Exhibit 10.2

 

Execution Version

  

THIS CONVERTIBLE BOND (“CB”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE
WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR PURCHASER SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO- ACTION
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

SEVEN STARS CLOUD

 

GROUP, INC.

 

CONVERTIBLE BOND

 

US$12,000,000 Date of Issuance: June , 2018

 

FOR VALUE RECEIVED, Seven Stars Cloud Group, Inc., a Nevada corporation (the
“Company”), hereby promises to pay to the order of Advantech Capital Investment
II Limited, an exempted company incorporated and existing under the laws of the
Cayman Islands (“Holder”), the aggregate principal sum of Twelve Million US
Dollars ($12,000,000) (the “Principal”) in lawful money of the United States of
America and in immediately available funds, subject to the provisions contained
herein. The Company and Holder shall be collectively referred to as the
“Parties”. Unless otherwise expressly provided in this CB, initially capitalized
words or terms used in this convertible bond ("CB") shall have the meanings set
forth in the Purchase Agreement.

 

1.PRINCIPAL REPAYMENT

 

1.1                  Maturity Date. The Principal and any other amounts payable
to Holder hereunder, shall be due and payable to Holder on the third anniversary
of the Date of Issuance (the “Maturity Date”).

 

1.2                  Interest. Interest will accrue from the date hereof on the
Principal amount at the rate of 8% per annum compounded annually until payment
in full or until the conversion of the Principal pursuant to Section 2 of this
CB. If the Principal is not converted pursuant to Section 2 of this CB, interest
shall be paid with the Principal amount on the Maturity Date. If the Principal
is converted pursuant to Section 2 of this CB, interest accrued through the
Conversion Date shall be paid or converted into Common Stocks (as defined in
Section 2.1 below) at the option of Holder on the Conversion Date in accordance
with Section 2 of this CB.

 

1.3                  Payment. All payments made pursuant to this CB shall be
made by check or wire transfer of immediately available funds and in lawful
money of the United States of America to Holder at the address for notices
pursuant to Section 5.6 below or at such other place as Holder may designate.
Any payment on this CB shall be applied first to accrued interest, then to other
amounts owing hereunder, and thereafter to the outstanding principal balance
hereof.

 

2.CONVERSION

 

2.1                  Right to Convert. Holder shall have the right but not the
obligation to convert any portion of this CB into up to shares of common stock
of the Company (the “Common Stock”) representing 19.9% Common Stock (on a fully
diluted and fully converted basis) (such portion of this CB, "First Conversion
Amount"). At any time following the conversion of the First Conversion Amount,
subject to the approval of the Company's Shareholders, Holder shall have the
right but not the obligation to convert the remaining portion of the Principal
and the interest accrued thereon ("Remaining Conversion Amount") into Common
Stock. Holder shall not be entitled to vote any shares of Common Stock acquired
by it pursuant to this CB or any other Company Agreements in connection with any
such stockholder approval sought by the Company.

 

 

 

 

2.2                  Stockholder Approval. As promptly as practicable after the
Closing of this CB, and in any event, within three (3) months, the Company
covenants and agrees to use best efforts to (i) obtain any approvals of the
Company’s stockholders required under the Company’s organizational documents,
applicable laws and/or the listing rules and regulations of NASDAQ in connection
with the transactions contemplated by this CB, (ii) file an Information
Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations promulgated
thereunder with the Securities and Exchange Commission with regard to the
transactions contemplated by this CB (the “Information Statement”), and (iii)
mail the definitive Information Statement to the Company’s stockholders (the
“Conversion Conditions”).

 

2.3                  Conversion Price. Following the election by Holder pursuant
to Section 2.1, upon satisfaction of the Conversion Conditions, the first
conversion Amount shall be automatically converted into shares of the Common
Stock at a conversion rate of $1.82 per share ("Rate of Conversion") of Common
Stock (the “First Conversion Shares”). Following the conversion of the First
Conversion Amount and the election by Holder pursuant to Section 2.1, upon
satisfaction of the Conversion Conditions and applicable shareholder's approval,
the Remaining Conversion Amount shall be automatically converted into shares of
the Common Stock at the Rate of Conversion (together with the First Conversion
Shares, the “Conversion Shares”).

