EXHIBIT 2.1
PLAN OF RESTRUCTURING AND SECURITIES PURCHASE AGREEMENT
THIS PLAN OF RESTRUCTURING AND SECURITIES PURCHASE AGREEMENT (this
"AGREEMENT") is made as of January 29, 2003, by and among SHANGHAI XXXXXX
INTERNET DEVELOPMENT CO., LTD. [Chinese name], a limited liability company
formed under the laws of the People's Republic of China ("SHANGHAI XXXXXX"),
SPIRIT HIGH VENTURES LIMITED (to be renamed as XXXXXX HOLDINGS LIMITED), an
international business company formed under the laws of the British Virgin
Islands ("BVI XXXXXX"), TWIN LUCK VENTURES LTD., an international business
company formed under the laws of the British Virgin Islands ("TWIN LUCK"), LUCK
JOY VENTURES LTD., an international business company formed under the laws of
the British Virgin Islands (together with Twin Luck, the "FOUNDER HOLDING
COMPANIES"), CHEN TIANQIAO and XXXX XXXXXX (together with Xx. XXXX Tianqiao, the
"FOUNDERS"), and SB ASIA INFRASTRUCTURE FUND L.P., a limited partnership formed
under the laws of the Cayman Islands ("SAIF").
RECITALS
A. Shanghai Xxxxxx is a limited liability company incorporated
under the Company Law of the People's Republic of China, with a registered
capital of RMB 1,500,000.
B. Shanghai Xxxxxx is currently engaged in the business of
developing, marketing and distributing online games in the People's Republic of
China (the "BUSINESS"), as more fully described in a Business Plan prepared by
the Company, dated________ ____, 2003 (the "BUSINESS PLAN"), a copy of which is
attached hereto as EXHIBIT A.
C. The Founders own beneficially and of record all the registered
capital of Shanghai Xxxxxx and manage the Business on behalf of Shanghai Xxxxxx.
D. Shanghai Xxxxxx and SAIF signed a non-binding Term Sheet,
dated as of November 28, 2002, which sets forth certain terms and conditions
relating to a proposed investment by SAIF, or one of its affiliated funds or
designees, in Shanghai Xxxxxx (the "SERIES A FINANCING") through an offshore
holding company to be organized under the laws of the British Virgin Islands.
E. SAIF has received a copy of the draft Xxxxxx Networking Co.
Ltd. Agreed-upon Procedures dated December 31, 2002.
F. In connection with the proposed Series A Financing, it is
deemed necessary and desirable to implement a Plan of Restructuring, as more
fully described in Section 2 below.
G. Pursuant to the Plan of Restructuring, the Founders
established BVI Xxxxxx and, subject to this Agreement, will cause BVI Xxxxxx to
(i) amend and restate its Memorandum and Articles of Association (the "RESTATED
MEMORANDUM AND ARTICLES") to incorporate the Certificate of Designation of
Preferred Stock in substantially the form attached hereto as EXHIBIT B and
provisions contained in Sections 2, 3, 4, and 5 of the Shareholders Agreement
(as defined below) and (ii) adopt the Restated Memorandum and Articles prior to
Closing (as defined below).
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement the following terms have
the following meanings:
"ACTOZ DISPUTE" means any dispute, potential litigations, arbitrations
or claims arising out of, in connection with or in relation to that certain
Software Licensing Agreement among Actoz Soft Co., Ltd., Shanghai Xxxxxx
Internet Development Co., Ltd., Shanghai Pudong New Area Imp. & Exp. Corp. dated
as of June 29, 2001.
"AFFILIATE" means, in respect of a Person, any other Person if it
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, the other specified Person.
"AGREEMENT" has the meaning set forth in the preamble to this
Agreement.
"BALANCE SHEET DATE" means December 31, 2002.
"BUSINESS" shall have the meaning set forth in the recitals.
"BUSINESS DAY" means any day, excluding Saturdays and Sundays, on which
banks in Hong Kong, the People's Republic of China and the Commonwealth of
Massachusetts are open for business during their normal business hours.
"CLOSING" has the meaning set forth in Section 3.2 of this Agreement.
"COFTEC" means the Shanghai Foreign Investment Commission.
"COMMON STOCK" means the common stock, par value US$0.01 per share, of
BVI Xxxxxx.
"COMPANY GROUP" means Shanghai Xxxxxx, BVI Xxxxxx, the WFOE and their
respective Subsidiaries from time to time whose gross assets exceed
US$15,000,000, or any one of them.
"COMPLETION OF THE PLAN" has the meaning set forth in Section 2.3 of
this Agreement.
"CONTROL" means, when used with respect to any Person, the power to
direct the management and policies of such Person, directly or, indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" have meanings correlative to the
foregoing.
"E&Y" means Ernst & Young Hua Ming Assurance & Advisory Business
Services, auditors to Shanghai Xxxxxx.
"FINANCIAL STATEMENTS" means the audited balance sheets, profit and
loss accounts and cash flow statements of Shanghai Xxxxxx as of December 31,
2002, copies of which are attached to this Agreement as EXHIBIT C.
"GRANDALL" means Grandall Legal Group (Shanghai), PRC Counsel to
Shanghai Xxxxxx.
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"XXXXXXX XXXXX" means Xxxxxxx Xxxxx, Hong Kong counsel to Shanghai
Xxxxxx.
"IFRS" means International Financial Reporting Standards, as
promulgated by the International Accounting Standards Board and as in effect
from time to time (save in respect of any warranty in Section 4, "IFRS" shall be
construed as at the time or period to which the respective warranty relates).
Except as otherwise expressly provided in this Agreement, all terms of an
accounting or financial nature shall be construed in accordance with IFRS.
"ICP LICENSE" means the License for Operation of Telecommunication and
Information Service issued by the Shanghai Telecommunication Administration to
Shanghai Xxxxxx on April 7, 2001.
"INTELLECTUAL PROPERTY" means patents, patent applications, trademarks,
service marks, mask works, trade names, copyrights, trade secrets, information,
proprietary rights, and processes.
"KNOWLEDGE" means the knowledge after making all reasonable inquiries
and investigation and refers to the knowledge of the senior management and
executive officers of an entity to which knowledge is attributed.
"MATERIAL ADVERSE EVENT" means, with respect to any member of BVI
Xxxxxx, the WFOE or Shanghai Xxxxxx any change, event, or effect that is
materially adverse to the business, operations, assets, liabilities, financial
condition, or results of operations or prospects of that Person.
"PERSON" means any individual, sole proprietorship, partnership, firm,
joint venture, estate, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or governmental
authority or other entity of any kind or nature.
"PLAN OF RESTRUCTURING" means the Memorandum of Understanding,
dated__________ ___, 2003, attached hereto as EXHIBIT D.
"PRC" means the People's Republic of China, excluding the Hong Kong
Special Administrative Region, Macau Special Administrative Region and the
Islands of Taiwan.
"PRC GAAP" means generally accepted accounting principles in the PRC
applied on a consistent basis.
"PREFERRED STOCK" means the Preferred Stock of BVI Xxxxxx.
"PURCHASED SECURITIES" has the meaning set forth in Section 3.1 of this
Agreement.
"QUALIFIED IPO" means the closing of the Company's first firm
commitment, underwritten public offering of Common Stock in connection with
which Common Stock (or the shares of a company of which the Company is a wholly
owned subsidiary established for the purpose of listing (the "LISTCO")) is
listed and becomes publicly traded on an internationally recognized securities
exchange or the NASDAQ National Market or the issue or transfer of shares in a
company whose shares are listed on an internationally recognized stock exchange
or
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on NASDAQ National Market for which shares approval for listing and trading has
been duly obtained and which shares are issued or transferred in consideration
of the acquisition of the Common Stock of the Company or the shares of the
Listco, provided, however, that such transaction or listing shall result in
aggregate proceeds to the Company or to SAIF in excess of US$100,000,000 (before
deduction for underwriters commissions and expenses) and (b) a total market
capitalization of the Company or the Listco of not less than US$500,000,000.
"RELEVANT CLAIM" means a claim by SAIF in respect of any of the
representations and warranties contained in Section 4 hereof.
"RESERVED" means, with respect to any class or series of a company's
stock to be issued in connection with the conversion thereinto or exchange
therefor of any security or the exercise of any option, warrant or right with
respect thereto, that the board of directors of such company has adopted a
resolution providing that the company shall refrain from issuing a number of
shares of such stock, and that such shares will remain in the authorized but
unissued capital of the company, unless issued as a result of such conversion,
exchange or exercise. The word "Reserve" shall have a meaning correlative to the
foregoing.
"RESTATED MEMORANDUM AND ARTICLES" has the meaning set forth in the
recitals of this Agreement.
