to the extent, if at all, that it is actually prejudiced by reason of
such delay or failure. The Indemnitor shall have a period of 20
calendar days in which to respond thereto. If the Indemnitor so
elects, within such 20 day period, it shall be entitled to assume the
defense of such claim (such election to be without prejudice to the
right of the Indemnitor to dispute whether such claim constitutes
Losses under this Section 5.8(i)). If the Indemnitor fails to assume
the defense of such matter within such 20 calendar day period or does
not respond within such 20 calendar day period, the Indemnitee
against which such matter has been asserted shall (upon delivering
notice to such effect to the Indemnitor) have the right to undertake,
at the Indemnitor's cost and expense, the defense, compromise or
settlement of such matter on behalf of the Indemnitee, provided that
the Indemnitee shall not settle such claim without the consent of the
Indemnitor (which consent shall not be unreasonably withheld) and
provided further that the Indemnitor shall have the right to
participate (but not control) at its own expense in the defense of
such asserted claim. In any event, the Indemnitee shall have the
right to participate (but not control) at its own expense in the
defense of such asserted liability; provided, however, that the
Indemnitor shall pay the expenses of such defense if the Indemnitee
is advised by counsel in writing that there are one or more legal
defenses available to the Indemnitee that are different from or
additional to those available to the Indemnitor (in which case, if
the Indemnitee notifies the Indemnitor in writing, the Indemnitor
shall not have the right to assume the defense of such asserted
liability on behalf of the Indemnitee).
27
(iv) Contribution. If the indemnification provided for in this Section
5.8(h) is held by a court of competent jurisdiction to be unavailable
to an Indemnitee with respect to any Losses, then the Indemnitor, in
lieu of indemnifying such Indemnitee hereunder, shall contribute to
the amount paid or payable by such Indemnitee as a result of such
Losses in such proportion as is appropriate to reflect the relative
fault of the Indemnitor on the one hand and of the Indemnitee on the
other in connection with the Violation that resulted in such Losses,
as well as any other relevant equitable considerations; provided,
however, that in no event shall any contribution under this Section
5.8(h)(iv) from any Selling Holder, together with the amount of any
indemnification payments made by such Selling Holder pursuant to
Section 5.8(h)(ii) above, exceed the net proceeds from the offering
received by such Selling Holder. The relative fault of the Indemnitor
and of the Indemnitee shall be determined by reference to, among
other things, whether the Violation relates to information supplied
by the Indemnitor or the Indemnitee and the parties relative intent,
knowledge, access to information, and opportunity to correct or
prevent such Violation.
(v) No Inconsistent Underwriting Agreements. Notwithstanding any
provision of this Agreement to the contrary, the Selling Holders
shall not be required to enter into an underwriting agreement that
contains indemnification and contribution provisions which, in the
sole discretion of such Selling Holders, materially differ from those
contained in this Section 5.8(h).
(vi) Registration in Non-U.S. Jurisdictions. In the event that the ADS
Shares cease to be listed on the Nasdaq Global Market and have not
been listed on another nationally recognized securities exchange in
the United States, but the Company has listed its Common Shares (or
related depositary shares) on any Designated Offshore Securities
Market or other internationally recognized securities exchange, then
the Company shall use its reasonable best efforts, to the extent
permitted by applicable law, to provide the Registrable Securities
Holders with substantially the same rights and benefits in such
jurisdiction as are provided for in this Section 5.8, and to take
such steps, if any, consistent with customary market practice at the
time so that the Registrable Securities are freely transferable in
such listed market without transfer restrictions imposed by the
securities or similar laws of such jurisdiction.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Company's Obligations.
28
The obligation of the Company to sell and issue the Shares and to
consummate the other Transactions on the Closing Date shall be subject to the
fulfillment (or waiver by the Company) at or prior to the Closing of each of the
following conditions:
(a) No Order. No court or other Governmental Authority having jurisdiction
over the Company or any of its Subsidiaries or the Investor shall have
instituted, enacted, issued, promulgated, enforced or entered any Law (whether
temporary, preliminary or permanent) that is then in effect and that (i) has the
effect of making illegal or otherwise prohibiting or invalidating consummation
of any of the Transactions or any provision of any Transaction Document or (ii)
seeks to restrain, prohibit or invalidate the consummation of the Transactions
or to invalidate any provision of any Transaction Document.
(b) Company Approvals. Each Company Approval shall have been obtained or
made and shall be in full force and effect to the extent that the failure to
obtain or make such Company Approval (i) has the effect of making illegal or
otherwise prohibiting or invalidating consummation of any of the Transactions or
any provision of this Agreement or the other Transaction Documents or (ii) would
reasonably be expected, individually or together with other Company Approvals
that have not been obtained or made, to have a Material Adverse Effect.
(c) Performance of Obligations. The Investor shall have performed in all
material respects each of its respective covenants and agreements contained in
this Agreement or the other Transaction Documents and required to be performed
at or prior to the Closing.
(d) Representations and Warranties. Each of the representations and
warranties of the Investor contained in this Agreement that is qualified as to
materiality shall be true and correct on and as of the Closing Date as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties of the Investor
that is not so qualified shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date).
(e) Officer's Certificate. A certificate executed on behalf of the Investor
by a senior executive of the Investor, to the effect that the conditions set
forth in paragraphs (c) and (d) above have been satisfied, shall have been
delivered to the Company.
(f) Investor Consent. The consent of the Investor to the authorization and
issuance of certain "Parity Shares" pursuant to Section 5.2(c) of the
Authorizing Resolution, substantially in the form attached as Exhibit F hereto,
shall have been duly executed by the Investor and delivered to the Company.
Section 6.2 Conditions to the Investor's Obligations.
The obligation of the Investor to purchase the Shares and to consummate the
other Transactions on the Closing Date shall be subject to the fulfillment (or
waiver by the Investor) at or prior to the Closing of each of the following
conditions:
29
(a) Adoption and Filing of Authorizing Resolution. The Authorizing
Resolution shall have been duly adopted by the Board, and shall be in full force
and effect.
(b) No Order. No court or other Governmental Authority having jurisdiction
over the Company or any of its Subsidiaries or the Investor shall have
instituted, enacted, issued, promulgated, enforced or entered any Law (whether
temporary, preliminary or permanent) that is then in effect and that (i) has the
effect of making illegal or otherwise prohibiting or invalidating consummation
of any of the Transactions or any provision of any Transaction Document or
results or would result in a Material Adverse Effect or (ii) seeks to restrain,
prohibit or invalidate the consummation of any of the Transactions or to
invalidate any provision of any Transaction Document.
(c) Company Approvals. Each Company Approval shall have been obtained or
made and shall be in full force and effect to the extent that the failure to
obtain or make such Company Approval (i) has the effect of making illegal or
otherwise prohibiting or invalidating consummation of any of the Transactions or
any provision of any Transaction Document or (ii) would reasonably be expected,
individually or together with other Company Approvals that have not been
obtained or made, to have a Material Adverse Effect.
(d) Contractual Consents. Each Company Contractual Consent shall have been
obtained and shall be in full force and effect to the extent that the failure to
obtain such Company Contractual Consent would reasonably be expected,
individually or together with other Company Contractual Consents that have not
been obtained, to have a Material Adverse Effect.
(e) Performance of Obligations. The Company shall have performed in all
material respects each of its respective covenants and agreements contained in
this Agreement and each other Transaction Document and required to be performed
at or prior to the Closing.
(f) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement that is qualified as to
materiality shall be true and correct on and as of the Closing Date as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date, which shall be true and correct as of such
certain date) and each of the representations and warranties of the Company that
is not so qualified shall be true and correct in all material respects on and as
of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain date,
which shall be true and correct in all material respects as of such certain
date).
(g) No Other Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any changes, events or developments that have had,
or would reasonably be expected, individually or in the aggregate, to have, a
Material Adverse Effect.
(h) Officer's Certificate. A certificate executed on behalf of the Company
by a senior executive officer of the Company to the effect that the conditions
set forth in paragraphs (c), (d), (e) and (f) above have been satisfied, shall
have been delivered to the Investor.
(i) Opinions of Company Counsel. The Investor shall have received an
opinion from (i) Xxxxxxx, Xxxx & Xxxxxxx, special Cayman Islands counsel to the
Company,
30
dated as of the Closing Date, substantially in the form attached as Exhibit C-1
and (ii) Xxxxxx & Xxxxxxx LLP, special New York counsel to the Company, dated as
of the Closing Date, substantially in the form attached as Exhibit C-2 hereto.
(j) Good Standing Certificates. The Investor shall have received a
Certificate of Good Standing for the Company dated not more than three (3)
Business Days prior to the Closing Date issued by the Registrar of Companies of
the Cayman Islands.
(k) Company Secretary's Certificate. The Investor shall have received a
certificate in a form reasonably satisfactory to the Investor from the Company
Secretary or another officer (if there is no person serving as Company
Secretary) of the Company attaching and certifying: (i) true and correct copies
of the Memorandum and Articles of Association of the Company; (ii) a true and
correct copy of the Authorizing Resolution as duly adopted by the Board and as
in full force and effect, (iii) true and correct copies of the resolutions
adopted by the Board authorizing the execution and delivery of this Agreement
and each of the other Transaction Documents to which the Company is a party, as
in full force and effect, and (iv) as to the incumbency of any officers of the
Company executing any Transaction Document.
(l) XFL Secretary's Certificate. The Investor shall have received a
certificate in a form reasonably satisfactory to the Investor from the Company
Secretary or another officer (if there is no person serving as Company
Secretary) of Xinhua Finance Limited attaching and certifying: (i) true and
correct copies of the resolutions adopted by the Board of Directors of Xinhua
Finance Limited authorizing the execution and delivery of Shareholders
Agreement, as in full force and effect, and (ii) as to the incumbency of the
officer of Xinhua Finance Limited executing the Shareholders Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Survival.
The respective representations, warranties, covenants and agreements of the
Company and the Investor set forth in this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or prior to the Closing Date) shall survive the Closing Date and the
consummation of the Transactions until April 30, 2009, except that (i) the
representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.21 and
3.24 (collectively, the "Surviving Representations") shall survive indefinitely
and (ii) the representations and warranties contained in Section 3.13 shall
survive until the expiration of the applicable statute of limitations set forth
in the Code or other applicable Tax law.
Section 7.2 Indemnification.
Subject to the limitations set forth in this Article VII, the Company shall
indemnify, defend and hold harmless the Investor, its members, managers,
officers, employees and Affiliates (collectively, the "Investor Indemnified
Parties") from and against any and all losses, costs, damages, liabilities,
obligations, impositions, inspections, assessments, fines, deficiencies and
expenses (collectively, "Damages") resulting from, in connection with or arising
out of (i) any inaccuracy in any representation or warranty of the Company
contained in this
31
Agreement or in the certificate delivered pursuant to Section 6.2(h) or (ii) any
breach of or default under any of the covenants or agreements given or made by
the Company in this Agreement; provided, however, that any claim by any Investor
Indemnified Party under clause (i) above shall be made prior to the date on
which the applicable representation and warranty expires pursuant to Section 7.1
and that any claim by any Investor Indemnified Party under clause (ii) above
shall be made within twelve (12) months of the time performance of such covenant
or agreement is contemplated.
Section 7.3 Damages Threshold and Cap.
With respect to any claim by an Investor Indemnified Party for
indemnification pursuant to clause (i) of Section 7.2, such Investor Indemnified
Party may not seek indemnification with respect to any claim for Damages until
the sum of all Damages for which all Investor Indemnified Parties are entitled
to indemnification pursuant to such clause (i) equals or exceeds US$300,000,
whereupon each Investor Indemnified Party shall be entitled to seek
indemnification with respect to all Damages incurred by it. Notwithstanding the
foregoing: (x) the maximum liability of the Company for indemnification claims
pursuant to clause (i) of Section 7.2 except in the case of a breach of a
Surviving Representation shall not exceed US$15,000,000 and (y) the maximum
liability of the Company for all indemnification claims pursuant to clause (i)
of Section 7.2 (including claims based on breaches of Surviving Representations)
shall not exceed the Net Purchase Price.