 

2.4                  Mechanics of Conversion. Upon satisfaction of the
Conversion Conditions, the Company and Holder shall agree to a date for such
conversion which, in no event, shall be no later than ten (10) calendar days
following the date of the satisfaction of the Conversion Conditions, in
compliance with Exchange Act Rule 14c-2(b) (the “Conversion Date”). On or before
the Conversion Date, Holder shall surrender the CB for conversion and the
Company shall (i) denote in its corporate records the ownership by Holder of the
Conversion Shares, effective as of close of business on the Conversion Date and
(ii) return to Holder a new CB with respect to the portion of the original CB
which was not converted. Effective as of close of business on the Conversion
Date (i) the rights of Holder with respect to the Principal, together with all
other amounts due hereunder to Holder shall cease, and (ii) Holder shall be
treated for all purposes as having become the record holder of such Conversion
Shares. Subject to the terms of Section 2.4 of the Purchase Agreement and the
Escrow Agreement, on the Conversion Date the Conversion Shares shall be placed
in the Escrow Account. The issuance of Common Stock upon conversion of this CB
shall be made without charge to Holder for any tax in respect of such issuance,
and such Conversion Shares shall be issued in such names as may be directed by
Holder.

 

2.5                  Adjustment of Conversion Shares. Subject to Section 2.6
hereof, the number and kind of Conversion Shares or other securities to be
issued upon conversion determined pursuant to Section 2.3 shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:

 

(a)                 Merger, Sale of Assets, etc. If the Company at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation or other entity, this CB shall thereafter be
deemed to evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section 2.5 shall apply to such securities of
such successor or purchaser after any such consolidation, merger, sale or
conveyance.

 

(b)                 Reclassification. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes that may be issued or
outstanding, this CB shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the Common Stock
immediately prior to such reclassification or other change.

 

 

 

 

(c)                 Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares
of Common Stock, the number of Conversion Shares to be issued upon conversion
shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

 

(d)                Incorporation of Outstanding Shares. The Rate of Conversion
shall be adjusted if the Company incorporates outstanding securities of the
Company (including the form of reverse share split) to decrease the number of
shares, the rate of Conversion shall be multiplied by a fraction, whose
numerator is the number of outstanding securities of the Company immediately
before the occurrence of the matter, and denominator is the number of
outstanding securities of the Company immediately after the occurrence of the
matter.

 

(e)                 Issues at Less than Rate of Conversion. If and whenever the
Company shall issue any shares (other than Common Stocks issued on the exercise
of this CB or on the exercise of any other rights of conversion into, or
exchange or subscription for, any Common Stock) or issue or grant options,
warrants or other rights to subscribe for, purchase or otherwise acquire any
shares, in each case at a price per share which is less than the Rate of
Conversion on the date of announcement of the terms of such issue, the Rate of
Conversion shall be adjusted to be equal to such price per share. Such
adjustment shall become effective on the date of issue of such additional shares
or, as the case may be, the issue or grant of such options, warrants or other
rights.

 

2.6                  Most Favored Nation Treatment. If, within the period
commencing from the Date of Issuance until the Conversion Date, or (in terms
that the conversion set forth in Section 2 does not occur) the Maturity Date,
the Company issues or agrees to issue to any person convertible notes or other
instruments similar to this CB with terms or conditions more favorable to such
person than, or otherwise benefits such person in a manner that is more
favorable to such person than the terms set forth in this CB, the Company shall
notify Holder and upon Holder’s request, promptly amend this CB in order for
Holder to receive all such more favorable terms and conditions without imposing
any additional obligation or liability on Holder.

 

2.7                  Adjustment Notices. Whenever the number of Conversion
Shares to be issued upon conversion is adjusted as provided in Section 2.5, the
Company shall promptly deliver to Holder written notice setting forth the
revised number of Conversion Shares with a statement of facts regarding the
adjustment and the computation thereof.

 

2.8                  Seniority. The CB ranks senior in right of payment to any
of the Company’s indebtedness that is expressly subordinated in right of payment
to the CB, pari passu in right of payment to any of the Company’s other
indebtedness and liabilities that are not so subordinated, junior in right of
payment to any of the Company’s secured indebtedness to the extent of the value
of the assets securing such indebtedness, and structurally junior to all
indebtedness and liabilities incurred by the Company’s subsidiaries.