"RESTRUCTURING" means the reorganization of the business, affairs and
arrangements of the Company Group in accordance with the Plan of Restructuring.
"RESTRUCTURING DOCUMENTS" means the documents set forth in EXHIBIT E.
"SENIOR MANAGER" means, with respect to any member of the Company
Group, the chief executive officer of such company and any member of management
reporting directly to the board of directors or chief executive officer of such
company.
"SERIES A PREFERRED STOCK" means the Series A Preferred Stock, par
value US$0.01 per share, of BVI Xxxxxx.
"SERIES A-1 PREFERRED STOCK" means the Series A-1 Preferred Stock, par
value US$0.01 per share, of BVI Xxxxxx.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement in
substantially the form attached as EXHIBIT F to this Agreement.
"SUBSIDIARY" means, with respect to any Person that is not an
individual, any corporation, partnership, or other entity, Controlled by such
Person.
"TRANSACTION DOCUMENTS" means this Agreement and the Shareholders
Agreement and the Restructuring Documents.
"US GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
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"WFOE" means [Chinese name] a wholly foreign-owned enterprise
established by BVI Xxxxxx in Shanghai.
"WARRANTORS" means the Founder Holding Companies, Shanghai Xxxxxx and
BVI Xxxxxx.
2. Plan of Restructuring.
2.1 Adoption of the Plan. The Board of the Directors and the
shareholders of Shanghai Xxxxxx shall adopt the Plan of Restructuring in
substantially the form attached as EXHIBIT D hereto.
2.2 Restructuring Documents. EXHIBIT E sets forth accurately all
material documents necessary to implement the Plan of Restructuring. Each of
Shanghai Xxxxxx and the Founders agrees, jointly and severally, that it or he
will execute, or procure to be executed, the Restructuring Documents in a form
mutually agreed by SAIF and BVI Xxxxxx.
2.3 Completion of the Plan. Each of Shanghai Xxxxxx and the
Founder Holding Companies undertakes, jointly and severally, to SAIF that it or
he will use best endeavors to complete the Plan of Restructuring prior to
Closing. For the purpose of this Agreement, completion of the Plan of
Restructuring shall mean the following (the "COMPLETION OF THE PLAN"): (i) all
Restructuring Documents in form and substance reasonably acceptable to SAIF have
been duly executed by all parties thereto and constitute legally binding
obligations of the parties thereto in accordance with their respective terms;
(ii) all necessary consents and approvals for the establishment of the WFOE have
been duly obtained; (iii) delivery of a legal opinion by Grandall with respect
to the Plan of Restructuring in a form reasonably acceptable to SAIF; (iv)
transfer of funds totaling not less than RMB220,000,000 (the actual amount of
such transfer shall equal to all of the cash on hands held by Shanghai Xxxxxx as
reflected on its balance sheet as of Closing) by Shanghai Xxxxxx to a bank
account in the name of WFOE with a bank mutually acceptable to Shanghai Xxxxxx
and SAIF pursuant to a loan agreement between Shanghai Xxxxxx and SAIF in a form
reasonably acceptable to SAIF. Within 14 days from Completion of the Plan,
Shanghai Xxxxxx shall deliver to SAIF a certificate in form reasonably
satisfactory to SAIF signed by the legal representative of Shanghai Xxxxxx to
the effect that the Restructuring has been completed as provided herein.
2.4 Conduct of the Business of Shanghai Xxxxxx. Prior to the
Closing, each of the Founders undertakes to SAIF, jointly and severally, to
cause Shanghai Xxxxxx to conduct its business in the ordinary course of business
and in a prudent manner consistent with past practice.
2.5 Founders' Interest in Shanghai Xxxxxx. The Founders jointly
and severally represent to SAIF as follows: (i) they are the only record and
beneficial owners of all the interest in the registered capital of Shanghai
Xxxxxx, free and clear of all liens, security interest, pledges, claims,
restrictions, equities, charges and encumbrances of any nature whatsoever (the
"Encumbrances") except for the grant of the options set forth below. Each of the
Founders jointly and severally undertakes to SAIF that he will not transfer,
alienate or dispose of any interest in the registered capital of Shanghai Xxxxxx
or create any Encumbrances on the registered capital of Shanghai Xxxxxx (except
for the grant of options pursuant to this Agreement)
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without the consent of SAIF. Each Founder hereby grants an option to BVI Xxxxxx
or a Person designated in writing by BVI Xxxxxx to purchase for RMB 10,000
either all his interest in the register capital of Shanghai Xxxxxx or
substantially all the assets of Shanghai Xxxxxx remaining after the Completion
of the Plan, including, without limitation, the ICP License, subject to
applicable restrictions under PRC law.
2.6 Consummation of the Restructuring. BVI Xxxxxx and Shanghai
Xxxxxx agree to use best efforts to perform all of their obligations under the
Restructuring Documents and to consummate the transactions contemplated
thereunder promptly after entry into this Agreement, and in no event later than
two years from the date hereof.
3. Purchase and Sale of Preferred Stock; Purchase and Sale of Founders
Stock; and the Issuance of the Warrant.
3.1 Subject to the terms and conditions of this Agreement:
(a) BVI Xxxxxx agrees to issue and sell to SAIF, and SAIF
agrees to buy from BVI Xxxxxx, 19,788,918 shares of Series A Preferred Stock
(the "PURCHASED SHARES") at a per share price of US$1.5160 for an aggregate
purchase price of US$30,000,000.
(b) BVI Xxxxxx agrees to grant to SAIF a Warrant, in
substantially the form attached hereto as EXHIBIT G (the "WARRANT"), to purchase
additional shares of the Series A Preferred Stock. The Purchased Shares and the
Warrant shall hereinafter be referred to as the "PURCHASED SECURITIES".
(c) The Founder Holding Companies shall sell to SAIF, and
SAIF shall purchase from each of the Founder Holding Companies, the number of
shares of Common Stock for the consideration set forth opposite such Founder
Holding Companies' name in Exhibit 3.1 hereof ("FOUNDER SHARES") at a per share
price of US$0.6064.
(d) BVI Xxxxxx agrees to issue shares of Series A-1
Preferred Stock to SAIF in exchange for the Founders Shares at a ratio of 1
share of the Series A-1 Preferred Stock for 1 Founders Share.
3.2 Closing. The consummation of the transactions set forth in
Section 3.1 (the "CLOSING") shall take place at the offices of O'Melveny & Xxxxx
LLP, 20/F, Xxxxx Center, 0000 Xxxxxxx Xxxx Xxxx, Xxxxxxxx 000000, China, on the
later of (i) the fourth Business Day following satisfaction or waiver (if
applicable) of the conditions set out in Sections 8 and 9, (ii) ten Business
Days after the execution and delivery hereof by each of the parties hereto, or
(iii) such other place and time as BVI Xxxxxx and SAIF shall mutually agree. At
the Closing, subject to satisfaction or waiver of the conditions set forth in
Sections 8 and 9 and the performance by each other party of its obligations
hereunder,
(a) BVI Xxxxxx shall deliver to SAIF (i) a certificate
representing the Purchased Shares, (ii) the duly executed Warrant, (iii) a
counterpart or counterparts of the Shareholders Agreement executed by all
parties other than SAIF, and (iv) any other documents or items any Warrantor is
contemplated hereunder to deliver to SAIF at or prior to the Closing;
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(b) SAIF shall deliver to BVI Xxxxxx (i) a counterpart of
the Shareholders Agreement executed by SAIF, and (ii) the purchase price in
immediately available funds for the Purchased Shares.
(c) The Founder Holding Companies shall deliver to SAIF
certificates evidencing the Founders Shares, together with a duly executed
instrument of transfer in form reasonably satisfactory to SAIF.
(d) SAIF shall pay each Founder Holding Company, or its
designee in immediately available funds, the purchase price indicated in Exhibit
3.1 for the Founders Shares sold to SAIF by such Founder Holding Company.
(e) SAIF shall deliver to BVI Xxxxxx certificates
evidencing the Founders Shares, together with a duly executed instrument of
transfer in form reasonably satisfactory to BVI Xxxxxx.
(f) BVI Xxxxxx shall issue to SAIF certificates
evidencing the shares of Series A-1 Preferred Stock issued to SAIF in exchange
for the Founders Shares.
(g) The Founder Holding Companies shall cause two
individuals nominated by SAIF in writing to be elected to BVI Shanda's board of
directors.
3.3 Payment Terms. Payment of the purchase price for the Purchased
Shares shall be made by wire transfer to an account designated by BVI Xxxxxx to
SAIF in writing at least three (3) Business Days prior to Closing. Payment of
the purchase price for the Founders Shares shall be made by wire transfer to
such account as each Founder Holding Company shall designate to SAIF in writing
at least three (3) Business Days prior to Closing.