Section 7.4 Indemnification Procedures.
In the event an Investor Indemnified Party has a claim against the Company
under this Article VII, such Investor Indemnified Party shall deliver notice of
such claim (which claim shall be described with reasonable specificity in such
notice) with reasonable promptness to the Company. The failure by such Investor
Indemnified Party to so notify the Company shall not relieve the Company from
any liability which it may have to such Investor Indemnified Party under this
Article VII, except to the extent that the Company demonstrates that it has been
actually prejudiced by such failure. If the Company disputes its liability with
respect to such claim, such Investor Indemnified Party and the Company shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by arbitration
pursuant to Section 9.10.
Section 7.5 Third-Party Claims.
In the event that an Investor Indemnified Party becomes aware of a
third-party claim which such Investor Indemnified Party believes may result in a
demand for indemnification pursuant to this Article VII, such Investor
Indemnified Party shall promptly notify the Company of such claim, and the
Company shall be entitled to assume the defense of such claim (such election to
be without prejudice to the right of the Company to dispute whether such claim
constitutes indemnifiable Damages under this Article VII); provided, however,
that such Investor Indemnified Party shall be entitled to participate, at the
Investor Indemnified Party's sole expense, in (but not control) such defense and
(ii) the Company shall not settle such claim without the consent of such
Indemnified Party (which consent shall not be unreasonably withheld) unless such
settlement entails no payment of any kind by such Investor Indemnified
32
Party and provides for the complete release from all liabilities and claims of
any kind of such Investor Indemnified Party from such claim and the
circumstances giving rise to such claim; provided, further, however, that if the
Company does not elect to assume the defense of such claim pursuant to this
sentence, then the Company may participate, at the Company's sole expense, in
such defense.
Section 7.6 Tax Treatment of Indemnity Payments.
Any indemnity payments made hereunder by the Company to an Investor
Indemnified Party, shall be treated by the parties for all federal, state and
local income tax purposes as an adjustment to the Purchase Price paid by the
Investor for the Shares, and not as a dividend or other form of income payment
from the Company to the Investor.
Section 7.7 Exclusivity.
Except in the case of fraud, the indemnification provisions of this Article
VII shall be the Investor's sole and exclusive monetary remedy with respect to
any and all claims relating to the subject matter of this Agreement and the
Investor shall not pursue or seek any other monetary remedy.
Section 7.8 Certain Damages.
In no event shall the indemnification obligations under this Agreement or
the term "Damages" cover or include consequential, incidental, special, indirect
or punitive damages or lost profits suffered by an Investor Indemnified Party,
whether based on statute, contract, tort or otherwise.
ARTICLE VIII
FURTHER AGREEMENTS; TRANSFER RESTRICTIONS
Section 8.1 Public Announcements.
The Investor and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to the
execution and delivery of this Agreement or the other Transaction Documents or
any of the Transactions, and shall not issue any such press release or make any
such public statement prior to reaching mutual agreement on the language of such
press release or such public statement, except as may otherwise be required by
applicable Law or stock exchange rule.
Section 8.2 Fees and Expenses.
(a) Except as otherwise specified in this Section 8.2 or agreed in writing
by the parties, all costs and expenses incurred in connection with this
Agreement, the other Transaction Documents and the Transactions shall be paid by
the party incurring such cost or expense.
33
(b) On the Closing Date, the Investor will be entitled to deduct US$300,000
for the Purchase Price as a non-accountable reimbursement (the "Expense
Reimbursement") for certain legal and other expenses incurred by the Investor in
connection with the Transactions.
(c) The Company shall pay or promptly reimburse the Investor for any
transfer taxes, document Taxes, stamp duty or other similar Taxes imposed in
connection with the issuance of the Shares or any PIK Dividend Shares or
Conversion Shares to the Investor.
Section 8.3 Limitation on Short Sales. For long as the Investor holds any
Series B Preferred Shares, the Investor shall not engage in any short sales of
Common Shares or ADS Shares. For the avoidance of doubt, the foregoing
restriction shall cease to apply once the Investor no longer holds Series B
Preferred Shares, even if the Investor thereafter continues to hold Common
Shares.
Section 8.4 Restrictions on Transfers of Series B Preferred Shares.
(a) Certain Transfers Prohibited. Except with the prior written consent of
the Company, the Investor may not Transfer any Series B Preferred Shares to any
Person other than an Affiliate until such time as the right to convert the
Series B Preferred Shares into A Common Shares pursuant to Section 4.1 of the
Authorizing Resolution becomes exercisable. In no event shall the Investor
Transfer any Series B Preferred Shares to a Competitor at any time. For the
avoidance of doubt, the foregoing restrictions shall not apply to any Transfers
of Common Shares held by the Investor.
(b) Transferees to be Bound by Certain Restrictions. It shall be a
condition to any Transfer of Series B Preferred Shares by the Investor that the
transferee agree in writing to be bound by (i) the limitation on short sales set
forth in Section 8.3 above (which shall apply so long as such transferee shall
continue to hold any Series B Preferred Shares) and (ii) the restriction on
Transfers of Series B Preferred Shares to Competitors set forth in Section
8.4(a) above.
(c) Non-Complying Transfers Null and Void. Any purported Transfer of Series
B Preferred Shares in violation of this Section 8.4 shall be null and void and
the Company will not register such purported Transfer.
ARTICLE IX
GENERAL
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of the Investor and the Company;
(b) by the Investor if there has been (i) a material breach of any of the
representations or warranties of the Company set forth in this Agreement that
would give rise to the failure of the condition set forth in Section 6.2(f) or
(ii) a material breach of any of the covenants or agreements of the Company set
forth in this Agreement, which breach has not been cured within ten (10)
Business Days following receipt by the Company of notice of such breach
34
from the Investor; provided that the Investor is not then in material breach of
any representation or warranty made by it in this Agreement.
(c) by the Company if there has been (i) a material breach of any of the
representations or warranties of the Investor set forth in this Agreement that
would give rise to the failure of the condition set forth in Section 6.1(d) or
(ii) a material breach of any of the covenants or agreements of the Investor set
forth in this Agreement, which breach has not been cured within ten (10)
Business Days following receipt by the Investor of notice of such breach from
the Company; provided that the Company is not then in material breach of any
representation or warranty made by it in this Agreement.
(d) by either the Investor or the Company if any permanent order, decree,
ruling or other action of a court or other competent authority restraining,
enjoining or otherwise preventing the consummation of any of the Transactions
shall have become final and non-appealable;
(e) by either the Investor or the Company if the Closing shall not have
occurred on or before March 15, 2008 (the "Upset Date", as such date may be
hereafter extended by agreement of the parties), unless the failure for the
Closing to occur is the result of a material breach of this Agreement by the
Party seeking to terminate this Agreement;
In the event of termination of this Agreement by either the Investor or the
Company, as provided in this Section 9.1, this Agreement shall forthwith become
void and there shall be no liability hereunder on the part of the Investor or
the Company, or their respective officers, directors, managers, members or
shareholders, except for Sections 8.2 and 9.1 and except that no such
termination shall relieve any Party of liability for any breach of any other
provision of this Agreement occurring prior to such termination.
Section 9.2 Notices.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given only when such notice is in writing and is delivered by messenger
or courier or, if sent by fax, when received. All notices, requests and other
communications hereunder shall be delivered by courier or messenger or shall be
sent by facsimile to the following addresses:
(i) If to the Investor, at the following address:
35
The Yucaipa Global Partnership Fund L.P.
0000 X. Xxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Fax: x0.000.000.0000
Attn: Xxx Xxxxxxxxxx, General Counsel
with a copy by fax or messenger or courier to:
Sidley Austin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
(ii) If to the Company, at the following address:
Xinhua Finance Media Limited
Xinhua Finance Limited
3905-09, 0 Xxxxx Xxxxxxx
0 Xxxxxxxx Xx, Xxxxxxxx 200030
People's Republic of China
Fax: +8621.6448.4916
with a copy by fax or messenger or courier to:
Xxxxxx & Xxxxxxx LLP
00xx Xxxxx, Xxx Xxxxxxxx Xxxxxx
0 Xxxxxxxxx Xxxxx, Xxxxxxx
Xxxx Xxxx
Fax: x000.0000.0000
Attn: Xxxxx X. Xxxxx
or to such other respective addresses as may be designated by notice given in
accordance with this Section 9.2. If, subsequent to the date hereof, the
Investor assigns any of its pre-emptive rights under Section 5.7 to an Affiliate
or an Affiliated Fund in accordance with this Agreement, any notice to the
Investor pursuant to this Section 9.2 shall be deemed to also have been duly
delivered to such Affiliate or Affiliated Fund.
Section 9.3 Complete Agreement; No Third-Party Beneficiaries.
This Agreement, the Disclosure Schedule, the Confidentiality Agreement and
the other Transaction Documents constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements and understandings of the parties in connection therewith. This
Agreement, other than Article VII, is not intended to confer upon any person
other than the Company and the Investor any rights or remedies hereunder.
36
Section 9.4 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICTS
OF LAWS THAT WOULD APPLY THE LAW OF ANY OTHER JURISDICTION. SUBJECT TO SECTION
9.10, THE INVESTOR AND THE COMPANY HEREBY CONSENT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS
LOCATED IN THE BOROUGH OF MANHATTAN WITH RESPECT TO ANY ACTION, SUIT OR
PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR TO DETERMINE
THE RIGHTS OF ANY PARTY HERETO.
Section 9.5 No Assignment.
Except as provided below, neither this Agreement nor any rights or
obligations under it are assignable by either Party without the written consent
of the other Party. After the Closing, (a) the Investor may assign pre-emptive
rights under Section 5.7 only to a transferee that is an Affiliate or Affiliated
Fund of the Investor, (b) the Investor may only assign rights under Section
5.1(b) and (c) in connection with a Transfer to a transferee that is not a
Competitor of Series B Preferred Shares representing (on an as-converted basis)
at least 5% of the Adjusted Outstanding Common Shares, (c) the Investor may only
assign rights to register Registrable Securities under Section 5.8 in connection
with a Transfer to a transferee of Registrable Securities representing at least
1% of the number of Common Shares outstanding at the time of such Transfer,
provided the Company is furnished with a written notice of the name and address
of such transferee or assignee and the Registrable Securities with respect to
which such registration rights are being assigned, (d) it shall be a condition
to any assignment of any of the Investor's rights hereunder that the assignee
shall have agreed in writing to be bound by the transfer restrictions and other
applicable provisions of this Agreement and (e) it shall be a further condition
to any assignment of any of the rights of the Investor set forth in Section
5.1(b) or (c) that the assignee shall have entered into a confidentiality
undertaking reasonably satisfactory to the Company (it being agreed that any
confidentiality undertaking substantially similar to the Confidentiality
Agreement shall be satisfactory to the Company). Any permitted assignee of any
rights of the Investor under this Agreement may further assign such rights to
any transferee of any of the Series B Preferred Shares or Conversion Shares held
by such assignee to the extent that the Investor would have been permitted to
effect such an assignment.
Section 9.6 Counterparts.
This Agreement may be executed in one or more counterparts and by different
parties in separate counterparts. All such counterparts shall constitute one and
the same agreement and shall become effective when one or more counterparts have
been signed by each Party and delivered to the other Party.
Section 9.7 Remedies; Waiver.
Subject to Section 7.7, all rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available. No failure on
37
the part of any Party to exercise or delay in exercising any right hereunder
shall be deemed a waiver thereof, nor shall any single or partial exercise
preclude any further or other exercise of such or any other right.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that remedies at law would be inadequate in the case of any breach of the
covenants contained in this Agreement. The Company and the Investor shall be
entitled to equitable relief, including the remedy of specific performance, with
respect to any breach or attempted breach of such covenants by the other Party.
Section 9.8 Severability.