 

2.9                  Exempted Transactions. The Holder understands and
acknowledges that, concurrently with issuance of this CB, the Company is also in
the process of negotiating, concluding or closing the following financing
transactions: (i) subscription of Common Stock of the Company by GT DOLLAR PTE.
LTD. in the amount of US$10,000,000.92; and (ii) subscriptions of Common Stock
of the Company by Beijing Tonghe Fund Management Co., Ltd. (北京通和基金管理有限公司) and
Sun Seven Stars Investment Limited or any other affiliate of Mr. Bruno Wu and/or
Ms. Lan Yang or the Company (the “Exempted Transactions”). The Company confirms
and covenants that the price of any Common Stock to be issued or issuable in the
Exempted Transactions shall be equal to US$1.82 per share.

 

 

 

 

3.COVENANTS OF THE COMPANY

 

3.1                  Payment of Principal; Conversion. The Company hereby
covenants and agrees that it shall pay or cause to be paid all amounts due
hereunder on the Maturity Date or, if applicable prior to the Maturity Date, the
Company shall effect or cause to be effected any conversion of the Principal
into Conversion Shares.

 

3.2                  Reserves. From the date hereof until the Conversion Date or
Maturity Date, whichever is later, the Company shall at all times reserve and
keep available, out of its authorized but unissued Common Stock, solely for the
purpose of issue upon conversion of this CB, such number of shares of Common
Stock as shall then be issuable upon the conversion of this CB. The Company
covenants that all such shares of Common Stock shall, upon issuance, be duly and
validly issued, fully paid and non-assessable.

 

3.3                  Consent Rights. Prior to conversion of all of the
Principals and accrued interest, or (in terms that the conversion set forth in
Section 2 does not occur) the Maturity Date, the following acts of the Company
shall require prior written approval of Holder: (i) any consolidation, merger or
corporate reorganization involving the Company; and (ii) any Related Party
Transaction or series of Related Party Transactions in excess of US$5,000,000.
For purpose of this CB, “Related Party Transaction” means an agreement,
contract, plan, arrangement or other transaction effected or proposed to be
effected by the Company, or by an entity controlled by the Company, (1) to
which, at the relevant time, a Related Party of the Company is a party or has a
material financial interest, or (2) to which an officer, director, business
partner or employee of a Related Party of the Company is a party or has a
material financial interest. “Related Party” means (A) a director or stockholder
of the Company, (B) a director or stockholder's spouse, or a parent or sibling
thereof; (C) a child, grandchild, parent, cousin, uncle, aunt of a director or
stockholder, or the spouse of any thereof; (D) an individual living in the same
home as the director or stockholder, or a trust or estate of which a person
specified in subparagraph (A) to (D) inclusive of this subdivision is a
substantial beneficiary; or (E) an entity, other than the Company or an entity
controlled by the Company, that is controlled by or is an affiliate of the
director or stockholder or any person specified in subparagraphs (A) to (D),
inclusive, of this subdivision.

 

4.DEFAULT, ACCELERATION

 

4.1                  Events of Default. Each of the following events shall be an
“Event of Default” hereunder: (i) the Company fails to pay timely any amounts
due under this CB on the date the same becomes due and payable, (ii) the Company
breaches any covenant, representation, warranty, or agreement under this CB,
(iii) the Company files a petition or action for relief under any bankruptcy,
insolvency or moratorium law or any other law for the relief of, or relating to,
debtors, now or hereafter in effect, or makes any assignment for the benefit of
creditors or takes any action in furtherance of any of the foregoing, or (iv) an
involuntary petition is filed against the Company (unless such petition is
dismissed or discharged within sixty (60) days of filing) under any bankruptcy
statute now or hereafter in effect, or a custodian, receiver, trustee, assignee
for the benefit of creditors (or other similar official) is appointed to take
possession, custody or control of any property of the Company.

 

4.2                  Acceleration. Upon the occurrence of an Event of Default,
all outstanding principal, accrued interest and other amounts owing hereunder
shall, at the option of Holder, and, in the case of an Event of Default pursuant
to Sections 4.1(a)(iii) or (iv) above, automatically, be immediately due and
payable. Holder shall have all rights and may exercise any remedies available to
it at law or in equity, successively or concurrently.