4. Representations and Warranties of the Warrantors to SAIF. As of the
date hereof each of Warrantors jointly and severally represents and warrants to
SAIF as follows:
4.1 BVI Shanda's Corporate Organization and Authority. BVI Xxxxxx:
(a) is a corporation duly organized, validly existing,
authorized to exercise all its corporate powers, rights, and privileges, and in
good standing under the laws of the British Virgin Islands;
(b) has the corporate power and corporate authority to
own, lease and operate its properties and to carry on its business as now
conducted; and
(c) has made available to SAIF or its counsel a copy of
its minute books. Such copy is true, correct, and complete and contains all
amendments and all minutes of meetings and actions taken by the shareholders and
directors of BVI Xxxxxx since the time of incorporation through the date of this
Agreement and reflects all transactions referred to in such minutes accurately
in all material respects.
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4.2 The WFOE's Corporate Organization and Authority. As of
Closing,
(a) The WFOE is a wholly foreign-owned entity duly
organized, validly existing, authorized to exercise all its corporate powers,
rights, and privileges, and in good standing under the laws of the PRC;
(b) The WFOE is duly approved by COFTEC and the relevant
PRC government agencies and has the corporate power and corporate authority to
own, lease and operate its properties and to carry on its business as now
conducted;
(c) The WFOE has made available to SAIF or its counsel a
copy of its minute books. Such copy is true, correct, and complete and contains
all amendments and all minutes of meetings and actions taken by the shareholders
and directors of the WFOE since the time of incorporation through the date of
this Agreement and reflects all transactions referred to in such minutes
accurately in all material respects; and
(d) The WFOE will enjoy, upon approval by the relevant
authorities, the preferential treatment and benefits (including but not limited
to the preferential tax treatment) available generally to wholly foreign-owned
entities under applicable PRC laws.
4.3 Shanghai Shanda's Corporate Organization and Authority.
Shanghai Xxxxxx:
(a) is a limited liability company duly organized,
validly existing, authorized to exercise all its corporate powers, rights and
privileges, and in good standing under the laws of PRC;
(b) has the corporate power and corporate authority to
own, lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted; and
(c) has made available to SAIF or its counsel a copy of
its minute books. Such copy is true, correct, and complete and contains all
amendments and all minutes of meetings and actions taken by the shareholders and
directors of Shanghai Xxxxxx since the time of incorporation through the date of
this Agreement and reflects all transactions referred to in such minutes
accurately in all material respects.
4.4 Capitalization of BVI Xxxxxx.
(a) Capital Stock. After the Restated Memorandum and
Articles have been filed and have become effective and immediately prior to the
Closing, the authorized capital of BVI Xxxxxx will consist of:
(i) Preferred Stock. 30,000,000 shares of Preferred
Stock, 19,788,918 shares of which shall be designated as the Series A
Preferred Stock, 4,947,230 shares of which shall be designated as the
Series A-1 Preferred Stock, and none of which shall be issued and
outstanding.
(ii) Common Stock. Exactly 186,000,000 shares of Common
Stock, of which exactly 100,000,000 shares will be duly and validly
issued, fully paid, nonassessable, and
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outstanding. Exhibit 4.4(a)(ii) completely and accurately lists all
those who will be record and beneficial holders of Common Stock
immediately prior to the Closing and the respective amounts of Common
Stock held thereby.
(b) Reserved Shares. As of the Closing, the following
shares of capital stock of BVI Xxxxxx shall have been Reserved: (i) 5,074,082
shares of Series A Preferred Stock for the exercise of the Warrant; (ii)
76,687,978 shares of the Common Stock for the conversion of the Series A
Preferred Stock and the Series A-1 Preferred Stock; and (iii) 13,309,880 shares
of Common Stock for the grant of options to employees, officers and directors
of, and consultants to, the BVI Xxxxxx and the WFOE pursuant to the ESOP (as
defined in Section 11.2).
(c) Other Securities. Immediately prior to the Closing
and save as contemplated by this Agreement or in the Restated Memorandum and
Articles, there will be no outstanding rights of first refusal, preemptive
rights, or other rights, warrants, options, conversion privileges,
subscriptions, or other rights, agreements or securities, either directly or
indirectly, entitling the holder thereof to purchase or otherwise acquire or to
compel BVI Xxxxxx to issue, repurchase or redeem any equity securities of BVI
Xxxxxx.
4.5 Capitalization of the WFOE.
(a) Registered Capital. The registered capital of the
WFOE is US$10,000,000. No capital contributions have been made to the registered
capital of the WFOE. Within 90 days after the date of the WFOE's establishment,
the WFOE will have received from BVI Xxxxxx the sum of US$3,000,000 in cash,
representing an interest in 30% of the WFOE's registered capital, all of which
interest shall be held by BVI Xxxxxx. Any unfunded balance of the registered
capital will be funded by BVI Xxxxxx in accordance with the terms of the WFOE's
articles of association.
(b) Other Securities. Except as described in paragraph
(a) above, there are no outstanding rights of first refusal, preemptive rights,
or other rights, warrants, options, conversion privileges, subscriptions, or
other rights, agreements or securities, either directly or indirectly, entitling
the holder thereof to purchase or otherwise acquire or to compel the WFOE to
increase or decrease the WFOE's registered capital.
4.6 Capitalization of Shanghai Xxxxxx. The registered capital of
Shanghai Xxxxxx is RMB1,500,000, of which Xx. XXXX Tianqiao holds an interest in
70% and Xx. XXXX Danian holds an interest in 30%. Except as contemplated in the
Plan of Restructuring, there are no outstanding rights of first refusal or
preemptive rights, warrants, options, conversion privileges, subscriptions, or
other agreements or securities, either directly or indirectly, entitling the
holder thereof to purchase or otherwise acquire or to compel Shanghai Xxxxxx to
increase or decrease Shanghai Shanda's registered capital.
4.7 Subsidiaries. Except as disclosed in Exhibit 4.7 or as
required in the Plan of Restructuring, at the date hereof, Shanghai Xxxxxx does
not have any Subsidiaries, and is not a participant in any joint venture,
partnership, or other similar arrangement. Between the date hereof and the
Closing, none of the Company Group will acquire any Subsidiaries or become
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party to any joint venture except as required by the Plan of Restructuring or
insofar as the cost to acquire such Subsidiary does not exceed RMB1,000,000.
4.8 Financial Condition.
(a) Shanghai Xxxxxx
(i) Except for the Actoz Dispute, there are no debts,
liabilities, or claims owed by or against Shanghai Xxxxxx, contingent
or otherwise, other than liabilities set forth in the Financial
Statements and other than liabilities incurred in the ordinary course
of business subsequent to the Balance Sheet Date which, individually or
in the aggregate, do not constitute a Material Adverse Event. Shanghai
Xxxxxx is not a guarantor or indemnitor of, and has not provided
security for, any indebtedness of any person, firm or corporation;
(ii) Shanghai Xxxxxx has established and maintained a
standard system of accounting in accordance with PRC GAAP;
(iii) Shanghai Xxxxxx has delivered to SAIF copies of the
Financial Statements, together with copies of a statement (the
"RECONCILIATION STATEMENT) reconciling under US GAAP Shanghai Shanda's
results for the period and net asset value at the end of the period
reported in the Financial Statements. These copies are true and
complete copies;
(iv) The Financial Statements, save as the Actoz Dispute,
give a true and fair view of Shanghai Shanda's present financial
position as of the dates presented and the results of operations and
changes in its financial position for the periods then ended, and have
been prepared in accordance with IFRS applied on a consistent basis
throughout the periods involved, subject to normal year-end
adjustments. The Reconciliation Statement fairly and accurately
reconciles under US GAAP Shanghai Shanda's results for the period and
net asset value at the end of the period reported in the Financial
Statements; and
(v) All of the accounts receivable and notes receivable
owing to Shanghai Xxxxxx as of the date of this Agreement, including
without limitation all accounts receivable and notes receivable set
forth on the Financial Statements, constitute valid and enforceable
claims other than accounts receivable and notes receivable which
individually and in the aggregate are not material. There are no
material contingent or asserted claims, refusals to pay, or other
rights of set-off with respect to Shanghai Xxxxxx known to the
Warrantors.
(b) BVI Xxxxxx
(i) Other than its obligation to contribute registered
capital to the WFOE, there are no debts, liabilities, or claims owed by
or against BVI Xxxxxx, whether contingent or otherwise. BVI Xxxxxx is
not a guarantor or indemnitor of, nor has it provided security for, any
indebtedness of any person, firm or corporation;
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(ii) As of the Closing, BVI Xxxxxx will have established
and will maintain a standard system of accounting in accordance with
IFRS; and
(iii) Except for any amounts which may be owing hereunder,
there are no amounts owing to BVI Xxxxxx.