Any invalidity, illegality or unenforceability of any provision of this
Agreement in any jurisdiction shall not invalidate or render illegal or
unenforceable the remaining provisions hereof in such jurisdiction and shall not
invalidate or render illegal or unenforceable such provisions in any other
jurisdiction. The Company and the Investor shall endeavor in good faith
negotiations to replace any invalid, illegal or unenforceable provision with a
valid, legal and enforceable provision, the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provision.
Section 9.9 Amendment; Waiver.
This Agreement may be amended only by agreement in writing of both parties.
No waiver of any provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the Party to be
bound and then only to the specific purpose, extent and instance so provided.
Section 9.10 Arbitration.
(a) Submission of Disputes to Dispute Resolution Procedures. Subject to
Section 9.10(e), any dispute, controversy or claim (a "Dispute") whether based
on contract, tort, statute, fraud, misrepresentation or any other legal theory
between the Company and the Investor (each a "Disputant" and collectively, the
"Disputants") arising from, relating to, or in connection with this Agreement,
(including without limitation any question regarding its formation, existence,
validity, termination, or the performance or breach thereof), any obligations
hereunder or the relationship of the Disputants hereunder, shall be resolved in
accordance with the procedures described in this Section 9.10.
(b) Arbitration. Any Dispute shall be referred to and finally resolved and
settled by mandatory, international and binding arbitration administered by the
American Arbitration Association (the "AAA"), in accordance with this Section
and the AAA's International Arbitration Rules of the International Centre for
Dispute Resolution (the "Rules of Arbitration") in effect on the date of this
Agreement, which rules are deemed to be incorporated by reference into this
Section and except as they may conflict with this Section, in which case the
terms of this Section will control. The Disputants may, by written agreement,
modify the rules governing the arbitration of any Dispute. Each Disputant is
voluntarily agreeing to submit to arbitration. Each Disputant hereby irrevocably
waives its right to commence any proceedings in any court with respect to any
matter subject to arbitration under this Agreement. The arbitral tribunal shall
consist of three arbitrators, all three of whom shall be lawyers (a) admitted to
38
practice law in the state of New York at least five years prior to the
commencement of arbitration proceedings and (b) members in good standing of the
bar of the state of New York at the time of the commencement of arbitration
proceedings. Each Disputant shall nominate one arbitrator and deliver written
notification of such nomination to the other Disputant and to the AAA within
thirty days after delivery of a request for arbitration. In the event a
Disputant fails to nominate an arbitrator or deliver notification of such
nomination to the other Disputant and to the AAA within this time period, upon
request of either Disputant, such arbitrator shall instead be appointed by the
AAA within thirty days of receiving such request in accordance with the Rules of
Arbitration. The two arbitrators appointed in accordance with the above
provisions shall nominate the third arbitrator and notify the Disputants and the
AAA in writing of such nomination within fifteen days of their appointment. If
the first two appointed arbitrators fail to nominate a third arbitrator or
notify the Disputants and the AAA of that nomination within this time period,
then, upon request of either Disputant, the third arbitrator shall be appointed
by the AAA within fifteen days of receiving such request in accordance with the
Rules of Arbitration. The third arbitrator shall serve as Chairman of the
arbitral tribunal. The place of arbitration shall be New York, NY. The language
of the arbitration shall be English. Any issues concerning the location of the
arbitration, the extent to which any dispute is subject to arbitration, the
applicability, interpretation, or enforceability of these procedures, including
any contention that all or part of these procedures are invalid or
unenforceable, and any discovery disputes, shall be resolved by the arbitral
tribunal. No potential arbitrator may serve on the tribunal unless he or she has
agreed in writing to be bound by these procedures. The decision of a majority of
the arbitrators shall be final and binding on the Disputants and their
respective successors and assigns. The decision shall not be subject to appeal
or judicial review. The arbitral tribunal shall determine the proportions in
which the Disputants shall pay the fees and expenses of the arbitral tribunal.
The Disputants hereby agree that, in addition to remedies provided by law, the
arbitral tribunal shall have the power to award equitable remedies (including,
but not limited to, specific performance), but shall not have the power to award
punitive or other exemplary damages. The prevailing Disputant in any arbitration
shall be awarded its reasonable attorneys' fees and costs.
(c) Arbitration Procedures. In connection with the arbitration, the
Disputants agree that there shall be discovery in accordance with the Federal
Rules of Civil Procedure, except as modified in this paragraph. Each Disputant
will, upon the written request of the other Disputant, promptly provide the
other with copies of all documents on which the producing Disputant may rely in
support of or in opposition to any claim or defense and a report of any expert
whom the producing party may call as a witness in the arbitration hearing. At
the request of a Disputant, and upon the showing of good cause, the arbitrators
shall have the discretion to order production by the other Disputant or by a
third party of other documents relevant to any claim or defense. Each Disputant
will be entitled to depose a maximum of ten witnesses, plus all experts
designated to be witnesses at the arbitration. The depositions shall be held
within thirty (30) days of the making of a request and shall be limited to a
maximum of six hours per deposition. All objections are reserved for the
arbitration hearing, except for objections based on privilege and proprietary or
confidential information. Additional depositions or deposition hours may be
ordered by the arbitral tribunal upon a showing of good cause. At the
arbitration hearing, the Disputants shall be permitted to present live testimony
and to call any witnesses regardless of such witnesses' Disputant affiliation.
39
(d) Confidentiality. All aspects of an arbitration shall be treated as
confidential and neither the Disputants nor the arbitrators may disclose the
existence, content or results of the arbitration, except as necessary to comply
with legal or regulatory requirements. Before making any such disclosure, the
disclosing party shall give written notice to all other parties and shall afford
such parties a reasonable opportunity to protect their interests. Nothing herein
restricts the ability of a Disputant to disclose confidential information
related to an arbitration to an expert retained for purposes of that
arbitration, provided such expert is informed about the restrictions contained
herein and agrees to abide by them.
(e) Judicial Procedure. A Disputant may seek conservatory or similar
interim relief in aid of arbitration, including but not limited to a preliminary
injunction or attachment in aid of the arbitration. A request for such interim
or conservatory relief by a Disputant to a court shall not be deemed a waiver of
this agreement to arbitrate. A Disputant also may seek a judgment upon or an
order for enforcement of an arbitration award. The Disputants hereto further
agree that the sending by internationally recognized courier service with
receipt acknowledged, of any process required with respect to any judicial
proceeding commenced pursuant to this paragraph shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by Law.
[the next page is the signature page]
40
IN WITNESS WHEREOF, the Company and the Investor have caused this Agreement
to be executed by their respective offers thereunto duly authorized all as of
the date first written above.
XINHUA FINANCE MEDIA LIMITED
By: /s/ Xxxxxx Xxxxx
----------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
YUCAIPA GLOBAL PARTNERSHIP FUND
L.P.
By: YGOF GP Ltd., its General Partner
By: /s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Vice President
41
Exhibit A
to
Series B Convertible Preferred Shares
Purchase Agreement
Defined Terms
"AAA" has the meaning set forth in Section 9.10(b).
"Action or Proceeding" means any suit, action, proceeding (including any
compliance, enforcement or disciplinary proceeding), arbitration, formal or
informal inquiry, inspection, investigation or formal order of investigation of
complaint.
"Adjusted Outstanding Common Shares" means, as of any date, the number of
Common Shares outstanding as of such date other than Common Shares issued after
the date of this Agreement (unless such Common Shares constituted "New
Securities" with respect to which the Investor (or its assignee) had the right
to exercise pre-emptive rights pursuant to Section 5.7 of this Agreement.
"ADRs" means the American Depositary Receipts evidencing the ADS Shares.
"ADS Shares" means the American depository shares issued by the Depositary
pursuant to the Deposit Agreement each of which shares represents two Class A
Common Shares.
"Affiliate" means with respect to any Person, any other Person that
directly or indirectly, though one or more intermediaries, controls, is
controlled by, or under common control with, the first mentioned Person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and under "common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Affiliated Fund" means any investment fund sponsored or managed by Yucaipa
Companies LLC or an Affiliate.
"Articles of Association" means the Amended and Restated Articles of
Association of the Company as currently in effect.
"Authorizing Resolution" has the meaning set forth in the recitals.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York or Hong Kong are authorized
by law or executive order to close.
A-1
"Capital Shares" means any shares in the capital of the Company.
"Class A Common Shares" means the A Common Shares in the Company with a
nominal value of $0.001 per share.
"Class B Common Shares" means the B Common Shares in the Company with a
nominal value of $0.001 per share.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the U.S. Internal Revenue Code of 1986, as amended.
"Common Shares" means, collectively, the Class A Common Shares and the
Class B Common Shares.
"Common Shares Purchase Agreement" means the Share Purchase Agreement dated
as of September 25, 2007 among the Company, the Investor and certain
shareholders of the Company pursuant to which the Investor acquired certain A
Common Shares.
"Company" has the meaning set forth in the preamble.
"Company Approvals" has the meaning set forth in Section 3.5(b).
"Company Contract" means any indenture, mortgage, deed of trust, lease,
contract, agreement, instrument or other undertaking or legally binding
arrangement (whether written or oral) to which the Company or any Subsidiary is
a party or by the Company or any Subsidiary or any of their respective
properties or assets is bound.
"Company Contractual Consents" has the meaning set forth in Section 3.5(c).
"Company Indemnified Persons" has the meaning set forth in Section
5.8(h)(ii)(1).
"Company Party" has the meaning set forth in Section 3.18.
"Competitor" means (i) any Person that is engaged in any business or
organization in any jurisdiction in which the Company or any of its Subsidiaries
sells products or provides services which, directly or indirectly, Competes (as
hereinafter defined) with the Company or any of its Subsidiaries; and (ii) any
Affiliates of a Person described in clause (i). A business or organization shall
be deemed to "Compete" with the Company or a Subsidiary of the Company if such
business or organization competes in a significant manner with the business of
the Company or any of its Subsidiaries as such business is conducted as of the
date hereof or at any time while this Agreement is in effect.
"Confidentiality Agreement" means the Confidentiality Agreement dated as of
August 2, 2007 between the Company and the Investor.
A-2
"Contingent Obligation" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument or arrangement (whether
in writing or otherwise) to which such Person is a party or by which it or any
of such Person's property is bound.
"Contractual Consent" applicable to a specified Person in respect of a
specified matter means any consent required to be obtained by such Person from
any other Person party to any Contractual Obligation to which such first Person
is a party or by which it is bound in order for such matter to occur or exist
without resulting in the occurrence of a default or event of default or
termination, the creation of any lien, the triggering of any decrease in the
rights of such first Person, any increase in the obligations of such first
Person or any other consequence adverse to the interests of such first Person,
under any provision of such Contractual Obligation.
"Contractual Obligation" means, as to any Person, any obligation arising
out of any indenture, mortgage, deed of trust, contract, agreement, insurance
policy, instrument or other undertaking to which such Person is a party or by
which it or any of its property is bound (including, without limitation, any
debt security issued by such Person).
"Conversion Shares" means any Class A Common Shares issued upon conversion
of any of the Shares or PIK Dividend Shares pursuant to Article 4 of the
Authorizing Resolution.
"Convertible Securities" means any securities or obligations that are
convertible into or exchangeable for Capital Shares.
"Damages" has the meaning set forth in Section 7.2.
"Deposit Agreement" means the Deposit Agreement among the Company, the
Depositary and the holders from time to time of the ADRs.
"Depositary" means The Bank of New York, as the depositary under the
Deposit Agreement.
"Designated Offshore Securities Market" means a Designated Offshore
Securities Market as defined in Section 230.902(b) of Regulation S of the
Securities Act.
"Disclosure Schedule" means the schedule dated the date hereof delivered by
the Company to the Investor, which schedule relates to this Agreement and is
designated therein as the Disclosure Schedule of the Company for the purposes
hereof.
"Disputant" has the meaning set forth in Section 9.10(a).
"Dispute" has the meaning set forth in Section 9.10(a).
"Elected New Securities" has the meaning set forth in Section 5.9(b).
"Employee Share Options" means any share options granted pursuant to the
Share Option and Share Grant Plan.