 

4.3                  Costs of Collection. In the event of any Event of Default
hereunder, the Company shall pay all reasonable attorneys’ fees and court costs
incurred by Holder in enforcing and collecting this CB.

 

5.MISCELLANEOUS

 

5.1                  Registration Rights. Holder shall have the registration
rights pursuant to certain registration rights agreement dated hereof.

 

5.2                  Remedies Cumulative and Continuing. All powers and remedies
of Holder hereunder with respect to an Event of Default shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any other thereof or
of any other power or remedy available to Holder, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this CB, and every power and remedy given by this CB or
by applicable law to Holder may be exercised from time to time, and as often as
shall be deemed expedient by Holder.

 

 

 

 

5.3                  Replacement; Exchange. If this CB is destroyed, lost or
stolen, the Company will deliver a new convertible bond to Holder on the same
terms and conditions as this CB with a notation of the unpaid principal in
substitution of the prior CB. Holder shall furnish to the Company reasonable
evidence that the CB was destroyed, lost or stolen and any security or indemnity
that may be reasonably required by the Company in connection with the
replacement of this CB.

 

5.4                  Choice of Law. This CB shall be governed by and construed
in accordance with the Requirements of Law of the State of New York without
giving effect to the principles of conflict of Laws.

 

5.5                  Bank Account. On the Date of Issuance, the Holder shall
remit the Principal by wire transfer of immediately available funds to the
following bank account as designated by the Company:

 

Name of Bank: THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED

 

Address: 1 QUEEN'S ROAD CENTRAL, HONG KONG

 

Account No.: 411758345838

 

Account holder: YOU ON DEMAND (ASIA) LIMITED

 

SWIFTCODE: HSBCHKHHHKH

 

5.6                  Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given if delivered personally or telecopied, on
the date of such delivery, or if sent by reputable overnight courier, on the
first Business Day following the date of such mailing, as follows:

 

(a)if to the Company:

 

Seven Stars Cloud Group, Inc.

No. 4 Drive-in Movie Theater Park, No. 21 Liangmaqiao Road, Chaoyang District,
Beijing, P.R.C. 100125

Attn: Legal Department

Telecopy: 86+10-8586-2775

 

(b)if to Holder:

 

190 Elgin Avenue, George Town, Grand Cayman KY 1-9005, Cayman Islands

 

With a copy to:

Suite 1702-03, One Exchange Square, 8 Connaught Place, Central, Hong Kong

Phone +852 2801 6988

Fax: +852 28014882

Attn: Finance Department

 

Any Party may by notice given in accordance with this Section 5.6 designate
another address or Person for receipt of notices hereunder.

 

5.7                  Assignment. This CB shall be binding upon the Company and
Holder and its successors and assigns. The Company may not assign this CB or
delegate any of its obligations hereunder without the written consent of Holder.
Holder may assign this CB and its rights hereunder to any third party at any
time without consent of the Company.

 

 

 

 

5.8                  Cooperation; Further Action. Each Party to this CB shall,
without further consideration, execute and deliver any further or additional
instruments and perform any acts which may become reasonably necessary to
effectuate and carry out the purposes of this CB.

 

5.9                  Severability. If any provision of this CB shall be held to
be invalid or unenforceable, such determination shall not affect the remaining
provisions of this CB.

 

5.10               Amendments. This CB may not be altered or amended, and no
right under this CB may be waived, except by a writing executed by the Parties
to this CB or except as otherwise provided in this CB. No waiver of any term,
provision or condition of this CB, in any one or more instances, shall be deemed
or construed as a further or continuing waiver of any such term, provision, or
condition, or as a waiver of any other term, provision, or condition of this CB.

 

5.11               Headings. The headings in this CB are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this CB as of the date first
set forth above.

 

  SEVEN STARS  CLOUD GROUP, INC.                     By:       Name: Bruno Wu  
  Title: CEO                   ADVANTECH CAPITAL INVESTMENT II LIMITED          
          By:       Name:       Title:    

 

 

[Signature Page – Convertible Bond]