(c) The WFOE
(i) There are no debts, liabilities or claims owed by or
against the WFOE, whether contingent or otherwise, except for debts,
liabilities or claims of Shanghai Xxxxxx set forth in the Financial
Statements which may be assumed by the WFOE under the Plan of
Restructuring.
(ii) The WFOE has established and will maintain a standard
system of accounting in accordance with PRC GAAP; and
(iii) There are no amounts owing to the WFOE except for
amounts set forth in the Financial Statements which may be assigned to
the WFOE under the Plan of Restructuring or amounts payable thereto in
the form of registered capital. All of the accounts receivable and
notes receivable owing to the WFOE constitute valid and enforceable
claims, other than accounts receivable and notes receivable which
individually and in the aggregate are not material. There are no
material contingent or asserted claims, refusals to pay, or other
rights of set-off with respect to the WFOE known to the Warrantors.
4.9 Corporate Power.
(a) Each member of the Company Group has all requisite
legal and corporate power and authority to execute and deliver the Restructuring
Documents and to carry out and perform the Restructuring and its obligations
under the terms of the Restructuring Documents.
(b) BVI Xxxxxx has all requisite legal and corporate
power and authority to execute and deliver the Transaction Documents and, at the
Closing, to authorize, sell, issue and deliver the Purchased Securities to SAIF,
to issue the Series A Preferred Stock upon the exercise of the Warrant, to issue
the Series A-1 Preferred Stock as contemplated hereunder in connection with the
exchange of the Founders Shares and to issue Common Stock issuable upon
conversion of the Series A Preferred Stock or the Series A-1 Preferred Stock,
and to carry out and perform its obligations under the terms of the Transaction
Documents.
(c) Shanghai Xxxxxx has all requisite legal and corporate
power and authority to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement.
4.10 Authorization.
(a) All corporate action on the part of each member of
the Company Group and such member's shareholders necessary for the
authorization, execution, delivery, and performance of all obligations under the
Restructuring Documents has been taken. Upon the
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execution thereof, the Restructuring Documents shall constitute legally binding
and valid obligations of each member of the Company Group, as applicable,
enforceable in accordance with their respective terms.
(b) All corporate action on the part of BVI Xxxxxx and
its shareholders necessary for the authorization, execution, delivery, and
performance of all obligations under the Transaction Documents, and, at the
Closing for the authorization, issuance, and delivery of the Purchased
Securities, the Series A Preferred Stock issuable upon the exercise of the
Warrant, the Series A-1 Preferred Stock issuable as contemplated hereunder in
connection with the exchange of the Founders Shares and the Common Stock
issuable upon conversion of the Series A Preferred Stock or the Series A-1
Preferred Stock, has been taken. The Transaction Documents constitute legally
binding and valid obligations of BVI Xxxxxx enforceable in accordance with their
respective terms.
(c) All corporate action on the part of Shanghai Xxxxxx
and its shareholders necessary for the authorization, execution, delivery and
performance of all obligations under this Agreement has been taken. This
Agreement constitutes the legally binding and valid obligation of Shanghai
Xxxxxx, enforceable in accordance with its terms.
4.11 Validity of Purchased Securities. The Purchased Securities,
when issued, sold, and delivered in accordance with the terms and for the
consideration expressed in this Agreement, will be duly and validly issued,
fully-paid and non-assessable and will be free of any preemption or similar
rights, liens or encumbrances. Save as otherwise provided under any of the
Transaction Documents, at the Closing, the Series A Preferred Stock issuable
upon the exercise of the Warrant has been duly and validly Reserved and,
assuming such stock is issued to SAIF, upon issuance will be duly and validly
issued, fully-paid and non-assessable and will be free of any preemption or
similar rights, liens or encumbrances. Save as otherwise provided under any of
the Transaction Documents, at the Closing, the Series A-1 Preferred Stock, when
issued and delivered to SAIF in exchange for the Founders Shares, will be duly
and validly issued, fully-paid and non-assessable and will be free of any
preemption or similar rights, liens or encumbrances. The Common Stock issuable
upon the conversion of the Series A Preferred Stock or the Series A-1 Preferred
Stock in accordance with the Restated Memorandum and Articles, upon issuance in
connection with such conversion, will be duly and validly issued, fully-paid and
non-assessable and will be free of any preemption or similar rights, liens or
encumbrances other than any liens or encumbrances created by or imposed thereon
by the holders.
4.12 Changes in Condition. Except as specifically contemplated by
this Agreement and pursuant to the Plan of Restructuring, and the Actoz Dispute,
since the Balance Sheet Date: (a) none of the members of the Company Group has
entered into any transaction which was not in the ordinary course of business;
(b) there has been no Material Adverse Event with respect to any member of the
Company Group; (c) none of the members of the Company Group has incurred any
material tax liability except in the ordinary course of business; (d) there has
been no resignation or termination of employment of any Senior Manager of any
member of the Company Group, and to the Warrantors' actual knowledge, there is
no impending resignation or termination of employment of any Senior Manager of
any member of the Company Group that, if consummated, would constitute a
Material Adverse Event; (e) there has been no labor dispute
12
involving any member of the Company Group or any of its respective employees
and, to the Warrantors' Knowledge, none is pending or threatened that could
result in a Material Adverse Event; (f) there has been no waiver by any member
of the Company Group of a valuable right or debt owing to such member which
would constitute a Material Adverse Event, (g) there has not been any
satisfaction or discharge of any material lien, claim, or encumbrance, or any
payment of any material obligation by any member of the Company Group, except
in the ordinary course of business and (h) there has been no material change to
a material contract or arrangement by which or to which any member of the
Company Group or any of its assets or properties is bound or subject.
4.13 Litigation. Except for the Actoz Dispute, there is no action,
proceeding, or, to the Warrantors' Knowledge, investigation against any member
of the Company Group, pending or threatened, or any basis therefore known to the
Warrantors, including action, proceeding or investigation, that questions the
validity of the Transaction Documents, the right of Shanghai Xxxxxx to enter
into the Restructuring Documents, the right of any member of the Company Group
to consummate the transactions contemplated by the Transaction Documents, or
that would result, either individually or in the aggregate, in any Material
Adverse Event. There is no judgment, decree, or order of any court in effect
against any member of the Company Group, and none of members of the Company
Group is in default with respect to any order of any governmental authority to
which it is a party or by which it is bound. There is no action, suit,
proceeding, or investigation by any member of the Company Group currently
pending or which any member of the Company Group or presently intends to
initiate.
4.14 Title to Properties; Liens and Encumbrances. Except as the
Actoz Dispute, each member of the Company Group has good and marketable title to
all its properties and assets, both real and personal, including without
limitation all properties and assets set forth on the Financial Statements, and
has good title to all its leasehold interests, in each case not being subject to
any mortgage, pledge, lien, security interest, conditional sales agreement,
encumbrance, or charge, other than: (a) liens of current taxes not yet due and
payable and (b) liens and encumbrances which do not materially detract from the
value of the property or materially impair the operations of that entity. With
respect to the properties and assets leased by Shanghai Xxxxxx, Shanghai Xxxxxx
is in compliance with such leases which are in full force and effect, except
where non-compliance would not constitute a Material Adverse Event. Shanghai
Xxxxxx owns or leases all properties and assets necessary to conduct its
business and operations as presently conducted and proposed to be conducted.
4.15 Proprietary Rights.
(a) Except as the Actoz Dispute, each member of the
Company Group has sufficient title and ownership of all Intellectual Property
necessary for its business as now conducted, and can obtain, on commercially
reasonable terms, any additional rights necessary for its business as
contemplated in the Business Plan; and (ii) none of the Intellectual Property of
any member of the Company Group conflicts with, or will conflict with or
constitute an infringement of, the rights of any third party;
(b) There are no outstanding options, licenses, or
agreements of any kind relating to the Intellectual Property of the members of
the Company Group, or that grant rights to
13
any other person, to manufacture, license, produce, assemble, market, or sell
the products and/or services of any member of the Company Group. Except as set
out in the Restructuring Documents, Exhibit 4.15 reflects all options, licenses
(other than licenses for off-the-shelf software) or agreements of any kind to
which any member of the Company Group is a party which are material to the
business of such member of the Company Group, or is bound by, with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights, and processes of any other Person.