A-3
"Enforceability Exceptions" has the meaning set forth in Section 3.3(b).
"Entity" means any corporation, partnership, limited liability company,
joint venture, association, partnership, business trust or other entity.
"Equity Securities" means the A Common Shares, and any other Capital Shares
(including the Series B Preferred Shares and the B Common Shares), equity
interest or other ownership interest or profit participation or similar right
with respect to the Company, including, without limitation, limited liability
company membership interests, partnership interests, voting trust certificates,
certificates of interest or participation in any profit-sharing agreement or
arrangement, options, warrants, bonds, debentures, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Expense Reimbursement" has the meaning set forth in Section 8.2(b).
"Financial Statements" has the meaning set forth in Section 3.6(b).
"GAAP" has the meaning set forth in Section 3.6(b)
"Governmental Authority" means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local, foreign or
supranational, as well as any applicable self regulatory body.
"Holder Indemnified Persons" has the meaning set forth in Section
5.8(h)(i)(1).
"Hong Kong" means the Special Administrative Region of Hong Kong.
"Indebtedness" shall mean as to any Person (a) all obligations of such
Person for borrowed money (including without limitation, reimbursement and all
other obligations with respect to surety bonds, unfunded credit commitments,
letters of credit and bankers' acceptances, whether or not matured), (b) all
indebtedness, obligations or liability of such Person (whether or not evidenced
by notes, bonds, debentures or similar instruments) whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit
or obligations in respect of bankers acceptances, (c) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (d) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the
A-4
happening of a contingency, (e) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (whether or not the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (f) all obligations of such Person under leases which
have been or should be, in accordance with GAAP, recorded as capital leases, (g)
all indebtedness secured by any Lien (other than Liens in favor of lessors under
leases) on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is non-recourse to the credit of that Person, and (h) any Contingent
Obligation of such Person incurred in respect of any Indebtedness referred to in
(a) to (g) above.
"Indemnitee" has the meaning set forth in Section 5.8(h)(iii).
"Indemnitor" has the meaning set forth in Section 5.8(h)(iii).
"Intellectual Property" has the meaning set forth in Section 3.11.
"Investor" has the meaning set forth in the Preamble.
"Investor Common Shares" means (a) any A Common Shares purchased by the
Investor pursuant to the Common Shares Purchase Agreement and any A Common
Shares issued or issuable upon conversion of (i) any Series B Preferred Shares
purchased by the Investor pursuant to this Agreement or (ii) any PIK Dividend
Shares issued to the Investor (or any permitted transferee hereunder) and (b)
any A Common Shares of the Company which the Investor (or any permitted
transferee hereunder) shall be entitled to receive, or shall have received, in
connection with any share splits, share dividends or similar events with respect
to the Company's A Common Shares.
"Investor Indemnified Party" has the meaning set forth in Section 7.2.
"Issuance Notice" has the meaning set forth in Section 5.9(a).
"Law" means any judgment, order (whether temporary, preliminary or
permanent), writ, injunction, decree, statute, rule, regulation, notice, law or
ordinance and shall also include any regulations of any applicable self
regulatory organizations.
"License" means any license, franchise, permit, privilege, immunity,
approval or other authorization required to be obtained under any applicable Law
from any applicable Governmental Authority.
"Liens" means security interests, liens, claims, pledges, mortgages,
options, rights of first refusal, agreements, limitations on voting rights,
charges, easements, servitudes, encumbrances and other restrictions of any
nature whatsoever.
"Losses" has the meaning set forth in Section 5.8(h)(i)(1).
"Material Adverse Effect" means a material adverse effect on (i) the
ability of the Company to consummate any of the Transactions or to perform any
of its obligations under any
A-5
of the Transaction Documents or (ii) the businesses, assets (including licenses,
franchises and other intangible assets), liabilities, financial condition or
operating income of the Company and its Subsidiaries, taken as a whole, except
(a) effects or changes (including general economic and political conditions)
that do not have a materially disproportionate effect (relative to other
industry participants) on the Company and its Subsidiaries and generally affect
the industry in which the Company and its Subsidiaries operate; (b) effects or
changes relating to loss of employees, suppliers, vendors, agents, customers or
other business partners resulting primarily from the announcement or pendency of
the transactions contemplated by this Agreement; (c) effects or changes to the
extent attributable to changes in PRC Law after the date of this Agreement and
(d) any change or effect that results from any action taken by the Company at
the request of the Investor or as required by the terms of this Agreement or the
other Transaction Documents.
"Memorandum of Association" means the Amended and Restated Memorandum of
Association of the Company as currently in effect.
"Net Purchase Price" has the meaning set forth in Section 2.1.
"New Securities" has the meaning set forth in Section 5.7(a).
"OFAC" means the Office of Foreign Assets Control of the US Department of
the Treasury.
"Organizational Document" means, with respect to any Entity. any
certificate or articles of incorporation, memorandum or articles of association,
by-laws, partnership agreement, limited liability agreement, operating
agreement, trust agreement or other agreement, instrument or document governing
the affairs of such Entity.
"Parity Registrable Securities" means (a) any "Registrable Securities" as
defined in the Patriarch Investor Rights Agreement and (b) any A Common Shares
into which any Permitted Parity Preferred Shares are convertible, to the extent
that registration rights are granted to the holders of such shares in connection
with the issuance of such Permitted Parity Preferred Shares.
"Patriarch" means Patriarch Partners Media Holdings, LLC.
"Patriarch Investor Rights Agreement" means the Investor Rights Agreement
dated as of March 16, 2006 among the Company, Xinhua Finance Limited and
Patriarch.
"Permitted Parity Preferred Shares" means any preferred shares of the
Company that constitute "Parity Shares" issued in compliance with Section 5.2(c)
of the Authorizing Resolution.
"Person" means any individual, Entity, unincorporated association or
Governmental Authority.
A-6
"PIK Dividend Shares" means any Series B Preferred Shares issued as
payment-in-kind dividends on the outstanding Shares or PIK Dividend Shares
pursuant to Article 3 of the Authorizing Resolution.
"Potential Material Event" means either (a) the possession by the Company
of material information not ripe for disclosure in a registration statement, or
(b) any material engagement or activity by the Company which would be adversely
affected by disclosure in a registration statement at such time, in each case,
which shall be evidenced by a written good faith determination by the Board of
Directors that both disclosure of such information, engagement or activity in a
registration statement would be detrimental to the business and affairs of the
Company, and a registration statement would be materially misleading absent the
inclusion of such information, engagement or activity.
"PRC" means the People's Republic of China, but for purpose of this
Agreement, does not include Taiwan and the Special Administrative Regions of
Hong Kong and Macau.
"Prospectus" means the prospectus included in any Registration Statement,
all amendments and supplements to such prospectus and all material incorporated
by reference in such prospectus.
"Purchase Price" has the meaning set forth in Section 2.1.
"Recent Balance Sheet" means the consolidated balance sheet of the Company
and its consolidated subsidiaries as of September 30, 2007 included in the
Financial Statements.
"Registrable Securities" means any Investor Common Shares; provided,
however, that Registrable Securities shall cease to be Registrable Securities
upon the earlier of (i) when, with respect to any Registrable Securities Holder,
in the reasonable opinion of counsel to the Company, all Registrable Securities
proposed to be sold by such Registrable Securities Holder may then be sold
pursuant to Rule 144 without any volume limitations, which counsel shall be
reasonably satisfactory to such Registrable Securities Holder and (ii) the date
as of which all of the Registrable Securities have been sold pursuant to a
Registration Statement, provided further, that "Registrable Securities" shall
exclude in all cases any Registrable Securities Transferred by a Registrable
Securities Holder or any other Person other than an assignment pursuant to
Section 9.5.
"Registrable Securities Holder" means any Person who holds Registrable
Securities who (i) is the Investor or (ii) is a Person to whom registration
rights under Section 5.8 have been assigned pursuant to Section 9.5. For the
purposes of this Agreement, any holder of Series B Preferred Shares shall be
deemed to be the holder of any Registrable Securities issuable upon conversion
of such Series B Preferred Shares.
"Registration Expenses" means all expenses incurred by the Company in
connection with the Shelf Registration Statement filed pursuant to Section 5.8,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration and the reasonable fees and
disbursements of a single special legal counsel to represent the Selling Holders
in connection
A-7
with any offering thereunder. Registration Expenses do not include compensation
of regular employees of the Company which shall be paid in any event by the
Company, underwriting discounts and commissions and share transfer taxes.
"Registration Statement" means any registration statement of the Company
filed with, or to be filed with, the SEC under the rules and regulations
promulgated under the Securities Act, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
and all exhibits and all material incorporated by reference in such registration
statement.
"Registration Rights Agreement" means a Registration Rights Agreement dated
as of the Closing Date between the Company and the Investor substantially in the
form attached hereto as Exhibit D hereto.
"Related Person" means, with respect to any Person, (a) any holder or
beneficial owner (directly or indirectly) of equity securities, or rights to
acquire equity securities, representing 5% or more of the voting equity
securities of such Person (a "5% Shareholder"); (b) any Affiliate of such
specified Person or of any such 5% Shareholder thereof; (c) any Person that
serves as a director, officer, partner, employee, executor or trustee (or in
similar capacity) of such Person or of any 5% Shareholder thereof, or any of
their respective Affiliates; (d) any Person with respect to which such specified
Person serves as a general partner, managing member, manager or trustee (or in a
similar capacity); and (e) any relative or spouse (or relative of such spouse)
who resides with, or is a dependent of, any Related Person described in clauses
(a), (b), (c) or (d) of this definition.
"Rule 144" means Rule 144 promulgated under the Securities Act, as such
rule shall be in effect from time to time.
"Rules of Arbitration" has the meaning set forth in Section 9.10(b).
"Sanctioned Entity" shall mean (i) the government of or an agency of the
government of, (ii) an organization directly or indirectly controlled by, or
(iii) a person resident in a country that is subject to a sanctions program
identified on the list maintained by OFAC and available at
xxxx://xxx.xxxxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxxxxxxx/, or as otherwise
published from time to time as such program may be applicable to such agency,
organization or person.
"Sanctioned Person" shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at
xxxx://xxx.xxxxx.xxx/xxxxxxx/xxxxxxxxxxx/xxxx/xxx/xxxxx.xxxx, or as otherwise
published from time to time.
"SEC" means the United States Securities and Exchange Commission and
includes any Governmental Authority succeeding to the functions thereof.
"SEC Reports" has the meaning set forth in Section 3.6(a)
A-8
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Selling Expenses" means, in respect of an offering pursuant to the Shelf
Registration Statement filed pursuant to Section 5.8, all underwriting
discounts, selling commissions and share transfer taxes applicable to the
Registrable Securities and/or Parity Registrable Securities registered by the
applicable Selling Holders.
"Selling Holders" means, in respect of an offering pursuant to the Shelf
Registration Statement filed pursuant to Section 5.8, Registrable Securities
Holders and/or Parity Registrable Securities Holders selling Registrable
Securities and/or Parity Registrable Securities pursuant to such Shelf
Registration Statement.
"Shareholders Agreement" means the Shareholders Agreement dated as of the
Closing Date among the Company, the Investor and XFL substantially in the form
attached hereto as Exhibit E hereto.
"Share Option and Share Grant Plan" means the Company's Share Option and
Share Grant Plan.
"Share Purchase Rights" means any options, warrants, awards or other rights
exercisable for the purchase or acquisition of Capital Shares or Convertible
Securities.
"Shares" has the meaning set forth in the Preamble.
"Shelf Registration Statement" means a Registration Statement of the
Company filed with the SEC on Form F-3 (or any successor form or other
appropriate form under the Securities Act) for an offering to be made on a
continuous or delayed basis pursuant to Rule 415 under the Securities Act (or
any similar rule that may be adopted by the SEC).
"Shelf Suspension" has the meaning set forth in Section 5.8(c)(1).