(c) Except as the Actoz Dispute, none of the members of
the Company Group has received any communication in writing alleging that it or
its Senior Managers has violated or infringed or, by conducting its business as
proposed in the Business Plan, would violate or infringe, nor is aware of any of
its own actions that has violated or infringed, any of the patents, trademarks,
service marks, trade names, copyrights, trade secrets, or any proprietary rights
of another Person;
(d) No Senior Manager of any member of the Company Group
is obligated under any applicable law or under any contract (including licenses,
covenants, or commitments of any nature) or other agreement, or subject to any
judgment, decree, or order of any court or administrative agency, that would
interfere with the use of that employee's best efforts to promote the interests
of such member of the Company Group or that would conflict with the business of
any members of the Company Group as contemplated in the Business Plan;
(e) The execution and delivery of each Transaction
Document and the Restructuring Documents, the carrying on of the business of
each member of the Company Group by the employees of each member of the Company
Group, and the conduct of each member of the Company Group's business as
proposed in the Business Plan and the Plan of Restructuring, will not conflict
with or result in a material breach of the terms, conditions, or provisions of,
or constitute a default under, any contract, covenant, or instrument under which
any employee is now obligated; and
(f) Each Senior Manager and key technical employee
employed by any member of the Company Group as of Closing will have executed a
Non-disclosure, Non-Competition and Proprietary Information Agreement
substantially in the form of Exhibit 4.15(f) to this Agreement (a
"NON-DISCLOSURE, NON-COMPETITION AND PROPRIETARY INFORMATION AGREEMENT"). The
Warrantors, after reasonable investigation, are not aware that any of the Senior
Managers, or technical employees employed by any member of the Company Group is
in violation thereof, and BVI Xxxxxx and Shanghai Xxxxxx will use their best
efforts to prevent any such violation.
4.16 Taxes. Each member of the Company Group has filed all
applicable tax returns required to be filed thereby and such returns are true
and complete, and all taxes, assessments, fees, and other governmental charges
upon or payable by such member, or upon any of its properties, income, or
franchises, shown in its returns to be due and payable, have been paid or, if
any of its tax returns has not been filed or if any taxes has not been paid or
reserved for, the failure to file or pay would not in the aggregate constitute a
Material Adverse Event.
14
4.17 Contracts.
(a) Legality of Contracts. Save as the Actoz Dispute, all
of the contracts and agreements to which each member of the Company Group is a
party: (i) with respect to distributors and game developers, with expected
receipts or expenditures in excess of US$1,000,000, (ii) otherwise with expected
receipts or expenditures in excess of US$1,000,000, (iii) with provisions
materially restricting or affecting the development, manufacture, or
distribution of the products or services of any members of the Company Group
(other than the Nondisclosure, Noncompetition and Developments Agreements
referred to in Section 4.15 (f)); or (iv) that provide indemnification by any
member of the Company Group with respect to infringements of Intellectual
Property, are set forth on Exhibit 4.17. Exhibit 4.17 also sets forth the top
five contracts entered into by Shanghai Xxxxxx with carriers in terms of
expected receipts or expenditures. Shanghai Xxxxxx has provided SAIF an
opportunity to review true and complete copies of all agreements disclosed in
Exhibit 4.15 and Exhibit 4.17, together with any and all amendments or
modifications thereto. All of the contracts and agreements set forth in Exhibit
4.15 and Exhibit 4.17 to which members of the Company Group are party are
legally binding, valid, enforceable and in full force and effect. The Warrantors
have no knowledge of any indication of reduced activity relating to any of the
contracts or agreements disclosed in Exhibit 4.15 and Exhibit 4.17 (other than
in the ordinary course of business) by any of the parties to such contracts or
agreements except as indicated on Exhibit 4.15 or Exhibit 4.17; and
(b) Dividends; Indebtedness. Except as set forth in
Exhibit 4.17 (b), save as the Actoz Dispute, since the Balance Sheet Date,
Shanghai Xxxxxx has not: (i) declared or paid any dividends, or authorized or
made any distribution, upon or with respect to equity held therein by its
shareholders; (ii) incurred any indebtedness for money borrowed or any other
liabilities other than as set forth in the Financial Statements or other than
incurred in the ordinary course of business; (iii) made any loans or advances
exceeding RMB500,000, whether individually or in the aggregate, to any person,
other than ordinary advances for travel expenses; or (iv) sold, exchanged, or
otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
4.18 Compliance with Other Agreements. None of the members of the
Company Group is in violation of any material term or provision of its
Memorandum or Articles of Association or equivalent constitutive documents as in
effect as of the Closing. Save as the Actoz Dispute, none of the members of the
Company Group is in violation of any term or provision of any indebtedness,
mortgage, indenture, contract, agreement, judgment or any decree, order,
statute, rule, or regulation applicable to that person, in each case, or in the
aggregate, the violation of which would constitute a Material Adverse Event. The
execution, delivery, and performance of the Transaction Documents by the
Warrantors and by any members of the Company Group will not result in any
violation of, be in conflict with, or constitute a default under, with or
without the passage of time or the giving of notice or otherwise:
(a) any provision of Memorandum or Articles of
Association or equivalent constitutive documents of any member of the Company
Group as in effect at the Closing;
(b) any provision of any decree or order to which any
member of the Company Group is a party or by which it is bound;
15
(c) any material contract, obligation, or commitment to
which a member of the Company Group is a party or by which it is bound; or
(d) any statute, rule, or governmental regulation
applicable to any member of the Company Group.
4.19 Employee Relations and Compensation Plans. Shanghai Xxxxxx,
together with the WFOE, has about 301 employees, each of whose annual
remuneration (excluding benefits of medical insurance, reimbursement of
out-of-pocket traveling expenses and moving expenses but including any sign-on
bonus) does not exceed $200,000 except as set forth in Exhibit 4.19. BVI Xxxxxx
has no employees. Except as required by applicable PRC law, no member of the
Company Group is bound by or subject to (and none of its assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the best of the knowledge of the Warrantors, has sought to represent any
of the employees, representatives or agents of any member of the Company Group.
Subject to applicable laws and regulations and except as set forth in Exhibit
4.19, the employment of each officer and employee of any member of the Company
Group is terminable by such member upon not more than one month's notice,
without payment of any compensation, other than statutory compensation. Except
as required by applicable laws or regulations or as envisioned in Section 11.2,
no member of the Company Group is party to or bound by any currently effective
deferred compensation agreements, bonus plans, incentive plans, profit sharing
plans, retirement agreements, or other employee compensation agreements.
4.20 Transactions with Affiliates. Except as required in the Plan
of Restructuring or as otherwise set forth in Exhibit 4.20, (i) no director or
Senior Manager of any member of the Company Group, no spouse, parent, sibling or
children of any such director or Senior Manager, and no entity Controlled by any
of the foregoing, has any agreement, understanding, proposed transaction with,
indebtedness owing to, commitments to make loans or to extend or guarantee
credit from any member of the Company Group of any such member other than in the
ordinary course of business; (ii) the sum of the value of all agreements,
understandings, proposed transactions with, indebtedness owing to, commitments
to make loans or to extend or guarantee credit by all members of the Company
Group with respect to any director or Senior Manager of any member of the
Company Group, the spouse, parents, siblings and children of such director or
Senior Manager, and any entity in which such director, Senior Manager or such
relatives thereof have a direct or indirect ownership interest of not less than
10%, do not exceed US$500,000; and (iii) no director or Senior Manager of any
member of the Company Group, no spouse, parent, sibling or children of any such
director or Senior Manager, and no entity Controlled by any of the foregoing,
has any direct or indirect ownership interest in any Affiliate of any member of
the Company Group or in any firm or corporation that competes with any member of
the Company Group, except that any of the foregoing persons may own stock of not
more than 3% in publicly traded companies or not more than 10% in privately-held
companies that compete with Shanghai Xxxxxx.
4.21 Governmental and Third Party Consents.
16
(a) Except for those set forth in Exhibit 4.21(a), as of
Closing, no material consent, approval, order, or authorization of, or
registration, qualification, designation, declaration, or filing with, any
governmental authority on the part of any members of the Company Group will be
required in connection with the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated in
the Restructuring Documents which has not already been secured or effected prior
to the Closing.
(b) Except for those set forth in Exhibit 4.21 (a), no
consent, approval, order, or authorization of, or registration, qualification,
designation, declaration, or filing with, any federal, state, local, or
provincial governmental authority on the part of BVI Xxxxxx or Shanghai Xxxxxx
is required in connection with the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated in
the Transaction Documents.
4.22 Permits. Shanghai Xxxxxx has all franchises, permits,
licenses, and any similar governmental authority necessary for the conduct of
its business as now being conducted (the "Licenses"), and the Warrantors believe
that the Company Group can obtain, without undue burden or expense, all Licenses
for the conduct of its business as proposed to be conducted in the Business
Plan. The Licenses are in full force and effect. To the Warrantors' Knowledge,
none of the members of the Company Group is in default in any material respect
under any of its Licenses and has not received any written notice relating to
the suspension, revocation or modification of any such-Licenses.
4.23 Full Disclosure. The Business Plan has been drawn up based on
reasonable assumptions and does not give a misleading indication of the
prospects of the Company Group in any material respect and nothing is omitted
from the Business Plan which is necessary to make it not misleading in any
material respect.
4.24 [RESERVED]
4.25 [RESERVED]
4.26 [RESERVED]
4.27 Brokers and Finders. Save for the Hong Kong and Shanghai
Banking Corporation Limited, none of the Warrantors has retained any investment
banker, broker, or finder and there are no fees or charges due or payable to
third parties (other than legal, technical, audit and financial consulting fees)
in connection with the transactions contemplated by this Agreement.
4.28 No Registration Rights. Save for the registration rights to be
given to SAIF, none of the members of the Company Group has granted any
registration rights to any third party with respect to sales of any of its
securities in the United States.
4.29 Actoz. Exhibit 4.29 sets forth a list of all contracts,
agreements, communications, and other material information relating to the Actoz
Dispute in respect of which SAIF acknowledges that it has full notice of the
contents of those documents and their contents are treated as forming part of
the disclosures and limitation to which the relevant warranties in this
17
Section 4 are subject. Exhibit 4.29 is true and accurate in all material
respects and no material information held by the Company is omitted from Exhibit
4.29.
5. Representations and Warranties of SAIF.
As of the date hereof, SAIF represents and warrants to BVI Xxxxxx as
follows:
5.1 Authorization. When executed and delivered by SAIF, and
assuming execution and delivery by the other parties thereto, each of the
Transaction Documents will constitute a legally valid and binding obligation of
SAIF, enforceable in accordance with its terms.
5.2 SAIF's Organization and Authority. SAIF (i) is a limited
partnership, duly organized, validly existing, authorized to exercise all its
powers, rights and privileges as a limited partnership, and in good standing
under the laws of the Cayman Islands and (ii) has the power and authority to own
and operate its properties and to carry on its business in accordance with its
constitutional documents.
5.3 Brokers and Finders. SAIF has not retained any investment
banker, broker, or finder and there are no fees or charges due or payable to
third parties (other than reasonable and customary legal fees and fees for
technical and financial consultants in connection with the due diligence
investigation of Shanghai Xxxxxx and the Business) in connection with the
transactions contemplated by this Agreement.
5.4 Investment. The Purchased Securities to be received will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof (other than in
compliance with applicable securities law). SAIF has no present intention of
selling, granting any participation in, or otherwise distributing any of these
securities. By executing this Agreement, SAIF further represents that it has no
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or warrant participation to that person or to any third person, with
respect to any of these securities.
6. Additional Covenants.
6.1 Resolutions, Contracts or Commitments. Each of the Warrantors,
severally and jointly, covenants with SAIF that, except as required by this
Agreement or the Plan of Restructuring, no resolution of the directors, owners,
members, partners or shareholders of any member of the Company Group shall be
passed nor shall any contract or commitment be entered into prior to Closing
without the written consent of SAIF where such consent shall not be unreasonably
withheld), except that Shanghai Xxxxxx may carry on its business in the same
manner as heretofore and may pass resolutions and enter into contracts so long
as they are effected in the ordinary course of business.
6.2 Subsequent Disclosure. Subject to Section 6.3, if at any time
before Closing, any party (the "WARRANTING PARTY") comes to know of any material
fact or event which, save for any matter already qualified herein by specific
reference to any Exhibit hereto:
(a) is in any way materially inconsistent with any of the
representations and warranties given by the Warranting Party, and/or
18
(b) suggests that any material fact warranted by the
Warranting Party may not be as warranted or may be materially misleading,
the Warranting Party shall give immediate written notice thereof to the other
parties, in which event subject to Section 6.3, (i) if the Warranting Party is
SAIF, then BVI Xxxxxx may terminate this Agreement without any penalty
whatsoever or (ii) if the Warranting Party is a Warrantor, then SAIF may
terminate this Agreement without any penalty whatsoever, in the case of either
(i) or (ii), by delivering written notice of such termination, within fourteen
(14) Business Days of receiving the Warranting Party's notice under this
Section.
6.3 Force Majeure. No party shall be entitled to terminate this
Agreement if any representation or warranty contained in Section 4 of this
Agreement is or becomes untrue, incomplete or inaccurate as a consequence of any
Force Majeure Event between the time of signing of this Agreement and Closing.
For purposes of this Agreement, "Force Majeure Event" shall mean acts of God,
natural disaster, acts of war and acts of computer hackers.
7. Confidentiality,
7.1 Disclosure of Terms. The terms and conditions of the
Restructuring Documents and Transaction Documents (collectively, the "FINANCING
TERMS"), including their existence, shall be considered confidential information
and shall not be disclosed by any of the parties hereto to any third party
except in accordance with the provisions set forth below.
7.2 Permitted Disclosures. Notwithstanding the foregoing, (i)
Shanghai Xxxxxx, BVI Xxxxxx or SAIF, as appropriate, may disclose any of the
Financing Terms to its current or bona fide prospective investors, employees,
investment bankers, lenders, accountants and attorneys, in each case only where
such persons or entities are under appropriate nondisclosure obligations; (ii)
SAIF may disclose any of the Financing Terms to its fund manager and the
employees thereof so long as such persons or entities are under appropriate
nondisclosure obligations and (iii) BVI Xxxxxx or SAIF may disclose that SAIF is
an investor in BVI Xxxxxx to any third parties without the requirement for the
consent of any other party.
7.3 Legally Compelled Disclosure. In the event that any Warrantor
or SAIF is requested or becomes legally compelled (including without limitation,
pursuant to securities laws and regulations) to disclose the existence or
content of any of the Financing Terms hereof in contravention of the provisions
of this Section 7, such Warrantor or SAIF, as the case may be (the "DISCLOSING
PARTY"), shall promptly provide the other parties hereto with written notice of
that fact so that such other parties may seek a protective order, confidential
treatment or other appropriate remedy. In such event, the Disclosing Party shall
furnish only that portion of the information which is legally required and shall
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded such information to the extent reasonably requested
by the other parties hereto.
7.4 Other Exceptions. Notwithstanding any other provision of this
Section 7, the confidentiality obligations of the parties shall not apply to:
(a) information which a restricted party learns from a third party having the
right to make the disclosure, provided the restricted party complies with any
restrictions imposed by the third party; (b) information which is in the
19
restricted party's possession prior to the time of disclosure by the protected
party and not acquired by the restricted party under a confidentiality
obligation; or (c) information which enters the public domain without breach of
confidentiality by the restricted party.
7.5 Other Information. The provisions of this Section 7 shall be
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby.
7.6 Notices. All notices required under this Section 7 shall be
made pursuant to Section 12.6 of this Agreement.
8. Conditions to SAIF's Obligations at Closing. The obligations of SAIF
under Section 3 of this Agreement are subject to the fulfillment at or before
the Closing of each of the following conditions, any of which may be waived in
writing by SAIF:
8.1 Representations and Warranties. The representations and
warranties of the Warrantors contained in this Agreement shall be true and
accurate in all material respects on and as of the Closing with the same effect
as if made on and as of the Closing with reference to the facts and
circumstances existing at the Closing.
8.2 Completion of the Restructuring. SAIF shall have received a
certificate from the CEO of the Company certifying the Completion of the Plan.
8.3 [RESERVED]
8.4 [RESERVED]
8.5 Performance. Each member of the Company Group shall have
performed or fulfilled in all material respects all the terms, obligations, and
conditions in this Agreement required to be performed or fulfilled by such
entity before the Closing and shall have obtained all approvals, consents and
qualifications necessary to complete the sale of the Purchased Securities save
for any approval and consent that are necessary for SAIF to perform its
obligations under the Agreement.
8.6 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body that are required under
BVI, Hong kong or PRC law in connection with the lawful issuance and sale of
securities pursuant to this Agreement shall be duly obtained effective as of the
Closing.
8.7 Proceedings Satisfactory; Compliance Certificate. All
corporate and legal proceedings taken by each member of the Company Group in
connection with the transactions contemplated by this Agreement and all
documents relating to these transactions shall be duly completed which are
necessary to the signing and delivery hereof and the performance hereunder of
the obligations of such member of the Company Group. BVI Xxxxxx shall have
delivered to SAIF a certificate dated as of the Closing, signed by any director
of BVI Xxxxxx (other than, any director nominated to such position by SAIF),
certifying that the conditions set forth in this Section 8 have been satisfied.