"Subsidiary" means any Entity of which the Company (either alone or through
or together with one or more other Subsidiaries) (x) owns, directly or
indirectly, more than 50% of the shares or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such Entity, (y) is a general partner, managing
member, trustee or other Person performing similar functions or (z) has control
(as defined in Rule 405 under the Securities Act).
"Surviving Representations" has the meaning set forth in Section 7.1.
"Tax Return" means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
"Tax" means any tax, governmental fee or other like assessment or charge of
any kind whatsoever (including any tax imposed under Subtitle A of the Code and
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sale, bulk sales, use, real
A-9
property, personal property, ad valorem, value added, transfer, franchise,
profits, license, withholding tax on amounts paid, withholding, payroll,
employment, excise severance, stamp, capital shares, occupation, property,
environmental or windfall profits tax, premium, custom, duty or other tax or
assessment), together with any interest, penalty, addition to tax or additional
amount thereto, imposed by any Governmental Authority.
"Taxing Authority" means any Governmental Authority (domestic or foreign)
responsible for the imposition of any Tax.
"Transaction Documents" means this Agreement, the Authorizing Resolution,
the Registration Rights Agreement and the Shareholders Agreement.
"Transfer" of a security means any sale, assignment, transfer, exchange,
pledge, grant of security interest in, hypothecation, encumbrance or other
disposition or conveyance of any interest in such security.
"Transactions" means the purchase and sale of the Shares and the other
transactions contemplated by the Transaction Documents.
"Upset Date" has the meaning set forth in Section 9.1(e).
"USD", "Dollars" or "US$" means the lawful currency of the United States of
America.
"Violation" has the meaning set forth in Section 5.8(h)(i)(1).
"XFL" means Xinhua Finance Limited, a company organized under the laws of
the Cayman Islands, or any successor.
A-10
EXHIBIT B
TO
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
RESOLUTION OF THE BOARD OF DIRECTORS OF XINHUA FINANCE MEDIA LIMITED
DESIGNATING THE RIGHTS AND RESTRICTIONS OF
THE SERIES B PREFERRED SHARES
WHEREAS, Article 12 of the Amended and Restated Articles of Association of
Xinhua Finance Media Limited, a Cayman Islands exempted company with limited
liability (the "Company"), empowers this Board to authorize by resolution or
resolutions from time to time the issuance of one or more classes or series of
preferred shares and to fix the designations, powers, preferences and relative,
participating, optional and other rights, if any, and the qualifications,
limitations and restrictions thereof, if any, including, without limitation, the
number of shares constituting each such class or series, dividend rights,
conversion rights, redemption privileges, voting powers, full or limited or no
voting powers, and liquidation preferences, and to increase or decrease the size
of any such class or series to the extent permitted by law; and
WHEREAS, this Board has determined that it is in the best interests of the
Company to create a new series of convertible preferred shares and to fix the
designations, powers, preferences and relative, participating, optional and
other rights thereof, and the qualifications, limitations and restrictions
thereof, as set forth below.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby established out of the
authorized and unissued share capital of the Company a series of convertible
preferred shares designated as "Series B Convertible Preferred Shares" (the
"Series B Preferred Shares"). The authorized number of Series B Preferred Shares
and the preferences, limitations and relative rights and other matters
pertaining to Series B Preferred Shares are described below.
DEFINITIONS
Terms Defined in the Articles.
Capitalized terms used but not otherwise defined herein that are defined in
the Amended and Restated Articles of Association of the Company (the
"Articles") are used herein with the meanings set forth therein.
Other Defined Terms.
Capitalized terms that are defined in Schedule 1 hereto are used herein
with the meanings set forth therein.
NUMBER AND STATED VALUE OF SHARES
Authorized Number of Shares.
The Series B Preferred Shares shall initially consist of Three Hundred
Thousand (300,000) preferred shares. Prior to the issuance of additional
Series B Preferred Shares
A-11
as PIK Dividends pursuant to Section 3.3 below, the Board of Directors
shall authorize a sufficient number of additional Series B Preferred Shares
for such purpose.
Stated Value.
Each Series B Preferred Share shall have a stated value ("Stated Value") of
US$100.00, which amount shall be proportionately adjusted in the event of
any share split, reverse share split or other subdivision or combination of
the outstanding Series B Preferred Shares.
DIVIDENDS
Accrual of Dividends.
Preferred dividends ("Dividends") shall accrue during each fiscal quarter
of the Company on each Series B Preferred Share outstanding during such
quarter at a rate equal to the higher of (i) eight percent (8%) per annum
of the Stated Value of such Series B Preferred Share and (ii) to the extent
that any dividends were declared during such fiscal quarter on the Common
Shares, the aggregate amount of such dividends that would have been
declared on the number of Conversion Shares into which such Series B
Preferred Share would have been converted if such Series B Preferred Share
had been fully converted into Conversion Shares pursuant to Article 4 below
on the date of declaration of such dividends, determined without taking
into consideration the limitations on convertibility set forth in Section
4.1 or the limitation on the issuance of fractional shares set forth in
Section 4.3 (a "Common Equivalent Dividend Amount"). In the event that any
Series B Preferred Shares were outstanding during only a portion of any
such quarter, the amount of Dividends accrued during such quarter on such
Series B Preferred Shares shall be pro rated to reflect the number of days
during such quarter when such Series B Preferred Shares were outstanding.
Accrued Dividends shall be paid in the manner provided in Section 3.3
below. All Dividends will be cumulative.
Record Date.
The Board may fix a record date for the determination of holders of the
Series B Preferred Shares entitled to receive payment of any Dividends,
which record date shall not be more than sixty (60) days nor less than ten
(10) days prior to the date on which any such Dividend is paid.
Form of Payment.
Dividends may be paid, at the option of the Company (i) in cash, in United
States Dollars, or (ii) through the issuance to the holders of the
outstanding Series B Preferred Shares of additional fully paid and
nonassessable Series B Preferred Shares with an aggregate Stated Value
equal to the Dividend to be paid with respect to each such Series B
Preferred Share (a "PIK Dividend") with no right for a holder of Series B
Preferred Shares to elect to receive cash instead; provided that for any
quarter with respect to which the amount of the accrued Dividend is based
on the Common Equivalent Dividend Amount, such Dividend may be paid only in
United States Dollars.
A-12
Ranking.
The Series B Preferred Shares shall, with respect to dividend rights and rights
on other distributions and rights upon any liquidation or dissolution of
the Company, rank (x) pari passu with any applicable Parity Shares that are
outstanding from time to time and (y) senior to the Common Shares and any
other Junior Shares that are outstanding from time to time.
If all accrued Dividends on the Series B Preferred Shares and all accrued
dividends on any Parity Shares are not paid in full, or declared in full
and funds set apart for the payment thereof, any Dividends declared or paid
on the Series B Preferred Shares and any dividends declared or paid on any
applicable Parity Shares shall be paid or declared pro rata so that in all
cases the amount of Dividends paid or declared on the Series B Preferred
Shares and the amount of dividends paid or declared on such Parity Shares
shall bear to each other the same ratio as the amount of accrued but unpaid
Dividends on the Series B Preferred Shares and the amount of accrued but
unpaid dividends on such Parity Shares bear to each other.
Unless all Dividends accrued on the Series B Preferred Shares have been paid in
full, or declared in full and funds set apart for the payment thereof, no
dividends may be paid on, or funds set apart for the payment of any
dividends on, any Junior Shares unless the Majority Holders otherwise
consent in writing.
CONVERSION
Right to Convert.
At any time and from time to time after the earlier of either (i) [INSERT
DATE THAT IS ONE YEAR AFTER THE ANTICIPATED CLOSING DATE] or (ii) the
occurrence of any Realization Event, without the payment of additional
consideration thereof, any holder of Series B Preferred Shares shall have
the right, at its option, to convert, all or any portion of the Series B
Preferred Shares held by it into A Common Shares ("Conversion Shares") at
the then applicable conversion rate (the "Conversion Rate"). For purposes
hereof, the Conversion Rate at any time shall be determined by dividing an
amount (the "Conversion Base Amount") equal to the sum of (x) the Stated
Value per share plus (y) the amount of any accrued Dividends per share then
remaining unpaid on each Series B Preferred Share being converted by the
then applicable Conversion Price per share. The "Conversion Price" shall
initially be equal to the US$3.00 per share, but shall be subject to
adjustment from time to time as provided herein.
A-13
Mechanism of Conversion.
Conversion shall be effected by the redemption of the Series B Preferred Shares
being converted for an amount per share equal to the applicable Conversion
Base Amount and the issuance in exchange therefor of the applicable
Conversion Shares at a price per share equal to the then applicable
Conversion Price. In order to exercise its conversion right, the holder of
the Series B Preferred Shares to be converted shall surrender the
certificate or certificates representing such shares to the Company, with a
notice of election to convert, duly completed and signed, at the principal
office of the Company. Unless the Conversion Shares issuable upon
conversion are to be issued in the same name as the name in which the
Series B Preferred Shares are registered, each share certificate
surrendered for conversion shall be accompanied by instruments of transfer
duly executed by the holder or his duly authorized attorney.
As promptly as practicable after the surrender by a holder of the certificate or
certificates representing the Series B Preferred Shares to be converted
(together with a duly completed and signed notice of election to convert)
and in any event within ten (10) business days after such surrender, the
Company shall issue and deliver to the Person for whose account such
certificate was surrendered, or to its nominee or nominees, a certificate
or certificates for the number of Conversion Shares or other securities
issuable upon the conversion of those shares and any fractional interest in
respect of Conversion Shares or other securities arising upon the
conversion shall be settled as provided below.
Conversion shall be deemed to have been effected immediately prior to the close
of business on the date on which the holder delivers the certificates for
the Series B Preferred Shares and the notice of election to convert to the
Company, and the Person or Persons in whose name or names any Conversion
Shares or other securities issuable upon such conversion shall be entered
in the Register of Members as the holder or holders of record of such
Conversion Shares or other securities at such time on such date and such
conversion shall be at the Conversion Price in effect at such time, unless
the Register of Members shall be closed on such date, in which event such
Person or Persons shall be entered in the Register of Members as the holder
or holders of record of such Conversion Shares or other securities at the
close of business on the next succeeding day on which such Register of
Members is open, and such conversion shall be at the Conversion Price in
effect on the date such Register of Members is open. All Conversion Shares
issuable upon conversion of the Series B Preferred Shares will upon
issuance be duly and validly issued and fully paid and nonassessable, free
of all liens and charges and not subject to any preemptive rights. Upon any
such conversion of the Series B Preferred Shares, such shares shall no
longer be deemed to be outstanding and all rights of a holder with respect
to such shares shall immediately terminate upon the issuance of such
Conversion Shares.
A-14
No Fractional Shares.
No fractional shares or securities representing fractional A Common Shares
shall be issued upon conversion of the Series B Preferred Shares. Any
fractional interest in A Common Shares resulting from conversion of the
Series B Preferred Shares shall be paid in cash (computed to the nearest
cent) equal to such fraction multiplied by the Fair Market Value of one A
Common Share determined pursuant to Section 9.4. If more than one
certificate representing Series B Preferred Shares shall be surrendered for
conversion at one time by the same holder, the number of full A Common
Shares issuable upon conversion thereof shall be computed on the basis of
the aggregate number of the Series B Preferred Shares represented by the
certificates so surrendered that are to be converted.
Adjustment of Conversion Price.
The Conversion Price shall be subject to adjustment as follows if any of
the events listed below occur prior to the conversion of any Series B
Preferred Shares being converted pursuant to Section 4.1.
In case the Company shall (i) subject to Section 3.4(c) above pay a dividend or
make a distribution on its Common Shares in Common Shares, (ii) subdivide
or reclassify its outstanding Common Shares into a greater number of
shares, or (iii) consolidate or reclassify its outstanding Common Shares
into a smaller number of shares, the Conversion Price in effect immediately
prior to such event shall be adjusted so that the holder of the Series B
Preferred Shares thereafter converted shall be entitled to receive the
number of A Common Shares of the Company which it would have owned or have
been entitled to receive after the happening of such event had the Series B
Preferred Shares been converted immediately prior to the happening of such
event. An adjustment made pursuant to this paragraph shall become effective
immediately after the record date in the case of a dividend or distribution
and shall become effective on the effective date in the case of
subdivision, combination or reclassification. If any dividend or
distribution is not paid or made, the Conversion Price then in effect shall
be appropriately readjusted.