20
8.8 [RESERVED]
8.9 Restated Memorandum and Articles. The Restated Memorandum and
Articles shall have been duly adopted by BVI Xxxxxx by all necessary corporate
action of the Board of Directors and shareholders of BVI Xxxxxx. BVI Xxxxxx
shall have filed its Restated Memorandum and Articles with the Registrar of
Companies of the British Virgin Islands, which Restated Memorandum and Articles
shall be in full force and effect as of the Closing.
8.10 Reservation of Underlying Stock. The Series A Preferred Stock
issuable upon the exercise of the Warrant and the Common Stock issuable on
conversion of the Series A Preferred Stock or the Series A-l Stock shall have
been duly authorized and Reserved.
8.11 Legal Opinions. BVI Xxxxxx shall have delivered to the Company
legal opinions issued by Grandall in the form attached hereto as EXHIBIT H, and
Xxxxxxx, Xxxx & Xxxxxxx, as British Virgin Islands counsel to BVI Xxxxxx, and
Xxxxxxx Xxxxx, in form and substance reasonably satisfactory to SAIF.
8.12 [RESERVED]
8.13 [RESERVED]
8.14 SAIF shall have completed legal due diligence investigation of
Shanghai Xxxxxx to its reasonable satisfaction within fifteen Business Days
after signing of this Agreement and shall have received a copy of the finalized
and signed Xxxxxx Networking Co., Ltd. Agreed-upon Procedures in substantially
the same form and substance as the draft Xxxxxx Networking Co. Ltd. Agreed-upon
Procedures dated December 31, 2002.
8.15 [RESERVED]
8.16 Additional Documents. BVI Xxxxxx shall have delivered to SAIF:
(a) a copy of the Restated Memorandum and Articles
certified by a director of BVI Xxxxxx to be a true and complete copy thereof;
(b) a copy of the register of members of BVI Xxxxxx as at
the date of the Closing, certified by a director of BVI Xxxxxx to be a true and
complete copy thereof; and
(c) a copy of each of the Restructuring Documents duly
executed by all parties set forth therein or issued by the appropriate
government agency.
9. Conditions to BVI Shanda's Obligations at Closing. The obligations of
BVI Xxxxxx under Section 3 of this Agreement are subject to the fulfillment at
or before the Closing of each of the following conditions, any of which may be
waived in writing by BVI Xxxxxx:
9.1 Representations and Warranties. The representations and
warranties of SAIF contained in Section 5 of this Agreement shall be true and
complete in all material respects on and as of the Closing with the same effect
as if made on and as of the Closing with reference to the facts and
circumstances existing at the Closing.
21
9.2 Proceedings Satisfactory. All corporate and legal proceedings
taken by SAIF in connection with the transactions contemplated by this Agreement
and all documents relating to these transactions shall be duly completed which
are necessary to the signing and delivery hereof and the performance hereunder
of the obligations of SAIF.
10. Long-Stop Date.
In the event that any condition to the Closing hereunder is not
fulfilled or waived within thirty (30) Business Days of the signing of this
Agreement, this Agreement shall terminate with immediate effect. Notwithstanding
any termination of this Agreement, the obligations of the parties specified in
Section 7, Section 12.1, Section 12.2, Section 12.3, Section 12.6 and Section
12.12 shall continue unimpaired and in full force and effect and (ii) such
termination shall not relieve any party from any liability hereunder for any
misrepresentation or for the breach of any warranty, agreement or obligation
hereunder.
11. Post-Closing Covenants of BVI Xxxxxx, Shanghai Xxxxxx and the Founders.
11.1 Information Rights Relating to PFIC. On or prior to a
Qualified IPO, BVI Xxxxxx will furnish SAIF, upon request, as promptly as
practicable, such information as SAIF shall reasonably request from time to time
to determine whether any member of the Company Group is a passive foreign
investment company within the meaning of Section 1296 of the United States
Internal Revenue Code of 1986, as amended.
11.2 Employee Stock Ownership Plan. Following the Closing, BVI
Xxxxxx will establish an employee stock ownership plan (an "ESOP"), pursuant to
which the board of directors may grant employees, officers, directors or
consultants (each a "PLAN BENEFICIARY") of BVI Xxxxxx or the WFOE options to
purchase Common Stock or sell shares of Common Stock ("RESTRICTED STOCK") to
Plan Beneficiaries. Except as set forth below, the terms of the ESOP shall be
subject to the consent of SAIF.
(a) The number of shares of Restricted Stock issued under
the ESOP, together with any shares of Common Stock issuable upon the exercise of
options granted under the ESOP, shall not exceed 13,309,880, which equals to 10%
of the post-Closing total capitalization of BVI Xxxxxx (assuming the exercise of
all of the options granted under the ESOP) (as adjusted for stock splits, stock
dividends, reverse stock splits and the like). The per share purchase price paid
by any Plan Beneficiary for Restricted Stock and the exercise price per share
for options granted under the ESOP will not be less than the per share purchase
price of the Series A Preferred Stock hereunder. No employee, officer, director
or consultant of the Company shall be eligible to participate in the ESOP who
owns more than 6,654,940 (as adjusted for stock splits, stock dividends, reverse
stock splits and the like).
(b) Unless otherwise unanimously approved by the board of
directors of BVI Xxxxxx, in connection with any grant of Restricted Stock to a
Plan Beneficiary under the ESOP, so long as the Plan Beneficiary remains an
employee, officer, director or consultant of BVI Xxxxxx or the WFOE, then 25% of
such stock will vest at the end of the first anniversary of the grant and an
additional 25% thereof will vest at the end of each of the following three
anniversaries. In the event that a Plan Beneficiary is no longer employed by
either BVI Xxxxxx
22
or the WFOE, then BVI Xxxxxx or a designee thereof (to the extent permissible
under applicable securities laws) shall have the right to repurchase any
unvested shares of Restricted Stock held by such Plan Beneficiary at a price
equal to the lower of the original purchase price paid therefor by the Plan
Beneficiary or the current fair market value thereof.
(c) Unless otherwise unanimously approved by the board of
directors of BVI Xxxxxx, in connection with any grant of options to a Plan
Beneficiary under the ESOP, so long as the Plan Beneficiary remains an employee,
officer, director or consultant of BVI Xxxxxx or the WFOE, then on the first
anniversary of the grant, such options shall be exercisable with respect to 25%
of the underlying shares of Common Stock and, at the end of each of the
following three anniversaries, shall be exercisable with respect to an
additional 25% of such shares. In the event that a Plan Beneficiary is no longer
employed by either BVI Xxxxxx or the WFOE, then any options granted to such Plan
Beneficiary under the ESOP which remain unexercisable shall expire.
11.3 Future Employees. BVI Xxxxxx shall use commercially reasonable
endeavors to cause each future Senior Manager and key technical employee of BVI
Xxxxxx and its Subsidiaries, to deliver to BVI Xxxxxx an executed
Non-disclosure, Non-competition and Proprietary Information Agreement or a
service contract which includes comparable terms and conditions.
11.4 [RESERVED]
11.5 Commitment of Funding. BVI Xxxxxx shall use its proceeds from
the allotment and issue of the Purchased Securities for business expansion,
capital expenditures and general working capital requirements of the Company
Group as permitted by the budget and business plan of the Company duly approved
by BVI Shanda's board of directors (for avoidance of doubt, the budget and the
Business Plan of the Company for 2003 have already been proved.
11.6 [RESERVED]
11.7 Conduct of Business. BVI Xxxxxx shall procure that:
(a) All necessary approvals and consents required for the
vesting in BVI Xxxxxx or the WFOE, as applicable, of title to and ownership of
technology and related assets and intellectual property rights for the operation
of the Business contemplated in the Business Plan shall be obtained as soon as
practicable and in accordance with the relevant rules and regulations (including
without limitation, any time limits imposed thereunder); and
(b) In connection with any technology or other
intellectual property related to the business of the Company Group which is
developed by or belongs to Shanghai Xxxxxx from time to time or at any time, if
required by SAIF, the parties shall cause Shanghai Xxxxxx to assign all right,
title and interest in such intellectual property to the WFOE or, in the event it
is not possible to so assign the intellectual property, to grant the WFOE an
exclusive, royalty-free, transferable license in perpetuity to use such
intellectual property throughout the universe, all such arrangements which shall
be documented in form and substance reasonably satisfactory to SAIF.
23
12. Miscellaneous.
12.1 Governing, Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Hong Kong Special Administrative
Region, excluding those laws that direct the application of the laws of another
jurisdiction.
12.2 Dispute Resolution
(a) Any dispute, controversy or claim arising out of or
relating to this Agreement, or the interpretation, breach, termination or
validity hereof, shall be resolved through consultation. Such consultation shall
begin immediately after one party hereto has delivered to the other party hereto
a written request for such consultation. If within 30 days following the date on
which such notice is given the dispute cannot be resolved, the dispute shall be
submitted to arbitration upon the request of either party with notice to the
other.
(b) The arbitration shall be conducted in Hong Kong under
the auspices of the Hong Kong International Arbitration Centre (the "CENTRE").
There shall be three arbitrators, who shall be qualified to practice Hong Kong
law. In the event that the parties have not agreed on all arbitrators to
constitute the arbitral panel within 30 days after a notice of arbitration, the
Secretary General of the Centre shall appoint arbitrators to fill any unfilled
positions on the panel.
(c) The arbitration proceedings shall be conducted in
English. The arbitration tribunal shall apply the Arbitration Rules of the
United Nations Commission on International Trade Law, as in effect at the time
of the arbitration. However, if such rules are in conflict with the provisions
of this Section 12.2, including the provisions concerning the appointment of
arbitrators, the provisions of this Section 12.2 shall prevail.
(d) The arbitrators shall decide any dispute submitted by
the parties to the arbitration strictly in accordance with the substantive law
of Hong Kong and shall not apply any other substantive law.
(e) Each party to an arbitration hereunder shall
cooperate with the other in making full disclosure of and providing complete
access to all information and documents reasonably requested by the other in
connection with such arbitration proceedings, subject only to any
confidentiality obligations binding on such party and rights of privileges to
which the parties or their advisors may enjoy.
(f) The award of the arbitration tribunal shall be final
and binding upon the disputing parties, and the prevailing party may apply to a
court of competent jurisdiction for enforcement of such award.
(g) Either party shall be entitled to seek preliminary
injunctive relief, if possible, from any court of competent jurisdiction pending
the constitution of the arbitral tribunal.
12.3 Limitation on Liability for Relevant Claims.
(a) No Relevant Claim shall be made unless written notice
thereof ("Claim Notice") is served on the Warrantors before the earliest of (i)
four years from the date hereof, (ii)
24
the date of a Qualified IPO, and (iii) the date any Series A Preferred Stock or
Series A-l Preferred Stock is redeemed pursuant to the terms thereof. Such Claim
Notice shall set forth in reasonable detail the basis of the Relevant Claim.
(b) SAIF shall not make any Relevant Claim against the
Warrantors unless the amount of all losses, costs, expenses, fees, liabilities
and damages ("DAMAGES") sustained by SAIF with respect thereof, together with
the amount of all Damages in connection with other Relevant Claims (excluding
Damages represented by legal fees or advisory fees in making the Relevant Claim)
which may have arisen or may arise hereunder, exceeds RMB3,000,000, in which
case SAIF shall be entitled to make all Relevant Claims.
(c) The aggregate amount of the liability of the
Warrantors in respect of the aggregate of all Relevant Claims and all claims for
breach of any other provision of this Agreement shall not exceed US$45,000,000
and all liabilities of the Warrantors with respect to Relevant Claims shall
extinguish and be fully discharged upon the redemption of all of the outstanding
Preferred Stock.
(d) A Relevant Claim shall not be enforceable against the
Warrantors and shall be deemed to have been withdrawn unless any legal
proceedings in connection with it are commenced within six months after a Claim
Notice is first served on the Warrantors.
(e) The Warrantors shall not be liable in respect of a
Relevant Claim to the extent it relates to any matter provided for, included as
liability or disclosed in the Financial Statements.
12.4 Counterparts and Facsimile Execution. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Any
counterpart or other signature delivered by facsimile shall be deemed for all
purposes as being good and valid execution and delivery of this Agreement by
that party.
12.5 Headings. The headings of the sections of this Agreement are
for convenience and shall not by themselves determine the interpretation of this
Agreement.
12.6 Notices. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this
Agreement shall be in writing and shall be conclusively deemed to have been duly
given (a) when hand delivered to the other party; (b) when received when sent by
facsimile at the number set forth below (or hereafter amended by subsequent
notice to the parties hereto), with printed confirmation sheet verifying
successful transmission of the facsimile; (c) 10 Business Days after deposit in
the mail as certified mail, receipt requested, postage prepaid and addressed to
the other party as set forth below; or (d) 4 Business Days after deposit with an
overnight delivery service, postage prepaid, addressed to the parties as set
forth below, provided that the sending party receives a confirmation of delivery
from the delivery service provider.
To: SHANGHAI XXXXXX
Attention: Xx. Xxxx Tianqiao
25
Address: 1289 South Xxxxxx Xxxx,
Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx 000000, Xxxxx
Tele. No.: 86-21-5050-4720 Ext. 8888
Fax No.: 00-00-0000-0000
To: BVI XXXXXX
Attention: Xx. Xxxx Tianqiao
Address: 1289 South Xxxxxx Xxxx,
Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxxxxxxx 000000, Xxxxx
Tele. No.: 86-21-5050-4720 Ext. 8888
Fax No.: 00-00-0000-0000
To: SAIF
Attention: Xxxx Xxxxx
Address: 8 Xxxx Xxx Men Bei Dajie
Xxxxx Xxxxxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx 000000, Xxxxx
Tele. No.: 00-00-0000-0000
Fax No.: 00-00-0000-0000
cc: SAIF
Attention: Xxxxxxx Xxx
Address: Suites 2115-2118
Two Xxxxxxx Xxxxx
00 Xxxxxxxxx, Xxxx Xxxx
Tele. No.: 000-0000-0000
Fax No.: 000-0000-0000
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 12.6 by giving the other parties written
notice of the new address in the manner set forth above.
12.7 Amendment of this Agreement. Any provision of this Agreement
may be amended by a written instrument signed by SAIF and the Warrantors.
12.8 Dollar Amounts. Unless otherwise specified, all dollar amounts
in this Agreement are stated in, and shall be interpreted to be, dollars of the
currency of the United States of America.
26
12.9 Entire Agreement; Successors and Assigns. Except as
specifically referenced in this Agreement, this Agreement, together with all
Exhibits to this Agreement, constitute the entire contract among the parties
with respect to the subject matter of this Agreement. Any prior or
contemporaneous agreement, discussion, understanding, or correspondence among
the parties (including any prior representations or warranties given by the
parties) regarding the purchase of capital stock of BVI Xxxxxx is superseded by
this Agreement. Subject to the exceptions specifically set forth in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors, and assigns of the parties to this Agreement.
12.10 Survival of Warranties. The representations, warranties, and
covenants of SAIF and the Warrantors contained in this Agreement shall survive
the execution and delivery of this Agreement and the Closing.
12.11 Further Assurances. From and after the date of this Agreement,
upon the request of SAIF, the Warrantors shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
12.12 Expenses. Shanghai Xxxxxx agrees to pay SAIF US$100,000 as
administrative expenses to cover the costs and expenses already and to be
incurred by SAIF in conducting due diligence on Shanghai Xxxxxx and in
preparing, negotiating and executing all documentation, including the expenses
of SAIF's outside legal counsel, if the transactions contemplated hereby are
consummated. If the transactions contemplated hereby are not consummated,
Shanghai Xxxxxx agrees to pay (1) the fees and disbursements of O'Melveny &
Xxxxx LLP, counsel to SAIF, up to US$30,000 and (2) SAIF an amount equal to
US$20,000 as full payment of the expenses incurred by SAIF in connection with
its financial due diligence of Shanghai Xxxxxx.
12.13 Exclusivity. Prior to the Closing, each of the Warrantors
agrees, jointly and severally, with SAIF that they will not make and/or maintain
any form of contact with any other potential investors, whether private or
institutional or corporate, for the purpose of raising funds for Shanghai Xxxxxx
or its Subsidiaries or Affiliates, without the prior written consent of SAIF.
[Remainder of this page intentionally left blank]
27
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Plan of Restructuring and Securities Purchase Agreement as of the date first
above written.
SPIRIT HIGH VENTURES LIMITED
By: /s/ Chen Tianqiao 2003/01/29
--------------------------------
Name: Chen Tianqiao
Title: CEO
SHANGHAI XXXXXX INTERNET DEVELOPMENT
CO., LTD.
By: /s/ Chen Tianqiao 2003/01/29
--------------------------------
Name:
Title:
SB ASIA INFRASTRUCTURE FUND L.P.
By: /s/ Xxxxxx X. Xxx Jan. 29, 2003
--------------------------------
Name: Xxxxxx X. Xxx
Title: Authorized Signatory
LUCK JOY VENTURES LTD.
By: /s/ Xxxx Xxxxxx 2003/01/29
--------------------------------
Name:
Title:
28
TWIN LUCK VENTURES LTD.
By: /s/ Chen Tianqiao 2003/01/29
--------------------------------
Name:
Title:
CHEN TIANQIAO
/s/ Chen Tianqiao 2003/01/29
---------------------------------------
XXXX XXXXXX
/s/ Xxxx Xxxxxx 2003/01/29
---------------------------------------
29