In case the Company shall (i) issue Common Shares, (ii) issue rights, options or
warrants to subscribe for or purchase Common Shares, or (iii) issue or sell
other rights for Common Shares or securities (including issuances of Series
B Preferred Shares, other than in Exempt Issuances) convertible or
exchangeable into Common Shares (any of the issuances in clauses (i), (ii)
or (iii), hereinafter "New Securities"), for a consideration per share less
than the then effective Conversion Price on the date the Company issues or
sells such New Securities, then in each such case the Conversion Price in
effect immediately prior to the issuance of such New Securities shall be
reduced, concurrently with the issue of such New Securities, to the price
(calculated to the nearest one-hundredth of a cent) determined in
accordance with the following formula:
(A + B)
CP2 = CP1 x -----------
(A + C)
For purposes of the foregoing formula, the following definitions shall
apply: (1) CP(2) shall mean the Conversion Price in effect immediately
after such issue of New Securities; (2) CP(1) shall mean the Conversion
Price in effect immediately prior to such
A-15
issue of New Securities; (3) "A" shall mean the number of Common Shares
outstanding (on a fully-diluted basis) immediately prior to such issue of
New Securities; (4) "B" shall mean the number of Common Shares (on a
fully-diluted basis) that would have been issued if such New Securities had
been issued at a price per share equal to CP(1) (determined by dividing the
aggregate consideration received by the Company in respect of such issue by
CP(1)); and (5) "C" shall mean the number of such New Securities (on a
fully-diluted basis) issued in such transaction.
The adjustment provided for in this Section 4.4(b) shall be made
successively whenever any New Securities are issued (provided that no
further adjustments in the Conversion Price shall be made upon the
subsequent exercise, conversion or exchange, as applicable, of such New
Securities pursuant to the original terms of any such New Securities that
are convertible into, exchangeable for or exercisable for the purchase of
Common Shares) and shall become effective immediately, except as provided
in Section 4.4(f) below, after such issuance. If any or all of such New
Securities that are convertible into, exchangeable for or exercisable for
the purchase of Common Shares expire or terminate without having been
exercised, converted or exchanged, the Conversion Price then in effect
shall be appropriately readjusted to the Conversion Price in effect
immediately prior to the issuance of such New Securities, subject, however,
to such other adjustments as may have been made or that would have
otherwise been made under this Section 4.4(b) since the issuance of such
New Securities.
In case the Company shall distribute to all holders of its Common Shares any
share capital of the Company (other than Common Shares) or evidences of
Indebtedness or cash or other assets (excluding regular cash dividends or
distributions paid from retained earnings of the Company and dividends or
distributions referred to in Section 4.4(a) above) or rights, options or
warrants to subscribe for or purchase any of its securities (excluding
those referred to in Section 4.4(b) above) then, in each such case, the
Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the date of the distribution by a fraction, the numerator of which shall
be the Conversion Price in effect immediately prior to the date of the
distribution less the then Fair Market Value (as determined pursuant to
Section 9.4) of the portion of the share capital, cash or assets or
evidences of Indebtedness so distributed, or of the subscription rights,
options or warrants so distributed or of such convertible or exchangeable
securities, with respect to one A Common Share, and the denominator of
which shall be the Conversion Price in effect immediately prior to the date
of the distribution. Such adjustment shall be made whenever any such
distribution is made, and shall become effective retroactive to the record
date for the determination of shareholders entitled to receive such
distribution. If any such distribution is not made or if any or all of such
rights, options or warrants expire or terminate without having been
exercised, the Conversion Price then in effect shall be appropriately
readjusted.
Notwithstanding the foregoing, the provisions of this Section 4.4 shall not
apply to the issuance of any of the following ("Exempt Issuances"): (1) A
Common Shares issued upon conversion of Series B Preferred Shares; (2)
Common Shares issued upon conversion or exchange of New Securities where
the Conversion Price had been adjusted concurrently with the issue of such
New Securities in accordance with the provisions of this Section
A-16
4.4; (3) Series B Preferred Shares issued as PIK Dividends or in connection
with a subdivision or consolidation of outstanding Series B Preferred
Shares; (4) Parity Shares issued with the consent of the Majority Holders
pursuant to Section 5.2(c); (5) A Common Shares issued upon conversion of
Parity Shares; (6) Parity Shares issued as payment-in-kind dividends or in
connection with a subdivision or consolidation of any class or series of
Parity Shares; (7) Equity Incentive Awards (and any A Common Shares issued
pursuant to the exercise of any such Employee Incentive Awards) the
issuance of which has been approved by the Board; and (8) A Common Shares
issued as Permitted Acquisition Consideration.
In the event any securities of the Company (other than Series B Preferred
Shares) (collectively, the "Subject Securities"), are amended or otherwise
modified by operation of their terms or otherwise (including, without
limitation, by operation of such Subject Securities' anti-dilution
provisions) in any manner whatsoever that results in (i) the reduction of
the exercise, conversion or exchange price of such Subject Securities
payable upon the exercise for, or conversion or exchange into, Common
Shares or other securities exercisable for, or convertible or exchangeable
into, Common Shares and/or (ii) such Subject Securities becoming
exercisable for, or convertible or exchangeable into (A) more shares or a
greater amount of Subject Securities which are, in turn exercisable for, or
convertible or exchangeable into, Common Shares, or (B) more Common Shares,
then such amendment or modification shall be treated for purposes of
Section 4.4(b) above as if the Subject Securities which have been amended
or modified have been terminated and New Securities have been issued with
the amended or modified terms, the Company shall make all necessary
adjustments (including successive adjustments if required) to the
Conversion Price in accordance with Section 4.4(b) above. On the expiration
or termination of any such amended or modified Subject Securities for which
adjustment has been made pursuant to the operation of the provisions of
this Section 4.4(e) or Section 4.4(b) above, without such Subject
Securities having been exercised, converted or exchanged in full pursuant
to their terms, the Conversion Price shall be appropriately readjusted to
reverse such previous adjustment.
No adjustment in the Conversion Price shall be required unless such adjustment
would require a change equal to at least one percent (1%) in the Conversion
Price; provided, however, that any adjustments which by reason of this
Section 4.4(f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment; and provided, further,
that adjustment shall be required and made in accordance with the
provisions of this Section 4.4 (other than this Section 4.4(f)) at the time
of any conversion of any Series B Preferred Shares pursuant to Section
4.4(a) above. All calculations shall be made to the nearest cent or to the
nearest one hundredth of a share.
Whenever the Conversion Price or the Conversion Rate is adjusted as herein
provided, the Company shall promptly prepare a notice of the adjustment
setting forth the relevant Conversion Price or the relevant Conversion Rate
that is being adjusted and the date on which the adjustment becomes
effective and shall mail the notice of such adjustment (together with a
copy of an officer's certificate setting forth the facts requiring such
adjustment) to each holder of Series B Preferred Shares at such holder's
last address as shown on the Register of Members.
A-17
Notice of Certain Events.
In case at any time prior to the conversion or redemption of all
outstanding Series B Preferred Shares:
the Company shall authorize the granting to all the holders of Common
Shares of rights to subscribe for or purchase any shares of any class
or of any other rights; or
there shall be any reclassification of the Common Shares of the Company
other than a subdivision or combination of its outstanding Common
Shares; or
there shall be any capital reorganization by the Company; or
there shall be a consolidation or merger involving the Company or sale of
all or substantially all of the Company's property and assets; or
there shall be a voluntary or involuntary dissolution, liquidation or
winding up by the Company or dividend or distribution to holders of A
Common Shares; or
any other event which would cause an adjustment in the Conversion Price or
Conversion Rate shall occur;
then in any one or more of said cases, the Company shall cause to be
delivered to the holders of the Series B Preferred Shares, at the earliest
practicable time (and, in any event, not less than fifteen (15) days before
any record date or the date set for definitive action, provided that if the
relevant transaction has not been publicly announced at such time the
Company may first require that each such holder execute a confidentiality
agreement in customary form), notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up or other
transaction shall take place, as the case may be. Such notice shall also
set forth such facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the kind and amount of the shares and other securities
and property deliverable upon conversion of the Series B Preferred Shares,
as well as a comparison of what (if anything) the holders of Series B
Preferred Shares would be entitled to receive in connection with such
action if such holders elect not to convert their Series B Preferred
Shares. Such notice shall also specify the date, if known, as of which the
holders of record of the Common Shares shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Shares for securities or other property (including cash) deliverable
upon such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up or other transaction, as the case may be, and the
right of the holders of Series B Preferred Shares to convert their Series B
Preferred Shares into A Common Shares as of such date.
Reservation of A Common Shares.
The Company shall at all times reserve and keep available, out of the aggregate
of its authorized but unissued A Common Shares, for the purpose of
effecting conversions of the Series B
A-18
Preferred Shares, the full number of A Common Shares issuable upon the
conversion of all outstanding Series B Preferred Shares not theretofore
converted including, for purposes of this paragraph, the number of A Common
Shares which shall be issuable upon conversion of all of the outstanding
Series B Preferred Shares which shall be computed as if, at the time of
computation, all of the outstanding shares were held by a single holder.
The Company shall from time to time, subject to the Law, the Articles and
the Memorandum of Association of the Company, increase the authorized
amount of its A Common Shares if at any time the number of A Common Shares
remaining unissued shall not be sufficient to permit the conversion of all
the then outstanding Series B Preferred Shares.
Notwithstanding any other provision of this authorizing resolution to the
contrary, the Conversion Price shall at all times be equal to or greater
than the then par value of the A Common Shares issuable upon conversion of
each Series B Preferred Share. Before taking any action which would cause
an adjustment reducing the Conversion Price below such par value, the
Company shall use its best efforts to reduce the par value of the A Common
Shares so that such adjustment can be given effect.
Taxes.
Except where registration is requested in a name other than the name of the
registered holder, the Company will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of A Common Shares on conversion of the Series B Preferred Shares pursuant
hereto.
Merger, Consolidation, Etc.
In case of any reclassification or change of outstanding A Common Shares
(other than a change in par value, or as a result of a subdivision or
combination), or in case of any consolidation of the Company with, or
merger of the Company with or into, any other entity that results in a
reclassification, change, conversion, exchange or cancellation of the
outstanding A Common Shares or any sale or transfer of all or substantially
all of the assets of the Company, each holder of the Series B Preferred
Shares then outstanding shall have the right thereafter to convert the
Series B Preferred Shares held by such holder into the kind and amount of
securities, cash and other property which the holder would have been
entitled to receive upon such reclassification, change, consolidation,
merger, sale or transfer if immediately prior to the reclassification,
change, consolidation, merger, sale or transfer such holder had held the A
Common Shares then issuable upon conversion of such Series B Preferred
Shares.
A-19
Protection of Conversion Rights.
The Company will not through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Company but will at all times in good faith assist in the carrying out
of all the provisions of this Article 4 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series B Preferred Shares against
impairment.
Cancellation of Converted Shares.
Upon any conversion of the Series B Preferred Shares, the shares so
converted shall be cancelled and shall not be reissued, and the Company may
from time to time take such appropriate action as may be necessary to
diminish the authorized number of Series B Preferred Shares accordingly.
VOTING RIGHTS
Voting.
The issued and outstanding Series B Preferred Shares shall be voted at any
annual or extraordinary general meeting of the Company upon the following
basis: the holders of any Series B Preferred Shares shall be entitled to
the number of votes equal to the number of A Common Shares into which such
Series B Preferred Shares could be converted (determined without giving
effect to the limitations on convertibility set forth in Section 4.1) at
the record date for determination of the Members entitled to vote on such
matters, or, if no such record date is established, at the date such vote
is taken, such votes to be counted together with all other shares of the
Company having general voting power and not counted separately as a class.
Matters Requiring Approval.
None of the following actions involving the Company or any Subsidiary shall
be valid unless approved in advance by the holders of Series B Shares
and/or Parity Shares constituting a majority of the total number of Series
B Shares and Parity Shares (except for the matters set forth in clauses
(b), (c) and (f), which shall only require the prior approval of the
Majority Holders):
Any material change in the scope of the businesses carried on by the
Company and its Subsidiaries;
Any amendment to the Articles or the Memorandum of Association of the
Company that adversely affects the holders of the Series B Preferred
Shares;
A-20
The authorization or issuance of any Parity Shares or any class or series
of shares with powers, rights, preferences or privileges that are
senior to the Series B Preferred Shares;
Any Substantial Asset Sale;
The Company or any of its Subsidiaries entering into, modifying or
terminating any Related-Party Transaction (1) other than on
commercially reasonable arm's length terms or (2) where the
transaction value exceeds US$5,000,000, in either case unless such
action is approved by a committee of the Board of Directors comprised
of at least three "independent" directors (within the meaning of the
NASDAQ Marketplace Rules, regardless of whether or not the Company
then has a class of shares listed for trading on a NASDAQ market);
Any redemption or purchase (by the Company or any of its Subsidiaries) of
Parity Shares other than a Permitted Parity Share Redemption; or
Any redemption or purchase (by the Company or any of its Subsidiaries) of
Junior Shares other than a Permitted Common Repurchase.
REDEMPTION
Redemption Notice.
The Company shall deliver to the holders of the outstanding Series B
Preferred Shares a written notice (a "Realization Event Notice") at least
twenty (20) days prior to the effective date of any Realization Event. If
so requested in writing by the Majority Holders within five (5) days
following the giving of any such Realization Event Notice, the Company
shall deliver to each holder of outstanding Series B Preferred Shares a
written notice (a "Redemption Notice") offering to redeem all Series B
Preferred Shares held by such holder upon the occurrence of such
Realization Event at the Redemption Price per share specified in Section
6.2. Any such holder may accept such offer by delivering to the Company
within ten (10) days after the giving of such Redemption Notice a written
notice of acceptance in the form reasonably prescribed by the Company for
such purpose (an "Acceptance Notice", with any Series B Preferred Shares
with respect to which a valid Acceptance Notice has been given being
sometimes referred to herein as "Redeemable Shares").
Redemption Price.
The redemption price (the "Redemption Price") to be paid by the Company for
each Redeemable Share shall be equal to the greater of (x) the sum of (i)
the Stated Value and (ii) the amount of any accrued Dividends per share
remaining unpaid on each Redeemable Share as of the Redemption Date and (y)
the Common Equivalent Value of each Redeemable Share as of the Redemption
Date.
Redemption Procedure.
A-21
On the effective date of the applicable Realization Event, or on such other
date as may be agreed to by the Company and the holders of a majority of
the Redeemable Shares (in either case, the "Redemption Date"), subject to
the Law and any other applicable laws, the Company shall redeem each of the
Redeemable Shares by payment to the holders of the Redemption Price
therefor in immediately available funds, subject to surrender to the
Company of the certificate(s) representing such Redeemable Shares.
Termination of Rights.
On and after the Redemption Date, all rights of any holder of Redeemable
Shares shall cease and terminate, and such Redeemable Shares shall no
longer be deemed to be outstanding, whether or not the certificates
evidencing such shares have been received by the Company; provided,
however, that, if the Company defaults in the payment of the Redemption
Price for any such Redeemable Shares for any reason, including without
limitation the lack of funds for redemption, the rights of the holders of
such Redeemable Shares shall continue until the Company cures such default.
LIQUIDATION, DISSOLUTION OR WINDING UP
Ranking.
Upon the occurrence of any liquidation, dissolution or winding up of the
Company, the assets of the Company available for distribution shall be
distributed as follows:
Subject to the Law and any other applicable laws, the holders of the Series
B Preferred Shares shall be entitled to be paid the Liquidation Preference,
pro rata, in respect of each Series B Preferred Share, and the holders of
any Parity Shares shall be entitled to be paid any liquidation preferences
applicable to such Parity Shares, in each case prior to and in preference
of any payments to holders of Junior Shares. If the assets of the Company
are not sufficient to pay in full the Liquidation Preference of the Series
B Preferred Shares and any liquidation preferences of such Parity Shares,
then the holders of the Series B Preferred Shares and such Parity Shares
shall share equally and ratably in the distributions of such assets based
on the Liquidation Preference of the Series B Preferred Shares and the
liquidation preferences of such Parity Shares. Subject to the Law and
applicable law, after payment has been made to the holders of the Series B
Preferred Shares and any such Parity Shares of the full amounts to which
they shall be entitled, all remaining assets of the Company shall be
distributed first to the holders of any Junior Shares entitled to
liquidation preferences until such liquidation preferences are paid in full
and thereafter to the holders of Common Shares pro rata based on the
numbers of Common Shares held by them.
Non-Cash Distributions.
In the event the Company proposes to distribute assets other than cash in
connection with any liquidation, dissolution or winding up of the Company,
the value of the assets to be distributed to the holders of the Series B
Preferred Shares, any Parity Shares, any Junior
A-22
Shares entitled to a liquidation preference and the Common Shares shall be
deemed to be equal to the Fair Market Value of such assets as determined
pursuant to Section 9.4.
NOTICES
Except as otherwise expressly provided, whenever notices or other communications
are required to be made, delivered or otherwise given to holders of the Series B
Preferred Shares, the notice or other communication shall be made in writing and
shall be by telefax, commercial express courier service or personal delivery,
addressed to the Persons shown on the books of the Company as such holders at
the addresses as they appear in the books of the Company, as of a record date or
dates determined in accordance with the Articles and applicable law, as in
effect from time to time. All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally delivered; when
delivered by such courier, if delivered by commercial express courier service;
or if faxed, when transmission is confirmed by the sender's fax machine.
MISCELLANEOUS
No Other Rights.
Except as may otherwise be conferred or required by the Law or any other
applicable laws, the Series B Preferred Shares shall not have any
designations, preferences, limitations or relative rights other than those
specifically set forth herein (as same may be amended from time to time)
and in any applicable provision of the Articles and the Memorandum of
Association of the Company.
Severability.
If any right, preference or limitation of the Series B Preferred Shares set
forth herein (as amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations set forth herein which can be
given effect without the invalid, unlawful or unenforceable right,
preference or limitation herein set forth shall not be deemed dependant
upon any other such right, preference or limitation unless so expressed
herein.
A-23
Equitable Remedies.
Any registered holder of Series B Preferred Shares shall be entitled to an
injunction or injunctions to prevent violations of the provisions of the
Articles or this authorizing resolution and to enforce specifically the
terms and provisions of the Articles and this authorizing resolution in any
court of the Cayman Islands or any countries having jurisdiction, this
being in addition to any other remedy to which such holder may be entitled
at law or in equity. Notwithstanding the foregoing, the observance of any
term of the Articles or this authorizing resolution which benefits only the
holders of the Series B Preferred Shares may be waived by the Majority
Holders voting as a separate class (either generally or in a particular
instance and either retroactively or prospectively) provided that such
waiver may not be conducted by such holders unless such waiver applies to
all holders of Series B Preferred Shares.
Determination of Fair Market Value. Whenever the Fair Market Value of any
securities (including A Common Shares) or other assets is required to be
determined for the purpose of this authorizing resolution, such "Fair
Market Value" shall be determined as follows:
Such Fair Market Value shall in the first instance be determined by the Board of
Directors in good faith and notice of such determination shall be given as
promptly as practicable to the applicable holders of Series B Preferred
Shares. If the securities in question are not subject to significant
restrictions on free marketability and are (i) traded on one or more
securities exchanges or (ii) actively traded over-the-counter, the
determination of the Board of Directors shall be final and binding on the
Company and each holder of Series B Preferred Shares if the Board of
Directors has applied the methodology set forth in clause (i) or (ii) of
Section 9.4(c), as the case may be. If the securities in question are
subject to restrictions on free marketability and/or there is no public
market for such securities, but the determination of Fair Market Value of
such securities is in the context of an acquisition by the Company or any
Subsidiary thereof of another Person or business for equity consideration
consisting of the issuance of not more than one million (1,000,000) A
Common Shares (which number shall be adjusted to reflect any dividends on
the A Common Shares payable in A Common Shares, share splits or other
combinations or subdivisions of A Common Shares subsequent to the date of
this authorizing resolution) (the "De Minimis Exception"), the
determination of the Board of Directors shall be final and binding on the
Company and each holder of Series B Preferred Shares if such determination
has been made consistent with the applicable provisions of Section 9.4(c).
Subject to the De Minimis Exception, if the securities in question are subject
to significant restrictions on free marketability and/or if there is no
public market for the securities in question and if holders of Series B
Shares and/or Parity Shares constituting a majority of the total number of
Series B Shares and Parity Shares do not deliver to the Company a written
notice of objection to the determination of the Board of Directors within
ten (10) days after the giving of such notice, the Fair Market Value set
forth in such notice shall be final and binding on the Company and each
holder of Series B Preferred Shares and Parity Shares. If holders of Series
B Shares and/or Parity Shares constituting a majority of the total number
of Series B Shares and Parity Shares deliver such a notice objecting to
such determination within such 10-day period, the Fair Market Value of such
securities or
A-24
other assets shall be determined by an independent third-party appraiser
(the "Appraiser") jointly appointed by the Company and such holders. Such
valuation shall be made in accordance with Section 9.4(c).
For purposes of this Section 9.4, valuation shall be made as follows: For
securities (including A Common Shares) not subject to significant
restrictions on free marketability: (i) if traded on one or more securities
exchanges, the value shall be deemed to be the average of the closing
prices of the securities on the principal such exchange over the fifteen
(15) day period ending three days prior to the applicable valuation date,
or such other measurement period as the Board of Directors may reasonably
select; (ii) if actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid or sale prices (whichever are
applicable) over the fifteen (15) day period ending three (3) days prior to
the applicable valuation date, or such other measurement period as the
Board of Directors may reasonably select; and (iii) if there is no active
public market for the securities in question, the value shall be the fair
market value thereof as of the applicable valuation date, as determined by
the Appraiser (or the Board of Directors, as the case) based on such
valuation principles and methods as it deems appropriate. Notwithstanding
the foregoing, in the case of a determination of the Common Equivalent
Value of Series B Preferred Shares in connection with a redemption of such
Series B Preferred Shares pursuant to Article 6, the value of the A Common
Shares determined pursuant to clause (i) of the preceding sentence shall be
based on the price of the A Common Shares as of the applicable Redemption
Date and the value of the A Common Shares determined pursuant to clause
(ii) of the preceding sentence shall be based on the average of the bid and
ask prices as of such Redemption Date.
In the case of A Common Shares, the trading value for such purpose shall be
based on the price of the related American Depositary Shares.
The method of valuation of securities subject to any restrictions on free
marketability shall be to make an appropriate discount from the market
value determined pursuant to subparagraph (i) above to reflect the
approximate fair market value thereof, as determined by the Appraiser (or
the Board of Directors, as the case may be). In the case of assets other
than securities, the value shall be the fair market value thereof as
determined by the Appraiser (or the Board of Directors, as the case may be)
based on such valuation principles and methods as it deems appropriate.
A-25
Schedule 1
to
Series B Preferred Shares Authorizing Resolution
DEFINITIONS
For the purposes of the attached authorizing resolution, the following terms
shall have the meanings indicated below.
"Acceptance Notice" shall have the meaning set forth in Section 6.1.
"Affiliate" shall mean with respect to any Person, any other Person
that directly or indirectly, though one or more intermediaries, controls, is
controlled by, or under common control with, the first mentioned Person. For
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and under "common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Appraiser" shall have the meaning set forth in Section 9.4(b).
"Articles" has the meaning set forth in Section 1.1.
"Associate" shall mean, with respect to any Person, any Entity of which
such Person is a senior officer, director or partner, any trust or estate in
which such Person has a substantial beneficial interest or as to which such
Person serves as a trustee or in a similar capacity or any spouse, children,
grandchildren, parents, parents-in-law or siblings of such Person, or a trust
primarily for the benefit of any of the foregoing.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York or Hong Kong are required or
authorized by law or executive order to close."
"Change of Control" of the Company shall be deemed to have occurred (i) if
any Person or "group" (within the meaning of Rule 13d-5(b)(i) under the Exchange
Act), other than Xinhua Finance Limited and its Affiliates, shall acquire, take
control of (whether by merger, consolidation, sale or otherwise, in one
transaction or in a related series of transactions) or otherwise beneficially
own voting securities of the Company (or any successor entity in a merger or
consolidation involving the Company) representing more than thirty-five percent
(35%) of the total voting power of all outstanding voting securities of the
Company unless Xinhua Finance Limited and its Affiliates then beneficially own
voting securities of the Company representing a higher percentage of the voting
power of all such outstanding voting securities of the Company (or such
successor entity) or (ii) any Person or "group", other than Xinhua Finance
Limited and its Affiliates, shall obtain the ability to Control the Company;
provided that any transaction or series of transactions where Xinhua Finance
Limited and its Affiliates retain Control (whether directly or indirectly) over
the Company shall be deemed not to be a "Change of Control" of the Company or a
"Realization Event."
"Common Equivalent Dividend Amount" shall have the meaning set forth in
Section 3.1.
A-26
"Common Equivalent Value" of any Series B Preferred Shares at any time
shall mean the Fair Market Value (as determined pursuant to Section 9.4) at such
time of the Conversion Shares into which such Series B Preferred Shares are then
convertible (determined without giving effect to any limitations on such
convertibility set forth in Section 4.1).
"Common Shares" means, collectively, the A Common Shares and the B
Common Shares.
"Contingent Obligation" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument or arrangement (whether
in writing or otherwise) to which such Person is a party or by which it or any
of such Person's property is bound.
"Control" shall mean, with respect to any Entity, the possession, directly
or indirectly, of power to direct or cause the direction of management or
policies of such Entity or any of its Subsidiaries (whether through ownership of
more than 50% of the voting power of voting securities of such Entity or any of
the Subsidiaries, through the power to appoint a majority of the members of the
board of directors or similar governing body of such Entity or any of its
Subsidiaries, or through contractual arrangements or otherwise).
"Conversion Base Amount" shall have the meaning set forth in Section 4.1.
"Conversion Price" shall have the meaning set forth in Section 4.1.
"Conversion Rate" shall have the meaning set forth in Section 4.1.
"Conversion Shares" shall have the meaning set forth in Section 4.1.
"Dividend" shall have the meaning set forth in Section 3.1.
"De Minimis Exception" shall have the meaning set forth in Section 9.4(a).
"Entity" means any corporation, partnership, limited liability company,
joint venture, association, partnership, business trust or other entity.
"Equity Incentive Awards" shall mean share options or restricted share
awards granted under the Company's Share Option and Share Grant Plan.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"Exempt Issuances" shall have the meaning set forth in Section 4.4(d).
"Fair Market Value" of a security or other asset shall mean the value
thereof determined pursuant to Section 9.4.
"GAAP" shall mean the generally accepted accounting principles in the
United States of America, consistently applied.
"Governmental Authority" means any government or political subdivision or
department thereof, any governmental or regulatory body, commission, board,
bureau, agency or instrumentality, or any court or arbitrator or alternative
dispute resolution body, in each case whether federal, state, local, foreign or
supranational, as well as any applicable self regulatory body.
"Hong Kong" shall mean the Special Administrative Region of Hong Kong.
"Indebtedness" shall mean as to any Person (a) all obligations of such
Person for borrowed money (including without limitation, reimbursement and all
other obligations with respect to surety bonds, unfunded credit commitments,
letters of credit and bankers' acceptances, whether or not matured), (b) all
indebtedness, obligations or liability of such Person (whether or
A-27
not evidenced by notes, bonds, debentures or similar instruments) whether
matured or unmatured, liquidated or unliquidated, direct or indirect, absolute
or contingent, or joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit
or obligations in respect of bankers acceptances, (c) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (d) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (e) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (f) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (g) all
indebtedness secured by any Lien (other than Liens in favour of lessors under
leases other than leases included in clause (f) above) on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse to the credit
of that Person, and (h) any Contingent Obligation of such Person incurred in
respect of any Indebtedness referred to in (a) to (g) above.
"Junior Shares" shall mean the Common Shares and any other shares in
the Company's share capital that may be authorized after the date hereof other
than Parity Shares.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), charge, claim, restriction
or preference, priority, right or other security interest or preferential
arrangement of any kind or nature whatsoever (excluding preferred share and
equity related preferences) including, without limitation, those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, or any financing lease having substantially the same economic effect
as any of the foregoing.
"Liquidation Preference" shall mean, with respect to a Series B
Preferred Share at any time, the greater of (a) the sum of (i) two hundred
percent (200%) of the Stated Value per share plus (ii) the amount of any accrued
Dividends per share then remaining unpaid on such Series B Preferred Share and
(b) the amount that would be distributed at such time in a complete liquidation
of the Company to the holder of such Series B Preferred Share as a holder of A
Common Shares if all outstanding Series B Preferred Shares had been converted
into Conversion Shares at such time pursuant to Article 4 hereof (determined
without giving effect to the limitations on convertibility set forth in Section
4.1).
"Majority Holders" at any time shall mean the holders of a majority of
the Series B Preferred Shares outstanding at that time.
"New Securities" shall have the meaning set forth in Section 4.4(b).
"Parity Shares" shall mean any shares in the capital of the Company
that rank pari passu with the Series B Preferred Shares with respect to dividend
rights, rights on other distributions and/or rights upon any liquidation or
dissolution of the Company (as applicable),
A-28
the authorization and issuance of which have been approved by the Majority
Holders pursuant to Section 5.2(c).
"Permitted Acquisition Consideration" shall mean A Common Shares issued as
consideration for the acquisition by the Company or any Subsidiary thereof
(whether by direct purchase, share exchange, merger or otherwise) of another
Person or business that has been approved by the Board of Directors, but only to
the extent that the Fair Market Value (as determined pursuant to Section 9.4) of
the interests in such Person or such business acquired by the Company or such
Subsidiary is at least equal to the Fair Market Value (as determined pursuant to
Section 9.4) of such A Common Shares. Notwithstanding the foregoing sentence,
any A Common Shares that the Company is contractually obligated to issue
pursuant to "earnout" provisions in effect as of the date hereof relating to
prior acquisitions by the Company (or its Subsidiaries) of other Persons or
businesses shall be deemed to constitute Permitted Acquisition Consideration for
the purposes hereof, regardless of the value of such shares or the related
interests acquired by the Company (or such Subsidiaries).
"Permitted Common Repurchase" shall mean (i) any repurchase by the
Company of A Common Shares or Equity Incentive Awards held by an employee of the
Company or a Subsidiary thereof in connection with the termination of the
employment of such employee where such repurchase (x) has been approved by the
Board of Directors or is required pursuant to an agreement entered into between
the Company (or such Subsidiary) and such employee that has been approved by the
Board of Directors and (y) is at a price per share that does not exceed the then
current market price per share of the A Common Shares or (ii) any repurchase of
A Common Shares (or, if applicable, American Depository Receipts representing A
Common Shares) through open market purchases pursuant to a share buy back
program approved by the Board of Directors; provided that no repurchase shall be
permitted pursuant to clause (ii) which would cause the cumulative aggregate
number of A Common Shares repurchased pursuant to clause (ii) (or represented by
American Depository Receipts repurchased pursuant to clause (ii)) to exceed
twenty percent (20%) of the number of Common Shares outstanding at the time of
such repurchase (determined without giving effect to any prior repurchases
permitted pursuant to clause (ii)) reduced by the number of A Common Shares
repurchased (or represented by American Depository Receipts repurchased) prior
to the date hereof pursuant to the Company's share buy back program announced on
May 29, 2007; and provided, further, that no repurchase shall be permitted
pursuant to clause (i) or (ii) unless all accrued Dividends on the Series B
Preferred Shares (other than Dividends accrued during the fiscal quarter during
which such repurchase takes place) shall have been paid in full, or declared in
full and funds set apart for the payment thereof.
"Permitted Parity Share Redemption" shall mean a redemption of Parity
Shares or a repurchase (by the Company or a Subsidiary thereof) of Parity Shares
or of A Common Shares issued upon conversion of Parity Shares to the extent that
such redemption or repurchase is required pursuant to the terms of such Parity
Shares or the terms of any agreement pursuant to which such Parity Shares are
issued, but only if such terms have been approved the Majority Holders.
"Person" shall mean any individual, Governmental Authority, Entity or
unincorporated association.
A-29
"PIK Dividend" shall have the meaning set forth in Section 3.3.
"Realization Event" shall mean any of the following:
(a) Any Change of Control of the Company;
(b) Any Substantial Asset Sale;
(c) Any consolidation or merger (other than a reincorporation transaction)
or acquisition or sale of voting securities of the Company resulting
in the holders of the issued and outstanding voting securities of the
Company immediately prior to such transaction beneficially owning or
controlling less than a majority of the voting securities of the
continuing or surviving entity immediately following such transaction;
or
(d) Any tender offer, exchange offer or repurchase offer for more than
fifty percent (50%) of the outstanding Common Shares.
"Realization Event Notice" shall have the meaning set forth in Section 6.1.
"Redeemable Shares" shall have the meaning set forth in Section 6.1.
"Redemption Date" shall have the meaning set forth in Section 6.3.
"Redemption Notice" shall have the meaning set forth in Section 6.1.
"Redemption Price" shall have the meaning set forth in Section 6.2.
"Related Party" means (i) any shareholder of the Company or any Subsidiary
of the Company (other than the Company or another Subsidiary thereof), (ii) any
Affiliate of any Person described in clause (i) (other than the Company or any
of its Subsidiaries), (iii) any officer, director, employee or consultant of any
Person described in clause (i) or (ii), or (iv) or any Associate of any Person
described in clause (iii).
"Related-Party Transaction" shall mean any transaction, agreement or
arrangement involving the Company or any of its Subsidiaries, on the one hand,
and any Related Party, on the other hand.
"Stated Value" shall have the meaning set forth in Section 2.2.
"Subject Securities" shall have the meaning set forth in Section 4.4(e).
"Subsidiary" means with respect to any Person, any Entity of which more
than 50% of the total voting power of shares of stock or other ownership
interest entitled (without regard to the occurrence of any contingency) to vote
in the election of the Person or Persons (whether directors, managers, trustees
or other Persons performing similar functions) having the power to direct or
cause the direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of the Person or a combination thereof.
"Substantial Asset Sale" shall mean any disposition (whether by way of a
sale, a merger or consolidation pursuant to which any Subsidiary of the Company
ceases to be a majority-
A-30
owned and controlled Subsidiary, a contribution of assets to any Entity other
than a majority-owned and controlled Subsidiary, a spin-off or split-off
involving any Subsidiary of the Company, a partial liquidating dividend or
distribution of assets or any other form of disposition) of assets of the
Company or of any of its Subsidiaries representing substantially all of the
assets of the Company and its Subsidiaries determined on a consolidated basis.
"USD", "United States Dollars" "US Dollars", "US$" and "cent" shall
mean the lawful currency of the United States of America.
X-00
XXXXXXX X-0
TO
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
FORM OF OPINION OF XXXXXXX, XXXX & XXXXXXX
X-00
XXXXXXX X-0
TO
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
FORM OF OPINION OF XXXXXX & XXXXXXX LLP
A-33
EXHIBIT D
TO
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
A-34
EXHIBIT D
TO
SERIES B CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT
FORM OF SHAREHOLDERS AGREEMENT
Note: the executed copy of the shareholders agreement has been filed with the
annual report of the Registrant for the fiscal year ended December 31, 2007 as
Exhibit 4.61.
A-35
